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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMKOR TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 23-1722724
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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1345 ENTERPRISE DRIVE
WEST CHESTER, PENNSYLVANIA 19380
(610) 431-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KEVIN HERON, ESQ.
GENERAL COUNSEL
1345 ENTERPRISE DRIVE
WEST CHESTER, PENNSYLVANIA 19380
(610) 431-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LARRY SONSINI, ESQ.
BRUCE M. MCNAMARA, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)
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5% Convertible Subordinated Notes due 2007....... $258,750,000 98.375% $254,545,313 $67,200
Common Stock, $0.001 par value, issuable upon
conversion of the Convertible Notes............ 4,512,557 Shares(3) N/A N/A N/A
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(1) Estimated solely for purposes of calculation of the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended; based on the average of the high and low prices of the Registrant's
Convertible Notes on the PORTAL Market on June 14, 2000.
(2) Pursuant to Rule 457(i) there is no filing fee with respect to the shares of
common stock issuable upon conversion of the Convertible Notes because no
additional consideration will be received in connection with the exercise of
such conversion privilege.
(3) Plus such additional indeterminate number of shares as may become issuable
upon conversion of the Convertible Notes being registered hereunder by means
of adjustment to the conversion price.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 19, 2000
$258,750,000
AMKOR TECHNOLOGY, INC.
5% Convertible Subordinated Notes due 2007 (the "Convertible Notes") and
the Common Stock Issuable Upon Conversion of the Convertible Notes
-------------------------
We issued the Convertible Notes in a private placement in March 2000. This
prospectus will be used by holders of Convertible Notes, to whom we also refer
as the selling security holders, to resell their Convertible Notes and the
common stock issuable upon conversion of their Convertible Notes.
The Convertible Notes are convertible prior to maturity into our common
stock at an initial conversion price of $57.34 per share, subject to adjustment
in certain events. We will pay interest on the Convertible Notes on March 15 and
September 15 of each year, beginning on September 15, 2000. The Convertible
Notes will mature on March 15, 2007, unless earlier converted or redeemed.
We may redeem all or a portion of the Convertible Notes after September 20,
2001 and prior to March 24, 2003 under the circumstances and at the prices
described in this prospectus, and we may redeem all or a portion of the
Convertible Notes on or after March 20, 2003. In addition, the holders may
require us to repurchase the Convertible Notes upon a change of control or the
occurrence of other designated events prior to March 15, 2007.
The reported last sales price of our common stock on the Nasdaq National
Market on June 15, 2000 was $43.5625 per share. Our common stock is traded on
the Nasdaq National Market under the symbol "AMKR."
-------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated , 2000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN ANY PROSPECTUS
SUPPLEMENT OR THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THOSE DOCUMENTS.
TABLE OF CONTENTS
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Where You Can Find More Information......................... 3
Forward-Looking Statements.................................. 3
Summary..................................................... 5
The Offering................................................ 6
Risk Factors................................................ 8
Use of Proceeds............................................. 18
Ratio of Earnings to Fixed Charges.......................... 18
Description of Notes........................................ 19
Description of Capital Stock................................ 35
Certain Federal Income Tax Considerations................... 38
Selling Security Holders.................................... 44
Plan of Distribution........................................ 45
Legal Matters............................................... 46
Independent Accountants..................................... 47
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Commission, in accordance with the Securities Exchange Act of 1934. You may read
and copy our reports, proxy statements and other information filed by us at the
public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices; 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our reports, proxy statements and other information
filed with the Commission are available to the public over the Internet at the
Commission's World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" into this prospectus
the information we filed with the Commission. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999 and amendment thereto on Form 10-K/A filed April 28, 2000.
- Our Quarterly Report on Form 10-Q for the period ended March 31, 2000.
- Our Current Report on Form 8-K filed June 19, 2000, our Current Report on
Form 8-K filed May 12, 2000, our Current Report on Form 8-K filed March
21, 2000, our Current Report on Form 8-K filed March 10, 2000, and
amendments thereto on Form 8-K/A filed March 13, 2000 and March 17, 2000,
our Current Report on Form 8-K filed March 2, 2000, and our Current
Report on Form 8-K filed February 18, 2000.
- Our Schedule 14A filed on June 14, 2000.
- Our Schedule 14A filed on April 13, 2000.
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Summary" and "Risk
Factors," contains forward-looking statements. These statements relate to future
events or our future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such risks
and other factors include, among other things, those listed under "Risk Factors"
and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
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Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither any other person nor we
assume responsibility for the accuracy and completeness of such statements.
Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update publicly any of them in light of new
information or future events.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Attn: Jeff Luth
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, PA 19380
Tel: (610) 431-9600
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SUMMARY
This summary highlights some information from this prospectus and it may
not contain all of the information that is important to you. It is qualified in
its entirety by the more detailed information and consolidated financial
statements, including the notes to the consolidated financial statements,
incorporated by reference in this prospectus. You should read the full text of
and consider carefully the more specific details contained in this prospectus.
When used in this prospectus, the terms "Amkor," "we," "our" and "us" refer to
Amkor Technology, Inc. and not to the selling securityholders.
Amkor is the world's largest independent provider of semiconductor
packaging and test services. We believe that we are also one of the leading
developers of advanced semiconductor packaging and test technology. We offer one
of the industry's broadest integrated sets of packaging and test services, which
are the final procedures necessary to prepare semiconductor devices for further
use. Our customers outsource the packaging and testing of semiconductor chips to
us in order to benefit from our expertise in the development and implementation
of packaging and test technology and our advanced manufacturing capabilities. We
also market the wafer fabrication services provided by factories owned by Anam
Semiconductor, Inc. ("ASI"). We have more than 190 customers, including 37 of
the world's 40 largest semiconductor companies, for whom we packaged more than
4.1 billion semiconductor devices in 1999. Our customers include, among others,
Advanced Micro Devices, Inc., Intel Corporation, International Business Machines
Corp., Lucent Technologies, Inc., Motorola, Inc., National Semiconductor Corp.,
Philips Electronics N.V., ST Microelectronics PTE, Infineon Technologies AG and
Texas Instruments, Inc.
We provide packaging and test services through our three factories in the
Philippines and our four Korean factories. We acquired our Korean factory known
as K4 from ASI in May 1999. We also provide additional packaging and test
services from three factories, known as K1, K2 and K3, that are located in Korea
and which we purchased from ASI during the second quarter of 2000 for a purchase
price of approximately $950.0 million.
Our acquisition of K1, K2 and K3 ends our dependence on ASI for packaging
and test services. In 1999, we derived 45.0% of our net revenues and 29.5% of
our gross profit from sales of packaging and test services performed by ASI.
Historically, we have earned higher gross margins on the packaging and test
services performed by our company-owned facilities than on the packaging and
test services which we outsourced to ASI.
Following our acquisition of K1, K2 and K3, ASI's primary asset is its
wafer fabrication facility. In 1999, we derived 15.3% of our net revenues and
8.8% of our gross profit from sales of wafer fabrication services performed for
us by ASI. In October 1999, we invested $41.6 million in ASI and in May 2000 we
completed our purchase of ASI's three remaining packaging and test factories,
known as K1, K2 and K3 for a purchase price of $950.0 million and made an
additional equity investment in ASI of $309.0 million of the total $459.0
million we committed to invest. We will make the additional equity investment of
$150.0 million in three equal installments in June, August and October of 2000.
We expect ASI will use the proceeds from the sale of K1, K2 and K3 and our
investment to repay outstanding bank debt and for general corporate purposes.
Through our acquisition of K1, K2 and K3 and our investment in ASI, we
expect to be better positioned to capitalize on the anticipated growth in the
semiconductor industry and the increasing outsourcing of packaging and test
services by semiconductor manufacturers.
We were incorporated in Delaware in 1998. Our principal offices are located
at 1345 Enterprise Drive, West Chester, PA 19380, our telephone number os (610)
431-9600 and our website can be accessed at www.amkor.com. Information contained
in our website does not constitute part of this prospectus.
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THE OFFERING
Securities......................... $258.75 million aggregate principal
amount of Convertible Notes and shares of
our common stock issued upon conversion
of the 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 "Description of
Notes -- Conversion."
Provisional Redemption by the
Company............................ After September 30, 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 "Description of
Notes -- 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
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accrued and unpaid interest and
liquidated damages, if any, thereon. See
"Description of Notes -- Optional
Redemption."
Repurchase Upon Designated Event... The Convertible Notes are required to be
repurchased at 101% of their principal
amount together with accrued and unpaid
interest 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 "Description of
Notes -- Repurchase at Option of Holders
Upon a Designated Event."
Subordination...................... The Convertible Notes are 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
March 31, 2000, after giving effect to
our incurrence of approximately $750.0
million of new secured bank debt in
connection with our acquisition of K1, K2
and K3 and our investment in ASI, we had
approximately $1,375.0 million of
outstanding indebtedness that would have
constituted debt senior to the
Convertible Notes, and 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
$141.7 million. See "Description of
Notes -- Subordination."
Trading............................ The Convertible Notes are designated as
eligible for trading in the Portal
Market. Our common stock is quoted on the
Nasdaq National Market under the symbol
"AMKR."
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. We have
agreed to use reasonable efforts to keep
effective such shelf registration
statement, of which this prospectus forms
a part. See "Description of
Notes -- Registration Rights."
Risk Factors....................... See "Risk Factors" and the other
information in this prospectus for a
discussion of the factors you should
carefully consider before deciding to
invest in the Convertible Notes or the
common stock issued upon conversion of
the Convertible Notes.
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RISK FACTORS
Any investment in our Convertible Notes or our common stock involves a high
degree of risk. You should consider the risks described below carefully and all
of the information contained in this prospectus before deciding whether to
purchase our Convertible Notes or our common stock issued upon their conversion.
The risks and uncertainties described below are not the only risks and
uncertainties we face. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
and results of operations would suffer. In that event, the price of the
Convertible Notes and our common stock could decline, and you may lose all or
part of your investment in the Convertible Notes and our common stock. The risks
discussed below also include forward-looking statements and our actual results
may differ substantially from those discussed in these forward-looking
statements.
FLUCTUATIONS IN OPERATING RESULTS
Our operating results have varied significantly from period to period. A
variety of factors could materially and adversely affect our revenues, gross
profit and operating income, or lead to significant variability of quarterly or
annual operating results. These factors include, among others:
- the cyclical nature of both the semiconductor industry and the markets
addressed by end-users of semiconductors,
- the short-term nature of our customers' commitments, timing and volume of
orders relative to our production capacity,
- changes in our capacity utilization,
- evolutions in the life cycles of our customers' products,
- rescheduling and cancellation of large orders,
- erosion of packaging selling prices,
- fluctuations in wafer fabrication service charges paid to ASI,
- changes in costs, availability and delivery times of labor, raw materials
and components,
- fluctuations in manufacturing yields,
- changes in product mix,
- timing of expenditures in anticipation of future orders,
- availability and cost of financing for expansion,
- the ability to develop and implement new technologies on a timely basis,
- competitive factors,
- changes in effective tax rates,
- the loss of key personnel or the shortage of available skilled workers,
- international political or economic events,
- currency and interest rate fluctuations,
- environmental events, and intellectual property transactions and
disputes.
Unfavorable changes in any of the above factors may adversely affect our
business, financial condition and results of operations. In addition, we
increase our level of operating expenses and investment in manufacturing
capacity based on anticipated future growth in revenues. If our revenues
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do not grow as anticipated and we are not able to decrease our expenses, our
business, financial condition and operating results would be materially and
adversely affected.
DECLINING AVERAGE SELLING PRICES -- THE SEMICONDUCTOR INDUSTRY PLACES DOWNWARD
PRESSURE ON THE PRICES OF OUR PRODUCTS.
Historically, prices for our packaging and test services and wafer
fabrication services have declined over time. Beginning in 1997, a worldwide
slowdown in demand for semiconductor devices led to excess capacity and
increased competition. As a result, price declines in 1998 accelerated. We
expect that average selling prices for our packaging and test services will
continue to decline in the future. If we cannot reduce the cost of our packaging
and test services and wafer fabrication services to offset a decline in average
selling prices, our future operating results could suffer.
DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND ELECTRONIC PRODUCTS
INDUSTRIES -- WE OPERATE IN VOLATILE INDUSTRIES, AND INDUSTRY DOWNTURNS HARM OUR
PERFORMANCE.
Our business is tied to market conditions in the semiconductor industry,
which is highly cyclical. Because our business is and will continue to be
dependent on the requirements of semiconductor companies for independent
packaging, test and wafer fabrication services, any future downturn in the
semiconductor industry or any other industry that uses a significant number of
semiconductor devices, such as the personal computer industry, could have a
material adverse effect on our business. For example, our operating results for
1998 were adversely affected by downturns in the semiconductor market.
HIGH LEVERAGE AND RESTRICTIVE COVENANTS -- OUR SUBSTANTIAL INDEBTEDNESS COULD
ADVERSELY AFFECT THE FINANCIAL HEALTH OF OUR COMPANY AND COULD RESTRICT OUR
OPERATIONS.
We now have a significant amount of indebtedness, which increased
substantially after the incurrence of approximately $750.0 million of new
secured bank debt and the issuance of $258.8 million of the Convertible Notes in
connection with the May 2000 acquisition of K1, K2 and K3 and investment in ASI.
Covenants in the agreements governing the approximately $750.0 million of
new secured bank debt (which has been drawn from a facility that includes an
additional unused $150.0 million revolving credit line), our existing senior
notes and senior subordinated notes and any future indebtedness may materially
restrict our operations, including our ability to incur debt, pay dividends,
make certain investments and payments, and encumber or dispose of assets. In
addition, financial covenants contained in agreements relating to our existing
and future debt could lead to a default in the event our results of operations
do not meet our plans. A default under one debt instrument may also trigger
cross-defaults under our other debt instruments. An event of default under any
debt instrument, if not cured or waived, could have a material adverse effect on
us.
Our substantial indebtedness could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures,
acquisitions, research and development and other general corporate
requirements;
- limit our ability to obtain additional financing;
- require us to dedicate a substantial portion of our cash flow from
operations to service payments on our debt;
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- limit our flexibility to react to changes in our business and the
industry in which we operate; and
- place us at a competitive disadvantage to any of our competitors that
have less debt.
We cannot assure you that our business will generate cash in an amount
sufficient to enable us to service our debt or to fund our other liquidity
needs. In addition, we may need to refinance all or a portion of our debt on or
before maturity. We cannot assure you that we will be able to refinance any of
our debt on commercially reasonable terms or at all.
Despite current debt levels, the terms of the instruments governing our
debt do not prohibit us or our subsidiaries from incurring substantially more
debt. If new debt is added to our consolidated debt level, the related risks
that we now face could intensify.
RELATIONSHIP WITH ASI
WE WILL REPORT ASI'S FINANCIAL RESULTS IN OUR FINANCIAL STATEMENTS, AND IF ASI
ENCOUNTERS FINANCIAL DIFFICULTIES, OUR FINANCIAL PERFORMANCE COULD SUFFER.
With our $459.0 million additional investment in ASI and the conversion in
May 2000 of 150 billion won (approximately $132.0 million) of ASI's debt to
equity by ASI's creditor banks, we will own approximately 42% of ASI's
outstanding voting stock. Accordingly, we will continue to 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.
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 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.
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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CUSTOMER CONCENTRATION -- WE GENERATE A LARGE PERCENTAGE OF OUR NET REVENUES
FROM A SMALL GROUP OF CUSTOMERS WHO HAVE NO MINIMUM PURCHASE OBLIGATIONS.
We depend on a small group of customers for a substantial portion of our
revenues. During the three months ended March 31, 1999 and 2000, we derived
33.3% and 28.8%, respectively, of our net revenues from sales to five packaging
and test customers, with 17.5% and 8.4% of our net revenues, respectively,
derived from sales to Intel Corporation. In addition, during the three months
ended March 31, 1999 and 2000, we derived 16.5% and 15.5%, respectively, of our
net revenues from wafer fabrication services, and we derived substantially all
of these revenues from Texas Instruments. Our ability to maintain close,
satisfactory relationships with these customers is important to the ongoing
success and profitability of our business. We expect that we will continue to be
dependent upon a small number of customers for a significant portion of our
revenues in future periods.
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 four factories in Korea. We also source wafer
fabrication services from ASI's wafer fabrication facility. 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 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. With our additional investment in ASI, our financial
results will be further affected by exchange rate fluctuations.
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.
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RISKS ASSOCIATED WITH OUR OPERATIONS IN THE PHILIPPINES
Although the political situation and the general state of the economy in
the Philippines have stabilized in recent years, each has historically been
subject to significant instability. Most recently, the devaluation of the
Philippine peso relative to the U.S. dollar beginning in July 1997 led to
economic instability in the Philippines. Any future economic or political
disruptions or instability in the Philippines could have a material adverse
effect on our business.
Because the functional currency of our operations in the Philippines is the
U.S. dollar, we have recently benefited from cost reductions relating to
peso-denominated expenditures, primarily payroll costs. We believe that any
future devaluations of the Philippine peso will eventually lead to inflation in
the Philippines, which could offset any savings achieved to date.
RISKS ASSOCIATED WITH OUR ACQUISITION OF ASI'S PACKAGING AND TEST
BUSINESS -- THE ACQUISITION OF THIS BUSINESS REPRESENTS A MAJOR COMMITMENT OF
OUR CAPITAL AND MANAGEMENT RESOURCES.
Our acquisition of ASI's packaging and test factories will require our
management to devote a significant portion of our 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.
We retained the approximately 6,600 Korean employees currently working at
K1, K2 and K3, 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> 14
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 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 business could be harmed.
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 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.
DEPENDENCE ON MATERIALS AND EQUIPMENT SUPPLIERS -- OUR BUSINESS MAY SUFFER IF
THE COST OR SUPPLY OF MATERIALS OR EQUIPMENT ADVERSELY CHANGES.
We obtain from vendors the materials and equipment required for the
packaging and test services performed by our factories. We source most of our
materials, including critical materials such as leadframes and laminate
substrates, from a limited group of suppliers. Furthermore, we purchase all of
our materials on a purchase order basis and have no long-term contracts with any
of our suppliers. Our business may be harmed if we cannot obtain materials and
other supplies from our vendors: (1) in a timely manner, (2) in sufficient
quantities, (3) in acceptable quality and (4) at competitive prices.
RAPID TECHNOLOGICAL CHANGE -- OUR BUSINESS WILL SUFFER IF WE CANNOT KEEP UP WITH
TECHNOLOGICAL ADVANCES IN OUR INDUSTRY.
The complexity and breadth of both semiconductor packaging and test
services and wafer fabrication are rapidly changing. As a result, we expect that
we will need to offer more advanced package designs and new wafer fabrication
technology in order to respond to competitive industry conditions and customer
requirements. Our success depends upon the ability of our company and ASI to
develop and implement new manufacturing process and package design technologies.
The need to develop and maintain advanced packaging and wafer fabrication
capabilities and equipment could require significant research and development
and capital expenditures in future years. In addition, converting to new package
designs or process methodologies could result in delays in producing new package
types or advanced wafer designs that could adversely affect our ability to meet
customer orders.
Technological advances also typically lead to rapid and significant price
erosion and may make our existing products less competitive or our existing
inventories obsolete. If we cannot achieve advances in package design and wafer
fabrication technology or obtain access to advanced package designs and wafer
fabrication technology developed by others, our business could suffer.
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<PAGE> 15
COMPETITION -- WE MUST COMPETE AGAINST LARGE AND ESTABLISHED COMPETITORS IN BOTH
THE PACKAGING AND TEST BUSINESS AND THE WAFER FABRICATION BUSINESS.
The independent semiconductor packaging and test market is very
competitive. This sector is comprised of approximately 40 companies. We face
substantial competition from established packaging and test service providers
primarily located in Asia, including companies with significant manufacturing
capacity, financial resources, research and development operations, marketing
and other capabilities. Such companies have also established relationships with
many large semiconductor companies that are current or potential customers of
our company. On a larger scale, we also compete with the internal semiconductor
packaging and test capabilities of many of our customers.
The independent wafer fabrication business is also highly competitive. Our
wafer fabrication services compete primarily with independent semiconductor
wafer foundries, including those of Chartered Semiconductor Manufacturing, Inc.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectronics
Corporation. Each of these companies has significant manufacturing capacity,
financial resources research and development operations, marketing and other
capabilities and has been operating for some time. Many of these companies have
also established relationships with many large semiconductor companies that are
current or potential customers of our company. If we cannot compete successfully
in the future against existing or potential competitors, our operating results
would suffer.
ENVIRONMENTAL REGULATIONS -- FUTURE ENVIRONMENTAL REGULATIONS COULD PLACE
ADDITIONAL BURDENS ON THE MANUFACTURING OPERATIONS OF OUR COMPANY OR ASI.
The semiconductor packaging process uses chemicals and gases and generates
byproducts that are subject to extensive governmental regulations. For example,
we produce liquid waste when silicon wafers are diced into chips with the aid of
diamond saws, then cooled with running water. Federal, state and local
regulations in the United States, as well as environmental regulations in Korea
and the Philippines, impose various controls on the storage, handling, discharge
and disposal of chemicals used in our company's and ASI's manufacturing
processes and on the factories occupied by our company and ASI.
Increasingly, public attention has focused on the environmental impact of
semiconductor manufacturing operations and the risk to neighbors of chemical
releases from such operations. In the future, applicable land use and
environmental regulations may: (1) impose upon our company the need for
additional capital equipment or other process requirements, (2) restrict our
company's ability to expand our respective operations, (3) subject our company
to liability or (4) cause our company to curtail our operations.
PROTECTION OF INTELLECTUAL PROPERTY -- WE MAY BECOME INVOLVED IN INTELLECTUAL
PROPERTY LITIGATION.
As of February 29, 2000 we held 68 U.S. patents, and we also had 102
pending patents and were preparing an additional 57 patent applications for
filing. In connection with our acquisition of K1, K2 and K3 from ASI, we
acquired 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.
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We may need to enforce our patents or other intellectual property rights or
to defend our company against claimed infringement of the rights of others
through litigation, which could result in substantial cost and diversion of our
resources. If we fail to obtain necessary licenses or if we face litigation
relating to patent infringement or other intellectual property matters, our
business could suffer.
Although we are not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent and
other intellectual property rights. If any third party makes a valid claim
against our company or ASI, our company or ASI could be required to: (1)
discontinue the use of certain processes, (2) cease the manufacture, use, import
and sale of infringing products, (3) pay substantial damages, (4) develop
non-infringing technologies or (5) acquire licenses to the technology we had
allegedly infringed. Our business, financial condition and results of operations
could be materially and adversely affected by any of these negative
developments.
In addition, Texas Instruments has granted ASI very limited licenses under
the Texas Instruments Technology Agreements, including a license under Texas
Instruments' trade secret rights to use Texas Instruments' technology in
connection with ASI's provision of wafer fabrication services. However, Texas
Instruments has not granted ASI a license under Texas Instruments' patents to
manufacture semiconductor wafers for third parties. Furthermore, Texas
Instruments has reserved the right to bring infringement claims against
customers of our company or customers of ASI with respect to semiconductor
wafers purchased from our company or ASI. Such customers and others could in
turn subject our company or ASI to litigation in connection with the sale of
semiconductor wafers produced by ASI.
CONTINUED CONTROL BY EXISTING STOCKHOLDERS -- MR. JAMES KIM AND MEMBERS OF HIS
FAMILY CAN DETERMINE THE OUTCOME OF ALL MATTERS REQUIRING STOCKHOLDER APPROVAL.
As of May 1, 2000, Mr. James Kim and members of his family beneficially
owned approximately 51% 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 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.
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<PAGE> 17
STOCK PRICE VOLATILITY
The trading price of our common stock has been and is likely to continue to
be highly volatile and could be subject to wide fluctuations in response to
factors such as:
- actual or anticipated quarter-to-quarter variations in operating results;
- announcements of technological innovations or new products and services
by us or our competitors;
- general conditions in the semiconductor industry;
- changes in earnings estimates or recommendations by analysts;
- developments affecting ASI;
- or other events or factors, many of which are out of our control.
In addition, the stock market in general, and the Nasdaq National Market
and the markets for technology companies in particular, have experienced extreme
price and volume fluctuations. This volatility has affected the market prices of
securities of companies like ours for that have often been unrelated or
disproportionate to the operating performance. These broad market fluctuations
may adversely affect the market price of our common stock.
SUBORDINATION OF CONVERTIBLE NOTES -- THE CONVERTIBLE NOTES ARE SUBORDINATED TO
OUR SENIOR DEBT.
The Convertible Notes are unsecured and subordinated in right of payment in
full to all of our existing and future senior debt. As a result of such
subordination, in the event of bankruptcy, liquidation or reorganization of our
company, or upon the acceleration of any senior debt, our assets will be
available to pay obligations on the Convertible Notes only after all senior debt
has been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Convertible Notes then outstanding. The
Convertible Notes are also effectively subordinated to the liabilities,
including trade payables, of our subsidiaries. As of March 31, 2000, after
giving effect to our incurrence of approximately $750.0 million of new secured
bank debt in connection with our acquisition of K1, K2 and K3 and our investment
in ASI, we had approximately $1,375.0 million of outstanding indebtedness that
would have constituted debt senior to the Convertible Notes, and 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 $141.7 million. The
incurrence of additional indebtedness by us or our subsidiaries could adversely
affect our ability to pay our obligations on the Convertible Notes. The
Indenture relating to the Convertible Notes will not limit the amount of
additional indebtedness, including senior debt, that we can create, incur,
assume or guarantee, nor will the Indenture limit the amount of indebtedness and
other liabilities that any of our subsidiaries can create, incur, assume or
guarantee. We anticipate that from time to time we will incur additional
indebtedness and other liabilities, including senior debt, and that from time to
time our subsidiaries will incur additional indebtedness and other liabilities.
The Convertible Notes are obligations exclusively of our company. However,
since we conduct our operations primarily through our subsidiaries, our cash
flow and our consequent ability to service our debt, including the Convertible
Notes, depends primarily upon the earnings of our subsidiaries and the
distribution of those earnings to, or upon loans or other payments of funds by
those subsidiaries to, our company. The payment of dividends and the making of
loans and advances to us
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<PAGE> 18
by our subsidiaries may be subject to statutory or contractual restrictions,
depend upon the earnings of those subsidiaries and are subject to various
business considerations.
The Indenture for the Convertible Notes does not contain any financial
performance covenants. Consequently, we are not required under the Indenture to
meet any financial tests such as those that measure our working capital,
interest coverage, fixed charge coverage or net worth in order to maintain
compliance with the terms of the Indenture. See "Description of
Notes -- Subordination."
REPURCHASES OF CONVERTIBLE NOTES -- WE MAY BE LIMITED IN OUR ABILITY TO
REPURCHASE THE CONVERTIBLE NOTES.
Upon the occurrence of certain events, including a change of control or a
termination of trading (each as defined in the Indenture for the Convertible
Notes), each holder of Convertible Notes will have certain rights, at the
holder's option, to require us to repurchase such holder's Convertible Notes. If
any such event were to occur, there can be no assurance that we would have
sufficient funds to pay the repurchase price for all Convertible Notes tendered
by the holders thereof. In addition, the terms of our existing or future credit
or other agreements relating to indebtedness (including senior debt) may
prohibit us from purchasing any Convertible Notes and may also provide that such
an event, as well as certain other change-of-control events with respect to us,
would constitute an event of default thereunder. If such an event occurs at a
time when we are prohibited from purchasing Convertible Notes, we could seek the
consent of our lenders to the purchase of Convertible Notes or could attempt to
refinance the borrowings that contain such prohibition. If we do not obtain such
a consent or repay such borrowings, we would remain prohibited from purchasing
Convertible Notes. In such case, our failure or purchase tendered Convertible
Notes would constitute an event of default under the Indenture for the
Convertible Notes, which may, in turn, constitute a further default under the
terms of other indebtedness that we have entered into or may enter into from
time to time. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the holders of Convertible Notes.
See "Description of Notes -- Repurchase at Option of Holders Upon a Designated
Event."
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USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling security
holder of the Convertible Notes or the common stock issued upon their
conversion.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------ QUARTER ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges...... 4.6x 2.4x 2.5x 4.4x 2.6x 3.4x
</TABLE>
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.
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DESCRIPTION OF NOTES
Our Convertible Subordinated 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"). The following is a summary of
certain provisions of the Indenture and does not purport to be complete.
Reference should be made to all provisions of the Indenture, 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 and 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 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 or 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.
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 case the conversion right will terminate at the close of business on the
date such default is cured. In the event any holder
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exercises its right to require the Company to repurchase Convertible Notes upon
a Designated Event, such holder's conversion right will terminate on the close
of business on the Designated Event Offer Termination Date (as defined), unless
the Company defaults in the payment due upon repurchase or the holder elects to
withdraw the submission of election to repurchase. See "-- Repurchase at Option
of Holders Upon a Designated Event."
The right of conversion attaching to any Convertible Note may be exercised
by the holder by delivering the Convertible Note at the specified office of a
conversion agent, accompanied by a duly signed and completed notice of
conversion, together with any funds that may be required as described in the
preceding paragraph. Such notice of conversion can be obtained from the Trustee.
Beneficial owners of interests in a Global Note (as defined) may exercise their
right of conversion by delivering to The Depository Trust Company ("DTC") the
appropriate instruction form for conversion pursuant to DTC's conversion
program. The conversion date shall be the date on which the Convertible Note,
the duly signed and completed notice of conversion, and any funds that may be
required as described in the preceding paragraph shall have been so delivered. A
holder delivering a Convertible Note for conversion will not be required to pay
any taxes or duties payable in respect of the issue or delivery of common stock
on conversion, but will be required to pay any tax or duty which may be payable
in respect of any transfer involved in the issue or delivery of the common stock
in a name other than the holder of the Convertible Note. Certificates
representing shares of common stock will not be issued or delivered unless all
taxes and duties, if any, payable by the holder have been paid.
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) in certain events, including: (i) the issuance of common stock as
a dividend or distribution on common stock; (ii) certain subdivisions and
combinations of the common stock; (iii) the issuance to all or substantially all
holders of common stock of certain rights or warrants to purchase common stock
at a price per share less than the Current Market Price (as defined); (iv) the
dividend or other distribution to all holders of common stock of shares of
capital stock of the Company (other than common stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of common stock to the extent such distributions,
combined together with (A) all such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made plus (B) any
cash and the fair market value of other consideration payable in respect of any
tender offers by the Company or any of its Subsidiaries for common stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 15% of the Company's market capitalization (being the product
of the then current market price of the common stock times the number of shares
of common stock then outstanding) on the record date for such distribution; and
(vi) the purchase of common stock pursuant to a tender offer made by the Company
or any of its subsidiaries to the extent that the aggregate consideration,
together with (X) any cash and the fair market value of any other consideration
payable in any other tender offer expiring within 12 months preceding such
tender offer in respect of which no adjustment has been made plus (Y) the
aggregate amount of any such all-cash distributions referred to in clause (v)
above to all holders of common stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 15% of the Company's market capitalization on the expiration of
such tender offer.
In the case of (i) any reclassification or change of the common stock or
(ii) a consolidation, merger or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of common stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such common stock, the
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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
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 is required unless such adjustment
would require a change of at least 1% of the Conversion Price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the Conversion Price will not be adjusted for the issuance of
common stock or any securities convertible into or exchangeable for common stock
or carrying the right to purchase any of the foregoing.
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidation
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. Upon
any distribution to creditors of the Company in a liquidation or dissolution of
the Company or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property, an assignment for
the benefit of creditors or any marshaling of the Company's assets and
liabilities, the holders of Senior Debt will be entitled to receive payment in
full in cash or other payment satisfactory to the holders of Senior Debt of all
obligations in respect of such Senior Debt before the holders of Convertible
Notes will be entitled to receive any payment with respect to the Convertible
Notes.
In the event of any acceleration of the Convertible Notes because of an
Event of Default, the holders of any Senior Debt then outstanding will be
entitled to payment in full in cash or other payment satisfactory to the holders
of such Senior Debt of all obligations in respect of such Senior
21
<PAGE> 23
Debt before the holders of the Convertible Notes are entitled to receive any
payment or distribution in respect thereof. If payment of the Convertible Notes
is accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of Senior Debt or the trustee(s) for such Senior
Debt of the acceleration.
The Company also may not make any payment upon or in respect of the
Convertible Notes if (i) a default in the payment of the principal of, premium,
if any, interest, rent or other obligations in respect of Senior Debt occurs and
is continuing beyond any applicable period of grace or (ii) a default, other
than a payment default, occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or other person
permitted to give such notice under the Indenture. Payments on the Convertible
Notes may and shall be resumed (a) in the case of a payment default, upon the
date on which such default is cured or waived or ceases to exist and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received if the maturity of the
Senior Debt has not been accelerated. No new period of payment blockage may be
commenced unless and until 365 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or insolvency, holders of Senior Debt may receive
more, ratably, and holders of the Convertible Notes may receive less, ratably,
than the other creditors of the Company. Such subordination will not prevent the
occurrences of any Event of Default under the Indenture.
The Convertible Notes are obligations exclusively of the Company. However,
since the operations of the Company are primarily conducted through
Subsidiaries, the cash flow and the consequent ability of the Company to service
its debt, including the Convertible Notes, are primarily dependent upon the
earnings of its Subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those Subsidiaries to, the Company. The
payment of dividends and the making of loans and advances to the Company by its
Subsidiaries may be subject to statutory or contractual restrictions, are
dependent upon the earnings of those Subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its Subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Convertible Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such Subsidiary and
any indebtedness of such Subsidiary senior to that held by the Company.
As of March 31, 2000, after giving effect to our incurrence of
approximately $750.0 million of new secured bank debt in connection with our
acquisition of K1, K2 and K3 and our investment in ASI, we had approximately
$1,375.0 million of outstanding indebtedness that would have constituted debt
senior to the Convertible Notes, and 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 $141.7 million. The Indenture will not limit the amount
of additional indebtedness, including Senior Debt, that the
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<PAGE> 24
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, 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> 25
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 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
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<PAGE> 26
pursuant to the Designated Event Offer, (2) deposit with the paying agent an
amount equal to the Designated Event Payment in respect of all Convertible Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Convertible Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Convertible Notes or portions thereof
being purchased by the Company. On the date specified for payment of the
Designated Event Payment (the "Designated Event Payment Date"), the paying agent
will promptly mail to each holder of Convertible Notes so accepted the
Designated Event Payment for such Convertible Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each holder a new Convertible Note equal in principal amount to any unpurchased
portion of the Convertible Notes surrendered, if any; provided that each such
new Convertible Note will be in a principal amount of $1,000 or an integral
multiple thereof.
The foregoing provisions would not necessarily afford holders of the
Convertible Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect holders.
The right to require the Company to repurchase Convertible Notes as a
result of a Designated Event could have the effect of delaying, deferring or
preventing a Change of Control or other attempts to acquire control of the
Company unless arrangements have been made to enable the Company to repurchase
all the Convertible Notes at the Designated Event Payment Date. Consequently,
this right may render more difficult or discourage a merger, consolidation or
tender offer (even if such transaction is supported by the Company's Board of
Directors or is favorable to the stockholders), the assumption of control by a
holder of a large block of the Company's shares and the removal of incumbent
management.
Except as described above with respect to a Designated Event, the Indenture
does not contain provisions that permit the holders of the Convertible Notes to
require that the Company repurchase or redeem the Convertible Notes in the event
of a takeover, recapitalization or similar restructuring. Subject to the
limitation on mergers and consolidations described below, the Company, its
management or its Subsidiaries could in the future enter into certain
transactions, including refinancings, certain recapitalizations, acquisitions,
the sale of all or substantially all of its assets, the liquidation of the
Company or similar transactions, that would not constitute a Designated Event
under the Indenture, but that would increase the amount of Senior Debt (or any
other indebtedness) outstanding at such time or substantially reduce or
eliminate the Company's assets.
The terms of the Company's existing or future credit or other agreements
relating to indebtedness (including Senior Debt) may prohibit the Company from
purchasing any Convertible Notes and may also provide that a Designated Event,
as well as certain other change-of-control events with respect to the Company,
would constitute an event of default thereunder. If a Designated Event occurs at
a time when the Company is prohibited from purchasing Convertible Notes, the
Company could seek the consent of its then-existing lenders to the purchase of
Convertible Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company would remain prohibited from purchasing Convertible
Notes. In such case, the Company's failure to purchase tendered Convertible
Notes would constitute an Event of Default under the Indenture, which may, in
turn, constitute a further default under the terms of other indebtedness that
the Company has entered into or may enter into from time to time. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Convertible Notes.
A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
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<PAGE> 27
A "Change of Control" will be deemed to have occurred when: (i) any person
has become an Acquiring Person, (ii) the Company consolidates with or merges
into any other corporation, or conveys, transfers, or leases all or
substantially all of its assets to any person, or any other corporation merges
into the Company, and, in the case of any such transaction, the outstanding
common stock of the Company is changed or exchanged as a result, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, or (iii) any
time the Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor corporation to the
Company); provided that a Change of Control shall not be deemed to have occurred
if either (x) the last sale price of the common stock for any five trading days
during the ten trading days immediately preceding the Change of Control is at
least equal to 105% of the Conversion Price in effect on the date of such Change
of Control or (y) at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change of
Control consists of shares of common stock that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United
States.
The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Convertible Notes
to require the Company to repurchase such Convertible Notes as a result of a
lease, transfer or conveyance of less than all of the assets of the Company to
another person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
A "Termination of Trading" will be deemed to have occurred if our 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
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<PAGE> 28
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 filed for the benefit of the holders of the Convertible Notes and
common stock issued upon conversion thereof a shelf registration statement, of
which this prospectus is a part (the "Shelf Registration Statement"), with the
Commission with respect to resales of the Convertible Notes and the common stock
issuable upon conversion thereof. The Company has agreed 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 to 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) 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
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<PAGE> 29
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 our 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 this prospectus, which is 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
the Shelf Registration Statement will be required to be named as a selling
security holder in the relevant prospectus supplement and to deliver a
prospectus as so supplemented 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 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 prospectus supplements.
The Company will be permitted to suspend the use of this prospectus which
is a part of the Shelf Registration Statement for a period not to exceed 30 days
in any three-month period or for three periods not to exceed an aggregate of 90
days in any twelve-month period under certain circumstances 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
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<PAGE> 30
for 60 days after notice in the observance or performance of any other covenants
in the Indenture; (iv) default in the payment of the Designated Event Payment in
respect of the Convertible Notes on the date therefor, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (v)
failure 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; (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 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
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<PAGE> 31
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 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
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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 Notes for a period of 15
days before a selection of Convertible Notes to be redeemed.
The registered holder of a Convertible Note will be treated as the owner of
it for all purposes.
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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 described in
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
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certificates representing an ownership interest in such obligations) of any
state of the United States of America (including any agency or 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
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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).
"Person" mean 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.
The Selling Security Holders may offer Convertible Notes and shares of our
common stock, par value $0.001 per share. Holders of common stock are entitled
to receive dividends declared by our board of directors or an authorized
committee of our board of directors. We have paid cash dividends on our common
stock. We expect to retain future earnings for use in the operation and
expansion of our business. We do not anticipate paying cash dividends on our
common stock in the future. Each holder of common stock is entitled to one vote
per share. The holders of common stock have no preemptive rights.
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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 May
31, 2000, there were an aggregate of 151,752,465 shares of common stock
outstanding. In addition, as of May 31, 2000, 4,446,835 shares of common stock
were issuable upon exercise of outstanding options, 1,103,135 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, 8,250,557 shares of common stock were reserved for issuance
upon conversion of our convertible notes and 3,900,000 shares of common stock
were reserved for issuance upon exercise of the warrants.
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 the registration
statement of which this offering memorandum forms a part, 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.
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.
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
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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 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
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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 any additional 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.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes some of the U.S. federal income tax considerations
relating to the purchase, ownership, and disposition of Convertible Notes and of
common stock into which the notes may be converted. This summary does not
provide a complete analysis of all potential tax considerations. The information
provided below is based on existing authorities. These authorities may change,
or the Internal Revenue Service (the "IRS") might interpret the existing
authorities differently. In either case, the tax consequences of purchasing,
owning or disposing of Convertible Notes or common stock could differ from those
described below. The summary generally applies only to "U.S. Holders" that
purchase Convertible Notes in the initial offering at their issue price and hold
the notes or common stock as "capital assets" (generally, for investment). For
this purpose, U.S. Holders include citizens or residents of the United States
and corporations organized under the laws of the United States or any state.
Trusts are U.S. Holders if they are subject to the primary supervision of a U.S.
court and the control of one of more U.S. persons. Special rules apply to
nonresident alien individuals and foreign corporations or trusts ("Non-U.S.
Holders"). This summary describes some, but not all, of these special rules. For
U.S. federal income tax purposes, income earned through a foreign or domestic
partnership or similar entity is attributed to its owners. The summary generally
does not address tax considerations that may be relevant to particular investors
because of their specific circumstances, or because they are subject to special
rules. Finally, the summary does not describe the effect of the federal estate
and gift tax laws on U.S. Holders or the effects of any applicable foreign,
state, or local laws.
INVESTORS CONSIDERING THE PURCHASE OF CONVERTIBLE NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FEDERAL ESTATE OR
GIFT TAX LAWS, FOREIGN, STATE, OR LOCAL LAWS, AND TAX TREATIES.
U.S. HOLDERS
Taxation of Interest
U.S. Holders will be required to recognize as ordinary income any interest
paid or accrued on the notes, in accordance with their regular method of
accounting. In general, if the terms of a debt instrument entitle a holder to
receive payments other than fixed periodic interest that exceed the issue price
of the instrument, the holder may be required to recognize additional interest
as "original issue discount" over the term of the instrument. We believe that
the notes will not be issued with original issue discount. In certain
circumstances, we may be obligated to pay holders of Convertible Notes amounts
in excess of stated interest or principal. For example, if the closing price of
our common stock equals or exceeds 150 percent of the conversion price then in
effect for a prescribed period, we will have the option of redeeming the
Convertible Notes for a price that will include an additional amount in excess
of their principal amount. A Change of Control or Termination of Trading would
also enable holders of the Convertible Notes to require us to redeem the notes
at a price in excess of their principal amount. The original issue discount
rules allow contingent payments such as these to be disregarded in computing a
holder's interest income if the contingency is "remote." We believe that the
possibility is remote that we will make any of the payments in excess of stated
interest or principal described above. Our determination in this regard is
binding on U.S. Holders unless they disclose their contrary position. If,
contrary to expectations, we pay liquidated damages for a failure to provide
registration rights, U.S. Holders would be required to recognize additional
interest income. If we redeem the Convertible Notes at a premium in excess of
their principal amount upon the exercise of any of the options described above,
the redemption premium would be treated as capital gain under the rules
described under "U.S. Holders -- Sale, Exchange or Redemption of the Notes."
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Sale, Exchange or Redemption of the Notes
A U.S. Holder will generally recognize capital gain or loss if the holder
disposes of a Convertible Note in a sale, redemption or exchange other than a
conversion of the note into common stock. The holder's gain or loss will equal
the difference between the proceeds received by the holder and the holder's
adjusted tax basis in the Convertible Note. The proceeds received by the holder
will include the amount of any cash and the fair market value of any other
property received for the Convertible Note. The holder's tax basis in the
Convertible Note will generally equal the amount the holder paid for the note.
The portion of any proceeds that is attributable to accrued interest will not be
taken into account in computing the holder's capital gain or loss. Instead, that
portion will be recognized as ordinary interest income to the extent that the
holder has not previously included the accrued interest in income. The gain or
loss recognized by a holder on a disposition of the Convertible Note will be
long-term capital gain or loss if the holder held the note for more than one
year. Long-term capital gains of individual taxpayers are generally taxed at a
maximum rate of 20 percent. The deductibility of capital losses is subject to
limitation.
Conversion of the Convertible Notes
A U.S. Holder generally will not recognize any income, gain or loss on
converting a Convertible Note into common stock. If the holder receives cash in
lieu of a fractional share of stock, however, the holder would be treated as if
he received the fractional share and then had the fractional share redeemed for
the cash. The holder would recognize gain or loss equal to the difference
between the cash received and that portion of his basis in the stock
attributable to the fractional share. The holder's aggregate basis in the common
stock will equal his adjusted basis in the Convertible Note. The holder's
holding period for the stock will include the period during which he held the
Convertible Note.
Dividends
If, after a U.S. Holder converts a Convertible Note into common stock, we
make a distribution in respect of that stock, the distribution will be treated
as a dividend, taxable to the U.S. Holder as ordinary income, to the extent it
is paid from our current or accumulated earnings and profits. If the
distribution exceeds our current and accumulated profits, the excess will be
treated first as a tax-free return of the holder's investment, up to the
holder's basis in his common stock. Any remaining excess will be treated as
capital gain. If the U.S. Holder is a U.S. corporation, it would generally be
able to claim a deduction equal to a portion of any dividends received.
The terms of the Convertible Notes allow for changes in the conversion
price of the notes in certain circumstances. A change in conversion price that
allows noteholders to receive more shares of common stock on conversion may
increase the noteholders' proportionate interests in our earnings and profits or
assets. In that case, the noteholders would be treated as though they received a
dividend in the form of our stock. Such a constructive stock dividend could be
taxable to the noteholders, although they would not actually receive any cash or
other property. A taxable constructive stock dividend would result, for example,
if the conversion price is adjusted to compensate noteholders for distributions
of cash or property to our shareholders. Not all changes in conversion price
that allow noteholders to receive more stock on conversion, however, increase
the noteholders' proportionate interests in the Company. For instance, a change
in conversion price could simply prevent the dilution of the noteholders'
interests upon a stock split or other change in capital structure. Changes of
this type, if made by a bona fide, reasonable adjustment formula, are not
treated as constructive stock dividends. Conversely, if an event occurs that
dilutes the noteholders' interests and the conversion price is not adjusted, the
resulting increase in the proportionate interests of our shareholders could be
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<PAGE> 41
treated as a taxable stock dividend to them. Any taxable constructive stock
dividends resulting from a change to, or failure to change, the conversion price
would be treated like dividends paid in cash or other property. They would
result in ordinary income to the recipient, to the extent of our current or
accumulated earnings and profits, with any excess treated as a tax-free return
of capital or as capital gain.
Sale of Common Stock
A U.S. Holder will generally recognize capital gain or loss on a sale or
exchange of common stock. The holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the stock. The proceeds received by the holder will include the amount of any
cash and the fair market value of any other property received for the stock. The
gain or loss recognized by a holder on a sale or exchange of stock will be
long-term capital gain or loss if the holder held the stock for more than one
year.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
Taxation of Interest
Payments of interest to nonresident persons or entities are generally
subject to U.S. federal income tax at a rate of 30 percent, collected by means
of withholding by the payor. Payments of interest on the Convertible Notes to
most Non-U.S. Holders, however, will qualify as "portfolio interest," and thus
will be exempt from the withholding tax, if the holders certify their
nonresident status as described below. The portfolio interest exception will not
apply to payments of interest to a Non-U.S. Holder that
- owns, directly or indirectly, at least 10 percent of our voting stock, or
- is a "controlled foreign corporation" that is related to us.
In general, a foreign corporation is a controlled foreign corporation if at
least 50 percent of its stock is owned, directly or indirectly, by one or more
U.S. persons that each owns, directly or indirectly, at least 10 percent of the
corporation's voting stock.
The portfolio interest exception and several of the special rules for
Non-U.S. Holders described below apply only if the holder certifies its
nonresident status. A Non-U.S. Holder can meet this certification requirement by
providing a Form W-8BEN or appropriate substitute form to us or our paying
agent. If the holder holds the note through a financial institution or other
agent acting on the holder's behalf, the holder will be required to provide
appropriate documentation to the agent. The holder's agent will then be required
to provide certification to us or our paying agent, either directly or through
other intermediaries. For payments made to a foreign partnership after December
31, 2000, the certification requirements generally apply to the partners rather
than the partnership.
Sale, Exchange or Redemption of Notes
Non-U.S. Holders generally will not be subject to U.S. federal income tax
on any gain realized on the sale, exchange, or other disposition of Convertible
Notes. This general rule, however, is subject to several exceptions. For
example, the gain would be subject to U.S. federal income tax if
- the gain is effectively connected with the conduct by the Non-U.S. Holder
of a U.S. trade or business,
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<PAGE> 42
- the Non-U.S. Holder was a citizen or resident of the United States and
thus is subject to special rules that apply to expatriates, or
- the rules of the Foreign Investment in Real Property Tax Act ("FIRPTA")
(described below) treat the gain as effectively connected with a U.S.
trade or business.
The FIRPTA rules may apply to a sale, exchange or other disposition of
Convertible Notes if we are, or were within five years before the transaction, a
"U.S. real property holding corporation" ("USRPHC"). In general, we would be a
USRPHC if interests in U.S. real estate comprised most of our assets. We do not
believe that we are a USRPHC or that we will become one in the future. The
FIRPTA rules would apply to a disposition of Convertible Notes by a Non-U.S.
Holder only if the holder owned, directly or indirectly, more than 5 percent of
our common stock within five years before the holder's disposition of the notes.
For this purpose, the Non-U.S. Holder would be treated as owning the stock that
the holder could acquire on conversion of the holder's Convertible Notes. If all
of these conditions were met, and the FIRPTA rules applied to the sale,
exchange, or other disposition of Convertible Notes by a Non-U.S. Holder, then
any gain recognized by the holder would be treated as effectively connected with
a U.S. trade or business, and would thus be subject to U.S. federal income tax.
Conversion of the Convertible Notes
A Non-U.S. Holder generally will not recognize any income, gain or loss on
converting a Convertible Note into common stock. Any gain recognized as a result
of the holder's receipt of cash in lieu of a fractional share of stock would
also generally not be subject to U.S. federal income tax. See "Special Tax Rules
Applicable to Non-U.S. Holders -- Sale of Common Stock," below.
Dividends
Dividends paid to a Non-U.S. Holder on common stock received on conversion
of a Convertible Note will generally be subject to U.S. withholding tax at a 30
percent rate. The withholding tax might not apply, however, or might apply at a
reduced rate, under the terms of a tax treaty between the United States and the
Non-U.S. Holder's country of residence. A Non-U.S. Holder must demonstrate its
entitlement to treaty benefits by certifying its nonresident status as described
under "Special Tax Rules Applicable to Non-U.S. Holders -- Taxation of
Interest."
Sale of Common Stock
Non-U.S. Holders will generally not be subject to U.S. federal income tax
on any gains realized on the sale, exchange, or other disposition of common
stock. This general rule, however, is subject to exceptions, some of which are
described under "Special Tax Rules Applicable to Non-U.S. Holders -- Sale,
Exchange or Redemption of Notes."
Income or Gains Effectively Connected With a U.S. Trade or Business
The preceding discussion of the tax consequences of the purchase, ownership
or disposition of Convertible Notes or common stock by a Non-U.S. Holder assumes
that the holder is not engaged in a U.S. trade or business. If any interest on
Convertible Notes, dividends on common stock, or gain from the sale, exchange or
other disposition of Convertible Notes or stock is effectively connected with a
U.S. trade or business conducted by the Non-U.S. Holder, then the income or gain
will be subject to U.S. federal income tax at the regular graduated rates. If
the Non-U.S. Holder is eligible for the benefits of a tax treaty between the
United States and the holder's country of residence, any
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<PAGE> 43
"effectively connected" income or gain will be subject to U.S. federal income
tax only if it is also attributable to a permanent establishment maintained by
the holder in the United States. Payments of dividends that are effectively
connected with a U.S. trade or business, and therefore included in the gross
income of a Non-U.S. Holder, will not be subject to the 30 percent withholding
tax. To claim exemption from withholding, the holder must certify its
qualification, which can be done by filing a Form W-8ECI. If the Non-U.S. Holder
is a corporation, that portion of its earnings and profits that are effectively
connected with its U.S. trade or business would generally be subject to a
"branch profits tax." The branch profits tax rate is generally 30 percent,
although an applicable tax treaty might provide for a lower rate.
U.S. Federal Estate Tax
The estates of nonresident alien individuals are subject to U.S. federal
estate tax on property with a U.S. situs. Convertible Notes will not be U.S.
situs property as long as interest on the notes paid immediately before the
death of the holder would not have been subject to tax because of the portfolio
interest exception described under "Special Tax Rules Applicable to Non-U.S.
Holders: Taxation of Interest." Because we are a U.S. corporation, our common
stock will be U.S. situs property, and therefore will be included in the taxable
estate of a nonresident alien decedent. The U.S. federal estate tax liability of
the estate of a nonresident alien may be affected by a tax treaty between the
United States and the decedent's country of residence.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Code and the Treasury regulations require those who make specified
payments to report the payments to the IRS. Among the specified payments are
interest, dividends, and proceeds paid by brokers to their customers. The
required information returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime is reinforced by
"backup withholding" rules. These rules require the payors to withhold tax at a
31 percent rate from payments subject to information reporting if the recipient
fails to cooperate with the reporting regime by failing to provide his taxpayer
identification number to the payor, furnishing an incorrect identification
number, or repeatedly failing to report interest or dividends on his returns.
The information reporting and backup withholding rules do not apply to payments
to corporations, whether domestic or foreign.
Payments of interest or dividends to individual U.S. Holders of Convertible
Notes or common stock will generally be subject to information reporting, and
will be subject to backup withholding unless the holder provides us or our
paying agent with a correct taxpayer identification number.
The information reporting and backup withholding rules do not apply to
payments that are subject to the 30 percent withholding tax on dividends or
interest paid to nonresidents, or to payments that are exempt from that tax by
application of a tax treaty or special exception. Therefore, payments of
dividends on common stock, or interest on Convertible Notes, will generally not
be subject to information reporting or backup withholding. To avoid backup
withholding on dividends paid after December 31, 2000, a Non-U.S. Holder will
have to certify its nonresident status, as described under "Special Rules
Applicable to Non-U.S. Holders -- Taxation of Interest."
Payments made to U.S. Holders by a broker upon a sale of notes or common
stock will generally be subject to information reporting and backup withholding.
If, however, the sale is made through a foreign office of a U.S. broker, the
sale will be subject to information reporting but not backup withholding. If the
sale is made through a foreign office of a foreign broker, the sale will
generally not be subject to either information reporting or backup withholding.
This exception may not apply,
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<PAGE> 44
however, if the foreign broker is owned or controlled by U.S. persons, or is
engaged in a U.S. trade or business.
Payments made to Non-U.S. Holders by a broker upon a sale of notes or
common stock will not be subject to information reporting or backup withholding
as long as the Non-U.S. Holder certifies its foreign status.
Any amounts withheld from a payment to a holder of notes or common stock
under the backup withholding rules can be credited against any U.S. federal
income tax liability of the holder.
THE PRECEEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF
CONVERTIBLE NOTES OR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED
CHANGE IN APPLICABLE LAWS.
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<PAGE> 45
SELLING SECURITY HOLDERS
We originally issued the Convertible Notes in transactions exempt from the
registration requirements of the Securities Act of 1933 in March 2000. Selling
security holders may from time to time offer and sell the Convertible Notes and
our common stock pursuant to this prospectus.
The following table contains information as of May 31, 2000, with respect
to the selling security holders and the principal amount of Convertible Notes
and the underlying common stock beneficially owned by each selling security
holders that may be offered using this prospectus.
Prior to any use of this prospectus in connection with an offering of the
Convertible Notes or the common stock issued upon conversion thereof, this
prospectus will be supplemented to set forth the name and number of shares
beneficially owned by the selling security holder intending to sell such
Convertible Notes or common stock and the number of Convertible Notes or common
stock to be offered. The prospectus supplement will also disclose whether any
selling security holder selling in connection with the prospectus supplement has
held any position or office with, been employed by or otherwise has had a
material relationship with, the Company or any of its affiliates during the
three years prior to the date of the prospectus supplement.
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<PAGE> 46
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the Convertible
Notes or the common stock offered by this prospectus. The Convertible Notes and
the common stock issued upon their conversion may be sold from time to time to
purchasers:
- directly by the selling security holders;
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling security holders or the purchasers of the Convertible Notes
or the common stock.
The selling security holders and any such broker-dealers or agents who
participate in the distribution of the Convertible Notes or common stock may be
deemed to be "underwriters." As a result, any profits on the sale of the
Convertible Notes or common stock by selling security holders and any discounts,
commissions or concessions received by any such broker-dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
If the selling security holders were to deemed underwriters, the selling
security holders may be subject to certain statutory liabilities of, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the Convertible Notes or common stock are sold through underwriters or
broker-dealers, the selling security holders will be responsible for
underwriting discounts or commissions or agent's commissions.
The Convertible Notes and common stock may be sold in one or more
transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
Convertible Notes or common stock may be listed or quoted at the time of
the sale, including the Nasdaq National Market in the case of the common
stock;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the Convertible Notes or common stock or
otherwise, the selling security holders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
Convertible Notes or common stock in the course of hedging their positions. The
selling security holders may also sell the Convertible Notes or common stock
short and deliver Convertible Notes or common stock to close out short
positions, or loan or pledge Convertible
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<PAGE> 47
Notes or common stock to broker-dealers that in turn may sell the Convertible
Notes or common stock.
To our knowledge, there are currently no plans, arrangement or
understandings between any Selling Security Holders and any underwriter,
broker-dealer or agent regarding the sale of the Convertible Notes or common
stock by the selling security holders. Selling security holders may not sell any
or all of the Convertible Notes or the underlying common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that any such
selling security holder will not transfer, devise or gift the Convertible Notes
or common stock by other means not described in this prospectus.
Our common stock trades on the Nasdaq National Market under the symbol
"AMKR."
There can be no assurance that any selling security holder will sell any or
all of the Convertible Notes or common stock pursuant to this prospectus. In
addition, any Convertible Notes or common stock covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The selling security holders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the Convertible Notes or common stock by the
selling security holders and any other such person. In addition, Regulation M of
the Exchange Act may restrict the ability of any person engaged in the
distribution of the Convertible Notes or common stock to engage in market-making
activities with respect to the particular Convertible Notes or common stock
being distributed for a period of up to five business days prior to the
commencement of such distribution. This may affect the marketability of the
Convertible Notes or common stock and the ability of any person or entity to
engage in market-making activities with respect to the Convertible Notes or
common stock.
Pursuant to the registration rights agreement filed as an exhibit to the
registration statement of which this prospectus is a part, we and the selling
security holders will be indemnified by the other against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying common stock to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
The validity of the issuance of our securities offered by this prospectus
will be passed upon for Amkor Technology, Inc. by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California.
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<PAGE> 48
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of Amkor Technology, Inc. and
its subsidiaries as of December 31, 1998 and 1999 and for each of the years in
the three-year period ended December 31, 1999, included in our annual report on
Form 10-K incorporated by reference in this prospectus and elsewhere in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their 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 is included herein in reliance upon the authority of
said firm as experts in giving said report. In that report, that firm states
that with respect to the investment in ASI and with respect to ATK, a
wholly-owned subsidiary, its opinion is based on the report of other independent
public accountants, namely Samil Accounting Corporation.
The consolidated financial statements of ASI as of December 31, 1996 and
1997, and for each of the three years in the period ended December 31, 1997,
prepared in accordance with generally accepted accounting principles in Korea,
have been audited by Samil Accounting Corporation, independent accountants,
except as they relate to Anam Engineering & Construction Co., Ltd. ("AEC"),
audited by Chong Un & Company, independent accountants, and Anam USA Inc.,
audited by Sianna, Carr & O'Connor, LLP, independent accountants, and the
investment in Amkor/Anam Pilipinas, Inc. audited by SyCip, Gorres, Velayo & Co.,
independent accountants. Such ASI financial statements are incorporated in this
Prospectus by reference to our Annual Report on Form 10-K for the year ended
December 31, 1998 in reliance on the report of such independent accountants
given on the authority of such firms as experts in auditing and accounting. The
report regarding AEC includes an explanatory paragraph with respect to the
ability of AEC to continue as a going concern and the report regarding ASI
includes an explanatory paragraph regarding changes in accounting principles,
the impact of the Korean economic situation on ASI and the ability of ASI to
continue as a going concern.
The financial statements of the Kwangju Packaging Business (K4) of ASI as
of December 31, 1997 and 1998, and for each of the three years in the period
ended December 31, 1998, prepared in accordance with generally accepted
accounting principles in the United States, incorporated in this Prospectus by
reference to our Current Report on Form 8-K dated on April 21, 1999, have been
so incorporated in reliance on the report of Samil Accounting Corporation,
independent accountants, given on the authority of said firm in auditing and
accounting.
The consolidated financial statements of ASI as of December 31, 1997, 1998
and 1999 and for each of the three years in the period ended December 31, 1999,
prepared in accordance with generally accepted accounting principles in the
United States, have been audited by Samil Accounting Corporation, independent
accountants, except as they relate to Anam Engineering & Construction Co., Ltd.
("AEC"), audited by Ahn Kwon & Co., independent accountants, and Anam USA Inc.,
audited by Sianna, Carr & O'Connor, LLP, independent accountants. Such ASI
financial statements are incorporated in this Prospectus by reference to our
Current Report on Form 8-K/A dated December 7, 1999 -- in reliance on the
reports of such independent accountants given on the authority of said firms as
experts in auditing and accounting. The report regarding ASI includes an
explanatory paragraph with the respect to the Korean economic situation, the
Workout Program and revenues from Amkor. The report regarding AEC includes and
explanatory paragraph with respect to AEC's ability to continue as a going
concern and its voluntary petition in bankruptcy. The report regarding Anam USA,
Inc. includes an explanatory paragraph with respect to ASI's Workout Program.
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<PAGE> 49
The financial statements of the Seongsu, Pucheon and Pupyong Packaging
Business (K1, K2 and K3) of ASI as of December 31, 1998 and 1999, and for each
of the three years in the period ended December 31, 1999, prepared in accordance
with generally accepted accounting principles in the United States, incorporated
in this Prospectus by reference to our Current Report on Form 8-K dated on May
12, 2000, have been so incorporated in reliance on the report of Samil
Accounting Corporation, independent accountants, given on the authority of said
firm in auditing and accounting.
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<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The aggregate expenses to be paid by the Registrant in connection with this
offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 69,000
Nasdaq National Market Listing Fee.......................... 17,500*
Accounting fees and expenses................................ 30,000*
Legal fees and expenses..................................... 50,000*
Miscellaneous............................................... 13,500*
--------
Total............................................. $180,000
========
</TABLE>
---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), Amkor's Certificate of Incorporation provides that each person who is
or was or who had agreed to become a director or officer of Amkor or who had
agreed at the request of Amkor's Board of Directors or an officer of Amkor to
serve as an employee or agent of Amkor or as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by Amkor to the full extent permitted by the
DGCL or any other applicable laws. Such Certificate of Incorporation also
provides that no amendment or repeal of such Certificate shall apply to or have
any effect on the right to indemnification permitted or authorized thereunder
for or with respect to claims asserted before or after such amendment or repeal
arising from acts or omissions occurring in whole or in part before the
effective date of such amendment or repeal.
Amkor's Bylaws provide that Amkor shall indemnify to the full extent
authorized by law any person made or threatened to be made a party to an action
or a proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he or she was or is a director, officer or employee of
Amkor or any predecessor of Amkor or serves or served any other enterprise as a
director, officer or employee at the request of Amkor or any predecessor of
Amkor.
Amkor has entered into indemnification agreements with its directors and
certain of its officers.
Amkor maintains insurance on behalf of any person who is a director or
officer against any loss arising from any claim asserted against such person and
expense incurred by such person in any such capacity, subject to certain
exclusions.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<S> <C>
3.1 The Company's Certificate of Incorporation.*
3.2 The Company's Bylaws.*
4.1 Indenture.**
</TABLE>
II-1
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<S> <C>
4.2 Registration Rights Agreement dated March 22, 2000.**
4.3 Form of Note (included in Exhibit 4.1)
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Samil Accounting Corporation.
23.3 Consent of Siana Carr and O'Connor, LLP.
23.4 Consent of Ahn Kwon & Company.
23.5 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Amkor
Technology, Inc. (see page 50 of this Form S-3).
25.1+ Form T-1 Statement of Eligibility of Trustee for Indenture
under the Trust Indenture Act of 1939.
27.1 Financial Data Schedule.**
</TABLE>
-------------------------
* Incorporated by reference from Registrant's Registration Statement on Form
S-1 filed on October 6, 1997.
** Incorporated by reference from Registrant's Annual Report on Form 10-K filed
on March 30, 2000.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement,
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that clauses (a) and (b) do not apply if the
information required to be included in a post-effective amendment by
such clauses is contained in periodic reports filed with or furnished to
the Securities and Exchange Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the registration
statement.
II-2
<PAGE> 52
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities, other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, we
duly have caused this registration statement to be signed on our behalf by the
undersigned, thereunto duly authorized, in the City of West Chester,
Commonwealth of Pennsylvania on June 19, 2000.
AMKOR TECHNOLOGY, INC.
By: /s/ JAMES J. KIM
------------------------------------
James J. Kim
Chairman and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James J. Kim and Kenneth T. Joyce, and
each of them, his attorneys-in-fact, each with the power of substitution, for
him and his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments)to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that are to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such attorneys-
in-fact and agents or any of them, or his or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 19, 2000
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES J. KIM Chief Executive Officer and Chairman
------------------------------------------------
James J. Kim
/s/ JOHN N. BORUCH President and Director
------------------------------------------------
John N. Boruch
/s/ KENNETH T. JOYCE Chief Financial Officer
------------------------------------------------ (Principal Financial and Accounting Officer)
Kenneth T. Joyce
/s/ WINSTON J. CHURCHILL Director
------------------------------------------------
Winston J. Churchill
/s/ GEORGE K. HINCKLEY Director
------------------------------------------------
George K. Hinckley
/s/ JOHN B. NEFF Director
------------------------------------------------
John B. Neff
</TABLE>
II-4
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
3.1 The Company's Certificate of Incorporation.*
3.2 The Company's Bylaws.*
4.1 Indenture.**
4.2 Registration Rights Agreement dated March 22, 2000.**
4.3 Form of Note (included in Exhibit 4.1)
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Samil Accounting Corporation.
23.3 Consent of Siana Carr and O'Connor, LLP.
23.4 Consent of Ahn Kwon & Company.
23.5 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Amkor
Technology, Inc. (see page 50 of this Form S-3).
25.1+ Form T-1 Statement of Eligibility of Trustee for Indenture
under the Trust Indenture Act of 1939.
27.1 Financial Data Schedule.**
</TABLE>
-------------------------
* Incorporated by reference from Registrant's Registration Statement on Form
S-1 filed on October 6, 1997.
** Incorporated by reference from Registrant's Annual Report on Form 10-K filed
on March 30, 2000.
+ To be filed by amendment.
