<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
May 2, 2000
-------------------------------------
Date of Report (Date of earliest event reported)
AMKOR TECHNOLOGY, INC.
-------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-29472 23-1722724
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(Commission File No.) (IRS Employer Identification Number)
1345 Enterprise Drive
West Chester, PA 19380
(610) 431-9600
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(Address of Principal Executive Offices)
-------------------------------------
(Former name or former address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 2, 2000, Amkor Technology, Inc. ("Amkor"), through a
wholly-owned subsidiary, Amkor Technology Korea, Inc. ("Amkor Korea"), completed
an acquisition of three semiconductor packaging and test facilities, known as
K1, K2 and K3, located in Korea from Anam Semiconductor, Inc. ("ASI"), as
announced in a press release issued on May 2, 2000 (attached hereto as Exhibit
99.1). The acquisition, along with a related equity investment in ASI, is valued
at approximately $1.4 billion and is being funded with a combination of $410
million in private equity capital, $259 million in convertible subordinated
notes, and $750 million in bank debt. K1 is located in Seoul, Korea with
approximately 646,000 square feet of manufacturing space and 3,300 employees. K2
is located in Buchon, Korea with approximately 264,000 square feet of
manufacturing space and 1,800 employees. K3 is located in Bupyung, Korea with
approximately 404,000 square feet of manufacturing space and 1,500 employees.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements and exhibits are filed as part of
this Report:
(a) Financial statements of ASI and financial statements of K1, K2 and
K3 prepared pursuant to Rule 3-05 of Regulation S-X.
Incorporated by reference to the Company's definitive Consent
Solicitation Statement filed April 13, 2000 (attached hereto as Exhibit 20.1).
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X:
Incorporated by reference to the Company's definitive Consent
Solicitation Statement filed April 13, 2000 (attached hereto as Exhibit 20.1).
(c) Exhibits in accordance with Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Asset Purchase Agreement by and between Amkor Technology Korea, Inc.
and Anam Semiconductor, Inc., dated as of January 14, 2000.
2.2 Amendment to Asset Purchase Agreement by and between Amkor Technology
Korea, Inc. and Anam Semiconductor, Inc., dated as of February 25,
2000.
4.1 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.*
4.2 Registration Agreement between the Registrant and the Initial
Purchasers named therein dated as of March 22, 2000.*
</TABLE>
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<TABLE>
<S> <C>
4.3 Stockholder Rights Agreement between the Registrant and the
Purchasers named therein dated as of April 18, 2000.
4.4 Credit Agreement between the Registrant and the Initial Lenders
named therein dated as of April 26, 2000.
20.1 Definitive Consent Solicitation Statement filed April 13, 2000.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Samil Accounting Corporation.
23.3 Consent of Siana Carr & O'Connor, LLP.
23.4 Consent of Ahn Kwon & Co.
99.1 Press release dated May 2, 2000.
</TABLE>
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* Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMKOR TECHNOLOGY, INC.
By: /s/ KENNETH T. JOYCE
--------------------------------------
Kenneth T. Joyce
Chief Financial Officer
Dated: May 12, 2000
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==============================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
-------------
AMKOR TECHNOLOGY, INC.
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==============================
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Asset Purchase Agreement by and between Amkor Technology Korea, Inc.
and Anam Semiconductor, Inc., dated as of January 14, 2000.
2.2 Amendment to Asset Purchase Agreement by and between Amkor Technology
Korea, Inc. and Anam Semiconductor, Inc., dated as of February 25,
2000.
4.1 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.*
4.2 Registration Agreement between the Registrant and the Initial
Purchasers named therein dated as of March 22, 2000.*
4.3 Stockholder Rights Agreement between the Registrant and the
Purchasers named therein dated as of April 18, 2000.
4.4 Credit Agreement between the Registrant and the Initial Lenders
named therein dated as of April 26, 2000.
20.1 Definitive Consent Solicitation Statement filed April 13, 2000.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Samil Accounting Corporation.
23.3 Consent of Siana Carr & O'Connor, LLP.
23.4 Consent of Ahn Kwon & Co.
99.1 Press release dated May 2, 2000.
</TABLE>
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* Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 30, 2000.
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMKOR TECHNOLOGY KOREA, INC.
as Purchaser
AND
ANAM SEMICONDUCTOR, INC.
as Seller
Dated as of January 14, 2000
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ASSET PURCHASE AGREEMENT
This is an ASSET PURCHASE AGREEMENT (the "Agreement"), dated January 14,
2000 by and between Amkor Technology Korea, Inc., a corporation organized under
the laws of the Republic of Korea, ("Purchaser") and Anam Semiconductor, Inc., a
corporation organized under the laws of the Republic of Korea ("Seller").
Purchaser and Seller shall sometimes each be referred to as a Party and
collectively as the Parties.
RECITALS:
WHEREAS, Seller is the owner and operator of certain semiconductor packaging and
test facilities located in the Republic of Korea; and
WHEREAS, Purchaser provides semiconductor packaging and test services and is
desirous of expanding its manufacturing capability;
WHEREAS, Purchaser acquired from Seller the assets in K-4 in May 1999; and
WHEREAS, Seller desires to sell, Purchaser desires to purchase the facilities
for semiconductor packaging and test operations generally known as K-1, K-2 and
K-3 located at Sungsoo-dong, Sungdong-ku, Seoul, Korea, Buchon, Kyoungki-do,
Korea, Bupyung, Kyoungki-do, Korea, respectively, ("Business") upon terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein, and in reliance thereon,
Purchaser and Seller hereby agree as follows:
DEFINITIONS:
"Affiliate" or "Affiliates" means any Person(s) directly or indirectly
controlling, controlled by or under common control with such Person. As used in
this definition, "controlling" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies,
whether through ownership of securities, partnership or other ownership
interests, by contract or otherwise.
"Ancillary Agreements" has the meaning as described in Section 1.8(a).
"Asset List" has the meaning as described in Section 1.1.
"Assigned Contracts" has the meaning as described in Section 1.1(f).
"Assumed Liabilities" has the meaning as described in Section 1.7(a).
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"Authority" means any national or local or foreign governmental or
regulatory entity, or any department, agency, authority or political subdivision
thereof.
"Balance Sheet" has the meaning as described in Section 2.4.
"Business" has the meaning as described in Recitals Section.
"Closing" and "Closing Date" have the meanings as described in Section
1.11.
"Closing Statement" has the meaning as described in Section 1.6 (a)(i).
"Confidential Information" has the meaning as described in Section
1.13(g).
"Creditor Banks" shall mean those Korean financial institutions which
compose the Council of Creditor Financial Institutions as a party to the
Memorandum of Understanding for Workout of Affiliates of Anam Group dated April
1999 having Cho Hung Bank as the presiding bank thereof.
"Damages" has the meaning as described in Section 4.4(a)(iii).
"Employees" has the meaning as described in Section 2.20.
"Employee Releases" has the meaning as described in Section 4.2.
"Environmental Laws" has the meaning as described in Section 2.12(a)(i).
"Environmental Liabilities" means any liabilities (including costs of
re-mediation) known or unknown, foreseen or unforeseen, whether contingent or
otherwise, fixed or absolute, present or future, asserted against or incurred by
Purchaser or the Business arising out of or relating to (1) environmental
conditions first occurring or existing prior to the Closing (whether disclosed
or undisclosed) including, without limitation, the presence, Release, threat of
Release, Management or exposure of or to Hazardous Substances (each as defined
herein) at, on, in or under any property now or previously owned, operated or
leased by Seller, the Business or any of its Affiliates or predecessors (whether
into the air, soil, ground or surface waters on-site or off-site); (2) the
off-site transportation, storage, treatment, recycling or disposal of Hazardous
Materials Managed, Released or generated prior to the Closing by Seller or the
Business or any of its Affiliates or predecessors or generated in connection
with any of their operations; or (3) any violation of any Environmental Law
first occurring or existing prior to the Closing (including, without limitation,
costs and expenses for pollution control equipment required to bring the
Business into compliance with Environmental Laws and fines, penalties and
defense costs incurred for such reasonable time after the Closing as it takes
Purchaser to come into
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compliance).
"Environmental Permit" has the meaning as described in Section
2.12(a)(ii).
"Escrow Account" and "Escrow Agent" have the meanings as described in
Section 1.3(d).
"Exceptions That Will Not Exist at Closing" has the meaning as described
in Section 2.15(b)(i).
"Excluded Assets" has the meaning as described in Section 1.2.
"Excluded Liabilities" has the meaning as described in Section 1.7(b).
"Financial Statements" has the meaning as described in Section 2.4.
"Hazardous Substances" means any hazardous, toxic or polluting
materials, substances, wastes, pollutants or contaminants (including, without
limitation, petroleum and petroleum products, PCBs, radioactive materials,
asbestos or asbestos-containing materials).
"Indemnified Party" and "Indemnifying Party" have the meanings as
described in Section 4.4(c)(iv).
"Intellectual Property" means any or all of the following and all rights
relating to or otherwise necessary to the operation of the Business, whether
owned by, licensed to or otherwise used by Seller, in, arising out of, or
associated therewith: (i) all United States, Korean and foreign patents and
utility models and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in inventions and
discoveries; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation embodying
or evidencing any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all mask works, mask work registrations and
applications therefor, and any equivalent or similar rights in semiconductor
masks, layouts, architectures or topology; (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor and all goodwill associated
therewith throughout the world; (vii) all databases and data collections and all
rights therein throughout the world; and (viii) all computer software including
all source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded; (ix) all World Wide
Web addresses, sites and domain names; and (x) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.
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"IP Assignment and Licensing Agreements" have the meaning as described
in Section 1.1.
"Key Employees" has the meaning as described in Section 4.2.
"Knowledge" and words of similar import mean, with respect to any Party,
actual knowledge of a particular fact or other matter being possessed by any
officer or other individual now or formerly having principal responsibility for
a business or administrative function of such Party, including individuals
servicing in such a capacity in or for the Business, and the knowledge that
reasonably could be expected to be obtained in the course of conducting a
reasonably comprehensive investigation concerning the subject matter.
"K-2 Land" has the meaning as described in Section 1.2(f).
"law" means all laws, statutes, ordinances, regulations, and other
pronouncements having the effect of law of the Republic of Korea or any other
country or territory, commonwealth, city, county, municipality, protectorate,
possession, court, tribunal, agency, government, department, commission,
arbitrator, board, bureau, or instrumentality thereof.
"Lease Agreement" shall have the meaning as described in Section 1.8(a).
"liability" means all debt, liabilities, losses, claims, damages, costs,
expenses and obligations of every kind, whether fixed or contingent, mature or
unmatured, or liquidated or unliquidated, including, without limitation, those
arising under any law and those arising under any contract, commitment or
undertaking.
"Licensed Intellectual Property" has the meanings as described in
Section 2.16.
"Lien" or "Liens" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
tenancy, ground rent, license, mortgage, security agreement, covenant,
condition, restriction, right-of-way, easement, encroachment, option, judgment
or of other encumbrance of matter of title.
"loss" or "losses" means any and all deficiencies, judgments,
settlements, demands, claims, actions, assessments, liabilities, losses, damages
(other than consequential damages), interest, fines, penalties, costs and
expenses, including without limitation, reasonable legal, accounting and other
costs and expenses incurred in connection with investigating, defending,
settling or satisfying any and all demands, claims, actions, causes of action,
suit, proceedings, assessment, judgments or appeals.
"Management" has the meaning as described in Section 2.12(a)(iv).
"Managed" has a similar meaning appropriate for the context.
<PAGE> 6
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"Material Adverse Effect" has the meaning as described in Section
1.10(e).
"Net Asset Value" means the value of the assets of the Business less the
liabilities assumed by Purchaser where such assets and liabilities are
calculated in accordance with U.S. GAAP.
"Owned Real Properties" has the meaning as described in Section 2.15(b).
"Permitted Real Property Encumbrances" has the meaning as described in
Section 2.15(b).
"Person" means any individual, a corporation, a partnership, an
association, a trust or other entity or organization, including an Authority.
"Personal Property Permitted Encumbrances" has the meaning as described
in Section 2.14.
"Property Taxes" has the meaning as described in Section 4.9.
"Purchased Assets" has the meaning as described in Section 1.1.
"Purchase Price" has the meaning as described in Section 1.3(a).
"Real Properties" has the meaning as described in Section 2.15(a).
"Released" means released, spilled, leaked, pumped, poured, emitted,
emptied, discharged, injected, escaped, leached, disposed, or dumped and other
similar terms. "Release" when used as a verb has the same meaning, but in the
present tense, and when used as a noun has a similar meaning appropriate for the
context.
"Schedules to be Prepared" has the meaning of such schedules to this
Agreement which have not yet been attached hereto as of the date of this
Agreement, but shall be prepared to Purchaser's satisfaction and delivered by
Seller within a reasonable time after the date hereof.
"Taxes" and "Tax" have the meanings as described in Section 2.7.
"Tax Exemption" has the meaning as described in Section 1.10(i).
"Third Party Claim" has the meaning as described in Section 4.4(c)(i).
"Transferred Employees" has the meaning as described in Section 4.2.
<PAGE> 7
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"Transition Service Agreement" and "Transition Period" have the meaning
as described in Section 4.8.
"U.S. GAAP" has the meaning as described in Section 1.6(a)(i).
"Workout" has the meaning as defined in the Accord Among Financial
Institutions for Promotion of Restructuring of Business Enterprises dated as of
June 29, 1998.
<PAGE> 8
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ARTICLE 1
THE TRANSACTION
1.1. Sale and Purchase of Assets. Subject to the terms and conditions
hereof, at the Closing referred to in Section 1.8 below, Seller will sell,
transfer, convey and assign to Purchaser, free and clear of all Liens of every
kind, nature and description, except for the Excluded Assets (as defined in
Section 1.2) or as otherwise disclosed and agreed in this Agreement, and
Purchaser will purchase from Seller, all of the assets as shall be listed on
Schedule 1.1 (the "Asset List") and any other assets that are being used for or
are substantially related to the Business including, without limitation,
Seller's properties and business as a going concern and good will and assets
existing on the date of Closing, wherever such assets are located and whether
real, personal or mixed, tangible or intangible, and whether or not any of such
assets have any value for accounting purposes or are carried or reflected on or
specifically referred to in its books or Financial Statement (collectively, the
"Purchased Assets"). The Purchased Assets shall include, without limitation, all
of Seller's right, title and interest in and to the following, as the same may
exist on the Closing Date (as defined in Section 1.11):
(a) the Owned Real Properties together with the buildings,
fixtures, structures and other improvements erected thereon, and together with
all easements, rights and privileges appurtenant thereto, as more particularly
described on the Asset List;
(b) all of Seller's machinery, equipment, tooling, dies, jigs,
vehicles, spare parts and supplies being used for or substantially related to
the Business, including without limitation, the items listed on the Asset List;
(c) all of Seller's raw materials, work in process, parts,
subassemblies, finished goods and other inventories being used for or
substantially related to the Business, wherever located and whether carried on
Seller's books of account;
(d) all of Seller's other tangible assets being used for or
substantially related to the Business, including office furniture, office
equipment and supplies, computer hardware and software and vehicles;
(e) all of Seller's books, records, manuals, documents, books of
account, correspondence, sales and credit reports, customer lists, literature,
brochures, advertising material and the likes that are used for or are
substantially related to the Business;
(f) all of Seller's rights under leases for property, whether
real or personal, used for or substantially related to the Business, and all of
Seller's rights under all other contracts, agreements and purchase and sale
orders related to the Business (the "Assigned Contracts"), which Assigned
Contracts will be assigned to Purchaser at or prior to the Closing and which
shall be listed on Schedule 1.10;
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(g) All of Seller's interest in governmental permits, licenses,
registrations, orders and approval substantially relating to the Business to the
extent such permits, licenses, registrations, orders and approvals are
separately transferable to Purchaser; and
(h) All right, title and interest of Seller in and to the
goodwill incident to the Business other than those exclusively related to the
businesses of Seller which are not to be transferred hereunder.
The Parties agree that certain Intellectual Properties (including
Licensed Intellectual Property) which are identified in Schedule 2.16 as the
Assigned Intellectual Property shall be assigned to Purchaser hereunder, while
the Intellectual Properties which are identified in Schedule 2.16 as the
Licensed Intellectual Properties shall be licensed to Purchaser rather than
being assigned to Purchaser. With respect to the Assigned Intellectual
Properties, to the extent legally and/or contractually permissible, Seller shall
sell, transfer, convey and assign to Purchaser, free and clear of all Liens of
every kind, nature and description, all right, title and interest of Seller in
and to such Intellectual Properties. With respect to the Licensed Intellectual
Properties, to the extent legally and/or contractually permissible, Seller
hereby shall grant to Purchaser and its Affiliates, effective at the Closing
Date, an irrevocable, world-wide, non-exclusive, perpetual, paid-up,
royalty-free and transferable (and sub-licensable) license (or sub-license) to
utilize such Intellectual Properties (including the Licensed Intellectual
Property) which Seller has rights to use as of the Closing Date, after obtaining
any and all consents necessary therefor for Purchaser to be able to operate the
Business substantially in the manner as such Business was operated by Seller.
For this purpose, Purchaser shall enter into one or more assignment and
licensing agreements (the "IP Assignment and Licensing Agreements") with the
holders of relevant Intellectual Properties, including Seller itself, prior to
the Closing. All costs, if any, shall be payable by Seller to any third parties
in connection with the transfer, licenses or sub-licenses for the benefit of
Purchaser pursuant to this Agreement.
To the extent that there are any tangible or intangible assets
used by Seller in connection with or otherwise necessary to the operation of the
Business that are not included in this Section 1.1 and are not specifically
designated as Excluded Assets by Section 1.2, the Purchased Assets shall include
an irrevocable, nonexclusive, perpetual, paid-up, royalty-free, transferable
license, contract or lease to utilize such assets in connection with the
operation of the Business after the Closing Date. To the extent that any such
assets may not be licensed, contracted or leased, Seller shall take all steps
required to assure that Purchaser obtains the benefit of such assets.
1.2. Excluded Assets. Notwithstanding any other provision of this
Agreement, Seller shall retain all property of any nature, kind and description
other than the Purchased Assets and for the avoidance of doubt the Purchased
Assets shall not include the following assets of the Business (collectively, the
"Excluded Assets"):
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(a) all of Seller's cash, cash in banks, certificates of deposit,
cash equivalents, bank and mutual fund accounts, deposits, securities and bonds
and other similar investments, deferred charges, and other cash equivalents on
hand or on deposit in any financial institution on the Closing Date;
(b) all consideration received by and the rights of Seller under
or pursuant to this Agreement or any agreement, instrument or document ancillary
hereto;
(c) all notes and accounts receivables owing to Seller on the
Closing Date;
(d) any claims and rights against third parties (including,
without limitation, insurance carriers) arising from any event or actions first
occurring after the Closing Date;
(e) all assets exclusively dedicated to the wafer fabrication
business; and
(f) land of K-2 which shall be set forth in Schedule 1.2(f).
1.3. Purchase Price.
(a) The total aggregate purchase price for the Purchased Assets
exclusive of VAT shall be US$800,000,000 (the "Purchase Price") plus the Assumed
Liabilities.
(b) Purchaser shall pay the amount equal to the Purchase Price to
Seller at Closing. Out of the amount which shall be set forth in Schedule
1.4(a), Seller shall pay the VAT amount to be payable in accordance with the
relevant VAT law of Korea ("Payable VAT") to the relevant Korean tax authority
when due, and shall immediately provide a copy of the receipt to Purchaser. When
Purchaser actually receives the refund of the VAT in the amount of the Payable
VAT from the relevant tax office, Purchaser shall immediately deposit the same
amount to an Escrow Account or a bank account designated by the Creditor Banks
for the repayment of debt by Seller to the Creditor Banks. Deposit by Purchaser
of the refunded VAT shall discharge Purchaser's obligation to pay the Purchase
Price irrespective of whether such refunded VAT amount is less than Payable VAT.
(c) On or prior to the Closing Date, Seller and Purchaser shall
mutually agree on the appointment of an escrow agent among the Korean financial
institutions that are creditors of Seller ("Escrow Agent"). Such portion of the
Purchase Price as provided in Section 1.4 (b) shall be deposited with one or
more bank accounts ("Escrow Accounts") to be opened within the Escrow Agent to
assure the repayment of certain liabilities by Seller and released to its
creditors in accordance with the terms of this Agreements.
1.4. Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser to
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Seller as follows:
(a) Purchaser's payment at the Closing of the amount which shall
be set forth in Schedule 1.4(a), by wire transfer or delivery of a certified
bank check immediately available and in accordance with the instructions of
Seller;
(b) Purchaser's deposit at the Closing into an Escrow Account of
the amount which shall be set forth in Schedule 1.4(b); and
(c) Purchaser's assumption of Seller's liabilities as set forth
on Section 1.7.
1.5. Allocation of Purchase Price. Purchaser and Seller agree that the
Purchase Price shall be allocated among the Purchased Assets in accordance with
the principles of allocation which shall be set forth in Schedule 1.5. Purchaser
and Seller agree that each will report all Tax consequences of the purchase and
sale contemplated hereby in a manner consistent with such allocation.
1.6 Adjustments to Purchase Price.
(a) Post-Closing Balance Sheet Adjustment.
(i) Within 60 days of the Closing Date, Seller shall
prepare a statement of assets acquired and liabilities assumed relating to the
Business and shall, at its expense, prepare and deliver to Purchaser a statement
of the Net Asset Value of the Business, as of the Closing Date and as of the
Balance Sheet Date (the "Closing Statement"), as audited by independent
certified public accountants chosen by Seller and acceptable to Purchaser (i.e.,
Samil). The Closing Statement shall be prepared in U.S. dollars according to the
Generally Accepted Accounting Principles in the United States ("U.S. GAAP").
(ii) Purchaser shall fully cooperate with Seller in
Seller's preparation of the list of assets and liabilities as mentioned in
Section 1.6(a)(i) above, and each Party shall fully cooperate with the other
Party in the other Party's preparation of its Tax returns for the relevant Tax
year or years.
(iii) In the event that Purchaser disagrees with the
Closing Statement, Purchaser shall hire an independent certified public
accountant at its own expense, which shall prepare Seller's proposed adjustments
to the Closing Statement within 60 days of Seller's receipt of the Closing
Statement using U.S. GAAP. Any dispute (and only those items in dispute)
concerning the Closing Statement which cannot be resolved by the parties and
their respective independent certified public accountants within 60 days of
Purchaser's receipt of Seller's proposed adjustments to the Closing Statement
will be submitted no later than 60 days after such receipt to an independent
accounting firm mutually selected by Purchaser and Seller, and the
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determination of such firm shall be final and binding on the Parties. The fees
and expenses of such third independent accounting firm shall be borne equally by
the Parties.
(b) Adjustment Formula.
If the Net Asset Value at the Closing Date is less than the Net
Asset Value as of the Balance Sheet Date (without considering the depreciation
between the Closing Date and the Balance Sheet Date), then, the Purchase Price
shall be reduced by the amount of such deficiency accordingly. In order to give
effect to any such reduction, Purchaser at its option, may demand Seller to
compensate for such deficiency by requiring payments or delivery of additional
assets having values equivalent to such deficiency within 15 days from the date
of discovery of such deficiency by Purchaser, or, alternatively, withholding of
such deficient amount from any amount owing to Seller by Purchaser or its
Affiliates to the extent permissible under Korean law.
1.7. Assumption of Liabilities.
(a) Assumed Obligations. At the Closing, Purchaser shall assume
and agree to perform, pay or discharge, when due, and Seller shall be released
from all obligations related to all of the following:
(i) Seller's obligations and liabilities under the
Assigned Contracts solely with respect to conditions or events occurring after
the Closing Date; and
(ii) The obligations and liabilities to be assumed by
Purchaser pursuant to this Section 1.7 are hereinafter sometimes referred to as
the "Assumed Liabilities." Except with respect to the Assumed Liabilities,
Purchaser does not hereby and shall not assume or in any way undertake to pay,
perform, satisfy or discharge any liabilities or obligations of Seller, and
Seller agrees to pay and satisfy when due any such liabilities and obligations
not assumed by Purchaser.
(b) Excluded Liabilities. Except as expressly provided in Section
1.7(a), Seller shall retain and neither Purchasing Parties shall assume nor be
liable for any liabilities and obligations of Seller and any other obligations
relating to the Business (such liabilities retained by Seller are referred to as
the "Excluded Liabilities"), including without limitation the following:
(i) any liabilities or obligations of Seller, contingent
or otherwise, for any indebtedness of Seller;
(ii) the liabilities or obligations of Seller to its
stockholders respecting dividends, distributions to its stockholders in
liquidation, redemption of stock, or otherwise;
<PAGE> 13
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(iii) liabilities or obligations of Seller arising out of
any transactions occurring, or obligations incurred, after the Closing;
(iv) any obligations of Seller for expenses, public dues
or fees levied to Seller or deemed to be borne by Seller under relevant laws and
regulations incident to or arising out of the negotiation, preparation, approval
or authorization of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, all stamp duties, attorneys
and accountants fees and all brokers or finders fees or commissions payable by
Seller;
(v) any obligation of Seller under or arising out of this
Agreement or any of the Ancillary Agreements;
(vi) any liabilities relating to claims by the insurer (or
the indemnitor) that the insured (or the indemnitees) had breached it
obligations under the policy of insurance (or the contract of indemnity) or had
committed fraud in the insurance application;
(vii) any liability or obligation of Seller to any
Affiliate unless otherwise provided for in this Agreement;
(viii) subject to the terms and conditions provided in
this Agreement, any liabilities or obligations, the existence of which
constitute a breach of the representations, warranties or covenants of Seller
contained in this Agreement;
(ix) subject to the terms and conditions provided in this
Agreement, any obligations or liabilities of Seller to indemnify its officers,
directors, employees or agents;
(x) any liability or obligation in respect of the Excluded
Assets;
(xi) all Taxes imposed on Seller, including (i) any Tax of
any other corporation which Tax is assessed against Seller by virtue of its
status, prior to the Closing Date, as a member of any consolidated group of
which such other corporation was also a member and (ii) any Taxes, including all
value-added, gross receipts, excise, registration, stamp duty, transfer or other
similar taxes or governmental fees, imposed in connection with or attributable
to this Agreement, or as a result of the consummation of the transaction under
this Agreement;
(xii) subject to the terms and conditions provided in this
Agreement, any Environmental Liabilities;
(xiii) except for the Assumed Liabilities, any obligation
or liability arising under any contract, instrument or agreement (1) that is not
transferred to Purchaser as part of the Purchased Assets, or (2) that is not
transferred to Purchaser because of Seller's failure or
<PAGE> 14
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inability to obtain any third party consent required for the transfer or
assignment of such contract or agreement to Purchaser, or (3) that relates to
any breach or default (or an event which might, with the passing of time or the
giving of notice, or both, constitute a default) under any contract, instrument
or agreement or to any services to be provided by Seller under any such
contract, instrument or agreement arising out of or relating to periods on or
prior to the Closing Date, or (4) for which Seller received payment prior to the
Closing;
(xiv) any existing or future liabilities to financial
institutions, such as banks, installment financing companies and leasing
companies;
(xv) any liability relating to the infringement or
asserted infringement of any intellectual property by Seller;
(xvi) any liability exclusively relating to the wafer
fabrication business of Seller; and
(xvii) any other liability or obligation of Seller or
including any liability or obligation directly or indirectly arising out of or
relating to the operation of the Business or ownership of the Purchased Assets
on or prior to the Closing Date, whether contingent or otherwise, fixed or
absolute, known or unknown, matured or unmatured, present, future or otherwise,
irrespective of whether such liability or obligation is asserted before or after
the Closing, except for the Assumed Liabilities.
1.8. Conditions to Each Party's Obligations. The obligations of both
Purchaser and Seller to consummate the transactions contemplated hereby are
subject to the fulfillment of each of the following conditions on or before the
Closing Date.
(a) The IP Assignment and Licensing Agreements, a lease Agreement
for Purchaser's long-term use of K-2 Land on terms satisfactory to Purchaser
("Lease Agreement"), and, the Transition Service Agreement, the assignment
agreement provided in Section 1.10(b) hereof and any other agreements, if any,
necessary to vest in good, valid and marketable title to the Purchased Assets to
Purchaser (collectively, the "Ancillary Agreements") have been duly executed and
delivered after having been duly authorized by all necessary corporate actions
by the relevant parties thereto.
(b) No provisions of any applicable law, and no judgment,
injunction, order or decree shall (i) prohibit the consummation of the Closing
or (ii) restrain, prohibit or otherwise interfere with the effective operation
or enjoyment by Purchaser of all or any material portion of the Purchased Assets
or the Business.
(c) Purchaser and Seller shall have each received all material
consents, authorizations or approvals from their respective boards of directors,
governmental agencies
<PAGE> 15
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(including but not limited to an approval by the Fair Trade Commission of
Korea), and third parties that are a pre-requisite to the Closing as a matter of
law, in form and substance satisfactory to the other Party, and no such consent,
authorization or approval shall have been revoked.
(d) Amkor Technology, Inc, a corporation established under the
laws of the state of Delaware, U.S.A. and an affiliate of Purchaser ("Amkor")
shall have invested US$500,000,000 to Seller (including Amkor's existing equity
investment into Seller made in October 1999 in the amount of US$41,595,600) in
the form of equity or equity related bonds (e.g., convertible bonds) on the
terms and conditions satisfactory both to Amkor and Seller.
(e) Amkor and Seller shall have executed an agreement under which
Amkor shall invest US$150,000,000 to Seller within one year from the Closing (in
addition to the investment set forth in Section 1.8(d) hereof) in the form of
equity or equity related bonds (e.g., convertible bonds) on the terms and
conditions satisfactory both to Amkor and Seller.
Purchaser and Seller agree that in the event that the
conditions set forth in Sections 1.8(b) and (c) herein are not satisfied on or
before the Closing Date, the conditions may be satisfied on or before May 31,
2000, or a later date mutually agreed in writing between the Parties, in which
case the Parties must comply with their respective obligations to consummate the
transactions as provided in this Agreement.
1.9 Conditions to Seller's Obligations. The obligations of Seller to
consummate the transaction contemplated hereby are subject to fulfillment of all
of the following conditions on or prior to the Closing Date.
(a) Each and every material representation and warranty made by
Purchaser contained in this Agreement shall have been true in all material
respects as of the date when made and shall be true in all material respects at
and as of the Closing Date as if originally made on and as of the Closing Date.
(b) All obligations of Purchaser to be performed on or before the
Closing Date shall have been performed in all material respects.
(c) No action shall be threatened or pending before any court or
governmental agency the probable outcome of which would result in the restraint
or prohibition of the consummation of the transactions contemplated hereby.
1.10 Conditions to Purchaser's Obligations. The obligations of Purchaser
to consummate the transactions contemplated hereby are subject to the
fulfillment of all of the following conditions on or prior to the Closing Date.
<PAGE> 16
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(a) Each and every representation and warranty made by Seller
contained in this Agreement and in any certificate or other writing delivered by
Seller pursuant hereto shall be true in all material respects as of the date
when made and shall be true in all material respects at and as of the Closing
Date as if originally made on and as of the Closing Date.
(b) Seller shall have effectively assigned the Assigned Contracts
(including obtaining all necessary consents). For each contract assigned under
this provision, Seller shall deliver to Purchaser at the Closing an assignment
agreement in such form and substance as shall be mutually agreed by the parties.
(c) All obligations of Seller to be performed hereunder on or
before the Closing Date shall have been performed in all material respects.
(d) No action shall be threatened or pending before any court or
governmental agency as of the Closing Date the probable outcome of which would
result in (i) the restraint or prohibition of the consummation of the
transactions contemplated hereby or (ii) the restraint or prohibition of, or
interference with, the effective operation of enjoyment by Purchaser of all or
any material portion of the Assets or the Business.
(e) On the Closing Date, there shall be no injunction, writ,
preliminary restraining order or any order of any nature in effect issued by a
court of competent jurisdiction directing that the transactions provided for
herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other Person shall have been instituted or threatened
which questions of validity or legality of the transactions contemplated hereby
or which if successfully asserted might otherwise have a Material Adverse
Effect. "Material Adverse Effect" means an effect that is materially adverse (i)
to the properties, business, operations, earnings, assets, liabilities or
financial condition, or prospects of the Business taken as a whole, (ii) the
ability of Seller to perform its obligations under this Agreement, or (iii) the
enforceability of this Agreement.
(f) Between the date hereof and the Closing Date, there shall
have been no change which could have a Material Adverse Effect on the Business
or the Purchased Assets.
(g) Any and all notices to Employees, as required under
applicable employment laws, shall have been provided by Seller. Substantially
all of the Transferred Employees shall have accepted employment with Purchaser
and Purchaser shall have entered into arrangements with key Employees of Seller
satisfactory to Purchaser in its sole discretion.
(h) After (i) Amkor shall have been satisfied with the results of
their due diligence, (ii) Amkor shall have entered into an arrangement
satisfactory to Amkor in its sole discretion, to finance the Purchase Price in
full, (iii) Amkor shall have received a fairness
<PAGE> 17
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opinion with respect to the terms of the transactions contemplated by this
Agreement, (iv) CIL Limited, a company established under the law of Cayman
Islands and the parent of Purchaser, shall have received a tax exemption under
the Tax Exemption and Limitation Law in regard to its foreign investment into
Purchaser for the purchase of the Business ("Tax Exemption"), (v) the Board of
Directors of Amkor shall have approved the transactions contemplated herein.
(i) Seller shall have obtained the approvals for the transactions
contemplated hereunder from any governmental agencies, Seller's shareholders'
meeting and the Creditor Banks.
(j) Purchaser shall have received to its satisfaction the
favorable legal opinion of the counsel for Seller in the form and substance
satisfactory to Purchaser.
(k) Seller shall have delivered all of the Schedules to be
Prepared, which schedules will be satisfactory to Purchaser in form and contents
as of the Closing Date, and shall have obtained the consent thereto from
Purchaser.
(l) Seller shall have received duly executed copies of all
agreements, instruments, certificates, consents or other documents necessary or
appropriate from the creditors of Seller to release any and all material
encumbrances against the Purchased Assets.
1.11. Closing. The closing under this Agreement will take place at such
other time, date or place as the Parties shall mutually agree (the "Closing").
The date on which Closing occurs is sometimes referred to herein as the "Closing
Date."
1.12. Deliveries and Proceedings at Closing. At the Closing:
(a) Deliveries by Seller. Seller will deliver or cause to be
delivered to Purchaser:
(i) assignment of all transferable or assignable licenses,
permits and warranties relating to the Purchased Assets or the Business, duly
executed and in recordable forms;
(ii) title certificates to the Owned Real Properties,
motor vehicles, or any other applicable assets together with title or license
certificates to Intellectual Properties (including the Licensed Intellectual
Property), included in the Purchased Assets right to which are transferred by
registration with any Authority, duly executed by Seller (together with any
other transfer forms or other documents necessary to effectively transfer such
Purchased Assets to Purchaser);
(iii) all the books of account, ledgers, payroll records,
inventory and
<PAGE> 18
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asset records and other books and documents which are used for or are
substantially related to the Business (other than minute books relating to
directors' and shareholders' meetings and statutory books) in whatever form and
upon whatever media they may be recorded;
(iv) copies of the Employee Releases and the employment
contracts with respect to the Key Employees;
(v) consent letters necessary for the valid assignment of
the Assigned Contracts duly executed by the parties thereto;
(vi) certified copies of resolutions of Seller's board of
directors and shareholders meeting, both approving the sale of the Purchased
Assets and the Business on the terms of this Agreement and authorizing any one
its officers to execute this Agreement for and on behalf of Seller;
(vii) such other instruments of conveyance as shall be
necessary to vest in Purchaser good, valid and marketable title to the Purchased
Assets;
(viii) receipt for the portion of the Purchase Price
provided in Section 1.4(a);
(ix) a certificate dated the Closing Date, from the
Representative Director of Seller to the effect that Seller has fulfilled the
conditions set forth in Section 1.10(c);
(x) a certificate dated the Closing Date, from the
Representative Director of Seller to the effect that Seller has cleared all
Liens or other types of encumbrances on the Business or the Purchased Assets;
and
(xi) executed copies of the Ancillary Agreements.
(b) Deliveries by Purchaser. At the Closing, Purchaser will
deliver to Seller:
(i) payment of the amount stated in Schedule 1.4 (a);
(ii) a certificate evidencing the deposit of the amount
stated in Schedule 1.4 (b) with the Escrow Account;
(iii) a certificate evidencing the assumption of, and
consents by the creditors of, the liabilities listed on Schedule 1.7(a);
(iv) a certified copy of a resolution of Purchaser's board
of directors approving the purchase of the Purchased Assets and Business on the
terms of this Agreement and
<PAGE> 19
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authorizing any one of its directors or officers to execute this Agreement for
and on behalf of Seller;
(v) a certificate dated the Closing Date, from an
authorized officer of Purchaser to the effect that Purchaser has fulfilled the
conditions set forth in Section 1.9(b); and
(vi) executed copies of the Ancillary Agreements.
(b) Other Deliveries. Any other documents required to be
delivered pursuant to this Agreement will be exchanged.
1.13. Covenants of Seller. From and after the date hereof and until the
Closing Date, Seller hereby covenants and agrees that:
(a) Business in Ordinary Course. Seller will carry on the
Business in the ordinary and normal course in substantially the same manner as
heretofore, except as otherwise expressly provided herein, and shall notify
Purchaser immediately in writing of any changes or deviations from the ordinary
and normal course of business.
(b) Maintain Properties. Seller will maintain and keep the plant
and equipment of or related to the Business in as good repair, working order and
condition as at present, except for depreciation due to ordinary wear and tear
and damage due to casualty.
(c) Insurance. Seller will keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to what is now
covering the Business and all assets related thereto.
(d) Perform Contracts. Seller will perform in all material
respects the obligations to be performed under all the contracts and documents
of or relating to the Business.
(e) Maintain Organization. Seller will maintain and preserve the
relationships of or related to the Business with suppliers and customers and
maintain the goodwill of the Business.
(f) Approvals and Consents. As soon as practicable after the
execution of this Agreement, Seller shall take all reasonable action required to
obtain all waivers, consents, approvals, including an approval from the
shareholders meeting; and promptly to give all notices, effect all registrations
pursuant to and make all other filings with or submissions to, any third
parties, including governmental authorities, necessary or advisable to
authorize, approve or permit the transactions contemplated hereby.
(g) Confidentiality. Seller hereby covenants and agrees that,
except as may
<PAGE> 20
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be required by law, rule or regulation or court order, unless this Agreement is
terminated, it will not at any time reveal, divulge or make known to any Person
(other than Purchaser, their Affiliates or their agents) any information that
relates to this Agreement, the transactions contemplated hereby or the Business
(whether now possessed by Seller or furnished by Purchaser after the Closing
Date), including, but not limited to, customer lists or other customer
information, trade secrets or formulae, marketing plans or proposals, financial
information or any data, written material, records or documents used by or
relating to the Business that are of a confidential nature (collectively, the
"Confidential Information").
(h) Advice of Changes. Seller hereby covenants and agrees that it
will advise Purchaser promptly in writing of any fact that, if previously known,
would have been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in breach in any material respect by Seller of
any of its representations and warranties, covenants or agreements hereunder or
which would have a Material Adverse Effect on the Business, the Purchased Assets
or the transactions contemplated hereby.
(i) All Necessary Filings. Seller hereby covenants that it has
made and will make all necessary filings with the relevant government agencies
which are required for the completion of the transactions contemplated in this
Agreement.
(j) Access to Information; Cooperation. Seller hereby covenants
and agrees that it shall give Purchaser and their representatives, counsel,
accountants and consultants reasonable access, during normal business hours, to
such of the properties, books, accounts, contracts and records of Seller as
Purchaser deem relevant to the Purchased Assets and the Business, and furnish or
otherwise make available to Purchaser all such information concerning the
Purchased Assets and the Business as Purchaser may request. Seller further
agrees and covenants that it shall cooperate with Purchaser and their
representatives, counsel, accountants and consultants to make sure that the
Closing Statement is prepared as provided in Section 1.6(a)(i).
(k) Preparation. Seller will diligently prepare and deliver to
Purchaser all of the Schedules to be Prepared as soon as practicable after the
date hereof, which schedules will be satisfactory to Purchaser in form and
contents, and shall obtain the consents thereto from Purchaser.
(l) No Intentional Misrepresentation. Without express written
consent of Purchaser, Seller shall not take or omit any action with the
intention to cause any of its representations and warranties under this
Agreement to be inaccurate in material respect at, or any time prior to, the
Closing.
1.14. Obligations After the Closing Date.
<PAGE> 21
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(a) Assistance by Seller. Seller shall cooperate with Amkor,
Purchaser, the advisors and representatives, including its legal counsel, of
Purchaser or Amkor in connection with the preparation of any report or filing
required in connection with the transactions contemplated hereby, such
cooperation to be provided by Seller at no cost to Amkor or Purchaser.
(b) Further Assurances of Seller. From and after the Closing
Date, Seller shall, at the request of Purchaser, execute, acknowledge and
deliver to Purchaser, without further consideration, all such further
assignments, conveyances, endorsements, deeds, special powers of attorney,
consents and other documents, and take such other action, as Purchaser may
reasonably request (i) to transfer to and vest in Purchaser, and protect its
rights, title and interest in, all the Purchased Assets and (ii) otherwise to
consummate the transactions contemplated by this Agreement.
(c) Further Assurances of Purchaser. From and after the Closing
Date, Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such books and records
relating to the Business as reasonably may be required in connection with the
preparation of financial information for periods concluding on or prior to the
Closing Date. Purchaser shall cooperate in all reasonable respects with Seller
with respect to its former interest in the Business and in connection with
financial account closing and reporting and claims and litigation asserted by or
against third parties, including, but not limited to, making employees available
at reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation.
<PAGE> 22
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents, warrants and covenants to and with
Purchaser as follows (as far as any of the following representations, warranties
and covenants are conditioned upon the preparation of the Schedules to be
Prepared, such representations, warranties and covenants shall be deemed to have
been made as of the date when the relevant Schedules to be Prepared are
delivered to Purchaser, and obtained their written consents thereto):
2.1. Organization. Seller is a corporation duly incorporated and
validly existing under the laws of the Republic of Korea. Seller has all
requisite corporate power and authority to own or lease its properties and
assets as now owned or leased, to carry on its businesses as and where now being
conducted and to enter into this Agreement, and perform its obligations
hereunder. The copies of Seller's articles of incorporation and bylaws, as
amended to date, which have been delivered to Purchaser, are correct and
complete and are in full force and effect.
2.2. Authorization and Enforceability. The execution, delivery
and performance of this Agreement has been, and the Ancillary Agreements shall
have been duly authorized by all necessary corporate action on the part of
Seller, including the approvals by the board of directors (other than the
shareholders approval which Seller shall obtain before the Closing). This
Agreement has been, and at the Closing all the Ancillary Agreements shall have
been duly executed and delivered by Seller, and this Agreement constitutes, and
at Closing the Ancillary Agreements will constitute, the legal, valid and
binding obligations of Seller, enforceable in accordance with their respective
terms.
2.3. No Violation of Laws or Agreements. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the compliance with the terms, conditions and
provisions of this Agreement by Seller, will not (a) contravene any provision of
Seller's articles of incorporation or bylaws; (b) conflict with or result in a
breach of or constitute a default (or an event which might, with the passage of
time or the giving of notice or both, constitute a default) under any of the
terms, conditions or provisions of any indenture, mortgage, loan or credit
agreement or any other agreement or instrument to which Seller is a party or by
which it or any of its assets may be bound or affected except as set forth on
Schedule 2.10, or any judgment or order of any court or governmental department,
commission, board, agency or instrumentality, domestic or foreign, or any
applicable law, rule or regulation, (c) result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon Seller's assets or
give to others any interests or rights therein, (d) result in the maturation or
acceleration of any liability or obligation of Seller that will not be paid in
full by Seller at Closing (or give others the right to cause such a maturation
or acceleration), or (e) result in the termination of or loss of any right (or
give others the right to cause such a termination or loss) under any of the
Assigned Contracts except as set
<PAGE> 23
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forth on Schedule 2.10.
2.4. Financial Statements. The books of account and related
records of Seller fairly reflect in reasonable detail the assets, liabilities
and transactions related to the Business and are in adequate condition for the
preparation of the Financial Statement (as defined below and which shall be
limited only to a balance sheet and a statement of profits and losses) of the
Business in accordance with U.S. GAAP applied on a consistent basis. Seller has
delivered to Purchaser the audited financial statements of the Business as of
September 30, 1999, June 30, 1999, December 31, 1998, respectively, and shall
shortly provide the audited financial statements of the Business as of December
31, 1999 (the "Financial Statements"). The Financial Statements of the Business:
(i) fairly presents and will present the financial condition, assets and
liabilities of the Business as of the dates thereof; and (ii) has been and will
be prepared in accordance with U.S. GAAP consistently applied. All references in
this Agreement to the "Balance Sheet" shall mean the balance sheet of the
Business as of December 31, 1999 included in the Financial Statement and all
references to the "Balance Sheet Date" shall mean December 31, 1999.
2.5. Undisclosed Liabilities. The Business has no liability or
obligation of any nature, whether due or to become due, absolute, contingent or
otherwise, including liabilities for or in respect of national, local or foreign
Taxes, customs duties and any interest or penalties related hereto, except for
liabilities that are (a) fully reflected on the Balance Sheet or (b) incurred in
the ordinary course of business since the Balance Sheet Date and fully reflected
as liabilities on the Business's books of account, none of which individually or
in the aggregate, has been materially adverse.
2.6. No Changes. Except as disclosed on Schedule 2.6, since the
Balance Sheet Date and until the Closing, Seller has conducted the Business only
in the ordinary course. Without limiting the generality of the foregoing
sentence, there has not been: Except as otherwise disclosed on Schedule 2.6,
there has not been:
(a) any change in the financial condition, assets,
liabilities, net worth of the Business, except changes in the ordinary course of
business, none of which, individually or in the aggregate has been or could have
an Material Adverse Effect;
(b) any damage, destruction or loss, whether or not
covered by insurance, which could have a Material Adverse Effect;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of the assets, tangible or intangible of the Business;
(d) any strike, walkout, labor trouble or any other new or
continued event, development or condition of any character which has or could
have a Material Adverse Effect;
<PAGE> 24
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(e) any increase in the salaries or other compensation
(excluding increases in the ordinary course of business and consistent with past
practice) payable or to become payable to, or any advance (excluding advances
for ordinary business expenses) or loan to, any officer, director or employee of
the Business, or any increase in, or any addition to, other benefits (including
without limitation any bonus, profit-sharing, pension or other plan) to which
any of its officers, directors or employees may be entitled, or any payments to
any pension, retirement, profit-sharing, bonus or similar plan except payments
in the ordinary course of business and consistent with past practice made
pursuant to any employee benefit plan, or any other payment of any kind to (or
on behalf of) any such officer, director or employee other than payment of base
compensation and reimbursement for reasonable business expenses in the ordinary
course of business;
(f) any making or authorization of any capital
expenditures which are not in the ordinary course of business or in excess of 6
billion Won;
(g) any cancellation or waiver of any right material to
the operation of the Business or any cancellation or waiver of any debts or
claims of substantial value or any cancellation or waiver of any debts or claims
against any Affiliate;
(h) any sale, transfer or other disposition of any assets
of the Business, except sales of assets in the ordinary course of business;
(i) any payment, discharge or satisfaction of any
liability or obligation (whether accrued, absolute, contingent or otherwise) by
Seller related to or affecting the Business, other than the payment, discharge
or satisfaction, in the ordinary course of business, of liabilities or
obligations shown or reflected on the Balance Sheet or incurred in the ordinary
course of business since the Balance Sheet Date;
(j) any adverse change or any threat of any adverse change
in Seller's relations with, or any loss or threat of loss of, Seller's
suppliers, clients or customers, which change or loss could have a Material
Adverse Effect;
(k) any write-offs as uncorrectable of any notes
receivable of the Business or write-downs of the value of any assets or
inventory by Seller related to the Business other than in immaterial amounts or
in the ordinary course of business consistent with past practice and at a rate
no greater than during the twelve months ended on the Balance Sheet Date;
(l) any change by Seller in any method of accounting or
keeping its books of account or accounting practices related to or affecting the
Business;
(m) any creation, incurrence, assumption or guarantee by
the Business
<PAGE> 25
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of any obligations or liabilities (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by the Business
of any indebtedness for money borrowed;
(n) any payment, loan or advance of any amount to or in
respect of, or the sale, transfer or lease of any properties or assets (whether
real, personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any Affiliate, except for (i)
compensation to the officers and employees of the Business at rates not
exceeding the rates of compensation disclosed on Schedule 2.19 hereto and (ii)
reimbursements of or advances for expenses incurred for business-related
purposes not exceeding 1.2 billion Won outstanding in the aggregate at any given
time.
(o) any disposition of or failure to keep in effect any
rights in, to or for the use of Intellectual Property included in the Purchased
Assets, or, to Seller's Knowledge, any disclosure to any person not an employee
or other disposal of any trade secret, process or know-how relating to the
Business; or
(p) any transaction, agreement or event to which Seller is
a party or a participant relating to the Business outside the ordinary course of
the Business or inconsistent with past practice.
(q) to Seller's Knowledge, neither the Business nor Seller
has become subject to any newly enacted or adopted law which may reasonably be
expected to have a Material Adverse Effect.
(r) any written up the value of any inventory or any other
assets, except for write-ups in the ordinary course of business and consistent
with past practices.
2.7. Taxes. Seller has (a) timely filed all national or local,
payroll, withholding, VAT, excise, sales, use, customs duties, personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock and franchise or other tax returns of any kind whatsoever relating
to the Business (all the foregoing taxes, including interest and penalties
thereon and including estimated taxes, being hereinafter collectively called
"Taxes" and individually a "Tax"), (b) has paid all Taxes which are due pursuant
to such returns and (c) paid all other Taxes for which a notice of assessment or
demand for payment has been received. All such returns have been prepared in
accordance with all applicable laws and requirements and accurately reflect the
taxable income (or other measure of Tax) of the Party filing the same. The
accruals for Taxes contained in the Balance Sheet are adequate to cover all
liabilities for Taxes relating to the Business for all periods ending on or
before the Balance Sheet Date and nothing has occurred subsequent to that date
to make any of such accruals inadequate as of the Balance Sheet Date. All Taxes
for periods beginning after the Balance Sheet Date have been paid or are
adequately reserved against on the books of Seller. Seller has timely filed all
information returns
<PAGE> 26
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or reports which are required to be filed and has accurately reported all
information required to be included on such returns or reports. To Seller's
Knowledge, there are no proposed assessments of Tax against Seller or proposed
adjustments to any Tax returns filed, pending against Seller. Except as
disclosed on Schedule 2.7, Seller has not received notice that any Tax return is
under examination by any taxing authority. Except as disclosed on Schedule 2.7
hereto, Seller has not executed a waiver or consent extending any statute of
limitation for any Tax liability which remains outstanding. Except as disclosed
on Schedule 2.7 hereto, since January 1, 1998, Seller has not (a) joined in or
been required to join in filing a consolidated income Tax return, or (b) entered
into a closing agreement with any taxing authority.
2.8. Inventory. All of the inventories of the Business, including
that reflected in the Balance Sheet, are valued at cost being determined on a
weighted average basis except as disclosed in the Financial Statements. All of
the inventories of the Business reflected in the Balance Sheet and all such
inventories acquired since the Balance Sheet Date consist of items of a quality
and quantity usable and saleable in the ordinary course of business and at
normal profit margins (other than normal trade discounts regularly offered by
the Business for prompt payment or quantity purchase), and all of the raw
materials and work in process inventory of the Business reflected in the Balance
Sheet and all such inventories acquired since the Balance Sheet Date can
reasonably be expected to be consumed in the ordinary course of business within
a reasonable period of time. A physical inventory shall be taken during the week
prior to the Closing Date. Attached hereto is Schedule 2.8 which sets forth the
value of the Business's inventory of finished goods, work in process and raw
materials as of December 31, 1999 together with the period of time within which
such inventories are usable and salable.
2.9. No Pending Litigation or Proceedings. Except as set forth on
Schedule 2.9 hereto, there are no actions, suits, investigations, proceedings or
claims pending or affecting, or to Seller's Knowledge, threatened against or the
Business of Seller or Seller's agents or their assets of or related to the
Business, by or before any court or governmental department, agency or
instrumentality, and to Seller's Knowledge, there is no basis for any such
action, suit, investigation, proceeding or claim. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency, against or, to Seller's Knowledge, affecting the
Business.
2.10. Contracts; Compliance. Except as listed on Schedule 2.10
hereto, Seller is not a party to nor bound by any contract or commitment, oral
or written, formal or informal related to or affecting the Business, of the
following types:
(a) mortgages, indentures, security agreements or other
agreements and instruments relating to the borrowing of money, the extension of
credit or the granting of liens or encumbrances;
(b) employment and consulting agreements;
<PAGE> 27
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(c) union or other collective bargaining agreements;
(d) powers of attorney;
(e) sales agency, manufacturers representative and
distributorship agreements or other distribution or commission arrangements;
(f) licenses of patent, trade secrets, know-how,
trademark, copyrights and other Intellectual Property;
(g) agreements, orders or commitments for the purchase of
services, raw materials, supplies or finished products from any one supplier for
an amount in excess of 100 million Won.
(h) agreements, orders or commitments for the sale of
products or services for more than 100 million Won to any single Purchaser;
(i) contracts or options relating to the sale by Seller of
any asset of the Business, other than sales of inventory in the ordinary course
of business;
(j) bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation, accrued vacation pay, group
insurance, welfare agreements or other plans, agreements, trusts or arrangements
for the benefit of employees;
(k) agreements or commitments for capital expenditures
which are not in the ordinary course of business or in excess of 6 billion Won
for any single project;
(l) joint venture agreements;
(m) agreements requiring the consent of any party thereto
to the consummation of the transactions contemplated hereby;
(n) agreements with any Affiliate;
(o) lease agreements under which it is either lessor or
lessee;
(p) agreements, contracts or commitments for any
charitable or political contribution;
(q) non-competition agreements;
<PAGE> 28
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(r) any foreign currency exchange or forward purchase
agreements directly related to the Business;
(s) any agreements providing for indemnification or
guaranty obligations of Seller with respect to the Business other than in the
ordinary course of business having a potential cost in excess of 100 million
Won;
(t) requirements agreements relating to obligations to
purchase all or substantially all of any products as well as to supply all or
substantially all of the products;
(u) any non-disclosure agreement; or
(v) other agreements, contracts and commitments which are
material to the Business, or which involve payments or receipts of more than 1.2
billion Won in any single year, or which were entered into other than in the
ordinary and usual course of business.
All such contracts and other commitments are in full force and
effect; all parties to such contracts and other commitments have complied with
the provisions thereof; no such party is in default under any of the terms
thereof; and no event has occurred that with the passage of time or the giving
of notice or both would constitute a default by any party under any provision
thereof.
2.11. Compliance with Laws. Schedule 2.11 hereto sets forth a
list of all material permits, certificates, licenses, orders, registrations,
franchises, authorizations and other approvals from all national, local and
foreign governmental and regulatory bodies held by Seller that relate to or
effect the Business or the Purchased Assets. Seller holds and is in compliance
with all material permits, certificates, licenses, orders, approvals,
registrations, franchises and authorizations required under all laws in
connection with the Business and the Purchased Assets, and, to Seller's
Knowledge, all of such permits, certificates, licenses, orders, approvals,
registrations, franchises and authorizations are in full force and effect.
Seller has complied with all applicable statutes, rules, regulations and orders,
national and local, which, if not complied with, would have a Material Adverse
Effect on the Business or the Purchased Assets. No notice, citation, summons or
order has been issued, no complaint has been filed, no penalty has been assessed
and, to Seller's Knowledge, no investigation or review is pending or threatened
by any governmental or other entity (a) with respect to any alleged violation by
Seller of any law of any governmental entity relating to or affecting the
Business or the Purchased Assets (b) with respect to any alleged failure by
Seller to have any permit, certificate, license, approval, registration or
authorization required in connection with the Business or the Purchased Assets.
2.12. Environmental Matters.
(a) Except as disclosed on Schedule 2.12 hereto or in the
site
<PAGE> 29
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assessments of the Owned Real Properties performed by or on behalf of Purchaser
(true and complete copies of which Purchaser has delivered to Seller):
(i) The Business is in compliance with and are not in
violation of any national or local statutory or regulation, rule, order,
ordinance, guideline, direction, or notice, relating to the environment, public
health and safety, and employee health and safety, including those relating to
Hazardous Substances ("Environmental Laws").
(ii) Seller holds and is in compliance with all
necessary or required environmental permits, certificates, consent or other
settlement agreements, licenses, approvals, registrations and authorizations
required under all Environmental Laws that relate to or affect the Business
("Environmental Permits") as being used as of the date of this Agreement, and
all of such Environmental Permits are valid and in full force and effect. All
such Environmental Permits held by Seller are listed on Schedule 2.12 hereto and
any that are not transferable are so designated. Seller has made or will make
before the Closing timely application for renewals of all such Environmental
Permits for which Environmental Laws require that applications must be filed on
or before the Closing to maintain the Environmental Permits in full force and
effect after the Closing Date. Purchaser shall bear any fees, cost or other
expenses incurred in making such filings or applications to the extent to which
Purchaser receives a benefit from the Environmental Permit obtained as a result
of such filing or application.
(iii) No consent, approval or authorization of, or
registration or filing with any Person, including any environmental governmental
Authority or regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Seller (with Purchaser's reasonable assistance) has or will prepare and
file all applications for the transfer of all Environmental Permits, at
Purchaser's expense, that must be transferred as a result of the consummation of
the transactions contemplated by this Agreement.
(iv) No notice, citation, summons or order has been
issued or served upon, no complaint has been filed, no penalty has been assessed
and, to Seller's Knowledge, no investigation or review is pending or threatened
by any Authority or Person: (a) with respect to any alleged violation by Seller
of any Environmental Law relating to or affecting the Business; or (b) with
respect to any alleged failure by Seller to have any Environmental Permit
relating to or affecting the Business; or (c) with respect to any use,
possession, generation, treatment, storage, recycling, transportation or
disposal (collectively "Management") of any Hazardous Substances by or on behalf
of Seller or, to Seller's knowledge, its predecessors relating to or affecting
the Business.
(v) Seller has not received any request for
information, notice of claim, demand, order or notification for which it or any
of its predecessors are or may
<PAGE> 30
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be potentially responsible with respect to any investigation or clean-up of any
threatened or actual Release of any Hazardous Substance relating to or affecting
the Business.
(vi) Except for Hazardous Substances stored or used
in the ordinary course of their manufacturing processes, in quantities and in a
manner (1) not in violation of any applicable law, or (2) which has not or is
not reasonably likely to create a condition which requires investigation,
re-mediation or other responsive action or responsibility or liability under
Environmental Laws, to Seller's Knowledge neither Seller nor any Affiliate of
Seller has used, generated, treated, stored for more than 90 days, recycled or
disposed of any Hazardous Substances on any property now owned, operated or
leased by Seller or any Affiliate of Seller or on any formerly owned, operated
or leased property that is related in any way to the Business, nor has anyone
else during the period that such property has been owned, operated or leased by
Seller or, to Seller's Knowledge, during any other period, treated, stored for
more than 90 days, recycled or disposed of any Hazardous Substances on any
property now owned, operated or leased by Seller or Affiliate of Seller or on
any formerly owned, operated or leased property.
(vii) No Hazardous Substance generated by Seller or
any Affiliate of Seller that is any way related to the Business has been
recycled, treated, stored, disposed of or transported by any entity in violation
of any Environmental Law or in a manner which has created or is reasonably
likely to create any liability or responsibility under any Environmental Law.
(viii) No Hazardous Substance has been Released at,
on, about or under by Seller or, to Seller's Knowledge is present in the
Purchased Assets or in any property now owned, operated or leased by Seller or
any Affiliate of Seller that is in any way related to the Business which
requires investigation, re-mediation or other response action.
(ix) There are no environmental Liens on the
Purchased Assets or on any properties owned or leased by Seller or any Affiliate
of Seller which would materially impair Purchaser's ability to lawfully operate
the Business as such Business was operated prior to the Closing Date and, to
Seller's Knowledge, no government actions have been taken or are in process or
pending which could subject any of such properties to such Liens.
(x) No deed or other instrument of conveyance of real
property to Seller or any Affiliate of Seller with respect to the Real
Properties contains a restriction relating to the actual or suspected presence
of Hazardous Substances, which restriction would materially impair Purchaser's
ability to lawfully operate the Business as such Business was operated prior to
the Closing Date.
(xi) To Seller's Knowledge, there are no facts or
circumstances related to environmental matters concerning the Purchased Assets
that could
<PAGE> 31
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reasonably be expected to lead to any future environmental claims against
Seller, or Purchaser under current law.
(xii) There have been no environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted by
or at the direction of Seller or, in the possession of Seller indicating the
presence of any Hazardous Substance in or on any property or business now or
previously owned, operated, or leased by Seller or any Affiliate of Seller in
any way related to the Business in material violation of any Environmental Law
or which has created a condition which requires investigation, re-mediation or
other response action under Environmental Law which have not been provided to
Purchaser prior to the date hereof.
2.13. Consents. Except as set forth on Schedule 2.13, no consent,
approval or authorization of, or registration or filing with, any Person, is
required in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.14. Personal Property. Seller owns all of its tangible personal
property and assets substantially relating to or affecting the Business,
including the properties and assets reflected in the Balance Sheet (except those
disposed of in the ordinary course of business since the Balance Sheet Date);
and at the Closing none of such properties or assets will be subject to any
mortgage, pledge, lien, restriction, encumbrance, claim, security interest,
charge or any other matter affecting title, except, (a) minor imperfections of
title, none of which, individually or in the aggregate, materially detracts from
the value of or impairs the use of the affected properties or impairs any
operations of Seller, (b) liens for current Taxes not yet due and payable, or
(c) as disclosed on Schedule 2.14 hereto (the "Personal Property Permitted
Encumbrances"). All tangible personal property, assets, equipment or other
personal property consigned or leased to Seller, whether used exclusively in the
operation of the Business are listed on Schedule 2.14.
2.15. Real Estate.
(a) Schedule 2.15 hereto contains a true, correct and
complete list of all real properties owned, leased, subleased, licensed or
otherwise occupied by Seller substantially relating to or affecting the Business
including the real property that Purchaser purchases under this Agreement
(collectively, the "Real Properties") separately indicating the nature of
Seller's interest therein. Except as set forth on Schedule 2.15 hereto, no other
Person has any oral or written right, agreement or option to acquire, lease,
sublease or otherwise occupy all or any portion of such Real Properties. Seller
has not received any written or oral notice for assessment for public
improvements against any of the Real Properties which remains unpaid and, to
Seller's Knowledge, no such assessment has been proposed. There is no pending
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Properties and, to Seller's Knowledge, no such
proceeding is contemplated.
<PAGE> 32
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(b) Except as disclosed on Schedule 2.15 hereto,
(i) Seller has good and marketable title to the Real
Properties owned by Seller (the "Owned Real Properties"). The Owned Real
Property is free and clear of any and all Liens, exceptions, items,
encumbrances, easements, restrictions and other matters either of record or not
of record which either individually or in the aggregate, could prohibit or
adversely interfere with Purchaser's use of such property except (a) matters set
forth on Schedule 2.15 and referred to as the "Exceptions that will not exist at
Closing" (the "Exceptions That Will Not Exist at Closing"), (b) matters set
forth on Schedule 2.15, none of which is material in amount and none of which,
individually or in the aggregate, impairs, or grants or evidences rights which
if exercised would impair, the use of the affected property in the manner such
property is currently being used, or impairs the current operations of the
Business, (c) defects of title, conditions, easements, encroachments, covenants
or restrictions, if any, none of which is material in amount and none of which,
individually or in the aggregate, materially impairs, or grants or evidences
rights which if exercised would materially impair, the use of the affected
property in the manner such property is currently being used, or impairs the
current operations of the Business, and (d) zoning or land use ordinances, none
of which, individually or in the aggregate, impairs the use of the affected
property in the manner such property is currently being used or impairs the
current operations of the Business (collectively, the "Permitted Real Property
Encumbrances"). No material default or breach exists under any of the covenants,
conditions, restrictions, rights-of-way or easements, if any, affecting all or
any portion of the Owned Real Properties.
(ii) The current zoning of each of the Real
Properties permits the operator of such property to use such property for
Purchaser's intended use thereof, provided that such use is similar to Seller's
use thereof or otherwise disclosed to Seller. Seller has not made any
application for a rezoning of any of the Owned Real Properties. To Seller's
Knowledge, there are no proposed or pending changes to any zoning affecting any
of the Owned Real Properties.
(iii) All utilities, including without limitation,
potable water, sewer, gas, electric, telephone, and other public utilities and
all storm water drainage required by law or necessary for the operation of the
Real Properties, (1) either enter the Real Properties through open public
streets adjoining the Real Properties, or, if they pass through adjoining
private land, do so in accordance with valid public or private easements or
rights of way which will inure to the benefit of Purchaser, (2) are installed,
connected, operating and adequate for the operation of the Business as it has
been previously conducted by Seller, with all installation and connection
charges paid in full, including, without limitation, connection and the right to
discharge sanitary waste into the collector system of the appropriate sewer
utility, and (3) are adequate (in both quality and quantity) to service the Real
Properties for their respective use in the business as presently conducted
thereon.
<PAGE> 33
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(iv) Each of the Real Properties is located along one
or more dedicated public streets or has access thereto. All curb-cut and
street-opening permits or licenses required for vehicular access to and from the
Real Properties to any adjoining public street or to any parking spaces utilized
in connection with the Real Property have been obtained and paid for, are in
full force and effect and shall inure to the benefit of Purchaser.
(v) The improvements located on the Real Properties,
including the roof, structure, soil, elevators, walls, heating, ventilation, air
conditioning, plumbing, electrical, drainage, fire alarm, communications,
security and exhaust systems and their component parts, or other improvements on
or forming a part of the Real Properties, are adequate for the operation of the
Business as it has been previously conducted by Seller. Seller has not received
any notification of and there are no outstanding or incomplete work orders in
respect of any of the buildings, improvements or other structures constructed on
the Real Properties or of any current non-compliance with applicable statutes
and regulations or building and zoning by-laws and regulations.
(c) Except as set forth on Schedule 2.15 hereto, there are
no deeds of trust or mortgages which are a Lien upon the Real Properties.
2.16. Intellectual Properties
(a) Attached hereto as Schedule 2.16 is a correct list of
all Intellectual Property.
(b) Except as set forth on Schedule 2.16, to Seller's
Knowledge, neither the manufacture, sale, use of any products now or heretofore
manufactured or sold by Seller nor the operation of the Business did and does
infringe (nor has any claim been made that any such action infringes) the
patents or other Intellectual Property rights of others.
(c) With respect to the portion of the Intellectual
Property that is not owned by Seller ("Licensed Intellectual Property"), Seller
owns or possesses adequate licenses or other rights at reasonable market costs
to use the same as necessary to conduct the Business as now conducted. Except as
set forth on Schedule 2.16, there is no agreement to which Seller is a party or
to which Seller is legally bound and no restriction or Liens, materially and
adversely affecting the use by Seller and, after the Closing, the use by
Purchaser, of any of the Licensed Intellectual Properties.
(d) There is no pending litigation or other legal action
with respect to any of the Intellectual Properties, and no order, holding,
decision or judgment has been rendered by any Authority, and no agreement,
consent or stipulation exists to which, in any such event, Seller is a party or
of which Seller has knowledge, which would prevent Seller, or after the Closing,
Purchaser, from using any of the Intellectual Properties.
<PAGE> 34
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(e) The operation of the Business by Purchaser will not
result in Purchaser being required either (i) to pay any royalties, other
payments or consideration, or (ii) to grant any right, to any third parties,
either directly or indirectly or through Seller, with respect to the
Intellectual Property rights of such third parties.
(f) Schedule 2.16(f) sets forth a true and correct
description of Seller's Year 2000 plan together with a description of the
current status of the execution of the plan. Seller has, as of the date hereof,
taken all reasonable steps, and made every reasonable effort, to substantially
comply with, implement, carry out and effectuate all of the requirements, steps,
measures and procedures, and meet all the guidelines and deadline, as set forth
in such plan. Seller has no knowledge of any event, occurrence, condition or
reason that would prevent, or interfere with, the implementation of the plan
substantially in accordance with the guidelines and deadlines set forth in such
plan.
(g) Schedule 2.16(g) lists all actions that must be taken
by Purchaser within sixty (60) days of the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any of the Intellectual Property.
2.17. Transactions with Related Parties. Except as disclosed on
Schedule 2.17, no Affiliate has:
(a) borrowed money or loaned money to Seller in connection
with the Business or the Purchased Assets which remains outstanding;
(b) any contractual or other claims, express or implied,
of any kind whatsoever against Seller in connection with the Business or the
Purchased Assets;
(c) any interest in any property or assets used by Seller
in connection with the Business or the Purchased Assets; or
(d) is engaged in any other transaction with Seller
relating to or affecting the Business or the Purchased Assets (other than
employment relationships at the salaries disclosed in Schedule 2.19 hereto).
2.18. Condition of Assets. The buildings, machinery, equipment,
tools, furniture, improvements and other fixed assets of Seller used in or
related to or affecting the Business, including those reflected in the Balance
Sheet, are adequate for the operation of the Business as it has been previously
conducted by Seller.
2.19. Compensation Arrangements; Officers and Directors. Schedule
2.19
<PAGE> 35
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hereto sets forth the following information:
(a) The names and current annual salary, including any
bonus, if applicable, of all present directors, officers and employees of Seller
at the rank of "Kwa Jang" or higher who work in connection with the Business
together with a statement of the full amount of all remuneration paid by Seller
to each such person during the 12 month period preceding the date hereof.
(b) the names and titles of each trustee, fiduciary or
plan administrator of each employee benefit plan of Seller.
2.20. Labor Relations.
(a) Schedule 2.20 hereto contains a true and complete list
of all current employees of Seller that Seller asserts are necessary to the
operation of the Business ("Employees"), together with their respective job
titles and current annual compensation and bonuses or bonus eligibility (if
any), as of the date hereof. Schedule 2.20 shall have been updated as of the
Closing, if necessary. Except for those individuals identified on Schedule 2.20,
there are no employees hired by and currently working for Seller necessary to
the operation of the Business.
(b) Schedule 2.20 contains a list of all written
employment policies, practices, manuals, handbooks, procedures, and terms and
conditions of employment of Seller, including wages, pension benefit plan, an
employee welfare benefit plan or any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, health, cafeteria,
flexible benefit, medical expense reimbursement, dependent care, stock option,
stock purchase, stock appreciation rights, savings, deferred compensation,
consulting, severance pay or termination pay, vacation pay, life insurance,
welfare or other employee benefit or fringe benefit plan, program or
arrangement, or any other similar things that are applicable to Employees.
Except as listed on Schedule 2.20, there are no employment policies, practices,
manuals, handbooks, procedures or terms or conditions of employment that are
applicable to Employees.
(c) Schedule 2.20 contains a list of all current, or if
expired and not renewed, the most recent, employment, labor or collective
bargaining agreements with any of the Employees. Except as listed on Schedule
2.20, there are no employment, labor or collective bargaining agreement, or
governmental or administrative charges, affecting or concerning the Employees,
pending or to Seller's knowledge threatened against Seller.
(d) Except as set forth on Schedule 2.20, there are no
consulting, contracting or independent contracting agreements with any person
retained or employed in connection with the Assets or the Business.
<PAGE> 36
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(e) The overall relations of Seller with its employees are
good. There are no unfair labor practice complaints against Seller pending or,
to Seller's Knowledge, threatened. There is no labor strike, dispute, slow down
or stoppage actually pending or, to Seller's Knowledge, threatened against or
involving Seller. No employee grievance which might to Seller's Knowledge have
an adverse effect on Seller or the conduct of the Business is pending. No
private agreement restricts Seller from relocating, closing or terminating any
of its operations or facilities. Except as disclosed in Schedule 2.20, Seller
has not in the past twelve (12) months experienced any work stoppage or slow
down or, to the best of Seller's Knowledge committed any unfair labor practice.
2.21. Products Liability. Except for lawsuits, claims, damages
and expenses adequately covered by Seller's insurance, there are no (a)
liabilities of Seller, fixed or contingent, asserted or, to Seller's Knowledge,
unasserted, with respect to any product liability or any similar claim that
relates to any product manufactured and sold by Seller to others in connection
with the Business, or (b) liabilities of Seller, fixed or contingent, asserted
or, to Seller's Knowledge, unasserted, with respect to any claim for the breach
of any express or implied product warranty or any other similar claim with
respect to any product manufactured and sold by Seller to others other than
standard warranty obligations (to replace, repair or refund) made by Seller in
the ordinary course of business to Purchasers of its products in connection with
the Business.
2.22. Insurance. Attached hereto as Schedule 2.22 is a complete
and correct list of all policies of insurance relating to the Business or the
Purchased Assets of which Seller is the owner, insured or beneficiary, or
covering any of the property of the Business, true, correct and complete copies
of which have been delivered to Purchaser, indicating for each policy the
carrier, the insured, type of coverage, the amounts of coverage, deductible,
premium rate, cash value if any, expiration date and any pending claims
thereunder. All such policies are in full force and effect. The coverage
provided by such policies are reasonable, in both scope and amount, in light of
the risks attendant to the Business and the Purchased Assets. Seller has
paid-in-full all premiums due on such policies as of the Closing Date. There is
no default with respect to any provision contained in any such policy, nor has
there been any failure to give any notice or present any claim under any such
policy in a timely fashion or in the manner or detail required by the policy.
Except as set forth on Schedule 2.22, there are no outstanding unpaid premiums
or claims under such policies. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by Seller. Except as set forth on Schedule 2.22, Seller has not been
refused any insurance, nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last five years.
2.23 Brokerage. Seller has not made any agreement or taken any
other action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transaction contemplated hereunder.
<PAGE> 37
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2.24 Disclosure. No representation or warranty by Seller in this
Agreement, and no exhibit, certificate or schedule furnished or to be furnished
to Purchaser pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading or necessary to
provide Purchaser with proper information as to Seller and the Purchased Assets.
Seller shall disclose to Purchaser at Closing any information then in the
possession of Seller that indicates that Purchaser is in breach of this
Agreement or which may provide the basis for a claim by Seller that Purchaser
has breached this Agreement.
2.25 Mitigation. The Parties acknowledge that the representations
and warranties set forth above shall, in any case not be interpreted as limiting
or restricting Purchaser's general obligation at law, if any, to prevent and/or
mitigate any loss or damages which it may incur after the Closing in connection
with or involving the Business or the Purchased Assets to be transferred under
this Agreement.
2.26 Non-Competition. For a period of ten (10) years from the
Closing Date, Seller shall not compete, and shall cause all of its Affiliates,
principal shareholders, directors and officers to refrain from competing, in any
way, whether directly or indirectly, persistently or occasionally, in its own
name or in the name of a third party, for its own account or for the account of
a third party, or by acquisition of a direct or indirect ownership or
participation in a competitor or otherwise, with Purchaser in the business area
of the Business in any jurisdiction. Seller shall further ensure that neither
Seller, any of its Affiliates, nor any of their principal shareholders,
directors, officers, employees or agents shall directly or indirectly solicit or
encourage any employee of Purchasers engaged in the Business to leave the employ
of Purchaser.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.1. Organization and Good Standing. Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of
Korea.
3.2. Corporate Power and Authority. Purchaser has all requisite
corporate power and authority to make, execute, deliver and perform this
Agreement and all other agreements, documents and instruments to which it is a
party or is otherwise obligated which are executed, delivered or performed
pursuant to this Agreement.
3.3. Due Authorization. The execution, delivery and performance
of this Agreement and all other agreements, documents and instruments to which
Purchaser is a party or is otherwise obligated which are to be executed,
delivered or performed pursuant to this Agreement have been duly authorized by
all necessary corporate action on the part of Purchaser, and this Agreement
constitutes and any other instruments to be delivered by Purchaser at Closing,
when executed and delivered at Closing, will constitute, the legal, valid and
binding obligations of Purchaser, enforceable against it in accordance with
their respective terms.
3.4. Brokerage. Purchaser has not made any agreement or taken any
other action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereunder.
3.5. No Breaches; Etc. The execution, delivery and performance of
this Agreement and the other agreements contemplated by this Agreement and the
consummation of the transactions contemplated by this Agreement do not and will
not result in any breach or acceleration of any of the terms or conditions of
its articles of incorporation or bylaws, or of any mortgage, bond, indenture,
contract, agreement, license or other instrument or obligation to which
Purchaser is a party. The execution, delivery and performance of this Agreement
or the other agreements contemplated by this Agreement will not result in the
material violation of any statute, regulation, judgment, writ, injunction or
decree of any court, threatened or entered in a proceeding or action in which
Purchaser is, was or may be bound.
3.6. Disclosure. No representation or warranty by Purchaser in
this Agreement, and no exhibit, certificate or schedule furnished or to be
furnished to Seller pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading or necessary to
provide Seller with proper information as to Purchaser and the Purchase Assets.
Purchaser shall disclose to Seller at Closing any information then in the
possession of Purchaser that indicates that Seller
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is in breach of this Agreement or which may provide the basis for a claim by
Purchaser that Seller has breached this Agreement.
3.7. Litigation. There is no action, suit, proceeding or
investigation pending, or, to Purchaser's knowledge, threatened, against or
related to Purchaser or its respective properties or business which would be
reasonably likely to adversely affect or restrict Purchaser's ability to
consummate the transactions contemplated by this Agreement, and there is no
reasonable basis known to Purchaser for any such action that may result in such
effect and is probable of assertion.
3.8 Mitigation. The Parties acknowledge that the representations
and warranties set forth above shall, in any case not be interpreted as limiting
or restricting Seller's general obligation at law, if any, to prevent and/or
mitigate any loss or damages which it may incur after the Closing in connection
with the transfer of the Business or the Purchased Assets to Purchaser under
this Agreement.
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ARTICLE 4
CERTAIN ADDITIONAL COVENANTS
4.1. Costs, Expenses and Taxes. Unless otherwise provided for
herein, Purchaser and Seller will each pay all their own expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including (a) all costs, expenses and Taxes to the extent levied to each Party,
and (b) all accounting, legal and appraisal fees and settlement charges.
4.2. Employees of the Business. Not later than one week prior to
the Closing, the Parties shall finalize a list of employees to be transferred
from Seller to Purchaser (the "Transferred Employees"). Further, the Transferred
Employees shall include certain employees as shall be identified in Schedule 4.2
("Key Employees"). The transfer from Seller to Purchaser of the Transferred
Employees shall be subject to the following basic principles:
(a) All of the Transferred Employees shall have the right
to elect to be (i) formally terminated as employees of Seller and commence new
employment relation with Purchaser or (ii) transferred to Purchaser as a
continuation of their current employment.
(b) With respect to the Transferred Employees who elect to
terminate their employment with Seller and commence new employment relation with
Purchaser, Seller shall pay, in a timely manner in accordance with the
requirements of the Labor Standards Act and current company practices, all
salary, bonuses, allowances, severance, unused leave (including the pro rata
portion of accrued but unused leave attributable to the portion of the 2000
calendar year prior to the Closing) and any other monetary obligations or claims
relating to the Transferred Employees' employment with Seller or its Affiliates
that may have accrued to those personnel prior to their separation. Seller
represents and warrants that the amount paid by it to such personnel will be
adequate to fully satisfy all of their claims relating to each of their terms of
employment at Seller or any Affiliate of Seller. For the portion of the 2000
calendar year after the Closing Date, each of the Transferred Employees who have
elected to terminate shall receive the pro rata portion of paid leave days that
are attributable to this portion of the 2000 Calendar Year. For subsequent
years, each of the Transferred Employees who have elected to terminate shall
receive the same number of paid leave days that they would have received had
they continued to be employees of Purchaser, provided that Purchaser's agreement
to this provision shall in no way be interpreted as obligating Purchaser to pay
any severance to the Transferred Employees relating to their years of service at
any company other than Purchaser.
(c) With respect to the Transferred Employees who elect to
carry over their employment into Purchaser, the Parties hereby agree that Seller
shall be responsible for the severance payments. The Parties also agree that
Purchaser may be held statutorily liable for the payment of the aforementioned
severance payment, thus if and to the extent that Purchaser is required to
assume the liabilities to pay such severance payments to the Transferred
Employees who elect to carry over their employment into Purchaser, Seller shall
pay in cash to Purchaser the
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severance amount which Purchaser is required to assume within fifteen (15) days
from the Closing Date. With respect to any other liabilities of Seller relating
to those employees, as part of the Purchase Price adjustment under Section 1.6,
the Purchase Price shall be adjusted to reflect the increased liability for any
and all unpaid wages, unused leave and other rights, if any, that have accrued
to such personnel prior to commencement of their employment with Purchaser,
whether or not under any existing employment, labor or collective bargaining
agreement or under any such agreements entered into after the Closing Date but
with retroactive application extending to before the Closing Date. Purchaser
shall be responsible for the full amount of severance and other benefits of such
employees from the commencement of their employment with Purchaser. Seller
represents and warrants that the amount so adjusted under this Section 4.2(c)
will be adequate to fully satisfy all claims of these employees relating to each
of their terms of employment at Seller or any Affiliates of Seller.
(d) Prior to the Closing, Seller shall deliver to
Purchaser a list indicating the election of each Transferred Employee as
described in Section 4.2(a) above. Further, prior to the Closing, Seller shall
obtain releases from the Transferred Employees who elect to terminate their
employment with Seller and commence new employment relation with Purchaser, to
the effect that they will waive any right, if any, against Purchaser regarding
any severance, unused leave and other obligations or claims arising from their
employment relation with Seller before the Closing ("Employee Releases").
4.3 Land and Building Owned by Credit Union
Seller acknowledges that Seller does not have the full title to
the land and building which are set forth in detail in Schedule 4.3 even though
such land and building is used for the benefit of the Business. Therefore,
Seller hereby agrees to acquire the full title to such land and building prior
to Closing and shall transfer the same to Purchaser at Closing.
4.4 Indemnification.
(a) General Indemnification Obligations.
(i) Indemnification by Seller. Seller hereby agrees
to indemnify and hold harmless Purchaser from and against:
(1) any and all Damages arising out of or
resulting from any misrepresentation, breach of warranty or non-fulfillment of
any agreement on the part of Seller contained in this Agreement or in any
certificate, instrument, agreement or other document furnished or to be
furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby;
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(2) any and all Damages arising out of or
resulting from any liabilities of Seller of any nature, whether due or to become
due, whether accrued, absolute, contingent or otherwise existing on the Closing
Date or arising out of any transactions entered into, or any state of facts
existing, prior to such date, except the Assumed Liabilities;
(3) any Damages arising out of or resulting from
any claim asserted against Purchaser with respect to Excluded Liabilities;
(4) any and all Damages arising from claims
brought by Transferred Employees who have elected to terminate their employment
with Seller in relation to these employees' terms of employment with Seller or
any Affiliate of Seller, including but not limited to claims resulting from the
increase in any employee's wage during his or her period of employment with
Seller; and
(5) any secondary Tax liability of Purchaser
under the National Tax Basic Law and the Local Tax Law for the Taxes of Seller
that have accrued prior to the Closing Date.
(ii) Indemnification by Purchaser. Purchaser hereby
agrees to indemnify and hold harmless Seller from and against:
(1) any Damages arising out of or resulting from
any misrepresentation, breach of warranty or non-fulfillment of any agreement on
the part of Purchaser contained in this Agreement or in any certificate,
instrument, agreement or other document furnished or to be furnished to Seller
in connection with the transactions contemplated hereby;
(2) any Damages resulting from or arising out of
the failure by Purchaser to pay or discharge, or cause to be paid or discharged,
any of the Assumed Liabilities; and
(3) any Damages arising out of or resulting from
any claim asserted against Seller with respect to Assumed Liabilities.
(iii) For purposes of this Agreement, "Damages" means
the aggregate amount of all damages, claims, losses, obligations, liabilities
(including any governmental penalty, fines or punitive damages), deficiencies,
interest, costs and expenses arising out of or relating to a matter and any
actions, judgments, costs and expenses (including reasonable attorneys' fees and
all other expenses incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened) incident to such matter or to
the enforcement of this Agreement, including, but not limited to, reasonable
legal fees incurred by the Party entitled to indemnification under this
Agreement.
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(b) Indemnification Cap. The maximum aggregate liability
of Seller or Purchaser in respect of all claims shall not exceed the Purchase
Price.
(c) General Indemnification Procedures.
(i) Purchaser and Seller shall cooperate in the
defense or prosecution of any claim, action, suit or proceeding asserted against
either of them by a party other than a Party hereto or an Affiliate of any Party
hereto in respect of which indemnity may be sought hereunder (a "Third Party
Claim") and shall furnish such records, information and testimony, and attend
such conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith.
(ii) Except as otherwise provided in this Agreement,
no action or claim for Damages resulting from breaches of the representations
and warranties of Seller or Purchaser shall be brought or made after 24 months
following the Closing, except that such time limitation shall not apply to (i)
claims for misrepresentations or breaches of warranty relating to Section 2.7
(relating to Taxes) which may be asserted until 180 days after the running of
the applicable statute of limitations with respect to the taxable period to
which the particular claims relates, (ii) claims relating to Environmental
Liabilities that have been brought against Purchaser by third parties within
five years following the Closing Date and (iii) any claims which have been the
subject of a written notice from Purchaser to Seller prior to the expiration of
the applicable period under this Section 4.4(c)(vi), which notice specifies in
reasonable detail the nature of the claim.
(iii) Notwithstanding anything to the contrary in
this Section 4.4, no limitation or condition of liability provided in this
Section shall apply to the breach of any of the representations and warranties
contained herein if such representation or warranty was made with actual
knowledge that it contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements or facts contained
therein not misleading.
(iv) If there shall be a judicial determination that
any Party (the "Indemnified Party") seeking indemnification from another Party
(the "Indemnifying Party") under this Agreement is not entitled to such
indemnification in the amount originally claimed by a third party, then the
Indemnifying Party shall be entitled to reimbursement from the Indemnified Party
for its costs and expenses, including reasonable attorneys' fees, incurred in
the defense of the claim for such indemnity pro rata, to the extent that the
amount awarded is less than the amount originally claimed.
(v) Following the receipt by either Party of a
complaint initiating a lawsuit in respect of a Third Party Claim in respect of
which indemnity may be sought from either Party hereunder, within a reasonable
time after such receipt, the receiving
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Party shall give the other Party notice of such Third Party Claim.
(vi) Purchaser shall notify Seller and Seller shall
notify Purchaser of any claim for Damages. Such notice shall describe, to the
extent reasonably available, the nature of the claim, the proposed remedy and
the cost to remedy or to satisfy the claim. Purchaser and Seller shall, in good
faith, consult with the other Party and give the other Party a reasonable
opportunity to propose an alternative method to remedy or satisfy the claim.
Provided, however, that if the nature of the claim is such that, in Purchaser
and Seller's judgment, the above notice and opportunity provisions could
reasonably be expected to cause further Damages or would otherwise not be
appropriate under the circumstances, then the prior notice and opportunity shall
not be required. Neither Purchaser nor Seller shall be required in any event to
adopt the method proposed by the other Party. Purchaser and Seller's failure to
give the other Party the prior notice and opportunity or to adopt the method
proposed, shall not bar in any event either Party from asserting an
indemnification claim against the other under and subject to the terms and
conditions described in this Section 4.4, but, in any such claim, the failure of
either Party to give prior notice and opportunity, or to adopt the method
proposed shall be admissible evidence if either Party shall contest the
reasonableness of the amount of the Damages that it may recover from the other
Party.
(vii) Any amounts due to Purchaser or its Affiliates
as a result of Seller's indemnification obligations under this Agreement,
arising from the transactions contemplated hereby, arising from any breach of
any representation or warranty of Seller or otherwise may be set off by
Purchaser or any of its affiliates from any amounts owed at any time to Seller
or its affiliates to the extent permissible under Korean law.
4.5 Confidentiality. From and after the Closing, Seller shall,
and shall cause its Affiliates and representatives to, keep confidential and not
disclose to any other Person or use for his or its own benefit or the benefit of
any other Person any trade secrets or other confidential proprietary information
in its possession or control regarding Seller or their respective businesses and
operations. The obligations of Seller under this Section 4.5 shall not apply to
information which (i) is or becomes generally available to the public without
breach of the commitment provided for in this Section; or (ii) is required to be
disclosed by law, order or regulation of a court or tribunal or governmental
authority; provided, however, that, in any such case, Seller shall notify
Purchaser as early as reasonably practicable prior to disclosure to allow
Purchaser to take appropriate measures to preserve the confidentiality of such
information.
4.6 Access to Information. Seller and Purchaser shall reasonably
cooperate with each other after the Closing so that (subject to any limitations
that are reasonably required to preserve any applicable attorney-client
privilege) each Party has access without causing excessive hardship to normal
operations to the business records, contracts and other information existing at
the Closing Date and relating to Seller (whether in the possession of Seller or
Purchaser) (including copies thereof) as is reasonably necessary for the (a)
preparation
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for or the prosecution or defense of any suit, action, litigation or
administrative, arbitration or other proceeding or investigation (other than one
by or on behalf of a Party to this Agreement) by or against Purchaser or Seller
(b) preparation and filing of any Tax return or election relating to Seller and
any audit by any taxing authority of any returns of Purchaser or Seller relating
thereto, (c) preparation and filing of any other documents required by
governmental or regulatory bodies, (d) transfer of data to Purchaser relating to
Seller and (e) the preparation of any reports necessary for their financial
reporting purposes including that required in connection with any registration
statement or report filed by Purchaser with any governmental agency. The Party
requesting such information and assistance shall reimburse the other Party for
all out-of-pocket costs and expenses incurred by such Party in providing such
information and in rendering such assistance. The access to files, books and
records contemplated by this Section 4.6 shall be during normal business hours
and upon not less than two (2) business days prior written request, and shall
identify the scope of the information to be reviewed and shall be subject to
such further reasonable limitations as the Party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein, and shall not extend to material subject to a claim of privilege unless
expressly waived by the Party entitled to claim the same. The Parties mutually
agree to use their commercially reasonable efforts to cause their independent
public accountants to provide each other with any necessary or required consents
in connection with audit of the Business.
4.7 Cooperation.
(a) With respect to the Excluded Liabilities, Purchaser
agrees to reasonably cooperate with Seller, at no cost to Purchaser, in
connection with Seller's defense of any claims or lawsuit relating thereto,
including, without limitation, making available to Seller for inspection and
copying business records of Purchaser pertaining to such claims or lawsuits and
making employees of Purchaser available as needed from time to time for
interviews, trial testimony and similar appearances.
(a) Seller agrees to cooperate with Purchaser in Purchaser's
efforts to obtain the Tax Exemptions, provided that
Seller shall not be obligated to bear any costs in
relation to such cooperation.
4.8 Transition Services.
(a) During a certain period from the Closing Date (the
"Transition Period") to be separately agreed by the Parties, Seller shall ensure
that the Business is continued to be provided with all of the services and parts
and components currently provided to the Business by Seller or any Person
affiliated with Seller including, among other things, the research and
development, accounting, data processing, materials procurement, electronic data
processing, administrative services and all other such support services as are
reasonably required in connection with the operation of the Business, on the
terms and conditions not less favorable
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than the terms and conditions pursuant to which such services and parts and
components are now being provided to the Business. Purchaser shall pay a
reasonable fee for the services to be provided by Seller during the Transition
Period, as mutually agreed by the Parties. Prior to the Closing, Seller and
Purchaser shall enter into a service agreement ("Transition Service Agreement")
to ensure such continued services during the Transition Period, in such form and
substance as attached hereto as Schedule 4.8.
(b) During the Transition Period, Seller shall ensure that
all services currently made available to the employees of the Business
including, without limitation, cafeteria, clinic and human welfare services
continue to be provided to the Transferred Employees on the same terms and
conditions as such services are now being provided to them.
4.9 Property Taxes. Any and all Taxes, charges, public imposts,
fees, and the like (collectively "Property Taxes") which are assessed on or are
required to be paid by Purchaser for the first time after the Closing but prior
to the end of the calendar year in which the Closing occurs, in relation to, or
as a result of, ownership of the real properties (including land and buildings)
acquired from Seller or the operation of business at the place(s) acquired from
Seller shall be shared by Seller and Purchaser on the basis of the number of
days of their respective holding of the real properties or operation of business
during the calendar year in which Property Taxes are assessed. Property Taxes
shall include, but not be limited to, property tax on buildings, global land tax
on land, business place tax, and any and all surtaxes on these taxes.
4.10 Repayment of Debt. Seller agrees to use that portion of the
Purchase Price set forth in Section 1.4(b) hereto, together with any of its
funds, necessary to repay in full those obligations of Seller set forth on
Schedule 1.4(b).
4.11 Assignment of Contracts
(a) Notwithstanding anything to the contrary in this
Agreement or any Ancillary Agreements, this Agreement shall not constitute an
agreement to assign any contract which is to be an Purchased Asset or any
benefit arising thereunder or resulting therefrom, if an attempted assignment
thereof, without the consent of a party thereto other than Seller, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Purchaser, or its designees, thereunder (a "Non-Assignable
Contract"). Seller shall use prior to the Closing all commercially reasonable
efforts to obtain the consent of the other Persons for the assignment thereof to
Purchaser or its designees. If such consent is not obtained prior to the
Closing, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights thereunder so that Purchaser would not receive
substantially all such rights, (x) Seller shall continue to use all commercially
reasonable efforts to obtain the consent of the other Persons for the assignment
thereof to Purchaser or its designees, and (y) Seller and Purchaser shall
cooperate in a mutually agreeable arrangement under which Purchaser would obtain
the benefits and
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assume the obligations thereunder in accordance with Agreement, including
subcontracting, sub-licensing or sub-leasing to Purchaser, or under which Seller
would enforce for the benefit of Purchaser, with Purchaser assuming Seller's
obligations, any and all rights of Seller against a third party thereto. Seller
shall promptly pay to Purchaser when received all monies received by Seller in
respect of such Non-Assignable Contracts or any benefit arising thereunder,
except to the extent the same represents and Excluded Asset. To the extent the
benefits therefrom and obligations thereunder have been provided by alternative
arrangements as provided above, any such Non-Assignable Contract shall be deemed
a Purchased Asset, provided that Purchaser shall not be responsible for any
liabilities (i) arising out of a claim of breach of such Non-Assignable Contract
due to the establishment of the alternative arrangements, or (ii) arising out of
such Non-Assignable Contract as a result of Seller's action without Purchaser's
approval in a manner inconsistent with the alternative arrangements.
(b) In furtherance, and not in limitation of the foregoing
subsection (a), in the event that Seller is unable to obtain any required
consent to the transfer at Closing to Purchaser of any Non-Assignable Contract
and Seller and Purchaser have failed to agree on alternate arrangements to an
assignment reasonably satisfactory to Purchaser, then (i) Seller shall remain a
party to and shall continue to be bound by such Non-Assignable Contract, (ii)
Purchaser shall pay, perform and discharge fully all of the obligations of
Seller thereunder from and after the Closing Date, upon the terms and subject to
the conditions of such Non-Assignable Contract, (iii) Seller shall, without
further consideration received in respect of such Non-Assignable Contract on and
after the Closing Date, and (vi) Seller shall, without further consideration
therefor, exercise and exploit its rights and options under such Non-Assignable
Contract in the manner and only to the extent directed by Purchaser. If and when
any consent shall be obtained following the Closing Date with respect to the
transfer by Seller to Purchaser of any such Non-Assignable Contract or such
Non-Assignable Contract shall otherwise become assignable following the Closing
Date, Seller shall promptly assign all of its rights and obligations thereunder
to Purchaser, without further consideration therefor, and Purchaser shall,
without further consideration therefor, assume such rights and obligations, to
the fullest extent permitted. The existence of the provisions of this Section
4.11 shall not reduce or otherwise adversely affect any Party's ability to
enforce any of its rights under this Agreement.
4.12 Notices of Certain Events. Seller shall promptly notify
Purchaser of (i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement, (ii) any notice or other
communication from any governmental agency in connection with the transactions
contemplated by this Agreement, and (iii) any claims commenced or, to Seller's
Knowledge, threatened against, relating to or involving or otherwise affecting
the Business or the Purchased Assets that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to this
Agreement or that relate to the consummation of the transactions contemplated by
this Agreement.
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ARTICLE 5
MISCELLANEOUS
5.1. Further Assurances; Cooperation. At and after the Closing,
Seller will execute and deliver such further instruments of conveyance and
transfer as Purchaser may reasonably request to convey and transfer effectively
to Purchaser the Purchased Assets or to put Purchaser in actual possession and
control of the business of Seller.
5.2. Nature and Survival of Representations. The representations,
warranties, covenants and agreements of Purchaser and Seller contained in this
Agreement, and all statements contained in this Agreement or any Exhibit or
Schedule hereto or any certificate delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby, shall be deemed to
constitute representations, warranties, covenants and agreements of the
respective Party delivering the same. All such representations, warranties,
covenants and agreements shall survive the Closing hereunder subject to Section
4.4 hereof. Except for the representation and warranties expressly contained in
this Agreement, the Parties make no other representations or warranties and no
additional representations and warranties may be implied.
5.3. Notices. All notices, requests, demands elections and other
communications which either Party to this Agreement may desire or be required to
give hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally, by a reputable courier service which requires a
signature upon delivery, by mailing the same by registered or certified first
class mail, postage prepaid, return receipt requested, or by tele-copying with
receipt confirmation (followed by a first class mailing of the same) to the
Party to whom the same is so given or made. Such notice, request, demand,
waiver, election or other communication will be deemed to have been given as of
the date so delivered or electronically transmitted or seven days after mailing
thereof.
If to Seller, to: Anam Semiconductor, Inc.
280-8, 2-ga Sungsoo-dong
Sungdong-gu, Seoul 133-706 Korea
Attn: Kyu-Hyun Kim
If to Purchaser, to: Amkor Technology Korea, Inc.
957, Daechon-dong, Buk-gu
Kwangju 500-470 Korea
Attn: Daniel Sparks
or to such other address as such Party shall have specified by notice to the
other Party hereto.
5.4. Successors and Assigns. This Agreement, and all rights and
powers granted hereby, will bind and inure to the benefit of the Parties hereto
and their respective
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successors and assigns.
5.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Republic of Korea, without regard
to its conflict of law provisions.
5.6 Headings. The headings preceding the text of the sections
and subsections hereof are inserted solely for convenience of reference, and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
5.7 Amendment and Waiver. The Parties may by mutual agreement
amend this Agreement in any respect, and any Party, as to such Party, may (a)
extend the time for the performance of any of the obligations of any other
Party, (b) waive any inaccuracies in representations by any other Party, (c)
waive compliance by any other Party with any of the agreements contained herein
and performance of any obligations by such other Party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such Party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the Party against whom
enforcement of the same is sought.
5.8 Entire Agreement. This Agreement and the Schedules hereto,
each of which is hereby incorporated herein, set forth all of the promises,
covenants, agreements, conditions and undertakings between the Parties hereto
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
5.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
5.10 Governing Language. The English language text of the
Agreement shall prevail over any translation thereof.
5.11 Dispute Resolution. For any dispute arising under this
Agreement which is not settled after good faith attempts by the Parties to
amicably resolve such dispute, Seoul District Court shall have non-exclusive
jurisdiction over such matters.
5.12 Termination. This Agreement may be terminated upon the
occurrence of any of the following events:
(a) the mutual agreement of all the Parties to terminate the
Agreement;
(b) if the Closing does not take place prior to July 31,
2000, provided that
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the right of any Party to terminate this Agreement under
this Clause (b) shall not be available to any Party
whose failure to fulfil any obligation under this
Agreement has been the cause of, or resulted in, the
failure of the Closing Date to occur on or before such
date;
(c) by any Party upon notice to the other if any of the
conditions set forth in Sections 1.8, 1.9 and 1.10
hereof become impossible to satisfy (other than by
reason of the failure of each Party to fulfill its
obligations under this Agreement); or
(d) by any Party if any court of competent jurisdiction
shall have issued an order, decree or ruling or taken
any other action enjoining or otherwise prohibiting the
transactions contemplated under this Agreement and such
order, decree or ruling or other action has become final
and nonappealable.
5.13 Consequences of Termination. If this Agreement is terminated
by Seller or Purchaser as permitted under Section 5.12 and not as a result of a
breach of a representation or warranty or the failure of any Party to perform
its obligations hereunder, such termination shall be without liability of any
Party. If a Party terminates this Agreement as a result of a breach of a
representation or warranty by the other Party or the failure of the other Party
to perform its obligations hereunder, the non-breaching Party, in addition to
any other legal remedies that may be available, shall be entitled to
reimbursement from the breaching Party for all expenses incurred by the
non-breaching Party in connection with this Agreement and the transactions
contemplated hereby.
5.14 Enforcement and Damages. Purchaser and Seller agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each of Purchaser and Seller
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy, including without
limitation damages, to which it is entitled at law or in equity.
5.15 Severability. If at any time subsequent to the date hereof,
any term or provision of this Agreement shall be determined by any court of
competent jurisdiction to be partially or wholly illegal, void or unenforceable,
such provision shall be of no force and effect to the extent so determined, but
the illegality or unenforceability of such term or provision shall have no
effect upon and shall not impair the legality or enforceability of any other
term or provision of this Agreement.
5.16 Construction. The Parties acknowledge that each Party and
its counsel
<PAGE> 51
-50-
have reviewed and revised this Agreement and that any rule of construction to
the effect that any ambiguities are to be resolved against the drafting Party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits hereto.
<PAGE> 52
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed in their
respective names by an officer thereof duly authorized as of the date first
above written.
Amkor Technology Korea, Inc.
By: /s/ John Boruch
-------------------------------
Name: John Boruch
Title: Director
Anam Semiconductor, Inc.
By: /s/ Kim Kyu-Hyun
-------------------------------
Name: Kyu-Hyun, Kim
Title: President
<PAGE> 53
LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1 Asset List
Schedule 1.2(f) Description of K-2 Land
Schedule 1.4(a) Purchase Price
Schedule 1.4(b) Liabilities of Seller to be Repaid
Schedule 1.4(c) Downward Adjustment
Schedule 1.5 Allocation of Purchase Price
Schedule 1.6 Restrictions on Adjustment
Schedule 1.10 Contracts to be Assigned
Schedule 2.6 Changes since Balance Sheet Date
Schedule 2.7 Taxes
Schedule 2.8 Inventory
Schedule 2.9 Pending Litigation
Schedule 2.10 Contracts
Schedule 2.11 Permits
Schedule 2.12 Environmental Matters
Schedule 2.14 Personal Property Permitted Encumbrances
Schedule 2.15 Real Estate
Schedule 2.16 Intellectual Properties
Schedule 2.16(f) Year 2000 Plan
Schedule 2.16(g) Actions to be Taken
Schedule 2.17 Transactions with Related Parties
Schedule 2.19 Compensation Arrangements; Officers and Directors
Schedule 2.20 Employees
Schedule 2.22 Insurance
</TABLE>
<PAGE> 54
<TABLE>
<S> <C>
Schedule 4.2 Key Employees
Schedule 4.3 Description of Land and Building Owned by Credit Union
Schedule 4.8 Transition Service Agreement
</TABLE>
<PAGE> 1
EXHIBIT 2.2
AMENDMENT
TO
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMKOR TECHNOLOGY KOREA, INC.
as Purchaser
AND
ANAM SEMICONDUCTOR, INC.
as Seller
Dated as of February 25, 2000
<PAGE> 2
AMENDMENT TO ASSET PURCHASE AGREEMENT
This is AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment"), dated
as of February 25, 2000 by and between Amkor Technology Korea, Inc., a
corporation organized under the laws of the Republic of Korea ("Purchaser"), and
Anam Semiconductor, Inc., a corporation organized under the laws of the Republic
of Korea ("Seller"). Purchaser and Seller shall sometimes individually be
referred to as a Party and collectively as the Parties
RECITALS:
WHEREAS, Seller and Purchaser entered into an Asset Purchase Agreement dated
January 14, 2000 (the "Original Agreement") under which the Seller agreed to
Sell and Purchaser agreed to purchase the semiconductor packaging and test
operations generally known as K-1, K-2 and K-3 located at Sungsoo-dong,
Sungdong-ku, Seoul, Korea, Buchon, Kyoungki-do, Korea and Bupyung, Kyuongki-do,
Korea, respectively, ("Business"); and
WHEREAS, both Parties desires to make changes to certain sections of the
Original Agreement by entering into and amendment in accordance with Section 5.7
of the Original Agreement.
NOW THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein, and in reliance thereon,
Purchaser and Seller hereby agree as follows:
DEFINITIONS:
Unless specifically defined otherwise herein, the terms defined herein
shall have the same meanings as set forth in the Original Agreement.
AMENDMENT TO DEFINITIONS
The following definition shall be newly added in the Original Agreement:
"Market Price of Seller Shares" shall mean the issue price of new shares
(common stock) of Seller determined in accordance with the formula applicable in
case of issuance to third parties as set forth in the Regulation of Financial
Management of Listed Companies established by the Financial Supervisory Service
in Korea: in other words, 90% of the lesser of (i) KSE closing price on the Base
Date or (ii) the arithmetic average of (x) KSE closing price on the Base Date,
(y) weighted average of KSE closing price for the one week period prior to (and
including) the Base Date, and (z) weighted average of KSE closing price for the
one month period prior to (and including) the Base Date; where the Base Date
means the day before the date the board of directors of Seller resolves the
issue of the relevant new shares.
<PAGE> 3
1.3 Amendment of Section 1.3: "Purchase Price"
Sub-section 1.3(a) of the Original Agreement is hereby deleted entirely
and the following shall be substituted therefor:
The total aggregate purchase price for the Purchased Assets exclusive of
VAT shall be US$950,000,000 (the "Purchase Price") plus the Assumed
Liabilities.
1.8 Amendment of Section 1.8: "Conditions to Each Party's Obligations"
Sub-section 1.8(d) of the Original Agreement is hereby deleted and the
following shall be substituted therefor:
Amkor Technology, Inc, a corporation established under the laws of the
state of Delaware, U.S.A. and an affiliate of Purchaser ("Amkor"), shall
have invested total of US$309,000,000 to Seller: (i) US$109,000,000 to
acquire the common stock of Seller at the Market Price and (ii)
US$200,000,000 to acquire the common stock of Seller at 18,000 Korean
Won per share. Other terms and conditions of such investment shall be
mutually agreed by Amkor and Seller.
Sub-section 1.8(e) of the Original Agreement is hereby deleted entirely
and the following shall be substituted therefor:
Amkor and Seller shall have executed an agreement under which Amkor
shall subscribe and purchase the common stock of Seller at 18,000 Korean
Won per share in the total amount of US$150,000,000: (i) US$30,000,000
by no later than June 30, 2000, (ii) US$60,000,000 by no later than
August 31, 2000 (iii) and US$60,000,000 by no later than October 31,
2000. Other terms and conditions of such investment shall be mutually
agreed by Amkor and Seller.
-2-
<PAGE> 4
IN WITNESS WHEREOF, the Parties have caused this AMENDMENT to be signed
in their respective names by an officer thereof duly authorized as of
the date first above written.
Amkor Technology Korea, Inc.
By: /s/ John N. Boruch
---------------------------------
Name: John N. Boruch
Title: Director
Anam Semiconductor, Inc.
By: /s/ Kim Kyu-Hyun
---------------------------------
Name: Kyu-Hyun, Kim
Title: President
<PAGE> 1
EXHIBIT 4.3
AMKOR TECHNOLOGY, INC.
STOCKHOLDER RIGHTS AGREEMENT
This Stockholder Rights Agreement (this "Agreement") is made as of this
18th day of April, 2000, by and among Amkor Technology, Inc., a Delaware
corporation (the "Company"), and the purchasers of the Company's Common Stock
(the "Common Stock") pursuant to that certain Amended and Restated Stock
Purchase Agreement dated as of April 14, 2000 between the Company and such
purchasers in one or more closings (the "Purchasers") (the "Purchase
Agreement"). Purchasers who execute a counterpart signature page to this
Agreement after the date hereof shall become parties to this agreement without
further action by the other parties hereto.
WHEREAS, the Company and the Purchasers entered into the Purchase
Agreement pursuant to which the Company agreed to grant to the Purchasers
certain rights upon the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual obligations and promises
contained in this Agreement and other sufficient consideration deemed received,
the parties hereto agree as follows:
Agreement
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" shall mean any affiliate (as that term is defined in
Rule 405 promulgated by the Commission under the Securities Act) and, without
limitation, as respects a Holder of Registrable Securities, shall include any
investment fund that is managed by or under common management with such Holder.
"Commission" shall mean the Securities and Exchange Commission or
any successor agency.
"Registrable Securities" shall mean (i) shares of the Company's
Common Stock issued in connection with the Purchase Agreement; (ii) shares of
Common Stock issued or issuable upon the exercise of the Warrants issued
pursuant to the Purchase Agreement (the "Warrants"); and (iii) shares of the
Common Stock or other securities issued or issuable with respect to, or in
exchange for or in replacement of shares of the Common Stock and Warrants or
other securities convertible into or exercisable for the Common Stock and
Warrants upon any stock split, stock dividend, recapitalization, or similar
event; provided, however, that any shares described in clauses (i)-(iii) above
which have been resold to the public or, except for purposes of Section 19
herein, can be sold pursuant to Rule 144 of the Securities Act (as defined
below) shall cease to be Registrable Securities.
<PAGE> 2
"Holder" shall mean each Purchaser and any transferee of
Registrable Securities who, pursuant to Section 15 below, is entitled to
registration rights hereunder.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof (or any similar
legend).
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), the declaration or
ordering of the effectiveness of such registration statement and the absence of
a stop order suspending the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incidental to the
Company's performance of its obligations under this Agreement, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, accounting fees of the Company, and the expense of any
special audits incident to or required by any such registration.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
2. Restrictions on Transferability. The Restricted Securities shall not
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder of Restricted Securities will cause any proposed
transferee of the Restricted Securities held by such Holder to agree to take and
hold such Restricted Securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Common
Stock, and (ii) any other securities issued in respect of the Common Stock
issued upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 4 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
IN ADDITION, THE SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
STOCKHOLDER RIGHTS AGREEMENT BY AND AMONG THE CORPORATION, THE ORIGINAL
OWNER OF THESE SHARES AND CERTAIN OTHER HOLDERS OF THE CORPORATION'S
SHARES. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
2
<PAGE> 3
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
4. Notice of Proposed Transfers. The Holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than (i) a transfer not involving a change
in beneficial ownership, or (ii) in transactions involving the distribution
without consideration of Restricted Securities by a Purchaser to any of its
partners, or retired partners, or to the estate of any of its partners or
retired partners, (iii) a transfer to an affiliated fund or partnership, (iv)
transfers in compliance with Rule 144, so long as the Company is furnished with
satisfactory evidence of compliance with such Rule), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall, if
the Company so requests, be accompanied (except in transactions in compliance
with Rule 144) by either (i) a written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend if in the opinion of counsel for the Company such legend is not required
in order to establish compliance with any provisions of the Securities Act.
5. Request for Registration. At any time after the one year anniversary
of the First Closing Date (as defined in the Purchase Agreement), each of (i)
the AIG Funds listed on Exhibit A (acting as a group), (ii) Bellwether
Investment Pte Ltd, (iii) the Gilbert Global Funds listed on Exhibit A (acting
as a group) and (iv) Far East Investments Limited shall have the right,
severally, to request in writing that the Company file a registration statement
on Form S-3 (or any successor thereto) for a public offering of shares of
Registrable Securities, provided that the reasonably anticipated aggregate price
to the public of such offering would exceed $50,000,000. Upon receipt of such
request, and subject to the condition that the Company is a registrant entitled
to use Form S-3 to register securities for such an offering, the Company will
promptly give written notice of the request for the proposed registration to all
other Holders and include all Registrable Securities or other shares of Common
Stock of any Holder or Holders joining in such request as are specified in a
written request received by the Company within 30 days after receipt of such
written notice from the Company. Notwithstanding the foregoing, the Company may,
upon written notice to all the Holders, postpone having the registration
statement declared effective for a reasonable period not to exceed 90 days if
the Company possesses material non-public information, the disclosure of which
would have a material adverse effect on the Company and its subsidiaries taken
as a whole.
3
<PAGE> 4
Notwithstanding the foregoing provisions of this Section 5, the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 5:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has effected four such
registrations pursuant to this Section 5, such registrations have been declared
or ordered effective and the securities offered pursuant to such registrations
have been sold;
(C) Within nine months following the effective date
of a registration statement previously filed by the Company pursuant to this
Section 5; or
(D) After the 6 year anniversary of the First
Closing Date (as defined in the Purchase Agreement)
The Company shall not include any securities that are not Registrable
Securities in any registration statement filed with the Commission pursuant to a
demand made under this Section 5 without the prior written consent of the
holders of a majority of the Registrable Securities covered by such registration
statement.
6. Company Registration.
(a) Notice of Registration. If, at any time prior to the six year
anniversary of the First Closing Date (as defined in the Purchase Agreement) the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders exercising their
respective requested registration rights, other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to a
transaction pursuant to Rule 145 of the Securities Act, (iii) a registration
statement on Form S-4, (iv) any registration statement filed solely to register
debt securities or convertible debt securities or (v) a registration on Form S-3
solely for the purpose of registering shares issued in a non-underwritten
offering in connection with a merger, combination or acquisition, the Company
will:
(i)promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities or other shares of Common Stock
specified in a written request or requests, made within 10 days after receipt of
such written notice from the Company, by any Holder or Holders.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such
4
<PAGE> 5
underwriting to the extent provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 6, if the managing underwriter for the offering
determines that the success of the offering requires a limitation of the number
of shares to be underwritten, the managing underwriter for the offering Company
may limit the number of Registrable Securities and other securities to be
distributed through such underwriting.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the other Holders. The Registrable
Securities and/or other securities so withdrawn shall also be withdrawn from
registration; provided, however, that if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the Company), then the Company may offer to all Holders who have included
Registrable Securities in the registration the right on a pro rata basis to
include additional Registrable Securities in the offering in an aggregate amount
not to exceed the amount of Registrable Securities withdrawn.
(c) In all registered public offerings, whether underwritten or
not, the amount of Registrable Securities of Holders which are included in such
registration, in accordance with Section 6(a)(ii) above, shall be allocated to
the Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by each of such Holders as of the date of the
notice given pursuant to this Section 6.
7. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 5 or Section 6 shall be borne by the Company. All Selling Expenses
relating to securities registered by the Holders shall be borne by the Holders
of such securities pro rata on the basis of the number of shares so registered.
8. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will use its best efforts to:
(a) Prepare and file with the Commission a registration statement
with respect to such securities within 90 days, cause such registration
statement to become effective within 180 days and remain effective for at least
120 days, or, in the case of a Company registration, until the distribution
described in the registration statement has been completed;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to the Holders participating in such registration and
to the underwriters, if any, of the securities being registered such reasonable
number of copies of the
5
<PAGE> 6
registration statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(g) Cause such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed or quoted on each automated quotation
system on which similar securities issued by the Company are then quoted; and
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
9. Termination of Registration Rights. The registration rights granted
pursuant to this Agreement shall terminate (i) as to all Holders on the six year
anniversary of the First Closing Date (as defined in the Purchase Agreement)
anniversary of the date hereof and (ii) as to any Holder, at such time as the
Registrable Securities held by such Holder represents 1% or less of the
outstanding Common Stock of the Company and as (A) such Holder is able to sell
all Registrable Securities held by it under Rule 144 within a three month period
or (B) such Holder is able to sell all Registrable Securities held by it
pursuant to Rule 144(k) promulgated under the Securities Act.
10. Lock-Up Agreement. In consideration for the Company agreeing to its
obligations under this Agreement each Holder of Registrable Securities agrees
not to offer to sell, contract to sell or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to any Registrable Securities, any
options or warrants to purchase any Registrable Securities or any securities
convertible into or exchangeable for Registrable Securities, or otherwise
dispose of any Registrable Securities or other securities of the Company, except
to Affiliates, to any investment fund that is managed by, or under common
management with, such Holder, to any general or limited partner of such Holder
and to other Holders, in each case provided that the transferee executes and
delivers to
6
<PAGE> 7
the Company the Adoption Agreement attached as Exhibit A, without the prior
written consent of the Company until the one year anniversary of the First
Closing Date (as defined in the Purchase Agreement). Notwithstanding the
foregoing, if (i) a transferee is a limited partner of either of a Holder or an
Affiliate of such Holder, and (ii) the transferee receives fewer than 100,000
shares of capital stock of the Company (in one or more transactions with, or
distributions from, the Holder or the Affiliate of such Holder), then such
transferee shall not be required to execute the Adoption Agreement to be bound
by the obligations of the transferor pursuant to this Agreement. In addition,
each Holder of Registrable Securities agrees at all times not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities or other securities of the Company, except,
subject to the Company's right of first refusal (as set forth in Section 18):
(a) pursuant to a bona fide public offering registered under the
Securities Act;
(b) pursuant to Rule 144 under the Securities Act;
(c) in other transactions so long as such transactions do not
result in any single person or group owning 5% or more of the outstanding total
voting power of the Company and provided that no investor may transfer shares to
any competitor of the Company (as determined by the Company in its reasonable
discretion);
(d) sales into any tender or exchange offer (A) which is made by
or on behalf of the Company; (B) which is made by another person or group and is
not opposed by the Board of Directors of the Company; or (C) which is made by
another person or group and which would result in such person or group owning
more than fifty percent (50%) of the total outstanding voting power of the
Company;
(e) to a wholly-owned subsidiary, to an Affiliate of such Holder,
to an investment fund that is managed by, or under common management with, such
Holder and/or to any general or limited partner, in each case provided that the
transferee executes and delivers to the Company the Adoption Agreement attached
as Exhibit A; provided, however, that if (i) a transferee is a limited partner
of either of a Holder or an Affiliate of such Holder, and (ii) the transferee
receives fewer than 100,000 shares of capital stock of the Company (in one or
more transactions with, or distributions from, the Holder or the Affiliate of
such Holder), then such transferee shall not be required to execute the Adoption
Agreement to be bound by the obligations of the transferor pursuant to this
Agreement; or
(f) pursuant to a bona fide pledge of such shares to an
institutional lender to secure a loan, guarantee or other financial support,
provided that such lender agrees to hold such stock subject to all provisions of
this Agreement and any sale or disposition by such lender of such pledged stock
shall be subject to the limitations of this Section 10;
(g) in the event of a merger or consolidation in which the
Company is acquired by another corporation, or pursuant to a plan of liquidation
of the Company; or
(h) any public distribution (including any Rule 144 sale),
provided that, in cases other than public distributions underwritten by an
underwriter selected by the Company, no single
7
<PAGE> 8
Holder (other than an underwriter) is known to be acquiring more than five
percent (5%) of the outstanding Company shares in such distribution.
In addition to the foregoing restrictions, each Holder agrees that it
will not nor will it permit any of its affiliates to sell or transfer any of the
shares of the Company to a person or entity which as of the date of such
transfer, is engaged in or has publicly announced its intention to enter into
the business of semiconductor packaging and/or test services. Each Holder agrees
that the Company may instruct its transfer agent to place stop transfer
notations in its records to enforce the provisions of this Section 10. For
purposes of this Section 10, an acquisition or merger of an Holder by or into
another entity, in which such entity following the acquisition or merger owns at
least a majority of the outstanding capital stock of such Holder, shall not be
deemed a transfer or sale of the Registrable Securities of the Company held by
such Holder.
11. Public Offering Standoff. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
Registrable Securities, any options or warrants to purchase any Registrable
Securities or any securities convertible into or exchangeable for Registrable
Securities (except in all cases for Registrable Securities that are included in
the registration and except for transfers among Affiliates, to one or more
investment funds that are managed by, or under common management with, such
Holder, and transfers to other Holders, in each case provided that the
transferee has executed an agreement to be bound by the obligations of the
transferor pursuant to this Agreement) without the prior written consent of the
Company and such managing underwriters for such period of time, not to exceed
180 days, as the Board of Directors establishes pursuant to its good faith
negotiations with such managing underwriters, provided that the Company's
directors, officers and 5% stockholders agree to the same limitations. Each
Holder further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing. If the Holders are not permitted to
sell securities pursuant to this Section 11 in connection with any registration
requested by the Holders pursuant to Section 5, then such registration shall not
count against the number of registrations that the Holders may request pursuant
to Section 5.
12. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading, and will reimburse each such
8
<PAGE> 9
Holder, each of its officers, directors, and each person controlling such
Holder, for any legal and any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or action arises
out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company in writing for inclusion in a registration
statement by such Holder.
(b) Each Holder will, on a several but not joint basis, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers and each underwriter,
if any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company in writing for
inclusion in a registration statement by such Holder; provided, however, that
the obligations of such Holders hereunder shall be limited to an amount equal to
the gross proceeds before expenses and commissions to each such Holder of
Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 12
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense; provided, however, that the Indemnified Party (together with all other
Indemnified Parties that may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the reasonable fees
and expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding; and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent, but only to the extent,
that the Indemnifying Party's ability to defend against such claim or litigation
is impaired as a result of such
9
<PAGE> 10
failure to give notice. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 12 is
unavailable to or insufficient to hold harmless an Indemnified Party under
subsection (a) or (b) of this Section 12 in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
and liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnifying Party or by such Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 12(d)
were determined by pro rata allocation (even if the Holders or any underwriters,
selling agents or other securities professionals or all of them were treated as
one entity for such purpose) or by any other method of allocation that does not
take into account the equitable considerations referred to in this Section
12(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Holders and any
underwriters, selling agents or other securities professionals in this Section
12(d) to contribute shall be several in proportion to the percentage of
principal amount of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
13. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
14. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
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<PAGE> 11
(b) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended; and
(c) Furnish to Holders of Registrable Securities forthwith upon
request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144, and of the Securities Act and the Securities
Exchange Act of 1934, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents of the Company as a Holder of
Registrable Securities may reasonably request in availing itself of any rule or
regulation of the Commission allowing such Holder to sell any such securities
without registration.
15. Transfer of Registration Rights. The right to cause the Company to
register securities granted hereunder may be assigned to a transferee or
assignee who acquires at least 1,000,000 shares of Registrable Securities (as
adjusted for stock splits, stock dividends, recapitalizations or similar
events), provided that the Company is given written notice of such assignment
prior to such assignment. In addition, rights to cause the Company to register
securities may be freely assigned to any Affiliate, or to one or more investment
funds that are managed by, or under common management with, such Holder.
Notwithstanding the foregoing, Far East Investments, Ltd. or any Affiliate
thereof ("Far East Investments") may transfer the right to cause the Company to
register securities to a transferee or assignee who acquires at least 400,000
shares of Registrable Securities (as adjusted for stock splits, stock dividends,
recapitalizations or similar events) from Far East Investments.
16. Company Covenants. The Company hereby covenants and agrees as
follows:
(a) Annual and Quarterly Financial Information. The Company will
send to each Purchaser for so long as such Purchaser is a holder of at least
1,000,000 shares of Registrable Securities (as adjusted for stock splits, stock
dividends, recapitalizations or similar events) all quarterly and annual reports
filed with the Commission pursuant to the Securities Exchange Act of 1934, as
amended, as soon as practicable after each such report is filed.
(b) Termination of Covenants. Notwithstanding anything to the
contrary set forth herein, the covenants set forth in this Section 16 shall
terminate and be of no further force or effect with respect to any Purchaser at
such time that such Purchaser holds less than 1,000,000 shares of Registrable
Securities (as adjusted for stock splits, stock dividends, recapitalizations or
similar events).
17. Rights of First Refusal in New Issuances of Company Securities.
Until the 5 year anniversary of the First Closing Date (as defined in the
Purchase Agreement), the Company hereby grants to each Purchaser who holds at
least 750,000 (or in the case of Far East Investments or a transferee or
assignee thereof, at least 400,000) shares of Registrable Securities (as
adjusted for stock splits, stock dividends, recapitalizations or similar events)
the right of first refusal to purchase its pro rata share of "New Securities"
(as defined in this Section 17) that the Company may, from time to time propose
to sell and issue. Such pro rata share, for purposes of this right of first
refusal, is the ratio of (X) the number of shares of Common Stock immediately
prior to the issuances of New Securities then owned by such Purchaser (including
shares issuable upon exercise of options or warrants held by such Purchaser), to
(Y) the total number of shares of Common Stock immediately
11
<PAGE> 12
prior to the issuances of New Securities then outstanding, after giving effect
to the conversion of all outstanding convertible securities and the exercise of
all outstanding options and warrants. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any Common Stock and Preferred
Stock of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are convertible or exercisable for or into Common
Stock or Preferred Stock; provided, however, that "New Securities" does not
include the following:
(i) the Common Stock issued to the Purchasers pursuant to
the Purchase Agreement or any agreement or commitment to issue any of the
foregoing;
(ii) the Warrants issued to the Purchasers pursuant to the
Purchase Agreement and shares of Common Stock issuable upon exercise of the
Warrants;
(iii) shares of Common Stock, or options to purchase
shares of Common Stock (including all options granted by the Company prior to
the date of this Agreement), issued or granted to officers, directors and
employees of, or consultants to, the Company pursuant to a stock grant, employee
restricted stock purchase agreement, option plan or purchase plan or other stock
incentive program (collectively, the "Plans");
(iv) securities of the Company offered to the public
pursuant to a firm commitment underwritten public offering pursuant to a
registration statement filed under the Securities Act, if the rights of the
Purchasers pursuant to this Section 17 would, in the reasonable opinion of legal
counsel to the Company, cause the Company to violate applicable rules and
regulations promulgated under the Securities Act;
(v) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(vi) securities of the Company issued in connection with
equipment lease financing transactions, real estate leases or bank financing
transactions the principal purpose of which is not to raise equity funding;
(vii) securities issued to corporate partners or in
connection with other strategic alliances if the Board of Directors agrees that
such transaction should be excluded from operation of this Section 17;
(viii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company; and
(ix) debt securities issued on a private placement basis
or with an intent for them to be available for resale under Rule 144A of the
Securities Act.
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<PAGE> 13
(b) In the event that Company proposes to undertake an issuance
of New Securities, it shall give each Purchaser written notice of its intention,
describing the type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have ten (10)
business days after receipt of such notice to agree to purchase its pro rata
share of such New Securities at the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein (i) the
quantity of New Securities to be purchased and (ii) the maximum number of New
Securities such Purchaser desires to purchase (up to its pro rata share) if any
other Purchasers choose not to exercise their rights pursuant to this Section
17.
(c) In the event that Purchasers fail to exercise in full the
right of first refusal within the ten (10) business day period specified above,
the Company shall have one hundred eighty (180) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within ninety (90) days from the date of
said agreement) the New Securities respecting which the rights of the Purchasers
were not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within such one hundred eighty (180) day period (or sold
and issued New Securities in accordance with the foregoing within ninety (90)
days from the date of such agreement) the Company shall not thereafter issue or
sell any New Securities, without first offering such New Securities to the
Purchasers and in the manner provided above.
(d) This right of first refusal is nonassignable except to any
transferee to whom registration rights may be transferred pursuant to Section 15
of this Agreement.
18. Company's Right of First Refusal on Stock Transfers.
(a) Grant. The Company is hereby granted the right of first
refusal (the "Transfer Right of First Refusal"), exercisable in connection with
any proposed sale or other transfer of the Company's capital stock, other than
transfers permitted by Paragraphs (a), (b), (e) and (h) of Section 10 of this
Agreement, now or hereafter owned by any Holder (the "ROFR Shares"). For
purposes of this Section 18, the term "transfer" shall include any assignment,
pledge, encumbrance or other disposition for value of the ROFR Shares intended
to be made by the Holder of such ROFR Shares.
(b) Notice of Intended Disposition. In the event the Holder
desires to accept a bona fide third-party offer for any or all of the ROFR
Shares (the shares subject to such offer to be hereinafter called, solely for
the purposes of this Section 18 the "Target Shares"), the Holder shall promptly
deliver to the Company written notice (the "Disposition Notice") of the offer
and the basic terms and conditions thereof, including the proposed purchase
price.
(c) Exercise of Right.
(i) The Company (or its assignees) shall, for a period of
ten (10) business days following receipt of the Disposition Notice, have the
right to repurchase any or all of the Target Shares specified in the Disposition
Notice upon substantially the same terms and conditions specified therein. Such
right shall be exercisable by written notice (the "Exercise Notice") delivered
to the Holder prior to the expiration of the ten (10) business day exercise
period (the "Exercise Period"). The Company (or its assignee) shall effect the
repurchase of the Target Shares, including
13
<PAGE> 14
payment of the purchase price therefor, not more than five (5) business days
after delivery of the Exercise Notice. At such time the Holder shall deliver to
the Company the certificates representing the Target Shares to be purchased,
each certificate to be properly endorsed for transfer. The Target Shares so
purchased shall thereupon be cancelled and cease to be issued and outstanding
shares of the Company's capital stock.
(ii) With respect to any repurchase of shares pursuant to
this Section 18(c), should the purchase price specified in the Disposition
Notice be payable in property other than cash or evidences of indebtedness, the
Company (or their assignees) exercising its Transfer Right of First Refusal
shall have the right to pay the purchase price in the form of cash equal in
amount of the value of such property. If the Holder and the Company cannot agree
on such cash value within ten (10) business days after the Company's receipt of
the Disposition Notice, the valuation shall be made by an appraiser of
recognized standing selected by the Holder and the Company, or, if they cannot
agree on an appraiser within ten (10) business days after the Company's receipt
of the Disposition Notice, each shall select an appraiser of recognized
standing, and the two appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Holder and the Company. The closing
shall then be held on the later of (i) the date of five (5) business days
following delivery of the Exercise Notice or (ii) the date ten (10) business
days after such cash valuation shall have been made.
(d) Non-Exercise of Right. In the event an Exercise Notice is not
given to the Holder within ten (10) business days following the date of the
Company's receipt of the Disposition Notice, the Holder shall have a period of
thirty (30) days thereafter, in which to sell or otherwise dispose of the Target
Shares upon terms and conditions (including the purchase price) no more
favorable to the third-party purchaser than those specified in the Disposition
Notice. The third-party purchaser shall acquire the Target Shares free and clear
of all the terms and provisions of this Transfer Right of First Refusal. In the
event the Holder does not sell or otherwise dispose of the Target Shares within
the specified thirty (30) day period, the Transfer Right of First Refusal shall
continue to be applicable to any subsequent disposition of the Target Shares by
the holder of such Target Shares.
(e) Partial Exercise or Right. In the event the Company (or its
assignees) make a timely exercise of the Transfer Right of First Refusal with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, the Holder shall (i) sell to the Company (or its assignees)
the portion of the Target Shares which the Company (or its assignees) has
elected to purchase, such sale to be effected in substantial conformity with the
provisions of Section 18(c), and (ii) sell or dispose of the remaining Target
Shares to a third party purchaser in compliance with Section 18(d).
19. Board Observation Rights. Until the six year anniversary of the
First Closing Date (as defined in the Purchase Agreement), each of Gilbert
Global Equity Partners, L.P. ("Gilbert") and AIG Asian Opportunity Fund, L.P.
("AIG") shall have the right to have a representative attend all meetings of the
Board of Directors of the Company in a nonvoting observer capacity (and, in that
capacity, receive all notices, minutes and consents provided to the Company's
Board of Directors), provided that such representatives (i) shall be reasonably
acceptable to the Board of Directors, (ii)
14
<PAGE> 15
shall agree to be bound by the Company's insider trading compliance policies as
currently existing and as may be modified from time to time, and (iii) shall
execute a confidentiality agreement in form reasonably acceptable to the
Company. Such representatives shall be entitled to consult with and advise
management of the Company on significant business issues and to meet with
management of the Company no more than once per fiscal quarter upon 30 days'
notice to the Company. Notwithstanding anything to the contrary in this Section
19, at such time that either of (a) Gilbert and funds Affiliated with Gilbert,
or (b) AIG and funds Affiliated with AIG, respectively, hold fewer than
1,250,000 Registrable Securities (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), then the rights of such party to board
observation rights shall irrevocably terminate.
20. Governing Law. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to its conflict of laws
principles. The parties hereto agree to submit to the non-exclusive jurisdiction
of the federal and state courts of the State of Delaware with respect to the
breach or interpretation of this Agreement or the enforcement of any and all
rights, duties, liabilities, obligations, powers, and other relations between
the parties arising under this Agreement.
21. Survival. The representations, warranties, covenants and agreements
made herein shall survive the execution and delivery of this Agreement and, in
the case of indemnification obligations set forth in Section 12, shall survive
the termination of the other provisions of this Agreement.
22. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that except as otherwise provided herein the rights of
Purchasers shall not be assignable without the consent of the Company.
23. Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing (as defined in the Purchase Agreement)
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Any provision of this Agreement may be amended, waived or modified only upon the
written consent of (i) the Company and (ii) the holders of a majority of the
outstanding shares of the Registrable Securities, acting together as a single
class.
24. Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person by facsimile or by courier
service or five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, at such
Purchaser's address set forth in Exhibit A to the Purchase Agreement, or at such
other address as such Purchaser shall have furnished to the Company in writing,
or (b) if to any other Holder of any Shares, at such address as such holder
shall have furnished the Company in writing, or, until any such Holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company, or (c) if
to the Company, one copy should be sent to the Company's address and facsimile
number set forth at the end of this Agreement and addressed to the
15
<PAGE> 16
attention of the Chief Financial Officer, or at such other address as the
Company shall have furnished to the Purchasers (with a copy to Bruce M.
McNamara, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California 94304; facsimile: (650) 493-6811).
25. Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any Holder of any
Registrable Securities, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such Holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Holder of any
breach or default under this Agreement, or any waiver on the part of any Holder
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.
26. Expenses. Except as otherwise provided herein, the Company, the
Purchasers and the Holders shall each bear their own expenses incurred on its
behalf with respect to this Agreement and the transactions contemplated hereby.
27. Injunctive Relief. Each of the parties hereto acknowledges and
agrees that it is impossible to measure in money the damages which will occur by
reason of the failure of any other party hereto to perform its obligations set
forth in this Agreement. Therefore, each of the parties hereto shall have the
right to specific performance of such obligations, and if any party hereto shall
have the right to specific performance of such obligations, and if any party
hereto shall institute any action or proceeding to enforce the provisions
hereof, each of the parties hereto hereby waives the claim or defense that the
party instituting such action or proceeding has an adequate remedy at law.
28. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
29. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
30. Titles and Subtitles. The Titles and Subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
31. No Impairment. The Company will not take any action, or permit any
change to occur, with respect to the Registrable Securities which would
adversely affect the ability of the holders of the Registrable Securities to
include such Registrable Securities in a registration statement undertaken
pursuant to this Agreement or which would adversely affect the marketability of
such Registrable Securities in any such registration.
16
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Stockholder
Rights Agreement as of the date set forth above.
"COMPANY"
AMKOR TECHNOLOGY, INC.
By: /s/ Kenneth Joyce
-----------------------------------------
Kenneth T. Joyce, Chief Financial Officer
Address: 1345 Enterprise Drive
West Chester, PA 19380
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 18
"PURCHASERS"
AIG ASIAN OPPORTUNITY FUND, L.P.
By: /s/ Peter Yu
-----------------------------------------
Name: Peter Yu
Title: Director
Address: c/o Maples and Calder
P.O. Box 309
Ugland House, South Church Street
Cayman Islands
with a copy to:
AIG Investment Corporation (Asia) Ltd.,
31st Floor, NatWest Tower
Times Square, 1 Matheson Street
Hong Kong
Telephone: 852-2143-1383
Fax: 852-25061061
Attention: Ms. Ada Tse
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 19
AIG ASIAN OPPORTUNITY PARALLEL FUND, C.V.
By: /s/ Peter Yu
-----------------------------------------
Name: Peter Yu
Title: Director
Address: c/o Maples and Calder
P.O. Box 309
Ugland House, South Church Street
Cayman Islands
with a copy to:
AIG Investment Corporation (Asia) Ltd.
31st Floor, NatWest Tower
Times Square, 1 Matheson Street
Hong Kong
Telephone: 852-2143-1383
Fax: 852-25061061
Attention: Ms. Ada Tse
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 20
AMERICAN INTERNATIONAL ASSURANCE
COMPANY LIMITED
By: /s/ Cesar Zalamea
-----------------------------------------
Name:
Title:
Address: 1 Stubbs Road
Hong Kong
Telephone: 852-2832-1200
Fax: 852-2591-0678
Attention: Mr. Cesar Zalamea
AIG GLOBAL EMERGING MARKETS FUND, L.L.C.
By: /s/ Peter Yu
-----------------------------------------
Name: Peter Yu
Title: Director
Address: c/o AIG Capital Partners Inc.
175 Water Street
New York, NY 10038
Telephone: (212) 458-2156
Fax: (212) 458-2153
Attention: Mr. Peter Yu
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 21
AIG GLOBAL EMERGING MARKETS PARALLEL
FUND, L.P.
By: /s/ Peter Yu
-----------------------------------------
Name: Peter Yu
Title: Director
Address: c/o AIG Capital Partners Inc.
175 Water Street
New York, NY 10038
Telephone: (212) 458-2156
Fax: (212) 458-2153
Attention: Mr. Peter Yu
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 22
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Sheryl Schwartz
-----------------------------------------
Name: Sheryl Shwartz
Title: Managing Director, Private
Placements
Address: 730 Third Avenue
4th Floor
New York, NY 10017
Attention: Ms. Sheryl Schwartz
Telephone: (212) 956-5905
Fax: (212) 907-2454
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 23
GILBERT GLOBAL EQUITY PARTNERS, L.P.
By: /s/ Eric Wei
-----------------------------------------
Eric H.C. Wei, Authorized Signatory
Address: c/o GGEP Investments, L.L.C.
785 Smith Ridge Road
New Canaan, CT 06846
with copies to:
Gilbert Global Equity Capital Asia, Ltd.
1302 Bank of America Tower
12 Harcourt Road
Hong Kong
Attention: Eric H.C. Wei
Fax: 011-852-2970-0078
and
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Thomas M. Vitale
Fax: (212) 262-1910
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 24
GILBERT GLOBAL EQUITY PARTNERS
(BERMUDA), L.P.
By: /s/ Eric Wei
-----------------------------------------
Eric H.C. Wei, Authorized Signatory
Address: Claredon House
2 Church Street
P.O. Box 666
Hamilton HM EX
BERMUDA
with copies to:
Gilbert Global Equity Capital Asia, Ltd.
1302 Bank of America Tower
12 Harcourt Road
Hong Kong
Attention: Eric H.C. Wei
Fax: 011-852-2970-0078
and
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Thomas M. Vitale
Fax: (212) 262-1910
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 25
GGEP-GECC EQUITY PARTNERS, L.P.
By: /s/ Eric Wei
-----------------------------------------
Eric H.C. Wei, Authorized Signatory
Address: c/o GGEP Investments, L.L.C.
785 Smith Ridge Road
New Canaan, CT 06846
with copies to:
Gilbert Global Equity Capital Asia, Ltd.
1302 Bank of America Tower
12 Harcourt Road
Hong Kong
Attention: Eric H.C. Wei
Fax: 011-852-2970-0078
and
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Thomas M. Vitale
Fax: (212) 262-1910
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 26
INVESTOR (GUERNSEY) LIMITED
By: /s/ David Jeffreys
-----------------------------------------
David Jeffreys, Managing Director
Address: c/o Abacus Financial Services
National Westminster House
Le Truchot, St. Peters Port
Guernsey (Channel Islands)
United Kingdom
Fax: 44-1481-728-493
By: /s/ Marc Hollander
-----------------------------------------
Marc Hollander, Managing Director
Address: c/o Abacus Financial Services
National Westminster House
Le Truchot, St. Peters Port
Guernsey (Channel Islands)
United Kingdom
Fax: 31-205-77-66-09
with copies to:
Expibel B.V.
World Trade Center
Strawinskylaan 507, Tower A, Floor 5
1077 XX, Amsterdam
Attention: Marc Hollander
Fax: 31-205-77-66-09
and to:
Paul, Weiss, Rifkind, Wharton & Garrison
13/F, Hong Kong Club Building
Central, 3A Chater Road
Hong Kong
Attention: John E. Lange, Esq.
Fax: 852-2536-9622
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 27
GLOBAL VENTURE TRADING LIMITED
By: NOMITOR LIMITED
By: /s/ Peter Brown
-----------------------------------------
Peter G. Brown, Director
Address: c/o Wilkinson & Grist
Prince's Building
6th Floor
Chater Road, Hong Kong
Attention: Ms. Rebecca Leung
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 28
CJY INVESTMENT LIMITED
By: /s/ Dean Park
-----------------------------------------
Name: Dean Park
Title: President
Address: c/o Wilkinson & Grist
Prince's Building
6th Floor
Chater Road, Hong Kong
Attention: Ms. Rebecca Leung
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 29
FAR EAST INVESTMENTS LIMITED
By: /s/ Dean Park
-----------------------------------------
Name: Dean Park
Title: President
Address: c/o Wilkinson & Grist
Prince's Building
6th Floor
Chater Road, Hong Kong
Attention: Ms. Rebecca Leung
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 30
BELLWETHER INVESTMENT PTE LTD
By: /s/ Ng Wai Meng
-----------------------------------------
Ng Wai Meng, Authorized Signatory
Address: 250, North Bridge Road
#38-00 Raffles City Tower
Singapore 179101
SINGAPORE
with copies to:
GIC Special Investments Pte Ltd
331, North Bridge Road
#09-01/06 Odeon Towers
Singapore 188720
SINGAPORE
Attention: Ng Wai Meng
Telephone: (65) 330-6969
Fax: (65) 330-6891
SCP PRIVATE EQUITY PARTNERS II, L.P.
By: SCP PRIVATE EQUITY II GENERAL
PARTNER, L.P.
Its General partner
By: SCP Private Equity II General Partner,
LLC
By: /s/ Winston Churchill
-----------------------------------------
Winston J. Churchill
A Manager
Address: SCP Private Equity Partners II,
L.P.
435 Devon Park Drive
Building 300
Wayne, PA 19087
Attention: Winston J. Churchill
Telephone: (610) 254-4170
Fax: (610) 975-9546
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 31
DB Capital Investors, L.P.
By: /s/ Steven K. Dollinger
-----------------------------------------
Steven K. Dollinger
Address: c/o DB Capital Partners
130 Liberty Street
25th Floor
New York, NY 10006
Attention: Heide Silverstein
[SIGNATURE PAGE TO STOCKHOLDER RIGHTS AGREEMENT]
<PAGE> 32
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Adoption Agreement") is executed by the
undersigned (the "Transferee") pursuant to the terms of that certain Stockholder
Rights Agreement dated as of ______, 2000 (the "Agreement") by and among Amkor
Technology, Inc. (the "Company") and the Purchasers of the Company's Common
Stock issued to the Purchasers pursuant to the Purchase Agreement. Capitalized
terms used but not defined herein shall have the respective meanings ascribed to
such terms in the Agreement. By the execution of this Adoption Agreement, the
Transferee agrees as follows:
1. Acknowledgment. Transferee acknowledges that Transferee is acquiring
certain shares of the capital stock of the Company (the "Stock"), subject to the
terms and conditions of the Agreement.
2. Agreement. Transferee agrees that in connection with the acquisition
of the Stock, Transferee shall be bound by and subject to the obligations of a
Holder as set forth in the Agreement. Notwithstanding the foregoing, if
Transferee is a limited partner of either of a Holder or an Affiliate of a
Holder and received the Stock in a distribution from such Holder or Affiliate,
Transferee shall not be bound by and subject to the terms of Section 11 of the
Agreement.
3. Notice. Any notice required or permitted by the Agreement shall be
given to Transferee at the address listed beside Transferee's signature below.
EXECUTED AND DATED this _____ day of _______________________, _____.
TRANSFEREE:
By:
-----------------------------------------
Name and Title
Address:
------------------------------------
------------------------------------
Fax
------------------------------------
Acknowledged:
AMKOR TECHNOLOGY, INC.
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 1
EXHIBIT 4.4
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of April 28, 2000 among AMKOR TECHNOLOGY,
INC., a Delaware corporation (the "Borrower"), the banks, financial institutions
and other institutional lenders listed on the signature pages hereof as the
Initial Lenders (the "INITIAL LENDERS"), the banks listed on the signature pages
hereof as the Initial Issuing Banks (the "INITIAL ISSUING BANKS"), SALOMON SMITH
BARNEY INC. ("SSBI") as book manager (the "BOOK MANAGER"), SOCIETE GENERALE
("SG"), as administrative agent (together with any successor administrative
agent appointed pursuant to Article VII, the "ADMINISTRATIVE AGENT") for the
Lender Parties (as hereinafter defined) and as collateral agent (together with
any successor collateral agent appointed pursuant to Article VII, the
"COLLATERAL AGENT"), SSBI, SG COWEN SECURITIES CORPORATION ("SG COWEN") and
DEUTSCHE BANK SECURITIES INC., as arrangers (the "ARRANGERS"), SSBI and SG as
syndication agents (each, a "SYNDICATION AGENT" and, together with the Book
Manager, the Administrative Agent, the Collateral Agent, the "AGENTS").
PRELIMINARY STATEMENTS:
(1) The Borrower has requested that the Lender Parties lend to the
Borrower up to $900,000,000 to be used (i) to acquire (the "ACQUISITION") three
semiconductor packaging and test facilities designated K-1, K-2 and K-3
(collectively, the "ACQUIRED BUSINESS") from Anam Semiconductor, Inc., an
affiliate of the Borrower ("ANAM"), pursuant to an asset purchase agreement
among AT Korea (as hereinafter defined) and Anam (as amended, to the extent
permitted under the Loan Documents (as hereinafter defined), the "ACQUISITION
AGREEMENT"), (ii) to refinance (the "REFINANCING") certain existing indebtedness
of the Borrower and certain of its Subsidiaries to the extent permitted under
the Loan Documents, and (iii) for general corporate purposes to the extent
permitted under the Loan Documents. The Acquisition will be consummated by Amkor
Technology Korea, Inc., an indirect wholly owned subsidiary of the Borrower ("AT
KOREA"), with the proceeds of a $625,000,000 loan, and a $325,000,000 cash
capital contribution (the "AT KOREA CASH EQUITY INVESTMENT") from the Borrower.
(2) In addition to the financing contemplated hereby, the Borrower shall
have, prior to or concurrently with the Initial Extension of Credit (as
hereinafter defined) hereunder, (a) issued up to $410,000,000 but in any event
not less than $400,000,000 of common stock (as amended, to the extent permitted
under the Loan Documents, the "COMMON STOCK") pursuant to a private placement
(the "EQUITY ISSUANCE") and (b) issued at least $225,000,000 in convertible
subordinated debt (as amended, to the extent permitted under the Loan Documents,
the "CONVERTIBLE SUBORDINATED DEBT") pursuant to a Rule 144A offering (the
"SUBORDINATED DEBT ISSUANCE").
(3) Following the Initial Extension of Credit hereunder but on or prior
to May 3, 2000, the Borrower will invest $309,000,000 in cash common equity in
Anam (the "INITIAL ANAM EQUITY INVESTMENT") with, among others, the proceeds of
the Subordinated Debt Issuance and the proceeds of the Equity Issuance. The
Borrower will make an additional cash common equity investment of $30,000,000 in
Anam on or prior to June 30, 2000, an additional cash common equity investment
of $60,000,000 in Anam on or prior to August 31, 2000 and an additional cash
common equity of $60,000,000 in Anam on or prior to September 30, 2000
(collectively, the "ADDITIONAL ANAM EQUITY INVESTMENTS" and, together with the
Initial Anam Equity Investment, the "ANAM EQUITY INVESTMENT").
(4) The Initial Extension of Credit hereunder, the Acquisition, the Anam
Equity Investment, the Equity Issuance, the Subordinated Debt Issuance, the
issuance of bonds (in substantially the form of those issued in connection with
the K-4 Acquisition, with such modification as may be
1
<PAGE> 2
reasonably requested by the Agents) by AT Korea (the "AT KOREA BONDS"), the AT
Korea Cash Equity Investment, the Refinancing and the various other financings
contemplated hereby and all related transactions, including, without limitation,
the Korean restructuring of Anam's liabilities (the "KOREAN RESTRUCTURING"), and
the other transactions contemplated by the Transaction Documents are hereinafter
collectively referred to as the "TRANSACTIONS".
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ACQUIRED BUSINESS" has the meaning specified in the preliminary
statements to this Agreement.
"ACQUISITION" has the meaning specified in the preliminary
statements to this Agreement.
"ACQUISITION AGREEMENT" has the meaning specified in the
preliminary statements to this Agreement.
"ADDITIONAL ANAM EQUITY INVESTMENTS" has the meaning specified
in the preliminary statements to this Agreement.
"ADMINISTRATIVE AGENT" has the meaning specified in the recital
of parties to this Agreement.
"ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the
Administrative Agent maintained by the Administrative Agent with SG at
its office at 1221 Avenue of the Americas, New York, New York 10020,
Account No. 026004226, Attention: Anna Lo Piccolo.
"ADVANCE" means a Term A Advance, a Term B Advance, a Revolving
Credit Advance or a Letter of Credit Advance.
"AFFILIATE" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person. For
purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a
Person means the possession, direct or indirect, of the power to vote
10% or more of the Voting Interests of such Person or to direct or cause
the direction of the management and policies of such Person, whether
through the ownership of Voting Interests, by contract or otherwise.
"AGENTS" has the meaning specified in the recital of parties to
this Agreement.
"AGREEMENT VALUE" means, for each Hedge Agreement, on any date
of determination, an amount determined by the Administrative Agent equal
to: (a) in the case of a Hedge Agreement
2
<PAGE> 3
documented pursuant to the Master Agreement (Multicurrency-Cross Border)
published by the International Swap and Derivatives Association, Inc.
(the "MASTER Agreement"), the amount, if any, that would be payable by
any Loan Party or any of its Subsidiaries to its counterparty to such
Hedge Agreement, as if (i) such Hedge Agreement was being terminated
early on such date of determination, (ii) such Loan Party or Subsidiary
was the sole "Affected Party", and (iii) the Administrative Agent was
the sole party determining such payment amount (with the Administrative
Agent making such determination pursuant to the provisions of the form
of Master Agreement); or (b) in the case of a Hedge Agreement traded on
an exchange, the mark-to-market value of such Hedge Agreement, which
will be the unrealized loss on such Hedge Agreement to the Loan Party or
Subsidiary of a Loan Party party to such Hedge Agreement determined by
the Administrative Agent based on the settlement price of such Hedge
Agreement on such date of determination, or (c) in all other cases, the
mark-to-market value of such Hedge Agreement, which will be the
unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary
of a Loan Party party to such Hedge Agreement determined by the
Administrative Agent as the amount, if any, by which (i) the present
value of the future cash flows to be paid by such Loan Party or
Subsidiary exceeds (ii) the present value of the future cash flows to be
received by such Loan Party or Subsidiary pursuant to such Hedge
Agreement; capitalized terms used and not otherwise defined in this
definition shall have the respective meanings set forth in the above
described Master Agreement.
"ANAM" has the meaning specified in the preliminary statements
to this Agreement.
"ANAM EQUITY INVESTMENT" has the meaning specified in the
preliminary statements to this Agreement.
"ANAM SHARES" has the meaning specified in Section
3.01(a)(ii)(A).
"APPLICABLE LENDING OFFICE" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a Base
Rate Advance and such Lender Party's Eurodollar Lending Office in the
case of a Eurodollar Rate Advance.
"APPLICABLE MARGIN" means (a) with respect to the Term B
Facility, 3.00% per annum in the case of Eurodollar Rate Advances, and
2.00% per annum in the case of Base Rate Advances and (b) with respect
to the Term A Facility and the Revolving Credit Facility, (i) for the
period from the date hereof to the six-month anniversary of the
Effective Date, 2.75% per annum in the case of Eurodollar Rate Advances,
and 1.75% per annum in the case of Base Rate Advances, and (ii)
thereafter, a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
LEVERAGE RATIO BASE RATE ADVANCES EURODOLLAR RATE ADVANCES
-------------- ------------------ ------------------------
<S> <C> <C>
Level I
less than or equal to 1.25: 1.0 1.00% 2.00%
Level II
greater than 1.25: 1.0 and less than or 1.25% 2.25%
equal to 1.75: 1.0
Level III
greater than 1.75: 1.0 and less than or 1.50% 2.50%
equal to 2.25: 1.0
Level IV
greater than 2.25: 1.0 1.75% 2.75%
</TABLE>
3
<PAGE> 4
For the purposes of this clause (b)(ii), the Applicable Margin for each
Base Rate Advance shall be determined by reference to the Leverage Ratio
in effect from time to time and the Applicable Margin for each
Eurodollar Rate Advance shall be determined by reference to the Leverage
Ratio in effect on the first day of each Interest Period for such
Advance; provided, however, that (A) no change in the Applicable Margin
shall be effective until three Business Days after the date on which the
Administrative Agent receives the financial statements required to be
delivered pursuant to Section 5.03(b) or (c), as the case may be, and a
certificate of the Chief Financial Officer of the Borrower demonstrating
such Leverage Ratio, (B) the Applicable Margin shall be at Level IV for
so long as the Borrower has not submitted to the Administrative Agent
the information described in clause (A) of this proviso as and when
required under Section 5.03(b) or (c), as the case may be and (C) the
Applicable Margin shall be at Level IV in the event a Default has
occurred.
"APPLICATION DATE" has the meaning specified in Section
2.06(b)(vii).
"APPROPRIATE LENDER" means, at any time, with respect to (a) any
of the Facilities, a Lender that has a Commitment with respect to such
Facility at such time and (b) the Letter of Credit Facility, (i) any
Issuing Bank and (ii) if the other Revolving Credit Lenders have made
Letter of Credit Advances pursuant to Section 2.03(c) that are
outstanding at such time, each such other Revolving Credit Lender.
"APPROVED FUND" means, with respect to any Lender that is a fund
that invests in bank loans, any other fund that invests in bank loans
and is advised or managed by the same investment advisor as such Lender
or by an Affiliate of such investment advisor.
"ARRANGERS" has the meaning specified in the recital of parties
to this Agreement.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted by
the Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"ASSUMING LENDER" has the meaning specified in Section 2.17(d).
"ASSUMPTION AGREEMENT" has the meaning specified in Section
2.17(d)(ii).
"AT KOREA" has the meaning specified in the preliminary
statements to this Agreement.
"AT KOREA BONDS" has the meaning specified in the preliminary
statements to this Agreement.
"AT KOREA CASH EQUITY INVESTMENT" has the meaning specified in
the preliminary statements to this Agreement.
"AVAILABLE AMOUNT" of any Letter of Credit means, at any time,
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to
drawing).
"BASE RATE" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of:
4
<PAGE> 5
(a) the rate of interest announced publicly by SG in New
York, New York, from time to time, as SG's base rate; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"BASE RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.07(a)(i).
"BOARD OF DIRECTORS" means the Board of Directors of the
Borrower or any duly authorized committee of the Board of Directors.
"BOOK MANAGER" has the meaning specified in the recital of
parties to this Agreement.
"BORROWER" has the meaning specified in the recital of parties
to this Agreement.
"BORROWER'S ACCOUNT" means the account of the Borrower
maintained by the Borrower with SG at its office at 1221 Avenue of the
Americas, New York, New York 10020, Account No. 9050345.
"BORROWING" means a Term A Borrowing, a Term B Borrowing or a
Revolving Credit Borrowing.
"BORROWING BASE CERTIFICATE" means a certificate in
substantially the form of Exhibit J hereto, duly certified by the chief
financial officer of the Borrower.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any Person for any period, the
sum of, without duplication, (a) all expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such period
for equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person or have a useful life of more than one year plus (b) the
aggregate principal amount of all Debt (including Obligations under
Capitalized Leases) assumed or incurred in connection with any such
expenditures.
"CAPITALIZED LEASES" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"CASH EQUIVALENTS" means any of the following, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all
Liens other than Liens created under the Collateral Documents and
Permitted Liens and having a maturity of not greater than 180 days from
the date of issuance thereof: (a) readily marketable direct obligations
of the Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith and
credit of the Government of the United States, (b) insured certificates
of deposit of or time deposits with any commercial bank that is a Lender
Party or a member of the Federal Reserve System, issues (or the parent
of which issues) commercial paper rated as described in clause (c)
below, is organized under the laws of the United States or any State
thereof and has combined capital and surplus of at least $1 billion, (c)
commercial paper maturing no more than
5
<PAGE> 6
12 months from the date of creation thereof and having at the time of
acquisition thereof, a rating of at least "Prime-1" (or the then
equivalent grade) from Moody's Investors Service, Inc. ("MOODY'S") or
"A-1" (or the then equivalent grade) from Standard & Poor's, a division
of The McGraw-Hill Companies, Inc. ("STANDARD & POOR'S") or (d)
Investments, classified in accordance with GAAP as Current Assets of the
Borrower or any of its Subsidiaries, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which
are administered by financial institutions that have the highest rating
obtainable from either Moody's or S&P, and the portfolios of which are
limited solely to Investments of the character, quality and maturity
described in clauses (a), (b) and (c) of this definition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"CHANGE OF CONTROL" means the occurrence of any of the
following: (a) the Existing Stockholders shall cease to own at least 51%
of Voting Interests of the Borrower (or other securities convertible
into such Voting Interests); or (b) the first date during any
consecutive two year period on which a majority of the members of the
board of directors of the Borrower are not Continuing Directors; or (c)
any Person or two or more Persons acting in concert shall have acquired
by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their
acquisition of control over Voting Interests of the Borrower (or other
securities convertible into such Voting Interests) representing 35% or
more of the combined voting power of all Voting Interests of the
Borrower or (d) the sale or other transfer or disposition by Anam of all
or substantially all of its assets in any transaction or series of
related transactions other than in connection with the Fab Transaction
and, on and after the occurrence of the Fab Transaction, the sale or
other transfer or disposition by Newco or Newco Successor of all or
substantially all of its assets in any transaction or series of related
transactions.
"COLLATERAL" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is intended to be
subject to any Lien in favor of the Collateral Agent for the benefit of
the Secured Parties.
"COLLATERAL ACCOUNT" has the meaning specified in the Security
Agreement.
"COLLATERAL AGENT" has the meaning specified in the recital of
parties to this Agreement.
"COLLATERAL DOCUMENTS" means the Security Agreement, the
Mortgages and any other agreement that creates or purports to create a
Lien in favor of the Collateral Agent for the benefit of the Secured
Parties.
"COMMITMENT" means a Term A Commitment, a Term B Commitment, a
Revolving Credit Commitment or a Letter of Credit Commitment.
"COMMITMENT DATE" has the meaning specified in Section 2.17(b).
"COMMITMENT INCREASE" has the meaning specified in Section
2.17(a).
"COMMON STOCK" has the meaning specified in the preliminary
statements to this Agreement.
6
<PAGE> 7
"CONFIDENTIAL INFORMATION" means information that any Loan Party
furnishes to any Agent or any Lender Party in a writing designated as
confidential, but does not include any such information that is or
becomes generally available to the public or that is or becomes
available to such Agent or such Lender Party from a source other than
the Loan Parties.
"CONSOLIDATED" refers to the consolidation of accounts in
accordance with GAAP.
"CONTINGENT OBLIGATION" means, with respect to any Person, any
Obligation or arrangement of such Person to guarantee or intended to
guarantee any Debt, leases, dividends or other payment Obligations
("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in
any manner, whether directly or indirectly, including, without
limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such
Person of the Obligation of a primary obligor, (b) the Obligation to
make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement or (c) any
Obligation of such Person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, assets, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the holder of
such primary obligation against loss in respect thereof. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable
pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is
required to perform thereunder), as determined by such Person in good
faith.
"CONTINUING DIRECTORS" means (i) members of the board of
directors on the Effective Date; and (ii) other Persons nominated or
elected to the board of directors with the approval of a majority of the
Continuing Directors who were members of the board of directors at the
time of such election or nomination.
"CONVERSION", "CONVERT" and "CONVERTED" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"CONVERTIBLE SUBORDINATED DEBT" has the meaning specified in the
preliminary statements to this Agreement.
"CONVERTIBLE SUBORDINATED NOTES" means the 5-3/4% Convertible
Subordinated Notes due 2003 issued pursuant to the Convertible
Subordinated Notes Indenture, as amended, to the extent permitted under
the Loan Documents.
"CONVERTIBLE SUBORDINATED NOTES INDENTURE" means the Indenture
dated as of May 6, 1998 between the Borrower and State Street Bank and
Trust Company, as trustee, pursuant to which the Convertible
Subordinated Notes were issued, as amended, to the extent permitted
under the Loan Documents.
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<PAGE> 8
"CURRENT ASSETS" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets of
a company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a
reserve is proper in accordance with GAAP.
"CURRENT LIABILITIES" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one year
after the date of determination (excluding any Debt renewable or
extendible, at the option of such Person, to a date more than one year
from such date or arising under a revolving credit or similar agreement
that obligates the lender or lenders to extend credit during a period of
more than one year from such date), (b) all amounts of Funded Debt of
such Person required to be paid or prepaid within one year after such
date and (c) all other items (including taxes accrued as estimated) that
in accordance with GAAP would be classified as current liabilities of
such Person.
"DEBT" of any Person means, without duplication for purposes of
calculating financial ratios, (a) all indebtedness of such Person for
borrowed money, (b) all Obligations of such Person for the deferred
purchase price of property or services, (c) all Obligations of such
Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all Obligations of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations
of such Person as lessee under Capitalized Leases, (f) all Obligations
of such Person under acceptance, letter of credit or similar facilities,
(g) all Obligations of such Person to purchase, redeem, retire, defease
or otherwise make any payment in respect of any Equity Interests in such
Person or any other Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of Redeemable Preferred
Interests, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all Obligations of
such Person in respect of Hedge Agreements, valued at the Agreement
Value thereof, (i) all Contingent Obligations of such Person and (j) all
indebtedness and other payment Obligations referred to in clauses (a)
through (i) above of another Person secured by (or for which the holder
of such Debt has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person to the extent of the
value of such property, even though such Person has not assumed or
become liable for the payment of such indebtedness or other payment
Obligations. Notwithstanding the foregoing, in no event shall the term
"Debt" include (i) any lease properly classified as an operating lease
in accordance with GAAP (other than a "synthetic lease" or a similar
transaction in which the obligation is considered Debt for Borrowed
Money for tax purposes), (ii) any trade payable arising in the ordinary
course of business, provided that no material part of such account
payable is more than ninety (90) days past due (unless subject to a bona
fide dispute for which adequate reserves have been established), (iii)
any obligations under open purchase orders to acquire tangible personal
property entered into in the ordinary course of business and not yet due
or payable, (iv) any accrued expenses or (v) any income taxes not at the
time delinquent.
"DEBT FOR BORROWED MONEY" of any Person means all items that, in
accordance with GAAP, would be classified as indebtedness on a
Consolidated balance sheet of such Person.
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"DEFAULTED ADVANCE" means, with respect to any Lender Party at
any time, the portion of any Advance required to be made by such Lender
Party to the Borrower pursuant to Section 2.01
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<PAGE> 9
or 2.02 at or prior to such time which has not been made by such Lender
Party or by the Administrative Agent for the account of such Lender
Party pursuant to Section 2.02(d) as of such time. In the event that a
portion of a Defaulted Advance shall be deemed made pursuant to Section
2.15(a), the remaining portion of such Defaulted Advance shall be
considered a Defaulted Advance originally required to be made pursuant
to Section 2.01 on the same date as the Defaulted Advance so deemed made
in part.
"DEFAULTED AMOUNT" means, with respect to any Lender Party at
any time, any amount required to be paid by such Lender Party to any
Agent or any other Lender Party hereunder or under any other Loan
Document at or prior to such time which has not been so paid as of such
time, including, without limitation, any amount required to be paid by
such Lender Party to (a) any Issuing Bank pursuant to Section 2.03(c) to
purchase a portion of a Letter of Credit Advance made by such Issuing
Bank, (b) the Administrative Agent pursuant to Section 2.02(d) to
reimburse the Administrative Agent for the amount of any Advance made by
the Administrative Agent for the account of such Lender Party, (c) any
other Lender Party pursuant to Section 2.13 to purchase any
participation in Advances owing to such other Lender Party and (d) any
Agent or any Issuing Bank pursuant to Section 7.05 to reimburse such
Agent or such Issuing Bank for such Lender Party's ratable share of any
amount required to be paid by the Lender Parties to such Agent or such
Issuing Bank as provided therein. In the event that a portion of a
Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the
remaining portion of such Defaulted Amount shall be considered a
Defaulted Amount originally required to be paid hereunder or under any
other Loan Document on the same date as the Defaulted Amount so deemed
paid in part.
"DEFAULTING LENDER" means, at any time, any Lender Party that,
at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take any action or be the subject of any action or proceeding of a
type described in Section 6.01(f).
"DOMESTIC LENDING OFFICE" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party, as
the case may be, or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Administrative Agent.
"DOMESTIC LOAN PARTIES" means the Borrower and the Subsidiary
Guarantors.
"DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower other
than a Foreign Subsidiary.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, of (a) net income (or net loss) excluding any
extraordinary gains or losses and other gains or losses arising from
asset sales and dispositions other than in the ordinary course of
business and, to the extent included in net income, non-cash charges
recorded in connection with the early conversion of convertible debt,
(b) interest expense, (c) income tax expense, (d) to the extent included
in net income, non-cash foreign currency loss (or less any non-cash
foreign currency gain), (e) to the extent included in net income,
non-cash equity in loss of Affiliates (or less any non-cash equity in
income of Affiliates), (f) depreciation expense and (g) amortization
expense, in each case of the Borrower and its Restricted Subsidiaries,
determined in accordance with GAAP for such period.
"EFFECTIVE DATE" means the first date on which the conditions
set forth in Article III shall have been satisfied or waived.
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<PAGE> 10
"ELIGIBLE ASSIGNEE" means (a) with respect to any Facility
(other than the Letter of Credit Facility), (i) a Lender; (ii) an
Affiliate of a Lender; (iii) an Approved Fund and (iv) any other Person
approved by the Agents and, unless a Default has occurred and is
continuing at the time any assignment is effected pursuant to Section
8.07, the Borrower, such approval not to be unreasonably withheld or
delayed, and (b) with respect to the Letter of Credit Facility, a
commercial bank approved by each of the Agents and, unless a Default has
occurred and is continuing at the time any assignment is effected
pursuant to Section 8.07, the Borrower, such approval not to be
unreasonably withheld or delayed; provided, however, that neither any
Loan Party nor any Affiliate of a Loan Party shall qualify as an
Eligible Assignee under this definition.
"ELIGIBLE COLLATERAL" means, collectively, Eligible Inventory
and Eligible Receivables.
"ELIGIBLE INVENTORY" means the Inventory of the Domestic Loan
Parties (other than the classes of excluded Inventory set forth below).
The value of such Inventory shall be determined by the Administrative
Agent in its reasonable judgment taking into consideration, among other
factors, the lowest of its cost, its book value determined in accordance
with GAAP and its liquidation value. The Administrative Agent may
consider any of the following classes of Inventory not to be Eligible
Inventory:
(a) Inventory located on leaseholds as to which the
lessor has not entered into a consent and agreement providing
the Collateral Agent with the right to receive notice of
default, the right to repossess such Inventory at any time and
such other rights as may be reasonably required by the
Collateral Agent;
(b) Inventory that is obsolete, unusable or otherwise
unavailable for sale;
(c) Inventory with respect to which the representations
and warranties set forth in Section 9 of the Security Agreement
applicable to Inventory are not true and correct in all material
respects;
(d) Inventory that fails to meet all standards imposed
by any governmental agency, or department or division thereof,
having regulatory authority over such Inventory or its use or
sale;
(e) Inventory that is subject to any licensing, patent,
royalty, trademark, trade name or copyright agreement with any
third party from whom any Domestic Loan Party has received
notice of a dispute in respect of any such agreement to the
extent of such dispute;
(f) Inventory that is not in the possession of or under
the sole control of the Domestic Loan Parties;
(g) Inventory consisting of work in progress; and
(h) Inventory in respect of which the Security
Agreement, after giving effect to the related filings of
financing statements that have then been made, if any, does not
or has ceased to create a valid and perfected first priority
lien or security interest in favor of the Collateral Agent for
the benefit of the Secured Parties securing the Secured
Obligations.
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<PAGE> 11
"ELIGIBLE RECEIVABLES" means the Receivables of the Domestic
Loan Parties other than the classes of excluded Receivables set forth
below. The value of such Receivables shall be determined by the
Administrative Agent in its reasonable judgment taking into
consideration, among other factors, their book value determined in
accordance with GAAP. The Administrative Agent may consider any of the
following classes of Receivables not to be Eligible Receivables:
(a) Receivables that do not arise out of sales of goods
or rendering of services in the ordinary course of the business
of the Domestic Loan Parties;
(b) Receivables on terms other than those normal or
customary in the business of the Domestic Loan Parties;
(c) Receivables owing from any Person that is an
Affiliate of any Loan Party or any of its Subsidiaries;
(d) Receivables more than 120 days past original invoice
date or more than 90 days past the date due;
(e) Receivables owing from any Person from which an
aggregate amount of more than 20% of the Receivables owing is
more than 90 days past due;
(f) Receivables owing from any Person that (i) has
disputed liability for any Receivable owing from such Person or
(ii) has otherwise asserted any claim, demand or liability
against any Loan Party or any of its Subsidiaries, whether by
action, suit, counterclaim or otherwise;
(g) Receivables owing from any Person that shall take or
be the subject of any action or proceeding of a type described
in Section 6.01(f);
(h) Receivables (i) owing from any Person that is also a
supplier to or creditor of any Domestic Loan Party unless such
Person has waived any right of set-off in a manner acceptable to
the Administrative Agent or (ii) representing any manufacturer's
or supplier's credits, discounts, incentive plans or similar
arrangements entitling the Borrower to discounts on future
purchase therefrom;
(i) Receivables arising out of sales to account debtors
outside the United States unless such Receivables are (i) fully
backed by an irrevocable letter of credit on terms, and issued
by a financial institution, acceptable to the Administrative
Agent and such irrevocable letter of credit is in the possession
of the Collateral Agent or the Administrative Agent or (ii)
owing from an account debtor that is a foreign subsidiary or
division of a Person organized and in good standing under the
laws of a jurisdiction within the United States;
(j) Receivables arising out of sales on a guaranteed
sale, sale-or-return, sale on approval or consignment basis or
subject to any right of return, set-off or charge-back;
(k) Receivables owing from an account debtor that is an
agency, department or instrumentality of the United States or
any State thereof unless the Borrower shall have satisfied the
requirements of the Assignment of Claims Act of 1940, as
amended, and any similar State legislation and the
Administrative Agent is satisfied as to the absence of set-offs,
counterclaims and other defenses on the part of such account
debtor;
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<PAGE> 12
(l) Receivables the full and timely payment of which the
Administrative Agent in its reasonable judgment believes to be
doubtful; and
(m) Receivables in respect of which the Security
Agreement, after giving effect to the related filings of
financing statements that have then been made, if any, does not
or has ceased to create a valid and perfected first priority
lien or security interest in favor of the Collateral Agent for
the benefit of the Secured Parties securing the Secured
Obligations.
"ENVIRONMENTAL ACTION" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental Law,
any Environmental Permit or Hazardous Material or arising from alleged
injury or threat to health, safety or the environment, including,
without limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or
guidance relating to pollution or protection of the environment, health,
safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
"ENVIRONMENTAL PERMIT" means any permit, approval,
identification number, license or other authorization required under any
Environmental Law.
"EQUITY INTERESTS" means, with respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such
Person, warrants, options or other rights for the purchase or other
acquisition from such Person of shares of capital stock of (or other
ownership or profit interests in) such Person, securities convertible
into or exchangeable for shares of capital stock of (or other ownership
or profit interests in) such Person or warrants, rights or options for
the purchase or other acquisition from such Person of such shares (or
such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination; provided that the
Convertible Subordinated Notes or the 2000 Convertible Subordinated
Notes shall not be Equity Interests so long as such Convertible
Subordinated Notes or 2000 Convertible Subordinated Notes shall not have
been converted.
"EQUITY ISSUANCE" has the meaning specified in the preliminary
statements to this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title IV
of ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
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<PAGE> 13
"ERISA EVENT" means (a)(i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA
apply with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph
(9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to
in Section 4041(e) of ERISA); (d) the cessation of operations at a
facility of any Loan Party or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan
Party or any ERISA Affiliate from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to any Plan;
(g) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA; or (h) the
institution by the PBGC of proceedings to terminate a Plan pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, such
Plan.
"EUROCURRENCY LIABILITIES" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender Party as such Lender Party may from
time to time specify to the Borrower and the Administrative Agent.
"EURODOLLAR RATE" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by dividing
(a) the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in U.S. dollars at 11:00
A.M. (London time) two Business Days before the first day of such
Interest Period for a period equal to such Interest Period (provided
that, if for any reason such rate is not available, the term "Eurodollar
Rate" shall mean, for any Interest Period for all Eurodollar Rate
Advances comprising part of the same Borrowing, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall
be the arithmetic mean of all such rates) by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Interest
Period.
"EURODOLLAR RATE ADVANCE" means an Advance that bears interest
as provided in Section 2.07(a)(ii).
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period for
all Eurodollar Rate Advances comprising part of the same Borrowing means
the reserve percentage applicable two Business Days before the first day
of such Interest Period under regulations issued from time to
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<PAGE> 14
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which the
interest rate on Eurodollar Rate Advances is determined) having a term
equal to such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCESS CASH FLOW" means, for any period,
(a) the sum of:
(i) Consolidated net income (or loss) of the
Borrower and its Subsidiaries for such period plus
(ii) the aggregate amount of all non-cash
charges deducted in arriving at such Consolidated net
income (or loss) plus
(iii) if there was a net increase in
Consolidated Current Liabilities of the Borrower and its
Subsidiaries during such period, the amount of such net
increase plus
(iv) if there was a net decrease in Consolidated
Current Assets (excluding cash and Cash Equivalents) of
the Borrower and its Subsidiaries during such period,
the amount of such net decrease less
(b) the sum of:
(i) the aggregate amount of all non-cash credits
included in arriving at such Consolidated net income (or
loss) plus
(ii) if there was a net decrease in Consolidated
Current Liabilities of the Borrower and its Subsidiaries
during such period, the amount of such net decrease plus
(iii) if there was a net increase in
Consolidated Current Assets (excluding cash and Cash
Equivalents) of the Borrower and its Subsidiaries during
such period, the amount of such net increase plus
(iv) the aggregate amount of Capital
Expenditures of the Borrower paid in cash during such
period to the extent permitted by this Agreement plus
(v) the aggregate amount of all regularly
scheduled principal payments of Funded Debt made during
such period plus
(vi) the aggregate principal amount of all
optional prepayments of Term Advances made during such
period pursuant to Section 2.06(a) plus
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<PAGE> 15
(vii) cash investments in joint ventures and
other minority investments made during such period
pursuant to Section 5.02(f)(viii)(1) through (4) plus
(viii) income attributed during such period to
minority Investments made pursuant to Section
5.02(f)(viii) to the extent such income is not received
by the Borrower or any of its Restricted Subsidiaries
plus
(iv) $50,000,000.
"EXCLUDED AMOUNT" has the meaning specified in Section
2.06(b)(iii)(B).
"EXISTING DEBT" has the meaning specified in Section 4.01(t)
hereof.
"EXISTING NOTES" means the Senior Notes, the Senior Subordinated
Notes and the Convertible Subordinated Notes.
"EXISTING STOCKHOLDERS" means James J. Kim, Agnes C. Kim, David
D. Kim Trust of December 31, 1987, John T. Kim Trust of December 31,
1987, Susan Y Kim Trust of December 31, 1987 and Mr. H.S. Kim.
"EXTRAORDINARY RECEIPT" means any cash received by or paid to or
for the account of any Person not in the ordinary course of business,
including, without limitation, cash received by way of tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of
business interruption insurance to the extent such proceeds constitute
compensation for lost earnings), condemnation awards (and payments in
lieu thereof), indemnity payments and any purchase price adjustment
received in connection with any purchase agreement; provided, however,
that an Extraordinary Receipt shall not include cash receipts received
from proceeds of insurance, condemnation awards (or payments in lieu
thereof) or indemnity payments to the extent that such proceeds, awards
or payments in respect of loss or damage to equipment, fixed assets or
real property are applied (or in respect of which expenditures were
previously incurred) to replace or repair the equipment, fixed assets or
real property in respect of which such proceeds were received in
accordance with the terms of the Loan Documents, so long as such
application is made within 6 months after the occurrence of such damage
or loss.
"FAB TRANSACTION" means one or more transactions which are
designed to create an international subsidiary-contract wafer foundry
business to be owned by an entity formed for such purpose ("NEWCO"),
which transactions shall consist of any or all of the following: (a) the
acquisition of all or substantially all of Anam's semiconductor wafer
fabrication assets by Newco or a Subsidiary of Newco, (b) the exchange
of Anam shares by the Borrower or any of its Subsidiaries for Equity
Interests of Newco and, if applicable, of such Subsidiary of Newco
provided that, following such exchange the Borrower will own, after
giving effect to such exchange, directly or indirectly, at least 30% of
the issued and outstanding Equity Interests of Newco (on a fully diluted
basis), (c) the transfer of the Borrower's wafer fabrication services
business to Newco in exchange for Equity Interests of Newco or cash, or
any combination thereof, (provided that, to the extent such transfer
shall be made in exchange for cash, it shall be made for fair value) and
(d) the exchange of Equity Interests of Newco for Equity Interests of
any entity engaged in the same business ("NEWCO SUCCESSOR") where the
Equity Interests of such entity are traded on any stock exchange located
in the United States or quoted on the NASDAQ National Market; provided
however that (i) Newco (and Newco Successor) shall be incorporated in
the United States, the Netherlands, Bermuda, Ireland, Luxembourg or
another jurisdiction reasonably
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<PAGE> 16
acceptable to the Agents, (ii) the Borrower's stock of Newco (and Newco
Successor) shall not be subject to any restrictions on transfer that are
more onerous to the Lender Parties as those applicable to the Borrower's
stock of Anam on the Effective Date (it being understood that any
restrictions on transfer resulting solely from such stock being
"restricted securities" under Rule 144 of the Securities Act of 1933, as
amended, shall not be deemed to be more onerous on the Lender parties),
(iii) any Equity Interests of Newco and Newco Successor held by the
Borrower, directly or indirectly, shall be pledged to the Lender Parties
and (iv) as a result of any transaction constituting a "Fab Transaction"
the Borrower shall not incur any dilution of the economic benefit in its
aggregate Equity Interests in Anam and, in the event of a transfer in
exchange for Equity Interests referred to in clause (c) above, any
dilution of its economic benefit derived from the wafer fabrication
services business (after taking into account tax and other economic
benefits reasonably derived from the implementation of the Fab
Transaction) in comparison to the Borrower's Equity Interests in Newco
or Newco Successor, as the case may be; provided further, that Newco or
Newco successor shall be formed as a corporation, limited liability
company or other form of entity with limited liability to shareholders.
"FACILITY" means the Term A Facility, the Term B Facility, the
Revolving Credit Facility or the Letter of Credit Facility.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"FEE LETTER" means the fee letter dated March 17, 2000 among the
Borrower, SSBI, SG, SG Cowen and Citibank, NA.
"FISCAL YEAR" means a fiscal year of the Borrower and its
Consolidated Subsidiaries ending on December 31 in any calendar year.
"FIXED CHARGE COVERAGE RATIO" means, at any date of
determination, the ratio of (a) Consolidated EBITDA of the Borrower and
its Restricted Subsidiaries minus Capital Expenditures to (b) the sum of
(i) income taxes that have been paid in cash plus (ii) interest payable
in cash on all Debt for Borrowed Money plus (iii) scheduled principal
amounts of all Debt for Borrowed Money payable, in each case, of or by
the Borrower and its Restricted Subsidiaries for the most recent
Measurement Period ending on or prior to such date.
"FOREIGN SUBSIDIARY" means a Subsidiary of the Borrower
organized under the laws of a jurisdiction other than the United States
or any State thereof.
"FUNDED DEBT" of any Person means Debt in respect of the
Advances, in the case of the Borrower, and all other Debt of such Person
that by its terms matures more than one year after the date of
determination or matures within one year from such date but is renewable
or extendible, at the option of such Person, to a date more than one
year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a
period of more than one year after such date, including, without
limitation, all amounts of Funded Debt of such Person required to be
paid or prepaid within one year after the date of determination.
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<PAGE> 17
"GAAP" has the meaning specified in Section 1.03.
"GRANTING LENDER" has the meaning specified in Section 8.07(i).
"GUARANTIES" means the Subsidiary Guaranty and the Intercompany
Guaranty.
"GUARANTORS" means each Subsidiary Guarantor and each
Intercompany Guarantor.
"GUARDIAN" means Guardian Assets, Inc., a direct wholly owned
Subsidiary of the Borrower.
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"HEDGE AGREEMENTS" means (i) interest rate swap, cap or collar
agreements and (ii) interest rate future or option contracts, currency
swap agreements, currency future or option contracts and other hedging
agreements.
"HEDGE BANK" means any Lender Party or an Affiliate of a Lender
Party in its capacity as a party to a Secured Hedge Agreement.
"INCREASE DATE" has the meaning specified in Section 2.17(a).
"INCREASING LENDER" has the meaning specified in Section
2.17(b).
"INDEMNIFIED COSTS" has the meaning specified in Section
7.05(a).
"INDEMNIFIED PARTY" has the meaning specified in Section
8.04(b).
"INDENTURES" means the Senior Notes Indenture, the Senior
Subordinated Notes Indenture, the Convertible Subordinated Notes
Indenture and the 2000 Convertible Subordinated Notes Indenture.
"INFORMATION MEMORANDUM" means the confidential information
memorandum dated March 2000 used by the Syndication Agents in connection
with the syndication of the Commitments.
"INITIAL ANAM EQUITY INVESTMENT" has the meaning specified in
the preliminary statements to this Agreement.
"INITIAL EXTENSION OF CREDIT" means the initial Borrowing
hereunder.
"INITIAL ISSUING BANKS" has the meaning specified in the recital
of parties to this Agreement.
"INITIAL LENDERS" has the meaning specified in the recital of
parties to this Agreement.
"INSUFFICIENCY" means, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
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<PAGE> 18
"INTERCOMPANY GUARANTOR" means each Subsidiary of the Borrower
listed on Schedule III hereto and each other Subsidiary of the Borrower
that shall be required to execute and deliver a guaranty pursuant to
Section 5.01(j).
"INTERCOMPANY GUARANTY" has the meaning specified in Section
3.01(a)(iv).
"INTERCOMPANY NOTES" means promissory notes, in form and
substance satisfactory to the Agents, evidencing Debt permitted pursuant
to Section 5.02(b)(i)(B) or (b)(ii), and shall include, without
limitation, the AT Korea Bonds.
"INTEREST COVERAGE RATIO" means, at any date of determination,
the ratio of (a) Consolidated EBITDA of the Borrower and its Restricted
Subsidiaries to (b) interest payable in cash on all Debt for Borrowed
Money of or by the Borrower and its Restricted Subsidiaries for the most
recent Measurement Period ending on or prior to such date.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the date
of such Eurodollar Rate Advance or the date of the Conversion of any
Base Rate Advance into such Eurodollar Rate Advance, and ending on the
last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Borrower may, upon notice received
by the Administrative Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period with
respect to any Eurodollar Rate Advance under a Facility that
ends after any principal repayment installment date for such
Facility unless, after giving effect to such selection, the
aggregate principal amount of Base Rate Advances and of
Eurodollar Rate Advances having Interest Periods that end on or
prior to such principal repayment installment date for such
Facility shall be at least equal to the aggregate principal
amount of Advances under such Facility due and payable on or
prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
and
(d) whenever the first day of any Interest Period occurs
on a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
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<PAGE> 19
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"INVENTORY" means all Inventory referred to in Section 1(b) of
the Security Agreement.
"INVESTMENT" in any Person means any loan or advance to such
Person, any deposit with such Person, any prepayment of the services of
such Person (other than in the ordinary course of business), any
purchase or other acquisition of any Equity Interests or Debt or the
assets comprising a division or business unit or a substantial part or
all of the business of such Person, any capital contribution to such
Person or any other direct or indirect investment in such Person,
including, without limitation, any acquisition by way of a merger or
consolidation and any arrangement pursuant to which the investor incurs
Debt of the types referred to in clause (i) or (j) of the definition of
"DEBT" in respect of such Person.
"ISSUING BANKS" means each Initial Issuing Bank and any other
Revolving Credit Lender approved as an Issuing Bank by each of the
Agents and any Eligible Assignee to which a Letter of Credit Commitment
hereunder has been assigned pursuant to Section 8.07 so long as each
such Revolving Credit Lender or each such Eligible Assignee expressly
agrees to perform in accordance with their terms all of the obligations
that by the terms of this Agreement are required to be performed by it
as an Issuing Bank and notifies the Administrative Agent of its
Applicable Lending Office and the amount of its Letter of Credit
Commitment (which information shall be recorded by the Administrative
Agent in the Register).
"KOREAN RESTRUCTURING" has the meaning specified in the
preliminary statements to this Agreement.
"L/C COLLATERAL ACCOUNT" has the meaning specified in the
Security Agreement.
"L/C RELATED DOCUMENTS" has the meaning specified in Section
2.04(d)(ii)(A).
"LENDER PARTY" means any Lender or any Issuing Bank.
"LENDERS" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 8.07 for so long as such
Initial Lender or Person, as the case may be, shall be a party to this
Agreement.
"LETTER OF CREDIT ADVANCE" means an advance made by any Issuing
Bank or any Revolving Credit Lender pursuant to Section 2.03(c).
"LETTER OF CREDIT AGREEMENT" has the meaning specified in
Section 2.03(a).
"LETTER OF CREDIT COMMITMENT" means, with respect to any Issuing
Bank at any time, the amount set forth opposite such Issuing Bank's name
on Schedule I hereto under the caption "Letter of Credit Commitment" or,
if such Issuing Bank has entered into one or more Assignment and
Acceptances, set forth for such Issuing Bank in the Register maintained
by the Administrative Agent pursuant to Section 8.07(d) as such Issuing
Bank's "Letter of Credit Commitment", as such amount may be reduced at
or prior to such time pursuant to Section 2.05.
"LETTER OF CREDIT FACILITY" means, at any time, an amount equal
to the lesser of (a) the aggregate amount of the Issuing Banks' Letter
of Credit Commitments at such time and (b) $50,000,000, as such amount
may be reduced at or prior to such time pursuant to Section 2.05.
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<PAGE> 20
"LETTERS OF CREDIT" has the meaning specified in Section
2.01(d).
"LEVERAGE RATIO" means, at any date of determination, the ratio
of Consolidated total Debt for Borrowed Money of the Borrower and its
Restricted Subsidiaries to Consolidated EBITDA of the Borrower and its
Restricted Subsidiaries for the most recent Measurement Period ending on
or prior to such date.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement
which is intended to serve as the functional equivalent of security,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"LOAN DOCUMENTS" means (a) for purposes of this Agreement and
the Notes and any amendment, supplement or modification hereof or
thereof, (i) this Agreement, (ii) the Notes, (iii) the Guaranties, (iv)
the Collateral Documents, (v) each Letter of Credit Agreement, (vi) each
Intercompany Note, and (vii) the Fee Letter and (b) for purposes of the
Guaranties and the Collateral Documents and for all other purposes other
than for purposes of this Agreement and the Notes, (i) this Agreement,
(ii) the Notes, (iii) the Guaranties, (iv) the Collateral Documents, (v)
each Letter of Credit Agreement, (vi) each Secured Hedge Agreement,
(vii) each Intercompany Note, and (viii) the Fee Letter, in each case as
amended.
"LOAN PARTIES" means the Borrower, the Guarantors and AT Korea.
"LOAN VALUE" means (a) with respect to Eligible Receivables, up
to 85% of the value of Eligible Receivables; and (b) with respect to
Eligible Inventory, up to 50% of the value of Eligible Inventory.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MATERIAL ADVERSE CHANGE" means any material adverse change in
the business, assets, properties, liabilities (actual and contingent),
condition (financial or otherwise), operations or prospects of (a) the
Borrower and its Subsidiaries, taken as a whole, (b) as of the Effective
Date only, the Acquired Business or (c) as of the Effective Date only,
Anam and its Subsidiaries, taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, assets, properties, liabilities (actual and contingent),
operations, condition (financial or otherwise), or prospects of (i) the
Borrower and its Subsidiaries, taken as a whole, (ii) as of the
Effective Date only, the Acquired Business or (iii) as of the Effective
Date only, Anam and its Subsidiaries, taken as a whole, (b) the rights
and remedies of any Agent or any Lender Party under any Transaction
Document or (c) the ability of any Loan Party to perform its Obligations
under any Transaction Document to which it is or is to be a party.
"MATERIAL CONTRACT" means the contracts listed on Schedule
4.01(z) hereto.
"MEASUREMENT PERIOD" means, at any date of determination, the
most recent four consecutive fiscal quarters ending on or prior to such
date; provided that, (a) for determination on June 30, 2000, Measurement
Period shall mean the fiscal quarter most recently ended multiplied by
four; (b) for determination on September 30, 2000, Measurement Period
shall mean the two fiscal quarters most recently ended multiplied by
two; and (c) for determination on December 31,
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<PAGE> 21
2000, Measurement Period shall mean the three fiscal quarters most
recently ended multiplied by 4/3.
"MORTGAGES" has the meaning specified in Section 5.01(r).
"MORTGAGE POLICIES" has the meaning specified in Section
5.01(r)(B).
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and at least one
Person other than the Loan Parties and the ERISA Affiliates or (b) was
so maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"NET CASH PROCEEDS" means, with respect to any sale, lease,
transfer or other disposition of any asset or the incurrence or issuance
of any Debt or the sale or issuance of any Equity Interests (including,
without limitation, any capital contribution) by any Person, or any
Extraordinary Receipt received by or paid to or for the account of any
Person, the aggregate amount of cash received from time to time (whether
as initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions, (b) the amount of taxes payable in connection with or as a
result of such transaction and (c) the amount of any Debt secured by a
Lien on such asset that, by the terms of the agreement or instrument
governing such Debt, is required to be repaid upon such disposition, in
each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person or any Loan Party or any
Affiliate of any Loan Party and are properly attributable to such
transaction or to the asset that is the subject thereof.
"NEWCO" has the meaning specified in the definition of
"Fab Transaction".
"NEWCO SUCCESSOR" has the meaning specified in the
definition of "Fab Transaction".
"NOTE" means a Term A Note, a Term B Note or a Revolving
Credit Note.
"NOTICE OF BORROWING" has the meaning specified in
Section 2.02(a).
"NOTICE OF ISSUANCE" has the meaning specified in
Section 2.03(a).
"NOTICE OF RENEWAL" has the meaning specified in Section
2.01(d).
"NOTICE OF TERMINATION" has the meaning specified in
Section 2.01(d).
"NPL" means the National Priorities List under CERCLA.
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<PAGE> 22
"OBLIGATION" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of any Loan
Party under the Loan Documents include (a) the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts
payable by such Loan Party under any Loan Document and (b) the
obligation of such Loan Party to reimburse any amount in respect of any
of the foregoing that any Lender Party, in its sole discretion, may
elect to pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"OPEN YEAR" has the meaning specified in Section 4.01(r)(ii).
"OTHER TAXES" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"PERMITTED INVESTMENTS" has the meaning specified in Section
2.06(b)(iii).
"PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b); (b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens
arising in the ordinary course of business securing obligations that are
not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings provided, that
any reserves required by GAAP shall have been made; (c) zoning
restrictions, easements, rights of way and other encumbrances on title
to real property that do not render title to the property encumbered
thereby unmarketable or materially adversely affect the use of such
property for its present purposes; (d) Liens arising from judgments or
decrees in circumstances not constituting an Event of Default so long as
such Lien is adequately bonded; (e) Liens on insurance proceeds in favor
of insurance companies with respect to the financing of insurance
premiums on policies under which such proceeds are to be paid ; (f)
Liens incurred or deposits made under worker's compensation,
unemployment insurance and other types of social security or to secure
the performance of bids, tenders, contracts (other than for the payment
of money), surety and appeal bonds or to secure indemnity, performance
or other similar bonds in the ordinary course of business; (g) Liens
incurred in connection with licenses and sublicenses which do not
interfere in any material respect with the business of the Borrower or
its Restricted Subsidiaries and any interest or title of a licensee
under any such leases, subleases, licenses or sublicenses; (h) Liens
arising out of consignment or similar arrangements for the sale of goods
in the ordinary course of business; and (i) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
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<PAGE> 23
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PLEDGED DEBT" has the meaning specified in the Security
Agreement.
"PLEDGED SHARES" has the meaning specified in the Security
Agreement.
"PREFERRED INTERESTS" means, with respect to any Person, Equity
Interests issued by such Person that are entitled to a preference or
priority over any other Equity Interests issued by such Person upon any
distribution of such Person's property and assets, whether by dividend
or upon liquidation, provided that the Convertible Subordinated Notes or
the 2000 Convertible Subordinated Notes shall not be "Preferred
Interests" for the purposes of this Agreement so long as such
Convertible Subordinated Notes or 2000 Convertible Subordinated Notes
shall not have been converted.
"PREPAYMENT AMOUNT" has the meaning specified in Section
5.03(a).
"PREPAYMENT DATE" has the meaning specified in Section 5.03(a).
"PREPAYMENT NOTICE" has the meaning specified in Section
5.03(a).
"PRO RATA SHARE" of any amount means, with respect to any
Revolving Credit Lender at any time, the product of such amount times a
fraction the numerator of which is the amount of such Lender's Revolving
Credit Commitment at such time (or, if the Commitments shall have been
terminated pursuant to Section 2.05 or 6.01, such Lender's Revolving
Credit Commitment as in effect immediately prior to such termination)
and the denominator of which is the Revolving Credit Facility at such
time (or, if the Commitments shall have been terminated pursuant to
Section 2.05 or 6.01, the Revolving Credit Facility as in effect
immediately prior to such termination).
"RECEIVABLES" means all Receivables referred to in Section 1(c)
of the Security Agreement.
"REDEEMABLE" means, with respect to any Equity Interest, any
Debt or any other right or Obligation, any such right or Obligation that
(a) the issuer has undertaken to redeem at a fixed or determinable date
or dates, whether by operation of a sinking fund or otherwise, or upon
the occurrence of a condition not solely within the control of the
issuer or (b) is redeemable at the option of the holder.
"REFINANCING" has the meaning specified in the preliminary
statements to this Agreement.
"REGISTER" has the meaning specified in Section 8.07(d).
"REGULATION U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the Acquisition Agreement, the
Subordinated Debt Documents, the Subscription Agreement, the documents
setting forth the Korean Restructuring delivered to the Borrower and
each other document and instrument executed and delivered in connection
with the consummation of the Transactions (other than the Loan
Documents) and the Indentures.
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<PAGE> 24
"REPLACED LENDER PARTY" has the meaning specified in Section
2.12(h).
"REPLACEMENT EFFECTIVE DATE" has the meaning specified in
Section 2.12(h).
"REPLACEMENT LENDER PARTY" has the meaning specified in Section
2.12(h).
"REQUIRED LENDERS" means, at any time, Lenders owed or holding
at least a majority in interest of the sum of (a) the aggregate
principal amount of the Advances outstanding at such time, (b) the
aggregate Available Amount of all Letters of Credit outstanding at such
time, (c) the aggregate unused Commitments under the Term Facilities at
such time and (d) the aggregate Unused Revolving Credit Commitments at
such time; provided, however, that if any Lender shall be a Defaulting
Lender at such time, there shall be excluded from the determination of
Required Lenders at such time (A) the aggregate principal amount of the
Advances owing to such Lender (in its capacity as a Lender) and
outstanding at such time, (B) such Lender's Pro Rata Share of the
aggregate Available Amount of all Letters of Credit outstanding at such
time, (C) the aggregate unused Term Commitments of such Lender at such
time and (D) the Unused Revolving Credit Commitment of such Lender at
such time. For purposes of this definition, the aggregate principal
amount of Letter of Credit Advances owing to any Issuing Bank and the
Available Amount of each Letter of Credit shall be considered to be owed
to the Revolving Credit Lenders ratably in accordance with their
respective Revolving Credit Commitments.
"RESPONSIBLE OFFICER" means any officer of any Loan Party or any
of its Subsidiaries.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Borrower
that is not an Unrestricted Subsidiary.
"REVOLVING CREDIT ADVANCE" has the meaning specified in Section
2.01(c).
"REVOLVING CREDIT BORROWING" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Credit Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "Revolving Credit
Commitment" or, if such Lender has entered into one or more Assignment
and Acceptances, set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 8.07(d) as such Lender's
"Revolving Credit Commitment", as such amount may be reduced at or prior
to such time pursuant to Section 2.05.
"REVOLVING CREDIT FACILITY" means, at any time, the aggregate
amount of the Revolving Credit Lenders' Revolving Credit Commitments at
such time.
"REVOLVING CREDIT LENDER" means any Lender that has a Revolving
Credit Commitment.
"REVOLVING CREDIT NOTE" means a promissory note of the Borrower
payable to the order of any Revolving Credit Lender, in substantially
the form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of
the Borrower to such Lender resulting from the Revolving Credit Advances
made by such Lender, as amended.
"SECURED HEDGE AGREEMENT" means any Hedge Agreement required or
permitted under Article V that is entered into by and between any Loan
Party and any Hedge Bank.
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<PAGE> 25
"SECURED OBLIGATIONS" has the meaning specified in the Security
Agreement.
"SECURED PARTIES" means the Agents and the Lender Parties.
"SECURITY AGREEMENT" has the meaning specified in Section
3.01(a)(ii).
"SENIOR DEBT RATIO" means, at any date of determination, the
ratio of (a) the sum of (i) outstanding Advances, (ii) the Available
Amount of outstanding Letters of Credit, and (iii) all other secured
outstanding Debt (other than Subordinated Debt), in each case, as at the
end of the most recently ended fiscal quarter of the Borrower for which
financial statements are required to be delivered to the Lender Parties
pursuant to Section 5.03(b) or (c), as the case may be, to (b)
Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for
such fiscal quarter and the immediately preceding three fiscal quarters,
as adjusted to give pro forma effect to any Investment made since the
last day of such fiscal quarter or to be made within 90 days after such
date of determination pursuant to an executed purchase agreement as
though such Investment had been made at the beginning of such four
fiscal quarter period.
"SENIOR NOTES" means the Series A and Series B 9 1/4% Senior
Notes due 2006 issued pursuant to the Senior Notes Indenture, as
amended, to the extent permitted under the Loan Documents.
"SENIOR NOTES INDENTURE" means the Indenture dated as of May 13,
1999 between the Borrower and State Street Bank and Trust Company, as
trustee, pursuant to which the Senior Notes were issued, as amended, to
the extent permitted under the Loan Documents.
"SENIOR SUBORDINATED NOTES" means the Series A and Series B 10
1/2% Senior Subordinated Notes due 2009 issued pursuant to the Senior
Subordinated Notes Indenture, as amended, to the extent permitted under
the Loan Documents.
"SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture dated
as of May 13, 1999 between the Borrower and State Street Bank and Trust
Company, as trustee, pursuant to which the Senior Subordinated Notes
were issued, as amended, to the extent permitted under the Loan
Documents.
"SG" has the meaning specified in the recital of parties to this
Agreement.
"SG COWEN" has the meaning specified in the recital of parties
to this Agreement.
"SINGLE EMPLOYER PLAN" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
any Loan Party or any ERISA Affiliate and no Person other than the Loan
Parties and the ERISA Affiliates or (b) was so maintained and in respect
of which any Loan Party or any ERISA Affiliate could have liability
under Section 4069 of ERISA in the event such plan has been or were to
be terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay such debts and
liabilities as they mature and (d) such Person is not
25
<PAGE> 26
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"SPC" has the meaning specified in Section 8.07(i).
"SSBI" has the meaning specified in the recital of parties to
this Agreement.
"STANDBY LETTER OF CREDIT" means any Letter of Credit issued
under the Letter of Credit Facility, other than a Trade Letter of
Credit.
"SUBORDINATED DEBT" means the Convertible Subordinated Debt and
any other Debt of the Borrower that is subordinated to the Obligations
of the Borrower under the Loan Documents on, and that otherwise
contains, terms and conditions reasonably satisfactory to the Required
Lenders.
"SUBORDINATED DEBT DOCUMENTS" means all agreements, indentures
and instruments pursuant to which Subordinated Debt is issued.
"SUBORDINATED DEBT ISSUANCE" has the meaning specified in the
preliminary statements to this Agreement.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement dated
as of April 14, 2000 among the Borrower and the purchasers named
therein, pursuant to which the Common Stock was purchased, as amended,
to the extent permitted under the Loan Documents.
"SUBSIDIARY" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
Equity Interests in any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"SUBSIDIARY GUARANTOR" means each Subsidiary of the Borrower
listed on Schedule II hereto and each other Subsidiary of the Borrower
that shall be required to execute and deliver a guaranty pursuant to
Section 5.01(j).
"SUBSIDIARY GUARANTY" has the meaning specified in Section
3.01(a)(iii).
"SURVIVING DEBT" means Debt of each Loan Party and its
Subsidiaries outstanding immediately before and after giving effect to
the transactions contemplated by the Transaction Documents.
"SYNDICATION AGENT" has the meaning specified in the recital of
parties to this Agreement.
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<PAGE> 27
"TANGIBLE NET WORTH" shall mean, at the end of any fiscal
quarter, the sum of the capital stock (including Debt converted into or
exchanged for capital stock or otherwise capitalized) and additional
paid-in capital, plus retained earnings (or minus accumulated deficit)
as determined on a consolidated basis in accordance with GAAP, minus any
goodwill and intangibles, all as determined in accordance with GAAP.
"TAX CERTIFICATE" has the meaning specified in Section 5.03(j).
"TAXES" has the meaning specified in Section 2.12(a).
"TERM A ADVANCE" has the meaning specified in Section 2.01(a).
"TERM A BORROWING" means a borrowing consisting of simultaneous
Term A Advances of the same Type made by the Term A Lenders.
"TERM A COMMITMENT" means, with respect to any Term A Lender at
any time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term A Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant
to Section 8.07(d) as such Lender's "Term A Commitment", as such amount
may be reduced at or prior to such time pursuant to Section 2.05.
"TERM A FACILITY" means, at any time, the aggregate amount of
the Term A Lenders' Term A Commitments at such time.
"TERM A LENDER" means any Lender that has a Term A Commitment.
"TERM A NOTE" means a promissory note of the Borrower payable to
the order of any Term A Lender, in substantially the form of Exhibit A-1
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term A Advance made by such Lender, as amended.
"TERM ADVANCE" means a Term A Advance or a Term B Advance.
"TERM B ADVANCE" has the meaning specified in Section 2.01(b).
"TERM B BORROWING" means a borrowing consisting of simultaneous
Term B Advances of the same Type made by the Term B Lenders.
"TERM B COMMITMENT" means, with respect to any Term B Lender at
any time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term B Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant
to Section 8.07(d) as such Lender's "Term B Commitment", as such amount
may be reduced at or prior to such time pursuant to Section 2.05.
"TERM B FACILITY" means, at any time, the aggregate amount of
the Term B Lenders' Term B Commitments at such time.
"TERM B LENDER" means any Lender that has a Term B Commitment.
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<PAGE> 28
"TERM B NOTE" means a promissory note of the Borrower payable to
the order of any Term B Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term B Advance made by such Lender, as amended.
"TERM BORROWING" means a Term A Borrowing or a Term B Borrowing.
"TERM COMMITMENTS" means the Term A Commitments and the Term B
Commitments.
"TERM FACILITIES" means the Term A Facility and the Term B
Facility.
"TERM LENDER" means a Term A Lender or a Term B Lender.
"TERMINATION DATE" means the earlier of (a) the date of
termination in whole of the Revolving Credit Commitments, the Letter of
Credit Commitments and the Term Commitments pursuant to Section 2.05 or
6.01 and (b) (i) for purposes of the Revolving Credit Facility and the
Letter of Credit Facility, March 31, 2005, (ii) for purposes of the Term
A Facility, March 31, 2005 and (iii) for purposes of the Term B Facility
and for all other purposes, the date that is the earlier of (A)
September 30, 2005 and (B) 6 months prior to maturity of the Senior
Notes.
"TRADE LETTER OF CREDIT" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a supplier
of Inventory to the Borrower or any of its Subsidiaries to effect
payment for such Inventory, the conditions to drawing under which
include the presentation to the Issuing Bank that issued such Letter of
Credit of negotiable bills of lading, invoices and related documents
sufficient, in the judgment of such Issuing Bank, to create a valid and
perfected lien on or security interest in such Inventory, bills of
lading, invoices and related documents in favor of such Issuing Bank.
"TRANSACTION DOCUMENTS" means, collectively, the Loan Documents
and the Related Documents.
"TRANSACTIONS" has the meaning specified in the preliminary
statements to this Agreement.
"2000 CONVERTIBLE SUBORDINATED NOTES" means the 5% Notes issued
pursuant to the 2000 Convertible Subordinated Notes Indenture, as
amended to the extent permitted under the Loan Documents.
"2000 CONVERTIBLE SUBORDINATED NOTES INDENTURE" means the
Indenture dated as of March 22, 2000 between the Borrower and State
Street Bank and Trust Company, as trustee, pursuant to which the
Convertible Subordinated Debt was issued, as amended, to the extent
permitted under the Loan Documents.
"TYPE" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"UNRESTRICTED SUBSIDIARY" means a direct, wholly-owned
Subsidiary of the Borrower, designated as an unrestricted Subsidiary by
the board of directors of the Borrower (and shall in any event include
any of Anam, Newco or Newco Successor if such entity becomes a
Subsidiary of the Borrower), provided that the conditions set forth on
Schedule IV hereto shall have been and shall remain satisfied with
respect to such Subsidiary.
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<PAGE> 29
"UNUSED REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Credit Lender at any time, (a) such Lender's Revolving Credit
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Revolving Credit Advances and Letter of Credit Advances
made by such Lender (in its capacity as a Lender) and outstanding at
such time plus (ii) such Lender's Pro Rata Share of (A) the aggregate
Available Amount of all Letters of Credit outstanding at such time and
(B) the aggregate principal amount of all Letter of Credit Advances made
by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such
time.
"VOTING INTERESTS" means shares of capital stock issued by a
corporation, or equivalent Equity Interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing
similar functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"WELFARE PLAN" means a welfare plan, as defined in Section 3(1)
of ERISA, that is maintained for employees of any Loan Party or in
respect of which any Loan Party could have liability.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods; Other Definitional
Provisions. In this Agreement and the other Loan Documents in the
computation of periods of time from a specified date to a later
specified date, the word "FROM" means "from and including" and the words
"TO" and "UNTIL" each mean "to but excluding". References in the Loan
Documents to any agreement or contract "AS AMENDED" shall mean and be a
reference to such agreement or contract as amended, amended and
restated, supplemented or otherwise modified from time to time in
accordance with its terms.
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles consistent with those applied
in the preparation of the financial statements referred to in Section
4.01(g) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances and the Letters of Credit. (a) The Term A
Advances. Each Term A Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "TERM A ADVANCE") to the
Borrower on the Effective Date in an amount not to exceed such Lender's Term A
Commitment at such time. The Term A Borrowing shall consist of Term A Advances
made simultaneously by the Term A Lenders ratably according to their Term A
Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid
may not be reborrowed.
(b) The Term B Advances. Each Term B Lender severally agrees, on the
terms and conditions hereinafter set forth, to make a single advance (a "TERM B
ADVANCE") to the Borrower on the Effective Date in an amount not to exceed such
Lender's Term B Commitment at such time. The Term B Borrowing shall consist of
Term B Advances made simultaneously by the Term B Lenders ratably according to
their Term B Commitments. Amounts borrowed under this Section 2.01(b) and repaid
or prepaid may not be reborrowed.
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<PAGE> 30
(c) The Revolving Credit Advances. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "REVOLVING CREDIT ADVANCE") to the Borrower from time to time
on any Business Day during the period from the Effective Date until the
Termination Date in an amount for each such Advance not to exceed such Lender's
Unused Revolving Credit Commitment at such time; provided, however, that the
aggregate amount of Revolving Credit Advances made on the Effective Date shall
not exceed $50,000,000. Each Revolving Credit Borrowing shall be in an aggregate
amount of $2,500,000 or an integral multiple of $500,000 in excess thereof
(other than a Borrowing the proceeds of which shall be used solely to repay or
prepay in full outstanding Letter of Credit Advances) and shall consist of
Revolving Credit Advances made simultaneously by the Revolving Credit Lenders
ratably according to their Revolving Credit Commitments. Within the limits of
each Revolving Credit Lender's Unused Revolving Credit Commitment in effect from
time to time, the Borrower may borrow under this Section 2.01(c), prepay
pursuant to Section 2.06(a) and reborrow under this Section 2.01(c).
(d) Letters of Credit. Each Issuing Bank severally agrees, on the terms
and conditions hereinafter set forth, to issue (or cause its Affiliate that is a
commercial bank to issue on its behalf) letters of credit (the "LETTERS OF
Credit") for the account of the Borrower from time to time on any Business Day
during the period from the date hereof until 60 days before the Termination Date
in an aggregate Available Amount (i) for all Letters of Credit issued by such
Issuing Bank not to exceed at any time the lesser of (x) the Letter of Credit
Facility at such time and (y) such Issuing Bank's Letter of Credit Commitment at
such time and (ii) for each such Letter of Credit not to exceed the Unused
Revolving Credit Commitments of the Revolving Credit Lenders at such time. No
Letter of Credit shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than the earlier of 60
days before the Termination Date and (A) in the case of a Standby Letter of
Credit, one year after the date of issuance thereof, but may by its terms be
renewable annually upon notice (a "NOTICE OF RENEWAL") given to the Issuing Bank
that issued such Standby Letter of Credit and the Administrative Agent on or
prior to any date for notice of renewal set forth in such Letter of Credit but
in any event at least three Business Days prior to the date of the proposed
renewal of such Standby Letter of Credit and upon fulfillment of the applicable
conditions set forth in Article III unless such Issuing Bank has notified the
Borrower (with a copy to the Administrative Agent) on or prior to the date for
notice of termination set forth in such Letter of Credit but in any event at
least 30 Business Days prior to the date of automatic renewal of its election
not to renew such Standby Letter of Credit (a "NOTICE OF TERMINATION") and (B)
in the case of a Trade Letter of Credit, 60 days after the date of issuance
thereof; provided that the terms of each Standby Letter of Credit that is
automatically renewable annually shall (x) require the Issuing Bank that issued
such Standby Letter of Credit to give the beneficiary named in such Standby
Letter of Credit notice of any Notice of Termination, (y) permit such
beneficiary, upon receipt of such notice, to draw under such Standby Letter of
Credit prior to the date such Standby Letter of Credit otherwise would have been
automatically renewed and (z) not permit the expiration date (after giving
effect to any renewal) of such Standby Letter of Credit in any event to be
extended to a date later than 60 days before the Termination Date. If either a
Notice of Renewal is not given by the Borrower or a Notice of Termination is
given by the relevant Issuing Bank pursuant to the immediately preceding
sentence, such Standby Letter of Credit shall expire on the date on which it
otherwise would have been automatically renewed; provided, however, that even in
the absence of receipt of a Notice of Renewal the relevant Issuing Bank may in
its discretion, unless instructed to the contrary by the Administrative Agent or
the Borrower, deem that a Notice of Renewal had been timely delivered and in
such case, a Notice of Renewal shall be deemed to have been so delivered for all
purposes under this Agreement. Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrower may request
the issuance of Letters of Credit under this Section 2.01(d), repay any Letter
of Credit Advances resulting from drawings thereunder pursuant to Section
2.03(c) and request the issuance of additional Letters of Credit under this
Section 2.01(d).
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<PAGE> 31
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in
Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar
Rate Advances, or the first Business Day prior to the date of the proposed
Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the
Borrower to the Administrative Agent, which shall give to each Appropriate
Lender prompt notice thereof by telex or telecopier. Each such notice of a
Borrowing (a "NOTICE OF BORROWING") shall be by telephone, confirmed immediately
in writing, or telex or telecopier, in substantially the form of Exhibit B
hereto, specifying therein the requested (i) date of such Borrowing, (ii)
Facility under which such Borrowing is to be made, (iii) Type of Advances
comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in
the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest
Period for each such Advance. Each Appropriate Lender shall, before 11:00 A.M.
(New York City time) on the date of such Borrowing, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing in accordance with the respective Commitments under the
applicable Facility of such Lender and the other Appropriate Lenders. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by crediting the Borrower's Account;
provided, however, that, in the case of any Revolving Credit Borrowing, the
Administrative Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Letter of Credit Advances made by any Issuing
Bank, as the case may be, and by any other Revolving Credit Lender and
outstanding on the date of such Revolving Credit Borrowing, plus interest
accrued and unpaid thereon to and as of such date, available to such Issuing
Bank, as the case may be, and such other Revolving Credit Lenders for repayment
of such Letter of Credit Advances.
(b) Anything in subsection (a) above to the contrary notwithstanding,
the Borrower may not select Eurodollar Rate Advances (i) for the initial
Borrowing hereunder, (ii) for any Borrowing if the aggregate amount of such
Borrowing is less than $5,000,000 or (iii) if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.09 or 2.10; provided, however, that if the syndication under this
Agreement has not been completed on or prior to the Effective Date, then the
Borrower may only select Eurodollar Rate Advances with one month Interest Period
until the earlier of (i) the date which is three months after the Effective Date
and (ii) the date the syndication has been completed as shall be specified by
the Administrative Agent in a notice to the Borrower. In addition, the Term A
Advances may not be outstanding as part of more than 5 separate Borrowings, the
Term B Advances may not be outstanding as part of more than 5 separate
Borrowings and the Revolving Credit Advances may not be outstanding as part of
more than 10 separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Appropriate Lender against any loss, cost or expense incurred by
such Lender as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
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<PAGE> 32
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay or pay to the Administrative
Agent forthwith on demand such corresponding amount and to pay interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid or paid to the Administrative Agent, at (i) in
the case of the Borrower, the interest rate applicable at such time under
Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative
Agent such corresponding amount, such amount so paid shall constitute such
Lender's Advance as part of such Borrowing for all purposes.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters
of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 A.M. (New York City time) on the fifth
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to any Issuing Bank, which shall give to the
Administrative Agent and each Revolving Credit Lender prompt notice thereof by
telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"NOTICE OF ISSUANCE") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letter of credit
as such Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "LETTER OF CREDIT AGREEMENT"). If (x) the
requested form of such Letter of Credit is acceptable to such Issuing Bank in
its sole discretion and (y) it has not received notice of objection to such
issuance from Lenders holding at least 50% of the Revolving Credit Commitments,
such Issuing Bank will, upon fulfillment of the applicable conditions set forth
in Article III, make such Letter of Credit available to the Borrower at its
office referred to in Section 8.02 or as otherwise agreed with the Borrower in
connection with such issuance. In the event and to the extent that the
provisions of any Letter of Credit Agreement shall conflict with this Agreement,
the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the
Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued by such
Issuing Bank during the previous week and drawings during such week under all
Letters of Credit issued by such Issuing Bank, (B) to each Revolving Credit
Lender on the first Business Day of each month a written report summarizing
issuance and expiration dates of Letters of Credit issued by such Issuing Bank
during the preceding month and drawings during such month under all Letters of
Credit issued by such Issuing Bank and (C) to the Administrative Agent and each
Revolving Credit Lender on the first Business Day of each calendar quarter a
written report setting forth the average daily aggregate Available Amount during
the preceding calendar quarter of all Letters of Credit issued by such Issuing
Bank.
(c) Drawing and Reimbursement. The payment by any Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by such Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. Upon written demand
by any Issuing Bank with an outstanding Letter of Credit Advance, with a copy of
such demand to the Administrative Agent, each Revolving Credit Lender shall
purchase from
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<PAGE> 33
such Issuing Bank, and such Issuing Bank shall sell and assign to each such
Revolving Credit Lender, such Lender's Pro Rata Share of such outstanding Letter
of Credit Advance as of the date of such purchase, by making available for the
account of its Applicable Lending Office to the Administrative Agent for the
account of such Issuing Bank, by deposit to the Administrative Agent's Account,
in same day funds, an amount equal to the portion of the outstanding principal
amount of such Letter of Credit Advance to be purchased by such Lender. Promptly
after receipt thereof, the Administrative Agent shall transfer such funds to
such Issuing Bank. The Borrower hereby agrees to each such sale and assignment.
Each Revolving Credit Lender agrees to purchase its Pro Rata Share of an
outstanding Letter of Credit Advance on (i) the Business Day on which demand
therefor is made by the Issuing Bank which made such Advance, provided that
notice of such demand is given not later than 11:00 A.M. (New York City time) on
such Business Day, or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment by an
Issuing Bank to any Revolving Credit Lender of a portion of a Letter of Credit
Advance, such Issuing Bank represents and warrants to such other Lender that
such Issuing Bank is the legal and beneficial owner of such interest being
assigned by it, free and clear of any liens, but makes no other representation
or warranty and assumes no responsibility with respect to such Letter of Credit
Advance, the Loan Documents or any Loan Party. If and to the extent that any
Revolving Credit Lender shall not have so made the amount of such Letter of
Credit Advance available to the Administrative Agent, such Revolving Credit
Lender agrees to pay to the Administrative Agent forthwith on demand such amount
together with interest thereon, for each day from the date of demand by such
Issuing Bank until the date such amount is paid to the Administrative Agent, at
the Federal Funds Rate for its account or the account of such Issuing Bank, as
applicable. If such Lender shall pay to the Administrative Agent such amount for
the account of such Issuing Bank on any Business Day, such amount so paid in
respect of principal shall constitute a Letter of Credit Advance made by such
Lender on such Business Day for purposes of this Agreement, and the outstanding
principal amount of the Letter of Credit Advance made by such Issuing Bank shall
be reduced by such amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any Lender
to make the Letter of Credit Advance to be made by it on the date specified in
Section 2.03(c) shall not relieve any other Lender of its obligation hereunder
to make its Letter of Credit Advance on such date, but no Lender shall be
responsible for the failure of any other Lender to make the Letter of Credit
Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Term A Advances. The Borrower
shall repay to the Administrative Agent for the ratable account of the Term A
Lenders the aggregate outstanding principal amount of the Term A Advances on the
following dates in the amounts indicated (which amounts shall be reduced as a
result of the application of prepayments in accordance with the order of
priority set forth in Section 2.06):
<TABLE>
<CAPTION>
Date Amount
---- -----------
<S> <C>
June 30, 2000 $17,500,000
September 30, 2000 $17,500,000
December 31, 2000 $17,500,000
March 31, 2001 $17,500,000
June 30, 2001 $17,500,000
September 30, 2001 $17,500,000
December 31, 2001 $17,500,000
March 31, 2002 $17,500,000
June 30, 2002 $17,500,000
September 30, 2002 $17,500,000
December 31, 2002 $17,500,000
</TABLE>
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<PAGE> 34
<TABLE>
<S> <C>
March 31, 2003 $17,500,000
June 30, 2003 $17,500,000
September 30, 2003 $17,500,000
December 31, 2003 $17,500,000
March 31, 2004 $17,500,000
June 30, 2004 $17,500,000
September 30, 2004 $17,500,000
December 31, 2004 $17,500,000
March 31, 2005 $17,500,000
</TABLE>
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term A Advances outstanding on such date.
(b) Term B Advances. The Borrower shall repay to the Administrative
Agent for the ratable account of the Term B Lenders the aggregate outstanding
principal amount of the Term B Advances on the following dates in the amounts
indicated (which amounts shall be reduced as a result of the application of
prepayments in accordance with the order of priority set forth in Section 2.06):
<TABLE>
<CAPTION>
Date Amount
---- -----------
<S> <C>
June 30, 2000 $ 875,000
September 30, 2000 $ 875,000
December 31, 2000 $875,000
March 31, 2001 $ 875,000
June 30, 2001 $ 875,000
September 30, 2001 $ 875,000
December 30, 2001 $ 875,000
March 31, 2002 $875,000
June 30, 2002 $ 875,000
September 30, 2002 $ 875,000
December 31, 2002 $ 875,000
March 31, 2003 $875,000
June 30, 2003 $ 875,000
September 30, 2003 $ 875,000
December 31, 2003 $42,000,000
March 31, 2004 $42,000,000
June 30, 2004 $42,000,000
September 30, 2004 $42,000,000
December 31, 2004 $42,000,000
March 31, 2005 $42,000,000
June 30, 2005 $42,000,000
September 30, 2005 $43,750,000
</TABLE>
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term B Advances outstanding on such date.
(c) Revolving Credit Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Revolving Credit Lenders on
the Termination Date the aggregate outstanding principal amount of the Revolving
Credit Advances then outstanding.
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<PAGE> 35
(d) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of each Issuing Bank and each other
Revolving Credit Lender that has made a Letter of Credit Advance on the earlier
of demand and the Termination Date the outstanding principal amount of each
Letter of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any Letter of
Credit Agreement and any other agreement or instrument relating to any Letter of
Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances (it being understood that any such
payment by the Borrower is without prejudice to, and does not constitute a
waiver of, any rights the Borrower might have or might acquire as a result of
the payment by any Issuing Bank of any draft or the reimbursement by the
Borrower thereof):
(A) any lack of validity or enforceability of any Loan Document,
any Letter of Credit Agreement, any Letter of Credit or any other
agreement or instrument relating thereto (all of the foregoing being,
collectively, the "L/C RELATED DOCUMENTS");
(B) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(C) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Bank or
any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(E) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or certificate or other document that does not
strictly comply with the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral or
other collateral, or any release or amendment or waiver of or consent to
departure from the Guaranties or any other guarantee, for all or any of
the Obligations of the Borrower in respect of the L/C Related Documents;
or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional.
The Borrower may, upon at least three Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the unused portions
of the Term A Commitments, the Term B Commitments and the Letter of Credit
Facility and the Unused Revolving Credit Commitments; provided, however, that
each partial reduction of a Facility (i) shall be in an aggregate amount of
$2,500,000 or an integral multiple of
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$500,000 in excess thereof and (ii) shall be made ratably among the Appropriate
Lenders in accordance with their Commitments with respect to such Facility.
(b) Mandatory. (i) On the date of the Term A Borrowing, after giving
effect to such Term A Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term A Advances, the aggregate Term A Commitments
of the Term A Lenders shall be automatically and permanently reduced, on a pro
rata basis, by an amount equal to the amount by which the aggregate Term A
Commitments immediately prior to such reduction exceed the aggregate unpaid
principal amount of the Term A Advances then outstanding.
(ii) On the date of the Term B Borrowing, after giving effect to such
Term B Borrowing, and from time to time thereafter upon each repayment or
prepayment of the Term B Advances, the aggregate Term B Commitments of the Term
B Lenders shall be automatically and permanently reduced, on a pro rata basis,
by an amount equal to the amount by which the aggregate Term B Commitments
immediately prior to such reduction exceed the aggregate unpaid principal amount
of the Term B Advances then outstanding.
(iii) The Letter of Credit Facility shall be permanently reduced from
time to time on the date of each reduction in the Revolving Credit Facility by
the amount, if any, by which the amount of the Letter of Credit Facility exceeds
the Revolving Credit Facility after giving effect to such reduction of the
Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon at least
three Business Days' notice to the Administrative Agent stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given the Borrower shall, prepay the outstanding aggregate principal amount of
the Advances comprising part of the same Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid; provided, however, that (x) each partial prepayment
shall be in an aggregate principal amount of $2,500,000 or an integral multiple
of $500,000 in excess thereof and (y) if any prepayment of a Eurodollar Rate
Advance is made on a date other than the last day of an Interest Period for such
Advance, the Borrower shall also pay any amounts owing pursuant to Section
8.04(c).
(b) Mandatory. (i) The Borrower shall, on the 90th day following the end
of each Fiscal Year, prepay an aggregate principal amount of the Term Advances
comprising part of the same Term Borrowings equal to (A) to the extent the
aggregate Commitments (whether used or unused) on the last day of such Fiscal
Year equal or exceed $500,000,000, 50% of the amount of Excess Cash Flow for
such Fiscal Year and (B) upon the reduction of the aggregate Commitments
(whether used or unused) on the last day of such Fiscal Year to any amount less
than $500,000,000, 25% of the amount of Excess Cash Flow for such Fiscal Year.
(ii) The Borrower shall, within 3 Business Days of the date of receipt
(or such later date as may be specified in Section 5.02(e)) of the Net Cash
Proceeds by the Borrower or any of its Restricted Subsidiaries from (A) the
sale, lease, transfer or other disposition of any assets of the Borrower or any
of its Restricted Subsidiaries (other than any sale, lease, transfer or other
disposition of assets pursuant to clause (i), (iv), (vi) or (vii) of Section
5.02(e)), (B) the incurrence or issuance by the Borrower or any of its
Restricted Subsidiaries of any Debt (other than Debt incurred or issued pursuant
to clause ((i)(A) through (E), (ii)(A) and (B), (iii)(A) through (D) or (iv)(A)
and (B)) of Section 5.02(b)), (C) any Extraordinary Receipt received by or paid
to or for the account of the Borrower or any of its Restricted Subsidiaries and
not otherwise included in clause (A) or (B) above or subsection (iii) below,
prepay an aggregate principal amount of the Term Advances comprising part of the
same Term Borrowings equal to 100% of such Net Cash Proceeds.
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(iii) The Borrower shall, within 2 Business Days of the date of receipt
(or such later date as may be specified below) of the Net Cash Proceeds by the
Borrower or any of its Restricted Subsidiaries from the issuance by the Borrower
or any of its Restricted Subsidiaries of any Equity Interests, prepay an
aggregate principal amount of the Term Advances comprising part of the same Term
Borrowings in an amount equal to (A) if the Senior Debt Ratio at such time is
greater than or equal to 1.0:1.0, 50% of such Net Cash Proceeds and (B) if the
Senior Debt Ratio at such time is less than 1.0:1.0, 0% of such Net Cash
Proceeds, provided, however, that for the purposes of calculating clause
(iii)(A) above, the Borrower shall be permitted to exclude an amount (the
"EXCLUDED AMOUNT") from the Net Cash Proceeds of such issuances of Equity
Interests to be used to fund Investments made or to be made pursuant to Section
5.02(f)(i) and (viii) ("PERMITTED INVESTMENTS") of up to (1) if the Senior Debt
Ratio is greater than 1.5:1.0 on such date of receipt, $50,000,000 in each
Fiscal Year but not more than $200,000,000 on a cumulative basis while the Loan
Documents are in effect and (2) if the Senior Debt Ratio is equal to or less
than 1.5:1.0, $200,000,000 on a cumulative basis while the Loan Documents are in
effect, provided further that to the extent any such Excluded Amount is not used
within 90 days of the receipt of such Net Cash Proceeds to fund Permitted
Investments, 50% of such unused Excluded Amount shall be applied to prepay the
Term Advances comprising part of the same Term Borrowings.
(iv) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Advances comprising part of the same
Borrowings and the Letter of Credit Advances equal to the amount by which (A)
the sum of the aggregate principal amount of (x) the Revolving Credit Advances
and (y) the Letter of Credit Advances then outstanding plus the aggregate
Available Amount of all Letters of Credit then outstanding exceeds (B) the
lesser of the Revolving Credit Facility and the Loan Value of Eligible
Collateral on such Business Day.
(v) The Borrower shall, on each Business Day, pay to the Administrative
Agent for deposit in the L/C Collateral Account an amount sufficient to cause
the aggregate amount on deposit in such Account to equal the amount by which the
aggregate Available Amount of all Letters of Credit then outstanding exceeds the
Letter of Credit Facility on such Business Day.
(vi) Prepayments of the Revolving Credit Facility made pursuant to
clause (iv) or (v) above shall be first applied to prepay Letter of Credit
Advances then outstanding until such Advances are paid in full and second
applied to prepay Revolving Credit Advances then outstanding comprising part of
the same Borrowings until such Advances are paid in full and third deposited in
the L/C Collateral Account to cash collateralize 100% of the Available Amount of
the Letters of Credit then outstanding. Upon the drawing of any Letter of Credit
for which funds are on deposit in the L/C Collateral Account, such funds shall
be applied to reimburse the relevant Issuing Bank or Revolving Credit Lenders,
as applicable.
(vii) Anything contained in this Section 2.06(b) to the contrary
notwithstanding, (A) if, following the occurrence of any "Asset Sale" (as such
term is defined in either the Senior Notes Indenture or the Senior Subordinated
Notes Indenture, as applicable) by any Loan Party or any of its Subsidiaries,
the Borrower is required to commit by a particular date (a "COMMITMENT DATE") to
apply or cause its Subsidiaries to apply an amount equal to any of the "Net
Proceeds" (as such term is defined in either the Senior Notes Indenture or the
Senior Subordinated Notes Indenture, as applicable) thereof in a particular
manner, or to apply by a particular date (an "APPLICATION DATE") an amount equal
to any such "Net Proceeds" in a particular manner, in either case in order to
excuse the Borrower from being required to make an "Asset Sale Offer" (as such
term is defined in either the Senior Notes Indenture or the Senior Subordinated
Notes Indenture, as applicable) in connection with such "Asset Sale," and the
Borrower shall have failed to so commit or to so apply an amount equal to such
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"Net Proceeds" at least 60 days before the applicable Commitment Date or
Application Date, as the case may be, or (B) if the Borrower at any other time
shall have failed to apply or commit or cause to be applied an amount equal to
any such "Net Proceeds," and, within 60 days thereafter assuming no further
application or commitment of an amount equal to such "Net Proceeds" the Borrower
would otherwise be required to make an "Asset Sale Offer" in respect thereof,
then in either such case the Borrower shall immediately apply or cause to be
applied an amount equal to such "Net Proceeds" to the payment of the Advances in
the manner set forth in Section 2.06(b)(ii) in such amounts as shall excuse the
Borrower from making any such "Asset Sale Offer".
(viii) All prepayments under this subsection (b) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid.
(c) Each prepayment under the Term Facilities pursuant to Section 2.06
shall be applied to prepay the Term A Facility and the Term B Facility, subject
to the provisions Section 2.06(d) below, on a pro rata basis. Prepayments of the
Term A Facility and the Term B Facility will be applied to the installments
thereof on a pro rata basis.
(d) With respect to any prepayment of the Term Advances, the
Administrative Agent shall ratably pay the Term A Lenders and the Term B
Lenders; provided, however, that any Term B Lender, at its option, to the extent
that any Term A Advances are then outstanding, may elect not to accept such
prepayment (such Lender being a "DECLINING LENDER"), in which event the
provisions of the next sentence shall apply. Any Term B Lender may elect not to
accept its ratable share of the prepayment referred to in any Prepayment Notice
by giving written notice to the Administrative Agent not later than 11:00 A.M.
(New York City time) on the Business Day immediately preceding the scheduled
Prepayment Date. On the Prepayment Date, an amount equal to that portion of the
Prepayment Amount available to prepay Term B Lenders (less any amounts that
would otherwise be payable to Declining Lenders) shall be applied to prepay Term
B Advances owing to Term B Lenders other than Declining Lenders and any amounts
that would otherwise have been applied to prepay Term B Advances owing to
Declining Lenders shall instead be applied ratably to prepay the remaining Term
Advances (other than Term B Advances held by Declining Lenders) as provided in
Sections 2.06(a) and (b); provided further that on prepayment in full of Term
Advances owing to Term Lenders other than Declining Lenders, the remainder of
any Prepayment Amount shall be applied ratably to prepay Term B Advances owing
to Declining Lenders.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
Base Rate Advance, a rate per annum equal at all times to the sum of (A)
the Base Rate in effect from time to time plus (B) the Applicable Margin
in effect from time to time, payable in arrears quarterly on the last
day of each March, June, September and December during such periods and
on the date such Base Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A) the
Eurodollar Rate for such Interest Period for such Advance plus (B) the
Applicable Margin in effect on the first day of such Interest Period,
payable in arrears on the last day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day
that occurs during such Interest Period every three months from the
first day of such Interest Period and on the date such Eurodollar Rate
Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance of
an Event of Default, the Administrative Agent may, and upon the request of the
Required Lenders shall, require that
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the Borrower pay interest on (i) the unpaid principal amount of each Advance
owing to each Lender, payable in arrears on the dates referred to in clause
(a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all times to
2% per annum above the rate per annum required to be paid on such Advance
pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent
permitted by law, the amount of any interest, fee or other amount payable under
the Loan Documents that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid, in the case
of interest, on the Type of Advance on which such interest has accrued pursuant
to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate Advances
pursuant to clause (a)(i) above, provided, however, that, following acceleration
of the advances pursuant to Section 6.01, interest shall accrue and be payable
at the rate required by this Section 2.07(b) whether or not requested by the
Administrative Agent or the Required Lenders.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to
Section 2.09 or a notice of selection of an Interest Period pursuant to the
terms of the definition of "Interest Period", the Administrative Agent shall
give notice to the Borrower and each Appropriate Lender of the applicable
Interest Period and the applicable interest rate determined by the
Administrative Agent for purposes of clause (a)(i) or (a)(ii) above.
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to the
Administrative Agent for the account of the Lenders a commitment fee, from the
date hereof in the case of each Initial Lender and from the effective date
specified in the Assumption Agreement or in the Assignment and Acceptance
pursuant to which it became a Lender in the case of each other Lender until the
Termination Date, payable in arrears quarterly on the last day of each March,
June, September and December, commencing June 30, 2000, and on the Termination
Date, at the rate of 1/2 of 1% per annum on the actual daily Unused Revolving
Credit Commitment of such Lender; provided, however, that any commitment fee
accrued with respect to any of the Commitments of a Defaulting Lender during the
period prior to the time such Lender became a Defaulting Lender and unpaid at
such time shall not be payable by the Borrower so long as such Lender shall be a
Defaulting Lender except to the extent that such commitment fee shall otherwise
have been due and payable by the Borrower prior to such time; and provided
further that no commitment fee shall accrue on any of the Commitments of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commission, payable in arrears quarterly on the last day of each March, June,
September and December, commencing June 30, 2000, and on the earliest to occur
of the full drawing, expiration, termination or cancellation of any Letter of
Credit and on the Termination Date, on such Lender's Pro Rata Share of the
actual daily aggregate Available Amount during such quarter of all Letters of
Credit outstanding from time to time at the rate per annum equal to the
Applicable Margin then in effect for Revolving Credit Advances that are
Eurodollar Rate Advances (including default interest, if any).
(ii) The Borrower shall pay to each Issuing Bank, for its own account,
(A) a fronting fee, payable in arrears quarterly on the last day of each March,
June, September and December, commencing June 30, 2000, and on the Termination
Date, on the average daily amount of its Letter of Credit Commitment during such
quarter, from the date hereof until the Termination Date, at the rate of 0.25%
per annum and an issuance fee for each Letter of Credit issued by such Issuing
Bank in an amount equal to 0.25% of the Available Amount of such Letter of
Credit on the date of issuance of such Letter of Credit, payable on such date;
provided that, in no event shall such issuance fee be less than $500 (B) such
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other commissions, transfer fees and other fees and charges in connection with
the issuance or administration of each Letter of Credit as the Borrower and such
Issuing Bank shall agree.
(c) Agents' Fees. The Borrower shall pay to each Agent for its own
account such fees as may from time to time be agreed between the Borrower and
such Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may on
any Business Day, upon notice given to the Administrative Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Section 2.10, Convert
all or any portion of the Advances of one Type comprising the same Borrowing
into Advances of the other Type; provided, however, that any Conversion of
Eurodollar Rate Advances into Base Rate Advances shall be made only on the last
day of an Interest Period for such Eurodollar Rate Advances, any Conversion of
Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less
than the minimum amount specified in Section 2.02(b), no Conversion of any
Advances shall result in more separate Borrowings than permitted under Section
2.02(b) and each Conversion of Advances comprising part of the same Borrowing
under any Facility shall be made ratably among the Appropriate Lenders in
accordance with their Commitments under such Facility. Each such notice of
Conversion shall, within the restrictions specified above, specify (i) the date
of such Conversion, (ii) the Advances to be Converted and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $2,500,000, such Advances shall
automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance. (iii) Upon the occurrence and during the continuance of a Default under
Section 6.01(a) or 6.01(f) or any Event of Default, (x) each Eurodollar Rate
Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders
to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining or participating in Letters of Credit or of
agreeing to make or of making or maintaining Letter of Credit Advances
(excluding, for purposes of this Section 2.10, any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrower shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender Party additional amounts sufficient to compensate such Lender Party for
such increased cost. A
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certificate as to the amount of such increased cost, submitted to the Borrower
by such Lender Party, shall be conclusive and binding for all purposes, absent
manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue or participate in Letters of
Credit hereunder and other commitments of such type or the issuance or
maintenance of or participation in the Letters of Credit (or similar contingent
obligations), then, upon demand by such Lender Party (with a copy of such demand
to the Administrative Agent), the Borrower shall pay to the Administrative Agent
for the account of such Lender Party, from time to time as specified by such
Lender Party, additional amounts sufficient to compensate such Lender Party in
the light of such circumstances, to the extent that such Lender Party reasonably
determines such increase in capital to be allocable to the existence of such
Lender Party's commitment to lend or to issue or participate in Letters of
Credit hereunder or to the issuance or maintenance of or participation in any
Letters of Credit. A certificate as to such amounts submitted to the Borrower by
such Lender Party shall be conclusive and binding for all purposes, absent
manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any Facility,
Lenders owed at least 50% of the then aggregate unpaid principal amount thereof
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, the Administrative Agent shall forthwith so notify the Borrower and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under such
Facility will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds, with payments being received by the Administrative Agent after such time
being deemed to have been received on the next succeeding Business Day. The
Administrative Agent will promptly thereafter cause like funds to be distributed
(i) if such payment by the Borrower is in respect of principal, interest,
commitment fees or any other Obligation then payable hereunder and under the
Notes to more than one Lender Party, to such Lender Parties for the account of
their respective Applicable Lending Offices
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ratably in accordance with the amounts of such respective Obligations then
payable to such Lender Parties and (ii) if such payment by the Borrower is in
respect of any Obligation then payable hereunder to one Lender Party, to such
Lender Party for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.07(d), from and after the
effective date of such Assignment and Acceptance, the Administrative Agent shall
make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
(c) All computations of interest based on the Base Rate shall be made by
the Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Eurodollar Rate or the
Federal Funds Rate and of fees and Letter of Credit commissions shall be made by
the Administrative Agent on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or commissions are
payable. Each determination by the Administrative Agent of an interest rate, fee
or commission hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee or Letter
of Credit fee, as the case may be; provided, however, that, if such extension
would cause payment of interest on or principal of Eurodollar Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
(f) If the Administrative Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party's proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of Credit
then outstanding, in repayment or prepayment of such of the outstanding Advances
or other Obligations owed to such Lender Party, and for application to such
principal installments, as the Administrative Agent shall direct.
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SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder
or under the Notes shall be made, in accordance with Section 2.11, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender Party and each Agent, taxes that
are imposed on its overall net income by the United States and taxes that are
imposed on its overall net income (and franchise taxes imposed in lieu thereof)
by the state or foreign jurisdiction under the laws of which such Lender Party
or such Agent, as the case may be, is organized or any political subdivision
thereof and, in the case of each Lender Party, taxes that are imposed on its
overall net income (and franchise taxes imposed in lieu thereof) by the state or
foreign jurisdiction of such Lender Party's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender Party or any Agent, (i)
the sum payable by the Borrower shall be increased as may be necessary so that
after the Borrower and the Administrative Agent have made all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender Party or such Agent, as the case may be, receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make all such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "OTHER TAXES").
(c) The Borrower shall indemnify each Lender Party and each Agent for
and hold them harmless against the full amount of Taxes and Other Taxes, and for
the full amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.12, imposed on or paid by such Lender Party or such
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
such Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Administrative Agent, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing such payment. In
the case of any payment hereunder or under the Notes by or on behalf of the
Borrower through an account or branch outside the United States or by or on
behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of
subsections (d) and (e) of this Section 2.12, the terms "UNITED STATES" and
"UNITED STATES person" shall have the meanings specified in Section 7701 of the
Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction outside
the United States shall, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender or Initial Issuing Bank, as
the case may be, and on the date of the Assignment and Acceptance pursuant to
which it becomes a Lender Party in the case of each other Lender Party, and from
time to time thereafter as requested in writing by the Borrower (but only so
long thereafter as such Lender Party remains lawfully able to do so), provide
each of the Administrative Agent and the Borrower with two original Internal
Revenue Service forms 1001, 4224, or W-8ECI or W-8 or W-8BEN (and, if such
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Lender Party delivers a form W-8 or W-8BEN, a certificate representing that such
Lender Party is not a "bank" for purposes of Section 881(c) of the Internal
Revenue Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender Party is exempt from or entitled to a reduced rate of United
States withholding tax on payments pursuant to this Agreement or the Notes or,
in the case of a Lender Party providing a form W-8 or W-8BEN, certifying that
such Lender Party is a foreign corporation, partnership, estate or trust. If the
forms provided by a Lender Party at the time such Lender Party first becomes a
party to this Agreement indicate a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from Taxes unless and until such Lender Party provides the appropriate forms
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
forms; provided, however, that if, at the effective date of the Assignment and
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) of this
Section 2.12 in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001,
4224, W-8, W-8BEN or W-8ECI (or the related certificate described above), that
the Lender Party reasonably considers to be confidential, the Lender Party shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in subsection (e) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e) above), such Lender Party shall not be
entitled to indemnification under subsection (a) or (c) of this Section 2.12
with respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Lender Party become subject to Taxes because of
its failure to deliver a form required hereunder, the Borrower shall take such
steps as such Lender Party shall reasonably request to assist such Lender Party
to recover such Taxes.
(g) Any Lender Party claiming any additional amounts payable pursuant to
this Section 2.12 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender Party, be
otherwise disadvantageous to such Lender Party.
(h) The Borrower may replace any Lender Party that has requested
additional amounts from such Borrower under this Section 2.12, by written notice
to such Lender Party and the Administrative Agent and identifying one or more
persons each of which shall be reasonably acceptable to the Administrative Agent
(each, a "REPLACEMENT LENDER PARTY," and collectively, the "REPLACEMENT LENDER
PARTIES") to replace such Lender Party (the "REPLACED LENDER PARTY"); provided
that (i) the notice from such Borrower to the Replaced Lender Party and the
Administrative Agent provided for hereinabove shall specify an effective date
for such replacement (the "REPLACEMENT EFFECTIVE DATE"), which shall be at least
five (5) Business Days after such notice is given and (ii) as of the relevant
Replacement Effective Date, each Replacement Lender Party shall enter into an
Assignment and Acceptance with the Replaced Lender Party pursuant to Section
8.07(a) (but shall not be required to pay the processing fee otherwise
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payable to the Administrative Agent pursuant to Section 8.07(a)), pursuant to
which such Replacement Lender Parties collectively shall acquire, in such
proportion among them as they may agree with such Borrower and the
Administrative Agent, all (but not less than all) of the Commitments and
outstanding Advances of the Replaced Lender Party, and, in connection therewith,
shall pay to the Replaced Lender Party, as the purchase price in respect
thereof, an amount equal to the sum as of the Replacement Effective Date,
without duplication, of (x) the unpaid principal amount of, and all accrued but
unpaid interest on, all outstanding Advances of the Replaced Lender Party and
(y) the Replaced Lender Party's ratable share of all accrued but unpaid fees
owing to the Replaced Lender Party hereunder.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall obtain
at any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise, other than as a result of an assignment
pursuant to Section 8.07) (a) on account of Obligations due and payable to such
Lender Party hereunder and under the Notes at such time in excess of its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender Party at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time) of payments on account of the Obligations due and payable to all
Lender Parties hereunder and under the Notes at such time obtained by all the
Lender Parties at such time or (b) on account of Obligations owing (but not due
and payable) to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations owing to such Lender Party at such time to (ii) the aggregate
amount of the Obligations owing (but not due and payable) to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations owing (but not due and payable) to all Lender Parties hereunder and
under the Notes at such time obtained by all of the Lender Parties at such time,
such Lender Party shall forthwith purchase from the other Lender Parties such
interests or participating interests in the Obligations due and payable or owing
to them, as the case may be, as shall be necessary to cause such purchasing
Lender Party to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender Party, such purchase from each other
Lender Party shall be rescinded and such other Lender Party shall repay to the
purchasing Lender Party the purchase price to the extent of such Lender Party's
ratable share (according to the proportion of (i) the purchase price paid to
such Lender Party to (ii) the aggregate purchase price paid to all Lender
Parties) of such recovery together with an amount equal to such Lender Party's
ratable share (according to the proportion of (i) the amount of such other
Lender Party's required repayment to (ii) the total amount so recovered from the
purchasing Lender Party) of any interest or other amount paid or payable by the
purchasing Lender Party in respect of the total amount so recovered; provided
further that, so long as the Obligations under the Loan Documents shall not have
been accelerated, any excess payment received by any Appropriate Lender shall be
shared on a pro rata basis only with other Appropriate Lenders. The Borrower
agrees that any Lender Party so purchasing an interest or participating interest
from another Lender Party pursuant to this Section 2.13 may, to the fullest
extent permitted by law, exercise all its rights of payment (including the right
of set-off) with respect to such interest or participating interest as fully as
if such Lender Party were the direct creditor of the Borrower in the amount of
such interest or participating interest.
SECTION 2.14. Use of Proceeds. The proceeds of the Term Advances shall
be available (and the Borrower agrees that it shall use such proceeds) solely to
make a loan to AT Korea pursuant to the AT Korea Bonds, to make the AT Korea
Cash Equity Investment in order to provide AT Korea with the funds necessary to
consummate a portion of the Acquisition and to effect the Refinancing. The
proceeds of the Revolving Credit Advances and the issuances of the Letters of
Credit shall be available (and the Borrower agrees that it shall use such
proceeds and Letters of Credit) to consummate the Transactions and for general
corporate purposes of the Borrower and its Restricted Subsidiaries to the extent
permitted under this Agreement.
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SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date of such setoff under the
Facility pursuant to which such Defaulted Advance was originally required to
have been made pursuant to Section 2.01. Such Advance shall be considered, for
all purposes of this Agreement, to comprise part of the Borrowing in connection
with which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01, even if the other Advances comprising such Borrowing
shall be Eurodollar Rate Advances on the date such Advance is deemed to be made
pursuant to this subsection (a). The Borrower shall notify the Administrative
Agent at any time the Borrower exercises its right of set-off pursuant to this
subsection (a) and shall set forth in such notice (A) the name of the Defaulting
Lender and the Defaulted Advance required to be made by such Defaulting Lender
and (B) the amount set off and otherwise applied in respect of such Defaulted
Advance pursuant to this subsection (a). Any portion of such payment otherwise
required to be made by the Borrower to or for the account of such Defaulting
Lender which is paid by the Borrower, after giving effect to the amount set off
and otherwise applied by the Borrower pursuant to this subsection (a), shall be
applied by the Administrative Agent as specified in subsection (b) or (c) of
this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or any of the other Lender Parties and (iii) the Borrower shall make
any payment hereunder or under any other Loan Document to the Administrative
Agent for the account of such Defaulting Lender, then the Administrative Agent
may, on its behalf or on behalf of such other Agents or such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents payment, to such extent,
of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Agents or such other
Lender Parties, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent, such other
Agents and such other Lender Parties and, if the amount of such payment made by
the Borrower shall at such time be insufficient to pay all Defaulted Amounts
owing at such time to the Administrative Agent, such other Agents and such other
Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted Amounts
then owing to the Administrative Agent, ratably in accordance with such
respective Defaulted Amounts then owing to Administrative Agent;
(ii) second, to the Issuing Banks for any Defaulted Amounts then
owing to them, in their capacities as such, ratably in accordance with
such respective Defaulted Amounts then owing to such Issuing Banks; and
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(iii) third, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in accordance
with such respective Defaulted Amounts then owing to such other Lender
Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, any Agent or any other Lender
Party shall be required to pay or distribute any amount hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrower or such Agent or such other Lender Party shall pay such amount to the
Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in an account
with SG, in the name and under the control of the Administrative Agent, but
subject to the provisions of this subsection (c). The terms applicable to such
account, including the rate of interest payable with respect to the credit
balance of such account from time to time, shall be SG's standard terms
applicable to escrow accounts maintained with it. Any interest credited to such
account from time to time shall be held by the Administrative Agent in escrow
under, and applied by the Administrative Agent from time to time in accordance
with the provisions of, this subsection (c). The Administrative Agent shall, to
the fullest extent permitted by applicable law, apply all funds so held in
escrow from time to time to the extent necessary to make any Advances required
to be made by such Defaulting Lender and to pay any amount payable by such
Defaulting Lender hereunder and under the other Loan Documents to the
Administrative Agent or any other Lender Party, as and when such Advances or
amounts are required to be made or paid and, if the amount so held in escrow
shall at any time be insufficient to make and pay all such Advances and amounts
required to be made or paid at such time, in the following order of priority:
(i) first, to the Administrative Agent for any amounts then due
and payable by such Defaulting Lender to the Administrative Agent
hereunder, ratably in accordance with such amounts then due and payable
to the Administrative Agent;
(ii) second, to the Issuing Banks for any amounts then due and
payable to them hereunder, in their capacities as such, by such
Defaulting Lender, ratably in accordance with such amounts then due and
payable to such Issuing Banks;
(iii) third, to any other Lender Parties for any amount then due
and payable by such Defaulting Lender to such other Lender Parties
hereunder, ratably in accordance with such respective amounts then due
and payable to such other Lender Parties; and
(iv) fourth, to the Borrower for any Advance then required to be
made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
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(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that any Agent or any Lender Party may have against such Defaulting Lender with
respect to any Defaulted Amount.
SECTION 2.16. Evidence of Debt. (a) The Borrower agrees that upon notice
by any Lender to the Borrower (with a copy of such notice to the Administrative
Agent) to the effect that a Note is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Advances owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a Note payable to the order of such
Lender in a principal amount up to the Commitment of such Lender. Each Lender
that does not receive a Note pursuant to the preceding sentence shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder in respect of such
Advances.
(b) The Register maintained by the Administrative Agent pursuant to
Section 8.07(d) shall include a control account and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the Type of Advances comprising
such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii)
the terms of each Assignment and Acceptance delivered to and accepted by it,
(iii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder and (iv) the amount of
any sum received by the Administrative Agent from the Borrower hereunder and
each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the
Register pursuant to subsection (b) above, and by each Lender in its account or
accounts pursuant to subsection (a) above, shall be prima facie evidence of the
amount of principal and interest due and payable or to become due and payable
from the Borrower to, in the case of the Register, each Lender and, in the case
of such account or accounts, such Lender, under this Agreement, absent manifest
error; provided, however, that the failure of the Administrative Agent or such
Lender to make an entry, or any finding that an entry is incorrect, in the
Register or such account or accounts shall not limit or otherwise affect the
obligations of the Borrower under this Agreement.
(d) Any reference to a Note or Notes made in this Agreement shall be a
reference to a Note or Notes only to the extent such Note or Notes have been
requested and issued pursuant to Subsection (a) above.
SECTION 2.17. Increase in the Aggregate Commitments. (a) The Borrower
may, at any time prior to the Termination Date, by notice to the Administrative
Agent, request the addition of a new facility pursuant to an increase in the
Commitments (each, a "COMMITMENT INCREASE") equal to $50,000,000 (or an integral
multiple of $10,000,000 in excess thereof) to be effective as of a date that is
at least 90 days prior to the scheduled Termination Date then in effect (the
"INCREASE DATE") as specified in the related notice to the Administrative Agent;
provided however that (i) in no event shall the aggregate amount of all of the
Commitment Increases exceed $100,000,000, (ii) on the date of any request by the
Borrower for a Commitment Increase and on the related Increase Date, the
applicable conditions set forth in Section 3.02 and in clause (d) of this
Section 2.17 shall be satisfied, (iii) the Borrower will only be able to make
one request hereunder, (iv) the final maturity of the Advances and Commitments
under any such new facility shall be no shorter than the final maturity of the
Term A Facility, provided, however, that in the event the Term A Facility has
been reduced to zero, then the final maturity of the Advances and Commitments
under any such new facility shall be no shorter than the final maturity of the
Term B
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Facility and (v) such new facility shall contain other terms as may be agreed by
the Borrower and the Agents.
(b) The Administrative Agent shall promptly notify the Lenders of a
request by the Borrower for a Commitment Increase, which notice shall include
(i) the proposed amount of such requested Commitment Increase, (ii) the proposed
Increase Date and (iii) the date by which Lenders wishing to participate in the
Commitment Increase must commit to an increase in the amount of their respective
Commitments (the "COMMITMENT DATE"). Each Lender that is willing to participate
in the requested Commitment Increase (each an "INCREASING LENDER") shall, in its
sole discretion, give written notice to the Administrative Agent on or prior to
the Commitment Date of the amount by which it is willing to increase its
Commitment. If the Lenders notify the Administrative Agent that they are willing
to increase the amount of their respective Commitments by an aggregate amount
that exceeds the amount of the requested Commitment Increase, the requested
Commitment Increase shall be allocated among the Lenders willing to participate
therein in such amounts as are agreed between the Borrower and the
Administrative Agent.
(c) Promptly following the Commitment Date, the Administrative Agent
shall notify the Borrower as to the amount, if any, by which the Lenders are
willing to participate in the requested Commitment Increase. If the aggregate
amount by which the Lenders are willing to participate in the requested
Commitment Increase on any such Commitment Date is less than the requested
Commitment Increase, then the Borrower may extend offers to one or more Eligible
Assignees to participate in any portion of the requested Commitment Increase
that has not been committed to by the Lenders as of the Commitment Date;
provided, however, that the Commitment of each such Eligible Assignee shall be
in an amount of $2,500,000 or an integral multiple of $1,000,000 in excess
thereof.
(d) On the Increase Date, each Eligible Assignee that accepts an offer
to participate in a requested Commitment Increase in accordance with Section
2.17(c) (each such Eligible Assignee, an "ASSUMING LENDER") shall become a
Lender party to this Agreement as of the Increase Date and the Commitment of
each Increasing Lender for such Commitment Increase shall be so increased by
such amount (or by the amount allocated to such Lender pursuant to the last
sentence of Section 2.17(b)) as of the Increase Date; provided, however, that
the Administrative Agent shall have received on or before the Increase Date the
following, each dated such date:
(i) (A) certified copies of resolutions of the Board of
Directors of the Borrower approving the Commitment Increase and the
corresponding modifications to this Agreement and (B) an opinion of
counsel for the Borrower (which may be in-house counsel), in a form
reasonably satisfactory to the Administrative Agent;
(ii) an assumption agreement from each Assuming Lender, if any,
in form and substance satisfactory to the Borrower and the
Administrative Agent (each an "ASSUMPTION AGREEMENT"), duly executed by
such Eligible Assignee, the Administrative Agent and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase
in the amount of its Commitment in a writing satisfactory to the
Borrower and the Administrative Agent.
On the Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.17(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier or
telex, of the occurrence of the Commitment Increase to be effected on the
Increase Date and shall record
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in the Register the relevant information with respect to each Increasing Lender
and each Assuming Lender on such date.
ARTICLE III
CONDITIONS OF LENDING AND
ISSUANCES OF LETTERS OF CREDIT
SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The
obligation of each Lender to make an Advance or of any Issuing Bank to issue a
Letter of Credit on the occasion of the Initial Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:
(a) The Agents shall have received on or before the day of the
Initial Extension of Credit the following, each dated such day (unless
otherwise specified), in form and substance satisfactory to the Agents
(unless otherwise specified) and (except for the Notes) in sufficient
copies for each Lender Party:
(i) The Notes payable to the order of the Lenders to the
extent required by any Lender pursuant to Section 2.16(a).
(ii) A security agreement in substantially the form of
Exhibit D hereto (together with each other security agreement
and security agreement supplement delivered pursuant to Section
5.01(j), in each case as amended, the "SECURITY AGREEMENT"),
duly executed by each Domestic Loan Party, together with:
(A) certificates representing the Pledged Shares
(other than the stock of the Borrower in Anam (the "ANAM
SHARES")) referred to therein accompanied by undated
stock powers or share transfer forms, as the case may
be, executed in blank and instruments evidencing the
Pledged Debt indorsed in blank,
(B) acknowledgment copies or stamped receipt
copies of proper financing statements, duly filed on or
before the day of the Initial Extension of Credit under
the Uniform Commercial Code of all jurisdictions that
the Administrative Agent may deem necessary or desirable
in order to perfect and protect the first priority liens
and security interests created under the Security
Agreement, covering the Collateral described in the
Security Agreement,
(C) completed requests for information, dated on
or before the date of the Initial Extension of Credit,
listing the financing statements referred to in clause
(B) above and all other effective financing statements
filed in the jurisdictions referred to in clause (B)
above that name any Domestic Loan Party as debtor,
together with copies of such other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Administrative Agent may
deem necessary or desirable in order to perfect and
protect the Liens created thereby,
(E) evidence of the insurance required by the
terms of the Security Agreement,
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(F) copies of the Assigned Agreements referred
to in the Security Agreement, together with a consent to
such assignment, in substantially the form of Exhibit B
to the Security Agreement, duly executed by each party
to such Assigned Agreements other than the Loan Parties,
(G) the Pledged Account Letters referred to in
the Security Agreement, duly executed by each Pledged
Account Bank referred to in the Security Agreement, and
(H) evidence that all other action that the
Administrative Agent may deem necessary or desirable in
order to perfect and protect the first priority liens
and security interests created under the Security
Agreement has been taken (including, without limitation,
receipt of duly executed payoff letters, UCC-3
termination statements and landlords' and bailees'
waiver and consent agreements and any local pledge
agreement required under local law to obtain a validly
perfected first priority security interest in the
Collateral).
(iii) A guaranty in substantially the form of Exhibit E
hereto (together with each other guaranty and guaranty
supplement delivered pursuant to Section 5.01(j), in each case
as amended, the "SUBSIDIARY Guaranty"), duly executed by each
Subsidiary Guarantor.
(iv) A guaranty in substantially the form of Exhibit F
hereto (together with each other guaranty and guaranty
supplement delivered pursuant to Section 5.01(j), in each case
as amended, the "INTERCOMPANY GUARANTY"), duly executed by each
Intercompany Guarantor.
(v) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving the transactions
contemplated by the Transaction Documents and each Transaction
Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and
governmental and other third party approvals and consents, if
any, with respect to the Transactions and each Transaction
Document to which it is or is to be a party.
(vi) A copy of a certificate of the Secretary of State
or other appropriate governmental official of the jurisdiction
of incorporation of each Loan Party, dated reasonably near the
date of the Initial Extension of Credit, certifying, where
applicable, (A) as to a true and correct copy of the charter or
other constitutive document of such Loan Party and each
amendment thereto on file in that office and (B) that (1) such
amendments are the only amendments to such Loan Party's charter
or other constitutive document on file in that office, (2) such
Loan Party has paid all franchise taxes to the date of such
certificate and (3) such Loan Party is duly incorporated and in
good standing or presently subsisting under the laws of the
jurisdiction of its incorporation.
(vii) A certificate of each Loan Party, signed on behalf
of such Loan Party by its President or a Vice President and its
Secretary or any Assistant Secretary, dated the date of the
Initial Extension of Credit (the statements made in which
certificate shall be true on and as of the date of the Initial
Extension of Credit), certifying as to (A) the absence of any
amendments to the charter of such Loan Party since the date of
the Secretary of State's certificate referred to in Section
3.01(a)(vi), (B) a true and correct copy of the bylaws of such
Loan Party as in effect on the date on which the resolutions
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referred to in Section 3.01(a)(v) were adopted and on the date
of the Initial Extension of Credit, (C) the due incorporation
and good standing or valid existence of such Loan Party as a
corporation organized under the laws of the jurisdiction of its
incorporation, and the absence of any proceeding for the
dissolution or liquidation of such Loan Party, (D) the truth of
the representations and warranties contained in the Loan
Documents as though made on and as of the date of the Initial
Extension of Credit and (E) the absence of any event occurring
and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(viii) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true
signatures of the officers of such Loan Party authorized to sign
each Transaction Document to which it is or is to be a party and
the other documents to be delivered hereunder and thereunder.
(ix) Certified copies of each of the Related Documents,
duly executed by the parties thereto and in form and substance
satisfactory to the Lender Parties, together with all
agreements, instruments and other documents delivered in
connection therewith as the Administrative Agent shall request.
(x) Certificates, in substantially the form of Exhibit G
hereto, attesting to the Solvency of each Loan Party after
giving effect to the Transactions and the other transactions
contemplated by the Transaction Documents, from its chief
financial officer; and a fairness opinion in form and substance
satisfactory to the Agents, from SSBI.
(xi) Such financial, business and other information
regarding each Loan Party and its Subsidiaries as the Lender
Parties shall have requested, including, without limitation,
information as to possible contingent liabilities, tax matters,
environmental matters, obligations under Plans, Multiemployer
Plans and Welfare Plans, collective bargaining agreements and
other arrangements with employees, forecasts prepared by
management of the Borrower, in form and substance satisfactory
to the Lender Parties, of balance sheets, income statements and
cash flow statements on a monthly basis for the first year
following the day of the Initial Extension of Credit and on an
annual basis for each year thereafter until the Termination
Date, a pro forma consolidated balance sheet of the Borrower as
of the most recently ended fiscal quarter of the Borrower, after
giving effect to the Transactions, together with a certificate
of the chief financial officer of the Borrower to the effect
that such statement accurately presents the pro forma financial
position of the Borrower and its subsidiaries in accordance with
generally accepted accounting principles (and the Agents and the
Lender Parties shall be reasonably satisfied that such balance
sheets are not materially inconsistent with the forecasts
previously provided to the Agents and the Lender Parties), and,
not later than 10 Business Days before the Effective Date, (x)
audited consolidated and, to the extent available, consolidating
balance sheets and related statements of income, stockholders'
equity and cash flows of each of the Borrower and of the
Acquired Business for the three fiscal years ended before the
Effective Date and (y) to the extent available, unaudited
consolidated and consolidating balance sheets and related
statements of income, stockholders' equity, and cash flows of
each of the Borrower and of the Acquired Business for each
completed fiscal quarter since the date of such audited
financial statements, which audited and unaudited financial
statements (i) shall be in form and scope reasonably
satisfactory to the Agents and the Lender Parties and (ii) shall
not be materially inconsistent with the financial statements
previously provided to the Agents and the Lender Parties.
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(xii) An environmental assessment report, in form and
substance satisfactory to the Agents, from an environmental
consulting firm acceptable to the Agents, with respect to the
domestic manufacturing facilities of the Borrower and its
Subsidiaries, as to any hazards, costs or liabilities under
Environmental Laws to which any Loan Party or any of its
Subsidiaries may be subject, the amount and nature of which and
the Borrower's plans with respect to which shall be acceptable
to the Agents, together with evidence, in form and substance
satisfactory to the Agents, that all applicable Environmental
Laws shall have been complied with. To the extent either the
report or any other information that may become available to the
Agents shall disclose any hazards, costs or liabilities under
Environmental Laws or otherwise that the Agents deem material,
the Agents shall be satisfied that such hazards, costs or
liabilities were adequately reflected in the Borrower's
financial reserves shown on the financial statements included in
the Information Memorandum or that, to the extent not so
reflected, the Borrower has made adequate provision for such
hazards, costs or liabilities.
(xiii) Evidence of insurance naming the Collateral Agent
as additional insured and loss payee with such responsible and
reputable insurance companies or associations, and in such
amounts and covering such risks, as is satisfactory to the
Lender Parties, including, without limitation, business
interruption insurance.
(xiv) Certified copies of all Material Contracts of each
Loan Party and its Subsidiaries as the Agents shall request.
(xv) A Borrowing Base Certificate.
(xvi) A favorable opinion of Wilson Sonsini Goodrich &
Rosati, counsel for the Loan Parties, in substantially the form
of Exhibit H hereto and as to such other matters as any Lender
Party through the Administrative Agent may reasonably request.
(xvii) Favorable opinion of local counsel to the Lender
Parties listed in Schedule V hereto in the jurisdictions listed
in Schedule V hereto in form and substance satisfactory to the
Lender Parties.
(xviii) A favorable opinion of Shearman & Sterling,
counsel for the Agents, in form and substance satisfactory to
the Agents.
(xix) Evidence satisfactory to the Agents that the
Acquired Business shall be owned by AT Korea free and clear of
all Liens (other than Permitted Liens).
(b) The Agents and the Lender Parties shall have completed a due
diligence investigation of the business, assets, operations, properties,
condition (financial or otherwise), contingent liabilities, prospects
and material agreements of the Borrower, Anam and their respective
subsidiaries and the Acquired Business in scope, and with results,
satisfactory to the Lender Parties and nothing shall have come to the
attention of the Agents and the Lender Parties during the course of such
due diligence investigation to lead them to believe (i) that the
Information Memorandum was or has become misleading, incorrect or
incomplete in any material respect, (ii) that, following the
consummation of the Acquisition, the Borrower and its Subsidiaries would
not have good and marketable title to all material assets of the
Acquired Business, free and clear of Liens other than Liens permitted
under the Loan Documents, and (iii) the Acquisition or the Anam Equity
Investment will have a Material Adverse Effect; without limiting the
generality of the foregoing, the Agents and the Lender Parties shall
have been given
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such access to the management, records, books of account, contracts and
properties of the Borrower and its Subsidiaries as they shall have
requested.
(c) The Transaction Documents shall not have been altered,
amended or otherwise changed or supplemented in any material respect or
any condition therein waived without the prior written consent of the
Lender Parties; and the Transactions shall have been consummated in
accordance with the terms of the Transaction Documents and in compliance
with applicable law and regulatory approvals.
(d) The Lender Parties shall be reasonably satisfied with the
terms and conditions of the Equity Issuance and the Subordinated Debt
Issuance. The Borrower shall have received gross cash proceeds of up to
$410,000,000 but in any event not less than $400,000,000 from the
issuance of the Common Stock and at least $225,000,000 from the issuance
of the Convertible Subordinated Debt; and a portion of the Net Cash
Proceeds of the Common Stock shall have been used to make the AT Korea
Cash Equity Investment, and a portion of the Net Cash Proceeds of the
Common Stock, together with the Net Cash Proceeds from the Convertible
Subordinated Debt, shall have been set aside to make a cash common
equity contribution of $309,000,000 to Anam.
(e) Before giving effect to the Transactions, there shall have
occurred no Material Adverse Change since December 31, 1999.
(f) There shall not have occurred any material disruption of or
material adverse change in loan syndication, financial, banking or
capital market conditions that, in the reasonable judgment of any Agent,
could materially disrupt or impair the Equity Issuance, the Subordinated
Debt Issuance or the syndication of the Commitments or would make it
impractical or inadvisable to proceed with the syndication or funding of
the Commitments, and a banking moratorium shall not have been declared
by Federal or New York State banking officials.
(g) All governmental, shareholder and third party consents
(including, without limitation, Hart-Scott-Rodino clearance) and
approvals (including, without limitation, any such consents and
approvals required with respect to the Korean restructuring of Anam's
liabilities) necessary or, in the reasonable opinion of the Agents,
desirable in connection with the Transactions shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Agents) and shall remain in effect; all applicable waiting periods in
connection with the Transactions shall have expired without any action
being taken by any competent authority that could restrain, prevent or
impose any material adverse conditions on the Transactions or the
Borrower and its subsidiaries or that could reasonably be expected to
seek or threaten any of the foregoing shall have occurred, and no law or
regulation shall be applicable which in the reasonable judgment of the
Agents could have such effect.
(h) There shall exist no action, suit, investigation, or
proceeding affecting any Loan Party or any of its Subsidiaries pending
or, to the knowledge of the Borrower, threatened in any court or before
any arbitrator or governmental authority that (i) could reasonably be
expected to have a Material Adverse Effect or (ii) purports to affect
the legality, validity or enforceability of any Transaction Document or
consummation of the Transactions.
(i) The Lender Parties shall be satisfied with the terms,
conditions and status of the Korean restructuring of Anam's liabilities
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(j) The Lender Parties shall have received evidence reasonably
satisfactory to them that the Advances hereunder shall be rated at least
BB-/Ba3 by Standard & Poor's and Moody's.
(k) The Lender Parties shall be reasonably satisfied that (i)
the Borrower and its Subsidiaries will be able to meet their obligations
under all Plans, Multiemployer Plans and Welfare Plans, (ii) the Plans
of the Borrower and its ERISA Affiliates are, in all material respects,
funded in accordance with the minimum statutory requirements, (iii) no
"reportable event" (as defined in ERISA, but excluding events for which
reporting has been waived) has occurred as to any such Plan,
Multiemployer Plans and Welfare Plans, and (iv) no termination of, or
withdrawal from, any such Plan, Multiemployer Plans and Welfare Plans,
has occurred or is contemplated that could reasonably be expected to
result in a material liability.
(l) The Lender Parties shall be reasonably satisfied that all of
the assets of Guardian and each of its direct and indirect Subsidiaries
shall be free and clear of any Lien, other than Liens permitted under
the Loan Documents.
(m) The Borrower shall have paid all accrued fees of the Agents
and the Lender Parties and all accrued expenses of the Agents (including
the accrued fees and expenses of advisors and counsel to the Agents and
local counsel for the Lender Parties).
(n) The Lender Parties shall be reasonably satisfied with the
corporate and legal structure and capitalization of each Loan Party and
each of its Subsidiaries the Equity Interests in which Subsidiaries is
being pledged pursuant to the Loan Documents, including the terms and
conditions of the charter, bylaws and each class of Equity Interest in
each Loan Party and each such Subsidiary and of each agreement or
instrument relating to such structure or capitalization.
(o) The Lender Parties shall be satisfied that all Existing
Debt, other than Surviving Debt, has been prepaid, redeemed or defeased
in full or otherwise satisfied and extinguished and all commitments
relating thereto terminated and that all such Surviving Debt shall be on
terms and conditions reasonably satisfactory to the Lender Parties.
(p) The Lender Parties shall be satisfied that, all single
purpose Subsidiaries of the Borrower holding inventory and receivables
shall have been merged into the Borrower on terms reasonably
satisfactory to the Agents.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance and
Renewal. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by an Issuing Bank or a Revolving Credit
Lender pursuant to Section 2.03(c)) on the occasion of each Borrowing (including
the initial Borrowing), each Commitment Increase, and the obligation of each
Issuing Bank to issue a Letter of Credit (including the initial issuance) or
renew a Letter of Credit, shall be subject to the further conditions precedent
that on the date of such Borrowing or the Applicable Increase Date or issuance
or renewal (a) the following statements shall be true (and each of the giving of
the applicable Notice of Borrowing, request for Commitment Increase, Notice of
Issuance or Notice of Renewal and the acceptance by the Borrower of the proceeds
of such Borrowing or of such Letter of Credit or the renewal of such Letter of
Credit shall constitute a representation and warranty by the Borrower that both
on the date of such notice and on the date of such Borrowing, such Increase Date
or issuance or renewal such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing, such Increase Date or issuance or renewal and
to the application of the proceeds therefrom, as though made on and as
of
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such date other than any such representations or warranties that, by
their terms, refer to a specific date other than such Borrowing,
issuance or renewal, in which case as of such specific date;
(ii) no event has occurred and is continuing, or would result
from such Borrowing, such Increase Date or issuance or renewal or from
the application of the proceeds therefrom, that constitutes a Default;
and
(iii) for each Revolving Credit Advance or issuance or renewal
of any Letter of Credit, the sum of the Loan Values of the Eligible
Collateral exceeds the aggregate principal amount of the Revolving
Credit Advances plus Letter of Credit Advances to be outstanding plus
the aggregate Available Amount of all Letters of Credit to be
outstanding after giving effect to such Advance or issuance or renewal,
respectively;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender through the Administrative Agent
may reasonably request.
SECTION 3.03. Conditions precedent to the release of the proceeds of the
initial Extension of Credit. The Collateral Agent shall release the funds
deposited in the Cash Collateral Account (as defined in the Security Agreement)
to the Borrower or at its direction in the following installments:
(x) An installment of $600,000,000 to be onlent by the Borrower to AT
Korea and used to pay an equal amount in respect of the price of the
Acquisition, and
(y) The balance of the funds in the Cash Collateral Account to be used
to make the Additional Anam Equity Investments on the dates and the amounts set
forth in Preliminary Statement (3).
Each installment shall only be released if the following conditions been
satisfied as of each date of release:
(i) the representations and warranties made by the Borrower and
the other Loan Parties contained in each Loan Document are correct in
all material respects on and as of such date, before and after giving
effect to the release and to the application of the proceeds therefrom,
as though made on and as of such date, other than any such
representations or warranties that, by their terms, refer to a specific
date other than the date of such release, in which case as of such
specific date;
(ii) no Default has occurred and is continuing, or would result
from such release or from the application of the proceeds therefrom; and
(iii) the Borrower shall have delivered to the Collateral Agent
a certificate to the effect that (a) the proceeds from each installment
shall be applied as set forth in clauses (x) and (y) respectively and
(b) the statements in clause (i) and (ii) are true as of such date.
SECTION 3.04. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall
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not have made available to the Administrative Agent such Lender Party's ratable
portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Each Loan Party and each of its Subsidiaries (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the conduct
of its business requires it to so qualify or be licensed except where
the failure to so qualify or be licensed could not be reasonably likely
to have a Material Adverse Effect and (iii) has all requisite corporate
power and authority (including, without limitation, all governmental
licenses, permits and other approvals) to own or lease and operate its
properties and to carry on its business as now conducted and as proposed
to be conducted. All of the outstanding Equity Interests in the Borrower
have been validly issued and are non-assessable.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of its Equity
Interests authorized, and the number outstanding, on the date hereof and
the percentage of each such class of its Equity Interests owned
(directly or indirectly) by such Loan Party and the number of shares
covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the date hereof. All of the outstanding
Equity Interests in each Loan Party's Subsidiaries have been validly
issued, are fully paid and non-assessable and are owned by such Loan
Party or one or more of its Subsidiaries free and clear of all Liens,
except those created under the Collateral Documents.
(c) The execution, delivery and performance by each Loan Party
of each Transaction Document to which it is or is to be a party, and the
consummation of the transactions contemplated by the Transaction
Documents, are within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
such Loan Party's charter or bylaws, (ii) violate any law, rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties or (iv) except for the Liens
created under the Loan Documents and Permitted Liens, result in or
require the creation or imposition of any Lien upon or with respect to
any of the properties of any Loan Party or any of its Subsidiaries. No
Loan Party or any of its Subsidiaries is in violation of any such law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could be reasonably likely
to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due
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execution, delivery, recordation, filing or performance by any Loan
Party of any Transaction Document to which it is or is to be a party, or
for the consummation of the transactions contemplated by the Transaction
Documents, (ii) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created under the Collateral Documents
(including the first priority nature thereof) or (iv) the exercise by
any Agent or any Lender Party of its rights under the Loan Documents or
the remedies in respect of the Collateral pursuant to the Collateral
Documents, except for the authorizations, approvals, actions, notices
and filings listed on Schedule 4.01(d) hereto, all of which have been
duly obtained, taken, given or made and are in full force and effect.
All applicable waiting periods in connection with the Transactions have
expired without any action having been taken by any competent authority
restraining, preventing or imposing materially adverse conditions upon
the Transactions or the rights of the Loan Parties or their Subsidiaries
freely to transfer or otherwise dispose of, or to create any Lien on,
any properties now owned or hereafter acquired by any of them. The
Transactions have been consummated in accordance with the Transaction
Documents and applicable law.
(e) This Agreement has been, and each other Transaction Document
when delivered hereunder will have been, duly executed and delivered by
each Loan Party party thereto. This Agreement is, and each other
Transaction Document when delivered hereunder will be, the legal, valid
and binding obligation of each Loan Party party thereto, enforceable
against such Loan Party in accordance with its terms.
(f) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) would be reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of any Transaction Document or the
consummation of the transactions contemplated by the Transaction
Documents.
(g) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 1998, and the related Consolidated
statement of income and Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by an unqualified opinion of Arthur Andersen, independent
public accountants, and the Consolidated balance sheet of the Borrower
and its Subsidiaries as at December 31, 1999, and the related
Consolidated statement of income and Consolidated statement of cash
flows of the Borrower and its Subsidiaries for the twelve months then
ended, duly certified by the chief financial officer of the Borrower,
copies of which have been furnished to each Lender Party, fairly present
the Consolidated financial condition of the Borrower and its
Subsidiaries as at such dates and the Consolidated results of operations
of the Borrower and its Subsidiaries for the periods ended on such
dates, all in accordance with generally accepted accounting principles
applied on a consistent basis, and since December 31, 1999, there has
been no Material Adverse Change.
(h) The Consolidated pro forma balance sheet of the Borrower and
its Subsidiaries as at December 31, 1999, and the related Consolidated
pro forma statements of income and cash flows of the Borrower and its
Subsidiaries for the twelve months then ended, certified by the chief
financial officer of the Borrower, copies of which have been furnished
to each Lender Party, fairly present the Consolidated pro forma
financial condition of the Borrower and its Subsidiaries as at such date
and the Consolidated pro forma results of operations of the Borrower and
its Subsidiaries for the period ended on such date, in each case giving
effect to the Transactions contemplated by the Transaction Documents,
all in accordance with GAAP.
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(i) The Consolidated forecasted balance sheet, statement of
income and statement of cash flows of the Borrower and its Subsidiaries
delivered to the Lender Parties pursuant to Section 3.01(a)(xi) or 5.03
were prepared in good faith on the basis of the assumptions stated
therein, which assumptions were fair in the light of conditions existing
at the time of delivery of such forecasts, and represented, at the time
of delivery, the Borrower's best estimate of its future financial
performance.
(j) Neither the Information Memorandum nor any other
information, exhibit or report furnished by or on behalf of any Loan
Party to any Agent or any Lender Party in connection with the
negotiation of the Loan Documents or pursuant to the terms of the Loan
Documents contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements made therein
not misleading.
(k) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance or drawings under any Letter of Credit will be
used to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock.
(l) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither any
Loan Party nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
as such terms are defined in the Public Utility Holding Company Act of
1935, as amended. Neither the making of any Advances, nor the issuance
of any Letters of Credit, nor the application of the proceeds or
repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated by the Transaction Documents, will violate any
provision of any such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(m) Neither any Loan Party nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that could be reasonably likely to have a Material Adverse
Effect.
(n) The Collateral Documents create a valid and perfected first
priority security interest in the Collateral subject only to Permitted
Liens, securing the payment of the Secured Obligations, and all filings
and other actions necessary or desirable to perfect and protect such
security interest have been duly taken. The Loan Parties are the legal
and beneficial owners of the Collateral free and clear of any Lien,
except for the liens and security interests created or permitted under
the Loan Documents.
(o) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(p) (i) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan.
(ii) Neither any Loan Party nor any ERISA Affiliate has incurred
or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(iii) Neither any Loan Party nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been
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terminated, within the meaning of Title IV of ERISA, and no such
Multiemployer Plan is reasonably expected to be in reorganization or to
be terminated, within the meaning of Title IV of ERISA.
(iv) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) for each Plan, copies of which have
been filed with the Internal Revenue Service and furnished to the Lender
Parties, is complete and accurate and fairly presents the funding status
of such Plan, and since the date of such Schedule B there has been no
material adverse change in such funding status.
(v) Set forth on Schedule 4.01(p) hereto is a complete and
accurate list of all Plans, Multiemployer Plans and Welfare Plans.
(q) (i) The operations and properties of each Loan Party and
each of its Subsidiaries comply in all material respects with all
applicable Environmental Laws and Environmental Permits, all past
non-compliance with such Environmental Laws and Environmental Permits
has been resolved without ongoing obligations or costs, and no
circumstances exist that could be reasonably likely to (A) form the
basis of an Environmental Action against any Loan Party or any of its
Subsidiaries or any of their properties that could have a Material
Adverse Effect or (B) cause any such property to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.
(ii) None of the properties currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous
foreign, state or local list or is adjacent to any such property; there
are no and never have been any underground or aboveground storage tanks
or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan Party
or any of its Subsidiaries or, to the best of its knowledge, on any
property formerly owned or operated by any Loan Party or any of its
Subsidiaries; there is no asbestos or asbestos-containing material on
any property currently owned or operated by any Loan Party or any of its
Subsidiaries; and Hazardous Materials have not been released, discharged
or disposed of on any property currently or formerly owned or operated
by any Loan Party or any of its Subsidiaries.
(iii) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together with
other potentially responsible parties, any investigation or assessment
or remedial or response action relating to any actual or threatened
release, discharge or disposal of Hazardous Materials at any site,
location or operation, either voluntarily or pursuant to the order of
any governmental or regulatory authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated,
handled or stored at, or transported to or from, any property currently
or formerly owned or operated by any Loan Party or any of its
Subsidiaries have been disposed of in a manner not reasonably expected
to result in material liability to any Loan Party or any of its
Subsidiaries.
(r) (i) Each Loan Party and each of its Subsidiaries has filed,
has caused to be filed or has been included in all tax returns (Federal,
state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and
penalties.
(ii) Set forth on Part I of Schedule 4.01(r) hereto is a
complete and accurate list, as of the date hereof, of each taxable year
of each Loan Party and each of its Subsidiaries for which Federal income
tax returns have been filed and for which the expiration of the
applicable statute
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of limitations for assessment or collection has not occurred by reason
of extension or otherwise (an "OPEN YEAR").
(iii) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and
each of its Subsidiaries proposed by the Internal Revenue Service with
respect to Open Years equals $ 0. No issues have been raised by the
Internal Revenue Service in respect of Open Years that, in the
aggregate, could be reasonably likely to have a Material Adverse Effect.
(iv) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan
Party and its Subsidiaries proposed by all state, local and foreign
taxing authorities (other than amounts arising from adjustments to
Federal income tax returns) equals $ 0. No issues have been raised by
such taxing authorities that, in the aggregate, could be reasonably
likely to have a Material Adverse Effect.
(v) No "ownership change" as defined in Section 382(g) of the
Internal Revenue Code, and no event that would result in the application
of the "separate return limitation year" or "consolidated return change
of ownership" limitations under the Federal income tax consolidated
return regulations, has occurred with respect to the Borrower or the
Acquired Business since May 1, 1998.
(s) Neither the business nor the properties of any Loan Party or
any of its Subsidiaries are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that could be reasonably likely to
have a Material Adverse Effect.
(t) Set forth on Schedule 4.01(t) hereto is a complete and
accurate list of all Existing Debt, showing as of the date hereof the
principal amount outstanding thereunder.
(u) Set forth on Schedule 4.01(u) hereto is a complete and
accurate list of all Surviving Debt, showing as of the date hereof the
principal amount outstanding thereunder, the maturity date thereof and
the amortization schedule therefor.
(v) Set forth on Schedule 4.01(v) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the street address, county
or other relevant jurisdiction, state, record owner and book and
estimated fair value thereof. Each Loan Party or such Subsidiary has
good, marketable and insurable fee simple title to such real property,
free and clear of all Liens, other than Liens created or permitted by
the Loan Documents.
(w) Set forth on Schedule 4.01(w) hereto is a complete and
accurate list of all leases of real property under which any Loan Party
or any of its Subsidiaries is the lessee, showing as of the date hereof
the street address, county or other relevant jurisdiction, state,
lessor, lessee, expiration date and annual rental cost thereof. Each
such lease is the legal, valid and binding obligation of the lessor
thereof, enforceable in accordance with its terms.
(x) Set forth on Schedule 4.01(x) hereto is a complete and
accurate list of all Investments held by any Loan Party or any of its
Subsidiaries on the date hereof, showing as of the date hereof the
amount, obligor or issuer and maturity, if any, thereof.
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(y) Set forth on Schedule 4.01(y) hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks and
copyrights, and all applications therefor and licenses thereof, of each
Loan Party or any of its Subsidiaries, showing as of the date hereof the
jurisdiction in which registered, the registration number, the date of
registration and the expiration date.
(z) Set forth on Schedule 4.01(z) hereto is a complete and
accurate list of all Material Contracts of each Loan Party and its
Subsidiaries, showing as of the date hereof the parties, subject matter
and term thereof. Each such Material Contract has been duly authorized,
executed and delivered by all parties thereto, has not been amended or
otherwise modified, is in full force and effect and is binding upon and
enforceable against all parties thereto in accordance with its terms,
and there exists no default under any Material Contract by any party
thereto that has or would be likely to have a Material Adverse Effect.
(aa) The Borrower has (i) initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the risk that computer
applications used by the Borrower or any of its Subsidiaries (or
suppliers, vendors and customers) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999 (the "YEAR 2000 PROBLEM"), (ii)
developed a plan and timetable for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented that plan in accordance with
such timetable. Based on the foregoing, the Borrower believes that all
computer applications (including those of its suppliers, vendors and
customers) that are material to its or any of its Subsidiaries' business
and operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000 ("YEAR 2000 COMPLIANT"), except to the extent that a
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
(bb) The proceeds of the Advances and the issuances of Letters
of Credit shall be available (and the Borrower agrees that it shall use
such proceeds and Letters of Credit) solely for the purposes set forth
in Section 2.14.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and
Corrupt Organizations Chapter of the Organized Crime Control Act of
1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to pay or discharge any such tax,
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assessment, charge or claim that is being contested in good faith and by
proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or
occupying its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits; obtain and
renew and cause each of its Subsidiaries to obtain and renew all
Environmental Permits necessary for its operations and properties; and
conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with the
requirements of all Environmental Laws; provided, however, that neither
the Borrower nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect
to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance (including, without limitation,
business interruption insurance) with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises;
provided, however, that the Borrower and its Subsidiaries may consummate
mergers or consolidations permitted under Section 5.02(d) and provided
further that neither the Borrower nor any of its Subsidiaries shall be
required to preserve any right, permit, license, approval, privilege or
franchise if the Board of Directors of the Borrower or such Subsidiary
shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lender Parties.
(f) Visitation Rights. At any reasonable time and from time to
time during regular business hours and on reasonable notice, permit any
of the Agents or any of the Lender Parties or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with their independent certified
public accountants, provided, however, that any proprietary information
shall only be disclosed with appropriate safeguard measures as may be
mutually agreed to by the Borrower and the Agents.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(h) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
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(i) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person
not an Affiliate.
The following items shall not be transactions with
affiliates and, therefore, will not be subject to the provisions of
the prior paragraph:
(A) any employment agreement or arrangement entered into
by the Borrower or any of its Restricted Subsidiaries or any
employee benefit plan available to the employees of the Borrower
and its Subsidiaries generally, in each case in the ordinary
course of business and consistent with the past practice of the
Borrower or such Restricted Subsidiary;
(B) transactions between or among the Borrower and/or
its Restricted Subsidiaries;
(C) payment of reasonable directors fees to Persons who
are not otherwise Affiliates of the Borrower and indemnity
provided on behalf of officers, directors and employees of the
Borrower or any of its Restricted Subsidiaries as determined in
good faith by the Board of Directors of the Borrower;
(D) any transaction specifically contemplated by the
Related Documents, as amended to the extent permitted under
Section 5.02(k); and
(E) any restricted payments that are permitted by
Section 5.02(g) hereof.
(j) Covenant to Guarantee Obligations and Give Security. Upon
(x) the request of the Collateral Agent following the occurrence and
during the continuance of a Default, (y) the formation or acquisition of
any new direct or indirect Subsidiaries by any Loan Party or (z) the
acquisition of any property by any Loan Party, and such property, in the
judgment of the Collateral Agent, shall not already be subject to a
perfected first priority security interest in favor of the Collateral
Agent for the benefit of the Secured Parties, then the Borrower shall,
in each case at the Borrower's expense:
(i) (A) in connection with the formation or acquisition
of a Domestic Subsidiary (other than an Unrestricted
Subsidiary), within 10 days after such formation or acquisition,
cause each such Subsidiary, and cause each direct and indirect
parent of such Subsidiary (if it has not already done so), to
duly execute and deliver to the Collateral Agent a guaranty or
guaranty supplement, in form and substance satisfactory to the
Collateral Agent, guaranteeing the other Loan Parties'
obligations of the Borrower and the other Subsidiary Guarantors
under the Loan Documents, (B) in connection with the formation
or acquisition of a Foreign Subsidiary (other than an
Unrestricted Subsidiary), within 10 days after such formation or
acquisition, cause each such Subsidiary, and cause each direct
and indirect parent of such Subsidiary (if it is a Foreign
Subsidiary and if it has not already done so), to duly execute
and deliver to the Collateral Agent a guaranty or guaranty
supplement, in form and substance satisfactory to the Collateral
Agent, guaranteeing the obligations of AT Korea and the other
Intercompany Guarantors under the Loan Documents,
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(ii) within 10 Business Days after such request,
formation or acquisition, furnish to the Collateral Agent a
description of the real and personal properties of the Domestic
Subsidiaries and their respective Subsidiaries in detail
satisfactory to the Agent,
(iii) within 15 Business Days after such request,
formation or acquisition, duly execute and deliver, and cause
each such Domestic Subsidiary and each direct and indirect
parent of such Subsidiary (if it has not already done so) to
duly execute and deliver, to the Collateral Agent mortgages,
pledges, assignments, security agreement supplements and other
security agreements, as specified by and in form and substance
satisfactory to the Collateral Agent, securing payment of all
the Obligations of the applicable Loan Party, such Subsidiary or
such parent, as the case may be, under the Loan Documents and
constituting Liens on all such properties,
(iv) in connection with either (A) the formation or
acquisition of an Unrestricted Subsidiary or (B) the formation
or acquisition by the Borrower or any Domestic Subsidiary of a
Foreign Subsidiary, in each case, within 10 days after such
formation or acquisition, pledge and deliver, or cause such
Domestic Subsidiary to pledge and deliver, certificates
representing all of the capital stock of any such Unrestricted
Subsidiary or, in the case of any such Foreign Subsidiary, 66%
of the capital stock of each such Foreign Subsidiary to the
extent the pledge of any greater percentage would result in
adverse tax consequences to the Borrower;
(v) within 30 days after such request, formation or
acquisition, take, and cause such Domestic Subsidiary or such
parent to take, whatever action (including, without limitation,
the recording of mortgages, the filing of Uniform Commercial
Code financing statements, the giving of notices and the
endorsement of notices on title documents) may be necessary or
advisable in the opinion of the Collateral Agent to vest in the
Collateral Agent (or in any representative of the Collateral
Agent designated by it) valid and subsisting Liens on the
properties purported to be subject to the mortgages, pledges,
assignments, security agreement supplements and security
agreements delivered pursuant to this Section 5.01(j),
enforceable against all third parties in accordance with their
terms,
(vi) within 60 days after such request, formation or
acquisition, deliver to the Collateral Agent, upon the request
of the Collateral Agent in its sole discretion, a signed copy of
a favorable opinion, addressed to the Collateral Agent and the
other Secured Parties, of counsel for the Loan Parties
acceptable to the Collateral Agent as to the matters contained
in clauses (i), (iii) and (iv) above, as to such guaranties,
guaranty supplements, mortgages, pledges, assignments, security
agreement supplements and security agreements being legal, valid
and binding obligations of each Loan Party thereto enforceable
in accordance with their terms and as to such other matters as
the Collateral Agent may reasonably request,
(vii) as promptly as practicable after such request,
formation or acquisition, deliver, upon the request of the
Collateral Agent in its sole discretion, to the Collateral Agent
with respect to each parcel of real property owned or held by
the entity that is the subject of such request, formation or
acquisition title reports, surveys and engineering, soils and
other reports, and environmental assessment reports, each in
scope, form and substance satisfactory to the Collateral Agent,
provided, however, that to the extent that any Loan Party or any
of its Subsidiaries shall have otherwise received any of the
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foregoing items with respect to such real property, such items
shall, promptly after the receipt thereof, be delivered to the
Collateral Agent,
(viii) upon the occurrence and during the continuance of
a Default under Section 6.01(a) or 6.01(f) or any Event of
Default, promptly cause to be deposited any and all cash
dividends paid or payable to it or any of its Subsidiaries from
any of its Subsidiaries from time to time into the Collateral
Account, and with respect to all other dividends paid or payable
to it or any of its Subsidiaries from time to time, promptly
execute and deliver, or cause such Subsidiary to promptly
execute and deliver, as the case may be, any and all further
instruments and take or cause such Subsidiary to take, as the
case may be, all such other action as the Collateral Agent may
deem necessary or desirable in order to obtain and maintain from
and after the time such dividend is paid or payable a perfected,
first priority lien on and security interest in such dividends,
and
(ix) at any time and from time to time, promptly execute
and deliver any and all further instruments and documents and
take all such other action as the Collateral Agent may deem
necessary or desirable in obtaining the full benefits of, or in
perfecting and preserving the Liens of, such guaranties,
mortgages, pledges, assignments, security agreement supplements
and security agreements.
(k) Further Assurances. (i) Promptly upon request by any Agent,
or any Lender Party through the Administrative Agent, correct any
material defect or error that may be discovered in any Loan Document or
in the execution, acknowledgment, filing or recordation thereof, and
(ii) Promptly upon request by any Agent, or any Lender Party
through the Administrative Agent, do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register any and all
such further acts, deeds, conveyances, pledge agreements, mortgages,
deeds of trust, trust deeds, assignments, financing statements and
continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as any Agent,
or any Lender Party through the Administrative Agent, may reasonably
require from time to time in order to (A) carry out more effectively the
purposes of the Loan Documents, (B) to the fullest extent permitted by
applicable law, subject any Loan Party's or any of its Domestic
Subsidiaries' properties, assets, rights or interests to the Liens now
or hereafter intended to be covered by any of the Collateral Documents
and to the extent Foreign Subsidiaries shall not suffer adverse tax
consequences, subject any of such Foreign Subsidiaries' properties,
assets, rights or interests to the Liens now or hereafter intended to be
covered by any of the Collateral Documents, (C) perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents
and any of the Liens intended to be created thereunder and (D) assure,
convey, grant, assign, transfer, preserve, protect and confirm more
effectively unto the Secured Parties the rights granted or now or
hereafter intended to be granted to the Secured Parties under any Loan
Document or under any other instrument executed in connection with any
Loan Document to which any Loan Party or any of its Subsidiaries is or
is to be a party.
(l) Performance of Related Documents. Perform and observe all of
the terms and provisions of each Related Document to be performed or
observed by it, maintain each such Related Document in full force and
effect, enforce such Related Document in accordance with its terms and,
upon request of the Administrative Agent, make to each other party to
each such Related Document such demands and requests for information and
reports or for action as the Borrower or any of its Subsidiaries is
entitled to make under such Related Document.
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(m) Preparation of Environmental Reports. At the reasonable
request of the Book Manager or the Collateral Agent from time to time,
provide to the Lender Parties within 90 days after such request, at the
expense of the Borrower, an environmental site assessment report for any
of its or its Subsidiaries' properties described in such request,
prepared by an environmental consulting firm acceptable to the Book
Manager or the Collateral Agent, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if the
Book Manager or the Collateral Agent determines at any time that a
material risk exists that any such report will not be provided within
the time referred to above, the Book Manager or the Collateral Agent may
retain an environmental consulting firm to prepare such report at the
expense of the Borrower, and the Borrower hereby grants and agrees to
cause any Subsidiary that owns any property described in such request to
grant at the time of such request, to the Agents, the Lender Parties,
such firm and any agents or representatives thereof an irrevocable
non-exclusive license, subject to the rights of tenants, to enter onto
their respective properties to undertake such an assessment.
(n) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be
forfeited or canceled, notify the Administrative Agent of any default by
any party with respect to such leases and cooperate with the
Administrative Agent in all respects to cure any such default, and cause
each of its Subsidiaries to do so except, in any case, where the failure
to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect.
(o) Collateral Accounts. Maintain, and cause each of its
Subsidiaries to maintain, main Collateral Accounts with SG and Pledged
Accounts into which all proceeds of Collateral are paid with SG or one
or more banks acceptable to the Collateral Agent that have accepted the
assignment of such accounts to the Collateral Agent pursuant to the
Security Agreement.
(p) Performance of Material Contracts. Perform and observe all
the terms and provisions of each Material Contract to be performed or
observed by it, maintain each such Material Contract in full force and
effect, enforce each such Material Contract in accordance with its terms
and, upon request of the Administrative Agent, make to each other party
to each such Material Contract such demands and requests for information
and reports or for action as the Borrower or any of its Subsidiaries is
entitled to make under such Material Contract, and cause each of its
Subsidiaries to do so except, in any case, where the failure to do so,
either individually or in the aggregate, could not be reasonably likely
to have a Material Adverse Effect.
(q) Further Performance. Perform all material contractual
obligations under any agreement relating to the Anam Equity Investment
or the Korean Restructuring. In particular, make a $30,000,000 equity
investment in the cash common equity of Anam on June 30, 2000, an
additional $60,000,000 equity investment in the cash common equity of
Anam on August 31, 2000 and an additional $60,000,000 equity investment
in the cash common equity of Anam on September 30, 2000.
(r) Conditions Subsequent. (i) Deliver to the Administrative
Agent as soon as possible and in any event no later than May 31, 2000
the Anam Shares or take, as soon as possible and in any event no later
than May 31, 2000, any other action necessary for the Lender Parties to
have a valid and first priority perfected security interest in the Anam
Shares;
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(ii) deliver to the Administrative Agent on or before the 30th
day after the Effective Date (or as provided below), the following, each
dated such day (unless otherwise specified) in form and substance
satisfactory to the Lenders: Deeds of trust, trust deeds, mortgages,
leasehold mortgages and leasehold deeds of trust covering the properties
listed on Schedules 4.01(v) and 4.01(w) hereto (together with the
Assignments of Leases and Rents referred to therein and each other
mortgage delivered pursuant to Section 5.01(j), in each case as amended,
the "MORTGAGES"), duly executed by the appropriate Loan Party, together
with:
(A) evidence that counterparts of the Mortgages have
been duly recorded in all filing or recording offices that the
Administrative Agent may deem necessary or desirable in order to
create a valid first and subsisting Lien on the property
described therein in favor of the Collateral Agent for the
benefit of the Secured Parties and that all filing and recording
taxes and fees have been paid,
(B) fully paid American Land Title Association Lender's
Extended Coverage title insurance policies (the "MORTGAGE
POLICIES") in form and substance, with endorsements and in
amount acceptable to the Administrative Agent, issued, coinsured
and reinsured by title insurers acceptable to the Administrative
Agent, insuring the Mortgages to be valid first and subsisting
Liens on the property described therein, free and clear of all
defects (including, but not limited to, mechanics' and
materialmen's Liens) and encumbrances, excepting only Permitted
Encumbrances, and providing for such other affirmative insurance
(including endorsements for future advances under the Loan
Documents and for mechanics' and materialmen's Liens) and such
coinsurance and direct access reinsurance as the Administrative
Agent may deem necessary or desirable,
(C) American Land Title Association form surveys
certified to the Administrative Agent and the issuer of the
Mortgage Policies in a manner reasonably satisfactory to the
Administrative Agent by a land surveyor duly registered and
licensed in the States in which the property described in such
surveys is located and acceptable to the Administrative Agent,
showing all buildings and other improvements, any off-site
improvements, the location of any easements, parking spaces,
rights of way, building set-back lines and other dimensional
regulations and the absence of encroachments, either by such
improvements or on to such property, and other defects, other
than encroachments and other defects reasonably acceptable to
the Administrative Agent,
(D) engineering, soils and other reports as to the
properties described in the Mortgages, in form and substance and
from professional firms reasonably acceptable to the
Administrative Agent,
(E) the Assignments of Leases and Rents referred to in
the Mortgages, duly executed by the appropriate Loan Party,
(F) such consents and agreements of lessors and other
third parties, and such estoppel letters and other
confirmations, as the Administrative Agent may reasonably deem
necessary or desirable,
(G) evidence of the insurance required by the terms of
the Mortgages, and
(H) evidence that all other action that the
Administrative Agent may reasonably deem necessary or desirable
in order to create valid first and subsisting Liens on the
property described in the Mortgages has been taken and
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(iii) deliver to the Administrative Agent no later than May 31,
2000 any landlord waiver or consent required to be delivered pursuant
this Agreement; and
(iv) to the extent that the gross cash proceeds received by the
Borrower from the issuance of the Common Stock prior to the Initial
Extension of Credit is less than $410,000,000, the Borrower shall have
received the full amount of the shortfall in such gross cash proceeds on
or before May 5, 2000.
(s) Ledger. The Borrower shall maintain or cause to be
maintained at its address specified in Section 8.02 hereof a ledger or
ledgers as evidence of Debt permitted pursuant to Section 5.02(b)(ii).
SECTION 5.02. Negative Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist, any Lien on or with respect to any of its properties of
any character (including, without limitation, accounts) whether now
owned or hereafter acquired, or sign or file or suffer to exist, or
permit any of its Restricted Subsidiaries to sign or file or suffer to
exist, under the Uniform Commercial Code of any jurisdiction, a
financing statement that names the Borrower or any of its Subsidiaries
as debtor, or sign or suffer to exist, or permit any of its Restricted
Subsidiaries to sign or suffer to exist, any security agreement
authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Restricted Subsidiaries to
assign, any accounts or other right to receive income, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a) hereto;
(iv) purchase money Liens upon or in real property or
equipment acquired or held by the Borrower or any of its
Restricted Subsidiaries in the ordinary course of business to
secure the purchase price of such property or equipment or to
secure Debt incurred solely for the purpose of financing the
acquisition, construction or improvement of any such property or
equipment to be subject to such Liens, or Liens existing on any
such property or equipment at the time of acquisition (other
than any such Liens created in contemplation of such acquisition
that do not secure the purchase price), or extensions, renewals
or replacements of any of the foregoing for the same or a lesser
amount; provided, however, that no such Lien shall extend to or
cover any property other than the property or equipment being
acquired, constructed or improved, and no such extension,
renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or
replaced; and provided further that the aggregate principal
amount of the Debt secured by Liens permitted by this clause
(iv) shall not exceed the amount permitted under Section
5.02(b)(i)D or (b)(iv)A at any time outstanding;
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(v) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(i)D or (b)(iv)A; provided that
no such Lien shall extend to or cover any Collateral or assets
other than the assets subject to such Capitalized Leases; and
(vi) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or
renewal (without increase in the amount or change in any direct
or contingent obligor) of the Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of its
Restricted Subsidiaries to create, incur, assume or suffer to exist, any Debt,
except:
(i) in the case of the Borrower,
(A) Debt in respect of Hedge Agreements incurred in the
ordinary course of business and consistent with prudent business
practice with an aggregate Agreement Value not to exceed
$400,000,000 at any time outstanding, provided that the
aggregate Agreement Value of Debt in respect of clause (ii) of
the definition of Hedge Agreements shall not exceed $100,000,000
at any time outstanding,
(B) Subordinated Debt owed to a wholly owned Restricted
Subsidiary of the Borrower, which Debt (x) shall constitute
Pledged Debt, (y) shall be on terms reasonably acceptable to the
Administrative Agent and (z) shall be evidenced by promissory
notes in form and substance satisfactory to the Administrative
Agent and such promissory notes shall be pledged as security for
the Obligations under the Loan Documents of the holder thereof
and delivered to the Collateral Agent pursuant to the terms of
the Security Agreement,
(C) the 2000 Convertible Subordinated Notes, the
Convertible Subordinated Notes and the Existing Notes,
(D) Debt secured by Liens permitted by 5.02(a)(iv) and
Capitalized Leases not to exceed in the aggregate $75,000,000 at
any time outstanding for all Debt under this clause (i)(D),
(E) other Debt provided that the aggregate principal
amount of such other Debt outstanding at any time does not
exceed $25,000,000 and
(ii) (A) in the case of any Restricted Subsidiary of the
Borrower that is a Domestic Subsidiary, Subordinated Debt owed to the
Borrower or to a Restricted Subsidiary that is a Domestic Subsidiary of
the Borrower, provided that, in each case, such Debt (x) shall
constitute Pledged Debt, (y) shall be on terms reasonably acceptable to
the Administrative Agent and (z) shall be evidenced by promissory notes
in form and substance satisfactory to the Administrative Agent and such
promissory notes shall be pledged as security for the Obligations under
the Loan Documents of the holder thereof and delivered to the Collateral
Agent pursuant to the terms of the Security Agreement or alternatively
shall be documented in any other way reasonably satisfactory to the
Administrative Agent pursuant to which the Administrative Agent shall
have a valid and perfected security interest in such Debt provided,
however, that notwithstanding the foregoing, no promissory note shall be
created to evidence any such Debt, unless such
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promissory note shall be forthwith pledged as security for the
Obligations under the Loan Documents of the holder thereof and delivered
to the Collateral Agent pursuant to the terms of the Security Agreement.
(B) in the case of any Restricted Subsidiary of the Borrower
that is a Foreign Subsidiary, Debt owed to the Borrower or to a
Restricted Subsidiary and provided that, in each case, such Debt (x)
shall constitute Pledged Debt, (y) shall be on terms reasonably
acceptable to the Administrative Agent and (z) shall be evidenced by
promissory notes in form and substance satisfactory to the
Administrative Agent and such promissory notes shall be pledged as
security for the Obligations under the Loan Documents of the holder
thereof and delivered to the Collateral Agent pursuant to the terms of
the Security Agreement or alternatively shall be documented in any other
way reasonably satisfactory to the Administrative Agent pursuant to
which the Administrative Agent shall have a valid and perfected security
interest in such Debt provided, however, that notwithstanding the
foregoing, no promissory note shall be created to evidence any such
Debt, unless such promissory note shall be forthwith pledged as security
for the Obligations under the Loan Documents of the holder thereof and
delivered to the Collateral Agent pursuant to the terms of the Security
Agreement, and
(iii) in the case of the Borrower and its Restricted
Subsidiaries,
(A) Debt under the Loan Documents,
(B) the Surviving Debt, and any Debt extending the
maturity of, or refunding or refinancing, in whole or in part,
any Surviving Debt, provided that the terms of any such
extending, refunding or refinancing Debt, and of any agreement
entered into and of any instrument issued in connection
therewith, are otherwise permitted by the Loan Documents,
provided further that the principal amount of such Surviving
Debt shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, refunding or
refinancing, and the direct and contingent obligors therefor
shall not be changed, as a result of or in connection with such
extension, refunding or refinancing, provided still further that
the terms relating to principal amount, amortization, maturity,
collateral (if any) and subordination (if any), and other
material terms taken as a whole, of any such extending,
refunding or refinancing Debt, and of any agreement entered into
and of any instrument issued in connection therewith, are no
less favorable in any material respect to the Loan Parties or
the Lender Parties than the terms of any agreement or instrument
governing the Surviving Debt being extended, refunded or
refinanced and the interest rate applicable to any such
extending, refunding or refinancing Debt does not exceed the
then applicable market interest rate,
(C) Debt arising from the endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business, and
(D) Debt of any Person existing at the time such Person
is merged with or into Borrower or such Restricted Subsidiary,
to the extent permitted as a merger under Section 5.02(d) and an
Investment under Section 5.02(f), provided that such Debt is not
incurred in connection with or in contemplation of such merger,
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<PAGE> 72
(iv) in the case of the Restricted Subsidiaries of the Borrower,
(A) Debt secured by Liens permitted by Section
5.02(a)(iv) and Capitalized Leases not to exceed an aggregate
amount of $30,000,000 at any time outstanding for all Debt
permitted under this clause (iv)(A), and
(B) other Debt provided that the aggregate principal
amount of such other Debt outstanding at any time does not
exceed $10,000,000.
(c) Change in Nature of Business. Enter or permit any of its
Restricted Subsidiaries to enter into any line of business other than
the line of business presently conducted and/or lines of business
reasonably related or supplementary thereto or reasonable extensions
thereof, as determined by the board of directors of the Borrower from
time to time.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Restricted
Subsidiaries to do so, except that:
(i) any Restricted Subsidiary of the Borrower may merge
into or consolidate with any other Restricted Subsidiary of the
Borrower, provided that, in the case of any such merger or
consolidation, the Person formed by such merger or consolidation
shall be a wholly owned Restricted Subsidiary of the Borrower,
provided further that, in the case of any such merger or
consolidation to which a Subsidiary Guarantor or an Intercompany
Guarantor, as the case may be, is a party, the Person formed by
such merger or consolidation shall be a Subsidiary Guarantor or
an Intercompany Guarantor, as the case may be;
(ii) in connection with any acquisition permitted under
Section 5.02(f)(viii), any Restricted Subsidiary of the Borrower
may merge into or consolidate with any other Person or permit
any other Person to merge into or consolidate with it; provided
that the Person surviving such merger shall be a wholly owned
Restricted Subsidiary of the Borrower provided further that, in
the case of any such merger or consolidation to which a
Subsidiary Guarantor or an Intercompany Guarantor, as the case
may be, is a party, the Person formed by such merger or
consolidation shall be a Subsidiary Guarantor or an Intercompany
Guarantor, as the case may be; and
(iii) any Restricted Subsidiary may merge into another
Person in connection with the disposition of all its assets to
the extent permitted under Section 5.02(e);
provided, however, that in each case, immediately before and after giving effect
thereto, no event shall occur and be continuing that constitutes a Default and,
in the case of any such merger to which the Borrower is a party, the Borrower is
the surviving corporation.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Restricted Subsidiaries to sell, lease,
transfer or otherwise dispose of, any assets, or grant any option or
other right to purchase (to the extent the exercise of such option or
right to purchase would result in a transaction not otherwise permitted
under this Section 5.02(e)), lease or otherwise acquire any assets other
than Inventory to be sold in the ordinary course of its business,
except:
(i) sales of Inventory in the ordinary course of its
business;
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<PAGE> 73
(ii) in a transaction authorized by subsection (d) of
this Section 5.02;
(iii) sales of assets for cash and for fair value in an
aggregate amount not to exceed $25,000,000 in any Fiscal Year;
(iv) sales of surplus, damaged, worn or obsolete
furniture, equipment in the ordinary course of business;
(v) sales or other dispositions of Investments permitted
by Section 5.02(f);
(vi) sales or discounts without recourse of accounts
receivables arising in the ordinary course of business in
connection with the collection or compromise thereof;
(vii) sales of licenses or sublicenses by the Borrower
or such Restricted Subsidiary of its patents, copyrights,
trademarks, tradenames and service marks in the ordinary course
of business and which do not materially interfere with the
business of the Borrower or any Restricted Subsidiary; and
(viii) transfers of any interest in property through the
granting of a Lien permitted under Section 5.02(a).
provided that in the case of sales of assets pursuant to clause (iii) or (v)
above, the Borrower shall, so long as any Term Advances shall be outstanding, on
the 180th day after the date of receipt by any Loan Party or any of its
Subsidiaries of the Net Cash Proceeds from such sale, prepay the Advances in an
amount equal to the amount of such Net Cash Proceeds not reinvested in like
assets during such 180-day period pursuant to, and in the order of priority set
forth in, Section 2.06(b)(ii), as specified therein.
(f) Investments in Other Persons. Make or hold, or permit any of
its Restricted Subsidiaries to make or hold, any Investment in any
Person, except,
(i) Investments by the Borrower and its Restricted
Subsidiaries in their Subsidiaries outstanding on the date
hereof;
(ii) loans and advances (excluding property consisting
of Equity Interests in the Borrower) to employees in the
ordinary course of the business of the Borrower and its
Restricted Subsidiaries as presently conducted in an aggregate
principal amount not to exceed $15,000,000 at any time
outstanding;
(iii) Investments by the Borrower and its Restricted
Subsidiaries in Cash Equivalents;
(iv) Investments existing on the date hereof and
described on Schedule 4.01(x) hereto;
(v) the Anam Equity Investments;
(vi) Investments by the Borrower in Hedge Agreements
permitted under Section 5.02(b)(i)(A);
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<PAGE> 74
(vii) Investments consisting of intercompany Debt (x)
permitted under Section 5.02(b)(i)(B) or 5.02(b)(ii)(A) or (y)
permitted under 5.02(b)(ii)(B) used for working capital purposes
and for Capital Expenditures so long as, immediately after
giving effect thereto, the Borrower shall be in compliance with
the covenants contained in Sections 5.02(o) and 5.04(a);
(viii) other Investments in Subsidiaries and other
entities (other than Anam, Newco and Newco Successor) in an
aggregate amount invested not to exceed (i) $125,000,000 (which
amount may, notwithstanding the preceding provisions of this
clause (viii), include an Investment of up to $50,000,000 in
Newco by the Borrower in contemplation of the Fab Transaction)
in the twelve month period commencing on the Effective Date,
(ii) $75,000,000 in the twelve month period immediately
succeeding the period referred to in clause (i) and (iii)
$100,000,000 in any subsequent twelve month period during the
term of this Agreement (together with any Investments made
pursuant to subsection (i)); provided that with respect to
Investments made under this clause (viii): (1) any newly
acquired or organized Subsidiary of the Borrower or any of its
Subsidiaries shall be a wholly owned Subsidiary thereof; (2)
immediately before and after giving effect thereto, no Default
shall have occurred and be continuing or would result therefrom;
(3) any company or business acquired or invested in pursuant to
this clause (viii) shall be in the same line of business as the
business of the Borrower or any of its Subsidiaries or lines of
business reasonably related or supplementary thereto or
reasonable extensions thereof; (4) immediately after giving
effect to the acquisition of a company or business pursuant to
this clause (viii), the Borrower shall be in pro forma
compliance with the covenants contained in Section 5.04,
calculated based on the financial statements most recently
delivered to the Lender Parties pursuant to Section 5.03 and as
though such acquisition had occurred at the beginning of the
four-quarter period covered thereby, as evidenced by a
certificate of the Chief Financial Officer of the Borrower
delivered to the Lender Parties demonstrating such compliance.
In addition, in the case of any Investment in, or resulting in
the formation or acquisition of, an Unrestricted Subsidiary, (x)
such Investment in such Unrestricted Subsidiary shall comply
with the requirements set forth in Schedule IV hereto and (y)
such Investment shall be made with common equity of the Borrower
or a portion of the Net Cash Proceeds of the issuance of common
equity of the Borrower to the extent permitted under Section
5.02(g);
(ix) Investments received (a) in satisfaction of
judgments and (b) as payment on a claim made in connection with
any bankruptcy, liquidations, receivership or other insolvent
proceeding;
(x) Investments in (a) negotiable instruments held for
collection within the ordinary course of business, (b) accounts
receivable arising in the ordinary course of business (and
Investments obtained in exchange or settlement of accounts
receivable for which the Borrower or such Subsidiary has
determined collection is not likely) and (c) operating leases,
deposits, utility and workers' compensation, performance and
other similar deposits arising in the ordinary course of
business;
(xi) Investments consisting of the transfer of the
semi-conductor wafer fabrication assets and associated exchange
of shares made as part of the Fab Transaction;
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<PAGE> 75
(xii) Investments made from the proceeds of, or in
exchange for, the issuance of Equity Interests of the Borrower
to the extent not required to be prepaid pursuant to Section
2.06(b)(iii); and
(xiii) Investments received by the Borrower or such
Restricted Subsidiary in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of
delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business.
(g) Restricted Payments. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Interests now or hereafter outstanding, return any capital to its
stockholders, partners or members (or the equivalent Persons thereof) as
such, make any distribution of assets, Equity Interests, obligations or
securities to its stockholders, partners or members (or the equivalent
Persons thereof) as such or issue or sell any Equity Interests (other
than common stock, options, warrants, convertible or exchangeable
securities or other rights for the purchase or other acquisition of
common stock of the Borrower or preferred stock of the Borrower (to the
extent such preferred stock does not contain terms which are materially
more restrictive (or provide the holders thereof materially greater
rights) than the series A preferred stock, the terms of which are
attached hereto as Schedule 5.02(g) or options, warrants, convertible or
exchangeable securities or other rights for the purchase or other
acquisition of such preferred stock), or permit any of its Restricted
Subsidiaries to do any of the foregoing, or permit any of its Restricted
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire
for value any Equity Interests in the Borrower or to issue or sell any
Equity Interests therein, except that, so long as no Default shall have
occurred and be continuing at the time of any action described below or
would result therefrom:
(i) the Borrower may (A) declare and pay dividends and
distributions payable only in capital stock of the Borrower, (B)
issue shares of its common stock as consideration for
Investments made pursuant to Section 5.02(f)(viii), (C) except
to the extent the Net Cash Proceeds thereof are required to be
applied to the prepayment of the Advances pursuant to Section
2.06(b), purchase, redeem, retire, defease or otherwise acquire
shares of its capital stock with the proceeds received
contemporaneously from, or in exchange for, the issue of new
shares of its capital stock with equal or inferior voting
powers, designations, preferences and rights and (D) except to
the extent the Net Cash Proceeds thereof are required to be
applied to the prepayment of the Advances pursuant to Section
2.06(b), issue and sell shares of its common stock in connection
with the making of an Investment pursuant to Section
5.02(f)(viii) so long as the Net Cash Proceeds thereof are used
within 90 days after the receipt thereof to make such Investment
or to prepay the Advances pursuant to Section 2.06;
(ii) any Subsidiary of the Borrower may (A) declare and
pay cash dividends to the Borrower and (B) declare and pay
dividends to any Restricted Subsidiary of which it is a
Subsidiary and (C) accept capital contributions from its parent
to the extent permitted under Section 5.02(f)(viii);
(iii) the Borrower may pay any premium consisting of
Equity Interests of the Borrower to any holder of Convertible
Subordinated Notes or 2000 Convertible Subordinated Notes in
connection with the conversion by such holder of such
Convertible Subordinated Notes or 2000 Convertible Subordinated
Notes or may honor exchange offers in respect of Equity
Interests in connection with the Convertible Subordinated Notes
or the 2000 Convertible Subordinated Notes;
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(iv) the Borrower may make any payment on or with
respect to, or in connection with, the redemption or repurchase
and retirement of Subordinated Debt in exchange for, or out of
the Net Cash Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Borrower) of, Equity
Interests of the Borrower in a maximum aggregate amount not to
exceed $20,000,000; provided, however, that any mandatory
prepayments of Advances required under Section 2.06(b) shall
have been made;
(v) the Borrower may effect any repurchase, redemption
or other acquisition or retirement for value of any Equity
Interests of the Borrower or any Restricted Subsidiary held by
any employee of the Borrower or any Restricted Subsidiary
pursuant to any employee equity subscription agreement, stock
ownership plan or stock option agreement in effect from time to
time in the event of the death or termination of such Employee;
provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 in any twelve-month period and $5,000,000 in the
aggregate;
(vi) the Borrower may make that portion of Investments
the payment for which consists of exclusively of Equity
Interests of the Borrower, provided, however, that any mandatory
prepayments of Advances required under 2.06(b) shall have been
made;
(vii) the Borrower may make other cash payments not
otherwise permitted under this Section 5.02(g) in an aggregate
amount not to exceed $10,000,000; and
(viii) the repurchase of Equity Interests of the
Borrower deemed to occur (excluding any payment in cash) upon
the exercise of stock options if such Equity Interests represent
a portion of the exercise price thereof.
(h) Amendments of Constitutive Documents. Amend, or permit any
of its Restricted Subsidiaries to amend, its certificate of
incorporation or bylaws or other constitutive documents except for any
amendment that could not be reasonably expected to adversely affect the
rights or interests of the Lender Parties, provided that any such
amendment shall be delivered to the Administrative Agent at least 3
Business Days before the date such Amendment is to become effective.
(i) Accounting Changes. Make or permit, or permit any of its
Restricted Subsidiaries to make or permit, any change in (i) accounting
policies or reporting practices, except as permitted by generally
accepted accounting principles or (ii) Fiscal Year.
(j) Prepayments, Etc., of Debt. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Debt, except (i) the prepayment of the Advances in accordance
with the terms of this Agreement and (ii) regularly scheduled or
required repayments or redemptions of Surviving Debt, or amend, modify
or change in any manner any term or condition of any Surviving Debt or
Subordinated Debt, or permit any of its Restricted Subsidiaries to do
any of the foregoing other than to prepay the Debt payable to the
Borrower; provided that the Borrower may honor any holders request to
convert any Convertible Subordinated Notes or 2000 Convertible
Subordinated Notes in accordance with their respective terms (and make
any payment in connection therewith representing the value of any
fractional share); and provided further, that the Borrower may make any
payment, on or with respect to, or in connection with, the legal
defeasance, redemption, repurchase or repayment of Debt of the Borrower
or any
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Restricted Subsidiary with the Net Cash Proceeds from the incurrence of
refinancing Debt permitted by Section 5.02(b)(iii)(B).
(k) Amendment, Etc., of Related Documents. Cancel or terminate
any Related Document or consent to or accept any cancellation or
termination thereof, amend, modify or change in any manner any term or
condition of any Related Document or give any consent, waiver or
approval thereunder, waive any default under or any breach of any term
or condition of any Related Document, agree in any manner to any other
amendment, modification or change of any term or condition of any
Related Document or take any other action in connection with any Related
Document that in each case would impair the value of the interest or
rights of any Loan Party thereunder or that would impair the rights or
interests of any Agent or any Lender Party, or permit any of its
Restricted Subsidiaries to do any of the foregoing.
(l) Negative Pledge. Enter into or suffer to exist, or permit
any of its Restricted Subsidiaries to enter into or suffer to exist, any
agreement prohibiting or conditioning the creation or assumption of any
Lien upon any of its property or assets except (i) in favor of the
Secured Parties or (ii) in connection with (A) any Surviving Debt, (B)
any purchase money Debt permitted by Section 5.02(b)(iii)(B) solely to
the extent that the agreement or instrument governing such Debt
prohibits a Lien on the property acquired with the proceeds of such
Debt, or (C) any Capitalized Lease permitted by Section 5.02(b)(iii)(C)
solely to the extent that such Capitalized Lease prohibits a Lien on the
property subject thereto.
(m) Partnerships, Etc. Become a general partner in any general
or limited partnership or joint venture, or permit any of its Restricted
Subsidiaries to do so, except in connection with any Investment by a
Restricted Subsidiary permitted by Section 5.02(f)(viii), provided that
such Restricted Subsidiary's sole asset consists of such interest in
such partnership or joint venture.
(n) Speculative Transactions. Engage, or permit any of its
Restricted Subsidiaries to engage, in any transaction involving
commodity options or futures contracts or any similar speculative
transactions for speculative purposes.
(o) Capital Expenditures. Make, or permit any of its Restricted
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by the Borrower and its
Restricted Subsidiaries in any period set forth below to exceed the
amount set forth below for such period;
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ --------------
<S> <C>
December 31, 2000 $ 550,000,000
December 31, 2001 $ 500,000,000
December 31, 2002 $ 625,000,000
December 31, 2003 $ 725,000.000
December 31, 2004 $ 950,000,000
December 31, 2005 $1,025,000,000
</TABLE>
provided, however, that the unused portion of Capital Expenditures
permitted in any Fiscal Year and not used in such period may be carried
over and added to the amount otherwise permitted in the immediately
succeeding Fiscal Year, provided further, that the aggregate amount of
Capital Expenditures in such immediately succeeding Fiscal Year after
such carry-over shall not exceed 125% of the amount of Capital
Expenditures permitted for such Fiscal Year (prior to any carry-over).
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<PAGE> 78
(p) Formation of Subsidiaries. Organize or invest, or permit any
Subsidiary to organize or invest, in any new Subsidiary except as
permitted under Section 5.02(f)(i), (viii) and (xi) and except for the
entities and amounts listed on Schedule 5.02(p) hereto; provided,
however, that Unrestricted Subsidiaries shall not be permitted to
organize or invest in any Restricted Subsidiary.
(q) Payment Restrictions Affecting Subsidiaries. Directly or
indirectly, enter into or suffer to exist, or permit any of its
Restricted Subsidiaries to enter into or suffer to exist, any agreement
or arrangement limiting the ability of any of its Subsidiaries to
declare or pay dividends or other distributions in respect of its Equity
Interests or repay or prepay any Debt owed to, make loans or advances
to, or otherwise transfer assets to or invest in, the Borrower or any
Subsidiary of the Borrower (whether through a covenant restricting
dividends, loans, asset transfers or investments, a financial covenant
or otherwise), except (i) the Loan Documents and (ii) any agreement or
instrument evidencing Surviving Debt.
(r) Amendment, Etc., of Material Contracts. Cancel or terminate
any Material Contract or consent to or accept any cancellation or
termination thereof, amend or otherwise modify any Material Contract or
give any consent, waiver or approval thereunder, waive any default under
or breach of any Material Contract, agree in any manner to any other
amendment, modification or change of any term or condition of any
Material Contract or take any other action in connection with any
Material Contract that would impair the value of the interest or rights
of any Loan Party thereunder or that would impair the interest or rights
of any Agent or any Lender Party, or permit any of its Subsidiaries to
do any of the foregoing except, in each of the foregoing cases where to
do so would not have a Material Adverse Effect.
SECTION 5.03. Reporting Requirements. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will furnish to the Agents and the Lender
Parties:
(a) Default and Prepayment Notices. (i) As soon as possible and
in any event within five Business Days after an officer of the Borrower
becomes aware of the occurrence of a Default or any event, development
or occurrence reasonably likely to have a Material Adverse Effect
continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default
and the action that the Borrower has taken and proposes to take with
respect thereto, and (ii) as soon as possible and in any event no later
than 11:00 A.M. (New York City time) at least three Business Days before
any prepayment of Term Advances is to be made by the Borrower pursuant
to Section 2.06 (the "PREPAYMENT DATE"), written notice of the principal
amount of such prepayment (the "PREPAYMENT AMOUNT") and the applicable
Prepayment Date. Each such notice (a "PREPAYMENT NOTICE") shall be by
telex or telecopier or otherwise as provided in Section 8.02.
(b) Annual Financials. As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for such
Fiscal Year, in each case accompanied by an opinion acceptable to the
Required Lenders of Arthur Andersen or other independent public
accountants of recognized standing acceptable to the Required Lenders,
together with (i) a certificate of such accounting firm to the Lender
Parties stating that in the course of the regular audit of the business
of the
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Borrower and its Subsidiaries, which audit was conducted by such
accounting firm in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge that a Default
has occurred and is continuing, or if, in the opinion of such accounting
firm, a Default has occurred and is continuing, a statement as to the
nature thereof, (ii) a schedule in form satisfactory to the
Administrative Agent of the computations used by such accountants in
determining, as of the end of such Fiscal Year, compliance with the
covenants contained in Section 5.04, provided that in the event of any
change in GAAP used in the preparation of such financial statements, the
Borrower shall also provide, if necessary for the determination of
compliance with Section 5.04, a statement of reconciliation conforming
such financial statements to GAAP and provided further that the Borrower
shall also provide, to the extent necessary, a balance sheet, statement
of income and statement of cash flows that will exclude the Unrestricted
Subsidiaries that existed during such reporting period and (iii) a
certificate of the chief financial officer of the Borrower stating that
no Default has occurred and is continuing or, if a Default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto.
(c) Quarterly Financials. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
Fiscal Year, an unaudited Consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such quarter and an unaudited
Consolidated statement of income and an unaudited Consolidated statement
of cash flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal quarter and ending with the
end of such fiscal quarter and an unaudited Consolidated statement of
income and an unaudited Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of
the previous Fiscal Year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures
for the corresponding period of the preceding Fiscal Year, all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Borrower as having
been prepared in accordance with GAAP, together with (i) a certificate
of said officer stating that no Default has occurred and is continuing
or, if a Default has occurred and is continuing, a statement as to the
nature thereof and the action that the Borrower has taken and proposes
to take with respect thereto and (ii) a schedule in form satisfactory to
the Administrative Agent of the computations used by the Borrower in
determining compliance with the covenants contained in Section 5.04,
provided that in the event of any change in GAAP used in the preparation
of such financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section 5.04, a
statement of reconciliation conforming such financial statements to GAAP
and provided further that the Borrower shall also provide, to the extent
necessary, a balance sheet, statement of income and statement of cash
flows that will exclude the Unrestricted Subsidiaries that existed
during such reporting period.
(d) Annual Business Plan and Forecasts. As soon as available and
in any event no later than 15 days before the end of each Fiscal Year, a
business plan and forecasts prepared by management of the Borrower of
balance sheets, income statements and cash flow statements on a monthly
basis for the Fiscal Year following such Fiscal Year and on an annual
basis for each Fiscal Year thereafter until the Termination Date.
(e) Litigation. Promptly after the commencement thereof, notice
of all actions, suits, investigations, litigation and proceedings before
any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, affecting any Loan Party or any
of its Subsidiaries of the type described in Section 4.01(f).
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(f) Securities Reports. Promptly after the sending or filing
thereof, copies of the Borrower's Reports on Form 10-K and Form 10-Q.
(g) Creditor Reports. Promptly after the furnishing thereof,
copies of any statement or report furnished to any holder of Debt
securities of any Loan Party or of any of its Subsidiaries pursuant to
the terms of any indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lender Parties pursuant to any
other clause of this Section 5.03.
(h) Agreement Notices. Promptly upon receipt thereof, copies of
all notices, requests and other documents received by any Loan Party or
any of its Subsidiaries under or pursuant to any Related Document or
Material Contract or instrument, indenture, loan or credit or similar
agreement and, from time to time upon request by the Administrative
Agent, such information and reports regarding the Related Documents, the
Material Contracts and such instruments, indentures and loan and credit
and similar agreements as the Administrative Agent may reasonably
request.
(i) Revenue Agent Reports. Within 30 days after receipt, copies
of all Revenue Agent Reports (Internal Revenue Service Form 886), or
other written proposals of the Internal Revenue Service, that propose,
determine or otherwise set forth positive adjustments to the Federal
income tax liability of the affiliated group (within the meaning of
Section 1504(a)(1) of the Internal Revenue Code) of which the Borrower
is a member aggregating $1,000,000 or more.
(j) Tax Certificates. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a certificate
(a "TAX CERTIFICATE"), signed by the President or the chief financial
officer of the Borrower, stating that the Borrower has paid to the
Internal Revenue Service or other taxing authority, the full amount that
such affiliated group is required to pay in respect of Federal income
tax for such year.
(k) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and
in any event within 10 days after any Loan Party or any ERISA Affiliate
knows or has reason to know that any ERISA Event has occurred, a
statement of the chief financial officer of the Borrower describing such
ERISA Event and the action, if any, that such Loan Party or such ERISA
Affiliate has taken and proposes to take with respect thereto and (B) on
the date any records, documents or other information must be furnished
to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA,
a copy of such records, documents and information.
(ii) Plan Terminations. Promptly and in any event within two
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any
Plan.
(iii) Multiemployer Plan Notices. Promptly and in any event
within five Business Days after receipt thereof by any Loan Party or any
ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each
notice concerning (A) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (B) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the
amount of liability incurred, or that may be incurred, by such Loan
Party or any ERISA Affiliate in connection with any event described in
clause (A) or (B).
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(iv) Plan Annual Reports. Promptly and in any event within 30
days after the filing thereof with the Internal Revenue Service, copies
of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Plan.
(l) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit that could (i) reasonably be
expected to have a Material Adverse Effect or (ii) cause any property
described in the Mortgages to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental
Law.
(m) Real Property. As soon as available and in any event within
30 days after the end of each Fiscal Year, a report supplementing
Schedules 4.01(v) and 4.01(w) hereto, including an identification of all
owned and leased real property disposed of by the Borrower or any of its
Subsidiaries during such Fiscal Year, a list and description (including
the street address, county or other relevant jurisdiction, state, record
owner, book value thereof, and in the case of leases of property,
lessor, lessee, expiration date and annual rental cost thereof) of all
real property acquired or leased during such Fiscal Year and a
description of such other changes in the information included in such
Schedules as may be necessary for such Schedules to be accurate and
complete.
(n) Insurance. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for
the Borrower and its Subsidiaries and containing such additional
information as any Agent, or any Lender Party through the Administrative
Agent, may reasonably specify.
(o) Borrowing Base Certificate. Within five Business Days after
the end of each quarter, a Borrowing Base Certificate, as at the end of
the previous quarter, certified by the chief financial officer of the
Borrower.
(p) Information Regarding Acquisitions by Anam. Concurrently
with the issuance by Anam of any Equity Interests to fund any
acquisition to be made by it, the business and financial information
(including any fairness opinion and financial projections) used by the
board of directors of Anam in approving such acquisition.
(q) Year 2000 Compliance. Promptly after the Borrower's
discovery or determination thereof, notice (in reasonable detail) that
any computer application (including those of its suppliers, vendors and
customers) that is material to its or any of its Subsidiaries' business
and operations will not be Year 2000 Compliant (as defined in Section
4.01(aa)), except to the extent that such failure could not reasonably
be expected to have a Material Adverse Effect.
(r) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Agent, or any Lender Party through the Administrative Agent, may
from time to time reasonably request, including information relating to
the Borrower's hedging policy, provided, however, that any proprietary
information shall only be disclosed with appropriate safeguard measures
as may be mutually agreed to by the Borrower and the Agents.
(s) Fab Certificate. At least 15 Business Days prior to the
occurrence of the Fab Transaction, the Borrower shall deliver reasonably
complete information in sufficient detail to permit the Lender Parties
to evaluate the Fab Transaction together with a certificate from the
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chief financial officer (or equivalent officer) of the Borrower as to
the satisfaction of clause (v) of the definition of the Fab Transaction.
SECTION 5.04. Financial Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will:
(a) Fixed Charge Coverage Ratio. Maintain at all times a Fixed
Charge Coverage Ratio of not less than the amount set forth below for
each period set forth below:
<TABLE>
<CAPTION>
QUARTER ENDING RATIO
-------------- -----
<S> <C>
December 31, 2000 1.00:1
March 31, 2001 1.00:1
June 30, 2001 1.10:1
September 30, 2001 1.20:1
December 31, 2001 1.30:1
March 31, 2002 1.40:1
June 30, 2002 1.40:1
September 30, 2002 1.40:1
December 31, 2002 1.40:1
March 31, 2003 1.50:1
June 30, 2003 1.50:1
September 30, 2003 1.50:1
December 31, 2003 1.50:1
March 31, 2004 1.50:1
June 30, 2004 1.50:1
September 30, 2004 1.50:1
December 31, 2004 1.50:1
March 31, 2005 1.75:1
June 30, 2005 1.75:1
September 30, 2005 1.75:1
</TABLE>
(b) Leverage Ratio. Maintain at all times a Leverage Ratio of
not more than the amount set forth below for each period set forth
below:
<TABLE>
<CAPTION>
QUARTER ENDING RATIO
-------------- -----
<S> <C>
June 30, 2000 3.00:1
September 30, 2000 3.00:1
December 31, 2000 2.75:1
March 31, 2001 2.75:1
June 30, 2001 2.75:1
September 30, 2001 2.50:1
December 31, 2001 2.50:1
March 31, 2002 2.50:1
June 30, 2002 2.50:1
September 30, 2002 2.50:1
December 31, 2002 2.50:1
March 31, 2003 2.25:1
June 30, 2003 2.25:1
</TABLE>
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<TABLE>
<S> <C>
September 30, 2003 2.25:1
December 31, 2003 2.25:1
March 31, 2004 2.00:1
June 30, 2004 2.00:1
September 30, 2004 2.00:1
December 31, 2004 2.00:1
March 31, 2005 2.00:1
June 30, 2005 2.00:1
September 30, 2005 2.00:1
</TABLE>
(c) Interest Coverage Ratio. Maintain at all times an Interest
Coverage Ratio of not less than the amount set forth below for each
period set forth below:
<TABLE>
<CAPTION>
QUARTER ENDING RATIO
-------------- -----
<S> <C>
June 30, 2000 3.75:1
September 30, 2000 3.75:1
December 31, 2000 4.00:1
March 31, 2001 4.00:1
June 30, 2001 4.00:1
September 30, 2001 4.00:1
December 31, 2001 4.00:1
March 31, 2002 4.00:1
June 30, 2002 4.00:1
September 30, 2002 4.00:1
December 31, 2002 4.00:1
March 31, 2003 4.00:1
June 30, 2003 4.00:1
September 30, 2003 4.00:1
December 31, 2003 4.00:1
March 31, 2004 4.00:1
June 30, 2004 4.00:1
September 30, 2004 4.00:1
December 31, 2004 4.00:1
March 31, 2005 4.00:1
June 30, 2005 4.00:1
September 30, 2005 4.00:1
</TABLE>
(d) Tangible Net Worth. The Borrower will not permit Tangible Net
Worth at any time to be less than (i) 90% of the Tangible Net Worth
on the Effective Date after giving affect to the Transaction plus
(ii) 50% of the sum of net income for each fiscal quarter beginning
with the first quarter after the Effective Date (without reduction
for losses) plus (iii) the amount of Net Cash Proceeds from issuances
of Equity Interests that the Borrower is entitled to keep pursuant to
Section 2.06 (b)(iii).
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("EVENTS
OF DEFAULT") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any
Advance when the same shall become due and payable or (ii) the Borrower
shall fail to pay any interest on any Advance, or any Loan Party shall
fail to make any other payment under any Loan Document, in each case
under this clause (ii) within 3 Business Days after the same becomes due
and payable; or
(b) any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document shall
prove to have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 2.14, 5.01(e), (f), (i), (j)
or (r), 5.02, 5.03 or 5.04; provided that, in the case of Section 5.03,
any such failure shall remain unremedied for three Business Days after
the earlier date of which (A) a Responsible Officer becomes aware of
such failure or (B) written notice shall have been given to the Borrower
by any Agent or Lender Party; or
(d) any Loan Party shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its part
to be performed or observed if such failure shall remain unremedied for
15 Business Days after the earlier of the date on which (A) a
Responsible Officer becomes aware of such failure or (B) written notice
thereof shall have been given to the Borrower by any Agent or any Lender
Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay
any principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal amount (or, in
the case of any Hedge Agreement, an Agreement Value) of at least
$10,000,000 either individually or in the aggregate (but excluding Debt
outstanding hereunder) of such Loan Party or such Subsidiary (as the
case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Debt; or any other event (other than a permitted redemption under
Section 5.02(g)(iv) or (v)) shall occur or condition shall exist under
any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt
or otherwise to cause, or to permit the holder thereof to cause, such
Debt to mature; or any such Debt shall be declared to be due and payable
or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
or
(f) any Loan Party or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being
diligently contested
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by it in good faith, either such proceeding shall remain undismissed or
unstayed for a period of 30 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any substantial part of its property)
shall occur; or any Loan Party or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or
(g) any judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 15 consecutive Business Days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against
any Loan Party or any of its Subsidiaries that could be reasonably
likely to have a Material Adverse Effect, and there shall be any period
of 15 consecutive Business Days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 or 5.01(j) shall for any reason cease to be
valid and binding on or enforceable against any Loan Party party to it,
or any such Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the
terms thereof) cease to create a valid and perfected first priority lien
on and security interest in the Collateral purported to be covered
thereby; or
(k) a Change of Control shall occur; or
(l) any ERISA Event shall have occurred with respect to a Plan
and the sum (determined as of the date of occurrence of such ERISA
Event) of the Insufficiency of such Plan and the Insufficiency of any
and all other Plans with respect to which an ERISA Event shall have
occurred and then exist (or the liability of the Loan Parties and the
ERISA Affiliates related to such ERISA Event) exceeds $10,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Loan Parties and the ERISA Affiliates as Withdrawal
Liability (determined as of the date of such notification), exceeds
$10,000,000 or requires payments exceeding $1,000,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, and as a result of such reorganization or termination
the aggregate annual contributions of the Loan Parties and the ERISA
Affiliates to all Multiemployer Plans that are then in reorganization or
being terminated have been or will be increased over the amounts
contributed to such Multiemployer Plans for the plan years of such
Multiemployer Plans immediately preceding the plan year in which such
reorganization or termination occurs by an amount exceeding $10,000,000;
or
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(o) Anam, Newco or Newco Successor shall enter into or engage in
any line of business unrelated to lines of business in which Anam is
engaged on the Effective Date (other than with respect to Anam
Electronics, Inc.) or Newco or Newco Successor is engaged as a result of
the Fab Transaction;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Commitments of each Lender Party and the obligation of each Lender
Party to make Advances (other than Letter of Credit Advances by an Issuing Bank
or a Revolving Credit Lender pursuant to Section 2.03(c) and of each Issuing
Bank to issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Required Lenders, (A) by notice to the Borrower, declare the Notes, all
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower, (B) by notice to each
party required under the terms of any agreement in support of which a Standby
Letter of Credit is issued, request that all Obligations under such agreement be
declared to be due and payable and (c) by notice to each Issuing Bank, direct
such Issuing Bank to deliver a Default Termination Notice to the beneficiary of
each Standby Letter of Credit issued by it, and each Issuing Bank shall deliver
such Default Termination Notices; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to the Borrower under
the Federal Bankruptcy Code, (x) the Commitments of each Lender Party and the
obligation of each Lender Party to make Advances (other than Letter of Credit
Advances by an Issuing Bank or a Revolving Credit Lender pursuant to Section
2.03(c) and of each Issuing Bank to issue Letters of Credit shall automatically
be terminated and (y) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default.
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Collateral Agent on behalf of the Lender
Parties in same day funds at the Collateral Agent's office designated in such
demand, for deposit in the L/C Collateral Account, an amount equal to the
aggregate Available Amount of all Letters of Credit then outstanding. If at any
time the Administrative Agent or the Collateral Agent determines that any funds
held in the L/C Collateral Account are subject to any right or claim of any
Person other than the Agents and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent or the
Collateral Agent, pay to the Collateral Agent, as additional funds to be
deposited and held in the L/C Collateral Account, an amount equal to the excess
of (a) such aggregate Available Amount over (b) the total amount of funds, if
any, then held in the L/C Collateral Account that the Administrative Agent or
the Collateral Agent, as the case may be, determines to be free and clear of any
such right and claim. Upon the drawing of any Letter of Credit for which funds
are on deposit in the L/C Collateral Account, such funds shall be applied to
reimburse the relevant Issuing Bank or Revolving Credit Lenders, as applicable,
to the extent permitted by applicable law.
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, an Issuing Bank (if applicable) and on behalf of itself
and its Affiliates as potential Hedge Banks)
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hereby appoints and authorizes each Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement and the
other Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), no
Agent shall be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding upon all Lender Parties and all holders
of Notes; provided, however, that no Agent shall be required to take any action
that exposes such Agent to personal liability or that is contrary to this
Agreement or applicable law. Each Agent agrees to give to each Lender Party
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. Neither any Agent nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, each Agent:
(a) may treat the payee of any Note as the holder thereof until, in the case of
the Administrative Agent, the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any
other Agent, such Agent has received notice from the Administrative Agent that
it has received and accepted such Assignment and Acceptance, in each case as
provided in Section 8.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. SG, SG Cowen, SSBI and Their Affiliates. With respect to
its Commitments, the Advances made by it and the Notes issued to it, each of SG,
SG Cowen and SSBI shall have the same rights and powers under the Loan Documents
as any other Lender Party and may exercise the same as though it were not an
Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise
expressly indicated, include SG, SG Cowen and SSBI in their respective
individual capacities. SG, SG Cowen and SSBI and their respective affiliates may
accept deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, any Loan Party, any of its Subsidiaries and any Person who may do business
with or own securities of any Loan Party or any such Subsidiary, all as if SG,
SG Cowen and SSBI were not Agents and without any duty to account therefor to
the Lender Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon any Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender
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Party also acknowledges that it will, independently and without reliance upon
any Agent or any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally agrees to
indemnify each Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender Party's ratable share (determined as provided
below) of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of the Loan Documents or any action
taken or omitted by such Agent under the Loan Documents (collectively, the
"INDEMNIFIED COSTS"); provided, however, that no Lender Party shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent's gross negligence or willful misconduct as found in a final,
non-appealable judgment by a court of competent jurisdiction. Without limitation
of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon
demand for its ratable share of any costs and expenses (including, without
limitation, fees and expenses of counsel) payable by the Borrower under Section
8.04, to the extent that such Agent is not promptly reimbursed for such costs
and expenses by the Borrower. In the case of any investigation, litigation or
proceeding giving rise to any Indemnified Costs, this Section 7.05 applies
whether any such investigation, litigation or proceeding is brought by any
Lender Party or any other Person.
(b) Each Lender Party severally agrees to indemnify each Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against such Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by such Issuing Bank under the Loan Documents; provided, however, that no Lender
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Issuing Bank's gross negligence or willful misconduct as
found in a final, non-appealable judgment by a court of competent jurisdiction.
Without limitation of the foregoing, each Lender Party agrees to reimburse such
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 8.04, to the extent that such Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower.
(c) For purposes of this Section 7.05, the Lender Parties' respective
ratable shares of any amount shall be determined, at any time, according to the
sum of (i) the aggregate principal amount of the Advances outstanding at such
time and owing to the respective Lender Parties, (ii) their respective Pro Rata
Shares of the aggregate Available Amount of all Letters of Credit outstanding at
such time, (iii) the aggregate unused portions of their respective Term
Commitments at such time and (iv) their respective Unused Revolving Credit
Commitments at such time; provided that the aggregate principal amount of Letter
of Credit Advances owing to any Issuing Bank shall be considered to be owed to
the Revolving Credit Lenders ratably in accordance with their respective
Revolving Credit Commitments. The failure of any Lender Party to reimburse any
Agent or any Issuing Bank, as the case may be, promptly upon demand for its
ratable share of any amount required to be paid by the Lender Parties to such
Agent or such Issuing Bank, as the case may be, as provided herein shall not
relieve any other Lender Party of its obligation hereunder to reimburse such
Agent or such Issuing Bank, as the case may be, for its ratable share of such
amount, but no Lender Party shall be responsible for the failure of any other
Lender Party to reimburse such Agent or such Issuing Bank, as the case may be,
for such other Lender Party's ratable share of such amount. Without prejudice to
the survival of any other agreement of
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any Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 7.05 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the other Loan
Documents.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent
may resign as to any or all of the Facilities at any time by giving written
notice thereof to the Lender Parties and the Borrower and may be removed as to
all of the Facilities at any time with or without cause by the Required Lenders.
Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Administrative Agent as to such of the Facilities as to
which such Administrative Agent has resigned or been removed. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lender Parties, appoint a successor Administrative
Agent, which shall be a commercial bank organized under the laws of the United
States or of any State thereof and having a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent as to all of the Facilities
and upon the execution and filing or recording of such financing statements, or
amendments thereto, and such amendments or supplements to the Mortgages, and
such other instruments or notices, as may be necessary or desirable, or as the
Required Lenders may request, in order to continue the perfection of the Liens
granted or purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent as to less
than all of the Facilities and upon the execution and filing or recording of
such financing statements, or amendments thereto, and such amendments or
supplements to the Mortgages, and such other instruments or notices, as may be
necessary or desirable, or as the Required Lenders may request, in order to
continue the perfection of the Liens granted or purported to be granted by the
Collateral Documents, such successor Administrative Agent shall succeed to and
become vested with all the rights, powers, discretion, privileges and duties of
the retiring Administrative Agent as to such Facilities, other than with respect
to funds transfers and other similar aspects of the administration of Borrowings
under such Facilities, issuances of Letters of Credit (notwithstanding any
resignation as Administrative Agent with respect to the Letter of Credit
Facility) and payments by the Borrower in respect of such Facilities, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement as to such Facilities, other than as aforesaid.
If, within 45 days after written notice is given of the retiring Administrative
Agent's resignation or removal under this Section 7.06, no successor
Administrative Agent shall have been appointed and shall have accepted such
appointment, then on such 45th day (i) the retiring Administrative Agent's
resignation or removal shall become effective, (ii) the retiring Administrative
Agent shall thereupon be discharged from its duties and obligations under the
Loan Documents and (iii) the Required Lenders shall thereafter perform all
duties of the retiring Administrative Agent under the Loan Documents until such
time, if any, as the Required Lenders appoint a successor Administrative Agent
as provided above. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent as to all of the Facilities shall have
become effective, the provisions of this Article VII shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent as to any Facilities under this Agreement.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes or any other Loan Document, nor consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
consent shall, unless in writing and signed by all of the Lenders (other than
any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.01
or, in the case of the Initial Extension of Credit, Section 3.02, (ii) change
any provision that expressly requires a vote or determination by all of the
Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid
principal amount of the Advances or (z) the aggregate Available Amount of
outstanding Letters of Credit that, in each case, shall be required for the
Lenders or any of them to take any action hereunder, (iii) reduce or limit the
obligations of any Guarantor under Section 1 of the Guaranty issued by it or
release such Guarantor or otherwise limit such Guarantor's liability with
respect to the Obligations owing to the Agents and the Lender Parties (other
than, in the case of any Guarantor, to the extent permitted under the Guaranty
to which it is a party), (iv) release all or substantially all of the Collateral
in any transaction or series of related transactions or permit the creation,
incurrence, assumption or existence of any Lien on all or substantially all of
the Collateral in any transaction or series of related transactions to secure
any Obligations other than Obligations owing to the Secured Parties under the
Loan Documents, (v) amend Section 2.13 or this Section 8.01, (b) no amendment,
waiver or consent shall, unless in writing and signed by the Required Lenders
and each Lender (other than any Lender that is, at such time, a Defaulting
Lender) that has a Commitment under the Term A Facility, Term B Facility or
Revolving Credit Facility if such Lender is directly and adversely affected by
such amendment, waiver or consent, (i) increase the Commitments of such Lender,
(ii) reduce the principal of, or interest on, the Notes held by such Lender or
any fees or other amounts stated to be payable hereunder to such Lender or (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender and (c) no amendment, waiver or consent shall, unless in writing and
signed by the Required Lenders and Lenders (other than any Lender Party that is,
at such time, a Defaulting Lender) holding at least a majority in interest of
the aggregate Commitments (whether used or unused) under the Term A Facility,
Term B Facility or Revolving Credit Facility if such Lenders under any of the
foregoing Facilities are directly and adversely affected by such amendment,
waiver or consent, change the allocation or order of application of any
prepayment set forth in Section 2.06; provided further that no amendment, waiver
or consent shall, unless in writing and signed by each Issuing Bank, as the case
may be, in addition to the Lenders required above to take such action, affect
the rights or obligations of the Issuing Bank under this Agreement; and provided
further that no amendment, waiver or consent shall, unless in writing and signed
by an Agent in addition to the Lenders required above to take such action,
affect the rights or duties of such Agent under this Agreement or the other Loan
Documents.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to the Borrower, at its address at Amkor Technology, Inc., Goshen Corporate
Park, 1345 Enterprise Drive, West Chester, PA 19380, (Telecopier: 610-431-9967),
Attention: Kenneth T. Joyce, Chief Financial Officer; if to any Initial Lender
or any Initial Issuing Bank, at its Domestic Lending Office specified opposite
its name on Schedule I hereto; if to any other Lender Party, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender Party; if to the Collateral Agent, at its address at 1221 Avenue
of the Americas, New York NY 10020 (Telecopier: 212-278-6418), Attention: Edward
Grimm, Vice-President, SG Cowen Securities Corporation; and if to the
Administrative Agent, at its address at 1221 Avenue of the Americas, New York NY
10020 (Telecopier: 212-278-6418), Attention: Edward Grimm, Vice-President, SG
Cowen Securities Corporation; and if to Salomon Smith Barney Inc., at its
address at 390 Greenwich St.,
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New York, NY 10013 (Telecopier: 212-723-8547), Attention: Nicholas Erni,
Director or, as to the Borrower or the Administrative Agent, at such other
address as shall be designated by such party in a written notice to the other
parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the
Administrative Agent. All such notices and communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively, except that notices and communications to any
Agent pursuant to Article II, III or VII shall not be effective until received
by such Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of an original executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
Party or any Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all costs and expenses of each Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, (A) all due diligence,
collateral review, syndication, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses and (B) the reasonable fees and expenses of counsel for each Agent with
respect thereto, with respect to advising such Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of each Agent and each Lender Party in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation, or
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally (including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent and each Lender Party with
respect thereto).
(b) The Borrower agrees to indemnify and hold harmless each Agent, each
Lender Party and each of their Affiliates and their respective officers,
directors, employees, agents and advisors (each, an "INDEMNIFIED PARTY") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (i) the Facilities, the actual
or proposed use of the proceeds of the Advances or the Letters of Credit, the
Transaction Documents or any of the transactions contemplated thereby,
including, without limitation, any acquisition or proposed acquisition
(including, without limitation, the Acquisition and any of the other
transactions contemplated by the Transaction Documents) by the Borrower or any
of its Subsidiaries or Affiliates of all or any portion of the Equity Interests
in or Debt securities or substantially all of the assets of the Acquired
Business or (ii) the actual or alleged presence of Hazardous Materials on any
property of any Loan Party or any of its Subsidiaries or any Environmental
Action relating in any way to any Loan Party or any of its Subsidiaries, except
to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
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misconduct. In the case of an investigation, litigation or other proceeding to
which the indemnity in this Section 8.04(b) applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by any Loan Party, its directors, shareholders or creditors or an Indemnified
Party or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated by the Transaction Documents are consummated. The
Borrower also agrees not to assert any claim against any Agent, any Lender Party
or any of their Affiliates, or any of their respective officers, directors,
employees, attorneys and agents, on any theory of liability, for indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Transaction Documents or any of the transactions
contemplated by the Transaction Documents.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, or by an Eligible Assignee to a Lender Party other than on the
last day of the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 8.07 as a result of a
demand by the Borrower pursuant to Section 8.07(a), or if the Borrower fails to
make any payment or prepayment of an Advance for which a notice of prepayment
has been given or that is otherwise required to be made, whether pursuant to
Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such
Lender Party (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender Party any amounts
required to compensate such Lender Party for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment or Conversion
or such failure to pay or prepay, as the case may be, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of such Loan Party by the Administrative Agent or any Lender Party, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of any Loan
Party hereunder or under any other Loan Document, the agreements and obligations
of the Borrower contained in Sections 2.10 and 2.12 and this Section 8.04 shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Agent and each Lender Party and each of their
respective Affiliates is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Agent, such Lender Party
or such Affiliate to or for the credit or the account of the Borrower against
any and all of the Obligations of the Borrower now or hereafter existing under
the Loan Documents, irrespective of whether such Agent or such Lender Party
shall have made any demand under this Agreement or such Note or Notes and
although such obligations may be unmatured. Each Agent and each Lender Party
agrees promptly to notify the Borrower after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Agent and each
Lender Party and their respective Affiliates under this Section 8.05 are in
addition to other rights and remedies (including,
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without limitation, other rights of set-off) that such Agent, such Lender Party
and their respective Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and each Agent and the
Administrative Agent shall have been notified by each Initial Lender and each
Initial Issuing Bank that such Initial Lender and such Initial Issuing Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, each Agent and each Lender Party and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the Lender
Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,
so long as no Default shall have occurred and be continuing, if demanded by the
Borrower (following a demand by such Lender pursuant to Section 2.10 or 2.12)
upon at least five Business Days' notice to such Lender and the Administrative
Agent, will assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment or Commitments, the Advances owing to it and the
Note or Notes held by it to the extent requested pursuant to Section 2.16(a));
provided, however, that (i) each such assignment shall be of a uniform, and not
a varying, percentage of all rights and obligations under and in respect of any
or all Facilities, provided, however, that nothing in this clause (i) shall
prevent a Lender from assigning an interest in a single Facility if such Lender
has an interest in more than one Facility, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender,
an Affiliate of any Lender or an Approved Fund of any Lender or an assignment of
all of a Lender's rights and obligations under this Agreement, the aggregate
amount of the Commitments being assigned to such Eligible Assignee pursuant to
such assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $2,500,000 and shall
be in an integral multiple of $1,000,000 in excess thereof under each Facility
for which a Commitment is being assigned, (iii) each such assignment shall be to
an Eligible Assignee, (iv) each such assignment made as a result of a demand by
the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower
after consultation with the Administrative Agent and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least equal
to the aggregate outstanding principal amount of the Advances owing to such
Lender, together with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender under this
Agreement, (vi) no such assignments shall be permitted without the consent of
the Administrative Agent and the Syndication Agent (such consents not to be
unreasonably withheld or delayed) and (vii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing and recordation fee of
$3,500 (except in the case of an assignment to a Lender or any Affiliate of a
Lender or any Approved Fund and except for any assignment by either Syndication
Agent or any other of their respective Affiliates); provided, however, that for
each such assignment made as a result of a demand by the Borrower pursuant to
this Section 8.07(a), the Borrower shall pay to the Administrative Agent the
applicable processing and recordation fee.
(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
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Assignment and Acceptance, have the rights and obligations of a Lender or
Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than its rights under Sections 2.10, 2.12 and 8.04 to the
extent any claim thereunder relates to an event arising prior to such
assignment) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all of the remaining portion
of an assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each
Lender Party assignor thereunder and each assignee thereunder confirm to and
agree with each other and the other parties thereto and hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
Party makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with any Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; (ii) such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or observance by any
Loan Party of any of its obligations under any Loan Document or any other
instrument or document furnished pursuant thereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon any Agent, such assigning Lender Party
or any other Lender Party and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under the Loan Documents as are delegated to such Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender or Issuing Bank, as the
case may be.
(d) The Administrative Agent, acting for this purpose (but only for this
purpose) as the agent of the Borrower, shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agents
and the Lender Parties shall treat each Person whose name is recorded in the
Register as a Lender Party hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Agent or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower and each other Agent. In the case of any assignment by a Lender, within
five Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent in
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exchange for the surrendered Note or Notes a new Note (to the extent requested
pursuant to Section 2.16(a)) to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under each Facility pursuant to such
Assignment and Acceptance and, if any assigning Lender has retained a Commitment
hereunder under such Facility, a new Note (to the extent requested pursuant to
Section 2.16(a)) to the order of such assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A-1,
A-2 or A-3 hereto, as the case may be.
(f) Each Issuing Bank may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under the undrawn portion of its
Letter of Credit Commitment at any time; provided, however, that(i) except in
the case of an assignment to a Person that immediately prior to such assignment
was an Issuing Bank or an assignment of all of an Issuing Bank's rights and
obligations under this Agreement, the amount of the Letter of Credit Commitment
of the assigning Issuing Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $2,500,000 and shall be in an
integral multiple of $1,000,000 in excess thereof, (ii) each such assignment
shall be to an Eligible Assignee and (iii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,500.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender
Parties shall continue to deal solely and directly with such Lender Party in
connection with such Lender Party's rights and obligations under this Agreement
and (v) no participant under any such participation shall have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes, or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) In addition to the assignment mechanics set forth in this Section
8.07(a) through (f), any Lender Party, (a "GRANTING LENDER") may grant to a
special purpose funding vehicle identified as such in writing from time to time
by the Granting Lender to the Administrative Agent and the Borrower (an "SPC")
the option to provide all or any part of any Advance that such Granting Lender
would otherwise be obligated to make pursuant to this Agreement, provided that
(i) nothing herein shall
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<PAGE> 96
constitute a commitment by any SPC to fund any Advance, and (ii) if an SPC
elects not to exercise such option or otherwise fails to make all or any part of
such Advance, the Granting Lender shall be obligated to make such Advance
pursuant to the terms hereof. The making of an Advance by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Advance were made by such Granting Lender. Each party hereto hereby agrees
that (i) no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement for which a Lender Party would otherwise be liable and (ii)
no SPC shall be entitled to the benefits of Sections 2.10 and 2.12 (or any other
increased costs protection provision). Notwithstanding anything to the contrary
contained in this Agreement, any SPC may (i) with notice to, but without prior
consent of, the Borrower, the Syndication Agent and the Administrative Agent and
with the payment of a processing fee of $500, assign all or any portion of its
interest in any Advance to the Granting Lender and (ii) disclose on a
confidential basis any non-public information relating to its funding of
Advances to any rating agency, commercial paper dealer or provider of any surety
or guarantee or credit or liquidity enhancement to such SPC. This subsection
8.07(i) may not be amended without the prior written consent of each Granting
Lender, all or any part of whose Advances are being funded by the SPC at the
time of such amendment. For the avoidance of doubt, with respect to the Agents,
the other Lender Parties and the Borrower, the Granting Lender shall for all
purposes, including, without limitation, the approval of any amendment or waiver
of any provision of any Loan Document or the obligation to pay any amount
otherwise payable by the Granting Lender under the Loan Documents, be the Lender
Party of record hereunder.
(j) Notwithstanding any other provision set forth in this Agreement, any
Lender Party may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it, if any) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(k) Any Lender that is a fund that invests in bank loans may pledge all
or any portion of the Advances owing to it and the Note or Notes, if any, held
by it to the trustee for holders of obligations owed, or securities issued, by
such fund as security for such obligations or securities; provided, that unless
and until such trustee actually becomes a Lender in compliance with the other
provisions of this Section 8.07, (i) no such pledge shall release the pledging
Lender from any of its obligations under the Loan Documents and (ii) such
trustee shall not be entitled to exercise any of the rights of a Lender under
the Loan Documents even though such trustee may have acquired ownership rights
with respect to the pledged interest through foreclosure or otherwise.
SECTION 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different 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.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of an original executed counterpart of
this Agreement.
SECTION 8.09. No Liability of the Issuing Banks. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither any
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a
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<PAGE> 97
claim against such Issuing Bank, and such Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages suffered
by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's
willful misconduct or gross negligence as determined in a final, non-appealable
judgment by a court of competent jurisdiction in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) such Issuing Bank's willful failure to make lawful payment under
a Letter of Credit after the presentation to it of a draft and certificates or
other document strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. Confidentiality. Neither any Agent nor any Lender Party
shall disclose any Confidential Information to any Person without the consent of
the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates
and their officers, directors, employees, agents and advisors, to Approved Funds
and to actual or prospective Eligible Assignees and participants, and then only
on a confidential basis, (b) as required by any law, rule or regulation or
judicial process, (c) as requested or required by any state, federal or foreign
authority or examiner, including the National Association of Insurance
Commissioners or any similar organization or quasi-regulatory authority
regulating such Lender Party, (d) to any rating agency when required by it,
provided that, prior to any such disclosure, such rating agency shall undertake
to preserve the confidentiality of any Confidential Information relating to the
Loan Parties received by it from such Lender Party and (e) to any direct or
indirect contractual counterparty in swap agreements or such contractual
counterparty's professional advisor (so long as such contractual counterparty or
professional advisor to such contractual counterparty agrees to be bound by the
provisions of this Section 8.10).
SECTION 8.11. Release of Collateral. Upon the sale, lease, transfer or
other disposition of any item of Collateral of any Loan Party in accordance with
the terms of the Loan Documents, the Collateral Agent will, at the Borrower's
expense, execute and deliver to such Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such item of Collateral
from the assignment and security interest granted under the Collateral Documents
in accordance with the terms of the Loan Documents.
SECTION 8.12. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
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SECTION 8.13. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the Agents and
the Lender Parties irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents, the Advances or the
actions of any Agent or any Lender Party in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMKOR TECHNOLOGY, INC.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
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<PAGE> 99
SOCIETE GENERALE,
as Administrative Agent Collateral Agent, and
Syndication Agent
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
99
<PAGE> 100
SALOMON SMITH BARNEY INC.,
as Syndication Agent
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
100
<PAGE> 101
INITIAL LENDERS
CITIBANK, N.A.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
101
<PAGE> 102
SOCIETE GENERALE
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
102
<PAGE> 103
DEUTSCHE BANK SECURITIES INC.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
103
<PAGE> 104
BANK OF AMERICA, N.A.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
104
<PAGE> 105
ABN AMRO BANK N.V.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
105
<PAGE> 106
FLEET NATIONAL BANK
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
106
<PAGE> 107
BANK OF CHINA, NEW YORK BRANCH
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
107
<PAGE> 108
FIRST UNION NATIONAL BANK
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
108
<PAGE> 109
KEY BANK NATIONAL ASSOCIATION
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
109
<PAGE> 110
BARCLAYS BANK PLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
110
<PAGE> 111
BANQUE NATIONALE DE PARIS
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
111
<PAGE> 112
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
112
<PAGE> 113
THE BANK OF NOVA SCOTIA
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
113
<PAGE> 114
PNC BANK, N.A.
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
114
<PAGE> 115
THE INDUSTRIAL BANK OF JAPAN, LIMITED
NEW YORK BRANCH
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
115
<PAGE> 116
IBM CREDIT CORPORATION
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
116
<PAGE> 117
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
117
<PAGE> 118
COMERICA BANK
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
118
<PAGE> 119
METROPOLITAN PROPERTY AND CASUALTY
INSURANCE COMPANY
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
119
<PAGE> 120
FRANKLIN FLOATING RATE TRUST
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
120
<PAGE> 121
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.
As: Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance Company as
Portfolio Manager
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
121
<PAGE> 122
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management
Company, Inc. its Managing Member
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
122
<PAGE> 123
KZH CYPRESSTREE-1 LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
123
<PAGE> 124
NORTH AMERICAN SENIOR FLOATING RATE FUND
By: CypressTree Investment Management
Company, Inc.
as Portfolio Manager
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
124
<PAGE> 125
FLEET NATIONAL BANK
As Trust Administrator for Long Lane
Master Trust IV
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
125
<PAGE> 126
GALAXY CLO 1999-1, LTD.
By SAI Investment Adviser, Inc.
its Collateral Manager
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
126
<PAGE> 127
KZH SOLEIL-2 LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
127
<PAGE> 128
KZH SOLEIL LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
128
<PAGE> 129
KZH HIGHLAND-2 LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
129
<PAGE> 130
OPPENHEIMER SENIOR FLOATING RATE FUND
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
130
<PAGE> 131
KZH SHOSHONE LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
131
<PAGE> 132
KZH STERLING LLC
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
132
<PAGE> 133
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ [ILLEGIBLE]
-----------------------------------------------
Name:
Title:
133
<PAGE> 134
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
REVOLVING LETTER OF DOMESTIC EURODOLLAR
TERM A TERM B CREDIT CREDIT LENDING LENDING
NAME OF INITIAL LENDER COMMITMENT COMMITMENT COMMITMENT COMMITMENT OFFICE OFFICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
134
<PAGE> 135
EXECUTION COPY
$900,000,000
CREDIT AGREEMENT
Dated as of April 28, 2000
Among
AMKOR TECHNOLOGY, INC.
as Borrower
and
THE INITIAL LENDERS AND INITIAL ISSUING BANKS
NAMED HEREIN
as Initial Lenders and Initial Issuing Banks
and
SALOMON SMITH BARNEY INC.
as Book Manager
and
SOCIETE GENERALE
as Administrative Agent and as Collateral Agent
and
SALOMON SMITH BARNEY INC. AND SOCIETE GENERALE
as Syndication Agents
and
SALOMON SMITH BARNEY INC., SG COWEN SECURITIES CORPORATION AND
DEUTSCHE BANK SECURITIES INC.
as Arrangers
and
DEUTSCHE BANK SECURITIES INC.
as Documentation Agent
135
<PAGE> 136
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.02. Computation of Time Periods; Other Definitional Provisions 29
1.03. Accounting Terms 29
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Advances and the Letters of Credit 29
2.02. Making the Advances 31
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit 32
2.04. Repayment of Advances 33
2.05. Termination or Reduction of the Commitments 35
2.06. Prepayments 36
2.07. Interest 38
2.08. Fees 39
2.09. Conversion of Advances 40
2.10. Increased Costs, Etc. 40
2.11. Payments and Computations 41
2.12. Taxes 43
2.13. Sharing of Payments, Etc. 45
2.14. Use of Proceeds 45
2.15. Defaulting Lenders 46
2.16. Evidence of Debt 48
2.17. Increase in the Aggregate Commitments 48
ARTICLE III
CONDITIONS OF LENDING AND
3.01. Conditions Precedent to Initial Extension of Credit 50
3.02. Conditions Precedent to Each Borrowing and Issuance and Renewal 55
</TABLE>
142
<PAGE> 137
<TABLE>
<S> <C> <C>
3.03. Conditions precedent to the release of the proceeds of the initial Extension of Credit 56
3.04. Determinations Under Section 3.01 56
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower 57
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants 62
5.02. Negative Covenants 69
5.03. Reporting Requirements 78
5.04. Financial Covenants 82
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default 84
6.02. Actions in Respect of the Letters of Credit upon Default 86
ARTICLE VII
THE AGENTS
7.01. Authorization and Action 86
7.02. Agents' Reliance, Etc. 87
7.03. SG, SG Cowen, SSBI and Their Affiliates 87
7.04. Lender Party Credit Decision 87
7.05. Indemnification 88
7.06. Successor Administrative Agent 89
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc. 90
8.02. Notices, Etc. 90
8.03. No Waiver; Remedies 91
8.04. Costs and Expenses 91
8.05. Right of Set-off 92
</TABLE>
143
<PAGE> 138
<TABLE>
<S> <C> <C>
8.06. Binding Effect 93
8.07. Assignments and Participations 93
8.08. Execution in Counterparts 96
8.09. No Liability of the Issuing Banks 96
8.10. Confidentiality 97
8.11. Release of Collateral 97
8.12. Jurisdiction, Etc. 97
8.13. Governing Law 98
8.14. Waiver of Jury Trial 98
</TABLE>
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Subsidiary Guarantors
Schedule III - Intercompany Guarantors
Schedule IV - Conditions for Unrestricted Subsidiaries
Schedule V - Certain Lender Parties
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and
Filings
Schedule 4.01(p) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(r) - Open Years; Unpaid Tax Liabilities; Adjusted Tax
Bases
Schedule 4.01(t) - Existing Debt
Schedule 4.01(u) - Surviving Debt
Schedule 4.01(v) - Owned Real Property
Schedule 4.01(w) - Leased Real Property
Schedule 4.01(x) - Investments
Schedule 4.01(y) - Intellectual Property
Schedule 4.01(z) - Material Contracts
Schedule 5.02(a) - Liens
Schedule 5.02(g) - Series A Preferred Stock Terms
Schedule 5.02(p) - New Subsidiaries
EXHIBITS
Exhibit A-1 - Form of Term A Note
Exhibit A-2 - Form of Term B Note
Exhibit A-3 - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Subsidiary Guaranty
Exhibit F - Form of Intercompany Guaranty
Exhibit G - Form of Solvency Certificate
Exhibit H - Form of Opinion of Counsel to the Loan Parties
Exhibit I - Form of Borrowing Base Certificate
144
<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AMKOR TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AMKOR TECHNOLOGY, INC.
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
TO THE STOCKHOLDERS
OF AMKOR TECHNOLOGY, INC.
Ladies and Gentlemen:
After careful consideration, the Board of Directors of Amkor Technology,
Inc., a Delaware corporation (the "Company" or "Amkor") has approved a series of
transactions (the "Acquisition Transactions") wherein (i) the Company would
consummate the transactions contemplated by an Asset Purchase Agreement by and
between Anam Semiconductor, Inc., a Korean corporation ("ASI") and the Company's
wholly-owned subsidiary Amkor Technology Korea, Inc. ("Amkor Korea") dated as of
January 14, 2000 and as amended on February 25, 2000, whereby Amkor will
purchase three test and packaging facilities located in Korea, known as K1, K2
and K3, and (ii) the Company would make an investment in ASI. In connection with
the Acquisition Transactions, the Company will undertake related equity
financing activities (the "Equity Financing Transactions"). The board has
determined that it is in the best interests of Amkor and its stockholders to
submit the Equity Financing Transactions to Amkor's stockholders for their
approval by written consent.
On behalf of the Board, I hereby request that you carefully review the
enclosed consent materials and provide your written consent to the Equity
Financing Transactions. Approval of this proposal includes approval of (i) the
issuance of up to approximately 4,512,560 shares of common stock upon conversion
of $258.75 million of our 5% convertible subordinated notes due 2007 sold by us
on March 22, 2000 in a private transaction, (ii) the sale of an aggregate of
20,500,000 shares of common stock, and warrants for 3,895,000 shares of common
stock, in a private transaction which we expect to complete in connection with
the Acquisition Transactions, and (iii) other equity financings, pursuant to
which the Company would issue common stock or securities convertible into common
stock which, when combined with the common stock to be issued in (i) and (ii)
above, would in an aggregate exceed 20% of the outstanding common stock of the
Company as of the record date for this written consent.
THE BOARD HAS APPROVED THE EQUITY FINANCING TRANSACTIONS. AFTER CAREFUL
CONSIDERATION, THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS CONSENT TO AND
APPROVE THE EQUITY FINANCING TRANSACTIONS. In addition, the holders of an
aggregate of approximately 30,053,921 shares of Amkor Common Stock, representing
approximately 22.9% of the outstanding Amkor Common Stock have entered into an
agreement pursuant to which such stockholders have agreed to vote in favor of
the Equity Financing Transactions. See "Certain Transactions -- Stock Ownership
of Certain Beneficial Owners and Management."
If you approve of the Equity Financing Transactions, please sign the
enclosed Action by Written Consent of Stockholders and return it to Kevin Heron
at Amkor either hand delivery, fax (610) 431-7189 or overnight courier to Amkor
Technology, Inc., 1345 Enterprise Drive, West Chester, Pennsylvania 19380, Attn:
Kevin Heron, Esq. as soon as possible, but in any event TO BE RECEIVED NO LATER
THAN 10:00 A.M. ON MONDAY, APRIL 17, 2000. Only stockholders of record at the
close of business on the record date set by the board of directors, April 12,
2000, are entitled to vote on the proposal.
If you have any questions on the Equity Financing Transactions or the
enclosed materials, please do not hesitate to call Mr. Heron at (610) 431-9600,
or Bruce McNamara, Esq. of Wilson Sonsini Goodrich & Rosati at (650) 493-9300.
Sincerely,
/s/ KENNETH T. JOYCE
--------------------------------------
Kenneth T. Joyce
Chief Financial Officer
<PAGE> 3
AMKOR TECHNOLOGY, INC.
NOTICE OF CONSENT SOLICITATION
This Notice of Consent Solicitation ("Consent Solicitation") is being
furnished to the stockholders ("Stockholders" or "you") of Amkor Technology,
Inc., a Delaware corporation ("Amkor" or the "Company") in connection with a
series of proposed equity financing transactions (the "Equity Financing
Transactions") related to (i) the Company's proposed acquisition (the
"Acquisition") by the Company of certain assets of Anam Semiconductor, Inc.
("ASI"), a Korean corporation headquartered at 280-8, 2-ga Sungsoo-dong,
Sungdong-gu, Seoul, the Republic of Korea, in accordance with the terms of the
Asset Purchase Agreement dated as of January 14, 2000 and as amended February
25, 2000 (the "Asset Purchase Agreement") by and between ASI and the Company's
wholly-owned subsidiary Amkor Technology Korea, Inc. ("Amkor Korea"), and (ii)
an investment in ASI.
You are requested to consent to the Equity Financing Transactions. Approval
of this proposal includes approval of (i) the issuance of up to approximately
4,512,560 shares of common stock upon conversion of $258.75 million of our 5%
convertible subordinated notes due 2007 sold by us on March 22, 2000 in a
private transaction, (ii) the sale of an aggregate of 20,500,000 shares of
common stock, and warrants for 3,895,000 shares of common stock, in a private
transaction which we expect to complete in connection with the Acquisition
Transactions, and (iii) other equity financings, pursuant to which the Company
would issue common stock or securities convertible into common stock which, when
combined with the common stock to be issued in (i) and (ii) above, would in an
aggregate exceed of 20% of the outstanding common stock of the Company as of the
record date for this written consent.
Pursuant to Section 228 of the Delaware General Corporation Law (the
"DGCL"), this Consent Solicitation is being distributed to Stockholders on or
about April 13, 2000 for their information in connection with the enclosed
Action by Written Consent of the Stockholders (the "Consent"), pursuant to which
the Stockholders are requested to consider and consent to the Equity Financing
Transactions. Stockholders of record at the close of business on April 12, 2000
are entitled, for each share held, to one vote on the proposal. At the record
date, 131,032,357 shares of our common stock were issued and outstanding. The
affirmative consent of a majority of these shares are required to approve the
Equity Financing Transactions.
You may revoke the enclosed Consent at any time before its use by
delivering to the Company a written notice of revocation or a duly executed
Consent bearing a later date. The Company shall bear the cost of this
solicitation. The Company may reimburse expenses incurred by brokerage firms and
other persons representing beneficial owners of shares in forwarding
solicitation material to beneficial owners. Certain of the Company's directors,
officers and regular employees, without additional compensation, may solicit
Consents personally or by telephone, telegram, letter or facsimile.
All information herein with respect to ASI has been furnished by ASI and
all information herein with respect to Amkor has been furnished by Amkor. No
person has been authorized to give any information or to give any representation
not contained in this Consent Solicitation in connection with the Acquisition
and, if given or made, such information or representation must not be relied
upon as having been authorized by ASI or Amkor. Summaries of documents contained
in this Consent Solicitation are qualified in their entirety by reference to
forms of such documents attached hereto as exhibits.
THE EQUITY FINANCING TRANSACTIONS INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS YOU SHOULD
CONSIDER CAREFULLY IN EVALUATING THE EQUITY FINANCING TRANSACTIONS.
THE AMKOR BOARD OF DIRECTORS (THE "BOARD") HAS APPROVED THE EQUITY
FINANCING TRANSACTIONS AND HAS UNANIMOUSLY DETERMINED THAT THEY ARE IN THE BEST
INTERESTS OF AMKOR AND THE STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, YOUR BOARD
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS CONSENT TO AND APPROVE THE EQUITY
FINANCING TRANSACTIONS. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
The date of this Consent Solicitation is April 13, 2000.
<PAGE> 4
AVAILABLE INFORMATION
Amkor is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, it files reports, Consent Solicitations and other
information with the Commission. Such reports, Consent Solicitations and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the SEC's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at Seven World Trade Center (13th Floor), New York, New York
10048. Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also makes
electronic filings publicly available on the Internet within 24 hours of
acceptance. The Commission's Internet address is http://www.sec.gov. The
Commission web site also contains reports, proxy and Consent Solicitations, and
other information regarding registrants that file electronically with the
Commission. Amkor Common Stock is quoted on The Nasdaq National Market, and the
reports, Consent Solicitations and other information referred to above can also
be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006. The exhibits required to be filed with the Commission as
part of the public reports referred to herein are available to the Stockholders
upon written request to Amkor Technology, Inc., Attn: Investor Relations, 1345
Enterprise Drive, West Chester, Pennsylvania 19380, telephone number (610)
431-9600.
THE DELIVERY OF THIS CONSENT SOLICITATION SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ASI OR AMKOR SINCE SUCH DATE.
DISSENTERS' RIGHTS
Dissenting stockholders have no rights of appraisal or other dissenting
rights with respect to the proposed Equity Financing Transactions.
OPPORTUNITY TO ASK QUESTIONS
You have the opportunity to ask questions and receive answers concerning
the terms and conditions of the Equity Financing Transactions and to obtain any
additional information which Amkor possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of information
furnished herein. In this regard, please contact Kevin Heron, Amkor Technology,
Inc., 1345 Enterprise Drive, West Chester, Pennsylvania 19380, telephone number
(610) 431-9600. For further information on the Equity Financing Transactions or
any of the attached related documents, please do not hesitate to contact Mr.
Heron.
ATTACHMENTS
The Written consent of Stockholders to approve the Equity Financing
Transactions is attached to this Consent Solicitation as Exhibit A.
FORWARD-LOOKING STATEMENTS
This Consent Solicitation contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
(the "Forward-Looking Statements"). Actual results could differ materially from
those projected in the Forward-Looking Statements as a result of the factors set
forth under "Risk Factors" and "Our Acquisition of ASI's Packaging and Test
Business and Investment in ASI" herein. In connection with the Forward-Looking
Statements, the Stockholders of Amkor should carefully review the factors set
forth in this Consent Solicitation under "Risk Factors," and "Our Acquisition of
ASI's Packaging and Test Business and Investment in ASI."
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<PAGE> 5
RISK FACTORS
You should carefully consider the risks described below and other
information contained in this consent solicitation. Additional risks and
uncertainties not presently known to us, or that we currently deem immaterial,
may also impair our business operations. We cannot assure you that any of the
events discussed in the risk factors below will not occur. If they do, our
business, financial condition or results of operations could be materially
adversely affected. In such case, the trading price of our securities could
decline.
This consent solicitation contains forward-looking statements made as of
the date of this consent solicitation regarding our expected performance that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere in this
consent solicitation.
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 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 CONSENT SOLICITATION, 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 Consent Solicitation, 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
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<PAGE> 6
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 Convertible Notes will have the right to require us to
redeem their Convertible Notes at a premium to their principal amount, plus
accrued interest and liquidated damages. See "Description of Convertible
Notes -- Repurchase at the Option of Holders if the Proposed Acquisition of K1,
K2 and K3 Does Not Close." If holders of a substantial amount of Convertible
Notes elect to have us redeem their Convertible Notes, our financial condition
could suffer.
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.
In October 1999, we purchased 10 million shares of ASI's voting stock at a
price of W5,000 per share for approximately $41.6 million. As a result of this
investment and the conversion of W98 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 common stock and
our proposed equity investment in ASI and ASI's creditor banks convert up to an
additional W150 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 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 "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.
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<PAGE> 7
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;
- 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 W844
to $1.00 as compared to W1,695 to $1.00 as of December 31, 1997, W1,195 to $1.00
as of December 31, 1998, W1,135 to $1.00 as of December 31, 1999 and W1,132 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
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<PAGE> 8
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 conveyance 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.
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<PAGE> 9
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 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.
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.
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<PAGE> 10
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 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.
See "Principal Stockholders" for additional information concerning
ownership of our common stock.
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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 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 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 W8,000 per share and the remaining
$350.0 million will be invested at W18,000 per share. As of February 28, 2000,
the closing price of ASI's common stock on the Korea Stock Exchange was W10,100
per share. As of March 16, 2000, the closing price of ASI's common stock on the
Korea Stock Exchange was W15,650. Our investment will fulfill our prior
obligation to invest $150.0 million in ASI. Based upon an exchange rate of
W1,135 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 W150 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.
PROPOSED FINANCING
We intend to finance the purchase of K1, K2 and K3 and the investment in
ASI with the proceeds of our offering of $258.75 million of convertible debt
(convertible into approximately 4,512,560 shares of common stock) which closed
on March 22, 2000, our proposed private placement of common stock, approximately
$750.0 million of new secured bank debt and cash on hand. For more information
on our convertible notes financing, please read "Description of Convertible
Notes."
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 20,500,000 shares
of 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
these investors. These warrants
9
<PAGE> 12
would expire four years after the date we issue them. For a more complete
description of our sale of common stock, including a description of ancillary
agreements that we would enter into with the common stock investors, see
"Proposed Private Placement of Common Stock."
We expect to borrow $750.0 million in term loans under a new $850.0 million
secured credit facility, consisting of $650 million of term loans and $100.0
million drawn under the $200.0 million revolving credit line included as part of
this 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 common 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 "Risk Factors -- Uncertainty Regarding Our Proposed Transactions with ASI."
If our proposed acquisition is not consummated in all material respects by
August 31, 2000, holders of our 5% Convertible Notes due 2007 will have the
right to require us to repurchase their Convertible Notes. See "Description of
Convertible Notes -- Repurchase at the Option of Holders if the Proposed
Acquisition of K1, K2 and K3 Does Not Close".
WHO IS ANAM SEMICONDUCTOR, INC.?
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. On a pro forma basis, after giving effect to our
acquisition of K4 and our proposed acquisition of K1, K2 and K3 as if they had
occurred on January 1, 1999, we would have derived 15% of our net revenues and
6% of our gross profit in 1999 from sales of services performed for us by ASI.
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
10
<PAGE> 13
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 W250 billion (approximately $208
million) of their ASI debt into (1) equity in the amount of W122.3
billion (approximately $102 million), (2) five-year non-interest bearing
convertible debt in the amount of W108.1 billion (approximately $90
million) and (3) non-interest bearing loans in the amount of W19.6
billion (approximately $16 million), provided that we made a $150.0
million equity investment in ASI.
In October 1999, the creditor banks converted W98 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 W50 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 W1,088 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 W150 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 concessions relating to its debt. Following the
conversion of ASI's debt
11
<PAGE> 14
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 common 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 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.
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.
12
<PAGE> 15
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA OF AMKOR
The unaudited pro forma consolidated balance sheet as of December 31, 1999
appearing below gives effect to the following proposed transactions as if they
had occurred on December 31, 1999:
- our proposed $410.0 million private placement of our common stock;
- our proposed incurrence of $750.0 million of new secured bank debt;
- our proposed acquisition of K1, K2 and K3 for $950.0 million;
- our proposed $459.0 million equity investment in ASI;
- ASI's use of the net proceeds from its proposed sale of K1, K2 and K3 and
our proposed investment, principally to repay outstanding debt; and
- the proposed conversion of W150 billion (approximately $132 million) of
ASI's debt to equity by ASI's creditor banks.
The unaudited pro forma consolidated income statement gives effect to the
above proposed and the following historical transactions for the year ended
December 31, 1999 appearing below as if they occurred on January 1, 1999:
- our sale of $258.75 million of 5% Convertible Subordinated Notes due 2007
and
- our acquisition of K4 in May 1999 for $582.0 million and our incurrence
of $625.0 million of long-term debt in connection with that acquisition;
- our W50 billion (approximately $41.6 million) equity investment in ASI in
October 1999;
- the conversion of W98 billion (approximately $82 million) of ASI's debt
into equity by ASI's creditor banks in October 1999; and
- ASI's use of the net proceeds from its sale of K4, principally to repay
outstanding debt.
The unaudited pro forma consolidated financial information appearing below
is not necessarily indicative of the results of operations and financial
condition that we would have achieved if the completed and proposed transactions
described above had actually been consummated on such dates, nor are they
necessarily indicative of the future results and financial condition we will
achieve if the proposed transactions are consummated. In addition, while we
expect that the proposed transactions described above will be consummated on the
terms described in this Consent Solicitation, these transactions may not be
consummated on those terms, or at all. Accordingly, our future results and
financial condition could vary significantly from the unaudited pro forma
consolidated financial information appearing below.
We have used the purchase method of accounting in accordance with APB
Opinion No. 16 "Business Combinations" to prepare the accompanying unaudited pro
forma consolidated financial information. Under this method of accounting, we
allocated (1) the $575.0 million aggregate purchase price of K4, plus $7.0
million of assumed employee benefit liabilities, and (2) the $950.0 million
aggregate purchase price of K1, K2 and K3, to specific assets acquired based on
their estimated fair values. The purchase price does not include $20.3 million
of transaction expenses incurred in connection with the acquisition of K4 or the
$30.9 million of estimated transaction fees and expenses expected to be incurred
in connection with our proposed acquisition of K1, K2 and K3 and related
financing. The balance of the purchase price of both K4 and K1, K2 and K3
represents the excess of cost over net assets acquired. We have estimated the
preliminary fair value of K1, K2 and K3 assets based primarily on our knowledge
of this business and on information furnished by ASI. We will determine the
final allocation of the purchase price after the consummation of the acquisition
of K1, K2 and K3 based upon the receipt of an appraisal. We will not complete
all of the work required to fully evaluate the assets acquired by the time of
the closing of the acquisitions. Accordingly, we may not finalize purchase
accounting adjustments for up to one year after the closing of our acquisition
of K1, K2 and K3.
13
<PAGE> 16
We have used the equity method of accounting in accordance with APB Opinion
No. 18 to prepare the accompanying unaudited pro forma financial information to
give effect to our investment in ASI. Under this method of accounting, our
investment in ASI is carried at cost plus or minus our equity in all increases
or decreases in the investee's net assets after the date of investment. Under
the equity method, net income and stockholders' equity of the investor should be
the same as if the investor fully consolidated the investee. Accordingly, we
have included in the unaudited pro forma consolidated income statement for the
year ended December 31, 1999 the equity in the loss of ASI, including
amortization of the excess of the cost of our investment over the underlying
equity in the net assets at the date of our investment.
We have prepared the unaudited pro forma consolidated financial information
in accordance with U.S. GAAP. These principles require us to make extensive use
of estimates and assumptions that affect: (1) the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and (2) the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
You should read the unaudited pro forma consolidated financial information
in conjunction with "Risk Factors -- Uncertainty Regarding Our Proposed
Transactions with ASI," "Our Acquisition of ASI's Packaging and Test Business
and Investment in ASI," our consolidated financial statements and the related
notes, the financial statements of K1, K2 and K3 and the related notes and the
financial statements of ASI and the related notes, included elsewhere in this
Consent Solicitation.
14
<PAGE> 17
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR
ACQUISITION
OF K1, K2
AND K3 AND PRO FORMA
K1, K2 OUR ADJUSTMENTS FOR
AMKOR AND K3 INVESTMENT RELATED PRO FORMA
HISTORICAL HISTORICAL IN ASI FINANCINGS AS ADJUSTED
---------- ---------- ----------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ 98,045 $ -- $ -- $ -- $ 98,045
Short-term investments.................. 136,595 -- -- (108,164)(a) 28,431
Accounts receivable:
Trade................................. 157,281 3,416 (3,416)(b) 71,500(e) 228,781
Due from affiliates................... 6,278 304,762 (304,762)(b) -- 6,278
Other................................. 6,469 3,653 (3,653)(b) -- 6,469
Inventories............................. 91,465 7,984 -- -- 99,449
Other current assets.................... 11,117 2,666 (2,666)(b) -- 11,117
---------- --------- --------- ---------- ----------
Total current assets........... 507,250 322,481 (314,497) (36,664) 478,570
---------- --------- --------- ---------- ----------
Property, plant and equipment, net...... 859,768 404,384 20,616(c) -- 1,284,768
---------- --------- --------- ---------- ----------
Investments............................. 63,672 -- 459,000(j) -- 522,672
---------- --------- --------- ---------- ----------
Other assets:
Due from affiliates................... 27,858 277 (277)(b) -- 27,858
Excess of cost over net assets
acquired............................ 233,532 -- 517,016(d) -- 750,548
Deferred income taxes................. -- 41,656 (41,656)(b) -- --
Other................................. 63,009 4,953 (4,953)(b) 30,928(f) 93,937
---------- --------- --------- ---------- ----------
Total other assets............. 324,399 46,886 470,130 30,928 872,343
---------- --------- --------- ---------- ----------
Total assets................... $1,755,089 $ 773,751 $ 635,249 $ (5,736) $3,158,353
========== ========= ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank overdraft.......................... $ 16,209 $ -- $ -- $ -- $ 16,209
Short-term borrowings and current
portion of long-term debt............. 6,465 -- -- (6,465)(k) --
Trade accounts payable.................. 122,147 51,360 (51,360)(b) -- 122,147
Due to affiliates....................... 37,913 14,788 (14,788)(b) -- 37,913
Accrued expenses........................ 88,577 13,845 (13,845)(b) -- 88,577
Accrued income taxes.................... 41,587 -- -- -- 41,587
---------- --------- --------- ---------- ----------
Total current liabilities...... 312,898 79,993 (79,993) (6,465) 306,433
Long-term debt.......................... 9,021 -- -- 750,000(g) 750,000
(9,021)(k)
Due to affiliates....................... -- 124,294 (124,294)(b) -- --
Senior and senior subordinated notes.... 625,000 -- -- -- 625,000
Convertible subordinated notes.......... 53,435 -- -- 258,750(h) 312,185
Other noncurrent liabilities............ 16,994 45,122 (45,122)(b) -- 16,994
---------- --------- --------- ---------- ----------
Total liabilities.............. 1,017,348 249,409 (249,409) 993,264 2,010,612
---------- --------- --------- ---------- ----------
Stockholders' equity:
Common stock.......................... 131 -- -- 21(i) 152
Warrants to purchase common stock..... -- -- -- 35,000(i) 35,000
Additional paid-in capital............ 551,964 -- -- 374,979(i) 926,943
Receivable from stockholders.......... (3,276) -- -- -- (3,276)
Retained earnings..................... 189,733 -- -- -- 189,733
Unrealized losses..................... (811) -- -- -- (811)
Net assets (liabilities).............. -- 524,342 (524,342)(b) -- --
---------- --------- --------- ---------- ----------
Total stockholders' equity..... 737,741 524,342 (524,342) 410,000 1,147,741
---------- --------- --------- ---------- ----------
Total liabilities and
stockholders' equity......... $1,755,089 $ 773,751 $(773,751) $1,403,264 $3,158,353
========== ========= ========= ========== ==========
</TABLE>
- ---------------
(a) Represents net cash to be used to acquire K1, K2 and K3, to make the
additional investment in ASI and to pay transaction fees and expenses.
(b) Represents the elimination of those assets and liabilities of K1, K2 and K3
that we will not acquire or assume as part of our proposed acquisition of
K1, K2 and K3.
15
<PAGE> 18
(c) Represents the excess of the fair value over the book value of the
property, plant and equipment acquired.
(d) Represents the excess of the purchase price for K1, K2 and K3 over the
estimated fair values of the net assets acquired.
(e) Represents the repurchase of accounts receivable to retire our accounts
receivable sales agreement.
(f) Represents transaction fees and expenses, which have been recorded as
deferred financing costs and will be amortized over the debt's term.
(g) Represents the financing of the transactions with $750.0 million of new
secured bank debt.
(h) Represents the issuance of $258.75 million of Convertible Notes.
(i) Represents the issuance of 20,500,000 shares of common stock we intend to
issue in a private equity offering and the fair value of the related
warrants to purchase 3,895,000 shares of common stock at $27.50 per share.
(j) Represents our additional $459.0 million investment in ASI.
(k) Represents the paydown of existing debt.
16
<PAGE> 19
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR
ACQUISITION
PRO FORMA OF K1, K2
ADJUSTMENT AND K3
FOR K1, K2 AND OUR PRO FORMA
AMKOR K4 ACQUISITION AND K3 INVESTMENT ADJUSTMENTS FOR PRO FORMA
HISTORICAL HISTORICAL OF K4 HISTORICAL IN ASI RELATED FINANCINGS AS ADJUSTED
---------- ---------- ------------ ---------- ----------- ------------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. $1,909,972 $ 42,582 $(39,353)(a) $435,659 $(407,751)(a) $ -- $1,941,109
Cost of
revenues -- including
purchases from ASI....... 1,577,226 30,725 (39,353)(a) 289,233 (407,751)(a) -- 1,472,235
10,751(b) 51,881(b) --
(4,792)(c) (35,685)(c) --
---------- -------- -------- -------- --------- -------- ----------
Gross profit........... 332,746 11,857 (5,959) 146,426 (16,196) -- 468,874
---------- -------- -------- -------- --------- -------- ----------
Operating expenses:
Selling, general and
administrative......... 145,233 2,344 -- 16,120 -- -- 163,697
Research and
development............ 11,436 536 -- 3,383 -- -- 15,355
---------- -------- -------- -------- --------- -------- ----------
Total operating
expenses........... 156,669 2,880 -- 19,503 -- -- 179,052
---------- -------- -------- -------- --------- -------- ----------
Operating income....... 176,077 8,977 (5,959) 126,923 (16,196) -- 289,822
---------- -------- -------- -------- --------- -------- ----------
Other (income) expense:
Interest expense, net.... 45,364 24,492 (1,319)(d) (19,091) 19,091(d) 85,810(g) 159,939
-- -- -- -- -- 1,733(h) --
5,408(h) --
(1,549)(h) --
Foreign currency (gain)
loss................... 308 (16,665) 16,665(d) (582) 582(d) -- 308
Other (income) expense,
net.................... 25,117 113 -- 1,449 -- (4,280)(i) 22,399
---------- -------- -------- -------- --------- -------- ----------
Total other (income)
expense............ 70,789 7,940 15,346 (18,224) 19,673 87,122 182,646
---------- -------- -------- -------- --------- -------- ----------
Income (loss) before
income taxes and
equity in loss of
investees............ 105,288 1,037 (21,305) 145,147 (35,869) (87,122) 107,176
Provision for (benefit
from) income taxes....... 26,600 -- (5,937)(e) 46,376 (46,376)(f) (1,125) 19,538
Equity in loss of
investees................ (1,969) -- -- -- (69,971)(j) -- (71,940)
---------- -------- -------- -------- --------- -------- ----------
Net income............. $ 76,719 $ 1,037 $(15,368) $ 98,771 $ (59,464) $(85,997) $ 15,698
========== ======== ======== ======== ========= ======== ==========
Basic net income per
common share............. $ .64 $ .11
========== ==========
Diluted net income per
common share............. $ .63 $ .11
========== ==========
Shares used in computing
basic net income per
common share(k).......... 119,341 139,841
Shares used in computing
diluted net income per
common share(k).......... 135,067 141,339
</TABLE>
- ---------------
(a) We have eliminated the processing charges that we have paid to ASI for
services performed for us at the K4 and the K1, K2 and K3 facilities under
our supply agreements. Because we currently sell substantially all of K4's
and K1, K2 and K3's services, the net revenue from the sale of these
services to our customers is already reflected in our historical net
revenues.
(b) Represents the amortization of goodwill related to our acquisition of K4 and
our proposed acquisition of K1, K2 and K3, assuming a ten-year life.
(c) Represents change in depreciation expense based on adjusted book values of
acquired property, plant and equipment of K4 and of K1, K2 and K3.
(d) Represents the elimination of interest expense and foreign currency losses
related to the debt of K4 and of K1, K2 and K3 which we have not assumed as
part of the acquisition of K4 and will not assume as part of our acquisition
of K1, K2 and K3. As it relates to the acquisition of K4, interest expense,
net includes (1) interest expense of $22.2 million on $625.0 million of
senior and senior subordinated notes at an assumed weighted average interest
rate of 9.65%, (2) $1.0 million of amortization of debt issuance costs,
which are amortized over the life of the respective debt, and (3) net of
$24.5 million of the K4 interest eliminated.
(e) Represents an income tax benefit due to the pro forma adjustments for
interest expense.
(f) Represents the elimination of income tax expenses at K1, K2 and K3 due to
the fact that profits of K1, K2 and K3 will be subject to a tax holiday in
Korea.
17
<PAGE> 20
(g) Represents (1) interest expense on $750.0 million of new secured bank debt
and on $258.75 million of Convertible Notes at an assumed weighted average
interest rate of 8.17% and (2) $6 million of amortization of debt issuance
costs, which are amortized over the life of the respective debt.
(h) Represents interest on funds used to finance our $41.6 million investment in
ASI made in October 1999 and cash used to repurchase accounts receivable of
$71.5 million and to fund transaction costs and expenses net of interest
savings as a result of the pay down of $15.5 million of our existing debt.
(i) Represents fees paid by us under our accounts receivable sale agreement.
(j) Represents our equity in the loss of ASI, including $51.5 million of
amortization of the difference between the cost of our investment over the
underlying equity in net assets of ASI, assuming that the investment
occurred on January 1, 1999.
(k) Shares used in computing basic pro forma as adjusted net income per common
share for the year ended December 31, 1999 give effect to the issuance of
20,500,000 shares of common stock we intend to issue in a private equity
offering. Shares used in computing the diluted pro forma as adjusted net
income per common share for the year ended December 31, 1999 give effect to
the issuance of 20,500,000 shares of common stock we intend to issue in a
private equity offering and the exercise of outstanding stock options. On a
pro forma as adjusted basis, the conversion of convertible subordinated
notes is not dilutive.
18
<PAGE> 21
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
Consent Solicitation. 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 Consent Solicitation. 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 Consent Solicitation.
<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 interests(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>
19
<PAGE> 22
<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
Ratio of earnings to fixed charges(e)..................... 4.6x 2.4x 2.5x 4.4x 2.6x
</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.
(e) We have calculated the ratio of earnings to fixed charges by dividing (1)
the sum of (x) income (loss) before income taxes, equity in income (loss) of
investees and minority interest plus (y) fixed charges by (2) fixed charges.
Fixed charges consist of interest expense plus one-third of rental expense.
We believe that one-third of rental expense is representative of the
interest factor of rental payments under our operating leases.
20
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA OF K1, K2 AND K3
The following table sets forth selected historical income statement and
other financial data of K1, K2 and K3 determined in accordance with U.S. GAAP.
We have derived the selected financial data of K1, K2 and K3 presented below for
each of the years in the three-year period ended December 31, 1999 and as of the
end of each of the years in the three-year period ended December 31, 1999, from
the financial statements of K1, K2 and K3. Samil Accounting Corporation,
independent public accountants, has audited the financial statements as of
December 31, 1997, 1998 and 1999 and for each of the years in the three-year
period ended December 31, 1999. Their report on the financial statements as of
December 31, 1998 and 1999 and for each of the years in the three year period
ended December 31, 1999, together with such audited financial statements and the
related notes, are included elsewhere in this Consent Solicitation under the
title "Seongsu, Pucheon and Pupyong Packaging Business of Anam Semiconductor,
Inc."
You should read the following table in conjunction with the financial
statements of K1, K2 and K3 and the related notes, included elsewhere in this
Consent Solicitation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues(a)........................................... $ 599,575 $409,929 $435,659
Cost of revenues.......................................... 408,435 283,995 289,233
--------- -------- --------
Gross profit.............................................. 191,140 125,934 146,426
--------- -------- --------
Operating expenses:
Selling, general and administrative..................... 45,850 34,567 16,120
Research and development................................ 1,894 1,267 3,383
--------- -------- --------
Total operating expenses........................ 47,744 35,834 19,503
--------- -------- --------
Operating income.......................................... 143,396 90,100 126,923
--------- -------- --------
Other (income) expense:
Interest expense (income), net(b)....................... 5,508 15,882 (19,091)
Foreign currency (gain) loss(c)......................... 70,470 (2,396) (582)
Other (income) expense, net............................. (4,987) (7,541) 1,449
--------- -------- --------
Total other (income) expense.................... 70,991 5,945 (18,224)
--------- -------- --------
Income before income taxes................................ 72,405 84,155 145,147
Provision for (benefit from) income taxes................. (50,452) 30,289 46,376
--------- -------- --------
Net income................................................ $ 122,857 $ 53,866 $ 98,771
========= ======== ========
OTHER FINANCIAL DATA:
Depreciation and amortization............................. $ 116,534 $137,181 $133,452
Capital expenditures...................................... 145,642 24,345 39,281
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1998 1999
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $(151,903) $ 6,485 $242,488
Total assets.............................................. 830,633 661,471 773,751
Long-term debt............................................ 181,214 160,032 124,294
Total debt, including short-term borrowings and current
maturities of long-term debt............................ 341,203 197,285 139,082
Net assets................................................ 317,698 365,325 524,342
</TABLE>
21
<PAGE> 24
- ---------------
(a) Substantially all of K1, K2 and K3's net revenues represent processing
charges that we have paid to K1, K2 and K3 for services performed under our
supply agreements. Because we currently sell substantially all of K1, K2
and K3's services, the net revenues from the sale of K1, K2 and K3 services
to our customers are already reflected in our historical net revenues.
(b) Represents interest expense (income), net on debt of ASI attributable to
K1, K2 and K3's business, based on assumptions deemed reasonable by ASI's
management.
(c) The foreign currency gain in 1997 and foreign currency loss in 1998 are
primarily attributable to the effects of fluctuations in the Korean won
relative to the U.S. dollar on Korean won denominated debt and on foreign
currency forward contracts.
22
<PAGE> 25
SELECTED HISTORICAL FINANCIAL DATA OF ASI
The following table sets forth the selected historical consolidated
financial data of ASI determined in accordance with U.S. GAAP. We have derived
the selected financial data of ASI presented below for each of the years in the
three-year period ended December 31, 1999 and as of the end of each of the years
in the three-year period ended December 31, 1999, from the consolidated
financial statements of ASI. Samil Accounting Corporation, independent public
accountants, has audited the consolidated financial statements of ASI as of
December 31, 1997, 1998 and 1999 and for each of the years in the three-year
period ended December 31, 1999. Their report on 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, together with such audited
consolidated financial statements and the related notes, are included elsewhere
in this Consent Solicitation.
The selected income statement data of ASI appearing below, as well as ASI's
consolidated income statements included in this Consent Solicitation, present
the packaging and test business of ASI on a discontinued operations basis to
reflect the sale of K4 and the proposed sale of K1, K2 and K3 to our company.
You should read the following table in conjunction with the consolidated
financial statements of ASI and the related notes, included elsewhere in this
Consent Solicitation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues(a)...................................... $ 406,937 $ 221,098 $ 285,925
Cost of revenues(b).................................. 314,666 230,478 239,632
---------- ---------- ----------
Gross profit (loss).................................. 92,271 (9,380) 46,293
---------- ---------- ----------
Operating expenses:
Selling, general and administrative................ 84,564 27,328 25,168
Impairment of long-lived assets(c)................. 15,942 273,937 --
Research and development........................... -- 2,064 87
---------- ---------- ----------
Total operating expenses................... 100,506 303,329 25,255
---------- ---------- ----------
Operating income (loss).............................. (8,235) (312,709) 21,038
---------- ---------- ----------
Other (income) expense:
Interest expense, net.............................. 123,781 207,084 179,413
Foreign currency (gain) loss(d).................... (159,897) 142,605 33,198
Impairment loss on loans to affiliates(e).......... -- 122,188 22,646
Guarantee obligation loss(f)....................... -- 97,344 --
Loss on valuation of inventories................... 543 15,140 2,041
Loss (gain) from disposal of investments........... (4,972) (23,082) 601
Other (income) expense, net........................ 4,598 12,808 (24,889)
---------- ---------- ----------
Total other (income) expense............... (35,947) 574,087 213,010
---------- ---------- ----------
Income (loss) from continuing operations before
income taxes, equity in loss of affiliates and
minority interest.................................. 27,712 (886,796) (191,972)
Equity in loss of unconsolidated affiliates.......... (18,137) (66,792) (31,787)
Minority Interest.................................... (1,720) (2,035) --
---------- ---------- ----------
Income (loss) from continuing operations before
income taxes....................................... 7,855 (955,623) (223,759)
Provision (benefit) for income taxes................. 109,894 1,542 (54,000)
---------- ---------- ----------
Income (loss) from continuing operations............. (102,039) (957,165) (169,759)
Discontinued Operations:
Income from discontinued packaging and test
operations (net of income taxes of $0, $0,
$12,408)(g)..................................... 143,469 109,632 130,064
Gain on sale of K4 (net of income taxes of $0, $0,
$14,268)........................................ -- -- 149,560
---------- ---------- ----------
Net income (loss).................................... $ 41,430 $ (847,533) $ 109,865
========== ========== ==========
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................ $ (984,190) $ (221,798) $ 10,081
Total assets......................................... 2,922,114 1,878,950 1,487,469
Long-term debt....................................... 1,096,398 1,892,428 1,304,765
Total debt, including short-term borrowings and
current maturities of long-term debt............... 2,336,674 2,134,494 1,447,975
Net assets (liabilities)............................. 248,795 (615,806) (297,750)
</TABLE>
- ---------------
(a) In 1997, ASI's revenues included approximately $232.6 million from
construction services related to Anam Engineering and Construction Co.,
Ltd. ("Anam Construction"). Anam Construction became insolvent in 1998 and
filed for corporate reorganization. Consequently, ASI deconsolidated Anam
Construction starting in 1998. Revenues related to CMOS wafers manufactured
by ASI were $97.1 million in 1998 and $264.2 million in 1999. Remaining
revenues in 1998 related principally to Anam Instruments Co., Ltd., which
was accounted for using the equity method in 1999 as a result of a decrease
in ASI's ownership percentage.
(b) In January 1998, ASI commenced commercial operations in its wafer
fabrication facility and ramped up operations during that year. As a result,
ASI was not able to fully absorb its fixed manufacturing costs and realized
a $38.9 million loss at the gross profit line.
(c) ASI recognized an impairment loss of $273.9 million related to the wafer
fabrication facility in 1998.
(d) The foreign currency gain in 1997 and loss in 1998 are primarily
attributable to the effects of fluctuations in the Korean won relative to
the U.S. dollar on Korean won denominated debt and on foreign currency
forward contracts.
(e) In 1998 ASI determined that several affiliated companies facing financial
difficulties would not be able to satisfy their obligations to ASI and an
impairment loss was recognized in the amount of $122.2 million and $22.6
million in 1998 and 1999, respectively.
(f) In 1998 ASI recognized a loss related to guarantees provided to affiliated
companies in the amount of $97.3 million.
(g) Represents income from discontinued packaging and test operations (K4 and
K1, K2 and K3).
24
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA OF ASI
The unaudited pro forma consolidated balance sheet of ASI as of December
31, 1999 appearing below gives effect to the following proposed transactions as
if they had occurred on December 31, 1999:
- ASI's proposed sale of K1, K2 and K3 for $950.0 million;
- our proposed $459.0 million equity investment in ASI;
- ASI's use of the net proceeds from its proposed sale of K1, K2 and K3 and
our proposed investment, principally to repay outstanding debt; and
- the proposed conversion of W150 billion (approximately $132 million at
the exchange rate in effect as of December 31, 1999) of ASI's debt to
equity by ASI's creditor banks.
The unaudited pro forma consolidated income statement of ASI for the year
ended December 31, 1999 appearing below gives effect to the above proposed and
the following historical transactions as if they had occurred on January 1, 1999
using the exchange rate as of that date:
- ASI's sale of K4 to our company in May 1999 for $582.0 million;
- our W50 billion (approximately $41.6 million) equity investment in ASI in
October 1999;
- the conversion of W98 billion (approximately $82 million) of ASI's debt
into equity by ASI's creditor banks in October 1999; and
- ASI's use of the net proceeds from its sale of K4, principally to repay
outstanding debt.
The unaudited pro forma consolidated financial information of ASI appearing
below is not necessarily indicative of the results of operations and financial
condition that ASI would have achieved if the completed and proposed
transactions described above had actually been consummated on such dates, nor
are they necessarily indicative of the future results and financial condition
ASI will achieve if the proposed transactions are consummated. In addition,
while ASI expects that the proposed transactions described above will be
consummated on the terms described in this Consent Solicitation, these
transactions may not be consummated on those terms, or at all. Accordingly,
ASI's future results and financial condition could vary significantly from the
unaudited pro forma consolidated financial information appearing below.
The unaudited pro forma consolidated financial information of ASI appearing
below is based on financial statements prepared in accordance with U.S. GAAP.
These principles require the extensive use of estimates and assumptions that
affect: (1) the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and (2) the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
You should read the unaudited pro forma consolidated financial information
of ASI in conjunction with "Risk Factors -- Uncertainty Regarding Our Proposed
Transactions with ASI," "Our Acquisition of ASI's Packaging and Test Business
and Investment in ASI," ASI's consolidated financial statements and the related
notes and the financial statements of K1, K2 and K3 and the related notes,
included elsewhere in this Consent Solicitation.
25
<PAGE> 28
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF ASI
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASI PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
----------- ----------- ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................................ $ 285,925 $ $ 285,925
Cost of sales.................................... 239,632 239,632
----------- ----------- ------------
Gross profit..................................... 46,293 -- 46,293
----------- ----------- ------------
Operating expenses
Research and development....................... 87 87
Provision for doubtful accounts................ 901 901
Selling and administrative expenses............ 24,267 24,267
----------- ----------- ------------
Total operating expenses............... 25,255 -- 25,255
----------- ----------- ------------
Operating income................................. 21,038 -- 21,038
----------- ----------- ------------
Other (income) expense
Interest income................................ (5,902) (5,902)
Interest expense............................... 185,315 (150,657)(a) 34,658
Foreign currency (gains) loss.................. 33,198 (25,972)(b) 7,226
Loss (gain) from disposal of investments....... 601 601
Loss on valuation of inventories............... 2,041 2,041
Impairment loss on loans to affiliates......... 22,646 22,646
Other, net..................................... (24,889) (24,889)
----------- ----------- ------------
Total other (income) expense........... 213,010 (176,629) 36,381
----------- ----------- ------------
Income (loss) from continuing operations before
income taxes, equity in loss of affiliates..... (191,972) 176,629 (15,343)
Equity in loss of unconsolidated affiliates...... 31,787 -- 31,787
----------- ----------- ------------
Income (loss) from continuing operations before
income taxes................................... (223,759) 176,629 (47,130)
Provision (benefit) for income taxes............. (54,000) 54,402(c) 402
----------- ----------- ------------
Income (loss) from continuing operations......... $ (169,759) $ 122,227 $ (47,532)
=========== =========== ============
PER SHARE DATA:
Basic income (loss) from continuing operations
per common share............................ $ (5.82) $ (0.43)
=========== =========== ============
Diluted income (loss) from continuing operation
per common share............................ $ (5.82) $ (0.43)
=========== =========== ============
Shares used in computing basic net income
(loss) per common share..................... 29,208,739 81,007,520(d) 110,216,259
=========== =========== ============
Shares used in computing diluted net income
(loss) per common share..................... 32,444,636 81,007,520(d) 113,452,206
=========== =========== ============
</TABLE>
- ---------------
(a) Represents the elimination of interest expense related to debt which was
assumed to be paid off and the conversion of debt to equity as follows:
<TABLE>
<S> <C>
Conversion of debt to equity in October 1999.............. $ 82,200
Net cash proceeds from sale of K4 used for debt payment in
May 1999............................................... 520,100
Proposed conversion of debt to equity by ASI's creditor
banks.................................................. 125,400
Portion of proposed equity investment by Amkor to be used
to repay debt.......................................... 309,000
Net cash proceeds from the proposed sale of K1, K2 and K3
available for debt payment............................. 650,000
----------
Total debt assumed to be paid on January 1,
1999............................................. $1,686,700
==========
</TABLE>
(b) Represents the elimination of foreign currency (gain) loss related to won
currency debt which is assumed to be paid off.
26
<PAGE> 29
(c) Represents income tax expense due to the pro forma adjustments.
(d) Represents adjustments for the number of common shares as follows:
<TABLE>
<S> <C>
Proposed equity investment by Amkor......................... 37,708,974
Proposed debt to equity conversion by creditor banks........ 18,750,000
Increase in the number of shares related to Amkor's equity
investment in October 1999................................ 8,273,973
Increase in the number of shares related to debt to equity
conversion in October 1999................................ 16,274,573
----------
Total number of shares adjusted................... 81,007,520
==========
</TABLE>
27
<PAGE> 30
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF ASI
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASI PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets:
Cash and cash equivalents......................... $ 56,469 $ 184,900(a) $ 241,369
Restricted cash................................... 41,086 (2,881)(b) 38,205
Bank deposits..................................... 105,414 105,414
Accounts and notes receivable
Trade, net of allowance for doubtful
accounts..................................... 3,416 3,416
Due from affiliates, net of allowance for
doubtful accounts............................ 29,377 29,377
Other.......................................... 22,797 22,797
Short-term loans to affiliates, net............... 4,464 4,464
Inventories....................................... 41,949 (7,984)(b) 33,965
Other current assets.............................. 6,894 6,894
---------- ----------- ----------
Total current assets...................... 311,866 174,035 485,901
Non-current bank deposits........................... 204 204
Restricted cash..................................... 73 73
Investments
Available for sale................................ 28,128 28,128
Affiliated companies.............................. 18,550 18,550
Long-term receivables
Due from affiliate................................ 250 250
Others............................................ 2,906 2,906
Property, plant and equipment, less accumulated
depreciation...................................... 1,037,935 (398,932)(b) 639,003
Deferred tax asset-noncurrent....................... 53,212 53,212
Other assets........................................ 34,345 (5,690)(b) 28,655
---------- ----------- ----------
Total assets.............................. $1,487,469 $ (230,587) $1,256,882
========== =========== ==========
Current liabilities:
Short-term borrowings............................. $ 69,328 $ $ 69,328
Current portion of long-term debt................. 73,882 (73,882)(d) --
Trade accounts and notes payable.................. 48,902 48,902
Other accounts payable............................ 77,141 77,141
Accrued expenses.................................. 3,850 3,850
Forward contract liability........................ 15,364 15,364
Other current liabilities......................... 13,318 13,318
---------- ----------- ----------
Total current liabilities................. 301,785 (73,882) 227,903
Long-term debt, net of current portion and discounts
on debentures..................................... 875,175 (606,911)(d) 268,264
Long-term obligations under capital leases, net of
current portion................................... 429,590 (410,207)(d) 19,383
Accrued severance benefits, net..................... 48,757 (45,100)(c) 3,657
Liability for loss contingency...................... 129,912 (117,000)(e) 12,912
Other long-term liabilities......................... -- --
---------- ----------- ----------
Total liabilities......................... 1,785,219 (1,253,100) 532,119
---------- ----------- ----------
Total stockholders' equity................ (297,750) 1,022,513(f) 724,763
---------- ----------- ----------
Total liabilities and stockholders'
equity.................................. $1,487,469 $ (230,587) $1,256,882
========== =========== ==========
</TABLE>
28
<PAGE> 31
- ---------------
(a) Represents the amount to be used for purposes other than the repayment of
debt (see note (d) below).
(b) Represents the assets of K1, K2 and K3 to be sold.
(c) Represents severance benefits to be paid upon sale of K1, K2 and K3.
(d) Represents payment of debt and the proposed conversion of debt to equity as
follows:
<TABLE>
<S> <C>
Proposed conversion of debt to equity by ASI's creditor
banks..................................................... $ 132,000
Portion of proposed equity investment by Amkor to be used to
repay debt................................................ 309,000
Net cash proceeds from the proposed sale of K1, K2 and K3
available for debt payment................................ 650,000(*)
----------
Total debt assumed to be paid on December 31,
1999............................................ $1,091,000
==========
</TABLE>
<TABLE>
<S> <C> <C>
(*) Proposed sale price..................................... $ 950,000
Less:
- Related taxes....................................... (103,000)
- Severance payment................................... (45,100)
- Payment for guarantee obligation (see (e) below).... (117,000)
- Other operational needs............................. (34,900)
---------
$ 650,000
=========
</TABLE>
(e) Represents the amount to be used for the payment to eliminate guarantee
obligations provided for Anam Construction and Anam Electronics Co., Ltd.
(f) Represents the proposed conversion of approximately $132 million of ASI's
debt to equity by ASI's creditor banks, our proposed $459.0 million equity
investment in ASI and a remainder, which is principally comprised of gain
on the proposed sale of K1, K2 and K3, net of related tax expense.
29
<PAGE> 32
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) future won/dollar
exchange rates, (6) our proposed acquisition of K1, K2 and K3 and our proposed
investment in ASI, including the financing of these transactions, (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." 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 Consent Solicitation.
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.
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 of ASI's fixed costs. If
we complete our proposed acquisition of
30
<PAGE> 33
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 W150 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 -- Relationship with ASI," "Risk Factors -- Potential Conflicts of
Interest with ASI," "Our Acquisition of ASI's Packaging and Test Business and
Investment in ASI" and "-- Liquidity and Capital Resources."
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, general and
administrative expenses
31
<PAGE> 34
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
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.
32
<PAGE> 35
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% 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.
33
<PAGE> 36
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
34
<PAGE> 37
U.S. dollar is our functional 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 Consent Solicitation.
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.
35
<PAGE> 38
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.
<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
entitled "Relationship with ASI," "Absence of Backlog," "Risks Associated with
Our Wafer Fabrication Business," and "Protection of Intellectual Property."
36
<PAGE> 39
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
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 our sale of $258.75 million of 5% Convertible Subordinated Notes due
2007, 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 "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.
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<PAGE> 40
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 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
38
<PAGE> 41
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 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 Consent Solicitation, 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 Consent Solicitation,
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.
39
<PAGE> 42
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-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 our 5% Convertible Notes due 2007. 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 INTEREST
DEBT 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, and our 5% Convertible Notes due 2007 are convertible
into common stock at $57.34 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.
40
<PAGE> 43
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our outstanding common stock as of February 29, 2000 by:
- each person or entity who is known by us to beneficially own 5% or more
of our outstanding common stock;
- each of our directors; and
- all of our executive officers.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(A)
------------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OWNERSHIP
---------------- ---------- ----------
<S> <C> <C>
James J. and Agnes C. Kim(b)(c)............................. 30,053,921 22.9
1345 Enterprise Drive
West Chester, PA 19380
David D. Kim Trust of December 31, 1987(c)(d)............... 14,457,344 11.0
1500 E. Lancaster Avenue
Paoli, PA 19301
John T. Kim Trust of December 31, 1987(c)(d)................ 14,457,344 11.0
1500 E. Lancaster Avenue
Paoli, PA 19301
Susan Y. Kim Trust of December 31, 1987(c)(d)(e)............ 14,457,344 11.0
1500 E. Lancaster Avenue
Paoli, PA 19301
J. & W. Seligman & Co. Incorporated(f)...................... 10,848,800 8.3
100 Park Avenue
New York, New York 10017
Capital Group International, Inc.(g)........................ 7,370,400 5.6
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Winston J. Churchill(h)..................................... 15,000 *
Thomas D. George(h)......................................... 15,000 *
Gregory K. Hinckley(h)...................................... 6,000 *
John B. Neff(h)............................................. 65,000 *
John N. Boruch(i)........................................... 203,985 *
Eric R. Larson(j)........................................... 49,609 *
Kenneth T. Joyce(k)......................................... 8,237 *
Michael D. O'Brien(l)....................................... 81,444 *
All directors and executive officers as a group (9
persons)(m)............................................... 30,498,196 23.2
</TABLE>
- ---------------
* Represents less than 1%.
(a) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. The information is not necessarily indicative of beneficial
ownership for any other purpose. Under this rule, beneficial ownership
includes any share over which the individual or entity has voting power or
investment power. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of our common
stock subject to options held by that person that will be exercisable on or
before April 29, 2000 are deemed outstanding. Unless otherwise indicated,
each person or entity has sole voting and investment power with respect to
shares shown as beneficially owned.
(b) James J. and Agnes C. Kim are husband and wife. Accordingly, each
beneficially owns shares of our common stock held in the name of the other.
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<PAGE> 44
(c) David D. Kim, John T. Kim and Susan Y. Kim are children of James J. and
Agnes C. Kim. Each of the David D. Kim Trust of December 31, 1987, John T.
Kim Trust of December 31, 1987 and Susan Y. Kim Trust of December 31, 1987
has in common Susan Y. Kim and John F.A. Earley as co-trustees, in addition
to a third trustee (John T. Kim in the case of the Susan Y. Kim Trust and
the John T. Kim Trust, and David D. Kim in the case of the David D. Kim
Trust) (the trustees of each trust may be deemed to be the beneficial
owners of the shares held by such trust). In addition, the trust agreement
for each of these trusts encourages the trustees of the trusts to vote the
shares of common stock held by them, in their discretion, in concert with
James Kim's family. Accordingly, the trusts, together with their respective
trustees and James J. and Agnes C. Kim, may be considered a "group" under
Section 13(d) of the Exchange Act. This group may be deemed to have
beneficial ownership of 73,425,953 shares or 56.1% of the outstanding
shares of our common stock.
(d) These three trusts together with the trusts described in note (e) below
comprise the Kim Family Trusts.
(e) Includes 8,200,000 shares held by the Trust of Susan Y. Kim dated April 16,
1998 established for the benefit of Susan Y. Kim's two children.
(f) J. & W. Seligman & Co. Incorporated ("JWS") reported in a Schedule 13G
filed with the Commission on February 10, 2000 that it beneficially owned
these shares as of December 31, 1999. JWS also reported that William C.
Morris, as the owner of a majority of the outstanding voting securities of
JWS, may be deemed to beneficially own the shares beneficially owned by
JWS. JWS is the investment adviser for Seligman Communications and
Information Fund, Inc. (the "Fund"). Of the 10,848,800 shares that JWS
beneficially owns, the Fund beneficially owns 9,050,000 shares.
(g) Capital Group International, Inc. reported in a Schedule 13G filed with the
Commission on February 14, 2000 that it beneficially owned these shares as
of December 31, 1999.
(h) Includes 5,000 shares issuable upon the exercise of stock options that are
exercisable on or before April 29, 2000.
(i) Includes 189,914 shares issuable upon the exercise of stock options that
are exercisable on or before April 29, 2000.
(j) Includes 39,374 shares issuable upon the exercise of stock options that are
exercisable on or before April 29, 2000.
(k) Includes 6,562 shares issuable upon the exercise of stock options that are
exercisable on or before April 29, 2000.
(l) Includes 48,444 shares issuable upon the exercise of stock options that are
exercisable on or before April 29, 2000 and 33,000 shares held jointly with
Mr. O'Brien's wife.
(m) Includes 304,294 shares issuable upon the exercise of stock options that
are exercisable on or before April 29, 2000.
42
<PAGE> 45
DESCRIPTION OF CONVERTIBLE NOTES
SUMMARY
Securities................. $258.75 million aggregate principal amount of
Convertible Notes.
Maturity................... The Convertible Notes will mature on March 15, 2007
unless earlier redeemed or converted.
Payment of Interest........ Interest on the Convertible Notes at the rate of 5%
per annum is payable semi-annually on September 15
and March 15 of each year, commencing September 15,
2000.
Conversion Rights.......... The Convertible Notes are convertible into our
common stock at the option of the holder at any
time on or before the close of business on the last
trading day prior to maturity, unless previously
redeemed, at a conversion price of $57.34 per
share, subject to adjustment in certain events. See
"-- Conversion."
Provisional Redemption by
the Company................ After September 20, 2001 and prior to March 20,
2003, the Convertible Notes may be redeemed at our
option, in whole or in part, at any time or from
time to time, at a redemption price equal to
103.571% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages,
if any, to the date of redemption if the closing
price of our common stock shall have equaled or
exceeded 150% of the conversion price then in
effect for at least 20 out of 30 consecutive days
on which the Nasdaq National Market is open for the
transaction of business prior to the date of
mailing the notice of provisional redemption. Upon
any provisional redemption, we will be obligated to
make an additional payment 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 Notes from the provisional redemption
date to, but excluding, March 20, 2003. The present
value will be calculated 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 the date on
which a notice of provisional redemption is mailed.
See "-- Provisional Redemption by the Company."
Redemption at the Option of
the Company................ On or after March 20, 2003, we may, upon at least
15 days' notice, redeem the Convertible Notes at
the redemption prices set forth herein, together
with accrued and unpaid interest and liquidated
damages, if any, thereon. See "-- Optional
Redemption."
Repurchase at the Option of
Holders if the Proposed
Acquisition of K1, K2 and
K3 Does Not Close........ If the 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 will have the
right to require us to redeem their Convertible
Notes, in whole, but not in part, at a purchase
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the special
redemption date.
43
<PAGE> 46
See "-- Repurchase at the Option of Holders if the
Proposed Acquisition of K1, K2 and K3 Does Not
Close."
In the event that at any time after the special
redemption date, less than 10% of the aggregate
principal amount of the Convertible Notes remain
outstanding, we may, at our option, redeem the
remaining Convertible Notes, in whole, but not in
part, at a price equal to the special redemption
price, plus accrued and unpaid interest and
liquidated damages, if any, to the date fixed for
their redemption by us, such date to be a date no
later than 30 days following the special redemption
date.
Repurchase Upon Designated
Event.................... The Convertible Notes are required to be
repurchased at 101% of their principal amount
together with accrued and unpaid interest and
liquidated damages, if any, thereon, at the option
of the holder, upon the occurrence of a designated
event (i.e., a change of control or a termination
of trading (each as defined)). See "-- Repurchase
at Option of Holders Upon a Designated Event."
Subordination.............. The Convertible Notes will be unsecured obligations
of Amkor and will be subordinated in right of
payment to all of our existing and future senior
debt and effectively subordinated to all existing
and future liabilities and obligations of our
subsidiaries. As of December 31, 1999, we had
approximately $710.8 million of outstanding
indebtedness that would have constituted debt
senior to the Convertible Notes. As of such date,
the indebtedness and other liabilities of our
subsidiaries (excluding intercompany liabilities
and obligations of a type not required to be
reflected on the balance sheet of such subsidiary
in accordance with GAAP) that would effectively
have been senior to the Convertible Notes were
approximately $212.6 million. After giving effect
to our proposed incurrence of approximately $750.0
million of new secured bank debt in connection with
our proposed acquisition of K1, K2 and K3 and our
proposed investment in ASI, such amounts will be
approximately $1,375.0 million and $209.2 million,
respectively. See "-- Subordination."
Registration Rights........ We have agreed to file a shelf registration
statement under the Securities Act relating to
resales of the Convertible Notes and the common
stock issuable upon conversion thereof. If such
registration statement is not filed or has not
become effective within the time periods set forth
herein, we will be required to pay liquidated
damages to holders of the Convertible Notes and
holders of the common stock issued upon conversion
thereof. See "-- Registration Rights."
Transfer Restrictions...... Neither the Convertible Notes nor the common stock
offered hereby have been registered under the
Securities Act, and such Convertible Notes and the
common stock issuable upon conversion thereof are
subject to certain restrictions on transfer.
Trading.................... The Convertible Notes are expected to be designated
as eligible for trading in The Portal Market. Our
common stock is quoted on the Nasdaq National
Market under the symbol "AMKR."
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<PAGE> 47
Our Convertible Subordinated notes due 2007 (the "Convertible Notes") are
issued under an indenture dated as of March 16, 2000 (the "Indenture") between
the Company and State Street Bank and Trust Company, as trustee (the "Trustee").
A copy of the Indenture and the Registration Agreement referred to below is
available as set forth under "-- Additional Information" below. The following is
a summary of certain provisions of the Indenture and the Registration Agreement
and does not purport to be complete. Reference should be made to all provisions
of the Indenture and the Registration Agreement, including the definitions
therein of certain terms. Certain definitions of terms used in the following
summary are set forth under "-- Certain Definitions" below. As used in this
section, the "Company" means Amkor Technology, Inc., but not any of its
Subsidiaries, unless the context requires otherwise.
GENERAL
The Convertible Notes are general unsecured subordinated obligations of the
Company, will mature on March 15, 2007 (the "Maturity Date"), and are in an
aggregate principal amount of $258.75 million. The Convertible Notes are issued
in denominations of $1,000 and integral multiples of $1,000 in fully registered
form. The Convertible Notes are exchangeable and transfers thereof are
registrable without charge therefor, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge in connection
therewith.
The Convertible Notes accrue interest at a rate of 5% per annum from March
17, 2000, or from the most recent interest payment date to which interest has
been paid or duly provided for, and accrued and unpaid interest are payable
semi-annually in arrears on September 15 and March 15 of each year beginning
September 15, 2000. Interest is paid to the person in whose name a Convertible
Note is registered at the close of business on the September 1 or March 1
immediately preceding the relevant interest payment date (other than with
respect to a Convertible Note or portion thereof called for redemption on a
redemption date, or repurchased in connection with a Designated Event or a
Related Transactions Event on a repurchase date, during the period from a record
date to (but excluding) the next succeeding interest payment date (in which case
accrued interest shall be payable (unless such Convertible Note of portion
thereof is converted) to the holder of the Convertible Note or portion thereof
redeemed or repurchased)). Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
If the Company does not comply with certain deadlines set forth in the
Registration Agreement with respect to the registration of the Convertible Notes
or the common stock issuable upon conversion thereof for resale under a shelf
registration statement, holders of the Convertible Notes and/or the common stock
issued upon conversion thereof will be entitled to Liquidated Damages. See
"-- Registration Rights" below.
CONVERSION
The holders of Convertible Notes are entitled at any time on or before the
close of business on the last trading day prior to the Maturity Date of the
Convertible Notes, subject to prior redemption or repurchase, to convert any
Convertible Notes or portions thereof (in denominations of $1,000 or multiples
thereof) into common stock of the Company, at the conversion price of $57.34 per
share of common stock, subject to adjustment as described below (the "Conversion
Price"). Except as described below, no adjustment will be made on conversion of
any Convertible Notes for interest or Liquidated Damages, if any, accrued
thereon or for dividends on any common stock issued. If Convertible Notes not
called for redemption are converted after a record date for the payment of
interest and prior to the next succeeding interest payment date, such
Convertible Notes must be accompanied by funds equal to the interest and
Liquidated Damages, if any, payable on such succeeding interest payment date on
the principal amount so converted. The Company is not required to issue
fractional shares of common stock upon conversion of Convertible Notes and, in
lieu thereof, will pay a cash adjustment based upon the market price of the
common stock on the last trading day prior to the date of conversion. In the
case of Convertible Notes called for redemption, conversion rights will expire
at the close of business on the trading day preceding the date fixed for
redemption, unless the Company defaults in payment of the redemption price, in
which
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<PAGE> 48
case the conversion right will terminate at the close of business on the date
such default is cured. In the event any holder exercises its right to require
the Company to repurchase Notes upon a Designated Event or a Related
Transactions Event, such holder's conversion right will terminate on the close
of business on the Designated Event Offer Termination Date (as defined) or the
Special Redemption Date, as applicable, unless the Company defaults in the
payment due upon repurchase or the holder elects to withdraw the submission of
election to repurchase. See "-- Repurchase at Option of Holders Upon a
Designated Event."
The right of conversion attaching to any Convertible Note may be exercised
by the holder by delivering the Convertible Note at the specified office of a
conversion agent, accompanied by a duly signed and completed notice of
conversion, together with any funds that may be required as described in the
preceding paragraph. Such notice of conversion can be obtained from the Trustee.
Beneficial owners of interests in a Global Note (as defined) may exercise their
right of conversion by delivering to The Depository Trust Company ("DTC") the
appropriate instruction form for conversion pursuant to DTC's conversion
program. The conversion date shall be the date on which the Convertible Note,
the duly signed and completed notice of conversion, and any funds that may be
required as described in the preceding paragraph shall have been so delivered. A
holder delivering a Convertible Note for conversion will not be required to pay
any taxes or duties payable in respect of the issue or delivery of common stock
on conversion, but will be required to pay any tax or duty which may be payable
in respect of any transfer involved in the issue or delivery of the common stock
in a name other than the holder of the Convertible Note. Certificates
representing shares of common stock will not be issued or delivered unless all
taxes and duties, if any, payable by the holder have been paid.
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) in certain events, including: (i) the issuance of common stock as
a dividend or distribution on common stock; (ii) certain subdivisions and
combinations of the common stock; (iii) the issuance to all or substantially all
holders of common stock of certain rights or warrants to purchase common stock
at a price per share less than the Current Market Price (as defined); (iv) the
dividend or other distribution to all holders of common stock of shares of
capital stock of the Company (other than common stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of common stock to the extent such distributions,
combined together with (A) all such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made plus (B) any
cash and the fair market value of other consideration payable in respect of any
tender offers by the Company or any of its Subsidiaries for common stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 15% of the Company's market capitalization (being the product
of the then current market price of the common stock times the number of shares
of common stock then outstanding) on the record date for such distribution; and
(vi) the purchase of common stock pursuant to a tender offer made by the Company
or any of its subsidiaries to the extent that the aggregate consideration,
together with (X) any cash and the fair market value of any other consideration
payable in any other tender offer expiring within 12 months preceding such
tender offer in respect of which no adjustment has been made plus (Y) the
aggregate amount of any such all-cash distributions referred to in clause (v)
above to all holders of common stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 15% of the Company's market capitalization on the expiration of
such tender offer.
In the case of (i) any reclassification or change of the common stock or
(ii) a consolidation, merger or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of common stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such common stock, the holders of the Convertible Notes then outstanding will be
entitled thereafter to convert such Convertible Notes into the kind and amount
of shares of stock, other securities or other property or assets, which they
would have owned or
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<PAGE> 49
been entitled to receive upon such reclassification, change, consolidation,
merger, combination, sale or conveyance had such Convertible Notes been
converted into common stock immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance (assuming, in a case in
which the Company's stockholders may exercise rights of election, that a holder
of Convertible Notes would not have exercised any rights of election as to the
stock, other securities or other property or assets receivable in connection
therewith and received per share the kind and amount received per share by a
plurality of non-electing shares). Certain of the foregoing events may also
constitute or result in a Designated Event requiring the Company to offer to
repurchase the Convertible Notes. See "-- Repurchase at Option of Holders Upon a
Designated Event."
In the event of a taxable distribution to holders of common stock (or other
transaction) that results in any adjustment of the Conversion Price, the holders
of Convertible Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of common stock.
The Company from time to time may, to the extent permitted by law, reduce
the Conversion Price of the Convertible Notes by any amount for any period of at
least 20 days, in which case the Company shall give at least 15 days' notice of
such decrease, if the Board of Directors has made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in the
Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
common stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes.
No adjustment in the Conversion Price will be required unless such
adjustment would require a change of at least 1% of the Conversion Price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the Conversion Price will not be adjusted for the
issuance of common stock or any securities convertible into or exchangeable for
common stock or carrying the right to purchase any of the foregoing.
SUBORDINATION
On or prior to Put Expiration Date
On or before the earlier of the following dates (the "Put Expiration
Date"):
- to the extent such date does not occur after August 31, 2000, the date
the Related Transactions are consummated in all material respects and
- 30 days following the Special Redemption Date,
the Convertible Notes shall be senior debt of the Company and rank equally in
right of payment to all of the Company's existing and future unsecured senior
debt (including its 9 1/4% senior notes due 2006) 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 Notes including our 5 3/4% convertible
subordinated notes due 2003 and our 10 1/2% senior subordinated notes due 2009.
After Put Expiration Date
After the Put Expiration Date, the payment of principal of, premium, if
any, interest and Liquidated Damages, if any on the Convertible Notes will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or other payment satisfactory to the holders of Senior
Debt of all Senior Debt, whether outstanding on the date of the Indenture or
thereafter incurred. After the Put Expiration Date, upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, an assignment for the benefit of
creditors or any marshaling of the Company's
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<PAGE> 50
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash or other payment satisfactory to the Senior Debt of all
Senior Debt of all obligations in respect of such Senior Debt before the holders
of Convertible Notes will be entitled to receive any payment with respect to the
Convertible Notes.
After the Put Expiration Date, in the event of any acceleration of the
Convertible Notes because of an Event of Default, the holders of any Senior Debt
then outstanding will be entitled to payment in full in cash or other payment
satisfactory to the holders of such Senior Debt of all obligations in respect of
such Senior Debt before the holders of the Convertible Notes are entitled to
receive any payment or distribution in respect thereof. If payment of the
Convertible Notes is accelerated because of an Event of Default, the Company or
the Trustee shall promptly notify the holders of Senior Debt or the trustee(s)
for such Senior Debt of the acceleration.
After the Put Expiration Date, the Company also may not make any payment
upon or in respect of the Convertible Notes if (i) a default in the payment of
the principal of, premium, if any, interest, rent or other obligations in
respect of Senior Debt occurs and is continuing beyond any applicable period of
grace or (ii) a default, other than a payment default, occurs and is continuing
with respect to Designated Senior Debt that permits holders of the Designated
Senior Debt as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company or other person permitted to give such notice under the Indenture.
Payments on the Convertible Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived or
ceases to exist and (b) in case of a nonpayment default, the earlier of the date
on which such nonpayment default is cured or waived or ceases to exist or 179
days after the date on which the applicable Payment Blockage Notice is received
if the maturity of the Senior Debt has not been accelerated. No new period of
payment blockage may be commenced unless and until 365 days have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice. Notwithstanding anything herein to the
contrary, payments made by the Company to repurchase Convertible Notes following
a Related Transactions Event shall not be subject to the provisions herein and
will not be subordinated in right of payment to the prior payment of Senior
Debt.
By reason of the subordination provisions described above, after the Put
Expiration Date, in the event of the Company's liquidation or insolvency,
holders of Senior Debt may receive more, ratably, and holders of the Convertible
Notes may receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrences of any Event of Default under the
Indenture.
The Convertible Notes are obligations exclusively of the Company. However,
since the operations of the Company are primarily conducted through
Subsidiaries, the cash flow and the consequent ability of the Company to service
its debt, including the Convertible Notes, are primarily dependent upon the
earnings of its Subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those Subsidiaries to, the Company. The
payment of dividends and the making of loans and advances to the Company by its
Subsidiaries may be subject to statutory or contractual restrictions, are
dependent upon the earnings of those Subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its Subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Convertible Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such Subsidiary and
any indebtedness of such Subsidiary senior to that held by the Company.
As of December 31, 1999, the Company had approximately $710.8 million of
outstanding indebtedness that would have constituted Senior Debt, and the
indebtedness and other liabilities of the Company's subsidiaries (excluding
intercompany liabilities and obligations of a type not required to be reflected
on the balance sheet of such subsidiary in accordance with GAAP) that would
effectively have
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<PAGE> 51
been senior to the Convertible Notes were approximately $212.6 million. After
giving effect to the proposed incurrence by the Company of $750.0 million of new
secured bank debt in connection with its proposed acquisition of K1, K2 and K3
and its proposed investment in ASI, such amounts will be approximately $1,225.0
million and $212.6 million, respectively. The Indenture will not limit the
amount of additional indebtedness, including Senior Debt, that the Company can
create, incur, assume or guarantee, nor will the Indenture limit the amount of
indebtedness and other liabilities that any Subsidiary can create, incur, assume
or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Convertible Notes receives any payment or distribution of assets of the
Company of any kind after the Put Expiration Date in contravention of any of the
terms of the Indenture, whether in cash, property or securities, including,
without limitation by way of set-off or otherwise, in respect of the Convertible
Notes before all Senior Debt is paid in full in cash or other payment
satisfactory to the holders of Senior Debt, then such payment or distribution
will be held by the recipient in trust for the benefit of holders of Senior
Debt, and will be immediately paid over or delivered to the holders of Senior
Debt or their representative or representatives to the extent necessary to make
payment in full in cash or other payment satisfactory to such holders of all
Senior Debt remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior Debt.
PROVISIONAL REDEMPTION BY THE COMPANY
After September 20, 2001 and prior to March 20, 2003, the Convertible Notes
may be redeemed at the option of the Company in whole or in part (in any
integral multiple of $1,000), at any time or from time to time, upon not less
than 30 nor more than 60 days' prior notice by mail, at a redemption price equal
to 103.571% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the Provisional Redemption Date (subject to
the right of holders of record on the relevant record date to receive any such
amounts due on the relevant payment date) if the closing price of the common
stock shall have equaled or exceeded 150% of the Conversion Price then in effect
for at least 20 out of 30 consecutive days on which the Nasdaq National Market
is open for the transaction of business prior to the Notice Date.
Upon any Provisional Redemption, the Company will be obligated to make an
additional payment 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 Notes from the Provisional
Redemption Date to but excluding March 15, 2003. The present value will be
calculated 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 the date on which a notice of Provisional Redemption is
mailed.
OPTIONAL REDEMPTION
On or after March 20, 2003, the Convertible Notes may be redeemed at the
option of the Company, in whole or from time to time in part, on not less than
15 nor more than 60 days' prior written notice to the holders thereof by first
class mail, at the following redemption prices (expressed as percentages of
principal amount) if redeemed during the 12-month period beginning March 20 of
each year indicated (March 20 with respect to 2003), plus accrued and unpaid
interest and Liquidated Damages, if any, to the date fixed for redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003............................................ 102.857%
2004............................................ 102.143
2005............................................ 101.429
2006............................................ 100.714
</TABLE>
and 100% at March 15, 2007.
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<PAGE> 52
SELECTION AND NOTICE
If less than all the Convertible Notes are to be redeemed at any time,
selection of Convertible Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Convertible Notes are listed or, if the Convertible Notes
are not so listed, on a pro rata basis by lot or by any other method that the
Trustee considers fair and appropriate. The Trustee may select for redemption a
portion of the principal of any Convertible Note that has a denomination larger
than $1,000. Convertible Notes and portions thereof will be redeemed in the
amount of $1,000 or integral multiples of $1,000. The Trustee will make the
selection from Convertible Notes outstanding and not previously called for
redemption; provided that if a portion of a holder's Convertible Notes are
selected for partial redemption and such holder converts a portion of such
Convertible Notes, such converted portion shall be deemed to be taken from the
portion selected for redemption.
Provisions of the Indenture that apply to the Convertible Notes called for
redemption also apply to portions of the Convertible Notes called for
redemption. If any Convertible Note is to be redeemed in part, the notice of
redemption will state the portion of the principal amount to be redeemed. Upon
surrender of a Convertible Note that is redeemed in part only, the Company will
execute and the Trustee will authenticate and deliver to the holder a new
Convertible Note equal in principal amount to the unredeemed portion of the
Convertible Note surrendered.
On and after the redemption date, unless the Company shall default in the
payment of the redemption price, interest and Liquidated Damages, if any, will
cease to accrue on the principal amount of the Convertible Notes or portions
thereof called for redemption and for which funds have been set apart for
payment. In the case of Convertible Notes or portions thereof redeemed on a
redemption date which is also a regularly scheduled interest payment date, the
interest payment due on such date shall be paid to the person in whose name the
Note is registered at the close of business on the relevant record date.
The Convertible Notes are not entitled to any sinking fund.
REPURCHASE AT THE OPTION OF HOLDERS IF THE PROPOSED ACQUISITION OF K1, K2 AND K3
DOES NOT CLOSE
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"), each holder will have the right
to require the Company to repurchase the holder's Convertible Notes, in whole,
but not in part, at a purchase price equal to 101% of the principal amount
thereof (the "Special Redemption Price"), plus accrued interest and unpaid
interest and Liquidated Damages, if any, to the Special Redemption Date (the
"Special Redemption Payment"), subject to the right of holders of record on the
relevant record date to receive any such amount due on the relevant payment
date. Within 10 days following a Related Transactions Event, the Company will
mail a notice to each holder specifying the Special Redemption Date, which shall
be no earlier than 30 days nor later than 40 days from the date such notice is
mailed (the "Special Redemption Date"), and offering to repurchase Convertible
Notes pursuant to the procedures required by the Indenture and described in such
notice.
The Company will furnish to the Paying Agent not later than the last
business day prior to the Special Redemption Date the aggregate Special
Redemption Payment with respect to the Convertible Notes to be redeemed on the
Special Redemption Date.
In the event that, after the Special Redemption Date, less than 10% of the
original aggregate principal amount of the Convertible Notes remain outstanding,
the Company may, at its option, redeem the remaining Convertible Notes, in
whole, but not in part, at a price equal to the Special Redemption Price, 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 Special Redemption Date) subject to the right of holders of
record on the relevant record date to receive any such amount due on the
relevant payment date.
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<PAGE> 53
The Company has agreed that, during the period from the Issue Date to and
including the Put Expiration Date, it will maintain cash and cash equivalents in
an aggregate amount equal to or greater than 103% of the aggregate principal
amount of the outstanding Convertible Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Convertible Notes as a result of a Related Transactions Event.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the Convertible Notes. The Company will comply
with this rule to the extent applicable at that time.
"Related Transactions" means the acquisition by the Company or any of its
subsidiaries of K1, K2 and K3 from ASI.
"Related Agreement" means the asset purchase agreement between ASI and the
Company dated as of January 14, 2000 relating to the Related Transaction, as
such agreement may be amended or restated from time to time.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
Upon the occurrence of a Designated Event, each holder of Convertible Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such holder's Convertible Notes
pursuant to the offer described below (the "Designated Event Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase (the "Designated Event Payment"). Within 20 days following any
Designated Event, the Company will mail a notice to each holder describing the
transaction or transactions that constitute the Designated Event and offering to
repurchase Convertible Notes pursuant to the procedures required by the
Indenture and described in such notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Convertible Notes as a result of a Designated Event. Rule
13e-4 under the Exchange Act requires, among other things, the dissemination of
certain information to security holders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the Convertible Notes. The Company will comply with this rule to the
extent applicable at that time.
On the date specified for termination of the Designated Event Offer, the
Company will, to the extent lawful, (1) accept for payment all Convertible Notes
or portions thereof properly tendered pursuant to the Designated Event Offer,
(2) deposit with the paying agent an amount equal to the Designated Event
Payment in respect of all Convertible Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Convertible Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Convertible Notes or portions thereof being purchased by the Company.
On the date specified for payment of the Designated Event Payment (the
"Designated Event Payment Date"), the paying agent will promptly mail to each
holder of Convertible Notes so accepted the Designated Event Payment for such
Convertible Notes, and the Trustee will promptly authenticate and mail (or cause
to be transferred by book entry) to each holder a new Convertible Note equal in
principal amount to any unpurchased portion of the Convertible Notes
surrendered, if any; provided that each such new Convertible Note will be in a
principal amount of $1,000 or an integral multiple thereof.
The foregoing provisions would not necessarily afford holders of the
Convertible Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect holders.
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<PAGE> 54
The right to require the Company to repurchase Convertible Notes as a
result of a Designated Event could have the effect of delaying, deferring or
preventing a Change of Control or other attempts to acquire control of the
Company unless arrangements have been made to enable the Company to repurchase
all the Convertible Notes at the Designated Event Payment Date. Consequently,
this right may render more difficult or discourage a merger, consolidation or
tender offer (even if such transaction is supported by the Company's Board of
Directors or is favorable to the stockholders), the assumption of control by a
holder of a large block of the Company's shares and the removal of incumbent
management.
Except as described above with respect to a Designated Event, the Indenture
does not contain provisions that permit the holders of the Convertible Notes to
require that the Company repurchase or redeem the Convertible Notes in the event
of a takeover, recapitalization or similar restructuring. Subject to the
limitation on mergers and consolidations described below, the Company, its
management or its Subsidiaries could in the future enter into certain
transactions, including refinancings, certain recapitalizations, acquisitions,
the sale of all or substantially all of its assets, the liquidation of the
Company or similar transactions, that would not constitute a Designated Event
under the Indenture, but that would increase the amount of Senior Debt (or any
other indebtedness) outstanding at such time or substantially reduce or
eliminate the Company's assets.
The terms of the Company's existing or future credit or other agreements
relating to indebtedness (including Senior Debt) may prohibit the Company from
purchasing any Convertible Notes and may also provide that a Designated Event,
as well as certain other change-of-control events with respect to the Company,
would constitute an event of default thereunder. In the event a Designated Event
or a Related Transactions Event occurs at a time when the Company is prohibited
from purchasing Convertible Notes, the Company could seek the consent of its
then-existing lenders to the purchase of Convertible Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from purchasing Convertible Notes. In such case, the Company's
failure to purchase tendered Convertible Notes would constitute an Event of
Default under the Indenture, which may, in turn, constitute a further default
under the terms of other indebtedness that the Company has entered into or may
enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Convertible Notes.
A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
A "Change of Control" will be deemed to have occurred when: (i) any person
has become an Acquiring Person, (ii) the Company consolidates with or merges
into any other corporation, or conveys, transfers, or leases all or
substantially all of its assets to any person, or any other corporation merges
into the Company, and, in the case of any such transaction, the outstanding
common stock of the Company is changed or exchanged as a result, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, or (iii) any
time the Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor corporation to the
Company); provided that a Change of Control shall not be deemed to have occurred
if either (x) the last sale price of the common stock for any five trading days
during the ten trading days immediately preceding the Change of Control is at
least equal to 105% of the Conversion Price in effect on the date of such Change
of Control or (y) at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change of
Control consists of shares of common stock that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United
States.
The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law
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<PAGE> 55
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Convertible Notes to require the Company to repurchase such
Convertible Notes as a result of a lease, transfer or conveyance of less than
all of the assets of the Company to another person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
A "Termination of Trading" will be deemed to have occurred if the common
stock (or other common stock into which the Convertible Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may not, in a single transaction or
a series of related transactions, consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another corporation, person or
entity as an entirety or substantially as an entirety unless either (a)(i) the
Company shall be the surviving or continuing corporation or (ii) the entity or
person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company substantially as an entirety (x) is a corporation organized and
validly existing under the laws of the United States, any State thereof or the
District of Columbia and (y) assumes the due and punctual payment of the
principal of, and premium, if any, and interest on all the Convertible Notes and
the performance of every covenant of the Company under the Convertible Notes and
the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (b) immediately after such transaction no Default
or Event of Default exists; and (c) the Company or such person shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such transaction and the supplemental indenture comply with
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company, the capital stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
Upon any such consolidation, merger, sale, assignment, conveyance, lease,
transfer or other disposition in accordance with the foregoing, the successor
person formed by such consolidation or into which the Company is merged or to
which such sale, assignment, conveyance, lease, transfer or other disposition is
made will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such
successor had been named as the Company therein, and thereafter (except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under the Indenture and the Convertible Notes.
REGISTRATION RIGHTS
Pursuant to a registration agreement (the "Registration Agreement"), the
Company has agreed for the benefit of the holders of the Convertible Notes and
common stock issued upon conversion thereof that (i) it will, at its cost,
within 90 days after the Issue Date, file a shelf registration statement (the
"Shelf Registration Statement") with the Commission with respect to resales of
the Convertible Notes and the
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common stock issuable upon conversion thereof, (ii) the Company will use its
best efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act within 180 days after the Issue Date and (iii) the
Company will keep the Shelf Registration Statement continuously effective under
the Securities Act until the earliest of (a) the second anniversary of the Issue
Date, (b) the date on which the Convertible Notes or the common stock issuable
upon conversion thereof may be sold by non-affiliates of the Company pursuant to
paragraph (k) of Rule 144 (or any successor provision) promulgated by the
Commission under the Securities Act and (c) the date as of which all the
Convertible Notes or the common stock issuable upon conversion thereof have been
sold pursuant to the 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 usable
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 Issue Date and ending on
or prior to the second anniversary of the Issue Date (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 Convertible Notes or
$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 50 basis points per
annum per $1,000 principal amount of Convertible Notes or $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 has agreed
to 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). 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 Note and any share
of common stock issued on conversion thereof until the date on which such
Convertible 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 Note or share which has been filed with the Commission pursuant
to the Securities Act, in either case after such registration statement has
become 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 paragraph (k) of Rule 144 under the
Securities Act (or any successor provision promulgated by the Commission).
The Company will provide or cause to be provided to each holder of the
Convertible Notes, or the common stock issuable upon conversion of the
Convertible Notes, copies of the prospectus, which will be a part of the Shelf
Registration Statement, notify or cause to be notified to each such holder when
the Shelf Registration Statement for the Convertible Notes or the common stock
issuable upon conversion of the Convertible Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Convertible Notes or the common stock issuable upon conversion of the
Convertible Notes. A holder of Convertible Notes or the common stock issuable
upon conversion of the Convertible Notes that sells such securities pursuant to
a Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement that are applicable to such holder
(including certain indemnification and contribution rights or obligations). The
Company presently intends
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to distribute a questionnaire to each beneficial owner of Convertible Notes as
of a specified date to obtain certain information regarding such selling
security holders for inclusion in the prospectus.
The Company will be permitted to 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 (any such period being referred to as a
"Suspension Period") under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events. The Company
will pay all expenses of the Shelf Registration Statement; provided, however,
that each holder shall bear the expense of any broker's commission, agency fee
or underwriter's discount or commission.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being (i) default in
payment of the principal of, or premium, if any, on the Convertible Notes,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (ii) default for 30 days in payment of any installment of interest on
or Liquidated Damages with respect to the Convertible Notes, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (iii)
default by the Company for 60 days after notice in the observance or performance
of any other covenants in the Indenture; (iv) default in the payment of the
Designated Event Payment or the Special Redemption Payment in respect of the
Convertible Notes on the date therefor, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (v) failure of the
Company to maintain cash and cash equivalents in accordance with the provisions
of the Indenture or to provide timely notice of a Designated Event or a Related
Transactions Event; (vi) failure of the Company or any Material Subsidiary to
make any payment at maturity, including any applicable grace period, in respect
of indebtedness for borrowed money of, or guaranteed or assumed by, the Company
or any Material Subsidiary, which payment is in an amount in excess of
$20,000,000, and continuance of such failure for 30 days after notice; (vii)
default by the Company or any Material Subsidiary with respect to any such
indebtedness, which default results in the acceleration of any such indebtedness
of an amount in excess of $20,000,000 without such indebtedness having been paid
or discharged or such acceleration having been cured, waived, rescinded or
annulled for 30 days after notice; or (viii) certain events involving
bankruptcy, insolvency or reorganization of the Company or any Material
Subsidiary.
If an Event of Default (other than an Event of Default specified in clause
(viii) above with respect to the Company) occurs and is continuing, then and in
every such case the Trustee, by written notice to the Company, or the holders of
not less than 25% in aggregate principal amount of the then outstanding
Convertible Notes, by written notice to the Company and the Trustee, may declare
the unpaid principal of, premium, if any, and accrued and unpaid interest and
Liquidated Damages, if any, on all the Convertible Notes then outstanding to be
due and payable. Upon such declaration, such principal amount, premium, if any,
and accrued and unpaid interest and Liquidated Damages, if any, will become
immediately due and payable, notwithstanding anything contained in the Indenture
or the Convertible Notes to the contrary, but subject to the provisions limiting
payment described in "-- Subordination." If any Event of Default specified in
clause (viii) above occurs with respect to the Company, all unpaid principal of,
and premium, if any, and accrued and unpaid interest and Liquidated Damages, if
any, on the Convertible Notes then outstanding will automatically become due and
payable, subject to the provisions described in "-- Subordination," without any
declaration or other act on the part of the Trustee or any holder of Convertible
Notes.
Holders of the Convertible Notes may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to the provisions
of the Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the holders, unless such holders have
offered to the Trustee a security or an indemnity satisfactory to it against any
cost, expense or liability. Subject to all provisions of the Indenture and
applicable law, the holders of a majority in aggregate principal amount of the
then outstanding Convertible Notes have the right to direct the time, method and
place of conducting any
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proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. If a Default or Event of Default occurs and is
continuing and is known to the Trustee, the Indenture requires the Trustee to
mail a notice of Default or Event of Default to each holder within 60 days of
the occurrence of such Default or Event of Default, provided, however, that the
Trustee may withhold from the holders notice of any continuing Default or Event
of Default (except a Default or Event of Default in the payment of principal of,
premium, if any, interest or Liquidated Damages, if any, on the Convertible
Notes) if it determines in good faith that withholding notice is in their
interest. The holders of a majority in aggregate principal amount of the
Convertible Notes then outstanding by notice to the Trustee may rescind any
acceleration of the Convertible Notes and its consequences if all existing
Events of Default (other than the nonpayment of principal of, premium, if any,
interest and Liquidated Damages, if any, on the Convertible Notes that has
become due solely by virtue of such acceleration) have been cured or waived and
if the rescission would not conflict with any judgment or decree of any court of
competent jurisdiction. No such rescission shall affect any subsequent Default
or Event of Default or impair any right consequent thereto.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Convertible Notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Convertible Notes. If an Event of Default
occurs prior to any date on which the Company is prohibited from redeeming the
Convertible Notes by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Convertible Notes prior to such date, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Convertible Notes.
The holders of a majority in aggregate principal amount of the Convertible
Notes then outstanding may, on behalf of the holders of all the Convertible
Notes, waive any past Default or Event of Default under the Indenture and its
consequences, except Default in the payment of principal of, premium, if any, or
interest on the Convertible Notes (other than the non-payment of principal of,
premium, if any, interest and Liquidated Damages, if any, and interest on the
Convertible Notes that has become due solely by virtue of an acceleration that
has been duly rescinded as provided above) or in respect of a covenant or
provision of the Indenture that cannot be modified or amended without the
consent of all holders of Convertible Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Convertible Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Convertible Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Convertible Notes), and any existing default or compliance
with any provision of the Indenture or the Convertible Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Convertible Notes (including consents obtained in connection with a
tender offer or exchange offer for Convertible Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Notes held by a non-consenting holder): (a)
reduce the principal amount of Convertible Notes whose holders must consent to
an amendment, supplement or waiver, (b) reduce the principal of or change the
fixed maturity of any Convertible Note or, other than as set forth in the next
paragraph, alter the provisions with respect to the redemption of the
Convertible Notes, (c) reduce the rate of or change
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the time for payment of interest on any Convertible Notes, (d) waive a Default
or Event of Default in the payment of principal of or premium, if any, interest
or Liquidated Damages, if any, on the Convertible Notes (except a rescission of
acceleration of the Convertible Notes by the holders of at least a majority in
aggregate principal amount of the Convertible Notes and a waiver of the payment
default that resulted from such acceleration), (e) make any Convertible Note
payable in money other than that stated in the Indenture and the Convertible
Notes, (f) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Convertible Notes to
receive payments of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Convertible Notes, (g) waive a redemption payment with
respect to any Convertible Note, (h) except as permitted by the Indenture,
increase the Conversion Price or, other than as set forth in the next paragraph,
modify the provisions of the Indenture relating to conversion of the Convertible
Notes in a manner adverse to the holders thereof or (i) make any change to the
abilities of holders of Convertible Notes to enforce their rights under the
Indenture or the provisions of clause (a) through (i) hereof. In addition, any
amendment to the provisions of Article 11 of the Indenture (which relate to
subordination) will require the consent of the holders of at least 75% in
aggregate principal amount of the Convertible Notes then outstanding if such
amendment would adversely affect the rights of holders of Convertible Notes.
Notwithstanding the foregoing, without the consent of any holder of
Convertible Notes, the Company and the Trustee may amend or supplement the
Indenture or the Convertible Notes to (a) cure any ambiguity, defect or
inconsistency or make any other changes in the provisions of the Indenture which
the Company and the Trustee may deem necessary or desirable, provided such
amendment does not materially and adversely affect the Convertible Notes, (b)
provide for uncertificated Convertible Notes in addition to or in place of
certificated Convertible Notes, (c) provide for the assumption of the Company's
obligations to holders of Convertible Notes in the circumstances required under
the Indenture as described under "-- Merger and Consolidation," (d) provide for
conversion rights of holders of Convertible Notes in certain events such as a
consolidation, merger or sale of all or substantially all of the assets of the
Company, (e) reduce the Conversion Price, (f) make any change that would provide
any additional rights or benefits to the holders of Convertible Notes or that
does not adversely affect the legal rights under the Indenture of any such
holder, or (g) comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while
Convertible Notes remain outstanding if (i) all outstanding Convertible Notes
will become due and payable at their scheduled maturity within one year or (ii)
all outstanding Convertible Notes are scheduled for redemption within one year,
and, in either case, the Company has (a) deposited with the Trustee an amount
sufficient to pay and discharge all outstanding Convertible Notes on the date of
their scheduled maturity or the scheduled date of redemption and (b) paid all
other sums then payable by the Company under the Indenture.
GOVERNING LAW
The Indenture will provide that the Convertible Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Convertible Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Convertible Note selected for redemption or repurchase. Also, the Company is
not required to transfer or exchange any Convertible Note for a period of 15
days before a selection of Convertible Notes to be redeemed.
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The registered holder of a Convertible Note will be treated as the owner of
it for all purposes.
CERTAIN DEFINITIONS
"Acquiring Person" means any person (as defined in Section 13(d)(3) of the
Exchange Act) who or which, together with all affiliates and associates (each as
defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act and as further defined
below) of shares of common stock or other voting securities of the Company
having more than 50% of the total voting power of the Voting Stock of the
Company; provided, however, that an Acquiring Person shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any Permitted Holder, (iv) an
underwriter engaged in a firm commitment underwriting in connection with a
public offering of the Voting Stock of the Company or (v) any current or future
employee or director benefit plan of the Company or any Subsidiary of the
Company or any entity holding common stock of the Company for or pursuant to the
terms of any such plan. For purposes hereof, a person shall not be deemed to be
the beneficial owner of (A) any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such person or any of such person's
affiliates until such tendered securities are accepted for purchase or exchange
thereunder, or (B) any securities if such beneficial ownership (1) arises solely
as a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to the applicable rules and regulations under the
Exchange Act, and (2) is not also then reportable on Schedule 13D (or any
successor schedule) under the Exchange Act.
"Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, but excluding any debt
securities convertible into such equity.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means any particular Senior Debt if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Indebtedness shall be "Designated Senior Debt" for purposes
of the Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Debt to exercise
the rights of Designated Senior Debt).
"Eligible Investments" means any of the following: (i) investments in U.S.
Government Obligations maturing within 365 days of the date of acquisition
thereof; (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 90 days of the date of acquisition thereof
issued by a bank or trust company organized under the laws of the United States
of America or any state thereof having capital, surplus and undivided profits
aggregating in excess of $500 million and whose long-term debt is rated "A-3" or
"A-" or higher according to Moody's or S&P (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)); (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types describe din
clause (i) entered into with:
(a) a bank meeting the qualifications described in clause (ii) above, or
(b) any primary government securities dealer reporting to the Market
Reports Division of the Federal Reserve Bank of New York;
(iv) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America with a rating at the time as of which any Investment therein is made of
"P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P (or
such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)); and (v) direct obligations (or certificates representing an ownership
interest in such obligations) of any state of the United States of America
(including any agency or
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instrumentality thereof) for the payment of which the full faith and credit of
such state is pledged and which are not callable or redeemable at the issuer's
option, provided that: (a) the long-term debt of such state is rated "A-3" or
"A-" or higher according to Moody's or S&P (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)), and (b) such obligations mature within
180 days of the date of acquisition thereof.
"Event of Default" has the meaning set forth under "-- Events of Default
and Remedies" herein.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of the Company that is (1) given to secure all or part of the
purchase price of property subject thereto, whether given to the vendor of such
property or to another, or (2) existing on property at the time of acquisition
thereof), (b) evidenced by a note, debenture, bond or other written instrument,
(c) under a lease required to be capitalized on the balance sheet of the lessee
under GAAP or under any lease or related document (including a purchase
agreement) that provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the Company
under such lease or related document to purchase or to cause a third party to
purchase such leased property, (d) in respect of letters of credit, bank
guarantees or bankers' acceptances (including reimbursement obligations with
respect to any of the foregoing), (e) with respect to Indebtedness secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or
resulting in an encumbrance to which the property or assets of such person are
subject, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, (g)
under interest rate or currency swap agreements, cap, floor and collar
agreements, spot and forward contracts and similar agreements and arrangements;
(ii) with respect to any obligation of others of the type described in the
preceding clause (i) or under clause (iii) below assumed by or guaranteed in any
manner by such person or in effect guaranteed by such person through an
agreement to purchase (including, without limitation, "take or pay" and similar
arrangements), contingent or otherwise (and the obligations of such person under
any such assumptions, guarantees or other such arrangements); and (iii) any and
all deferrals, renewals, extensions, refinancings and refundings of, or
amendments, modifications or supplements to, any of the foregoing.
"Issue Date" means the date on which the Convertible Notes are first issued
and authenticated under the Indenture.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Holders" means James Kim and his estates, spouses, ancestors and
lineal descendants (and spouses thereof), the legal representatives of any of
the foregoing, and the trustee of any bona fide trust of which one or more of
the foregoing are the sole beneficiaries or the grantors, or any person of which
any of the foregoing, individually or collectively, beneficially own (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act) voting securities representing
at least a majority of the total voting power of all classes of Capital Stock of
such person (exclusive of any matters as to which class voting rights exist).
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"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof.
"Senior Debt" means the principal of, premium, if any, and interest on,
rent under, and any other amounts payable on or in or in respect of any
Indebtedness of the Company (including, without limitation, any Obligations in
respect of such Indebtedness and, in the case of Designated Senior Debt, any
interest accruing after the filing of a petition by or against the Company under
any bankruptcy law, whether or not allowed as a claim after such filing in any
proceeding under such bankruptcy law), whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (v) Indebtedness evidenced
by the Convertible Notes, (w) any liability for federal, state, local or other
taxes owed or owing by the Company, (x) Indebtedness of the Company to any
Subsidiary of the Company except to the extent such Indebtedness is of a type
described in clause (ii) of the definition of Indebtedness, (y) trade payables
of the Company for goods, services or materials purchased in the ordinary course
of business (other than, to the extent they may otherwise constitute such trade
payables, any obligations of the type described in clause (ii) of the definition
of Indebtedness), and (z) any particular Indebtedness in which the instrument
creating or evidencing the same expressly provides that such Indebtedness shall
not be senior in right of payment to, or is pari passu with, or is subordinated
or junior to, the Convertible Notes.
"Subsidiary" means, with respect to any person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more of the other Subsidiaries of that person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such person or a Subsidiary of such person or (b)
the only general partners of which are such person or of one or more
Subsidiaries of such person (or any combination thereof).
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable 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.
PROPOSED PRIVATE PLACEMENT OF COMMON STOCK
In November, 1999 we secured a commitment from a group of investors to
provide $410.0 million in equity financing for use in connection with our
proposed acquisition of K1, K2 and K3. The following discussion assumes that we
have consummated the acquisition and related transactions.
COMMON STOCK
We would issue to these investors 20,500,000 shares of common stock. For so
long as these investors hold shares of our common stock, they would be entitled
to the same dividend, voting and other rights as the holders of our common stock
generally enjoy.
WARRANTS
We would issue warrants for an aggregate of 3,895,000 shares of common
stock with a strike price of $27.50 per share to these common stock investors.
These warrants would expire four years after the date we issue them.
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STOCKHOLDER RIGHTS AGREEMENT
We would enter into an agreement with these common stock investors relating
to their rights and obligations as stockholders. The agreement would include the
following provisions:
- Registration Rights: Holders of the common stock and warrants issued with
respect thereto would be entitled to certain rights with respect to the
registration of the resale of shares of common stock issued on conversion
or exercise thereof (the "Registrable Securities") under the Securities
Act. We will have an obligation to register part or all of these shares
after the first anniversary of the date we first issue the common stock
on up to four occasions if the holders of at least 20% of the Registrable
Securities request that we do so, provided that we have not already
caused a registration statement to go effective within the last nine
months. In addition, we shall extend to the holders of Registrable
Securities the right to include their securities in registrations
initiated by us. These registration rights would expire six years after
we issue the common stock.
- Preemptive Rights: We would extend to the holders of at least 750,000
shares of Registrable Securities the right to purchase up to their
pro-rata amount of new securities that we issue, subject to various
exceptions, until five years after we issue the common stock.
- Board Observation Rights: We would extend to two investors observation
rights to Board of Directors meetings for so long as each investor holds
at least 1,250,000 Registrable Securities.
- Restrictions on Transfer: The holders of Registrable Securities would
agree to limitations on their ability to transfer our securities under
certain circumstances.
- Company Right of First Refusal: The holders of Registrable Securities
would agree to grant us a right of first refusal to acquire shares of our
capital stock held by them on the terms they would propose to transfer
such securities to third parties.
CO-SALE AGREEMENT
We would enter into an agreement with these common stock investors and
certain of our existing stockholders to provide these common stock investors
with co-sale rights with respect to prospective transfers of our securities by
the existing stockholders.
61
<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue up to 500,000,000 shares of common stock, $.001
par value, and 10,000,000 shares of preferred stock, $.001 par value. As of
February 29, 2000, there were an aggregate of 130,982,427 shares of common stock
outstanding. In addition, as of February 29, 2000, 4,596,805 shares of common
stock were issuable upon exercise of outstanding options, 4,938,651 shares of
common stock were reserved for issuance under the Company's 1998 Stock Plan,
1998 Stock Option Plan for French Employees, 1998 Director Option Plan and 1998
Employee Stock Purchase Plan and shares of common stock were reserved for
issuance upon conversion of our convertible notes.
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our Certificate of
Incorporation and Bylaws, which are included as exhibits to our report on Form
10-K for the year ended December 31, 1999, which is incorporated herein by
reference, and by the provisions of applicable Delaware law.
Our Certificate of Incorporation and Bylaws contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of our Board of Directors and which may have the effect of delaying,
deferring, or preventing a future takeover or change in control of our company
unless such takeover or change in control is approved by our Board of Directors.
COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Holders of common stock do not have
cumulative voting rights, and, therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors. See "Risk Factors -- Continued Control by Existing Stockholders."
Holders of the common stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between our company and its debtholders. Our company has never declared or paid
cash dividends on its capital stock. We expect to retain future earnings, if
any, for use in the operation and expansion of our business, and does not
anticipate paying any cash dividends in the foreseeable future. In the event of
the liquidation, dissolution or winding up of our company, the holders of common
stock are entitled to share ratably in all assets legally available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of any holders of preferred stock then outstanding.
PREFERRED STOCK
Our Board of Directors is authorized to issue up to 10,000,000 shares of
preferred stock in one or more series and to fix the price, rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting a series or the
designation of such series, without any further vote or action by our
stockholders. See "Proposed Equity Financing."
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of Delaware law and our Certificate of Incorporation and
Bylaws could make our acquisition more difficult by means of a tender offer, a
proxy contest or otherwise and could also make the removal of incumbent officers
and directors more difficult. These provisions, summarized below, are expected
to discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of us to first
negotiate with us. We believe that the benefits of increased protection of our
potential ability to negotiate with the proponent of an unfriendly or
62
<PAGE> 65
unsolicited proposal to acquire or restructure us outweighs the disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals could result in an improvement of their terms.
Anti-Takeover Provisions of Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Undesignated Preferred Stock
The issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying, deferring or making more difficult a change in control
of the company and may adversely affect the market price of, and the voting and
other rights of, the holders of our common stock. The issuance of preferred
stock with voting and conversion rights may adversely affect the voting power of
the holders of our common stock, including the loss of voting control to others.
We have no current plans to issue shares of preferred stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is First Chicago
Trust Company of New York Shareholder Services, 525 Washington Boulevard, Jersey
City, NJ 07310; telephone (201) 324-0014.
63
<PAGE> 66
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMKOR TECHNOLOGY, INC.:
Report of Independent Public Accountants (Arthur Andersen
LLP)...................................................... F-2
Consolidated Statements of Income -- Years ended December
31, 1997, 1998 and 1999................................... F-3
Consolidated Balance Sheets -- December 31, 1998 and 1999... F-4
Consolidated Statements of Stockholders' Equity -- Years
ended December 31, 1997, 1998 and 1999.................... F-5
Consolidated Statements of Cash Flows -- Years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Independent Auditors' Report (Samil Accounting Corporation)
with respect to the 1999 Financial Statements of Amkor
Technology Korea, Inc..................................... F-36
K1, K2 AND K3:
Report of Independent Accountants (Samil Accounting
Corporation).............................................. F-37
Statements of Net Assets (Liabilities) -- As of December 31,
1998 and 1999............................................. F-38
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-39
Statements of Changes in Net Assets (Liabilities) for the
years ended December 31, 1997, 1998 and 1999.............. F-40
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-41
Notes to Financial Statements............................... F-42
ANAM SEMICONDUCTOR, INC.:
Report of Independent Accountants (Samil Accounting
Corporation).............................................. F-55
Consolidated Balance Sheets -- As of December 31, 1998 and
1999...................................................... F-57
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-58
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1998 and 1999.............. F-59
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-60
Notes to Consolidated Financial Statements.................. F-61
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.......................... F-96
Independent Auditors' 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................................... F-97
</TABLE>
F-1
<PAGE> 67
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)
F-2
<PAGE> 68
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<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.
F-3
<PAGE> 69
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<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.
F-4
<PAGE> 70
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RECEIVABLE OTHER
COMMON PAID-IN RETAINED FROM COMPREHENSIVE COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCKHOLDER INCOME TOTAL INCOME
------ ---------- -------- ----------- ------------- -------- -------------
<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,
re-classification 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.
F-5
<PAGE> 71
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------
1997 1998 1999
----------- ------------ ---------
<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.
F-6
<PAGE> 72
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
F-7
<PAGE> 73
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
"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 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.
F-8
<PAGE> 74
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 $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).
F-9
<PAGE> 75
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 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.
F-10
<PAGE> 76
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
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.
F-11
<PAGE> 77
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
Research and Development Costs
Research and development costs are charged to expense as incurred.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In June 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.
F-12
<PAGE> 78
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 term 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 W150 billion (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 (W50,000,000,000) 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
F-13
<PAGE> 79
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
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
F-14
<PAGE> 80
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
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.
F-15
<PAGE> 81
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
- 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 W250 billion ($208,000, using the
December 31, 1998 exchange rate of W1,207 to $1.00) of ASI debt held by
the creditor banks into: (1) W122.3 billion ($102,000 using the December
31, 1998 exchange rate) in equity shares of ASI, (2) W108.1 billion
($90,000 using the December 31, 1998 exchange rate) in five-year
non-interest bearing convertible debt and (3) W19.6 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 W5,000 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 W5,000 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 W1,135 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
F-16
<PAGE> 82
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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
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>
F-17
<PAGE> 83
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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>
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 (W50,000,000,000) 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.
F-18
<PAGE> 84
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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% 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.
F-19
<PAGE> 85
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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
F-20
<PAGE> 86
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
covenants as of December 31, 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.
F-21
<PAGE> 87
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
F-22
<PAGE> 88
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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
F-23
<PAGE> 89
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
settlement of the related assets or liabilities and the amount of taxable income
recognized within the Philippine statutory carryforward limit of 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>
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.
F-24
<PAGE> 90
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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
F-25
<PAGE> 91
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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
======= =========== =====
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
F-26
<PAGE> 92
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 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>
F-27
<PAGE> 93
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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>
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 OF EXERCISE PRICE GRANT DATE
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
F-28
<PAGE> 94
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 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
F-29
<PAGE> 95
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 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.
F-30
<PAGE> 96
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
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.
F-31
<PAGE> 97
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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>
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
F-32
<PAGE> 98
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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 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
</TABLE>
F-33
<PAGE> 99
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
<TABLE>
<CAPTION>
PACKAGING WAFER
AND TEST FABRICATION OTHER TOTAL
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
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>
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.
F-34
<PAGE> 100
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
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.
F-35
<PAGE> 101
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
F-36
<PAGE> 102
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Anam Semiconductor, Inc.
We have audited the accompanying statements of net assets of the Seongsu,
Pucheon and Pupyong Packaging Businesses of Anam Semiconductor, Inc. (the
"Seongsu, Pucheon and Pupyong Packaging Businesses" and "Anam") as of December
31, 1999 and 1998 and the related statements of operations, changes in net
assets and cash flows for the years ended December 31, 1999, 1998 and 1997.
These financial statements are the responsibility of the Seongsu, Pucheon and
Pupyong Packaging Businesses' 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 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 provide 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 the Seongsu, Pucheon and
Pupyong Packaging Businesses as of December 31, 1999 and 1998 and the results of
their operations and their cash flows for the years ended December 31, 1999,
1998 and 1997, in conformity with generally accepted accounting principles in
the United States of America.
As discussed in Note 1 to the accompanying financial statements, the
Seongsu, Pucheon and Pupyong Packaging Businesses' revenues are generated
primarily from semiconductor packaging and test services provided to Amkor
Technology Inc. ("Amkor") pursuant to supply agreements. The Seongsu, Pucheon
and Pupyong Packaging Businesses are dependent upon this support from Amkor.
As discussed in Note 3 to the accompanying financial statements, the
operations of the Seongsu, Pucheon and Pupyong Packaging Business, and those of
similar companies 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 4 to the accompanying financial statements,
on October 23, 1998, Anam entered into the Korean financial restructuring
program known as the "Workout 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 was granted certain economic concessions through the Workout Program
which was approved by its creditors committee.
/s/ SAMIL ACCOUNTING CORPORATION
--------------------------------------
Seoul, Korea
January 25, 2000, except as to Note 14,
which is as of February 28, 2000
F-37
<PAGE> 103
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESSES
OF ANAM SEMICONDUCTOR, INC.
STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
THOUSANDS OF U.S.
DOLLARS
--------------------
AS OF DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ -- $ --
Due from corporate, current............................... 277,918 70,151
Accounts and notes receivable
Trade, net of allowance for doubtful accounts.......... 3,416 4,907
Due from affiliates, net of allowance for doubtful
accounts.............................................. 26,844 5,826
Other.................................................. 3,653 3,480
Inventories............................................... 7,984 6,190
Advances.................................................. 1,281 1,113
Prepaid expenses and other current assets................. 1,154 601
Deferred taxes, current................................... 231 1,482
-------- --------
Total current assets.............................. 322,481 93,750
Property, plant and equipment, net.......................... 404,384 498,555
Due from corporate, non-current............................. 277 1,622
Deferred taxes, non-current................................. 41,656 60,531
Other....................................................... 4,953 7,013
-------- --------
Total assets...................................... 773,751 661,471
-------- --------
LIABILITIES
CURRENT LIABILITIES:
Corporate borrowings, current............................. 14,788 37,253
Trade accounts payable.................................... 28,298 9,557
Other accounts payable.................................... 23,062 3,467
Accrued expenses.......................................... 11,098 33,112
Other current liabilities................................. 2,747 3,876
-------- --------
Total current liabilities......................... 79,993 87,265
Corporate borrowings, non-current........................... 124,294 160,032
Accrued severance benefits, net............................. 45,122 48,849
-------- --------
Total liabilities................................. 249,409 296,146
-------- --------
Commitments and contingencies
NET ASSETS.................................................. $524,342 $365,325
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE> 104
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESSES
OF ANAM SEMICONDUCTOR, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THOUSANDS OF U.S. DOLLARS
--------------------------------
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Sales...................................................... $435,659 $409,929 $599,575
Cost of sales.............................................. 289,233 283,995 408,435
-------- -------- --------
Gross profit............................................... 146,426 125,934 191,140
Operating expenses:
Selling and administrative............................... 16,120 34,567 45,850
Research and development................................. 3,383 1,267 1,894
-------- -------- --------
Operating income........................................... 126,923 90,100 143,396
-------- -------- --------
Non-operating income (expense):
Interest income (expense), net........................ 19,091 (15,882) (5,508)
Foreign exchange gains (losses), net.................. (3,235) (26,860) 26,249
Gains (losses) from forward contracts................. 3,817 29,256 (96,719)
Other, net............................................ (1,449) 7,541 4,987
-------- -------- --------
18,224 (5,945) (70,991)
-------- -------- --------
Income before income tax provision......................... 145,147 84,155 72,405
Income tax (provision) benefit............................. (46,376) (30,289) 50,452
-------- -------- --------
Net income................................................. $ 98,771 $ 53,866 $122,857
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 105
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESSES
OF ANAM SEMICONDUCTOR, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS U.S. DOLLARS)
<TABLE>
<S> <C>
BALANCE AT JANUARY 1, 1997.................................. $189,595
Net income................................................ 122,857
Net capital contribution.................................. 5,246
--------
BALANCE AT DECEMBER 31, 1997................................ 317,698
Net income................................................ 53,866
Net capital distribution.................................. (6,239)
--------
BALANCE AT DECEMBER 31, 1998................................ 365,325
Net income................................................ 98,771
Net capital contribution.................................. 60,246
--------
BALANCE AT DECEMBER 31, 1999................................ $524,342
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 106
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESSES
OF ANAM SEMICONDUCTOR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THOUSANDS OF U.S. DOLLARS
---------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 98,771 $ 53,866 $ 122,857
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 133,452 137,181 116,534
Provision for severance benefits, net.................. (3,727) 17,107 (8,705)
Foreign exchange losses (gains), net................... 3,235 26,860 (26,249)
Losses (Gains) from forward contracts.................. (3,817) (29,256) 96,719
Deferred income taxes.................................. 20,126 30,289 (50,452)
Changes in operating assets and liabilities:
Decrease (Increase) in trade accounts receivable....... (19,527) 7,768 (483)
Decrease (Increase) in other accounts receivable....... (173) 24,260 (18,266)
Decrease (Increase) in inventories..................... (1,794) 9,051 7,109
Decrease (Increase) in advances........................ (168) 2,831 2,628
Decrease (Increase) in prepaid expenses................ (595) 83 1,785
Decrease in due from corporate......................... 32 1,131 5,705
Decrease (Increase) in other current assets............ 42 (42) --
Increase (Decrease) in trade accounts payable.......... 18,741 (6,719) (23,640)
Increase (Decrease) in other accounts payable.......... 19,595 (1,122) (2,517)
Decrease in accrued expenses........................... (18,197) (49,109) (8,653)
Decrease in other current liabilities.................. (1,129) (3,826) (14,174)
--------- --------- ---------
Net cash provided by operating activities............ 244,867 220,353 200,198
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advance from (to) corporate............................... (193,111) (208) 20,940
Acquisition of property, plant and equipment.............. (39,281) (24,345) (145,642)
Decrease in other assets.................................. 2,060 19 2,322
--------- --------- ---------
(230,332) (24,534) (122,380)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Corporate borrowings, net................................. (58,203) (174,194) (66,137)
Net capital contribution (distribution)................... 60,246 (6,239) 5,246
--------- --------- ---------
Net cash provided by (used in) financing
activities........................................ 2,043 (180,433) (60,891)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (16,578) (17,705) (15,042)
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS............. -- (2,319) 1,885
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. -- 2,319 434
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ -- $ -- $ 2,319
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................. $ 13,568 $ 12,842 $ 26,508
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 107
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
1. BUSINESS AND BASIS OF PRESENTATION
Business and Organization
Seongsu ("K1"), Pucheon ("K2") and Pupyong ("K3") Packaging Businesses,
established in 1976, 1984 and 1982, respectively, are providers of semiconductor
packaging and test services. K1, K2 and K3 are located in the Republic of Korea
and are owned and operated by Anam Semiconductor, Inc. ("Anam"). K1, K2 and K3
operate primarily for Amkor Technology, Inc. ("Amkor"), a United States
affiliate. K1, K2 and K3 package and test integrated circuits from wafers
provided by Amkor (the "Packaging Service") pursuant to supply agreements (the
"Supply Agreements") with Amkor. Consequently, substantially all of K1, K2 and
K3's revenues are derived from Packaging Services provided to Amkor pursuant to
the Supply Agreements (see Note 2).
The businesses of Anam and Amkor have been inter-related for many years and
are under the common ownership by Mr. H.S. Kim and his family. Mr. H.S. Kim
currently serves as Anam's honorary chairman and director of Anam and his eldest
son, Mr. James Kim, serves as Amkor's chairman and chief executive officer. Mr.
James Kim also serves as a director of Anam and as the chairman of the Anam
Group, consisting principally of companies in the Republic of Korea in the
electronics industries. As of December 31, 1999, Mr. H.S. Kim and his family
owned approximately 6.9% of the outstanding common stock of Anam and 58.8% of
the outstanding common stock of Amkor (see Note 4).
Basis of Presentation
The Securities and Exchange Commission in Staff Accounting Bulletin No. 55,
requires that historical financial statements of a subsidiary, division, or
lesser business component of another entity include certain expenses incurred by
the parent on its behalf. These expenses generally include, but are not limited
to, officer and employee salaries, rent, or depreciation, advertising,
accounting and legal services, other selling, general and administrative
expenses and other such expenses. These financial statements include such
expenses and services.
These financial statements present the assets, liabilities and results of
operations of K1, K2 and K3. Because K1, K2 and K3 did not previously prepare
separate financial statements, these financial statements were derived by
extracting the assets, liabilities and results of operations of K1, K2 and K3
from the corresponding Anam accounts. As a result, the carved out financial
statements contain allocations of certain Anam assets, liabilities, revenues and
expenses attributable to K1, K2 and K3 deemed reasonable by management to
present K1, K2 and K3 on a stand-alone basis. Although management is unable to
estimate the actual benefits which would have been realized and costs which
would have been incurred had the respective transactions been executed with
independent third parties, the allocation methodologies described below and
within the respective notes to financial statements, where appropriate, are
considered reasonable by management.
The financial position and results of operations of K1, K2 and K3 may,
however, differ from the results which may have been achieved had K1, K2 and K3
operated as an independent legal entity. Additionally, future expenses incurred
as an independent entity may not be comparable to the historical levels.
The statement of changes in net assets presents the net income (loss) of
the business and the net capital contribution or distribution made by Anam.
F-42
<PAGE> 108
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
The carved out financial statements are presented in accordance with
generally accepted accounting principles of the United States of America. All
amounts in these financial statements have been presented in thousands of U.S.
dollars, unless otherwise stated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by K1, K2 and K3 in the
preparation of these financial statements are summarized below.
Allocations
The financial statements reflect the assets, liabilities, revenue and
expenses that were directly related to K1, K2 and K3 as it operated within Anam.
In cases involving assets and liabilities not specifically identifiable to any
particular facility, a portion of such items were allocated to K1, K2 and K3
based on assumptions that management considered reasonable in the circumstances.
Anam uses a centralized approach to cash management and the financing of
its operations. Cash and cash equivalents, marketable securities, bank and other
loan guarantee deposits and debt not specifically identifiable to the operations
of any particular facility were allocated to K1, K2 and K3 based on asset and
debt ratio of Anam as of the beginning of 1995. The balances of these accounts
at the end of each subsequent period reflect the beginning allocated balance
plus the net cash inflow and outflow during the years as they related to K1, K2
and K3 resulting in the balance of cash requirement at year end. Those balances
of cash requirements of K1, K2 and K3 at the end of each year are used as the
basis for allocation of Anam's total cash and cash equivalents, marketable
securities, bank and other loan guarantee deposits and debt not specified,
identifiable to any division. Due to the fact that financing of operations and
utilization of the cash resources and investments is performed centrally, the
net interest expense on outstanding debt obligations plus income earned on
utilization of cash resources and investments of ASI are allocated to K1, K2 and
K3 on the same basis.
The statements of operations include management's estimates of all of the
costs of doing business, including specific corporate costs of K1, K2 and K3 and
certain allocated costs incurred by Anam on K1, K2 and K3's behalf including
finance, human resources, strategic planning, legal, accounting and tax. These
allocations were based on a variety of factors including, for example, the
number of employees, estimates of usage and revenues. Research and development
expenses were allocated based on the ratio of K1, K2 and K3's property, plant
and equipment to that of Anam's.
K1, K2 and K3 participated in certain centralized foreign currency and
interest rate risk management functions of Anam. As part of these activities,
derivative financial instruments were utilized to manage risks generally
associated with foreign currency and interest rate volatility. Although K1, K2
and K3 are not contractually obligated under these arrangements, the statements
of operations reflect the allocated benefits and costs from these functions.
Such allocations were based on net sales of each individual operating facility.
Related Party Arrangements
The businesses of Anam and Amkor have been inter-related for many years by
virtue of the Supply Agreements (see Note 1), family ties between their
respective shareholders and management, financial relationships, coordination of
product and operating plans, joint research and development activities and
shared intellectual property rights. The Supply Agreements between Anam
(including K1, K2 and K3)
F-43
<PAGE> 109
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
and Amkor govern the responsibility and the performance of Packaging Services by
Anam on behalf of Amkor and Amkor on behalf of Anam.
Under the Supply Agreements, Anam has granted to Amkor a first right to
substantially all of the Packaging Services capacity of Anam. Amkor, in return,
is responsible for sales of Anam's Packaging Services and is obligated to
actively and diligently market the Anam Packaging Services to potential and
existing customers. Pursuant to long-standing arrangements between Anam and
Amkor, all sales from Anam to Amkor are made through Anam USA ("A-USA"), a
wholly owned financing subsidiary of Anam. Pursuant to the Supply Agreements,
Amkor reimburses A-USA for the financing costs incurred in connection with trade
financing provided to Amkor. The Supply Agreements also provide that Amkor-
Anam, Inc., a subsidiary of Amkor, provide raw material procurement and related
services to Anam on a fee basis. Sales of K1, K2 and K3's packaging and testing
services to Amkor, made through A-USA, amounted to $407,751 in 1999 ($387,528 in
1998, $479,380 in 1997).
Under the Supply Agreements, pricing arrangements relating to the Packaging
Services provided by Anam to Amkor are subject to quarterly review and
adjustment on the basis of factors such as changes in the semiconductor market,
forecasted demand, product mix, capacity utilization and fluctuations in
exchange rates as well as the mutual long-term strategic interest of Amkor and
Anam. The Supply Agreements dated January 1, 1998 have a five-year term and may
be terminated by the parties thereto upon five years' written notice at any time
after expiration of such initial five-year term.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. The most significant estimates and assumptions relate to the allocation
of carved out financial information, the allowance for uncollectable accounts
receivable, depreciation and product warranty liability. Actual results could
differ from these estimates.
Financial Instruments
The amounts reported for trade and other accounts receivable, other assets,
trade and other accounts payable, accrued expenses and other liabilities and
corporate borrowings and long-term borrowings and accounts payable approximate
fair value due to their short maturities or interest rates which approximate
market rates. Obligations due to or receivables from related parties have no
ascertainable fair value as no market exists for such instruments.
Allowance for Doubtful Accounts
K1, K2 and K3 provide an allowance for doubtful accounts receivable based
on the aggregate estimated collectibility of accounts receivable.
Inventories
Inventories, which primarily consist of raw materials and supplies are
stated at the lower of cost or market, cost being determined by the weighted
average method, except for materials in-transit, for which cost is determined
using the specific identification method.
F-44
<PAGE> 110
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as set forth below :
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C>
Buildings................................................... 25 years
Machinery and equipment..................................... 2 - 6 years
Tools....................................................... 3 - 5 years
Furniture and fixtures...................................... 3 - 10 years
Vehicles.................................................... 2 - 5 years
</TABLE>
Upon retirement or other disposal of fixed assets, the costs and related
accumulated depreciation or amortization are eliminated from the accounts, and
any resulting gain or loss is reflected in operations for the period.
Routine maintenance and repairs are charged to expense as incurred.
Expenditures which enhance the value or materially extend the useful lives of
the related assets are capitalized.
Interest expense incurred during the construction period of assets on funds
borrowed to finance construction is capitalized.
Revenue recognition
Revenues from the sale of packaging services are recognized upon shipment
of goods to customers. K1, K2 and K3 do not take ownership of customer-supplied
semiconductors. Title remains with the customer for these materials at all
times. Accordingly, the cost of the customer-supplied materials is not included
in the financial statements. Risk of loss for K1, K2 and K3's packaging costs
passes upon completion of the packaging process and shipment to the customer.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
K1, K2 and K3 are not a separate taxable entity for Korean or international
tax purposes. Accordingly, income tax expense in the carved out financial
statements has been calculated on a separate tax return basis.
K1, K2 and K3 account for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
SFAS 109 requires an asset and liability approach for financial accounting and
reporting for income tax purposes. Under the asset and liability method,
deferred income taxes are recognized for temporary differences, net operating
loss carryforwards ("NOL") and tax credits by applying enacted statutory tax
rates applicable to future years. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Investment and R&D tax credits are accounted for by the flow-through method
whereby they reduce income taxes in the period the assets giving rise to such
credits are placed in service. To the extent such
F-45
<PAGE> 111
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
credits are not currently utilized, deferred tax assets, subject to
considerations about the need for a valuation allowance, are recognized for the
carryforward account.
Accrued Severance Benefits
Employees and directors with one year or more of service are entitled to
receive a lump-sum severance payment upon termination of their employment. The
amount of the payment is based on their length of service and salary at the date
of termination. The accrual for severance benefits approximates the amount
required to be paid by K1, K2 and K3 if all employees were terminated at the
date shown on the statement of net assets.
Foreign Currency
The U.S. dollar is K1, K2 and K3's functional currency. The accompanying
financial statements are remeasured into U.S. dollars from books and records
that were kept in Korean Won using the monetary/non-monetary method. Monetary
assets and liabilities, such as cash, receivables, borrowings and other
payables, are translated using the current exchange rate. Non-monetary assets
and liabilities, such as inventory and fixed assets, are translated using
historical exchange rates. Revenues and expenses are translated using average
exchange rates for the period, except for items related to non-monetary assets
and liabilities, which are translated using historical exchange rates. All
translation gains and losses are included in determining income for the period
in which exchange rates change. The exchange rates used to remeasure the
financial statements as of December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
KOREAN WON TO U.S. DOLLAR
-----------------------------------
END OF PERIOD AVERAGE
EXCHANGE RATES EXCHANGE RATES
---------------- ----------------
<S> <C> <C>
1999.................................. W1,134.50 = US$1 W1,189.30 = US$1
1998.................................. W1,195.80 = US$1 W1,398.88 = US$1
1997.................................. W1,695.80 = US$1 W 951.11 = US$ 1
</TABLE>
Impairment of Long-Lived Assets
Effective January 1, 1996, K1, K2 and K3 adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of." In accordance with this standard, management periodically evaluates the
carrying value of long-lived assets to be held and used, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flows are separately
identifiable and less than the asset's carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived assets. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
The adoption of this accounting standard did not have a material effect on K1,
K2 and K3's operating results or financial position.
Concentration of Credit Risk
Financial instruments which potentially expose K1, K2 and K3 to a
concentration of credit risk consist primarily of trade receivables.
F-46
<PAGE> 112
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
K1, K2 and K3 perform and sell their Packaging Services exclusively for
Amkor pursuant to the Supply Agreements. Any reduction in purchases by Amkor
could have an adverse impact on K1, K2 and K3's financial position, results of
operations and cash flows.
Risks and Uncertainties
K1, K2 and K3's business involves certain risks and uncertainties. Factors
that could affect K1, K2 and K3's future operating results and cause actual
results to vary materially from expectations include, but are not limited to,
dependence on a cyclical semiconductor and personal computer industry that is
characterized by rapid technological changes, fluctuations in end-user demands,
evolving industry standards, competitive pricing and declines in average selling
prices, risks associated with foreign currencies, and enforcement of
intellectual property rights. Additionally, the market in which K1, K2 and K3
operates is very competitive. Key elements of competition in the independent
semiconductor packaging market include breadth of packaging offerings,
time-to-market, technical competence, design services, quality, production
yields, reliability of customer service and price. Additionally, substantially
all of K1, K2 and K3's revenues are derived from Packaging Services provided to
Amkor pursuant to the Supply Agreements. Other risks exist as of December 31,
1999 as they are described in Workout Program in Note 4.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" which establishes a comprehensive standard on accounting for
derivatives and hedging. It is effective for all fiscal years beginning after
June 2000. K1, K2 and K3 have reviewed the provisions of the SFAS No. 133 and
has not yet quantified the impact of adopting SFAS No. 133; however, SFAS No.
133 could increase volatility in earnings.
3. UNSTABLE ECONOMIC ENVIRONMENT
In connection with the Asian financial crisis which began in 1997, the
Korean economy as well as other economies in the Asia Pacific region experienced
economic contractions, a reduction in the availability of credit, increased
interest rates, increased inflation, negative fluctuations in currency exchange
rates, increased numbers of bankruptcies, increased unemployment and labor
unrest. Such conditions had a significant adverse effect on the operations of
the Company and other companies in Korea and in the Asia Pacific region.
Recently, economic conditions in the Republic of Korea have improved as
evidenced by increased trade surplus, increases in foreign exchange reserves,
record levels of foreign investment and economic growth, lower inflation and
interest rates and stabilized foreign exchange rates. Notwithstanding the
current recovery, significant uncertainties still exist related to the economy
in Korea and in the Asia Pacific region.
4. WORKOUT PROGRAM
Anam has guaranteed certain debt obligations of equity investees and
affiliated companies, including Anam Engineering & Construction Co., Ltd. ("Anam
Construction"), Anam Environmental Industry Co., Ltd. ("Anam environment") and
Anam Electronics Co., Ltd., ("Anam Electronics"), which face serious financial
difficulties.
In response to this situation, Anam management has undertaken certain
measures it considers appropriate, including: (1) disposing of Kwangju Packaging
factory ("K4"); (2) placing Anam
F-47
<PAGE> 113
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
Construction into corporate reorganization under the Korean Corporate
Reorganization Act; and (3) enlisting jointly, on October 23, 1998 Anam, Anam
Electronics and Anam Environment into the "Workout Program", a financial
restructuring program supervised by the Korean Financial Supervisory Committee
("FSC"). 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 negotiations between the companies and the creditors committee
represented by banks and other financial institutions providing financing to
Anam, Anam Electronics and Anam Environment and does not involve the judicial
system. The Workout Program also allows the companies to resume their operations
uninterrupted and does not impact debt outstanding with trade creditors.
On February 23, 1999, the following basic conditions and terms of Anam's
Workout Program were agreed to and approved by its creditors committee: (1)
five-year extension of the loan and capital leases repayment schedules; (2)
reduction of bank loan interest rates to Korean prime rate; (3) conversion of
certain outstanding bank loans of Anam approximating 122 billion Won and 108
billion Won to equity shares and convertible bonds, respectively; (4) five-year
suspension of the creditor's right to demand performance on loan guarantees made
by Anam on behalf of its affiliates. In order for the initial conversion of debt
to take place in accordance with the terms of the Workout, Anam 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 conversion of Anam debt by the creditor financial
institutions would coincide with each installment of Amkor's equity investment
in Anam as described below. The Workout contained provision for the entitlement
of the creditor financial institutions to vote the ASI shares owned by Mr. James
Kim and his family. Anam did not recognize any gain or loss as a result of the
Workout Program.
In addition to the basic restructuring terms as stated above, the approved
Workout Program also requires Mr. James Kim, the chairman of the Anam Group or
Amkor, to make capital contributions to Anam totaling $150,000 over the next
four years in exchange for equity shares of Anam at par value.
On May 13, 1999, Anam's Workout Program became effective upon signing of a
Memorandum of Understanding, which document detailed conditions and terms of
Anam's Workout Program, between Anam and the creditors committee.
The creditor financial institutions have the right to terminate or modify
the Workout if Anam does not fulfill the terms of the Workout, including meeting
certain financial targets. In addition, the creditor financial institutions can
modify the terms of the Workout upon agreement of creditor financial
institutions holding at least 75% of the debt restructured under the Workout. If
the creditor financial institutions subsequently terminate the Workout, the
creditor financial institutions could reinstate and enforce the original terms
of Anam's debt, including accelerating Anam's obligations and pursuing Anam's
guarantees of its affiliates' debt. If this were to occur, Anam's businesses
would be harmed.
There can be no assurance that Anam will be able to satisfy the terms of
the Workout Agreement. Any inability of Anam to comply with the terms of the
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 Anam's ability to continue to provide
services.
Anam Electronics' application for Workout Program was not accepted by the
creditors committee. As a result, on March 18, 1999, Anam Electronics filed an
application for corporate reorganization under the Korean Corporate
Reorganization Act and the district court approved Anam Electronics'
reorganization plan on February 7, 2000. On the other hand, Anam Environment's
application for Workout was accepted by its creditors committee on February 23,
1999. The probable outcome of these events was taken into
F-48
<PAGE> 114
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
consideration by Anam in estimating its liability under guarantees on the debts
of its equity investees and affiliates. No such liabilities are reflected in the
accompanying financial statements.
5. DUE FROM CORPORATE
As discussed in Note 1 to these financial statements, K1, K2 and K3 do not
undertake their own cash management functions and instead rely on Anam for such
activities. As such, any cash requirements are met by Anam or cash surplus is
maintained by Anam. The amounts due to K1, K2 and K3 at December 31, 1999 and
1998 consist of: (1) allocated cash and cash equivalents, marketable securities,
bank deposits and related receivables which are legally entered into and
maintained by Anam and (2) the amount by which obligations under capital lease
of K1, K2 and K3 exceed K1, K2 and K3's allocated portion of corporate
borrowings as of December 31, 1999 and 1998. The bank deposits and long-term
guarantee deposits which are maintained by Anam are denominated in Korean Won,
U.S. Dollars and Japanese Yen. Anam has purchased marketable securities for
purposes other than trading. Such securities consist primarily of debt
securities issued by the Korean government. K1, K2 and K3 do not have any
formalized cash management arrangements with Anam. Consequently, the amounts due
from Anam have been classified as current and long-term based on the maturity
dates, management's intent or restrictions of the underlying instruments.
6. INVENTORIES
Inventories at December 31, 1999 and 1998 comprise the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1999 1998
------ ------
<S> <C> <C>
Finished products........................................... $13,643 $12,370
Semi-finished products and work in process.................. 2,446 1,573
Raw materials and supplies.................................. 1,895 2,247
------ ------
$7,984 $6,190
====== ======
</TABLE>
F-49
<PAGE> 115
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1999 and 1998 comprise the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Buildings................................................... $ 214,190 $ 215,188
Machinery and equipment..................................... 861,200 838,673
Tools....................................................... 4,548 4,974
Furniture and fixtures...................................... 43,710 41,765
Vehicles.................................................... 1,696 2,113
---------- ----------
1,125,344 1,102,713
Accumulated depreciation.................................... (736,459) (636,056)
Governmental grants......................................... (1,247) (749)
---------- ----------
387,638 465,908
Land........................................................ 16,605 31,710
Construction in progress.................................... -- 820
Machinery in transit........................................ 141 117
---------- ----------
$ 404,384 $ 498,555
========== ==========
</TABLE>
At December 31, 1999, property, plant and equipment, other than land, were
insured against fire and other casualty losses up to approximately $638,392.
Capitalized interest costs for the year ended December 31, 1999 approximate
$432.
Buildings of K1, K2 and K3 at December 31, 1999 are pledged as collateral
for various loans obtained by Anam from banks, including Korea Development Bank,
up to a maximum amount of $634,471 (see Note 8).
Property, plant and equipment under capital leases which include machinery,
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cost of machinery and equipment under capital lease......... $ 250,651 $ 249,538
Accumulated depreciation.................................... (159,353) (111,126)
--------- ---------
$ 91,298 $ 138,412
========= =========
</TABLE>
F-50
<PAGE> 116
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
Future minimum lease payments under noncancelable capital leases as of
December 31, 1999 are as follows:
<TABLE>
<S> <C>
FOR YEARS ENDED DECEMBER 31,
2000........................................................ $ 27,628
2001........................................................ 27,775
2002........................................................ 27,664
2003........................................................ 27,544
2004........................................................ 27,417
Thereafter.................................................. 54,412
--------
Total minimum lease payments................................ 192,440
Less amount representing interest........................... (53,358)
--------
Present value of minimum lease payments..................... 139,082
Less: portion due within one year........................... (14,788)
--------
$124,294
========
</TABLE>
8. CORPORATE BORROWINGS
K1, K2 and K3 do not undertake their own financing but have been able to
benefit from the financing obtained by Anam. As of December 31, 1999 and 1998,
the balances of current and non-current include allocated corporate borrowings
limited to the obligations of K1, K2 and K3 for capital lease (see Note 7). Cash
requirement of K1, K2 and K3 as of December 31, 1999 and 1998 is less than
obligations under capital lease of K1, K2 and K3. The difference between the
cash requirement and the obligations under capital lease is recorded as due from
corporate, current.
Anam has entered into various types of financing arrangements including
short-term working capital borrowings, six-month trade letters of credit
financings, general term loans, guaranteed and non-guaranteed debentures,
convertible bonds, capital lease obligations and other long-term financing. K1,
K2 and K3 do not have their own six-month trade letters of credit but benefits
from such letters of credit when needed. Certain of these lines of credit and
borrowings have been guaranteed by affiliates and subsidiaries of Anam.
K1, K2 and K3 do not have any debt sharing or other arrangements with Anam.
Consequently, the amounts due to Anam have been classified as current and
long-term based on the expected maturities of Anam's contractual obligations.
9. FINANCIAL INSTRUMENTS
In the normal course of business, Anam has purchased various financial
instruments, including derivative instruments for purposes other than trading.
Derivative financial instruments are not entered into for speculative purposes.
Anam enters into foreign currency exchange contracts, including forward and swap
contracts, to manage the exposure to changes in currency exchange rates,
principally U.S. Dollars. The use of foreign currency forward contracts and
swaps allows Anam to reduce its exposure to the risk that the eventual Korean
Won cash outflows resulting from facility operating expenses, capital
expenditures, local supplier purchases and debt service will be adversely
affected by changes in exchange rates. Gains and losses on these foreign
exchange contracts entered into by Anam and that hedge
F-51
<PAGE> 117
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
forecasted transactions are recognized in income as the exchange rates change.
At December 31, 1999, the forward contracts and swap contracts under which Anam
is contractually obligated expire as follows:
Currency and interest swap
<TABLE>
<CAPTION>
CONTRACT CONTRACTED RECEIVING PAYING CONTRACT
BANK AMOUNT EXCHANGE RATE RATE(%) RATE(%) DUE DATE
---- -------- ------------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Korea Development Bank................ $50,000 W938 : US$1 9.95 6.25 Oct. 10, 2000
Shinhan Bank.......................... $10,000 W882 : US$1 10.20 6.90 Apr. 24, 2000
Korea Merchant Bank................... $20,000 W882 : US$1 10.20 6.90 Apr. 24, 2000
</TABLE>
Interest swap
<TABLE>
<CAPTION>
CONTRACT SELLING BUYING CONTRACT
BANK AMOUNT RATE(%) RATE(%) TERMS
---- -------- ------------- ------- --------------
<S> <C> <C> <C> <C>
Chase Manhattan Bank....................... $100,000 6 month LIBOR 5.80 Sept. 16, 2000
</TABLE>
10. ACCRUED SEVERANCE BENEFITS
Changes in accrued severance benefits for the year ended December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Beginning balance........................................... $54,620 $34,435
Provision, net of payments and translation gain/loss........ (4,143) 20,185
------- -------
Ending balance.............................................. 50,477 54,620
Balance of payments remaining with National Pension Fund.... (5,355) (5,771)
------- -------
$45,122 $48,849
======= =======
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
At December 31, 1999 Anam was contingently liable for guarantees of
indebtedness of subsidiaries and affiliated companies of Anam approximating
$411,896.
At December 31, 1999, Anam provided notes and checks, including 40 blank
notes and 28 blank checks, to several banks and financial institutions as
collateral in relation to various borrowings and guarantees of indebtedness.
Anam has made agreements with various banks to discount notes up to an
aggregate maximum amount of $281,401 at December 31, 1999.
F-52
<PAGE> 118
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
12. INCOME TAXES
The tax provision (benefit) consists of the following :
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Current.............................................. $26,250 $ -- $ --
Deferred............................................. 20,126 30,289 (50,452)
------- ------- --------
$46,376 $30,289 $(50,452)
======= ======= ========
</TABLE>
K1, K2 and K3 incurs income tax liabilities in Korean Won and based upon
taxable income determined in accordance with Korean generally accepted
accounting principles and tax laws. The tax provision included in these
financial statements reflects current tax expense and the impact of accounting
for deferred taxes under SFAS 109 on a separate tax return basis. K1, K2 and K3
do not have any formalized tax sharing agreement with Anam.
The deferred tax consequences of temporary differences in reporting items
for financial statement and income tax purposes are recognized, if appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including K1, K2 and K3's ability to generate taxable
income within the period during which the temporary differences reverse, the
outlook for the Korean economy environment and the overall future industry
outlook. Management has considered these factors in reaching its conclusion as
to the valuation allowance for financial reporting purposes. Such valuation
allowance is reviewed periodically.
The major components of the deferred tax assets and deferred tax
liabilities as of December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1999 1998
------- -------
<S> <C> <C>
Deferred tax assets
Corporate borrowings...................................... $ -- $ 237
Forward contracts......................................... 231 475
Provision for severance benefits, net..................... 11,823 11,459
Property, plant and equipment, net........................ 29,833 34,181
Tax credit................................................ -- 14,517
Other..................................................... -- 1,144
------- -------
Total deferred tax assets......................... $41,887 $62,013
======= =======
</TABLE>
F-53
<PAGE> 119
SEONGSU, PUCHEON AND PUPYONG PACKAGING BUSINESS
OF ANAM SEMICONDUCTOR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
-------------------------
The statutory income tax rates, including tax surcharges, applicable to K1,
K2 and K3 for 1999, 1998 and 1997 are approximately 30.8%. The reconciliation
from income taxes calculated at the statutory tax rate to the effective income
tax amount for each of the periods is as follows :
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Taxes at Korean statutory tax rate.......................... $44,705 $25,919 $ 22,301
Remeasurement effect........................................ 3,279 14,516 (56,317)
Tax credit incurred......................................... -- (2,224) (22,435)
Other, net.................................................. (1,608) (7,922) 5,999
------- ------- --------
Effective income tax provision (benefit).................. $46,376 $30,289 $(50,452)
======= ======= ========
</TABLE>
13. GEOGRAPHICAL INFORMATION
K1, K2 and K3 operate in one industry segment, semiconductor packaging and
test services. All of their assets are located in the Republic of Korea.
Sales amounts from external customers by country is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
U.S.A. ............................................ $407,751 $387,528 $479,380
Japan.............................................. -- 3,243 93,586
Republic of Korea.................................. 27,908 19,158 26,609
-------- -------- --------
$435,659 $409,929 $599,575
======== ======== ========
</TABLE>
14. SUBSEQUENT EVENT
On February 28, 2000, Anam made a decision to sell to Amkor all operating
assets related to Packaging Business excluding K2 land in accordance with the
approval of Anam's board of directors' meeting and Anam's creditors committee.
The sale price of Packaging Business is Korean Won equivalent to $950 million.
F-54
<PAGE> 120
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.
F-55
<PAGE> 121
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 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
F-56
<PAGE> 122
ANAM SEMICONDUCTOR, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
THOUSANDS OF US DOLLARS
---------------------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 56,469 $ 15,452
Restricted cash........................................... 41,086 --
Bank deposits............................................. 105,414 10,936
Accounts and notes receivable
Trade, net of allowance for doubtful accounts........... 3,416 50,180
Due from affiliates, net of allowance for doubtful
accounts............................................... 29,377 14,737
Other................................................... 22,797 10,153
Short-term loans to affiliates, net....................... 4,464 14,108
Inventories............................................... 41,949 59,807
Other current assets...................................... 6,894 22,597
---------- ----------
Total current assets................................ 311,866 197,970
Non-current bank deposits................................... 204 879
Restricted cash............................................. 73 2,351
Investments
Available for sale........................................ 28,128 34,009
Affiliated companies...................................... 18,550 19,146
Long-term receivables
Due from affiliate........................................ 250 --
Others.................................................... 2,906 5,729
Property, plant and equipment, less accumulated
depreciation.............................................. 1,037,935 1,581,614
Deferred tax asset -- noncurrent............................ 53,212 --
Other assets................................................ 34,345 37,252
---------- ----------
Total assets........................................ $1,487,469 $1,878,950
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $ 69,328 $ 228,112
Current portion of long-term debt......................... 73,882 13,954
Trade accounts and notes payable.......................... 48,902 42,759
Other accounts payable.................................... 77,141 75,211
Accrued expenses.......................................... 3,850 16,504
Forward contract liability................................ 15,364 36,968
Other current liabilities................................. 13,318 6,260
---------- ----------
Total current liabilities........................... 301,785 419,768
Long-term debt, net of current portion and discounts on
debentures................................................ 875,175 1,309,492
Long-term obligations under capital leases, net of current
portion................................................... 429,590 582,936
Accrued severance benefits, net............................. 48,757 65,727
Liability for loss contingency.............................. 129,912 97,344
Other long-term liabilities................................. -- 2,056
---------- ----------
Total liabilities................................... $1,785,219 $2,477,323
---------- ----------
Commitments and contingencies
Minority interests in consolidated subsidiaries............. $ -- $ 17,433
---------- ----------
Stockholders' equity:
Capital stock, W5,000 par value; authorized 300 million
shares of common stock and 10 million shares of
preferred stock.........................................
Common stock: issued and outstanding 55,031,183 shares in
1999 and 30,477,018 shares in 1998...................... 284,329 192,849
Series A preferred stock: issued and outstanding 2,240,240
shares in 1999 and 1998................................. 15,167 15,167
Series B preferred stock: issued and outstanding 336,036
shares in 1999 and 1998................................. 2,220 2,220
---------- ----------
301,716 210,236
Capital surplus........................................... 190,409 182,347
Receivable from stockholders.............................. (62,118) (116,417)
Accumulated deficit....................................... (712,000) (864,905)
Accumulated comprehensive income (loss):
Unrealized gains (losses) in investments................ (911) 1,728
Cumulative translation adjustment....................... (14,846) (28,795)
---------- ----------
Total stockholders' equity.......................... (297,750) (615,806)
---------- ----------
Total liabilities and stockholders' equity.......... $1,487,469 $1,878,950
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 123
ANAM SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THOUSANDS OF US DOLLARS
--------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Sales....................................................... $ 285,925 $ 221,098 $ 406,937
Cost of sales............................................... 239,632 230,478 314,666
----------- ----------- -----------
Gross profit................................................ 46,293 (9,380) 92,271
----------- ----------- -----------
Operating expenses
Research and development.................................. 87 2,064 --
Amortization of goodwill.................................. -- 768 5,334
Provision for doubtful accounts........................... 901 1,496 3,787
Impairment of long-lived assets........................... -- 273,937 15,942
Selling and administrative expenses....................... 24,267 25,064 75,443
----------- ----------- -----------
Total operating expenses................................ 25,255 303,329 100,506
----------- ----------- -----------
Operating income (loss)..................................... 21,038 (312,709) (8,235)
----------- ----------- -----------
Other (income) expense
Interest income........................................... (5,902) (20,715) (45,151)
Interest expense.......................................... 185,315 227,799 168,932
Foreign currency (gains) loss............................. 33,198 142,605 (159,897)
Loss (gain) from disposal of investments.................. 601 (23,082) (4,972)
Loss on valuation of inventories.......................... 2,041 15,140 543
Impairment loss on loans to affiliates.................... 22,646 122,188 --
Guarantee obligation loss................................. -- 97,344 --
Other, net................................................ (24,889) 12,808 4,598
----------- ----------- -----------
Total other (income) expense............................ 213,010 574,087 (35,947)
----------- ----------- -----------
Income (loss) from continuing operations before income
taxes, equity in loss of affiliates and minority
interest.................................................. (191,972) (886,796) 27,712
Equity in loss of unconsolidated affiliates................. (31,787) (66,792) (18,137)
Minority interest........................................... -- (2,035) (1,720)
----------- ----------- -----------
Income (loss) from continuing operations before income
taxes..................................................... (223,759) (955,623) 7,855
Provision (benefit) for income taxes........................ (54,000) 1,542 109,894
----------- ----------- -----------
Income (loss) from continuing operations.................... (169,759) (957,165) (102,039)
Discontinued operations:
Income from discontinued packaging and testing operation
(net of income taxes of $12,408; $0; $0)................ 130,064 109,632 143,469
Gain on sale of K4 (net of income taxes of $14,268; $0;
$0)..................................................... 149,560 -- --
----------- ----------- -----------
Net income (loss)........................................... $ 109,865 $ (847,533) $ 41,430
=========== =========== ===========
Unrealized gains (losses) in investments.................. (2,639) 7,892 (5,000)
Translation adjustment (loss)............................. 13,949 (38,352) 8,450
----------- ----------- -----------
Comprehensive income........................................ $ 121,175 $ (877,993) $ 44,880
=========== =========== ===========
PER SHARE DATA:
Basic income (loss) from continuing operations per common
share..................................................... $ (5.82) $ (40.43) $ (4.87)
=========== =========== ===========
Basic net income (loss) per common share.................... $ 3.76 $ (35.80) $ 1.97
=========== =========== ===========
Diluted income (loss) from continuing operation a per common
share..................................................... $ (5.82) $ (40.43) $ (4.87)
=========== =========== ===========
Diluted net income (loss) per common share.................. $ 3.42 $ (35.80) $ 1.84
=========== =========== ===========
Shares used in computing basic net income (loss) per common
share..................................................... 29,208,739 23,675,158 20,968,843
=========== =========== ===========
Shares used in computing diluted net income (loss) per
common share.............................................. 32,444,686 23,675,158 23,193,850
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 124
ANAM SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( IN THOUSANDS OF US DOLLARS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------- -------------------- CAPITAL RECEIVABLE FROM
SHARES AMOUNT SHARES AMOUNT SURPLUS STOCKHOLDERS
---------- -------- --------- ------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.................... 21,134,068 $137,372 2,240,240 $15,167 $143,321 $ (36,186)
Comprehensive income:
Net income..................................
Unrealized gains (loss) on investments......
Currency translation adjustments............
Comprehensive income..........................
Net cash advances to stockholders............. (93,623)
Stock dividends............................... 3,170,110 20,941 336,036 2,220 (23,161)
Issuance of common stock...................... 6,172,840 34,536 62,187
---------- -------- --------- ------- -------- ---------
Balance at December 31, 1997.................. 30,477,018 192,849 2,576,276 17,387 182,347 (129,809)
---------- -------- --------- ------- -------- ---------
Comprehensive loss:
Net loss....................................
Unrealized gains on investments.............
Currency translation adjustments............
Comprehensive loss............................
Collection of receivable from stockholders.... 13,392
---------- -------- --------- ------- -------- ---------
Balance at December 31, 1998.................. 30,477,018 192,849 2,576,276 17,387 182,347 (116,417)
---------- -------- --------- ------- -------- ---------
Comprehensive loss:
Net income..................................
Unrealized gains on investments.............
Currency translation adjustments............
Comprehensive income (loss):..................
Reverse stock split........................... (6,801,860) (43,040)
Issuance of common stock for cash............. 10,000,000 41,695
Debt to equity conversion..................... 19,669,600 82,011
Convertible bonds to equity conversion........ 1,686,425 10,814 8,906
Others........................................ (844)
Collection of receivable from stockholders.... 54,299
---------- -------- --------- ------- -------- ---------
Balance at December 31, 1999.................. 55,031,183 $284,329 2,576,276 $17,387 $190,409 $ (62,118)
========== ======== ========= ======= ======== =========
<CAPTION>
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE
DEFICIT INCOME TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
Balance at January 1, 1997.................... $ (58,802) $ (57) $ 200,815
Comprehensive income:
Net income.................................. 41,430 41,430
Unrealized gains (loss) on investments...... (5,000) (5,000)
Currency translation adjustments............ 8,450 8,450
---------
Comprehensive income.......................... 44,880
Net cash advances to stockholders............. (93,623)
Stock dividends...............................
Issuance of common stock...................... 96,723
--------- -------- ---------
Balance at December 31, 1997.................. (17,372) 3,393 248,795
--------- -------- ---------
Comprehensive loss:
Net loss.................................... (847,533) (847,533)
Unrealized gains on investments............. 7,892 7,892
Currency translation adjustments............ (38,352) (38,352)
---------
Comprehensive loss............................ (877,993)
Collection of receivable from stockholders.... 13,392
--------- -------- ---------
Balance at December 31, 1998.................. (864,905) (27,067) (615,806)
--------- -------- ---------
Comprehensive loss:
Net income.................................. 109,865 109,865
Unrealized gains on investments............. (2,639) (2,639)
Currency translation adjustments............ 13,949 13,949
---------
Comprehensive income (loss):.................. 121,175
Reverse stock split........................... 43,040 --
Issuance of common stock for cash............. 41,695
Debt to equity conversion..................... 82,011
Convertible bonds to equity conversion........ 19,720
Others........................................ (844)
Collection of receivable from stockholders.... 54,299
--------- -------- ---------
Balance at December 31, 1999.................. $(712,000) $(15,757) $(297,750)
========= ======== =========
Unrealized
losses in
investments $ (911)
Cumulative
translation
adjustment (14,846)
--------
$(15,757)
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-59
<PAGE> 125
ANAM SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THOUSANDS OF U.S. DOLLARS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 109,865 $(847,533) $ 41,430
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 271,513 291,915 138,627
Provision for severance benefits.......................... 10,472 35,228 23,263
Losses (gains) on foreign currency translation, net....... 33,198 142,605 (159,897)
Losses (gains) on sale of investments, net................ 601 (23,082) (4,972)
Impairment of long-lived assets........................... -- 273,937 15,942
Impairment loss on loan to affiliates..................... 22,646 122,188 --
Guarantee obligation loss................................. -- 97,344 --
Loss on investment in equity method investees, net........ 31,787 66,792 18,137
Gains on disposal of K4 and other......................... (180,453)
Other, net................................................ 10,830 32,841 28,492
Change in operating assets and liabilities, net of
deconsolidation effects...................................
Decrease (increase) in trade accounts and notes
receivable.............................................. 24,825 13,564 9,750
Decrease (increase) in other accounts receivable.......... (25,844) 32,763 1,437
Decrease in contracts receivable.......................... -- -- 15,461
Decrease (increase) in due from affiliates................ (43,339) (7,764) (51,939)
Decrease (increase) in inventories........................ (1,009) (31,951) 72,412
Decrease (increase) in other current assets............... 14,471 39,412 (35,167)
Increase (decrease) in trade accounts and notes payable... 16,202 (9,597) 7,592
Increase (decrease) in other accounts payable............. (1,123) 43,869 80
Increase (decrease) in forward contract credit............ (20,943) (79,329) 104,968
Increase (decrease) in other current liabilities.......... (13,922) (2,495) (7,974)
Increase in deferred tax asset............................ (53,212) -- --
Payments of severance benefits............................ (6,492) (6,099) (6,755)
--------- --------- ---------
Net cash provided by operating activities............... $ 200,073 $ 184,608 $ 210,887
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in bank deposits...................... $ (99,418) $ 9,403 $ 235,711
Decrease (increase) in short term loans................... 7,788 (227,641) (15,228)
Acquisition of property, plant and equipment.............. (183,650) (140,290) (511,620)
Proceeds from sale of property, plant and equipment
(including K4).......................................... 624,791 1,712 18,740
Acquisition of investments................................ (1,247) (8,937) (26,959)
Disposal of investment including AAPI..................... 41,425 39,698 6,353
Decrease (increase) in non-current bank deposits.......... (204) 18,034 2,179
Decrease (increase) in restricted cash.................... (41,132) 85,647 (66,955)
Decrease (increase) in long-term receivables.............. 1,485 171,979 (97,522)
Decrease (increase) in other assets....................... 128 (11,173) 20,919
Deconsolidation of subsidiaries........................... (6,279) (1,005) --
--------- --------- ---------
Net cash (used in) provided by investing activities..... 343,687 (62,573) (434,382)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings.............. (47,286) (91,884) 286,938
Repayment of current maturities of long-term debt......... (10,545) (48,206) (91,391)
Borrowing of long-term debt............................... 48,054 10,572 312,243
Repayment of long-term debt............................... (484,448) (50,175) (1,054)
Repayment of long-term obligations under capital leases... (61,597) (39,848) (2,556)
Increase (decrease) in other long-term liabilities........ 117 1,883 15,507
Dividends paid............................................ -- -- --
Decrease (increase) in receivable from stockholders....... 54,299 13,392 (93,623)
Increase in capital....................................... 41,695 -- 96,723
--------- --------- ---------
Net cash (used in) provided by financing activities..... (459,711) (204,266) 522,787
--------- --------- ---------
Effect of exchange rate changes on cash..................... (43,032) 59,935 (316,111)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 41,017 (22,296) (16,819)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 15,452 37,748 54,567
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 56,469 $ 15,452 $ 37,748
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 197,716 $ 221,900 $ 133,157
========= ========= =========
Income taxes............................................ $ 15,658 $ 2,812 $ 5,322
========= ========= =========
Property, plant and equipments acquired through capital
leases.................................................. $ 1,116 $ 54,748 $ 505,897
========= ========= =========
Capital increase through debt conversion.................. $ 101,731 $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-60
<PAGE> 126
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
1. ORGANIZATION AND NATURE OF BUSINESS:
The Controlling Company
Anam Semiconductor, Inc. (hereinafter referred to as "Anam" or "ASI"),
incorporated in the Republic of Korea in August 1956, is a provider of
semiconductor packaging and test services. In 1998, Anam commenced operations to
fabricate and sell non-memory semiconductor chips ("wafer fabrication").
Anam changed its name from Anam Industrial Co., Ltd. to Anam Semiconductor,
Inc. on March 20, 1998.
Anam's semiconductor packaging and test facilities operate primarily for
Amkor Technology, Inc. ("Amkor"), a United States affiliate. Anam packages and
tests integrated circuits from wafers provided by Amkor (the "Packaging
Service") pursuant to supply agreements (the "Supply Agreements") with Amkor. In
addition, pursuant to the manufacturing and purchasing agreements with Texas
Instruments Incorporated ("TI"), a United States corporation, further discussed
in Note 3, Anam fabricates wafers, which are also sold to Amkor.
The businesses of Anam and Amkor have been inter-related for many years and
are under the common ownership by Mr. H.S. Kim and his family (the "Kim
Family"). Mr. H.S. Kim currently serves as Anam's honorary chairman and his
eldest son, Mr. James Kim, serves as Amkor's chairman and chief executive
officer. Mr. James Kim also serves as a director of Anam and as the chairman of
the Anam Group, consisting principally of companies in the Republic of Korea in
the electronics and construction industries. As of December 31, 1999, Mr. H.S.
Kim and his family owned approximately 6.9% of the outstanding common stock of
Anam and 58.8% of the outstanding common stock of Amkor (See Note 5).
Consolidated Subsidiaries and Significant Equity Investees:
(A) Major subsidiaries and significant equity investees included in the
accompanying financial statements by either consolidation or equity method of
accounting at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
SUBSIDIARIES CAPITAL STOCK
------------ ------------------------- DIRECT AND
MILLIONS OF THOUSAND OF INDIRECT METHOD OF
WON US DOLLARS OWNERSHIP(%) ACCOUNTING
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Anam Instruments*............................. W12,746 $16,823 21.57 Equity
Anam Construction**........................... 25,898 32,563 49.00 Equity
Anam Environment**............................ 1,200 1,729 50.83 Equity
Anam USA...................................... 0.08 0.1 100.00 Consolidation
Acqutek (formerly, Anam S&T).................. 24,062 27,248 17.55 Equity
Anam Finance.................................. 39,000 45,899 44.60 Equity
Anam Telecom.................................. 47,958 57,135 29.51 Equity
</TABLE>
- -------------------------
* This entity was consolidated in 1998 and 1997 but deconsolidated in 1999.
** These entities were consolidated in 1997 but deconsolidated in 1999 and 1998.
(B) A summary of the subsidiaries referred to above is as follows:
Anam Instruments Co., Ltd. (Anam Instruments)
Anam Instruments was established under the name of Handeung Co., Ltd. in
February, 1989 to manufacture and sell electronic parts and equipment. In
December 1990, it merged with Anam Horologe Co., Ltd., an affiliate engaged in
manufacturing and selling watches. Concurrently, the company changed
F-61
<PAGE> 127
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
its name to Anam Instruments Co., Ltd. In October 1994, Anam Instruments
obtained the optical products and semiconductor machinery business of Anam.
As of December 31, 1999, its capital stock is W12,746 million ($16,823), of
which Anam Semiconductor owned 21.57%.
Anam Engineering and Construction Co., Ltd. (Anam Construction)
Anam Construction was incorporated in March 1983. Anam Construction is a
construction contractor for industrial and commercial buildings and is engaged
in the construction of condominiums primarily in the Republic of Korea. Its
major customers are affiliated companies in the Anam Group. As of December 31,
1999, Anam Construction has outstanding capital stock of W25,898 million
($32,563), of which Anam owned 49.00%. Anam Construction became insolvent and
filed an application for corporate reorganization under the Korean Corporate
Reorganization Act on October 24, 1998. It is currently under the control of a
receiver appointed by the Court. The court issued an order for preservation of
assets on October 30, 1998 and the commencement of the reorganization proceeding
was made by the court on April 23, 1999. A draft reorganization plan is
scheduled for submission at the statutory meeting of interested parties.
Approval of the draft reorganization plan by the creditors is expected to be
made in March 2000. As a result of this filing, Anam lost control over Anam
Construction. Anam deconsolidated this entity and accounted for it as an
investment under the equity method as of and for the years ended December 31
1999 and 1998.
Anam Construction holds investments in Anam Environmental Industry Co.,
Ltd. and Anam Thai Engineering & Construction Co., Ltd.
Anam Environmental Industry Co., Ltd. (Anam Environment)
Anam Environment was incorporated under the name of Yu-Bong Industry Co.,
Ltd. in February 1986 and is engaged in treatment of industrial scrap in the
Republic of Korea. Anam holds interest in Anam Environment through Anam
Construction. As of December 31, 1999, Anam Environment's capital stock is
W1,200 million ($1,729), of which Anam Construction owned 50.83%. As a
subsidiary of Anam Construction, this entity was also deconsolidated by Anam and
accounted for by the equity method as of and for the years ended December 31,
1999 and 1998.
Anam USA, Inc. (Anam USA)
Anam USA was incorporated in Philadelphia, United States in September 1994,
to sell semiconductor products of Anam. As of December 31, 1999, its capital
stock is US$0.1 of which Anam owned 100%.
Acqutek Semiconductor & Technology Co., Ltd. (Acqutek)
Acqutek was incorporated in January 1979. It is engaged in designing
semiconductors, manufacturing and selling semiconductor equipment and the Value
Added Network business. In September 1991, Acqutek was registered as a foreign
invested company under the Foreign Capital Inducement Law of the Republic of
Korea. The company changed its name from Anam S&T Co., Ltd. to Acqutek Semi-
conductor & Technology Co., Ltd. in November 1999.
As of December 31, 1999 its capital stock amounted to W24,062 million
($27,248), of which Anam owned 17.55%.
F-62
<PAGE> 128
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Hanmi-Anam Financial Service Co., Ltd. (Anam Finance)
Anam Finance was established in May 1994 and is engaged in installment
financing and factoring. As of December 31, 1999 its capital stock amounted to
W39,000 million ($45,899), of which Anam and its subsidiaries owned 39.00% and
5.60%, respectively.
Anam Telecommunications Co., Ltd. (Anam Telecom)
Anam Telecom was established in August 1997, and is engaged in the
telecommunication business. As of December 31, 1999, its capital stock amounted
to W47,958 million ($57,135), of which Anam owned 29.51%.
(C) Change in Entities included in Consolidation :
As of December 31, 1999, Anam owned 21.57% of Anam Instrument. Anam's
ownership percentage decreased from 67.24% as of December 31, 1998 due to sales
of Anam Instrument shares. Accordingly Anam accounted for it under the equity
method of accounting during 1999, effective January 1, 1999.
During 1999 Anam has sold its whole interest in Anam/Amkor Precision
Machine Company (Philippines) Inc. (AAPMCI) to Amkor Technology Inc.
Both Anam Instrument and AAPMCI were consolidated in the accompanying
financial statements for 1998 and 1997.
As of December 31, 1999 and 1998, Anam owned 49.00% of Anam Construction.
Anam's ownership percentage decreased from 56.15% as of December 31, 1997 due to
Anam Instrument's sale of its 10.64% interest in Anam Construction to Anam
Electronics Co., Ltd., an affiliated company through common ownership by the Kim
family, on September 29, 1998. Furthermore, Anam Construction filed for
corporate reorganization under the Korean Corporate Reorganization Act on
October 24, 1998. As part of the reorganization, Anam Construction was placed
under the control of a receiver. Because management of Anam no longer exercises
control over Anam Construction, Anam deconsolidated its investment in Anam
Construction, including its consolidated subsidiary, Anam Environment, and
accounted for it under the equity method of accounting during 1999 and 1998,
effective January 1, 1998.
Prior to January 1, 1998, due to continuous net loss incurred by Anam
Construction, the accumulated net losses from Anam Construction included in the
consolidated financial statements had exceeded Anam's original investment. Anam
continued to record such excess net loss due to the existence of a parent-
subsidiary relationship. At January 1, 1998, when Anam deconsolidated Anam
Construction, accumulated losses in excess of original investment were
reclassified as part of the allowance for Anam's loan to Anam Construction.
After the deconsolidation, Anam continued recognition of its share of Anam
Construction's losses and such losses were recorded as part of the allowance for
Anam's loan to Anam Construction. In addition, due to the significant financial
difficulty experienced by Anam Construction in 1999 and 1998, Anam recorded
additional allowance for its loan to Anam Construction to reduce the net loan
balance to zero.
Both Anam Construction and Anam Environment were consolidated in the
accompanying financial statements for 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES:
The consolidated financial statements are presented in accordance with
generally accepted accounting principles of the United States of America ("U.S.
GAAP"). Significant accounting policies followed by
F-63
<PAGE> 129
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Anam and its consolidated subsidiaries (hereinafter collectively referred to as
the "Company") in the preparation of the accompanying consolidated financial
statements are summarized below.
Principles of Consolidation --
The accompanying consolidated financial statements include the accounts of
Anam and its greater than 50% owned subsidiaries. The interest of other
stockholders in these subsidiaries is reflected as minority interests. The
equity method of accounting is used when Anam has both a 20% to 50% equity
interest and the ability to exercise significant influence over the investee.
Investments in companies owned less than 20% are carried at cost. All
significant intercompany transactions and balances with consolidated
subsidiaries have been eliminated in consolidation.
Unrealized profit arising from sales by the controlling company to the
consolidated subsidiaries or equity-method investees is fully eliminated and
charged to the interest of the controlling company. Unrealized profit, arising
from sales by the consolidated subsidiaries or equity-method investees to the
controlling company or sales between consolidated subsidiaries or equity-method
investees, is eliminated to the extent of the investor ownership interest.
Use of Estimates --
The preparation of financial statements in accordance with U.S. GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. The
most significant estimates and assumptions relate to the allowance for
uncollectable accounts receivables, guaranty obligations, depreciation and
impairment of long-lived assets. Actual results could differ from those
estimates and may affect amounts reported in future periods. Management believes
that the estimates are reasonable.
Cash and Cash Equivalents --
Cash and cash equivalents include cash on hand and all highly liquid
investments with original maturities of three months or less at purchase.
Restricted Cash --
Restricted cash consists of current and non-current bank deposits, which
are pledged in connection with various short-term borrowings (Note 14) and
long-term debt (Note 16). Restricted cash at December 31, 1999 and 1998 was
$41,159 and $2,351, respectively.
At December 31, 1998, $2,286 of restricted cash represent deposits made
under group severance insurance plans, the withdrawal of which is restricted to
the actual payment of severance benefits. The Company classified those
restricted bank deposits with remaining maturities between three months to one
year at the balance sheet date as current and all other restricted bank deposits
as non-current.
Bank Deposits --
Bank deposits consist of time deposits with banks and other financial
institutions which have remaining maturities of more than three months at
purchase. The Company classified these bank deposits with remaining maturities
of one year or less at the balance sheet date as current and those with
remaining maturities of more than one year as non-current.
F-64
<PAGE> 130
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Available For Sale Securities --
The Company accounts for those investments included in "Available for sale
securities" under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS 115). This statement requires investment securities to be divided into one
of three categories: held-to maturity, available for sale and trading.
The Company currently classifies all investments in debt and equity
securities as available for sale securities. Individual securities with
remaining contractual maturity of less than one year at the balance sheet date
are included in current assets, and others are included as non-current assets.
All available for sale securities are recorded at fair value. Unrealized holding
gains and losses on securities available for sale are reported as a separate
component of stockholders' equity, net of related deferred taxes. Realized gains
and losses on the sale of securities available for sale are determined using the
specific identification method and are charged to current operations.
Allowance for Doubtful Accounts --
The Company provides an allowance for doubtful accounts receivable based on
the aggregate estimated collectibility of accounts receivable.
Inventories --
Inventories are stated at the lower of cost or market, with cost being
determined by the weighted average method, except for materials in-transit, for
which cost is determined using the specific identification method.
Property, Plant and Equipment --
Property, plant and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as set forth below:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C>
Buildings............................................... 25 years
Structures.............................................. 2 - 25 years
Machinery, equipment and vehicles....................... 2 - 6 years
Tools................................................... 3 - 5 years
Furniture and fixtures.................................. 3 - 10 years
</TABLE>
Routine maintenance and repairs are charged to expense as incurred.
Expenditures which enhance the value or materially extend the useful lives of
the related assets are capitalized.
Interest expense incurred during the construction period of assets on funds
borrowed to finance such construction is capitalized. Capitalized interest costs
at December 31, 1999 and 1998 approximate $4,502 and $14,554, respectively.
The Korean government provides subsidies to the Company for purchases of
certain buildings and machinery. The Company recorded such purchases at full
acquisition costs and the related subsidies as a contra-asset account. The
contra-asset account is reduced using the straight-line method over the
estimated useful lives of the related assets.
F-65
<PAGE> 131
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Lease Transactions --
The Company accounts for lease transactions as capital leases, depending on
the terms of the underlying lease agreements. Assets leased under capital leases
are recorded at cost as property, plant and equipment and depreciated using the
straight-line method over their estimated useful lives. In addition, aggregate
lease payments are recorded as obligations under capital leases, net of accrued
interest as determined by total lease payments in excess of the cost of the
leased machinery and equipment. Accrued interest is amortized over the lease
period using the effective interest rate method.
Discounts on Debentures --
Discounts on debentures are amortized using the effective interest rate
method over the repayment period of the debentures. The resulting amortization
cost is included in interest expense.
Accrued Severance Benefits --
Employees and directors with one year or more of service are entitled to
receive a lump-sum payment upon termination of their employment with the
Company, based on their length of service and rate of pay at the time of
termination. Accrued severance benefits are estimated assuming all eligible
employees were to terminate their employment at the balance sheet date. The
annual severance benefits expense charged to operations is calculated based on
the net change in the accrued severance benefits payable at the balance sheet
date, plus the actual payments made during the year.
The contributions to national pension fund made under the National Pension
Plan are deducted from accrued severance benefit liabilities. Contributed
amounts are refunded from the National Pension Plan to employees on their
retirement.
Revenue Recognition (non-construction business) --
Substantially all revenues are recognized upon shipment of goods to
customers. The Company does not take ownership of customer-supplied
semiconductors. Title remain 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 and shipment to the
customer. In regards to wafer fabrication services, the Company recognizes
revenue upon shipment of completed wafers to its customers.
Revenue Recognition (construction business) --
Revenues from fixed-price and modified fixed-price construction contracts
are recognized on the percentage-of-completion method, measured by the
percentage of costs incurred to date to estimated total costs for each contract.
This method is used because management considers expended costs to be the best
available measure of progress on these contracts. A contract is considered
complete when all costs except insignificant items have been incurred and the
installation is operating according to specifications or has been accepted by
the customer. Revenues from sale of constructed condominiums and some
construction contracts are recognized on the completion method. This method is
used because of unreliable estimates that cause forecasts to be doubtful.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation costs. Selling, general, and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and
F-66
<PAGE> 132
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
are recognized in the period in which the revisions are determined. An amount
equal to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
Discontinued Operations --
The operating results of the packaging and testing business, including K4
which was sold in May 1999 (see Note 30), are shown separately as discontinued
operations in the accompanying income statement due to approved sale of the
remaining packaging and testing business in February 2000 (see Note 31). The
results of the discontinued business do not reflect any interest expense or
indirect expenses allocated by the Company. The income statements for 1998 and
1997 have been restated and operating results of the packaging business are also
shown separately.
Research and Development Costs --
Research and development costs are expensed as incurred.
Advertising Costs --
Advertising costs are charged to current period operations when incurred.
Advertising expenses for 1999, 1998 and 1997 were $236, $946 and $5,510,
respectively.
Income Taxes --
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes". SFAS 109 requires the recognition of deferred tax assets and liabilities
created by temporary differences between the financial statement and tax bases
of assets and liabilities. Deferred tax assets and liabilities are computed on
such temporary differences, including available net operating loss carryforwards
("NOL") and tax credits, by applying enacted statutory tax rates applicable to
the years when such differences are expected to be reversed. A valuation
allowance is provided on deferred tax assets to the extent that it is more
likely than not that such deferred tax assets will not be realized. Total income
tax provision includes current tax expenses under applicable tax regulations and
the change in the balance of deferred tax assets and liabilities.
Investment tax credits are accounted for by the flow-through method whereby
they reduce income taxes in the period the assets giving rise to such credits
are placed in service. To the extent such credits are not currently utilized,
deferred tax assets, subject to considerations about the need for a valuation
allowance, are recognized for the carryforward amount.
Earnings Per Share --
In February 1997, the Financial Accounting Standard Board (the "FASB")
issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
(SFAS 128). This statement specifies the computation, presentation and
disclosure requirements for earnings per share. The Company has calculated
earnings per share based on the basic and diluted per share calculation (see
Note 24). Basic EPS is computed using the weighted average number of common
shares outstanding for the period while diluted EPS is computed assuming
conversion of all dilutive securities, such as convertible bonds. Both
computations reflect all stock dividends and the June 17, 1999 reverse stock
split in the number of shares.
F-67
<PAGE> 133
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Remeasurement into US Dollar --
The U.S. dollar is the functional currency for ASI because the dollar is
the currency of reference for market pricing in the worldwide semiconductor
industry and revenue from external sales in U.S. dollars exceeds revenues in any
other currency. The functional currency used by ASI's subsidiaries and equity
investees, with the exception of Anam USA, is the Korean Won. The functional
currency used by Anam USA is the U.S. dollar.
For financial statement purposes, assets and liabilities of ASI are
remeasured into U.S. dollars from books and records kept in Korean Won using the
monetary/non-monetary method. Monetary assets and liabilities, such as cash,
receivables, borrowings and other payables, are translated to U.S. dollars at
end-of-period exchange rates. Non-monetary assets and liabilities, such as
inventory, investments and fixed assets, are translated using historical
exchange rates. Revenues and expenses are translated using average exchange
rates for the period, except for items related to non-monetary assets and
liabilities, which are translated using historical exchange rates. All
translation gains and losses are included in the determination of income for the
period in which exchange rates change.
The financial position and results of operations of the Company's
subsidiaries and equity-method investees except Anam USA are measured using
local currency as functional currency. The financial statements of these
subsidiaries and equity-method investees are translated to U.S. dollars using
the current exchange rate method. All the assets and liabilities are translated
to U.S. dollars at end-of-period exchange rates. Capital accounts are translated
using historical exchange rates. Revenues and expenses are translated using
average exchange rates. Translation adjustments arising from differences in
exchange rates from period to period are included in the cumulative translation
adjustment account in stockholders' equity.
The end of period exchange rates and average exchange rates for the period
used to remeasure the assets, liabilities, revenues and expenses in accordance
with the translation method stated above in 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
KOREAN WON TO U.S. DOLLAR
------------------------------------------------------
END OF PERIOD EXCHANGE RATES AVERAGE EXCHANGE RATES
---------------------------- ----------------------
<S> <C> <C>
1999............................ W1,134.50 = US$1 W1,189.30 = US$1
1998............................ W1,195.80 = US$1 W1,398.88 = US$1
1997............................ W1,695.80 = US$1 W 951.11 = US$1
</TABLE>
Dividends --
In the event that cash dividends are declared in the future, such dividends
will be paid in Korean Won. The Company does not intend to pay cash dividends in
the foreseeable future.
Derivative Financial Instruments --
The Company enters into foreign currency exchange contracts, including
forward and swap contracts, to manage the exposure to changes in currency
exchange rates, principally the exchange rate between Korean Won and U.S.
Dollar. The use of foreign currency forward contracts allows Anam to reduce its
exposure to the risk that the eventual Korean Won cash outflows resulting from
facility operating expenses, capital expenditures, local supplier purchases and
debt service will be adversely affected by changes in exchange rates. These
transactions do not meet the requirements for hedge accounting for financial
statement purpose. Therefore the resulting realized and unrealized gains or
losses, measured by quoted market prices, are recognized in income as the
exchange rates change. These gains and losses are included
F-68
<PAGE> 134
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
in the foreign currency gains (losses) account. The net unrealized gains
(losses) on these contracts are accrued in the balance sheet account, forward
contract debit (credit).
The Company enters into interest rate swap transactions to manage its
exposure to the fluctuation of interest rates. These transactions are accounted
for on an accrual basis, in which cash settlement receivable or payable is
recorded as an adjustment to interest income or expense.
In regards to the impact of derivative financial instruments on liquidity
and cash flow, no significant extra cash requirement is expected. Furthermore,
the Company enters into these derivative contracts with major financial
institutions and continues to monitor the credit worthiness of these
institutions. Management expects full performance from its counterparties under
these contracts.
Allowance for credit losses on loans receivable --
The Company accounted for allowance for credit losses in accordance with
SFAS 114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114). Under
SFAS 114, a loan is considered impaired, based on current information and
events, if it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. The measurement of impaired loans is
generally based on the present value of expected future cash flows discounted at
the historical effective interest rate, except that all collateral-dependent
loans are measured for impairment based on the fair value of the collateral.
When a loan is classified as impaired, no interest income is recognized.
Any subsequent cash payment is applied to reduce the principal.
Impairment of Long-Lived Assets --
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of." In accordance with
this standard, management periodically evaluates the carrying value of
long-lived assets, including intangibles, when events and circumstances warrant
such a review. The carrying value of a long-lived asset is considered impaired
when the anticipated undiscounted cash flows are less than the asset's carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived assets. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved.
Concentration of Credit Risk --
Financial instruments, which potentially expose the Company to a
concentration of credit risk, consist primarily of cash and cash equivalents,
bank deposits, restricted cash, trade receivables, loans to affiliates and
financial instruments with off-balance sheet risks.
It is the Company's practice to place its cash and cash equivalents, bank
deposits and restricted cash in various financial institutions located in Korea
and the United States (U.S.) so as to limit the amount of credit exposure to any
one financial institution. Deposits in U.S. banks may exceed the amount of
insurance provided on such deposits by the Federal Deposit Insurance Corporation
(the "FDIC"). The Company controls the credit risks associated with cash and
cash equivalents, bank deposits and restricted cash by monitoring the financial
standing of the related banks and financial institutions.
Anam performs and sells its Packaging Services exclusively to Amkor
pursuant to the Supply Agreements. In 1999, 1998 and 1997, sales to Amkor
accounted for substantially all of Anam's revenues
F-69
<PAGE> 135
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
and accounts receivables. Any reduction in purchases by Amkor could have an
adverse impact on Anam's financial position, results of operations and cash
flows.
The loans to affiliates are uncollateralized and collection is subject to
the operations of those affiliates. Management believes they have provided
adequate allowance against these loans to reduce them to their net realizeable
value.
The Company controls the credit risks associated with financial instruments
through credit approvals, investment limits and centralized monitoring
procedures but does not normally require collateral or other security from the
counterparties. If the counterparty fails to honor certain forward or swap
contracts, management believes any loss would be limited to the exchange rate or
interest rate differential from the time the contract was made and the
settlement date. The Company conducts its derivative transactions with major
financial institutions and does not anticipate non-performance by counterparties
which could have a significant impact on its financial position or results of
operations.
Risks and Uncertainties --
The Company's business involves certain risks and uncertainties. Factors
that could affect the Company's future operating results and the carrying value
of assets such as property, plant and equipment include, but are not limited to,
dependence on a cyclical semiconductor industry that is characterized by rapid
technological changes, fluctuations in end-user demands, evolving industry
standards, competitive pricing and declines in average selling prices, risks
associated with assets, liabilities and transactions denominated in foreign
currencies, and enforcement of intellectual property rights. Additionally, the
market in which the Company operates is very competitive. Key elements of
competition in the independent semiconductor packaging market include breadth of
packaging offerings, time-to-market, technical competence, design services,
quality, production yields, reliability of customer service and price. A
substantial portion of the Company's revenues is derived from Packaging
Services(See Note 28) provided to Amkor pursuant to the Supply Agreements. Other
risks exist as of December 31, 1999 as described in the Workout Program in Note
5.
Presentation of Unit Currency --
All amounts in the financial statements have been presented in thousands of
U.S. dollars, unless otherwise stated.
Recent Accounting Pronouncements --
In June 1999, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes a comprehensive standard
on accounting for derivatives and hedging. It is effective for all fiscal years
beginning after June 15, 1999. The Company has reviewed the provisions of the
SFAS No. 133 and has not yet quantified the impact of adopting SFAS 133.
However, SFAS 133 could increase volatility in earnings.
3. RELATIONSHIP WITH AMKOR:
The businesses of Anam and Amkor have been inter-related for many years by
virtue of the Supply Agreements (See Note 1), common ownership and management,
financial relationships, coordination of product and operating plans, joint
research and development activities and shared intellectual property rights.
At December 31, 1997, Amkor owned 8.1% of the outstanding stock of ASI. On
February 16, 1998, Amkor sold its investment in ASI common stock for $13,863 to
AK Investments, Inc., an affiliate through
F-70
<PAGE> 136
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
common ownership of Kim Family, based on the market value of ASI shares on the
Korean Stock Exchange. In accordance with the terms and condition of Workout
Program discussed in Note 5, on October 29, 1999, Amkor made $41,695 of capital
contribution to ASI in exchange for equity shares of ASI at par value. As a
result, ASI issued 10,000,000 shares of common stock to Amkor.
At December 31, 1998, ASI owned 100% of the outstanding stock of Anam/Amkor
Precision Machine Company (Philippines), Inc. ("AAPMCI"). On June 16, 1999, ASI
sold its whole investment in AAPMCI common stock for $3,800 to Amkor and $3,217
of realized gain from the sale was recognized.
At December 31, 1997, ASI owned 40% of the outstanding stock of Amkor/Anam
Philipinas, Inc. ("AAPI"). On May 22, 1998, ASI sold its investment in AAPI
common stock for $33,750 to Amkor and $22,329 of realized gain from the sale was
recognized.
In 1999, 1998 and 1997, approximately 93.3%, 91.5% and 77.1%, respectively,
of Anam's revenues was derived from sales to Amkor. By the terms of a
long-standing agreement, Amkor 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. Since 1998,
Amkor became responsible for marketing and selling ASI's semiconductor packaging
and test services to the majority of ASI's customers in Japan. ASI has worked
closely with Amkor in developing new technologies and products.
Effective January 1, 1998, ASI entered into the five-year Supply Agreements
with Amkor giving Amkor 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, taking into consideration factors such as changes in the
semiconductor market, forecasted demand, product mix, capacity utilization and
fluctuations in exchange rates as well as the mutual long-term strategic
interest of Anam and Amkor. Amkor, in return, is responsible for sales of
Packaging Services and is obligated to actively and diligently market the
Packaging Services to potential and existing customers.
Pursuant to arrangements between Anam and Amkor, all sales from Anam to
Amkor are made through Anam USA ("AUSA"). Prior to Amkor's initial public
offering in 1998, Amkor obtained a significant portion of its financing from
AUSA. AUSA obtained for the benefit of Amkor a continuous series of short-term
financing arrangements based on guarantees provided by ASI. Pursuant to the
Supply Agreements, Amkor reimburses AUSA for the financing costs incurred by it
in connection with trade financing provided to Amkor. Amkor no longer depends on
such financing arrangement as of December 31, 1998.
These agreements are cancelable 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 Amkor to
effectively market ASI's services. The termination of ASI's relationship with
Amkor for any reason, or any material adverse change in Amkor's business could
have a material adverse effect on ASI's business, financial condition and
results of operations.
In January 1998, the Company and Amkor entered into a manufacturing and
purchasing agreement with Texas Instruments Incorporated ("TI") pursuant to
which the Company will manufacture and Amkor will market wafer fabrication
services to TI. Under the terms of the agreement, TI has agreed to purchase at
least 40% of the foundry's capacity, and under certain circumstances has the
right to purchase up to 70% of the foundry's capacity. In addition, the Company
has a license to use TI technology only to provide wafer fabrication services to
TI.
F-71
<PAGE> 137
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
The agreement ends on December 31, 2007, but may be terminated earlier
upon, among other things, the consent of the Company, TI and Amkor, a material
breach by the Company, TI or Amkor, the failure of the Company to protect TI's
intellectual property and a change of control, bankruptcy, liquidation or
dissolution of the Company. The agreement may also be terminated by the Company
or TI on two years' notice if they cannot successfully negotiate an agreement to
govern the Company's use of TI's next-generation foundry technology prior to
June 30, 2000. During any such two-year notice period, TI will only be obligated
to purchase a minimum of 20% of the foundry's capacity.
4. UNSTABLE ECONOMIC ENVIRONMENT:
In connection with the Asian financial crisis which began in 1997, the
Korean economy as well as other economies in the Asia Pacific region experienced
economic contractions, a reduction in the availability of credit, increased
interest rates, increased inflation, negative fluctuations in currency exchange
rates, increased numbers of bankruptcies, increased unemployment and labor
unrest. Such conditions had a significant adverse effect on the operations of
the Company and other companies in Korea and in the Asia Pacific region.
Recently, economic conditions in the Republic of Korea have improved as
evidenced by increased trade surplus, increases in foreign exchange reserves,
record levels of foreign investment and economic growth, lower inflation and
interest rates and stabilized foreign exchange rates. Notwithstanding the
current recovery, significant uncertainties still exist related to the economy
in Korea and in the Asia Pacific region.
5. WORKOUT PROGRAM:
The Company has traditionally operated with a significant amount of debt
relative to its equity and had a significant working capital deficit at December
31, 1997. In addition, the Company has guaranteed certain debt obligations of
equity investees and affiliated companies, including Anam Construction, Anam
Environment and Anam Electronics Co., Ltd., ("Anam Electronics"), which face
serious financial difficulties.
In response to this situation, management has undertaken certain measures
it considers appropriate, including: (1) disposing of the Kwangju factory (see
Note 30); (2) placing Anam Construction into corporate reorganization under the
Korean Corporate Reorganization Act (see Note 1); and (3) enlisting, on October
23, 1998 ASI into the "Workout Program", a financial restructuring program
supervised by the Korean Financial Supervisory Commission ("FSC"). 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
negotiations between the companies and the creditors committee represented by
banks and other financial institutions providing financing to ASI and does not
involve the judicial system. The Workout Program also allows ASI to resume its
operations uninterrupted and does not impact debts outstanding with trade
creditors. Anam Electronics and Anam Environment also applied for the Workout
Program in October 1998.
On February 23, 1999, the following basic conditions and terms of ASI's
Workout Program were agreed to and approved by its creditors committee: (1)
five-year extension of the loan and capital leases repayment schedules; (2)
reduction of bank loan interest rates to Korean prime rate; (3) conversion of
certain outstanding bank loans of ASI to equity shares and convertible bonds
approximating $102,275 and $90,400, respectively; and (4) five-year suspension
of creditors' right to demand performance on loan guarantees made by Anam on
behalf of its affiliates. 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 conversion of ASI debt by the creditor financial institutions
would
F-72
<PAGE> 138
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
coincide with each installment of Amkor's equity investment in ASI as described
below. The workout contained provision for the entitlement of the creditor
financial institutions to vote the ASI shares owned by Mr. James Kim and his
family. The Company did not recognize any gain or loss as a result of the
Workout Program.
In addition to the basic restructuring terms as stated above, the approved
Workout Program also requires Mr. James Kim, the chairman of the Anam Group or
Amkor, to make capital contributions to the Company totaling $150,000 over the
next four years in exchange for equity shares of the Company at par value.
On May 13, 1999, ASI's Workout Program became effective upon signing of a
Memorandum of Understanding, which document detailed conditions and terms of
ASI's Workout Program, between ASI and the creditors committee.
The creditor financial institutions have the right to terminate or modify
the Workout if Anam does not fulfill the terms of the Workout, including meeting
certain financial targets. In addition, the creditor financial institutions can
modify the terms of the Workout upon agreement of creditor financial
institutions holding at least 75% of the debt restructured under the Workout. If
the creditor financial institutions subsequently terminate the Workout, the
creditor financial institutions could reinstate and enforce the original terms
of Anam's debt, including accelerating Anam's obligations and pursuing Anam's
guarantees of its affiliates' debt. If this were to occur, Anam's businesses
would be harmed.
There can be no assurance that Anam will be able to satisfy the terms of
the Workout Agreement. Any inability of Anam to comply with the terms of the
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 Anam's ability to continue to provide
services.
Anam Electronics' application for Workout Program was not accepted by the
creditors committee. As a result, on March 18, 1999, Anam Electronics filed an
application for corporate reorganization under the Korean Corporate
Reorganization Act. The reorganization plan was completed and approved by the
district court on February 7, 2000. On the other hand, Anam Environment's
application for Workout was accepted by its creditors committee on February 23,
1999. The probable outcome of these events was taken into consideration by the
Company in estimating its liability on guarantees on the debts of its equity
investees and affiliates.
F-73
<PAGE> 139
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
6. ACCOUNTS AND NOTES RECEIVABLE:
Accounts and notes receivable at December 31, 1999 and 1998 comprise the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Accounts receivable, trade.................................. $ 2,997 $37,211
Notes receivable, trade..................................... 551 16,072
------- -------
3,548 53,283
Allowance for doubtful accounts............................. (132) (3,103)
------- -------
Trade accounts and notes receivable, net.................... $ 3,416 $50,180
======= =======
Accounts receivable from affiliated companies............... $30,128 $14,502
Notes receivable from affiliated companies.................. 181 1,128
------- -------
30,309 15,630
Allowance for doubtful accounts............................. (932) (893)
------- -------
Due from affiliates, net.................................... $29,377 $14,737
======= =======
</TABLE>
7. INVENTORIES :
Inventories at December 31, 1999 and 1998 comprise of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Finished products and merchandise........................... $ 6,639 $21,799
Semi-finished products and work in process.................. 15,562 18,722
Raw materials and supplies.................................. 17,338 18,377
Materials in transit........................................ 2,410 909
------- -------
$41,949 $59,807
======= =======
</TABLE>
8. SHORT-TERM LOANS TO AFFILIATES:
Loans receivable at December 31, 1999 and 1998 comprise of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Loans to affiliated companies
Anam Construction......................................... $ 151,639 $ 144,156
Anam Environment.......................................... 13,486 12,795
Anam Electronics.......................................... 145,987 125,188
Acqutek................................................... 3,877 3,676
Dongan Engineering Co., Ltd............................... 587 892
--------- ---------
315,576 286,707
Loans to employees and directors............................ -- 36
--------- ---------
315,576 286,743
Allowance for credit loss on loans receivable (Note 9)...... (311,112) (272,635)
--------- ---------
$ 4,464 $ 14,108
========= =========
</TABLE>
F-74
<PAGE> 140
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
The loans to affiliated companies and other loans have maturity periods of
less than one year and are uncollateralized.
9. LOAN IMPAIRMENT:
The Company provided loans to several affiliated companies, which currently
face financial difficulties. Consequently, the Company assessed the
collectibility of these loans in accordance with SFAS 114 and determined that
the Company would not be able to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement on
certain loans.
The amount of impaired loans and related allowance for credit loss on loans
receivable are summarized below (see Note 8):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Impaired loans, gross....................................... $311,112 $272,635
Allowance for credit loss on loans receivable............... (311,112) (272,635)
-------- --------
Impaired loans, net......................................... $ -- $ --
======== ========
</TABLE>
For the year ended December 31, 1999 and 1998, the average recorded
investment in impaired loans was approximately $291,874 and $133,626,
respectively.
No interest income was recognized on impaired loans for the year ended
December 31, 1999 and 1998. Had these loans performed in accordance with their
original terms, interest income of $22,684 and $17,927 would have been recorded
in 1999 and 1998, respectively.
The changes in the allowance for credit loss on loans receivable are
summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Beginning balance........................................... $272,635 $ --
Excess loss from investment in Anam Construction carried
over from prior years (Note 1)............................ -- 93,563
Equity in loss of Anam Construction for 1998 (Note 1)....... -- 56,884
Additions charged to operations............................. 22,646 122,188
Effect of changes in exchange rates......................... 15,831 --
-------- --------
Ending balance.............................................. $311,112 $272,635
======== ========
</TABLE>
10. INVESTMENT IN AVAILABLE FOR SALE SECURITIES:
The Company's investment in available for sale securities are summarized
below:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
--------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Bonds issued by government................. $ 3 $-- $ -- $ 3
Bonds issued by local government........... 3 -- -- 3
Equity Securities.......................... 30,557 54 2,489 28,122
------- --- ------ -------
Total............................ $30,563 $54 $2,489 $28,128
======= === ====== =======
</TABLE>
F-75
<PAGE> 141
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
--------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Bonds issued by government................. $ 276 $ -- $ -- $ 276
Bonds issued by local government........... 1 -- -- 1
Equity Securities.......................... 32,004 2,320 592 33,732
------- ------ ---- -------
Total............................ $32,281 $2,320 $592 $34,009
======= ====== ==== =======
</TABLE>
The maturity of the bonds issued by the government and the bonds issued by
local government as of December 31,1999 ranged from less than one year to ten
years.
The gross realized gains from the sale of available for sale securities
during the years ended December 31, 1998 and 1997 were $5,317 and $4,972,
respectively. The gross realized losses from the sale of available for sale
securities in 1999 and 1998 were $891 and $4,564, respectively.
At December 31, 1999 and 1998, equity securities with total carrying amount
of $9,578 and $8,535, respectively, were pledged as collateral for issuing
non-guaranteed debentures and capital lease obligation, respectively (see Notes
13 and 16).
At December 31, 1999, 1998 and 1997, respectively, the net book value of
certain equity investment is below acquisition cost and is not expected to be
recovered in the near future. Accordingly, an impairment loss of $1,523, $244
and $2,477, respectively is included in non-operating expenses for the
other-than-temporary impairment of such investment.
11. INVESTMENTS IN AFFILIATED COMPANIES:
<TABLE>
<CAPTION>
PERCENTAGE OF DECEMBER 31,
OWNERSHIP (%) AT ------------------
DECEMBER 31, 1999 1999 1998
----------------- ------- -------
<S> <C> <C> <C>
Investments in affiliated companies:
By the equity method:
Anam Construction....................................... 49.00 $ -- $ --
Acqutek................................................. 17.55 4,164 7,788
Anam Instruments (1999 only)............................ 21.75 8,954 --
Anam Finance............................................ 39.00 -- --
Anam Telecom............................................ 29.51 4,261 7,987
Anam Japan Inc. and others (*).......................... 29.82 - 100.00 1,171 3,371
------- -------
$18,550 $19,146
======= =======
</TABLE>
- -------------------------
(*) Certain majority-owned subsidiaries are not consolidated due to
immateriality.
The Company has received dividends of $158 and $26 from investments in
affiliates accounted for by the equity method for the years ended December 31,
1998 and 1997, respectively. These dividends were recorded as a reduction in the
carrying value of the related investments.
F-76
<PAGE> 142
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
12. SUMMARY FINANCIAL DATA ON SIGNIFICANT EQUITY INVESTEES:
Additional information regarding the Company's equity investees is as
below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------------------------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT NET EQUITY
ASSETS ASSETS LIABILITIES LIABILITIES (DEFICIT)
-------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Anam Construction*............... $145,289 $85,895 $416,648 $65,199 $(250,663)
Anam Instruments................. 82,126 41,413 49,568 24,872 49,099
Acqutek.......................... 35,552 55,275 34,376 33,722 22,729
Anam Finance..................... 32,423 1,167 37,320 98 (3,828)
Anam Telecom..................... 6,502 22,862 2,416 5,996 20,952
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------------------
GROSS GROSS INCOME (LOSS) FROM NET INCOME
REVENUE PROFIT (LOSS) OPERATIONS (LOSS)
-------- ------------- ------------------ ----------
<S> <C> <C> <C> <C>
Anam Construction*..................... $ 63,621 $(14,766) $(66,991) $(66,991)
Anam Instruments....................... 169,051 26,601 11,135 7,487
Acqutek................................ 57,040 3,646 (7,978) (4,377)
Anam Finance........................... 9,980 (8,323) (8,343) (8,343)
Anam Telecom........................... 1,543 (3,278) (8,220) (8,220)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------------------------------------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT NET EQUITY
ASSETS ASSETS LIABILITIES LIABILITIES (DEFICIT)
-------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Anam Construction*............... $229,841 $92,041 $431,701 $61,368 $(171,187)
Acqutek.......................... 22,369 55,595 33,874 26,358 17,732
Anam Finance..................... 68,977 40,402 100,629 4,194 4,556
Anam Telecom..................... 14,592 23,863 5,866 7,427 25,162
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------
GROSS GROSS INCOME (LOSS) FROM NET INCOME
REVENUE PROFIT (LOSS) OPERATIONS (LOSS)
------- ------------- ------------------ ----------
<S> <C> <C> <C> <C>
Anam Construction*...................... $65,097 $(13,171) $(99,236) $(99,236)
Acqutek................................. 41,108 8,472 10,560 10,560
Anam Finance............................ 10,583 (23,866) (23,923) (23,923)
Anam Telecom............................ 367 (2,954) (3,658) (3,658)
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------
INCOME (LOSS)
GROSS GROSS FROM CONTINUING NET INCOME
REVENUE PROFIT OPERATIONS (LOSS)
-------- ------- --------------------- ----------
<S> <C> <C> <C> <C>
AAPI........................................... $223,380 $54,297 $(16,594) $(16,594)
Acqutek........................................ 95,403 30,485 (17,963) (17,963)
Anam Finance................................... 18,022 510 391 391
Anam Telecom................................... -- -- (8,186) (8,186)
</TABLE>
- -------------------------
* Anam Environment's figures are included in Anam Construction.
F-77
<PAGE> 143
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
13. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1999 and 1998 comprise of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Costs
Land...................................................... $ 43,260 $ 113,162
Buildings and structures.................................. 309,315 588,251
Machinery, equipment and vehicles......................... 1,578,736 1,628,360
Tools, furniture and fixtures............................. 55,402 17,443
Construction in progress.................................. -- 38,195
Machinery in transit...................................... 22,558 40,430
---------- ----------
2,009,271 2,425,841
Accumulated depreciation.................................... (968,910) (843,478)
---------- ----------
1,040,361 1,582,363
Governmental subsidies...................................... (2,426) (749)
---------- ----------
Net Property, Plant and Equipment........................... $1,037,935 $1,581,614
========== ==========
</TABLE>
Capital Leases
The Company has various facilities and equipment held under capital lease
agreements.
Capital lease assets included in the above categories are further described
below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Machinery and equipment..................................... $ 870,837 $ 907,644
Accumulated depreciation.................................... (356,140) (218,713)
--------- ---------
Capitalized Leases, net..................................... $ 514,697 $ 688,931
========= =========
</TABLE>
Future minimum lease payments under noncancelable capital leases as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL
FOR YEARS ENDED DECEMBER 31, LEASES
---------------------------- ---------
<S> <C>
2000........................................................ $ 101,556
2001........................................................ 100,492
2002........................................................ 99,076
2003........................................................ 97,552
2004........................................................ 95,911
Thereafter.................................................. 186,390
---------
Total minimum lease payments................................ 680,977
Less amount representing interest........................... (197,871)
---------
Present value of minimum lease payments under capital
leases.................................................... 483,106
Less: portion due within one year........................... (53,516)
---------
$ 429,590
=========
</TABLE>
F-78
<PAGE> 144
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Pledged Property, Plant and Equipment
A substantial portion of the Company's property, plant and equipment is
pledged as collateral for various loans from banks, up to a maximum amount of
$636,608 and $683,917, at December 31, 1999 and 1998, respectively (see Notes 14
and 16).
Impairment of Property, Plant and Equipment
The Company recognized an impairment loss of $273,937 related to its assets
held in the wafer fabrication factory (the "FAB") in Bucheon City, Republic of
Korea in 1998 in accordance with SFAS 121. The amounts in property, plant and
equipment above reflect the write-off of assets based upon the present value of
expected future cash flows, as summarized below:
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Building.................................................... $120,863
Machinery, equipment and vehicles........................... 153,074
--------
Total impairment write-off.................................. $273,937
========
</TABLE>
The FAB commenced operation in February 1998. Based on equipment installed
in FAB, as of December 31, 1998 production levels were below the levels
necessary for the factory to be profitable. Due to the lack of capital available
to the Company, investment in additional equipment for FAB was not planned in
the near future.
In 1999, the Company did not record the restoration of previously
recognized impairment loss in accordance with SFAS 121.
14. SHORT-TERM BORROWINGS:
Short-term borrowings at December 31, 1999 and 1998 comprise of the
following:
<TABLE>
<CAPTION>
ANNUAL INTEREST DECEMBER 31,
RATE (%) AT -------------------
DECEMBER 31, 1999 1999 1998
----------------- ------- --------
<S> <C> <C> <C>
Trade financing................................ N/A $ -- $165,301
General term loans............................. 11.96 69,328 62,214
Others......................................... N/A -- 597
------- --------
$69,328 $228,112
======= ========
</TABLE>
Trade financing of ASI have been converted to long-term debt following
conditions and terms of ASI's Workout Program on February 23, 1999.
The weighted average interest rate on short-term borrowings were 11.96% and
11.36% at December 31, 1999 and 1998, respectively.
At December 31, 1999, the Company provided notes and checks, including 40
blank notes and 28 blank checks, to several banks and financial institutions as
collateral in relation to various borrowings and guarantees of indebtedness.
Certain bank deposits and property, plant, equipment are pledged as collateral
in relation to the above short-term borrowings (see Notes 2 and 13).
F-79
<PAGE> 145
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
15. ACCRUED SEVERANCE BENEFITS:
Accrued severance benefits at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Beginning balance........................................... $73,428 $46,089
Decrease resulting from sales of divisions.................. (9,392) --
Decrease resulting from deconsolidation of affiliates....... (5,223) (1,790)
Provisions.................................................. 10,472 35,228
Severance payments.......................................... (14,717) (6,099)
------- -------
54,568 73,428
Balance of payments remaining with National Pension Fund.... (5,811) (7,701)
------- -------
$48,757 $65,727
======= =======
</TABLE>
The Company has partially funded accrued severance benefits through group
severance insurance plans. At December 31, 1998, the Company maintained $2,286
of group severance insurance deposits, the withdrawal of which is restricted to
the actual payment of severance benefits. The amounts funded under these
insurance plans are included as non-current bank deposits (see Note 2).
F-80
<PAGE> 146
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
16. LONG-TERM BORROWINGS AND INSTALLMENT PAYABLE:
Long-term debt, excluding capital lease obligations, at December 31, 1999
and 1998 comprise the following :
<TABLE>
<CAPTION>
ANNUAL INTEREST CARRYING VALUE AT
RATE (%) AT DECEMBER 31,
DECEMBER 31, ---------------------
1999 1999 1998
--------------- -------- ----------
<S> <C> <C> <C>
Won Currency Loans:
Choheung Bank due 2003............................... 3.00 - 11.50 $305,497 $ 408,021
Korea Development Bank............................... -- -- 77,474
Shinhan Bank due 2003................................ 8.47 - 11.25 41,157 60,329
Korea Exchange Bank.................................. 11.00 - 11.75 88,296 53,353
Hanvit Bank.......................................... 10.00 - 11.00 76,184 75,305
Seoul Bank........................................... 10.00 - 11.00 55,307 34,094
Others............................................... 3.00 - 11.50 64,820 67,934
-------- ----------
631,261 776,510
Less : current portion................................. (819) (1,593)
-------- ----------
630,442 774,917
-------- ----------
U.S. Currency Loans:
Korea Development Bank............................... -- -- 85,850
Seoul Bank........................................... -- -- 24,168
Korea Exchange Bank due 2004......................... Prime rate + 3 10,079 67,249
Shinhan Bank......................................... LIBOR + 3.5 11,502 37,046
Choheung Bank........................................ -- -- 57,563
Others............................................... LIBOR + 6.65 2,875 28,900
-------- ----------
24,456 300,776
Less : current portion................................. -- (2,765)
-------- ----------
24,456 298,011
-------- ----------
Debentures in Won currency:
Guaranteed, payable through 2004..................... 10.00 - 11.00 67,766 104,533
Non-guaranteed, payable through 2004................. 10.00 - 13.38 140,971 85,298
-------- ----------
208,737 189,831
Less: current portion................................ (19,392) --
Discounts on debentures........................... (1,812) (4,361)
-------- ----------
187,533 185,470
-------- ----------
Convertible Bonds (see Note 17):
US Dollar, payable through 2010...................... 0.25 31,193 48,749
-------- ----------
Installment Payable:
Installment Payable in Won currency.................. 2,515 11,941
Less: current portion................................ (719) (9,596)
Discounts on Installment Payable.................. (245) --
-------- ----------
1,551 2,345
-------- ----------
Total long-term debt......................... $875,175 $1,309,492
======== ==========
</TABLE>
F-81
<PAGE> 147
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
See Notes 7, 12 and 14 for the related collateral arrangements for the
Company's long-term debt. In relation to guaranteed debentures and convertible
bonds, the Company pays guarantee fees at 0.25% to 0.5% per annum. In addition,
the repayment of a substantial portion of long-term debt is guaranteed by
certain affiliated companies.
Certain debentures are guaranteed by Korea Development Bank, Kwangju Bank,
etc. The carrying amount of the debentures is equivalent to the registered,
issued and outstanding amount of debentures.
The annual maturities of long-term debt, excluding discounts on debentures,
outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
WON CURRENCY U.S. CURRENCY CONVERTIBLE INSTALLMENT
YEAR LOANS LOANS DEBENTURES BONDS PAYABLE TOTAL
---- ------------ ------------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
2000................. $ 819 $ -- $ 19,392 $ -- $ 719 $ 20,930
2001................. 487 -- -- -- 719 1,206
2002................. 404 -- -- -- 719 1,123
2003................. 428 -- -- -- 358 786
2004................. 629,123 24,456 189,345 -- -- 842,924
thereafter........... -- -- -- 31,193 -- 31,193
-------- ------- -------- ------- ------ --------
$631,261 $24,456 $208,737 $31,193 $2,515 $898,162
======== ======= ======== ======= ====== ========
</TABLE>
17. CONVERTIBLE BONDS:
In 1996, the Company issued US Dollar-denominated convertible bonds
aggregating $40 million bearing interest at 0.25% per annum. The bonds are
convertible into common stock from April 22, 1996 through November 30, 2010, at
a specified conversion price, subject to adjustment based on the occurrence of
certain events as provided in the offering agreement. The adjusted conversion
price as of W10,568 per share as of December 31, 1998 changed to W6,406 per
share as of December 31, 1999 to reflect issues of common stock in 1999 (see
Note 22). The exchange rate applicable to the exercise of the conversion rights
is fixed at W779.72 per US$1.
The Company may redeem all or some of the bonds on or at any time after
March 20, 1997 at their principal amount, together, in each case, with accrued
interest. No such redemption may be made on or prior to March 20, 2001 unless
the average of the last selling prices or, if no sales take place on such day,
the closing bid or offered prices of the common shares as reported by the Korea
Stock Exchange, for each of 30 consecutive trading days, ending not more than 30
days prior to the date upon which notice of such redemption is given, has been
at least 130% of the conversion price of each such trading day.
Any bondholder may request the Company to redeem all or some of the bonds
held by him on March 20, 2001 at 142.75% of the principal amount of such bonds,
together with interest accrued to the date of redemption.
Unless previously redeemed, purchased and cancelled or converted, the bonds
will be redeemed on December 31, 2010 at their principal amount together with
accrued interest.
During 1999, $19,720 of convertible bonds with interest of $3,545 were
converted into the Company's common stock. As a result of the conversion,
1,686,425 additional shares were issued, which resulted in increase of capital
and capital surplus by $10,814 and $8,906, respectively. Remainder of
convertible bonds comprised principal of $23,825 and interest of $7,368 as of
December 31, 1999.
F-82
<PAGE> 148
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
18. INTEREST CAPITALIZATION:
The Company capitalized interest costs on borrowings associated with
property, plant and equipment during the construction period (see Note 2).
Details related to interest costs for the years ended December 31, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Total interest costs incurred............................... $189,817 $242,353
Charged to expense.......................................... 185,315 227,799
-------- --------
Interest capitalized........................................ $ 4,502 $ 14,554
======== ========
</TABLE>
19. REVENUE:
Revenue from continuing operations consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue from construction services................. $ -- $ -- $232,631
Net sales of tangible products..................... 282,469 213,593 163,359
Other Revenue...................................... 3,456 7,505 10,947
-------- -------- --------
Total.................................... $285,925 $221,098 $406,937
======== ======== ========
</TABLE>
20. COST OF SALES OF CONTINUING OPERATIONS CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cost of construction services...................... $ -- $ -- $191,455
Cost of tangible product sold...................... 239,632 230,478 123,211
-------- -------- --------
Total.................................... $239,632 $230,478 $314,666
======== ======== ========
</TABLE>
21. INCOME TAXES:
The tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------ --------
<S> <C> <C> <C>
Current:............................................. $ 26,868 $1,172 $ 9,794
Deferred:............................................ (54,192) 370 100,100
-------- ------ --------
Total...................................... (27,324) 1,542 109,894
Allocated to discontinued packing and testing
operation.......................................... 12,408 -- --
Allocated to gain on sale of K4...................... 14,268 -- --
-------- ------ --------
Continuing operations................................ $(54,000) $1,542 $109,894
======== ====== ========
</TABLE>
Anam incurs income tax liabilities in Korean Won based on taxable income
determined in accordance with Korean generally accepted accounting principles
and tax laws. The tax provision included in these financial statements reflects
current tax expense and the impact of accounting for deferred taxes under SFAS
109.
F-83
<PAGE> 149
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
The deferred tax consequences of temporary differences in reporting items
for financial statement and income tax purposes are recognized, if appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including Anam's ability to generate taxable income
within the period during which the temporary differences reverse, the outlook
for the Korean economy environment and the overall future industry outlook.
Management has considered these factors in reaching its conclusion as to the
valuation allowance for financial reporting purposes. Such valuation allowance
is reviewed periodically.
The major components of deferred tax assets and deferred tax liabilities as
of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets :
Borrowings................................................ $ 3,141 $ 1,750
Forward contracts......................................... 371 580
Provision for severance benefits, net..................... 14,320 13,423
Property, plant and equipment............................. 116,278 147,958
Short term and long term loans............................ 163,469 157,164
Provision for contingency losses.......................... 40,013 29,982
Inventories............................................... 678 5,463
Accounts and notes receivable............................. 41 42,465
Investment................................................ 11,800 11,994
Deferred charges.......................................... -- 17,476
Loss carry forwards....................................... -- 35,288
Tax credit................................................ 58,942 61,094
Other..................................................... 41 38,574
--------- ---------
Total deferred tax assets.............................. 409,094 563,211
--------- ---------
Deferred tax liabilities
Reserves by Korean tax law................................ -- 2,357
Accounts and notes payable................................ -- 37,860
Advances from customers................................... -- 44,162
Other..................................................... 62 7,384
--------- ---------
Total deferred tax liabilities......................... 62 91,763
Valuation allowance.................................... (355,820) (472,428)
--------- ---------
Net deferred tax assets (liabilities)....................... $ 53,212 $ (980)
========= =========
</TABLE>
The net deferred tax liabilities as of December 31, 1998 are included in
other current liabilities and other long-term liabilities.
At December 31, 1999, the Company has available unused investment tax
credits of $58,942, which may be applied against future income tax amounts
through 2006.
Management has reassessed the estimated future taxable income and has
concluded that it is "more likely than not" that Anam will not realize the full
benefit of deferred tax assets. Accordingly, a valuation allowance of $355,820
and $472,428 at December 31, 1999 and 1998, respectively, has been recorded.
F-84
<PAGE> 150
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
The statutory income tax rates, including tax surcharges, applicable to
Anam for 1999, 1998 and 1997 are approximately 30.8%, respectively. The
reconciliation from income taxes calculated at the statutory tax rate to the
effective income tax amount for each of the periods is as follows:
<TABLE>
<CAPTION>
THOUSANDS OF U.S. DOLLARS
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Taxes at Korean statutory tax rate...................... $ 35,213 $(239,367) $ 52,724
Remeasurement effect.................................... 75,257 75,813 (212,612)
Increase (decrease) in valuation allowance.............. (116,608) 193,615 268,279
Tax credit used......................................... (12,057) -- --
Other, net.............................................. (9,129) (28,519) 1,503
--------- --------- ---------
Total income tax provision (benefit).................. $ (27,324) $ 1,542 $ 109,894
========= ========= =========
</TABLE>
22. CAPITAL STOCK:
The authorized share capital of the Company consists of 300,000,000 and
100,000,000 shares of common stock, respectively, and 10,000,000 and 30,000,000
shares of preferred stock, respectively, both with par value of W5,000 as of
December 31, 1999 and 1998.
As of December 31, 1999 and 1998, outstanding capital stocks are as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES ISSUED
AND OUTSTANDING THOUSANDS OF WON
------------------------ PAR VALUE ------------------------------------
1999 1998 1999 AND 1998 1999 1998
---------- ---------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Common stock.......... 55,031,183 30,477,018 W5,000 W275,155,915 W152,385,090
Preferred stock....... 2,576,276 2,576,276 5,000 12,881,380 12,881,380
---------- ---------- ---------------- ----------------
57,607,459 33,053,294 W288,037,295 W165,266,470
========== ========== ================ ================
</TABLE>
As of December 31, 1999 and 1998, preferred stocks are as follows:
<TABLE>
<S> <C>
Series A preferred stock.................................... 2,240,240 shares
Series B preferred stock.................................... 336,036
----------
2,576,276 shares
----------
----------
</TABLE>
Series A preferred stock (First Preferred) --
Series A preferred stockholders have no voting rights and are entitled to
non-cumulative and non-participating preferred dividends at a rate of one
percentage point over those provided to common shareholders. This preferred
dividend rate is not applicable to stock dividends.
Series B Cumulative Convertible preferred stock (Second Preferred) --
Series B Cumulative Convertible preferred stockholders are entitled to
cumulative and participating preferred dividends at a rate of 9% of par value.
The shareholders have no voting rights, except for the period from the
shareholders' meeting in which dividends at a rate less than 9% of par value are
declared through the shareholders' meeting in which dividends at a rate more
than 9% of par value are declared. Preferred stocks shall be converted to common
shares on March 15, 2007. The basis of conversion is one share of preferred
stock for one share of common stock.
F-85
<PAGE> 151
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Common and preferred stock issued in 1999 and 1997 are as follows: (Per
share date is stated in U.S. dollars)
<TABLE>
<CAPTION>
PAID-IN CAPITAL IN
DATE OF ISSUANCE TYPE SHARES PAR VALUE EXCESS OF PAR VALUE
---------------- ---- ---------- --------- -------------------
<S> <C> <C> <C> <C>
COMMON STOCK
October 29, 1999.......................... (A) 19,669,600 $82,011 $ --
October 29, 1999.......................... (B) 10,000,000 41,695 --
August 13 - December 30, 1999............. (C) 1,686,425 10,814 8,906
March 15, 1997............................ (D) 3,170,110(*) 20,941 --
July 24, 1997............................. (E) 6,172,840(*) 34,536 62,187
PREFERRED STOCK
March 15, 1997............................ (D) 336,036(*) 2,220 --
</TABLE>
- -------------------------
(A) Transfer of long-term borrowings to capital stock
(B) Issuance of common stock at $4.17 to creditors and Amkor
(C) Transfer of convertible bonds to capital stock
(D) Transfer of capital surplus to capital stock in the form of stock dividend
(E) Issuance of depository receipts
The Company completed an underwritten public offering of 6,172,840 shares of
its common stock in Luxemburg capital market, at a public offering price of
$15.67 per share, net of direct issuance cost of $3,278
(*) The number of shares represents stock issued before reverse stock split.
Common stock reduced in 1999 is as follows: (Per share data is stated in
U.S. dollars)
<TABLE>
<CAPTION>
PAID-IN CAPITAL IN
DATE OF REDUCTION TYPE SHARES PAR VALUE EXCESS OF PAR VALUE
----------------- ---- ---------- --------- -------------------
<S> <C> <C> <C> <C>
COMMON STOCK
June 17, 1999.......................... (A) (6,801,860) $(43,040) $ --
</TABLE>
- -------------------------
(A) Reverse stock split from 1.2873 share to one
23. RECEIVABLE FROM STOCKHOLDERS:
Receivable from stockholders is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Beginning balance...................................... $116,417 $129,809
Collection of advance.................................. (54,299) (13,392)
-------- --------
Ending balance......................................... $ 62,118 $116,417
======== ========
</TABLE>
In July 1997, the Company loaned $100,000 to a shareholder through an
affiliated company which is payable on demand. This loan was used to purchase
the Company's depository receipts issued on July 24, 1997. The Company collected
$39,555 from the shareholder in 1999. Interest is payable at the rate from 4.1%
to 14.3% as of December 31, 1999. The Company has not recognized interest income
receivable related to this loan. This loan is recorded as a contra equity item.
In addition, the Company also made certain non-interest bearing loans to
employees and directors to finance their acquisition of the Company's stock.
Such loans are also recorded as a contra equity item.
F-86
<PAGE> 152
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
24. EARNINGS (LOSS) PER SHARE:
For the years ended December 31, 1999, 1998 and 1997, earnings (loss) per
share (EPS) was calculated as follows:
<TABLE>
<CAPTION>
WEIGHTED AVG. PER SHARE
EARNINGS (LOSS) SHARES AMOUNT
(NUMERATOR) (DENOMINATOR) (IN US DOLLARS)
--------------- ------------- ---------------
<S> <C> <C> <C>
Earnings per Share -- Year Ended December 31,
1999
Loss from continuing operations.................. $(169,759)
Less: Preferred stock dividend................... (133)
---------
Weighted average number of common shares for the
year before retroactive adjustment to reflect
the reverse stock split........................ 32,320,823
Effect of retroactive adjustment to reflect the
reverse stock split............................ (3,112,084)
----------
Basic earnings per share:
Loss from continuing operations attributable to
common stock................................... (169,892) 29,208,739 $ (5.82)
========== =======
Add: Income from discontinued operations......... 279,624
---------
Net income attributable to common stock.......... 109,732 29,208,739 $ 3.76
=======
Effect of dilutive securities:
Convertible debentures........................... 1,252 2,899,911
Convertible preferred stock...................... 133 336,036
--------- ----------
Diluted earnings per share:
Net income attributable to common stock.......... 111,117 32,444,686 $ 3.42
========= ========== =======
Loss from continuing operations attributable to
common stock................................... $(169,892) 29,208,739 $ (5.82)
========= ========== =======
Earnings per Share -- Year Ended December 31,
1998
Loss from continuing operations.................. $(957,165)
Less: Preferred stock dividend................... (108)
---------
Weighted average number of common shares for the
year before retroactive adjustment to reflect
the reverse stock split........................ 30,477,018
Effect of retroactive adjustment to reflect the
reverse stock split............................ (6,801,860)
----------
Basic earnings per share:
Loss from continuing operations attributable to
common stock................................... (957,273) 23,675,158 $(40.43)
========== =======
Add: Income from discontinued operations......... 109,632
---------
Net loss attributable to common stock............ (847,641) 23,675,158 $(35.80)
=======
Effect of dilutive securities:
Convertible debentures........................... -- --
Convertible preferred stock...................... -- --
--------- ----------
</TABLE>
F-87
<PAGE> 153
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
WEIGHTED AVG. PER SHARE
EARNINGS (LOSS) SHARES AMOUNT
(NUMERATOR) (DENOMINATOR) (IN US DOLLARS)
--------------- ------------- ---------------
<S> <C> <C> <C>
Diluted earnings per share:
Net loss attributable to common stock............ (847,641) 23,675,158 $(35.80)
========= ========== =======
Loss from continuing operations attributable to
common stock................................... $(957,273) 23,675,158 $(40.43)
========= ========== =======
Earnings per Share -- Year Ended December 31,
1997
Income from continuing operations................ $(102,039)
Less: Preferred stock dividend................... (159)
---------
Weighted average number of common shares for the
year before retroactive adjustment to reflect
the reverse stock split........................ 26,993,191
Effect of retroactive adjustment to reflect the
reverse stock split............................ (6,024,348)
----------
Basic earnings per share:
Income from continuing operations attributable to
common stock................................... (102,198) 20,968,843 $ (4.87)
========== =======
Add: Income from discontinued operations......... 143,469
---------
Net income attributable to common stock.......... 41,271 20,968,843 $ 1.97
=======
Effect of dilutive securities:
Convertible debentures........................... 1,252 1,888,971
Convertible preferred stock...................... 159 336,036
Diluted earnings per share:
Net income attributable to common stock.......... 42,682 23,193,850 $ 1.84
========= ========== =======
Income from continuing operations attributable to
common stock................................... $(102,198) 20,968,843 $ (4.87)
========= ========== =======
</TABLE>
The basic earnings per share for discontinued operations was $9.58, $4.63
and $6.84 in 1999, 1998 and 1997, respectively. Diluted earnings per share for
discontinued operations was $9.24, $4.63 and $6.71 in 1999, 1998 and 1997,
respectively.
25. COMMITMENTS AND CONTINGENCIES:
At December 31, 1999, the Company was contingently liable for guarantees of
indebtedness of certain affiliated companies as follows :
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Anam Electronics(*).................................. $134,651 $147,014
Anam Construction.................................... 150,587 144,568
Anam Environment..................................... 9,626 11,070
Acqutek.............................................. 13,691 19,369
Anam Finance......................................... 4,966 11,666
Other Affiliates..................................... 8,391 26,543
-------- --------
Total...................................... $321,912 $360,230
======== ========
</TABLE>
(*) An affiliate through common ownership of the Kim Family.
F-88
<PAGE> 154
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
As discussed in Note 5, Anam Construction and Anam Electronics became
insolvent and filed an application for corporate reorganization under the Korean
Corporate Reorganization Act on October 24, 1998 and March 18, 1999,
respectively. The application of each company was accepted by the court. Under
the court appointed receivership management, both companies had been preparing
their reorganization plan including the restructuring of existing debt. Anam
Electronics reorganization plan was completed and approved by the court on
February 7, 2000 and Anam Construction's reorganization plan is expected to be
finalized in March 2000. According to Anam Electronics' reorganization plan, a
portion of ASI's loans to Anam Electronics approximating W32.4 billion shall be
converted to common stock of Anam Electronic in exchange for 2,072,300 shares at
W16,000 per share by June 1, 2000. After this conversion, ASI will own 32.4% of
Anam electronics' common shares.
Under the terms of Anam's Workout Program, the guaranteed creditors of Anam
Construction and Anam Electronics may exercise their right to request from the
Company the performance of guarantee obligations only at the time when the
guarantee obligation amount is fixed after the extinction of the primary
debtors' legal entity as a result of bankruptcy or liquidation. In addition, the
payment of the principal of the guarantee obligation was suspended until
December 31, 2003 and interest during such suspension period will be exempted.
Accordingly, it is expected that the Company may be contingently liable for
payment guarantees on the remaining indebtedness of Anam Construction and Anam
Electronics at December 31, 2003. The Company recorded a liability for loss
contingency of $101,460 and $66,707 at December 31, 1999 and 1998, respectively,
for the probable loss that may occur upon guaranteed creditors' demand for
performance of these loan guarantees.
In addition to loss provisions provided for those affiliate guarantees
discussed above, the Company accrued an additional provision of $18,452 and
$20,637 at December 31, 1999 and 1998, respectively, related to losses expected
on other guarantees.
At December 31, 1999 and 1998, the Company is contingently liable for
letters of commitment provided in relation to the issue of $38 million secured
floating rate notes due 2000 by Pacific Elephant Investment (L) limited ("PEIL")
and the issue of $20 million guaranteed floating rate notes due 2002 by Pacific
Rainbow Investment (L) Limited ("PRIL"). According to terms of the letters of
commitment, the Company is required, subject to any restrictions under Korean
Law, to make a capital injection to PEIL and PRIL if their gross asset value
become lower than 100% of the outstanding principal amount of all borrowings by
PEIL and PRIL, respectively. Because of the economic crisis in Asia Pacific
region, the gross asset value of both PEIL and PRIL significantly declined and,
as a result, the Company was asked to make capital injections to PEIL and PRIL.
The amount of capital injection requested on October 29, 1999 approximates
$18,000 for PEIL and $17,000 for PRIL. The Company has been negotiating this
matter with various parties including those responsible for the operations of
PEIL and PRIL to settle down these claims. By taking into consideration the
current status of negotiation, the Company recorded a liability for loss
contingency of $10,000 at December 31, 1999 and 1998 for the probable loss that
may occur upon settlement of these claims.
26. DERIVATIVE FINANCIAL INSTRUMENTS:
The total fair value of all derivative instruments at December 31, 1999 and
1998 was $164,636 and $273,962, respectively. Net unrealized losses in relation
to currency and interest swap contracts approximate $15,364 and $36,968 as of
December 31, 1999 and 1998, respectively (see Note 2).
F-89
<PAGE> 155
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
Currency and interest swap
The Company had several outstanding currency and interest rate swap
contracts at December 31, 1999 and 1998, further described as follows:
1999
<TABLE>
<CAPTION>
CONTRACTED RECEIVING PAYING CONTRACT
BANK CONTRACT AMOUNT EXCHANGE RATE RATE(%) RATE(%) DUE DATE
---- --------------- ------------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
Korea Development Bank............ US$50,000 W938 : US$1 9.95 6.25 Oct 10, 2000
Sinhan Bank....................... US$10,000 W882 : US$1 10.20 6.90 Apr 24, 2000
Korea Merchant Bank............... US$20,000 W882 : US$1 10.20 6.90 Apr 24, 2000
</TABLE>
1998
<TABLE>
<CAPTION>
CONTRACTED RECEIVING PAYING CONTRACT
BANK CONTRACT AMOUNT EXCHANGE RATE RATE(%) RATE(%) DUE DATE
---- --------------- ------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Chase Manhattan Bank............. $30,000 W830 : US$1 8.25 7.00 Sept 16, 1999
Chase Manhattan Bank............. $20,000 W840 : US$1 7.99 6.29 Oct 17, 1999
Korea Development Bank........... $50,000 W938 : US$1 9.95 6.25 Oct 10, 2000
Shinhan Bank..................... $10,000 W882 : US$1 10.20 6.90 Apr 24, 2000
Korea Merchant Bank.............. $20,000 W882 : US$1 10.20 6.90 Apr 24, 2000
</TABLE>
Under the terms of the currency and interest swaps, the Company is
obligated to pay the contract amount multiplied by the current exchange rate
multiplied by the paying rate and is entitled to receive the contract amount
multiplied by the contracted exchange rate multiplied by the paying rate at
six-month intervals until the contract due date.
Interest swap
The Company had several outstanding interest-rate swap contracts in
relation to payment of interest on foreign currency long-term debt at December
31, 1999 and 1998, further described as follows:
1999
<TABLE>
<CAPTION>
BUYING
BANK CONTRACT AMOUNT SELLING RATE(%) RATE(%) CONTRACT TERMS
---- --------------- --------------- ------- --------------
<S> <C> <C> <C> <C>
Chase Manhattan Bank US$100,000 6 month LIBOR 5.800 Sept 16, 2000
</TABLE>
1998
<TABLE>
<CAPTION>
SELLING BUYING CONTRACT
BANK CONTRACT AMOUNT RATE(%) RATE(%) TERMS
- -------------------- --------------- ------------- ------- --------------
<S> <C> <C> <C> <C>
Shinhan Bank US$ 50,000 6 month LIBOR 5.705 Jul 1, 1999
Chase Manhattan Bank US$100,000 6 month LIBOR 5.800 Sept 16, 2000
</TABLE>
27. 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 judgement is required in interpreting market data to
develop 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
F-90
<PAGE> 156
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
market and credit risks and may at times be concentrated with certain
counterparties or group of counter-parties. The creditworthiness of
counterparties is continually reviewed, and full performance is anticipated.
The carrying amount reported in the balance sheet for accounts receivable
from affiliates, other accounts receivable, short-term loans receivable, and
accrued expenses 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 are 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.
Investment in affiliated companies
Management believes it is impractical to estimate the fair value of non
publicly traded companies.
Short-term borrowing
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 value of this debt
is a reasonable estimate of fair value.
Convertible Bonds
Management believes it is impractical to estimate the fair value of such
bonds due to their unique feature and the lack of an active trading market for
such bonds.
Derivative Instruments
The fair value of derivative instruments is based on quoted market prices
if available or discounted cash flow if market quote is not available, and is
estimated to be $164,636 and $273,962 at December 31, 1999 and 1998,
respectively.
28. RELATED PARTY TRANSACTIONS:
Discontinued packaging and testing operations
On February 28, 2000, Anam's board of directors and the creditors committee
approved the formal plan to sell the remaining packaging and testing operations
to Amkor, the company related to Anam (see Notes 1 and 2). The anticipated
disposal date is approximately April 30, 2000. Net sales of the packaging and
testing operations, consisting of plants K1, K2 and K3, for the years ended
December 31, 1999, 1998 and 1997, including those of K4 sold to Amkor in May,
1999, were $477,862, $500,914 and $650,457,
F-91
<PAGE> 157
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
respectively. These amounts are not included in the net sales in the
accompanying income statements (see Notes 30 and 31).
Significant transactions with affiliated companies during 1999, 1998 and
1997 and the related account balances at December 31, 1999 and 1998 are
summarized as follows:
Transactions between the Company and its affiliated companies
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Sales
Amkor............................................ $712,300 $566,261 $530,262
Other affiliated companies....................... 2,428 4,051 19,013
-------- -------- --------
$714,728 $570,312 $549,275
======== ======== ========
Purchases
Other affiliated companies....................... $ 17,612 $ 16,277 $ 21,114
======== ======== ========
</TABLE>
Related accounts balances between the Company and its affiliated companies
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Receivables
Amkor..................................................... $26,586 $13,342
Other affiliated companies................................ 7,505 15,503
------- -------
$34,091 $28,845
======= =======
Payables
Amkor..................................................... $ 1,223 $22,578
Other affiliated companies................................ 10,633 2,012
------- -------
$11,856 $24,590
======= =======
</TABLE>
Employee and Directors Loans
The Company has short-term loans of $36 to its employees and directors at
December 31, 1998. Such loans are provided to assist employees and directors in
housing purchase. They generally bear market interest rate and are repaid
through regular payroll deduction based on a predetermined schedule.
29. SEGMENT INFORMATION:
The Company has identified three reportable segments, specifically
packaging and test services, wafer fabrication service and construction, that
are managed separately because the services provided by each segment require
different technology.
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 test and thermal and
electrical characterization. The Company also manufacture submicron CMOS wafers
through its foundry. Also, the Company, through its subsidiary, Anam
Construction, provide construction services, which was consolidated in 1997 but
deconsolidated since 1998.
F-92
<PAGE> 158
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
The accounting policies for segment reporting are the same as those
described in Note 2 to the consolidated financial statements. The Company
evaluates its operating segments based on profit and loss.
BY INDUSTRY SEGMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue from external customers:
Packaging............................................ $ 477,862 $ 500,914 $ 650,457
Construction......................................... -- -- 232,631
Wafer................................................ 264,177 97,068 --
Other................................................ 21,748 124,030 174,306
---------- ---------- ----------
Total........................................ $ 763,787 $ 722,012 $1,057,394
========== ========== ==========
Property, Plant and Equipment:
Packaging............................................ $ 401,568 $ 926,135
Construction......................................... -- --
Wafer................................................ 597,870 597,165
Other................................................ 38,497 58,314
---------- ----------
Total........................................ $1,037,935 $1,581,614
========== ==========
</TABLE>
The following is a summary of operations by country based on the location
of the customer. Property, plant and equipment is based on the location of the
equipment.
BY GEOGRAPHY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue from external customers:
United States........................................ $ 712,300 $ 566,261 $ 530,262
Republic of Korea and Others......................... 51,487 155,751 527,132
---------- ---------- ----------
Total........................................ $ 763,787 $ 722,012 $1,057,394
========== ========== ==========
Property, Plant, and Equipment
United States........................................ $ 76 $ 72
Republic of Korea.................................... 1,037,859 1,581,542
---------- ----------
Total........................................ $1,037,935 $1,581,614
========== ==========
</TABLE>
BY MAJOR CUSTOMER
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
-------- -------- ----------
<S> <C> <C> <C>
Revenue from external customers:
Amkor................................................... $712,300 $566,261 $ 530,262
Other................................................... 51,487 155,751 527,132
-------- -------- ----------
Total........................................... $763,787 $722,012 $1,057,394
======== ======== ==========
</TABLE>
F-93
<PAGE> 159
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
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.
<TABLE>
<CAPTION>
PACKAGING
AND TEST WAFER
(DISCONTINUED) FABRICATION CONSTRUCTION OTHER TOTAL
-------------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Net Revenue........................... $ 477,862 $264,177 $ -- $ 21,748 $ 763,787
Gross Profit.......................... 156,704 38,155 -- 8,138 202,997
Operating Income...................... 136,002 26,570 -- 938 163,510
Depreciation and Amortization......... 150,653 119,447 -- 1,531 271,631
Capital Expenditures.................. 595 3,907 -- -- 4,502
Total Assets.......................... 583,491 728,774 -- 175,204 1,487,469
Year ended December 31, 1998
Net Revenue........................... $ 500,914 $ 97,068 $ -- $124,030 $ 722,012
Gross Profit.......................... 139,129 (38,884) -- 29,504 129,749
Operating Income...................... 94,929 (315,911) -- 17,905 (203,077)
Depreciation and Amortization......... 179,955 115,428 -- 3,869 299,252
Capital Expenditures.................. 2,317 12,237 -- -- 14,554
Total Assets.......................... 1,075,286 740,135 -- 63,529 1,878,950
Year ended December 31, 1997
Net Revenue........................... $ 650,457 $ -- $387,946 $ 18,991 $1,057,394
Gross Profit.......................... 186,633 -- 94,469 (2,198) 278,904
Operating Income...................... 129,157 -- 55,287 (49,210) 135,234
Depreciation and Amortization......... 143,079 -- 11,243 (3,659) 150,663
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Total revenues for reportable segments............... $ 763,787 $ 722,012 $1,057,394
Elimination of revenues from discontinued operation
(Note 28)......................................... 477,862 500,914 650,457
---------- ---------- ----------
Total consolidated revenue........................... $ 285,925 $ 221,098 $ 406,937
========== ========== ==========
GROSS PROFIT
Total gross profit for reportable segments........... $ 202,997 $ 129,749 $ 278,904
Elimination of gross profit from discontinued
operation (Note 28)............................... 156,704 139,129 186,633
---------- ---------- ----------
Total consolidated gross profit...................... $ 46,293 $ (9,380) $ 92,271
========== ========== ==========
OPERATING INCOME
Total operating income (loss) for reportable
segments.......................................... $ 163,510 $ (203,077) $ 135,234
Elimination of operating income from discontinued
operation (Note 28)............................... 142,472 109,632 143,469
---------- ---------- ----------
Total consolidated operating income.................. $ 21,038 $ (312,709) $ (8,235)
========== ========== ==========
Total asset.................................. $1,487,469 $1,878,950 $2,922,114
========== ========== ==========
</TABLE>
F-94
<PAGE> 160
ANAM SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(CURRENCY -- THOUSANDS OF U.S. DOLLARS)
30. SALE OF K4 ASSETS AND OTHER:
On May 17, 1999, the Company sold to Amkor all the assets of the Company's
packaging and test facility located in Kwangju city, the Republic of Korea
("K4"), excluding cash and cash equivalents, notes and accounts receivables,
intercompany accounts and existing claims against third parties, in accordance
with an asset purchase agreement signed on December 30, 1998 and approved by its
shareholders on February 3, 1999. The sale price of K4 is $575,000 in cash, plus
the transfer of up to $7,000 of employee benefit liabilities. The sale of K4
resulted in a gain of approximately $163,828 on the sale. K4 provides packaging
and test services for advanced leadframe and laminate packages that are used in
high-performance electronic products such as cellular telephones, laptop
computers, digital cameras and microprocessors. K4 began operating in October
1996 and is Anam's newest semiconductor packaging and test facility. The
operating results of K4 are included in the income from the discontinued
operation because of the approved sale of the remaining packaging and testing
business in 2000 (see Note 31).
In connection with the sale of K4, Anam entered into a Transition Services
Agreement with Amkor. Pursuant to this agreement, Anam will continue to provide
many of the same non-manufacturing related services to K4 that it provided prior
to the sale, including, human resources, accounting and general administrative
services. The monthly fee for the service is $766. Anam also entered into an
Intellectual Property License Agreement with Amkor that became effective upon
the closing of the sale. Anam transferred certain patents to Amkor and licensed
certain intellectual property rights to Amkor under an exclusive, fully paid,
perpetual license.
In August 1999, the Company sold all assets and liabilities directly
related to the wiring business to a third party and recognized a gain of $16,671
on the sale. This sale did not qualify as discontinued operations and,
accordingly, the related gain was included in the results of continuing
operations.
31. SUBSEQUENT EVENTS :
On February 28, 2000, Anam made a decision to sell to Amkor all of the
remaining operating assets related to the packaging and testing business
excluding K2 land in accordance with the approval of the Anam's board of
directors' meeting and the Anam's creditors committee. The sale price of
Packaging Business is Korean Won equivalent to $950 million. The major assets of
the packaging and testing business are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Inventory.............................................. $ 7,984 $ 7,982
Fixed Assets........................................... 401,568 926,135
-------- --------
$409,552 $934,117
======== ========
</TABLE>
On February 28, 2000, the Company also made a decision to issue 56,457,039
shares of the new common stock on approval of a board of directors' meeting as
follows:
- Approximately 15,529,000 shares of common stock will be issued to Amkor
at W8,000 per share
- Additional 22,179,974 shares of common stock will be issued to Amkor at
W18,000 per share
- Additional 18,750,000 shares of common stock will be issued to creditor
banks at W8,000 per share through the conversion of W150 billion debt
into common stock
Management of the Company intends to use proceeds from the sales of the
packaging and testing operations to repay its borrowings due to remaining wafer
fabrication creditor institutions and invest in the remaining wafer fabrication
operations of the Company.
F-95
<PAGE> 161
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
F-96
<PAGE> 162
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
F-97
<PAGE> 163
AMKOR TECHNOLOGY, INC.
CONSENT SOLICITATION
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Written Consent of Stockholders to approve the Acquisition
Transactions.
Exhibit 23.1 Consent of Arthur Andersen LLP.
Exhibit 23.2 Consent of Samil Accounting Corporation.
Exhibit 23.3 Consent of Siana Carr & O'Connor, LLP.
Exhibit 23.4 Consent of Ahn Kwon & Co.
</TABLE>
<PAGE> 164
EXHIBIT A
WRITTEN CONSENT OF THE STOCKHOLDERS OF
AMKOR TECHNOLOGY, INC.
EFFECTIVE AS OF APRIL 17, 2000
Pursuant to Section 228 of the Delaware General Corporation Law and the
Bylaws of Amkor Technology, Inc., a Delaware corporation (the "Company"), the
undersigned, constituting the holders of the outstanding shares of the Company
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, hereby adopt the following resolutions by
written consent, effective for all purposes as of the date set forth above:
APPROVAL OF THE EQUITY FINANCING TRANSACTIONS
WHEREAS, the Board of Directors has approved transactions related to
the Company's proposed acquisition of the packaging and test business of
Anam Semiconductor, Inc. ("ASI") (the "Acquisition Transactions),
including:
(1) the acquisition of the facilities known as K1, K2 and K3 for $950
million, and
(2) an investment in ASI of approximately $500 million.
WHEREAS, the Board of Directors recommends that the Stockholders of the
Company approve equity financing transactions related to the Acquisition
Transactions (the "Equity Financing Transactions"), including:
(1) the issuance of up to approximately 4,512,560 shares of common stock
upon conversion of $258.75 million of the 5% convertible subordinated
notes due 2007 sold by us on March 22, 2000 in a private transaction,
(2) the sale of an aggregate of 20,500,000 shares of common stock and
warrants for 3,895,000 shares of common stock in a private transaction
we expect to complete in connection with the Acquisition Transactions,
and
(3) other equity financings, pursuant to which the Company would issue
common stock or securities convertible into common stock which, when
combined with the common stock to be issued pursuant to (1) and (2)
above, would in the aggregate exceed 20% of the outstanding common
stock of the Company as of April 12, 2000.
NOW, THEREFORE, BE IT RESOLVED: That the Equity Financing Transactions are
hereby approved and authorized in all respects, with such changes, additions,
deletions, supplements and amendments thereto as the officers of the Company may
deem necessary or advisable.
[ ] I consent to the resolution set forth above, approving the Equity
Financing Transactions.
[ ] I do not consent to the resolution set forth above, approving the
Equity Financing Transactions.
IN WITNESS WHEREOF, the undersigned Stockholders have executed this Written
Consent in counterpart as of the date set forth above, and direct that this
Written Consent be filed with the minutes of the proceedings of the stockholders
of the Company.
- ---------------------------------------------------------
Name of Stockholder:
<PAGE> 165
EXHIBIT 23.1
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
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) and to all
references to our Firm included in or made a part of this Proxy Statement; and
to the incorporation of that report included in this Proxy Statement into the
Company's previously filed Form S-8 Registration Statements File Numbers
333-62891 and 333-86161.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
April 3, 2000
<PAGE> 166
EXHIBIT 23.2
[PRICEWATERHOUSECOOPERS LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-62891 and No. 333-86161) of Amkor Technology,
Inc. of our following reports which appear in the Proxy Statement of Amkor
Technology, Inc.:
- dated February 28, 2000 relating to the consolidated financial
statements of Anam Semiconductor, Inc. and its subsidiaries;
- dated January 25, 2000, except as to Note 14, which is as of February
28, 2000, relating to the financial statements of the Seongsu, Pucheon
and Pupyong Packaging Business of Anam Semiconductor, Inc.; and
- dated January 15, 2000 relating to the financial statements of the
Amkor Technology Korea, Inc.
/s/ Samil Accounting Corporation
Seoul, Korea
April 3, 2000
<PAGE> 167
EXHIBIT 23.3
[SIANA CARR & O'CONNOR, LLP LETTERHEAD]
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. Proxy Statement.
/s/ SIANA CARR & O'CONNOR, LLP
- ------------------------------
Siana Carr & O'Connor, LLP
Paoli, Pennsylvania
April 3, 2000
<PAGE> 168
EXHIBIT 23.4
[AHN KWON & CO. LETTERHEAD]
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
Proxy Statement by Amkor Technology, Inc.
/s/ AHN KWON & CO.
- -------------------------------
Ahn Kwon & Co.
Seoul, Korea
April 3, 2000
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report 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) and to all references to our report or to our Firm included in
or made a part of this Current Report on Form 8-K; and to the incorporation of
that report incorporated by reference into this Current Report on Form 8-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
May 11, 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 are incorporated by reference into the
Current Report on Form 8-K of Amkor Technology, Inc.:
- dated February 28, 2000 relating to the consolidated financial
statements of Anam Semiconductor, Inc. and its subsidiaries;
- dated January 25, 2000, except as to Note 14, which is as of
February 28, 2000, relating to the financial statements of the
Seongsu, Pucheon and Pupyong Packaging Business of Anam
Semiconductor, Inc.; and
- dated January 15, 2000 relating to the financial statements of the
Amkor Technology Korea, Inc.
/s/ SAMIL ACCOUNTING CORPORATION
- ------------------------------------
Seoul, Korea
May 10, 2000
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of and
incorporation by reference to our report and to all references to our Firm
included in or made a part of the Amkor Technology, Inc. Current Report on Form
8-K.
/s/ SIANA CARR & O'CONNOR LLP
- ------------------------------------
Paoli, Pennsylvania
May 10, 2000
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of and
incorporation by reference to our reports and to all references to our Firm
included in or made a part of this Current Report on Form 8-K by Amkor
Technology, Inc.
/s/ AHN KWON & CO.
- ------------------------------------
Seoul, Korea
May 10, 2000
<PAGE> 1
EXHIBIT 99.1
AMKOR COMPLETES ACQUISITION OF THREE SEMICONDUCTOR ASSEMBLY FACTORIES
WEST CHESTER, Pa.--May 2, 2000--Amkor Technology (Nasdaq: AMKR) has completed
the acquisition of three semiconductor assembly and test factories (known as K1,
K2 and K3) from Anam Semiconductor, Inc. ("ASI"). In addition, Amkor will be
increasing its investment in ASI, whose principal operating asset is a
world-class semiconductor wafer foundry located in Buchon, Korea. The entire
transaction, (i.e. the asset purchase plus the equity investment in ASI) is
valued at approximately $1.4 billion, and is being funded with a combination of
$410 million in private equity capital; $259 million in convertible subordinated
notes; and $750 million in bank debt. James Kim, Amkor's Chairman and Chief
Executive Officer, noted that "We are delighted to finally complete this
landmark transaction. K1, K2 and K3 are among world's finest semiconductor
assembly factories. They operate with a broad range of semiconductor package
technology and serve what we believe is the industry's largest base of
established, fully qualified customers. This transaction solidifies Amkor's
position as the world's largest independent provider of semiconductor packaging
and test services by assuming direct ownership of all our packaging and test
operating assets and enhancing the operating profitability of our core business.
In addition, our investment in a restructured ASI provides Amkor with a
significant stake in what we believe is a very valuable asset - the ASI wafer
foundry." Amkor now owns and operates seven semiconductor packaging and test
facilities consisting of more than 3.5 million square feet of existing
manufacturing and support space, with an additional 1 million square feet of
manufacturing space available for expansion. In 1999, these seven factories
packaged approximately 4.1 billion semiconductor ICs, representing approximately
6% of the world's consumption of semiconductor chips. John Boruch, Amkor's
president, said, "We expect a very smooth transition, as these factories are
already substantially integrated into Amkor's operating systems. Owning these
factories should allow us to achieve greater flexibility in managing our
manufacturing operations and product development efforts."
About K1, K2 & K3
K1 - Seoul, Korea 646,000 ft2 - 3,300 employees
K2 - Buchon, Korea 264,000 ft2 - 1,800 employees
K3 - Bupyung, Korea 404,000 ft2 - 1,500 employees
Located in and around Seoul, Korea, K1, K2 and K3 are established, world-class
semiconductor packaging and test facilities with approximately 1.3 million
square feet of total manufacturing space. Virtually the entire output of these
factories has historically been dedicated to Amkor through a long-term Supply
Agreement with ASI. During 1999 the three factories assembled more than 1.2
billion individual semiconductor ICs, representing a comprehensive range of both
traditional and advanced package products. For the twelve months ended December
31, 1999, K1, K2 & K3 contributed approximately $793 million of Amkor's $1.6
billion in packaging and test revenue. During this period, Amkor recognized a
contractual gross margin of approximately 11.5% on the revenue derived from
these 3 factories. During the same period, these three factories operated with
gross margins similar to the gross margins achieved by Amkor's established
factories in the Philippines. "Now that this acquisition is completed, we will
achieve higher operating margins on our overall packaging and test business,
since the revenue derived from K1, K2 & K3 will no longer be subject to a
contractual gross margin," said Ken Joyce, Amkor's chief financial officer. "In
addition, we will generate significantly more EBITDA, which will facilitate the
repayment of debt incurred in this transaction."
About ASI's Semiconductor Wafer Foundry
Established in 1998, the ASI fab is a 480,000 ft2 world-class wafer fabrication
foundry located in Buchon, Korea. The fab, which was developed with technology
transferred from Texas Instruments Corporation, is currently producing 8-inch
semiconductor wafers using a range of sub-micron process technologies at the
0.35 micron, 0.25 micron, and 0.18 micron process levels. The foundry is
producing semiconductor chips for the rapidly growing cellular phone market, as
well as other wireless and mobile applications that require a combination of low
power and high performance. In addition to supplying digital signal processors
for Texas Instruments, the foundry is producing a broad range of semiconductors
for such customers as Alcatel Microelectronics, Atmel Corporation, Ericsson, NEC
Corporation and Toshiba Corporation. The foundry is expanding its semiconductor
manufacturing capacity to approximately 30,000 wafer starts per month from the
current capacity of approximately 23,000 wafer starts per month. Production
levels are expected to reach 25,000 wafers per month sometime in the second or
<PAGE> 2
third quarter of 2000, with higher output expected in the third or fourth
quarter of 2000. The additional wafer production will be focused on logic
devices at the 0.25 micron through 0.18 micron process levels.
Amkor Technology, Inc. is the world's largest provider of contract
microelectronics manufacturing solutions. The company offers semiconductor
companies and electronics OEMs a complete set of microelectronic design and
manufacturing services, including deep submicron wafer fabrication; wafer probe,
characterization and reliability testing; IC packaging design and assembly;
multi-chip module design and assembly; and final testing. More information on
Amkor is available from the company's SEC filings and on Amkor's web site:
www.amkor.com.
This news release may contain forward-looking statements - such as (1) our
belief that the acquisition of K1, K2, and K3 will allow Amkor to achieve
greater flexibility in managing our manufacturing operations and product
development efforts; (2) our expectations that, after the acquisition, we will
achieve higher operating margins and will generate significantly more EBITDA,
which will facilitate the repayment of debt incurred in this transaction; and
(3) our expectations that the ASI wafer fab will achieve production levels of
25,000 wafers per month sometime in the second or third quarter of 2000, with
higher production levels expected in the third or fourth quarter of 2000; - that
involve risks and uncertainties that could cause actual results to differ from
anticipated results. Further information on risk factors that could affect the
outcome of the events set forth in these statements and that would affect the
company's operating results and financial condition is detailed in the company's
filings with the Securities and Exchange Commission, including the Report on
Form 10-K for the fiscal year ended December 31, 1999.
- -------------------
Contact: Amkor Technology
Jeffrey Luth, VP Investor Relations
610/431-9600 ext. 5613
[email protected]
or
Ken Jensen, Director, Marketing Communications
480/821-2408 ext. 5130
[email protected]
