<PAGE>
As filed with the Securities and Exchange Commission on November 24, 1999
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC Liquidity Management Hungary Limited Liability Company
ChipPAC Luxembourg S.a.R.L.
ChipPAC Korea Company Ltd.
ChipPAC Limited
ChipPAC (Barbados) Ltd.
(Exact name of registrants as specified in their charters)
British Virgin Islands 3674 66-0573152
California 3674 77-0463-48
Hungary 3674 98-0209814
Luxembourg 3674 98-0209817
Republic of Korea 3674 98-0209695
British Virgin Islands 3674 98-0209699
Barbados 3674 98-0209821
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Code) Identification No.)
incorporation or
organization) --------------
3151 Coronado Drive, Santa Clara, California 95404
Telephone: (408) 486-5900
(Address, including zip code, and telephone number, including area code of
registrants' principal executive offices)
--------------
Dennis P. McKenna
President & Chief Executive Officer
ChipPAC, Inc.
--------------
3151 Coronado Drive, Santa Clara, California 95404
(408) 486-5900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies of all communications, including communications sent to agent for
service, should be sent to:
Eva Herbst Davis
Kirkland & Ellis
300 South Grand Avenue, Suite 3000
Los Angeles, California 90071
(213) 680-8400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
--------------
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Amount Maximum Proposed
Title of Each Class of Securities to be Offering Price Maximum Aggregate Amount of
to be Registered Registered Per Unit(1) Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
12 3/4% Series B Senior Subordinated Notes Due
2009.......................................... $150,000,000 100% $150,000,000 $41,700
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Guarantees of 12 3/4% Series B Senior
Subordinated Notes Due 2009(2)................ -- -- -- (3)
</TABLE>
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(1)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2)The guarantors are affiliates of the registrant and have guaranteed the
Series B notes being registered.
(3)Pursuant to Rule 457(n), no separate fee is payable with respect to the
guarantees of the Series B notes being registered.
--------------
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 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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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these notes until the registration statement filed with the +
+Securities and Exchange Commission and any applicable state securities +
+commission becomes effective. This prospectus is not an offer to sell these +
+notes and we are not soliciting offers to buy these notes in any state where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
Exchange Offer for $150,000,000
12 3/4% Senior Subordinated Notes Due 2009
of ChipPAC International Company Limited
-----------
Terms of the Exchange Offer:
. We are offering to . The terms of the notes
exchange the notes to be issued are
that we sold in a identical to the
private offering for outstanding notes,
new registered except for the
exchange notes. transfer restrictions
and registration
rights relating to the
outstanding notes.
. The exchange offer
expires 5:00 p.m., New
York City time,
, 2000,
unless extended.
. The parent company of
the issuer and some of
its direct and
indirect subsidiaries
will guarantee the
exchange notes with
unconditional
guarantees that will
effectively rank
junior in right of
payment to their
senior debt.
. You may withdraw your
tender of notes at any
time before the
expiration of the
exchange offer.
. We will exchange all
of the outstanding
notes that you validly
tender and do not
validly withdraw.
. There is no existing
market for the
exchange notes, and we
do not intend to apply
for their listing on
any securities
exchange.
. We believe that the
exchange of the notes
will not be a taxable
exchange for U.S.
federal income tax
purposes.
. If you are a broker-
dealer and you
acquired existing
notes as a result of
market-making or other
trading activities,
you must acknowledge
that you will deliver
this prospectus, as it
may be amended or
supplemented, in
connection with any
resale of exchange
notes that you acquire
in exchange for the
existing notes.
. We will not receive
any proceeds from the
exchange offer.
. This exchange offer is
subject to customary
conditions, which we
may waive.
You should carefully consider the risks described beginning on page 12 before
tendering your notes.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved the notes to be distributed in the exchange offer, nor
have any of these organizations determined that this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 12
Forward-Looking Statements................................................ 21
Industry Data............................................................. 21
Use of Proceeds........................................................... 22
Capitalization............................................................ 23
The Exchange Offer........................................................ 24
Unaudited Pro Forma Condensed Combined Financial Data..................... 32
Selected Historical Financial Data........................................ 36
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 38
Industry.................................................................. 46
Business.................................................................. 49
Management................................................................ 61
Principal Shareholders.................................................... 66
The Recapitalization...................................................... 69
Certain Relationships and Related Transactions............................ 71
Description of Other Financing Arrangements............................... 75
Description of the Exchange Notes......................................... 79
Material Income Tax Consequences.......................................... 121
Plan of Distribution...................................................... 122
Where You Can Find More Information....................................... 123
Legal Matters............................................................. 123
Experts................................................................... 123
Index to Combined Financial Statements.................................... F-1
Index to Unaudited Interim Condensed Consolidated Financial Statements.... F-39
Glossary.................................................................. G-1
</TABLE>
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the
information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from the prospectus. It does
not contain all of the information that is important to you in order to
understand this exchange offer or the terms of the exchange notes. Unless the
context requires otherwise, "ChipPAC," "Company," "we," "our," "ours" and "us"
refer to ChipPAC, Inc. and its subsidiaries. ChipPAC International Company
Limited, the issuer of the notes in the exchange offer, is a wholly owned
subsidiary of ChipPAC, Inc. ChipPAC reports on a calendar year basis. See the
"Glossary" section for a description of certain other terms used in this
prospectus.
Overview of Our Business
We are one of the world's largest providers of packaging and test services
for manufacturers in the semiconductor industry. We offer complete portfolios
of packaging and test solutions and we are one of the largest providers of
high-margin, ball grid array packages, or BGA packages, the most advanced mass-
produced semiconductor package. A semiconductor package is a container that
protects and insulates the enclosed semiconductor chip and attaches to a
printed circuit board. As a result, packages are an integral part of the basic
functionality of semiconductors and contribute to their overall performance. We
provide packaging and test services to approximately 70 customers worldwide,
including approximately 40 customers in the United States who represented 92.8%
of our sales during 1998. Our customers include some of the world's largest and
most prominent semiconductor manufacturers, such as Atmel Corporation, Intel
Corporation, International Business Machines Corporation, LSI Logic Corp.,
Lucent Technologies, Inc., Samsung Electronics Co., Ltd. and STMicroelectronics
N.V. Today, most major semiconductor manufacturers use independent packaging
and test service providers for at least a portion of their packaging and test
needs. We expect this outsourcing trend to continue as semiconductor
manufacturers focus on their core strengths, such as chip design and wafer
fabrication.
Our executive and sales headquarters are in the United States and our
packaging facilities are in Korea and China. During 1998, we packaged over
792.9 million units and generated $334.1 million in revenues, $63.7 million in
gross profit, $32.2 million in net income and $86.3 million in EBITDA. For the
nine-month period ended September 30, 1999, we packaged over 885.2 million
units and generated $267.7 million in revenues, $39.9 million in gross profit,
$3.3 million in net loss and $58.4 million in EBITDA. For the nine month period
ended September 30, 1999, we incurred one time charges for a change of control
expense and loss from early extinguishment of debt in the amount of $11.8
million and $1.4 million, respectively.
In 1984, our semiconductor packaging business began operating as a separate
division of Hyundai Electronics, one of the world's largest seminconductor
manufacturers and a member of the Hyundai Group, the Korean conglomerate. As of
August 5, 1999, we are no longer majority-owned by Hyundai Electronics as a
result of the recapitalization and other transactions described in this
prospectus.
Operations
We offer our customers a full array of semiconductor packages for both
traditional and advanced semiconductor products. The semiconductor production
process can be broadly divided into three primary stages:
(1) fabricating a wafer;
(2) slicing the wafer into multiple die and assembling those die into
finished devices, which is referred to as "packaging"; and
(3) testing of finished devices and other back-end processes.
We provide outsourced services for the final two stages of this
semiconductor production process. We offer the following packaging and test
services to our customers:
1
<PAGE>
Substrate, or BGA, packaging, which comprised 61.8% of our 1998
revenues. Substrate packaging, also referred to as BGA packaging, represents
the newest and fastest growing area in the semiconductor packaging industry and
is characterized by a semiconductor die placed directly on a plastic or tape
laminate substrate, which is a mini printed circuit board. We are continuously
developing new BGA packaging services and BGA assembly techniques, including
chip scale BGA packaging, which is characterized by a package size of less than
1.2 times the size of the device. Benefits of BGA packaging over traditional
leaded packaging include:
. smaller size;
. higher pin count, or number of connections to a printed circuit board;
. greater reliability;
. better electrical signal integrity; and
. easier attachment to a printed circuit board.
Leaded packaging, which comprised 35.5% of our 1998 revenues. Traditional
leaded packages are the most widely used packaging type, are found in almost
every electronics application and are characterized by a semiconductor die
encapsulated in a plastic mold compound with metal leads surrounding the
perimeter of the device. In 1998, leaded packaging comprised over half of total
industry packaging volume. Leaded packaging is used in a variety of
applications, including automobiles, household appliances, desktop computers
and telecommunications. We offer a wide range of lead counts and body sizes for
use in many different applications.
Test services, which comprised 2.7% of our 1998 revenues. Semiconductor
testing measures and ensures the performance, functionality and reliability of
a packaged device, and requires knowledge of the specific applications and
functions of the devices being tested. We provide our customers with
semiconductor test services for a number of device types, including logic,
mixed signal and memory devices.
Competitive Strengths
We believe the following attributes have helped us become one of the world's
largest providers of packaging and test services for semiconductor
manufacturers:
. demonstrated technology leadership;
. growing blue chip customer base;
. low-cost infrastructure;
. efficiency and quality leader;
. major investments in packaging facilities; and
. experienced management team.
Business Strategy
Our business strategy focuses on:
. maintaining high-quality customer service;
. increasing penetration with existing customers;
. expanding customer base through technology leadership; and
. maintaining low-cost structure.
The Recapitalization
On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a
portfolio concern of Citicorp Venture Capital Ltd., which we refer to
collectively as the "Equity Investors," and management acquired a controlling
interest in ChipPAC from Hyundai Electronics and Hyundai Electronics America
through a series of
2
<PAGE>
transactions, including a merger into ChipPAC, Inc. of a special purpose
corporation organized by the Equity Investors. The merger was structured to be
accounted for as a recapitalization. Specifically:
. the Equity Investors, and other parties, invested $92.0 million to
acquire common stock of ChipPAC, Inc. which represented approximately
90.2% of its common stock outstanding immediately following the
recapitalization;
. the prior stockholders of ChipPAC, Inc. retained a portion of their
common stock in ChipPAC, Inc. equal to $10.0 million, or approximately
9.8% of ChipPAC, Inc.'s common stock outstanding immediately following
the recapitalization; and
. the prior stockholders received as consideration for the remainder of
their common stock (i) an aggregate of $385.0 million in cash and (ii)
mandatorily redeemable convertible preferred stock payable for up to an
aggregate of $70.0 million.
These events are collectively referred to as the "recapitalization." You
should refer to the information in the section entitled "The Recapitalization"
for a more detailed description of the transactions summarized above.
In connection with the recapitalization, we entered into several agreements
with Hyundai Electronics and Hyundai Electronics America pursuant to which we
received, among other things, licenses to use technologies used in our business
and transitional operational, administrative and utility services. We have also
leased certain facilities from Hyundai Electronics and Hyundai Electronics
America. See "Certain Relationships and Related Transactions" for more
information on these agreements.
In order to finance the recapitalization, we completed the transactions set
forth in the section entitled "Use of Proceeds."
Our current corporate structure after giving effect to the recapitalization
is as follows:
3
<PAGE>
The Exchange Offer
The exchange offer relates to the exchange of all of ChipPAC International
Company Limited's outstanding 12 3/4% Senior Subordinated Notes due 2009 for an
equal aggregate principal amount of ChipPAC International Company Limited's new
12 3/4% Series B Senior Subordinated Notes due 2009. The exchange notes will be
obligations of ChipPAC International Company Limited entitled to the benefits
of the indenture governing the notes, which is the legal document governing the
outstanding notes.
Registration Rights You have the right to exchange your outstanding
Agreement................. notes for registered notes with terms that are
identical in all material respects. This
exchange offer is intended to satisfy this
right. After this exchange offer is complete,
you will no longer be entitled to the benefits
of the exchange or registration rights granted
under the registration rights agreement which
we entered into as part of the offering of the
outstanding notes.
The Exchange Offer........ We are offering to exchange $1,000 principal
amount of exchange notes, which have been
registered under the Securities Act, for each
$1,000 principal amount of outstanding notes.
Your outstanding notes must be properly
tendered and accepted to be exchanged. All
outstanding notes that are validly tendered and
not validly withdrawn will be exchanged.
$150,000,000 in aggregate principal amount of
our notes is currently outstanding.
We will issue the registered exchange notes on
or promptly after the expiration of this
exchange offer.
Expiration Date........... This exchange offer will expire at 5:00 p.m.,
New York City time, on , 2000,
unless we decide to extend the expiration date.
Conditions to the We will not complete this exchange offer if it
Exchange Offer............ violates applicable law or staff
interpretations of the Securities and Exchange
Commission. This exchange offer is not
conditioned upon any minimum principal amount
of our outstanding notes being tendered.
Resale of the Exchange We believe that the exchange notes may be
Notes..................... offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act. We have based this
belief on letters issued in connection with
past offerings of this kind in which the staff
of the Securities and Exchange Commission has
interpreted the laws and regulations relating
to the resale of notes to the public without
the requirement of further registration under
the Securities Act. See Shearman & Sterling
(available July 2, 1993); Morgan Stanley & Co.
Incorporated (available June 5, 1991); and
Exxon Capital Holdings Corporation (available
May 13, 1989). In order for the exchange notes
to be offered for resale, resold or otherwise
transferred:
. you must acquire the exchange notes in the
ordinary course of your business;
. you must not intend to participate, and have no
arrangement or understanding with any person to
participate, in the distribution of the exchange
notes issued to you in this exchange offer;
4
<PAGE>
. you must not be a broker-dealer who purchased
your outstanding notes directly from us for
resale under Rule 144A or any other available
exemption under the Securities Act; and
. you must not be an "affiliate" of ours within the
meaning of Rule 405 under the Securities Act.
If you do not meet the above conditions, you
may incur liability under the Securities Act if
you transfer any exchange note without
delivering a prospectus meeting the
requirements of the Securities Act. We do not
assume or indemnify you against this liability.
Each broker-dealer that is issued exchange
notes in this exchange offer for its own
account in exchange for outstanding notes which
were acquired by that broker-dealer as a result
of market-making or other trading activities
must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
the exchange notes.
A broker-dealer may use this prospectus for an
offer to resell, resale or other transfer of
the exchange notes issued to it in this
exchange offer. We have agreed that, for a
period of 180 days after the date this exchange
offer is completed, we will make this
prospectus and any amendment or supplement to
this prospectus available to a broker-dealer
for use in connection with resales.
We are not offering to exchange with you, and
will not accept surrenders for exchange from
you, in any jurisdiction in which this exchange
offer or its acceptance would not comply with
the securities or blue sky laws of that
jurisdiction. Furthermore, if you acquire the
exchange notes, you are responsible for
compliance with securities or blue sky laws
regarding resales. We assume no responsibility
for compliance with these requirements.
Accrued Interest on the
Exchange Notes and the
Outstanding Notes.........
Each exchange note will bear interest from its
issuance date. The holders of outstanding notes
that are accepted for exchange will receive, in
cash, accrued interest on those notes to, but
not including, the issuance date of the
exchange notes. This interest will be paid with
the first interest payment on the exchange
notes. Interest on the outstanding notes
accepted for exchange will cease to accrue upon
issuance of the exchange notes.
Consequently, if you exchange your outstanding
notes for exchange notes you will receive the
same interest payment on February 1, 2000,
which is the first interest payment date with
respect to the outstanding notes and the
exchange notes, that you would have received if
you had not accepted this exchange offer.
Procedures for Tendering If you wish to tender your notes for exchange
Notes..................... in this exchange offer, you must transmit to
the notes exchange agent, on or before the
expiration date either:
5
<PAGE>
. an original or a facsimile of a properly
completed and duly executed copy of the letter of
transmittal accompanying this prospectus,
together with your outstanding notes and any
other documentation required by the letter of
transmittal, at the address provided on the cover
page of the letter of transmittal; or
. if the notes you own are held of record by The
Depository Trust Company in book-entry form and
you are making delivery by book-entry transfer, a
computer-generated message transmitted by means
of the Automated Tender Offer Program System of
The Depository Trust Company in which you
acknowledge and agree to be bound by the terms of
the letter of transmittal and which, when
received by the notes exchange agent, forms a
part of a confirmation of book-entry transfer. As
part of the book-entry transfer, the Depository
Trust Company will facilitate the exchange of
your notes and update your account to reflect the
issuance of the exchange notes to you. The
Automated Tender Offer Program allows you to
electronically transmit your acceptance of the
exchange offer to The Depository Trust Company
instead of physically completing the delivering a
letter of transmittal to the notes exchange
agent.
In addition, you must deliver to the notes
exchange agent on or before the expiration
date:
. if you are effecting delivery by book-entry
transfer, a timely confirmation of book-entry
transfer of your outstanding notes into the
account of the notes exchange agent at The
Depository Trust Company as required by the
procedures for book-entry transfers described in
this prospectus under the heading "The Exchange
Offer--Procedures for Tendering"; or
. if necessary, the documents required for
compliance with the guaranteed delivery
procedures described in this prospectus under the
heading "The Exchange Offer--Guaranteed Delivery
Procedures."
By executing and delivering the accompanying
letter of transmittal or effecting delivery by
book-entry transfer, you are representing to us
that, among other things:
. the person receiving the exchange notes in this
exchange offer, whether or not that person is the
holder, is receiving them in the ordinary course
of business;
. neither you nor any other person receiving the
exchange notes in the exchange offer has an
arrangement or understanding with any person to
participate in the distribution of the exchange
notes and that you are not engaged in, and do not
intend to engage in, a distribution of the
exchange notes; and
. neither you nor any other person receiving the
exchange notes in the exchange offer is an
"affiliate" of ours within the meaning of Rule
405 under the Securities Act.
6
<PAGE>
Special Procedures for
Beneficial Owners.........
If you are a beneficial owner of the notes that
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your notes in this
exchange offer, you should promptly contact the
person in whose name your notes are registered
and instruct that person to tender on your
behalf. If you wish to tender on your own
behalf you must, before completing and
executing the letter of transmittal and
delivering your outstanding notes, either make
appropriate arrangements to register ownership
of the outstanding notes in your name or obtain
a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery If you wish to tender your outstanding notes
Procedures................ and:
. time will not permit your notes or other required
documents to reach the notes exchange agent by
the expiration date; or
. the procedure for book-entry transfer cannot be
completed on time;
you may tender your notes in compliance with
the guaranteed delivery procedures described in
this prospectus under the heading "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights......... You may withdraw the tender of your outstanding
notes at any time before 5:00 p.m., New York
City time, on , 2000 which is the
expiration date.
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes............ Except under the circumstances described above
under "Conditions to the Exchange Offer," we
will accept for exchange any and all
outstanding notes which are properly tendered
and not validly withdrawn before 5:00 p.m., New
York City time, on the expiration date. The
exchange notes issued in this exchange offer
will be delivered promptly following the
expiration date.
United States Federal Tax
Consequences..............
Based on the advice of our counsel, we believe
the exchange of your outstanding notes for the
exchange notes will not be a taxable exchange
for United States federal income tax purposes.
See "Material Income Tax Considerations."
Exchange Agent............ Firstar Bank of Minnesota, N.A. is serving as
the notes exchange agent in connection with the
exchange offer. The notes exchange agent will
assist us in the exchange offer by performing
various administrative functions on our behalf.
7
<PAGE>
The Exchange Notes
Issuer.................... ChipPAC International Company Limited, a wholly
owned subsidiary of ChipPAC, Inc.
General................... The form and terms of the exchange notes are
identical in all material respects to the form
and terms of the outstanding notes except that:
. the exchange notes will bear a Series B
designation to differentiate them from the
outstanding notes;
. the exchange notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting their transfer; and
. the holders of exchange notes will not be
entitled to rights under the registration rights
agreement.
The exchange notes will evidence the same debt
as the outstanding notes and will be entitled
to the benefits of the same indenture under
which the outstanding notes were issued.
Total Amount of Exchange
Notes Securities Offered..
$150,000,000 aggregate principal amount of 12
3/4% Series B Senior Subordinated Notes Due
2009.
Maturity Date............. August 1, 2009.
Interest Payment Dates.... February 1 and August 1 of each year, beginning
February 1, 2000.
Optional Redemption....... We cannot redeem the exchange notes prior to
August 1, 2004, except as discussed below.
Until August 1, 2002, we can choose to redeem
the exchange notes in an amount not to exceed
35.0% of the sum of the original principal
amount of the exchange notes with money
ChipPAC, Inc. raises in equity offerings
described herein, as long as:
. we pay the holders of the exchange notes a
redemption price of 112 3/4% of the principal
amount of the exchange notes, plus accrued
but unpaid interest to the date of
redemption; and
. at least 65.0% of the original aggregate
principal amount of the exchange notes (plus
any additional exchange notes issued under
the indenture) remains outstanding after each
such redemption.
On or after August 1, 2004, we can redeem some
or all of the exchange notes at the redemption
prices listed in the "Description of the
Exchange Notes--Optional Redemption" section of
this prospectus, plus accrued but unpaid
interest to the date of redemption.
Change of Control......... If a Change of Control of ChipPAC, Inc. occurs,
subject to certain conditions, we must give
holders of the exchange notes an opportunity to
sell to us their exchange notes at a purchase
price of 101.0% of the principal amount of the
exchange notes, plus accrued and unpaid
interest. The term "Change of Control" is
defined in the "Description of the Exchange
Notes--Change of Control" section of the
prospectus.
Ranking................... The exchange notes will be our senior
subordinated unsecured obligations. They will
rank senior in right of payment with any of our
future Subordinated Indebtedness, equal in
right of payment with any of our existing and
future Senior Subordinated Indebtedness and
8
<PAGE>
subordinated in right of payment to any of our
existing and future Senior Indebtedness. The
exchange notes are effectively subordinated to
indebtedness and other liabilities of ChipPAC,
Inc.'s subsidiaries which are not guarantors.
As of September 30, 1999, we had approximately
$300 million of Senior Indebtedness, and none
of our subsidiaries, whether or not such
subsidiary is a guarantor, had any Senior
Indebtedness. The terms "Senior Indebtedness,"
"Senior Subordinated Indebtedness" and
"Subordinated Indebtedness" are defined in the
"Description of the Exchange Notes--Certain
Definitions" section of this prospectus.
Guaranties................ The Issuer's parent, ChipPAC, Inc., and the
following direct, and indirect subsidiaries of
ChipPAC, Inc. are guarantors of the exchange
notes: ChipPAC (Barbados) Ltd., ChipPAC
Limited, ChipPAC Korea Company Ltd., ChipPAC
Luxembourg S.a.R.L. and ChipPAC Liquidity
Management Hungary Limited Liability Company.
Each guarantor has provided a full and
unconditional guarantee of the payment of the
principal, premium and interest on the exchange
notes on a senior subordinated basis.
The guaranties by the guarantors are
subordinated to all existing and future Senior
Indebtedness of such guarantors. Substantially
all of our operations are conducted through
ChipPAC Limited and its Korean and Chinese
subsidiaries. ChipPAC's Chinese subsidiaries
are not guarantors. See "Description of the
Exchange Notes--Guaranties" and "Risk Factors--
Our ability to pay our obligations under the
exchange notes may be reduced because ChipPAC's
Chinese operating subsidiaries are not
guarantors of the exchange notes."
Basic Covenants of the The indenture governing the exchange notes
Indenture................. contains covenants that limit our ability and
the ability of subsidiaries (other than
subsidiaries we have designated as unrestricted
subsidiaries) to:
. incur or guarantee additional indebtedness;
. pay dividends and make distributions;
. make investments and other restricted
payments;
. permit payment or dividend restrictions on
our subsidiaries;
. transfer or sell assets;
. create liens;
. engage in transactions with affiliates; and
. consolidate or merge.
These restrictions and prohibitions are subject
to a number of important qualifications and
exceptions. See "Description of the Exchange
Notes--Certain Covenants."
Use of Proceeds........... We will not receive any cash proceeds from the
issuance of the exchange notes.
For more complete information about the exchange notes, see "Description of
the Exchange Notes."
Principal Executive Offices
ChipPAC, Inc.'s executive offices are located at 3151 Coronado Drive, Santa
Clara, California 95054 and its telephone number is (408) 486-5900. ChipPAC
International Company Limited's executive offices are located at Craigmuir
Chambers, Road Town, Tortola, British Virgin Islands and its telephone number
is (284) 494-2233.
9
<PAGE>
Summary Historical and Unaudited Pro Forma Combined Financial and Operating
Data
The following summary financial historical data for the four years ended
December 31, 1998 were derived from the audited combined financial statements
of ChipPAC included elsewhere in this prospectus. The summary unaudited pro
forma data for the nine month period ended September 30, 1999, were derived
from our unaudited combined financial statements which, in the opinion of
management, reflect all adjustments necessary for the fair presentation of the
financial condition and results of operations for such period.
The summary unaudited pro forma combined statements of operations and other
operating data for the nine month period ended September 30, 1999 give effect
to the recapitalization as if it had occurred on January 1, 1998. The summary
unaudited pro forma balance sheet data at September 30, 1999 give effect to the
recapitalization as if it had occurred on September 30, 1999. Our historical
information reflected in the Pro Forma Combined Financial Statements represents
the accounts and operations of Hyundai Electronics with respect to ChipPAC.
During the period covered by our Combined Financial Statements, its activities
were conducted as part of Hyundai Electronics' overall operations, and separate
financial statements were not prepared. Our Combined Financial Statements were
prepared from the historical accounting records of Hyundai Electronics and
include various allocations for costs and expenses. Therefore, the Combined
Statement of Operations of ChipPAC may not be indicative of the results of
operations that would have resulted if ChipPAC had operated on a stand-alone
basis. All of the allocations and estimates reflected in our Combined Financial
Statements are based on assumptions that we believe are reasonable under the
circumstances and that have been reviewed by Hyundai Electronics America.
"EBITDA" as presented below has been adjusted to exclude certain historical
charges and credits. EBITDA is not intended to be a performance measure that
should be regarded as an alternative to, or more meaningful than, either
operating income or net income as an indicator of operating performance or cash
flow as a measure of liquidity, as determined in accordance with GAAP.
The following summary unaudited pro forma combined financial data are
intended for informational purposes and should not be considered indicative of
either the future results of operations or the results that might have occurred
if the recapitalization had been consummated on the indicated date or had been
in effect for the period presented. The following table should be read in
conjunction with "Capitalization," "Unaudited Pro Forma Condensed Combined
Financial Data," "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
historical combined financial statements and the notes related thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Unaudited
Fiscal Year Ended December 31, Pro Forma Nine
------------------------------------------ Month Period Ended
1995 1996 1997 1998 September 30, 1999
-------- -------- -------- -------- ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $179,234 $191,655 $289,429 $334,081 $267,671
Gross profit............ 20,707 24,990 60,191 63,716 39,879
Selling, general and
administrative (1)..... 11,943 14,753 19,052 15,595 14,416
Research and
development............ 1,724 2,617 4,052 7,692 8,628
Write-down of impaired
assets (2)............. -- -- 11,569 -- --
-------- -------- -------- -------- --------
Operating income........ $ 7,040 $ 7,620 $ 25,518 $ 40,429 $ 16,835
======== ======== ======== ======== ========
Balance Sheet Data (at September 30, 1999):
Cash and cash equivalents................................... 33,142
Accounts receivable......................................... 34,679
Inventories................................................. 12,420
Total assets................................................ 322,461
Total debt.................................................. 300,000
Total shareholders' deficit................................. 109,749
Other Financial Data:
Depreciation and
amortization........... $ 27,917 $ 26,632 $ 40,682 $ 45,855 $ 41,850
Capital expenditures
(3).................... 51,462 118,971 136,594 63,523 29,062
Ratio of earnings to
fixed charges (4)...... 1.4x -- (4) -- (4) 4.3x -- (4)
EBITDA (5).............. $ 34,957 $ 34,252 $ 77,769 $ 86,284 $ 58,436
Total cash interest
expense (6)............ 11,840
Ratio of EBITDA to total
cash interest expense
(7).................... 4.9x
</TABLE>
- --------
Footnotes to table appear on following page.
10
<PAGE>
Footnotes to table on previous page.
(1) Includes management fees charged by Hyundai.
(2) At December 1997, in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of, we recorded a charge of $11.6 million to write down the value of
certain assets which had been identified as economically impaired, as a
result of management's decision to discontinue certain product lines or
which were judged to be in excess of foreseeable requirements.
(3) Includes capital leases.
(4) For purposes of this computation, earnings are defined as income (loss)
before provision for income taxes and fixed charges. Fixed charges are the
sum of (a) interest costs, (b) the portion (approximately one-third) of
operating lease rental expenses that are representative of the interest
factor and (c) the pre-tax effect of preferred stock dividend requirements.
Earnings for 1996 and 1997 and the nine month period ended
September 30, 1999 were inadequate to cover fixed charges by $2.7 million,
$55.8 million, and $6.5 million, respectively. Earnings for the year ended
December 31, 1997 included a non-cash foreign currency loss of $69.7
million and a non-cash asset impairment charge of $11.6 million.
(5) "EBITDA" is defined herein as operating income plus depreciation,
amortization, and, in 1997, non-cash charges related to write-downs of
impaired assets. EBITDA is presented because we believe it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness. However, EBITDA should not be considered as an alternative to
net income as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting principles.
Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to those disclosed by other
companies. See footnote (6) in "Unaudited Pro Forma Condensed Combined
Financial Data" for the reconciliation of net income to EBITDA as defined
above.
(6) Total cash interest expense represents the pro forma interest expense less
amortization of deferred debt issuance costs.
(7) For purposes of this computation, EBITDA is defined at (5) and cash
interest expense is defined at (6). For the nine month period ended
September 30, 1999 we generated EBITDA of $58.4 million and incurred cash
interest expense of $11.8 million resulting from interest charges of $12.1
million less debt issuance amortization of $0.3 million.
11
<PAGE>
RISK FACTORS
You should carefully consider the risks described below in addition to the
other information set forth in this prospectus before making an investment in
the exchange notes.
Holders of existing notes who fail to exchange their existing notes may be
unable to resell their notes.
We did not register the outstanding notes under the federal or any state
securities laws, nor do we intend to register them following the exchange
offer. As a result, the outstanding notes may only be transferred in limited
circumstances under the securities laws. If the holders of outstanding notes do
not exchange their notes in the exchange offer, they lose their right to have
their notes registered under the federal securities laws, subject to certain
limitations. As a result, a holder of outstanding notes after the exchange
offer may be unable to sell their notes.
Your notes will not be accepted for exchange if you fail to follow the exchange
offer procedures.
The exchange notes will be issued to you in exchange for your notes only
after timely receipt by the exchange agent of:
. your notes; and
. a properly completed and executed Letter of Transmittal and all of
the required documentation; or
. a book-entry delivery by transmittal of an agent's message through
The Depository Trust Company.
If you want to tender your notes in exchange for exchange notes, you should
allow sufficient time to ensure timely delivery.
Neither we nor the exchange agent or any of its affiliates are under any
duty to give you notification of defects or irregularities with respect to
tenders of existing notes for exchange. Existing notes that are not tendered or
are tendered but not accepted will, following the exchange offer, continue to
be subject to their existing transfer restrictions. In addition, if you tender
your notes in the exchange offer to participate in a distribution of the
exchange notes, you will be required to comply with the registration and
prospectus delivery requirements of the federal securities laws in connection
with any resale transaction. For additional information, please refer to "The
Exchange Offer" and "Plan of Distribution" sections of this prospectus.
Our substantial indebtedness could adversely affect our financial health, make
us vulnerable to adverse economic and industry conditions and prevent us from
fulfilling our obligations under these exchange notes.
To finance the recapitalization, we incurred a significant amount of
indebtedness. The following chart sets forth important credit information,
assuming we had completed this offering as of the date, or at the beginning of
the periods, specified below and applied the proceeds as intended:
<TABLE>
<CAPTION>
At September 30, 1999
Pro Forma (unaudited)
---------------------
(in thousands)
<S> <C>
Total indebtedness.................................. $300,000
Shareholders' deficit............................... 112,249
</TABLE>
<TABLE>
<CAPTION>
Nine
Months
Ended
September
Years Ended December 31, 30,
-------------------------- ----------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges......................... 2.0x 1.4x -- -- 4.3x 5.1x --
</TABLE>
For the years ended December 31, 1996 and 1997 and the nine month period
ended September 30, 1999, earnings were insufficient to cover fixed charges by
$2.7 million $55.8 million and $6.5 million, respectively.
12
<PAGE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations with respect
to the exchange notes;
. increase our vulnerability to general adverse economic and industry
conditions by limiting our flexibility in planning for, or reacting
to, changes in our business and the industry in which we operate;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
. place us at a competitive disadvantage relative to our competitors
that have less debt; and
. limit, along with the financial and other restrictive covenants in
our indebtedness, among other things, our ability to borrow
additional funds. Furthermore, failing to comply with those covenants
could result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial
condition and results of operations.
For purposes of the computation of pro forma ratio of earnings to fixed
charges in the table above, earnings are defined as income (loss) before
provision for income taxes and fixed charges. Fixed charges are the sum of (a)
interest costs and (b) the portion (approximately one-third) of operating lease
rental expenses that are representative of the interest factor.
Despite our current levels of indebtedness, we still may be able to incur
substantially more debt which could increase the risks created by our
substantial indebtedness.
We may be able to incur substantial additional indebtedness in the future.
For example, our senior credit facilities permit us to borrow up to an
additional $70.0 million to finance working capital requirements and capital
expenditures, and for trade letters of credit. All of these borrowings will be
secured by all of our assets and those of certain of our subsidiaries. The
addition of new debt to our current debt levels could intensify the debt-
related risks that we now face that are described above. See "Description of
Other Financing Arrangements--Senior Credit Facilities" and "Description of the
Exchange Notes."
Your right to receive payments on the exchange notes is junior to ChipPAC
International Company Limited's existing and, possibly future, senior
indebtedness and all of the guarantors' senior indebtedness. It is possible,
therefore, that you may receive no compensation of any kind with respect to the
exchange notes if there is a bankruptcy, liquidation or similar proceeding
affecting us.
We may not have sufficient funds to satisfy our obligations with respect to
the exchange notes. The exchange notes and the guarantees rank behind all of
our existing indebtedness and all of our future borrowings, except any future
indebtedness that expressly provides that it ranks with, or subordinated in
right of payment to, the exchange notes and the guarantees. As a result, upon
any distribution to our creditors, in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or our property. We will
have to pay the holders of debt senior to the exchange notes in full before we
can make any payment to you with respect to the exchange notes.
In addition, all payments on the exchange notes and the guarantees will be
blocked in the event of a payment default on some of our senior debt (including
borrowings under the senior credit facilities) and may be blocked for specified
periods in the event of some non-payment defaults on senior debt.
As a holder of the exchange notes, you will typically have equal rights to
your ratable share, along with all of our suppliers and vendors to which we owe
money, commonly referred to as trade creditors, and other holders of debt of
the same class as the exchange notes, of any assets remaining after we have
paid off all of the debt senior to the exchange notes. However, the indenture
requires that amounts otherwise payable to holders of exchange notes in a
bankruptcy, liquidation or similar proceeding be paid to holders of debt senior
to the exchange notes instead. Consequently, holders of the exchange notes may
receive less, ratably, than holders of trade payables or other debt of the same
class in any such proceeding.
13
<PAGE>
ChipPAC International Company Limited, the issuer of the exchange notes, will
rely on intercompany loans through ChipPAC, Inc.'s direct and indirect
subsidiaries to satisfy obligations of its indebtedness; as a result, if these
subsidiaries are not able to make payments on these intercompany loans, we may
not be able to pay you interest on the exchange notes when due.
ChipPAC International Company Limited has no business operations of its own
and its only assets are intercompany notes and the capital stock of its
subsidiaries, none of which will have any substantial assets other than
intercompany loans or conduct any business of their own other than intercompany
financing. Thus, the only source of cash for ChipPAC International Company
Limited to pay interest on the exchange notes will be through payments of
interest and principal on intercompany notes, capital contributions from
ChipPAC, Inc. or dividends or distributions from ChipPAC, Inc.'s subsidiaries,
which dividends or distributions would be funded through payments on
intercompany notes. We will rely principally on funds generated by ChipPAC,
Inc.'s operating subsidiaries to fund payments on the exchange notes and other
indebtedness. If such subsidiaries are unable to make payments on their
intercompany loans, we may not be able to satisfy obligations under our debt
instruments, including payment of interest on the senior credit facilities and
the exchange notes.
Our ability to pay our obligations under the exchange notes may be reduced
because ChipPAC's Chinese operating subsidiaries are not guarantors of the
exchange notes.
ChipPAC's Chinese subsidiaries are not guarantors of the exchange notes.
However, the historical combined financial information and the pro forma
combined financial information included in this prospectus are presented on a
combined basis and include the Chinese entities. After giving effect to the
recapitalization, the aggregate revenue and EBITDA for the Chinese entities,
for the year ended December 31, 1998, would have been approximately $13.8
million and a loss of $3.0 million, respectively, and their combined fixed
assets at September 30, 1999 would have been approximately $78.0 million.
Since ChipPAC's Chinese subsidiaries will not guarantee the exchange notes,
holders of the exchange notes will have to rely solely on dividends or
distributions from ChipPAC's Korean and British Virgin Islands subsidiaries to
satisfy their respective obligations under the exchange notes should ChipPAC's
Chinese subsidiaries be unable to make dividends or distributions.
The exchange notes will not be secured by any of our assets. Our obligations
under the senior credit facilities are secured by our assets and those of
certain of our subsidiaries, and the senior lenders will have a prior claim to
our assets if we become insolvent, are liquidated or if our senior secured
indebtedness is accelerated.
The exchange notes and the guarantees will not be secured by any of our
assets. Our obligations under the senior credit facilities will be secured by a
first priority pledge of all our capital stock, a perfected first priority
security interest in substantially all of our assets and those of our
subsidiaries and a first priority pledge of all intercompany loans among:
. ChipPAC International Company Limited and each of ChipPAC Luxembourg
S.a.R.L., ChipPAC Assembly and Test (Shanghai) Company, Ltd. and
ChipPAC Limited, respectively;
. ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity Management Hungary
Limited Liability Company; and
. ChipPAC Liquidity Management Hungary Limited Liability Company and
ChipPAC Korea Company, Ltd.
If we become insolvent or are liquidated, or if payment under the senior
credit facilities or under other secured senior indebtedness is accelerated,
the lenders under the senior credit facilities or holders of such other secured
senior indebtedness will be entitled to exercise the remedies available to a
secured lender under applicable law and under documents pertaining to the
senior credit facilities or such other senior debt. Accordingly, holders of
such secured senior indebtedness will have a prior claim to our assets. See
"Description of Other Financing Arrangements--Senior Credit Facilities" and
"Description of the Exchange Notes."
14
<PAGE>
The senior credit facilities and the indenture governing the exchange notes
limit us in significant respects.
The senior credit facilities and the indenture governing the exchange notes
contain restrictions on us that could increase our vulnerability to general
adverse economic and industry conditions by limiting our flexibility in
planning for and reacting to changes in our business and industry.
Specifically, these restrictions limit our ability, among other things, to:
. incur additional debt;
. pay dividends and make other distributions;
. prepay subordinated debt;
. make investments and other restricted payments;
. enter into sale and leaseback transactions;
. create liens;
. sell assets; and
. enter into transactions with affiliates.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture governing the exchange notes.
If we undergo a change of control as defined in the indenture governing the
exchange notes, we must offer to buy back the exchange notes for a price equal
to 101.0% of the principal amount of the exchange notes, plus any accrued and
unpaid interest. In addition, our senior credit facilities prohibit us from
repurchasing the exchange notes until we first repay the senior credit
facilities in full. If we fail to repurchase the exchange notes in that
circumstance, we will go into default under both the indenture governing the
exchange notes and under the senior credit facilities. Any future debt which we
incur may also contain restrictions on repayment upon a change of control. If
any change of control occurs, we cannot assure you that we will have sufficient
funds to satisfy all of our debt obligations. These buyback requirements may
also delay or make it harder for others to effect a change of control. However,
some other corporate events, such as leveraged recapitalizations that would
increase our level of indebtedness, would not constitute a change of control
under the indenture governing the exchange notes. See "Description of Other
Financing Arrangements--Senior Credit Facilities" and "Description of the
Exchange Notes--Change of Control."
Federal and state laws allow courts, under specific circumstances, to void the
exchange notes and the subsidiary guarantees and require note holders to return
payments received from us or the subsidiary guarantors.
A significant portion of the net proceeds from the offering of the existing
notes was used to pay for our common stock outstanding prior to the
recapitalization and vested options to purchase our common stock. If a
bankruptcy proceeding or a lawsuit is initiated by our unpaid creditors, the
debt which we incurred to finance the recapitalization, including the exchange
notes and the guarantees, may be reviewed under federal bankruptcy laws and
comparable provisions of state fraudulent transfer laws. Under these laws,
indebtedness incurred by us to consummate the recapitalization could be voided,
or claims in respect of the debt could be subordinated to all other debt if,
among other things, we:
. received less than reasonably equivalent value or fair consideration
for the incurrence of such debt;
. were insolvent or rendered insolvent by reason of such incurrence;
. were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
. intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they mature.
15
<PAGE>
In addition, you may be required to return to us, or to a fund for the
benefit of creditors, any payments received from us in respect of the exchange
notes.
The measures of insolvency will vary depending upon the fraudulent transfer
law applied in any proceeding to determine whether such a transfer has
occurred. Generally, however, a debtor would be considered insolvent if:
. the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets;
. the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on
existing debts, including contingent liabilities, as they become
absolute and mature; or
. it could not pay its debts as they become due.
We believe that we received fair market value for the indebtedness we
incurred in connection with the recapitalization. On the basis of historical
financial information, recent operating history and other factors, we believe
that, after giving effect to the recapitalization, we will not be insolvent,
will not have unreasonably small capital for the business in which we are
engaged or will not have incurred debts beyond our ability to pay such
obligations as they mature. We cannot assure you, however, as to what standard
a court would apply in making such determination, or that a court would agree
with our conclusions in this regard.
Our operations could be materially adversely effected if our relationship with
Hyundai, our owner prior to the recapitalization, deteriorates.
Our facilities in Ichon, Korea occupy a portion of a building located on
property owned by Hyundai, our former owner. In addition, our operations at
this site are dependent upon various service and support personnel employed by
Hyundai. An unfavorable change in our relations with Hyundai could prevent us
from gaining access to and effectively managing this facility and its
operations which, in turn, could have a material adverse effect on our
business, financial condition and results of operations.
Our operating results may be adversely affected by market forces in the
semiconductor industry which are beyond our control.
Our business is substantially affected by market conditions in the
semiconductor industry, which is highly cyclical and, at various times, has
been subject to significant economic downturns characterized by reduced product
demand, rapid erosion of average selling prices and production overcapacity.
Beginning in 1997 and continuing through the end of 1998, intense competition
and a general slowdown in the semiconductor industry worldwide resulted in
decreases in the average selling prices of many of our packaging services. We
expect that average selling prices for our services will continue to decline in
the future. A decline in average selling prices for these services, if not
offset by reductions in the costs of providing those services or by a shift to
higher margin services, would decrease our gross profits and could have a
material adverse effect on our business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
In addition, we increase our level of operating expenses and investment in
packaging services capacity based on customer demand forecast(s) and
anticipated revenue growth. If our revenues do not grow as anticipated or the
forecasts upon which we rely are inaccurate, and we are unable to decrease
these expenses, our business, financial condition and operating results would
be materially and adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Our inability to provide new packaging and test services could adversely affect
our business.
The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of packaging services. As a result,
we expect that we will need to continually introduce more
16
<PAGE>
advanced package designs in order to respond to competitive industry conditions
and customer requirements. The requirement to develop and maintain advanced
packaging capabilities and equipment could require significant research and
development and capital expenditures in future years. In addition, advances in
technology typically lead to rapid and significant price decreases and lower
margins for older packaging types and may lead to our current services becoming
less competitive. Any failure by us to achieve advances in package design or to
obtain access to advanced package designs developed by others could have a
material adverse effect on our business, results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Our research and development efforts may not yield profitable and commercially
viable services for years.
Our research and development efforts may not yield commercially viable
packages or test services, if at all, for anywhere from one to two years. The
qualification process is conducted in various stages which may take up to an
additional year to complete, and during each stage there is a substantial risk
that we will have to abandon a potential package or test service which is no
longer marketable and in which we have invested significant resources. In the
event we are able to qualify new packages, a significant amount of time will
have elapsed between our investment in such packages and the receipt of any
related revenues.
The intensity of competition in our industry could result in downward pressure
on pricing, or loss of our customers which could adversely affect our operating
results.
We face substantial competition from a number of established independent
packaging companies and with the internal capabilities of many of our largest
customers. Each of our primary competitors has significant operational
capacity, financial resources, research and development operations, and
established relationships with many large semiconductor companies which are
current or potential customers of ours. The presence of these competitors may
result in downward price pressure in our industry. Furthermore, our competitors
may in the future capture our existing or potential customers through superior
responsiveness, service quality, product design, technical competence or other
factors which we view as the principal elements of competition in our industry.
In addition, our primary customers may, in the future, shift more of their
packaging and test service demand internally. Each of the factors could have a
material adverse effect on our business, financial condition and results of
operations.
Our results may be adversely affected by reduced quality of our packaging and
test services.
The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the operational environment, human
error, equipment malfunction, use of defective materials and plating services
and inadequate sample testing. From time to time, we expect to experience lower
than anticipated yields as a result of such factors, particularly in connection
with any expansion of capacity or change in processing steps. In addition, our
yield on new packaging will be lower during the period necessary for us to
develop the requisite expertise and experience with such processes. Any failure
by us to maintain high quality standards or acceptable yields, if significant
and sustained, could result in the loss of customers, delays in shipments,
increased costs and cancellation of orders.
Our business may be adversely affected by the loss of, or reduced purchases by,
Intel, Atmel Corporation, LSI Logic or any other large customer. Additionally,
we may encounter difficulties in soliciting new customers.
In 1998, sales of packaging and test services to Intel, Atmel Corporation
and LSI Logic accounted for approximately 67.0%, 10.1% and 9.8% of our net
revenues, respectively, and sales to our top five customers in the aggregate
accounted for approximately 89.7% of total net revenues. If any of our key
customers were to
17
<PAGE>
purchase significantly less of our services in the future, such decreased level
of purchases could have a material adverse effect on our business, financial
condition and results of operations.
Semiconductor packaging companies must pass a lengthy and rigorous
qualification process that can take up to six months at a cost to the customer
of $250,000 to $300,000. If we fail to qualify packages with potential
customers or customers with which we have recently become qualified do not use
our services, then our customer base could become more concentrated with a
limited number of customers accounting for a significant portion of our
revenues. Moreover, we believe that once a semiconductor company has selected a
particular packaging company's services, the former generally relies on that
vendor's packages for specific applications and, to the extent possible,
subsequent generations of that vendor's packages. Accordingly, it may be
difficult to achieve significant sales to a particular or potential customer
once another vendor's packages have been selected by that customer unless there
are compelling reasons to do so, such as significant performance or cost
advantages.
Economic crisis in the Pacific Rim region where our suppliers are located could
prevent us from securing adequate supplies of materials which could adversely
affect our operations.
All of our materials suppliers are located in the Pacific Rim. Historically,
over half of our substrate costs were incurred from the purchase of materials
from Japanese suppliers. In the future, we expect that a growing portion of
these materials will be supplied by sources in Korea and Taiwan. Several
countries in this region have experienced currency devaluation and/or
difficulties in financing short-term obligations. We cannot assure you that the
effect of this economic crisis on our suppliers will not impact operations, or
that the effect on our customers in that region will not adversely affect both
the demand for our services and the collectibility of receivables.
We obtain the direct materials to fill orders for our packaging and test
services directly from vendors. To maintain competitive packaging operations,
we must obtain from our vendors, in a timely manner, sufficient quantities of
acceptable materials at expected prices. We source most of our materials,
including critical materials such as lead frames, laminate substrates and gold
wires, from a limited group of suppliers. We purchase all of our materials on a
purchase order basis and have no long-term contracts with any suppliers. From
time to time, vendors have extended lead times or limited the supply of
required materials to us because of vendor capacity constraints and,
consequently, we have experienced difficulty in obtaining acceptable materials
on a timely basis. Our business, financial condition and results of operations
could be materially and adversely affected if our ability to obtain sufficient
quantities of materials and other supplies in a timely manner were
substantially diminished or if there were significant increases in the costs of
materials that we could not pass on to our customers.
Our inability to protect our intellectual property could adversely affect our
business. We license critical technology from Hyundai and Motorola. Our failure
to extend the Motorola sublicense after it expires on December 31, 2002 could
adversely affect our business.
We seek to protect our proprietary information and know-how through the use
of trade secrets, confidentiality agreements and other security measures. With
respect to patents, we cannot assure you that any applications we file for
patent protection will be granted, or, if granted, will offer meaningful
protection. Additionally, we cannot assure you that our competitors will not
develop, patent or gain access to similar know-how and technology, or reverse
engineer our packaging services, or that any confidentiality agreements upon
which we rely to protect our trade secrets and other proprietary information
will be adequate to protect our proprietary technology. The occurrence of any
such events could have a material adverse effect on our business, financial
condition and results of operations.
Any patents and utility model, design right and computer program right
registrations obtained with respect to technology that we developed prior to
the recapitalization are owned by Hyundai Electronics. In connection
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<PAGE>
with the recapitalization, we entered into a patent and technology license
agreement pursuant to which Hyundai Electronics granted us a license to use
certain intellectual property rights in our semiconductor packaging and test
activities. We expect to seek patents and utility model, design right and
computer program right registrations, as applicable, on new packaging process
and package design technologies that we develop as a means of protecting
technology and market position.
We have a non-exclusive sublicense from Hyundai to use certain patented BGA
technologies owned by Motorola. Motorola may also license such patents to
others, including our competitors. These BGA technologies contributed to 61.8%
of our net revenues in 1998. After expiration of this sublicense on December
31, 2002, we may be unable to utilize such BGA technologies if this sublicense
is not extended or otherwise renewed. Alternatively, in the event that we are
able to renew this arrangement, we cannot assure you that it will be on the
same terms as currently exist. Any failure to extend or renew this sublicense
arrangement with respect to Motorola's patented BGA technologies could cause us
to incur substantial liabilities and to suspend the packaging services and
processes that utilize these technologies.
We may in the future receive communications from third parties claiming that
we may be infringing certain of such parties' patents and other intellectual
property rights. Any infringement claim or other litigation against or by us
could have a material adverse effect on our business, financial condition and
results of operations.
The loss of our skilled personnel or our key executive officers could have a
material adverse effect on our business.
Our competitiveness within our industry will depend in large part upon
whether we can attract and retain skilled technical and marketing personnel and
can retain members of our executive team. Competition for skilled personnel is
intense, and we cannot assure you that we will be successful in attracting and
retaining the technical personnel or executive managers we require to develop
new and enhanced packaging and test services and to continue to grow and
operate profitably.
Our operations could be negatively affected by future labor problems.
As of September 30, 1999, over half of our employees were represented by the
ChipPAC Korea Labor Union. In addition, one of our Chinese subsidiaries
experienced labor protests and a two day work stoppage in July 1998 in
connection with proposed work force reductions. We cannot assure you that
issues with the labor union or other employees will be resolved favorably for
us in the future, that we will not experience significant work stoppages in
future years or that we will not record significant charges related to those
work stoppages.
Our business could be adversely affected by changes in political and economic
conditions in foreign countries, particularly in Asia.
For 1996, 1997 and 1998, we generated approximately 38.2%, 17.6% and 7.2% of
total revenues, respectively, from international markets, primarily from
customers in the Pacific Rim. In addition, all of the facilities currently used
to provide our packaging services are located in Korea and China and many of
our customers' operations are located in countries outside of the United
States. We cannot determine to what extent our future operations and earnings
may be affected by new laws, new regulations, changes in or new interpretations
of existing laws or regulations or other consequences of doing business outside
the U.S., particularly in Korea and China.
Fluctuations in the exchange rate of the U.S. dollar and foreign currencies
could have a material adverse effect on our financial performance and results
of operations.
A portion of our costs and revenues are denominated in other currencies,
such as the South Korean Won and the Chinese RMB. As a result, changes in the
exchange rates of these currencies or any other applicable currencies to the
U.S. dollar will affect our costs of goods sold and operating margins and could
result in exchange losses. The impact of future exchange rate fluctuations on
our results of operations cannot be
19
<PAGE>
accurately predicted. From time to time, we have engaged in, and may continue
to engage in, exchange rate hedging activities in an effort to mitigate the
impact of exchange rate fluctuations. However, we cannot assure you that any
hedging technique we may implement will be effective.
We could suffer adverse tax and other financial consequences if U.S. or foreign
taxing authorities do not agree with our interpretation of applicable tax laws.
Our corporate structure is based, in part, on certain assumptions about the
various tax laws, including withholding tax, and other relevant laws of the
applicable non-U.S. jurisdictions. We cannot assure you that foreign taxing
authorities will agree with our interpretations or that they will reach the
same conclusions. Our interpretations are not binding on any taxing authority
and, if such foreign jurisdictions were to change or to modify the relevant
laws, we could suffer adverse tax and other financial consequences or have the
anticipated benefits of our corporate structure materially impaired. See
"Material Income Tax Considerations."
We are controlled by two principal shareholders and their interests may
conflict with your interests.
ChipPAC International Company Limited, the issuer of the existing notes and
the exchange notes, is a wholly owned subsidiary of ChipPAC, Inc. Affiliates of
Bain Capital, Inc. and SXI Group LLC, together with members of our management,
own approximately 90.0% of the issued and outstanding voting stock of ChipPAC,
Inc. Consequently, these owners will have the ability to control our business
and affairs by virtue of their ability to elect a majority of ChipPAC, Inc.'s
board of directors. The directors have the authority to make decisions
affecting ChipPAC, Inc.'s capital structure, including the issuance of
additional indebtedness. In addition, a shareholders agreement that was signed
at the closing of the recapitalization entitles affiliates of Bain Capital,
Inc. and the SXI Group LLC to fill six of eight seats on the board of directors
of ChipPAC, Inc. We cannot assure you that the interests of Bain Capital, Inc.
and SXI Group LLC do not or will not conflict with the interests of the holders
of the outstanding notes or of the exchange notes. See "Principal Shareholders"
and "Certain Relationships and Related Transactions."
Our failure, or the failure of our customer or suppliers, to address
informational technology issues related to the year 2000 could adversely affect
our operations.
Our inability to remedy unforeseen Year 2000 problems or the failure of
third parties to do so may cause a business interruption or shutdown, financial
loss, regulatory action, reputational harm or result in liability to third
parties. We cannot assure you that our Year 2000 program or the programs of our
customers or suppliers will be effective, that our estimate about the timing
and costs of completing our program will be accurate or that all remediation
will be complete by the Year 2000. In addition, we have entered into
arrangements with Hyundai Electronics and Hyundai Electronics America for
business support services. We cannot assure you that Hyundai Electronics and
Hyundai Electronics America will be Year 2000 compliant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
ChipPAC--Year 2000 Compliance."
You may not be able to resell your exchange notes or may have to sell them at a
discount if an active trading market does not develop.
The exchange notes are new securities for which there currently is no
market. We have been informed by the initial purchasers of the outstanding
notes, Credit Suisse First Boston Corporation and Donaldson Lufkin & Jenrette
Securities Corporation, that they intend to make a market in the exchange
notes. However, they are not obligated to do so and may cease their market-
making activities at any time. Accordingly, there can be no assurance as to the
development or liquidity of any market for the exchange notes. The exchange
notes are expected to be eligible for trading by qualified buyers in the PORTAL
market. The PORTAL market acts as a facilitator of SEC Rule 144A and provides
regulatory oversight for the clearance and settlement of domestic and foreign
debt and equity securities through designated clearing and depository
organizations. We do not intend to apply for listing of the exchange notes on
any securities exchange or for quotation through The Nasdaq National Market. In
addition, both the liquidity and the market price quoted for the exchange notes
may be adversely affected by changes in the overall market for high-yield
securities and by changes in our financial performance or prospects, or in the
prospects for companies in our industry generally. As a result, we cannot
assure you that an active or stable trading market will develop for the
exchange notes.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements regarding, among other
things, our financial condition and business strategy. Also, statements that
contain words such as "believes," "expects," "anticipates," "intends,"
"estimated" or similar expressions are forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. While we believe that these expectations and
projections are reasonable, such forward-looking statements are inherently
subject to risks, uncertainties and assumptions about us, including, among
other things:
. our dependence on continuous introduction of new services based on
the latest technology;
. our ability to compete in the intensely competitive semiconductor and
personal computer component industries;
. risks associated with our international business activities and with
acquisitions and integration of acquired companies;
. our dependence on proprietary information and technology and key
personnel;
. our fluctuating quarterly results and product liability exposure;
. our response to general economic conditions, including economic
conditions related to the semiconductor and personal computer
industries; and
. those other risks identified in the "Risk Factors" section of this
prospectus.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
INDUSTRY DATA
In this prospectus, we rely on and refer to information regarding the
semiconductor market and its segments and competitors from Dataquest,
Electronic Trends Publications, International Data Corporation, Semiconductor
Industry Association, Worldwide Semiconductor Test Services, The McClean Report
(1999 edition), market research reports, analyst reports and other publicly
available information. Although we believe that this information is reliable,
we cannot guarantee the accuracy and completeness of the information and have
not independently verified it.
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<PAGE>
USE OF PROCEEDS
We used the gross proceeds of approximately $417.7 million from the offering
of the existing notes, the senior credit facility and the equity investment
made in connection with the recapitalization together with cash on hand:
. to pay approximately $257.3 million in recapitalization consideration
which is subject to post-closing adjustments for working capital,
capital expenditures, research and development expenditures and our
EBITDA in each of the four calendar years following the
recapitalization. See "Description of Other Financing Arrangements--
Hyundai Preferred Stock";
. to repay approximately $127.7 million of existing Hyundai debt; and
. to pay fees and expenses associated with the merger and related
transactions of approximately $32.7 million.
We will not receive any cash proceeds from the issuance of the exchange
notes in the exchange offer. In consideration for issuing these exchange notes
as contemplated in this prospectus, we will receive existing notes in like
principal amount, the terms of which are the same in all material respects to
the exchange notes. The existing notes surrendered in exchange for the exchange
notes will be retired, canceled and not reissued. Accordingly, the issuance of
the exchange notes will not result in any increase or decrease in our debt.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999.
The information in the following table should be read in conjunction with the
"Unaudited Pro Forma Condensed Combined Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections and the historical combined financial statements and the exchange
notes related thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
At
September 30,
1999
-------------
Actual
-------------
(in millions)
<S> <C>
Long-term debt (including current portion):
Existing senior credit facility and capital leases................ $ --
Senior Credit Facilities:
Revolving Credit Facility (1)................................... --
CapEx Facility (2).............................................. --
Term Loan Facilities (3)........................................ 150.0
Senior Subordinated Notes Due 2009.............................. 150.0
------
Total long-term debt.......................................... 300.0
Hyundai Redeemable Preferred Stock (4)(5)......................... 71.4
Shareholders' equity (deficit).................................... (109.7)
------
Total capitalization.......................................... $261.7
======
</TABLE>
- --------
(1) Borrowings of up to $50.0 million are available under the revolving credit
facility. We did not draw upon the revolving credit facility in connection
with the recapitalization.
(2) Borrowings of up to $20.0 million are available under the capex facility
for acquiring equipment and making certain other capital expenditures. We
did not draw upon the capex facility in connection with the
recapitalization.
(3) Borrowings of up to an aggregate of $150 million were available under the
two term loan facilities. Both term loan facilities were fully drawn at the
closing of the recapitalization to finance the consideration paid in the
recapitalization.
(4) Hyundai Electronics may receive up to an additional $55.0 million in cash
during the four-year period beginning January 1, 1999 if we exceed certain
levels of EBITDA as set forth in the recapitalization agreement. For more
information on the Hyundai Preferred Stock see, "Description of Other
Financing Arrangements--Hyundai Preferred Stock."
(5) The Hyundai Preferred Stock is mandatorily redeemable on the eleventh
anniversary of the closing of the Recapitalization, and will accrue
dividends from the date of issuance at a rate of 12.5% per annum over the
life of the securities, will not pay cash dividends during the five years
and six months following the Recapitalization. As discussed in footnote (4)
above however, up to $20.0 million of the Hyundai Preferred Stock and the
related accrued dividends may be redeemed during the four-year period
following the Recapitalization. See "Description of Other Financing
Arrangements--Hyundai Preferred Stock."
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<PAGE>
THE EXCHANGE OFFER
This is a summary of the material provisions of the registration rights
agreement entered into by and among ChipPAC International Company Limited, the
guarantors named therein and the initial purchasers as of July 29, 1999. It
does not purport to be complete and reference is made to the provisions of the
registration rights agreement which has been filed as an exhibit to the
registration statement of which this prospectus forms a part.
General
In connection with the issuance of the existing notes pursuant to a purchase
agreement dated as of July 22, 1999 by and among ChipPAC International Company
Limited, the guarantors named therein and the initial purchasers, the initial
purchasers and their respective assignees became entitled to the benefits of
the registration rights agreement.
The registration rights agreement requires us to file the registration
statement of which this prospectus is a part for a registered exchange offer
relating to an issue of exchange notes identical in all material respects to
the existing notes but containing no restrictive legend. Under the registration
rights agreement, ChipPAC International Company Limited is required to:
. file a registration statement not later than 150 days following the
date of original issuance of the existing notes (the "Issue Date");
. use its reasonable best efforts to cause the registration statement
to become effective no later than 210 days after the Issue Date;
. use its reasonable best efforts to keep the exchange offer effective
for not less than 30 days (or longer if required by applicable law)
after the date that notice of the exchange offer is first mailed to
holders of the existing notes; and
. use its reasonable best efforts to consummate the exchange offer on
or prior to the 60th day following the date on which the exchange
offer registration statement is initially declared effective.
The exchange offer being made pursuant to this prospectus, if commenced and
consummated within the time periods described above, will satisfy those
requirements under the registration rights agreement.
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, we will accept any and all existing notes
validly tendered and not validly withdrawn prior to 5:00 p.m., New York City
time, on the expiration date which is , 2000, or such later date and
time as to which the exchange offer has been extended. We will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding existing notes accepted in the exchange offer. Holders may
tender some or all of their existing notes pursuant to the exchange offer.
However, existing notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes are substantially the same as the
form and terms of the existing notes except that:
. the exchange notes bear an exchange note designation and a different
CUSIP number from the existing notes;
. the exchange notes have been registered under the federal securities
laws and will not bear legends restricting the transfer thereof as
the existing notes do; and
. the holders of the exchange notes will generally not be entitled to
rights under the registration rights agreement, which rights
generally will be satisfied when the exchange offer is consummated.
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<PAGE>
The exchange notes will evidence the same debt as the tendered existing
notes and will be entitled to the benefits of the same indenture under which
the existing notes were issued. As of the date of this prospectus, $150,000,000
aggregate principal amount of existing notes were outstanding.
Holders of existing notes do not have any appraisal or dissenters' rights
under the laws of the Territory of the British Virgin Islands or the indentures
relating to such exchange notes in connection with the exchange offer. We
intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934, and the rules and
regulations of the SEC thereunder.
We shall be deemed to have accepted validly tendered existing notes when, as
and if we have given oral or written notice thereof, such notice if given
orally, to be confirmed in writing, to the exchange agent. The exchange agent
will act as agent for the tendering holders for the purpose of receiving the
exchange notes from our company.
If any tendered existing notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted existing notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the expiration date.
Holders who tender existing notes in the exchange offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of existing
notes pursuant to the exchange offer. We will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
exchange offer. For additional information, please refer to the "--Fees and
Expenses" section of this prospectus.
Expiration Date; Extensions; Amendments
The expiration date is 5:00 p.m., New York City time, on , 2000,
unless we extend the exchange offer, in which case the expiration date will be
the latest date and time to which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice, such notice if given orally, to be
confirmed in writing, and will issue a press release or other public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right:
. to delay accepting any existing notes, to extend the exchange offer
or to terminate the exchange offer if any of the conditions set forth
below under "--Conditions" shall not have been satisfied, by giving
oral or written notice, such notice if given orally, to be confirmed
in writing, of such delay, extension or termination to the exchange
agent, or
. to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
Interest on the Exchange Notes
The exchange notes will bear interest from their date of issuance. Holders
of existing notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the exchange
notes. Such interest will be paid with the first interest payment on the
exchange notes on February 1, 2000 to persons who are registered holders of the
exchange notes on January 15, 2000. Interest on the existing notes accepted for
exchange will cease to accrue upon issuance of the exchange notes.
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<PAGE>
Interest on the exchange notes is payable semi-annually on each February 1
and August 1, commencing on February 1, 2000.
Procedures for Tendering
Only a registered holder of existing notes may tender such exchange notes in
the exchange offer. To tender in the exchange offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together
with the existing notes and any other required documents, or cause The
Depository Trust Company to transmit an agent's message as described below in
connection with a book-entry transfer, to the exchange agent prior to the
expiration date. To be tendered effectively, the existing notes, the Letter of
Transmittal or agent's message and other required documents must be completed
and received by the exchange agent at the address set forth below under "--
Exchange Agent" prior to the expiration date. Delivery of the existing notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the existing notes that such participant
has received and agrees:
. to participate in the Automated Tender Option Program;
. to be bound by the terms of the Letter of Transmittal; and
. that we may enforce such agreement against such participant.
By executing the Letter of Transmittal or agent's message, each holder will
make to us the representations set forth above in the fourth paragraph under
the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by us will constitute
agreement between such holder and the company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal or
agent's message.
The method of delivery of existing notes and the Letter of Transmittal or
agent's message and all other required documents to the exchange agent is at
the election and sole risk of the holder. As an alternative to delivery by
mail, holders may wish to consider overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the exchange
agent before the expiration date. No Letter of Transmittal or existing notes
should be sent to any of ChipPAC International Company Limited or any of its
affiliates. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the above transactions for such
holders.
Any beneficial owner whose existing notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. For additional
information, please refer to the "Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" included with
the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an eligible institution referred to below, unless
the existing notes tendered pursuant thereto are tendered by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or for the account of an eligible institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be
26
<PAGE>
guaranteed, such guarantee must be by a member firm of the Medallion System,
which we refer to as an "eligible institution."
If the Letter of Transmittal is signed by a person other than the registered
holder of any existing notes listed therein, such notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such notes with the
signature thereon guaranteed by an eligible institution.
If the Letter of Transmittal or any existing notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence to our satisfaction
of their authority to so act must be submitted with the Letter of Transmittal.
We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts with respect to the existing
notes at the book-entry transfer facility, The Depository Trust Company, which
we refer to as the "book-entry transfer facility," for the purpose of
facilitating the exchange offer, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of existing notes by causing
such book-entry transfer facility to transfer such existing notes into the
exchange agent's account with respect to the existing notes in accordance with
the book-entry transfer facility's procedures for such transfer. Although
delivery of the existing notes may be effected through book-entry transfer into
the exchange agent's account at the book-entry transfer facility, unless an
agent's message is transmitted to and received by the exchange agent in
compliance with the Automated Tender Option Program on or prior to the
expiration date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures, the
tender of such notes will not be valid. Delivery of documents to the book-entry
transfer facility does not constitute delivery to the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered existing notes and withdrawal of tendered
existing notes will be determined by ChipPAC International Company Limited, in
its sole discretion, which determination will be final and binding. ChipPAC
International Company Limited reserves the absolute right to reject any and all
existing notes not properly tendered or any existing notes our acceptance of
which would, in the opinion of ChipPAC International Company Limited's counsel,
be unlawful. ChipPAC International Company Limited also reserves the right to
waive any defects, irregularities or conditions of tender as to particular
existing notes. ChipPAC International Company Limited may not waive any
condition to the exchange offer unless such condition is legally waivable. In
the event such a waiver by ChipPAC International Company Limited gives rise to
the legal requirement to do so, ChipPAC International Company Limited will hold
the exchange offer open for at least five business days thereafter. ChipPAC
International Company Limited's interpretation of the terms and conditions of
the exchange offer, including the instructions in the Letter of Transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of existing notes must be cured
within such time as ChipPAC International Company Limited shall determine.
Although ChipPAC International Company Limited intends to notify holders of
defects or irregularities with respect to tenders of existing notes, neither
ChipPAC International Company Limited, the exchange agent nor any other person
shall incur any liability for failure to give such notification. Tender of
existing notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any existing notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the exchange
agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the expiration date.
Guaranteed Delivery Procedures
Holders who wish to tender their existing notes and whose existing notes are
not immediately available, who cannot deliver their existing notes, the Letter
of Transmittal or any other required documents to the
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<PAGE>
exchange agent, or who cannot complete the procedures for book-entry transfer,
prior to the expiration date, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives by
facsimile transmission, mail or hand delivery from such eligible
institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder, the certificate
number(s) of such existing notes and the principal amount of existing notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the
expiration date, the Letter of Transmittal, or facsimile thereof, or, in
the case of a book-entry transfer, an agent's message, together with the
certificate(s) representing the existing notes, or a confirmation of book-
entry transfer of such notes into the exchange agent's account at the Book-
Entry Transfer Facility, and any other documents required by the Letter of
Transmittal will be deposited by the eligible institution with the exchange
agent; and
(c) the certificate(s) representing all tendered existing notes in
proper form for transfer, or a confirmation of a book-entry transfer of
such existing notes into the exchange agent's account at the book entry
transfer facility, together with a Letter of Transmittal, of facsimile
thereof, properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an agent's message,
are received by the exchange agent within three New York Stock Exchange
trading days after the expiration date of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of existing notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date of the exchange offer.
To validly withdraw a tender of existing notes in the exchange offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth herein prior to 5:00
p.m., New York City time, on the expiration date of the exchange offer. Any
such notice of withdrawal must:
. specify the name of the person having deposited exchange notes to be
withdrawn, which we refer to as the "depositor";
. identify the notes to be withdrawn, including the certificate
number(s) and principal amount of such notes, or, in the case of
existing notes transferred by book-entry transfer, the name and
number of the account at the book entry transfer facility to be
credited;
. be signed by the holder in the same manner as the original signature
on the Letter of Transmittal by which such notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to
the existing notes register the transfer of such notes into the name
of the person withdrawing the tender; and
. specify the name in which any such existing notes are to be
registered, if different from that of the depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us and shall be final and
binding on all parties. Any existing notes so withdrawn will be deemed not to
have been validly tendered for purposes of the exchange offer, and no exchange
notes will be issued with respect thereto unless the existing notes so
withdrawn are validly retendered. Any existing notes which have been tendered
but which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the exchange offer. Properly withdrawn existing
notes may be retendered by following one of the procedures described above
under "--Procedures for Tendering" at any time prior to the expiration date.
28
<PAGE>
Conditions
Notwithstanding any other term of the exchange offer, ChipPAC International
Company Limited shall not be required to accept for exchange, or exchange notes
for, any existing notes, and may terminate or amend the exchange offer as
provided herein before the acceptance of such existing notes, if:
. any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange
offer which, in ChipPAC International Company Limited's sole
judgment, might materially impair ChipPAC International Company
Limited's ability to proceed with the exchange offer, or any material
adverse development has occurred in any existing action or proceeding
with respect to ChipPAC International Company Limited or any of its
subsidiaries; or
. any law, statute, rule, regulation or interpretation by the staff of
the SEC is proposed, adopted or enacted, which, in ChipPAC
International Company Limited's sole judgment, might materially
impair ChipPAC International Company Limited's ability to proceed
with the exchange offer or materially impair the contemplated
benefits of the exchange offer; or
. any governmental approval has not been obtained, which approval
ChipPAC International Company Limited shall, in its sole discretion,
deem necessary for the consummation of the exchange offer as
contemplated hereby.
If ChipPAC International Company Limited determines, in its sole discretion,
that any of the conditions are not satisfied, ChipPAC International Company
Limited may:
. refuse to accept any existing notes and return all tendered existing
notes to the tendering holders;
. extend the exchange offer and retain all existing notes tendered
prior to the expiration of the exchange offer, subject, however, to
the rights of holders to withdraw such existing notes as described in
"--Withdrawal of Tenders" above; and
. waive such unsatisfied conditions with respect to the exchange offer
and accept all properly tendered existing notes which have not been
withdrawn.
Exchange Agent
Firstar Bank of Minnesota, N.A. has been appointed as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the exchange agent
addressed as follows:
By Registered or Certified Mail or By Hand:
Overnight Courier: Firstar Bank of Firstar Bank of Minnesota, N.A. 101
Minnesota, N.A. 101 East Fifth Street East Fifth Street St. Paul, Minnesota
St. Paul, Minnesota 55101-1860 Attn: 55101-1860 Attn: Frank P. Leslie, III
Frank P. Leslie, III
By Facsimile:
(For Eligible Institutions Only)
(651) 229-6415
Confirm by Telephone:
(651) 229-2600
Delivery to an address other than set forth above will not constitute a
valid delivery.
29
<PAGE>
Fees and Expenses
The expenses of soliciting tenders will be borne by ChipPAC International
Company Limited. The principal solicitation is being made by mail however,
additional solicitation may be made by telegraph, telecopy, telephone or in
person by officers and regular employees of ChipPAC International Company
Limited and its affiliates.
ChipPAC International Company Limited has not retained any dealer-manager in
connection with the exchange offer and will not make any payments to brokers,
dealers, or others soliciting acceptances of the exchange offer. ChipPAC
International Company Limited, however, will pay the exchange agent reasonable
and customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
ChipPAC International Company Limited will pay the cash expenses to be
incurred in connection with the exchange offer. Such expenses include fees and
expenses of the exchange agent and trustee, accounting and legal fees and
printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
existing notes, which is face value, as reflected in ChipPAC International
Company Limited's accounting records on the date of exchange. Accordingly,
ChipPAC International Company Limited will recognize no gain or loss for
accounting purposes. The expenses of the exchange offer will be capitalized as
deferred financing costs and amortized over the term of the exchange notes.
Consequences of Failure to Exchange
The existing notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such existing
notes may be resold only:
. to ChipPAC International Company Limited, upon redemption thereof or
otherwise;
. so long as the existing notes are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A;
. in accordance with Rule 144 under the Securities Act;
. outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act;
. pursuant to another exemption from the registration requirements of
the Securities Act, and based upon an opinion of counsel reasonably
acceptable to ChipPAC International Company Limited; or
. pursuant to an effective registration statement under the Securities
Act, in each case in accordance with any applicable securities laws
of any state of the United States.
Resale of the Exchange Notes
With respect to resales of exchange notes, based on interpretations by the
staff of the SEC set forth in no-action letters issued to third parties, we
believe that a holder or other person who receives exchange notes, whether or
not such person is the holder, other than a person that is an "affiliate" of
ChipPAC International Company Limited within the meaning of Rule 405 under the
Securities Act, in exchange for existing notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the exchange notes, will be allowed to resell the exchange
notes to the public without further registration under the Securities Act and
30
<PAGE>
without delivering to the purchasers of the exchange notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires exchange notes in the exchange offer for the purpose of
distributing or participating in a distribution of the exchange notes, such
holder cannot rely on the position of the staff of the SEC enunciated in such
no-action letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that receives
exchange notes for its own account in exchange for existing notes, where such
existing notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such exchange notes.
As contemplated by these no-action letters and the registration rights
agreement, each holder who participates in the exchange offer will be required
to represent to ChipPAC International Company Limited in the Letter of
Transmittal that:
. any exchange notes received by it will be acquired in the ordinary
course of its business;
. at the time of the consummation of the exchange offer such holder
will have no arrangement or understanding with any person to
participate in the distribution of the exchange notes;
. such holder is not an "affiliate" of ChipPAC International Company
Limited within the meaning of the Securities Act; and
. any additional representation that in the written opinion of counsel
to ChipPAC International Company Limited are necessary under then-
existing interpretations of the SEC in order for the exchange
registration statement to be declared effective.
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined statements of
operations for the nine month period ended September 30, 1999 and the year
ended December 31, 1998, which we refer to as the "Pro Forma Financial
Statements," have been derived by the application of pro forma adjustments to
our combined results included elsewhere in this prospectus.
The Pro Forma statements of operations give effect to the recapitalization
as if it had occurred on January 1, 1998. EBITDA as presented below has been
adjusted to exclude certain historical charges and credits as described in Note
6.
The Pro Forma Financial Statements do not purport to represent what our
financial position or results of operations would have actually been had the
recapitalization in fact occurred on such dates, or to project results of
operations for any future period. The Pro Forma Financial Statements should be
read in conjunction with the "Capitalization," "Prospectus Summary--Summary
Historical and Unaudited Pro Forma Combined Financial and Operating Data,"
"Selected Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections and the historical
combined financial statements and the notes related thereto included elsewhere
in this prospectus.
During the periods covered by our Combined Financial Statements, our
activities were conducted as part of Hyundai Electronics' overall operations,
and separate financial statements were not prepared. Our Combined Financial
Statements were prepared from the historical accounting records of Hyundai
Electronics and include various allocations for costs and expenses. Therefore,
our Combined Statement of Operations may not be indicative of the results of
operations that would have resulted if we had operated on a stand-alone basis.
All of the allocations and estimates reflected in our Combined Financial
Statements are based on assumptions that we believe are reasonable under the
circumstances and that have been reviewed by Hyundai Electronics America.
<TABLE>
<CAPTION>
Nine-Month Period Ended
September 30, 1999
-------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- --------
(in thousands)
<S> <C> <C> <C>
Unaudited Pro Forma Condensed Combined
Statement of Operations:
Revenues...................................... $267,671 $ -- $267,671
Costs of revenues............................. 227,792 -- 227,792
-------- ------- --------
Gross profit.................................. 39,879 -- 39,879
Operating expenses:
Selling, general and administrative (1)..... 14,416 -- 14,416
Research and development.................... 8,628 -- 8,628
Change of control expense (2)............... 11,842 (11,842) --
-------- ------- --------
Operating income.............................. 4,993 11,842 16,835
Interest expense (3).......................... 12,089 13,515 25,604
Interest income............................... (2,334) -- (2,334)
Foreign currency (gain) loss.................. (506) -- (506)
Other (income) expense, net................... (566) -- (566)
-------- ------- --------
Income (loss) before provision for income
taxes and extraordinary item................. (3,690) (1,673) (5,363)
Provision (benefit) for income taxes (4)...... (1,823) (859) (2,682)
Extraordinary loss (5)........................ 1,372 (1,372) --
-------- ------- --------
Net income (loss)............................. $ (3,239) $ 558 $ (2,681)
======== ======= ========
Other Data:
EBITDA (6)........................................................... $ 58,436
Depreciation and amortization (7).................................... 41,601
Capital expenditures (including capital leases)...................... 29,062
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- --------
(in thousands)
<S> <C> <C> <C>
Unaudited Pro Forma Condensed Combined
Statement of Operations:
Revenues..................................... $334,081 $ -- $334,081
Costs of revenues............................ 270,365 -- 270,365
-------- -------- --------
Gross profit................................. 63,716 63,716
Operating expenses:
Selling, general and administrative (1).... 15,595 -- 15,595
Research and development................... 7,692 -- 7,692
-------- -------- --------
Operating income............................. 40,429 40,429
Interest expense (3)......................... 13,340 20,798 34,138
Interest income.............................. (1,276) -- (1,276)
Foreign currency (gain) loss................. (24,670) -- (24,670)
Other (income) expense, net.................. 168 -- 168
-------- -------- --------
Income before provision for income taxes..... 52,867 20,798 32,069
Provision (benefit) for income taxes (4)..... 20,564 (14,150) 6,414
-------- -------- --------
Net income (loss)............................ $ 32,303 $ (6,648) $ 25,655
======== ======== ========
Other Data:
EBITDA (6).......................................................... $ 86,284
Depreciation and amortization....................................... 45,855
Capital expenditures (including capital leases)..................... 63,523
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
Nine-Month Period Ended September 30, 1999
and Year Ended December 31, 1998
1. In connection with the recapitalization, we entered into advisory
agreements with the Equity Investors pursuant to which the Equity Investors
will provide financial, advisory and consulting services. In exchange for such
services, the Equity Investors are entitled to receive fees billed at the
Equity Investors' customary rates for actual time spent performing such
services plus reimbursement for out-of-pocket expenses. There are no minimum
levels of service required to be provided. Commencing with the fiscal quarter
ended March 31, 2000, when and if we achieve EBITDA for the preceding twelve-
month period in excess of $81.2 million, the Equity Investors will be entitled
to an annual advisory fee, the amount of which is limited by our senior credit
agreements. As there are no minimum levels of required service and because the
annual advisory fee would not commence until after December 31, 1999 and is
dependent upon achieving a certain EBITDA level, no amounts related to the
Equity Investors' advisory fees have been included in the pro forma operating
results.
2. As a result of the Recapitalization, the Company was contractually
required to make a one-time change of control payment to its unionized Korean
employees of approximately $11.8 million. The payment was recorded as an
operating expense during the quarter ended September 30, 1999. This amount has
been excluded from the pro forma operating results for the nine-month period
ended September 30, 1999, as it represents a one-time charge directly related
to the transaction.
3. The increase to pro forma interest expense as a result of the
recapitalization is summarized as follows:
<TABLE>
<CAPTION>
Nine Month
Period Ended Year Ended
September 30, 1999 December 31, 1998
------------------ -----------------
(in thousands)
<S> <C> <C>
Interest on Term Loan Facilities--
8.86%................................. $ 9,966 $13,288
Interest on Exchange Notes--12.75%..... 14,344 19,125
Interest on Revolving Credit Facility--
8.54%................................. -- --
Interest on CapEx Facility--8.54%...... -- --
Bank commitment fees/Capital leases.... -- --
------- -------
Cash interest expense.................. 24,310 32,413
Amortization of debt issuance costs.... 1,294 1,725
($13.8 million over an 8 year
amortization period)
------- -------
Interest expense from recapitalization
debt requirements..................... 25,604 34,138
Less: historical interest expense...... 12,089 13,340
------- -------
Net increase........................... $13,515 $20,798
======= =======
</TABLE>
An increase or decrease in the assumed weighted average interest rate on the
senior credit facilities of 0.125% would change pro forma interest expense by
$141,000 and $187,500 for the nine month period ended September 30, 1999 and
the year ended December 31, 1998 respectively.
4. Under the terms of the recapitalization agreement, Hyundai Electronics
was required to reorganize the ChipPAC entities into a distinct group of
subsidiaries owned by ChipPAC, Inc. If the reorganization had taken place on
January 1, 1998, ChipPac would have had an effective tax rate of approximately
20% for 1998. Based on the expected 1999 results, the expected effective tax
rate for 1999 is approximately 50%. These adjustments reflect the income tax
adjustment required to result in a pro forma income tax provision based on
these effective tax rates and the tax effects of the pro forma adjustments
described herein.
5. The Company incurred an extraordinary loss of $1.4 million related to the
early retirement of debt upon the recapitalization of the Company. This amount
has been excluded from the pro-forma operating results from the nine-month
period ended September 30, 1999.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED--(Continued)
STATEMENT OF OPERATIONS
Nine Month Period Ended September 30, 1999
and Year Ended December 31, 1998
6. "EBITDA" is defined herein as operating income, plus depreciation and
amortization and in 1997, non-cash charges related to write-downs of impaired
assets. EBITDA is presented because we believe it is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. However, EBITDA should not be considered as an alternative to net
income as a measure of operating results or to cash flows as a measure of
liquidity in accordance with generally accepted accounting principles. Because
EBITDA is not calculated identically by all companies, the presentation herein
may not be comparable to those disclosed by other companies. The following
table reconciles net income (loss) with EBITDA for the historical statements of
operations for each of the four years ended December 31, 1998 and the pro-forma
nine month period ended September 30, 1999.
<TABLE>
<CAPTION>
Unaudited Pro
Forma Nine
Month
Period Ended
Year Ended December 31, September 30,
---------------------------------- -------------
1995 1996 1997 1998 1999
------- ------- -------- ------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net income (loss) as
reported................... $ 98 $(5,625) $(46,118) $25,906 $(2,681)
Provision for (benefit from)
income taxes............... 1,977 2,883 (9,671) 6,477 (2,682)
Non-operating (income)
expense items:
Foreign currency (gains)
losses................... 1,012 5,041 69,669 (24,670) (506)
Interest income........... -- (108) (96) (1,276) (2,334)
Interest expense.......... 3,151 5,780 10,972 33,824 25,604
Other (income) expenses,
net...................... 802 (351) 762 168 (566)
------- ------- -------- ------- -------
Operating income as
reported................... 7,040 7,620 25,518 40,429 16,835
Adjustments to arrive at
EBITDA as defined:
Depreciation and
amortization............. 27,917 26,632 40,682 45,855 41,601
Write-down of impaired
assets................... -- -- 11,569 -- --
------- ------- -------- ------- -------
EBITDA as defined above..... $34,957 $34,252 $ 77,769 $86,284 $58,436
======= ======= ======== ======= =======
</TABLE>
7. Depreciation and amortization for the nine months ended September 30,
1999 exclude $0.3 million of amortization of debt insurance cost. This amount
is included as interest expense.
35
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents our selected historical combined statements of
operations, balance sheet, and other data for the periods presented. No
separate financial information for ChipPAC International Company Limited has
been provided in this prospectus because (a) ChipPAC International Company
Limited does not itself conduct any operations but rather all operations of
ChipPAC, Inc. are conducted by ChipPAC, Inc. or by its direct or indirect
subsidiaries; (b) ChipPAC International Company Limited has no material assets;
and (c) ChipPAC, Inc. and certain of its subsidiaries are unconditionally
guaranteeing the exchange notes on an unsecured, senior subordinated basis.
This information should only be read in conjunction with our audited and
unaudited combined financial statements and the related exchange notes thereto,
"Unaudited Pro Forma Condensed Combined Financial Data," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," all
included elsewhere in this prospectus. The data for each of the four years
ended December 31, 1998 have been derived from ChipPAC's combined financial
statements which have been audited by PricewaterhouseCoopers LLP, whose report
appears elsewhere in this prospectus.
<TABLE>
<CAPTION>
Nine-Month Period
Ended
Year Ended December 31, September 30,
------------------------------------------------------------ ------------------
1994 1995 1996 1997 1998 1998 1999
----------- -------- ----------- ----------- -------- -------- --------
(unaudited) (Dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $149,310 $179,234 $ 191,655 $ 289,429 $334,081 $237,969 $267,671
Costs and expenses:
Cost of revenue........ 129,068 158,527 166,665 229,238 270,365 186,000 227,792
Selling, general and
administrative
expenses.............. 13,407 11,805 11,431 15,853 15,067 10,396 14,416
Research and
development expenses.. 1,095 1,724 2,617 4,052 7,692 4,895 8,628
Management fees charged
by affiliate.......... -- 138 3,322 3,199 528 528 --
Write-down of impaired
assets (1)............ -- -- -- 11,569 -- -- --
Change in control
expenses (2).......... -- -- -- -- -- -- 11,842
-------- -------- ----------- ----------- -------- -------- --------
Operating income........ 5,740 7,040 7,620 25,518 40,429 36,150 4,993
Interest expense........ 2,423 3,151 5,780 10,972 13,340 10,037 12,089
Interest income......... -- -- (108) (96) (1,276) (491) (2,334)
Foreign currency (gains)
losses (3)............. (562) 1,012 5,041 69,669 (24,670) (20,427) (506)
Other (income) expense,
net.................... -- 802 (351) 762 168 (50) (566)
-------- -------- ----------- ----------- -------- -------- --------
Income (loss) before
income taxes........... 3,879 2,075 (2,742) (55,789) 52,867 47,081 (3,690)
Provision for (benefit
from) income taxes..... 1,492 1,977 2,883 (9,671) 20,564 17,933 (1,823)
Extraordinary item:
Loss from early
extinguishment of
debt, net of related
income tax benefit
(4)................... -- -- -- -- -- -- 1,372
-------- -------- ----------- ----------- -------- -------- --------
Net income (loss)....... $ 2,387 $ 98 $ (5,625) $ (46,118) $ 32,303 $ 29,148 $ (3,239)
======== ======== =========== =========== ======== ======== ========
Balance Sheet Data (at
end of period):
Cash and cash
equivalents............ $ 5,416 $ 2,602 $ 2,323 $ 3,067 $ 68,767 $ 33,013 $ 33,142
Working capital......... (20,240) (29,637) (26,436) 30,097
Total assets............ 98,112 127,984 215,932 233,241 359,472 313,970 322,461
Total long-term debt,
including current
portion................ 21,995 52,468 109,053 152,410 133,715 138,006 300,000
Total shareholders'
equity (deficit)....... 34,066 11,559 53,692 9,472 113,191 82,342 (109,749)
Other Financial Data:
Capital expenditures.... 38,635 51,462 118,971 136,594 63,523 52,111 29,062
Ratio of earnings to
fixed charges (5)...... 2.0x 1.4x -- (6) -- (6) 4.3x 5.1x -- (6)
</TABLE>
- --------
(1) At December 1997, in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of, ChipPAC recorded a charge of $11.6 million to write down the value of
certain assets which had been identified as economically impaired, as a
result of management's decision to discontinue certain product lines or
which were judged to be in excess of foreseeable requirements.
(2) The $11.8 million change in control charge in the nine-month period ended
September 30, 1999 was a special bonus paid to employees of ChipPAC's
Korean subsidiary arising from the change in control.
36
<PAGE>
(3) The foreign currency gains and losses were primarily the result of U.S.
Dollar denominated debt of ChipPAC's Korean subsidiary. In accordance with
U.S. GAAP, as the U.S. Dollar/South Korean Won exchange rates change,
resulting foreign currency exchange gains/(losses) are recorded in
ChipPAC's Combined Statement of Operations.
(4) The extraordinary loss of $1.4 million, net of tax effects, represents
costs related to the early retirement of debt, necessary under the
recapitalization of the company on August 5, 1999.
(5) For purposes of this computation, earnings are defined as income (loss)
before provision for income taxes and fixed charges. Fixed charges are the
sum of (a) interest costs and (b) the portion (approximately one-third) of
operating lease rental expenses that are representative of the interest
factor. Earnings for 1996 and 1997 and for the nine months ended September
30, 1999, were inadequate to cover fixed charges by $2.7 million, $55.8
million and $6.5 million, respectively. Earnings for the year ended
December 31, 1997 included a non-cash foreign currency loss of $69.7
million and a non-cash asset impairment charge of $11.6 million.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations covers periods prior to the completion of the recapitalization.
In connection with the recapitalization, we entered into financing arrangements
and, as a result, we have a different capital structure. Accordingly, the
results of operations for periods subsequent to the recapitalization will not
necessarily be comparable to prior periods. The following discussion should be
read in conjunction with the combined financial statements contained elsewhere
in this prospectus.
Overview
We are one of the world's largest providers of packaging and test services
to the semiconductor industry. We offer complete portfolios of packaging and
test solutions and are one of the largest providers of high-margin, BGA
packages, the most advanced mass-produced semiconductor packages. We provide
packaging and test services to approximately 70 customers worldwide, including
approximately 40 in the United States who represented approximately 92.8% of
our revenues in 1998. Our customers include some of the world's largest and
most prominent semiconductor manufacturers such as Atmel Corporation, Intel
Corporation, International Business Machines Corporation, LSI Logic Corp.,
Lucent Technologies, Inc., Samsung Electronics Co., Ltd. and STMicroelectronics
N.V. We maintain executive and sales headquarters in the United States and our
packaging and test facilities are located in Korea and China. We maintain sales
offices in Asia, Europe, and the United States. Research and development
activities are conducted in Korea and the United States.
In 1984, our packaging business began operating as a separate division of
Hyundai Electronics, one of the world's largest semiconductor manufacturers and
a member of the Hyundai Group, the Korean conglomerate. In 1997, ChipPAC, Inc.
was incorporated as a distinct entity and established as the parent of a stand-
alone worldwide business. Following the recapitalization, Hyundai Electronics
continues to own approximately 10.0% of our outstanding common stock and also
holds redeemable preferred stock having an aggregate liquidation preference of
approximately $70.0 million. In addition, Hyundai Electronics may receive up to
an additional $55.0 million of cash during the four-year period beginning
January 1, 1999 if we exceed certain levels of EBITDA as set forth in the
recapitalization agreement. Hyundai Electronics is entitled to receive 33.3% of
the amount by which our EBITDA (as defined in the recapitalization agreement)
exceeds $116.5 million, $171.3 million, $198.5 million and $231.8 million,
respectively, in each of the first four years following the recapitalization.
In the event the final $20.0 million of such $55.0 million in cash is required
to be paid to Hyundai Electronics, it shall be paid by the mandatory redemption
of an equal amount, including dividends, of Hyundai Preferred Stock.
Our revenues consist of fees charged to our customers for the packaging and
testing of their integrated circuits, which we refer to as ICs. From 1995 to
1998, net revenues increased from $179.2 million to $334.1 million, primarily
from the growth of BGA packaging. We are the second largest provider of
outsourced BGA packaging services worldwide, and one of two key suppliers of
BGA packaging services to Intel, whom we believe represents over 40% of the
independent packaging market today. The capital investments made by Hyundai
Electronics from 1995 to 1997 totaled approximately $300 million and provided
us with the capacity necessary to support this growth in advanced packaging
services, along with providing capacity to support future growth. By 1998, we
possessed the scale required to provide our services to other customers who
required BGA packaging services. We also have a significant business in leaded
packaging, which accounted for 35.5% of our sales in 1998.
The following table sets forth the composition of revenue by product group
and test services, as a percentage of total revenues:
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Month
December 31, Period Ended
------------------- September 30,
1996 1997 1998 1999
----- ----- ----- -------------
<S> <C> <C> <C> <C>
BGA.......................................... 3.5% 37.7% 61.8% 68.7%
Leaded....................................... 92.2 59.5 35.5 28.8
Testing...................................... 4.3 2.8 2.7 2.5
----- ----- ----- -----
Total...................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
38
<PAGE>
For the year ended December 31, 1998, over 95% of our revenues were
denominated in U.S. Dollars with the remainder denominated primarily in Korean
Won. Prior to 1999, our purchases of raw materials were made primarily in U.S.
Dollars and Japanese Yen. Since the beginning of 1999, however, almost all
purchases of raw materials have been made in U.S. Dollars. Labor and overhead
costs at our facilities in Korea and China have been incurred in the local
currencies of those countries. Our historical borrowings have been primarily
made in U.S. Dollars. Our monetary assets and liabilities are primarily
denominated in U.S. Dollars.
The historical financial statements of ChipPAC Korea and ChipPAC China have
been translated into U.S. Dollars using the local currency of those respective
countries as the functional currency. The assets and liabilities of these
entities have been translated at the exchange rates in effect on the balance
sheet dates, and the revenues and expenses have been translated using the
weighted average exchange rates for the periods measured.
Historically, our foreign currency gains and losses have arisen primarily
from the holding of monetary assets and liabilities denominated in U.S. Dollars
by ChipPAC Korea and did not have a cash impact. ChipPAC Korea's U.S. Dollar
denominated liabilities consist primarily of long- and short-term debt, and
accounts payable, while its U.S. Dollar monetary assets consist primarily of
intercompany receivables from other ChipPAC entities. From 1995 until December
31, 1998, ChipPAC Korea's U.S. Dollar-denominated liabilities exceeded its U.S.
Dollar monetary assets. During this period, our reported foreign currency
losses upon depreciation of the value of the Won and foreign currency gains
upon the appreciation of the Won. From December 31, 1998 through March 31,
1999, ChipPAC Korea's U.S. Dollar monetary assets exceeded its U.S. Dollar-
denominated liabilities.
Upon completion of the recapitalization, management decided to change the
functional currency of ChipPAC Korea and ChipPAC China from the respective
local currencies to the U.S. Dollar, effective October 1, 1999. The change in
functional currency to the U.S. Dollar reflects significant changes in the
nature of our business including an overall increase in the level of U.S.
Dollar sales, purchasing, and borrowings, as well as the planned change in
ownership from a Korean-based parent company to a U.S.-based parent company.
The use of the U.S. Dollar as the functional currency for ChipPAC Korea and
ChipPAC China will not impact the cash flows of ChipPAC Korea or ChipPAC China
or or us as a whole.
Quarterly Results
The following table sets forth our unaudited historical quarterly sales,
gross profit and EBITDA in thousands of U.S. Dollars:
<TABLE>
<CAPTION>
1997 1998 1999
---------------------------------- ---------------------------------- ------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $53,130 $67,662 $82,052 $86,585 $77,130 $78,020 $82,818 $96,113 $85,548 80,853 101,270
Gross profit............ 3,228 13,298 19,308 24,357 23,196 12,862 15,911 11,747 13,417 9,684 16,778
EBITDA.................. 5,795 17,826 24,768 29,380 27,180 18,827 22,423 17,854 19,368 15,273 23,795
Gross margin............ 6.1% 19.7% 23.5% 28.1% 30.1% 16.5% 19.2% 12.2% 15.7% 12.0% 16.6%
EBITDA margin(1)........ 10.9% 26.3% 30.2% 33.9% 35.2% 24.1% 27.1% 18.6% 22.6% 18.9% 23.7%
</TABLE>
(1) EBITDA margin represents EBITDA, defined herein, as operating income plus
depreciation, amortization and, in 1997, non cash charges related to write
downs of impaired assets, as a percentage of revenue.
The above table illustrates the cyclical and seasonal nature of our
financial performance, although management believes that as a provider of
packaging and test services, we are less susceptible to cyclical fluctuations
than the semiconductor industry as a whole. We have historically experienced
steadily rising revenue levels during the course of the year, peaking in the
fourth quarter, due to a peak in demand from the personal computer industry in
the fourth quarter of the year.
BGA revenues have risen steadily throughout the period as a result of
increased sales to Intel, our largest customer. The decline in leaded packaging
revenue in 1998 arose from soft market conditions prevalent throughout the
semiconductor industry and from our decision to discontinue certain
unprofitable product lines.
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<PAGE>
Results of Operations
The following table sets forth our results of operations based on the
percentage relationship of certain items to revenues during the periods shown:
<TABLE>
<CAPTION>
Nine-Month
Period
Year Ended December Ended September
31, 30,
--------------------- ----------------
1996 1997 1998 1998 1999
----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Weighted average exchange rate of Won
per U.S. Dollar...................... 804.7 939.0 1,388.9 1,425.7 1,194.7
===== ===== ======= ======= =======
Historical Statement of Operations
Data:
Revenue............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin.......................... 13.0 20.8 19.1 21.8 14.9
Selling, general & administrative..... 6.0 5.5 4.5 4.3 5.4
Research & development................ 1.4 1.4 2.3 2.1 3.2
Write down of impaired assets......... -- 4.0 -- -- --
Management fees....................... 1.7 1.1 0.2 0.2 --
Change of control expenses............ -- -- -- -- 4.4
----- ----- ------- ------- -------
Operating income...................... 3.9% 8.8% 12.1% 15.2 % 1.9%
===== ===== ======= ======= =======
Other Financial Data:
Depreciation & amortization........... 13.9% 14.1% 13.7% 13.6% 15.6%
Capital expenditures.................. 62.1 47.2 19.0 21.9 10.9
</TABLE>
Nine-Month Period Ended September 30, 1999 Compared to Nine-Month Period Ended
September 30, 1998
Revenues: Net revenues in the first nine months of 1999 increased 12.5% to
$267.7 million, compared with $238.0 in the first nine months of 1998. This
increase came primarily from sales growth in BGA packaging services, revenues
from which increased by 35.1% from $136.0 million to $183.8 million. This
increase was partially offset by a decline in revenues from leaded packages
services from $94.7 million to $77.1 million. The strong growth in BGA revenues
was driven primarily by higher volumes of BGA packaging services sold to Intel,
ChipPAC's leading customer, partially offset by lower average selling prices.
Additionally, ChipPAC started to ship BGA packages to new customers including
nVIDA, IBM, Lucent and Level One during the first nine months of 1999. The
decline in leaded product revenues was driven by the continuing soft market
conditions in the semiconductor industry present during the second half of
1998, and has been partially offset by strengthening market conditions during
the first nine months of 1999.
Gross Profit: Gross profit decreased to $39.9 million in the first nine
months of 1999 from $52.0 million resulting in gross margin of 14.9% in the
first nine months of 1999 compared to 21.8% for the same period in 1998. The
gross profit experienced during the first nine months of 1998 was significantly
higher than usual due to the large depreciation of the Korean Won which
averaged 1,425.7 Won per U.S. Dollar during the first nine months of 1998
compared to an average exchange rate of 1,194.7 Won per U.S. Dollar during the
first nine months of 1999. This exchange rate resulted in lower costs for
overhead and labor in 1998.
Selling, General and Administrative: Selling, general and administrative
expenses increased 38.7% to $14.4 million in the first nine months of 1999
compared to $10.4 million during the first nine months of 1998. As a percentage
of sales, these expenses increased from 4.3% to 5.4% of sales during the same
period. This increase was due to the additional expenses associated with hiring
new personnel in the areas of administration, sales and marketing necessary to
strengthen our worldwide infrastructure.
Research and Development: Research and development expenses increased to
$8.6 million in the first nine months of 1999 compared to $4.9 million in the
first nine months of 1998. As a percentage of sales, these expenses increased
to 3.2% of sales in the first nine months of 1999 as compared to 2.1% of sales
in the first nine months of 1998. The increase in the level of research and
development expenses was due to a combination of our increased spending on BGA
packaging technology and the establishment of a prototype development center in
Santa Clara, California at the end of 1998.
40
<PAGE>
Management fees charged by affiliate: From 1995 to June 30, 1998, Hyundai
charged fees to ChipPAC for the use of technology and technical support for our
facility in China. This agreement was terminated on June 30, 1998. ChipPAC is
fully capable of providing such support today.
Interest Income: For the first nine months of 1999, interest income
increased to $2.3 million from $0.5 million for the first nine months in 1998.
Most of the interest income was earned from cash invested in time deposits.
During the first nine months of 1999, ChipPAC maintained an average cash
balance exceeding $55.8 million. During the first nine months of 1998, ChipPAC
did not have a significant cash balance as substantially all cash was
transferred to Hyundai. ChipPAC does not expect to maintain significant cash
balances going forward.
Interest Expense: Interest expense for the first nine months of 1999
increased 20.4% to $12.1 million from $10.0 million for the first nine months
of 1998.
Foreign Currency (Gains) Losses: During the first nine months of 1998,
ChipPAC incurred a net non-cash foreign currency gain of $20.4 million which
arose from ChipPAC Korea's holding of U.S. Dollar-denominated liabilities in
excess of U.S. Dollar monetary assets and from an appreciation in the value of
the Won. During the first nine months of 1999, ChipPAC incurred a non-cash
foreign currency gain of $0.1 million.
Other Income (Expense): Other income increased from $0.1 million in the
first nine months of 1998 to $0.6 million for the first nine months of 1999.
The decline in other income arose principally from a decline in the gains from
the sale of excess production equipment.
Income Taxes: Income tax benefit was $1.8 million in the first nine months
of 1999 compared to $17.9 million expense for the first nine months of 1998.
The estimated effective tax rate is approximately 50% in 1999 versus the
historic effective tax rate of approximately 38.1% in 1998. The effective tax
rates during both periods were adversely affected by losses by ChipPAC's
operations in China, for which no tax benefit was realized.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues: Net revenues in 1998 increased 15.4% to $334.1 million from $289.4
million in 1997. This increase was primarily due to sales growth in BGA
packaging, which grew approximately 89.2% for 1998 as compared to the prior
year. As a percentage of total revenues, BGA packaging revenues increased from
37.7% in 1997 to 61.8% in 1998. Revenues from leaded packaging services
declined to $118.5 million in 1998 from $172.1 million in 1997. The decline in
revenues from leaded packaging services arose from a combination of soft market
conditions in the semiconductor industry in 1998 and from management's decision
to discontinue several unprofitable product lines in the fourth quarter of
1997. Testing revenues increased from $8.2 million to $9.3 million as a result
of management's efforts to increase sales in the test area.
Gross Profit: Gross profit increased 5.9% to $63.7 million in 1998 from
$60.2 million in 1997. Gross margin declined to 19.1% in 1998 from 20.8% in
1997. The decline in gross margin arose primarily from soft market conditions
prevailing in the semiconductor industry during 1998, which led to lower
average selling prices. The decline of gross margin was partially offset by
higher volumes of BGA packaging services sold, reductions in materials costs
from suppliers, cost reduction programs and a decline in labor and overhead
costs due to devaluation of the Won against the U.S. Dollar.
Selling, General and Administrative: Selling, general and administrative
expenses decreased 5.0% to $15.1 million in 1998 from $15.9 million in 1997. As
a percentage of sales, these expenses decreased to 4.5% in 1998 from 5.5% in
1997. The decrease in selling, general and administrative expenses arose
primarily from a
41
<PAGE>
weaker Won which was partially offset by an increase in administrative and
sales infrastructure costs incurred in connection with the implementation of a
new corporate infrastructure, including the addition of the new senior
management team.
Research and Development: Research and development expenses increased to
$7.7 million in 1998 from $4.1 million in 1997. As a percentage of sales, these
expenses increased to 2.3% in 1998 from 1.4% in 1997. Research and development
costs grew in 1998 primarily due to the effect from having a full year's
expenses from the R&D center established at Chandler, Arizona, and from
additional spending for BGA development.
Management fees charged by affiliate: From 1995 to June 30, 1998, Hyundai
charged us fees for the use of technology and technical support for our
facility in China. In 1998, the management fees charged by Hyundai declined to
$0.5 million from $3.2 million charged in 1997. The decline in the level of
management fees reflects the decline in the need for such support from Hyundai,
which led to the termination of the agreement effective June 30, 1998.
Write down of impaired assets: In accordance with U.S. GAAP, management
reviews all assets for possible impairment arising from changes in technology
and market conditions. At December 1997, we recorded a charge of $11.6 million
to write down certain equipment as a result of a combination of management's
decision to discontinue certain unprofitable product lines and from the
identification of certain production equipment judged to be in excess of
foreseeable requirements. There were no assets identified as impaired during
1998.
Interest Income: Interest income increased to $1.3 million in 1998 compared
to $0.1 million during 1997. Prior to July 1, 1998, our Korean operations did
not have any significant cash balances because it existed as a division of
Hyundai. As a division, almost all cash receipts and disbursements were handled
through Hyundai. Most of the interest income earned in 1998 was earned during
the second half of 1998 by our investments of surplus cash in time deposits.
Interest Expense: Interest expense for 1998 increased to $13.3 million from
$11.0 million during 1997. The increase arose from a combination of an increase
in the average level of bank debt from approximately $157 million during 1997
to $168 million in 1998 and from increases in the interest rates charged to us
by our lenders.
Foreign Currency (Gains) Losses: During 1998, we incurred a non-cash gain of
$24.7 million as the value of the Korean Won increased from 1,696 Won per
Dollar at December 31, 1997 to 1,196 Won per Dollar at December 31, 1997.
Other Income (Expense): Net other expense declined to $0.2 million in 1998
from $0.8 million in 1997. Most of the 1997 net other expense consisted of
losses recorded on the disposition of surplus equipment. There were no
significant gains or losses on disposition of equipment during 1998.
Income Taxes: We recorded a provision for income taxes of $20.6 million
during 1998 compared with a tax benefit of $9.7 million on a pretax loss of
$55.8 million for 1997. Our effective tax rate was 38.9% in 1998. Our effective
tax rate in 1997 was not meaningful since we incurred losses in 1997. The
effective tax rates during both periods were adversely affected by losses
incurred by our operations in China, for which no tax benefit was realized.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues: Revenues increased 51.0% to $289.4 million in 1997 from $191.7
million in 1996. This increase was due to the mass production of a newly
developed BGA package causing revenues from BGA packaging services to increase
from $6.8 million in 1996 to $109.1 million in 1997. Revenues from leaded
packaging services declined 2.6% to $172.1 million in 1997 from $176.7 million
in 1996. Revenues from test services remained flat at $8.2 million.
Gross Profit: Gross profit increased 140.9% to $60.2 million in 1997 from
$25.0 million in 1996. Gross margin as a percentage of revenue increased to
20.8% in 1997 compared to 13.0% for 1996. Gross profit in
42
<PAGE>
1997 increased from 1996 primarily due to the emergence of BGA packaging
services which carried higher margins and economies of scale arising from the
substantially higher level of sales of BGA packaging services, primarily to
Intel.
Selling, General and Administrative: Selling, general and administrative
expenses increased 38.7% to $15.9 million in 1997 from $11.4 million in 1996.
As a percent of sales, these expenses decreased to 5.5% in 1997 from 6.0% in
1996. The increase in the level of expenses arose from the establishment of a
new corporate management staff based in the United States, from an increase in
the level of customer support costs in Korea, and from an increase in the level
of administrative expense allocated by Hyundai.
Research and Development: Research and development expenses increased 54.8%
to $4.1 million in 1997 from $2.6 million in 1996. As a percent of sales, these
expenses remained level at 1.4% for both 1996 and 1997. The increase in the
level of research and development expenses reflected our efforts to develop
capabilities in BGA packaging services.
Management fees charged by affiliate: Management fees represented fees
charged by Hyundai for technology and technical support for our facility in
China. The fees charged in 1997 which were $3.2 million was approximately the
same as the $3.3 million charged in 1996.
Write down of impaired assets: In accordance with U.S. GAAP, management
reviews all assets for possible impairment arising from changes in technology
and market conditions. At December 1997, we recorded a charge of $11.6 million
to write down certain equipment as a result of a combination of management's
decision to discontinue certain product lines and from the identification of
certain production equipment judged to be in excess of foreseeable
requirements.
Interest Income: Interest income earned during 1997 and 1996 was
insignificant because, as a division of Hyundai, we did not have any
significant cash balances.
Interest Expense: Interest expense for 1997 increased to $11.0 million from
$5.8 million during 1996. The increase arose from net additional borrowing made
during 1996 and 1997 for capital equipment.
Foreign Currency (Gains) Losses: During 1997, we incurred a non-cash loss of
$69.7 million as the Korean Won devalued from 845 Won per Dollar at December
31, 1996 to 1,696 Won per Dollar at December 31, 1997. During 1996, we incurred
a non-cash loss of $5.0 million as the Korean Won devalued from 775 Won per
Dollar at December 31, 1995 to 845 Won per Dollar at December 31, 1996.
Other Income (Expense): We had net other expense of $0.8 million in 1997
compared to net other income of $0.4 million in 1996. In 1997, the $0.8 million
arose largely from losses taken on the disposition of surplus production
equipment. In 1996, we had $0.4 million of miscellaneous income.
Income Taxes: We recorded a tax benefit of $9.7 million in 1997 compared to
a tax expense of $2.9 million in 1996. In both years, the effective tax is not
meaningful because we incurred pre-tax losses.
Liquidity and Capital Resources
We have a borrowing capacity of $50.0 million for working capital and
general corporate purposes under the revolving credit facility. In addition,
borrowings of up to $20.0 million are available for acquiring equipment and
making certain other capital expenditures under the capex facility. We may
borrow and repay under the capex facility until August 5, 2001. Amounts that we
repay under the capex facility after August 5, 2001 may not be reborrowed by us
later. The final maturity for both these facilities will be on August 5, 2005.
We did not draw upon these facilities in connection with the recapitalization.
Our ongoing primary cash needs are for operations and equipment purchases.
Prior to the recapitalization, we met a significant portion of our cash
requirements from a combination of (1) short- and long-term bank loans and (2)
capital contributions from Hyundai.
Hyundai Electronics has invested significant amounts of capital to increase
our packaging and test services capacity. The capital investments made by
Hyundai Electronics from 1995 to 1997 totaled approximately $300 million, and
as a result, we believe that our facilities have sufficient capacity for future
growth without
43
<PAGE>
significant capital expenditures in the near future. We intend to spend
approximately $40.9 million in capital expenditures in 1999, a decline of 35.6%
from the $63.5 million spent in capital expenditures in 1998, and a decline of
70.1% from the $136.6 million spent in 1997. Through 2000, we intend to spend
approximately $35.0 million in capital expenditures to increase capacity for
our micro BGA packaging in order to support our three-year contract with
Hyundai to package an agreed upon amount of their RDRAM devices. If Hyundai
does not provide the agreed upon RDRAM devices, then Hyundai will reimburse us
for the underutilized equipment which will be depreciated over three years.
At the closing of the recapitalization, our debt consisted of $300.0 million
of borrowings which were comprised of $150.0 million in term loan facilities
and $150.0 million of senior subordinated notes. We also had $70.0 million of
preferred stock and approximately $100.0 million of newly contributed equity.
We believe that our existing cash balances, cash flow from operations,
available equipment lease financing, and the net proceeds from the
recapitalization will be sufficient to meet our projected capital expenditures,
working capital and other cash requirements.
Year 2000 Compliance
We recognize the need to ensure that our operations will not be adversely
impacted by year 2000 computer hardware and software failures and embedded chip
or processor failures. Issues relating to the year 2000 are the result of
computer programs and certain embedded-chip systems being written or developed
using two digits rather than four to define the applicable year. Any computer
programs or embedded-chip systems that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of our
operations, including, among other things, a temporary inability to process
transactions, obtain materials, provide packaging and test services, generate
invoices, or engage in similar normal business activities.
As of September 30, 1999, we had completed a formal review of all of the
computer hardware, software systems, communications equipment and equipment
used in our packaging and test processes. Our review included analysis of all
potentially affected business and process systems. Computer code which was non-
compliant was replaced or corrected, and when this was not possible, the
systems were replaced. Additionally, the systems have been tested for
compliance. We believe that all of our systems and equipment necessary for our
packaging and test process are 100% year 2000 compliant in all material
respects.
We have completed a survey of the year 2000 readiness of all of the
suppliers which are material to us. As part of the survey, these material
suppliers completed and returned to us a written questionnaire which we had
provided to them. The survey indicated that all of our material suppliers are
fully year 2000 compliant. Therefore, we believe that there will be no material
adverse effect on our business as a result of year 2000 problems or issues
experienced by our suppliers. If any of our suppliers do experience year 2000
problems, our contingency plans include procuring critical supplies from
alternate suppliers, and we have arranged to do so if necessary.
We do not have any information concerning the year 2000 compliance status of
our customers. If any significant customers do not successfully and in a timely
manner achieve year 2000 compliance, our business or operations could be
materially adversely affected.
Approximately $600,000 has been spent on year 2000 compliance issues through
September 30, 1999. While failure of any critical technology components to
operate properly in the year 2000 could adversely affect our operations, we
believe that resolution of the year 2000 issue will not require additional
material costs and will not have a material adverse effect on our results of
operations.
Year 2000 contingency plans for our information technology operations
include manual procedures for routing accounting, financial and product
information to support on-time delivery and processing of our customers'
products. If we experience interruptions in operations, we are prepared to
correct the problems while sustaining our operations manually.
44
<PAGE>
While we currently expect no material adverse affect on our business,
financial condition or results of operations due to year 2000 issues, our
beliefs and expectations are based on certain assumptions that ultimately may
prove to be inaccurate. We cannot assure you that if we do experience problems
associated with year 2000 issues or if our material suppliers or customers
experience such problems, that it will not have a material adverse effect on
us.
Derivative Financial Instruments
Since October 1998, we have entered into foreign forward contracts to
mitigate the effect of foreign currency movements on the cost of materials and
equipment. The contracts entered into require the purchase of Korean Won or
Japanese Yen, and the delivery of U.S. Dollars, and generally have maturities
which do not exceed three months. Because the contracts entered into to date do
not qualify as hedges under generally accepted accounting principles, the gains
and losses from these contracts have been recorded as foreign currency gains
and losses. We had a net gain of $2.2 million and no gain or loss arising in
1998 and through the first three quarters of 1999, respectively, from forward
foreign currency contracts.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 requires us to recognize all derivatives on the balance sheet at fair
value. Derivatives which are not hedges must be adjusted to fair value through
net income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either offset against the change
in fair value of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. SFAS 133 is effective for years
beginning after June 15, 2000, but companies can adopt it as of the beginning
of any fiscal quarter that begins after June 1998. We are evaluating the
requirements of SFAS 133, but do not expect this pronouncement to materially
impact our financial position or results of operations.
We have adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, issued in June 1997. This statement establishes
standards for disclosure about operating segments in annual financial
statements and selected information in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic area and major customers. This statement supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise. We operate in one
segment and accordingly, do not report product segment information but will
report geographic and significant customer revenue.
We have adopted Statement of Position ("SOP") 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use, issued in March
1998 by the Accounting Standards Executive Committee. SOP 98-1 provides
guidance on when costs related to software developed or obtained for internal
use should be capitalized or expensed. The adoption of this statement has not
had a material effect upon our combined results of operations, financial
position or cash flows.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to financial market risks, including changes in interest
rates and foreign currency exchange rates. We utilize derivative financial
instruments but do not use derivative financial instruments for speculative or
trading purposes. We have long-term debt that carries fixed interest rates.
Fluctuations in interest rates would not have a material effect on our
financial position, results of operations and cash flows. A majority of our
revenue and capital spending is transacted in U.S. dollars. We do, however,
enter into transactions in other currencies, primarily the Korean Won. With
effect from October 1, 1999 we have changed the functional currency of ChipPAC
Korea and ChipPAC China from their respective local currencies to the U.S.
Dollar. The use of the U.S. Dollar as the functional currency will not have a
material impact on our financial position, results of operations and cash
flows.
45
<PAGE>
INDUSTRY
The production of a semiconductor is a complex process that requires
increasingly sophisticated expertise. The production process can be broadly
divided into three primary stages: (1) fabricating a wafer; (2) slicing the
wafer into multiple die and processing these die into finished devices, which
is referred to as "packaging"; and (3) testing of finished devices and other
back-end processes.
The three primary steps of the semiconductor production process are
illustrated below:
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<PAGE>
According to International Data Corporation, worldwide semiconductor market
revenues were approximately $125.0 billion during 1998. Since 1993, the global
semiconductor market has expanded at a compound annual growth rate of
approximately 10.4%. The worldwide semiconductor market can be divided into
three segments:
. microcomponents, including microprocessors and microcontrollers,
which process data, such as the Pentium Microprocessor;
. memory devices, which store data, such as Dynamic Random Access
Memory, which is referred to as DRAM; and
. moving and shaping devices, which move and share electronic signals
around a printed circuit board, such as logic, analog, discrete and
power devices and chipsets.
Manufacturers have not outsourced packaging in their production of
microcomponents or volatile memory devices such as DRAM. Outsourcing to date
has been focused on the moving and shaping segment of the market. Historically,
leaded packages, which are characterized by metal leads around the perimeter of
the package connecting it to the printed circuit board, were the predominant
package types used in the industry. In 1995, manufacturers began large scale
production of BGA packaging, which offer significant advantages over leaded
packaging. BGA packages are characterized by a grid of tiny metal balls on the
bottom of the package that connect the device to the printed circuit board.
According to International Data Corporation, the semiconductor industry's
revenues are expected to grow at a compound annual growth rate of 13.2% from
1998 to 2003. Semiconductor growth continues to be driven by strong end-user
demand for computers, telecommunications and consumer products, which require
semiconductors characterized by greater functionality, increased speed and
smaller size. In 1998, according to Electronic Trends Publications, total
packaging revenues for the semiconductor industry were $16.1 billion of which
revenues from independent packaging companies, like us, represented $6.1
billion, or 38.0%, of total packaging revenues. Independent packaging revenues
are expected to grow at a compound annual growth rate of 16.2% from 1998 to
2003. Revenues for BGA packaging services, the fastest growing component of the
independent packaging market, are expected to grow at a compound annual growth
rate of 32.6% over the same period. Today, most major semiconductor
manufacturers use independent packaging and test service providers for at least
a portion of their packaging and test needs. We expect this outsourcing trend
to continue as semiconductor manufacturers focus on their core strengths, such
as chip design and wafer fabrication.
Trend Toward Outsourcing of Semiconductor Packaging and Test Services
Historically, semiconductor companies primarily manufactured semiconductors
in their own facilities. Independent semiconductor packaging and test services
were used only when semiconductor companies' production requirements exceeded
their capacity constraints. In recent years, however, semiconductor companies
have begun to face increasing time-to-market pressures, shorter product life
cycles, accelerating advancements in packaging technology and rapidly expanding
capital expenditure requirements. As a result of this challenging environment,
the need for semiconductor companies to outsource their semiconductor packaging
and test needs has grown dramatically. Principal factors contributing to this
are as follows:
Significant Capital Expenditures Are Required For Semiconductor
Manufacturing. Semiconductor packaging and test services have evolved into
increasingly complex processes that require a substantial investment in
specialized equipment and facilities. For example, the capital investment in
facilities and equipment necessary for a processing line capable of packaging
100 million BGA packages per year can be as much as $200 million. As a result
of these substantial costs, equipment must be utilized at a high capacity level
in order to be cost effective. However, it has become increasingly difficult
for semiconductor companies to sustain high levels of capacity utilization due
to ever-shorter product life cycles and the need to continuously update or
replace packaging equipment to accommodate new products. Independent providers
of packaging and
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test services, on the other hand, can use existing equipment at high
utilization levels over a longer period of time by providing services for a
broad range of customers.
Moreover, as the cost to build a new wafer fabrication facility has
increased to over $1 billion, semiconductor companies have been forced to
concentrate their capital resources on core wafer manufacturing activities. As
a result, semiconductor companies are increasingly using independent packaging
and test providers who are able to invest capital to develop new packaging and
test capacity. We believe that as the cost to construct new wafer fabrication
facilities continues to increase, semiconductor manufacturers will
increasingly seek to outsource their packaging and test needs.
Time-to-Market Pressures are Increasing For Semiconductor Companies. End-
users are increasingly demanding more sophisticated electronic products in a
market in which product life cycles are becoming more compressed and
manufacturers that are "first to market" can earn significant rewards. As a
result, semiconductor companies are increasingly seeking to shorten their
time-to-market for new products. Having the right packaging technology and
capacity in place is a critical factor in reducing time-to-market.
Semiconductor companies frequently do not have the equipment or expertise to
implement new packaging solutions or sufficient time to develop these
capabilities before introducing a new product into the market. For this
reason, semiconductor companies are increasingly utilizing the resources and
capabilities of independent packaging and test companies to deliver their new
products to market more quickly.
"Fabless" Semiconductor Companies are Focusing Exclusively on Semiconductor
Design Process. There has been a recent growth of "fabless" semiconductor
companies, which are companies that outsource all of their manufacturing and
all of their packaging and test service needs. Their core competency and focus
is entirely on the semiconductor design process. According to Dataquest, sales
by fabless semiconductor companies grew from $3.2 billion in 1993 to $9.1
billion in 1997, representing 3.7% and 6.7%, respectively, of the worldwide
market for semiconductors. Revenues of fabless semiconductor companies are
expected to grow at a compounded annual growth rate of 26.4% from 1998 to
2002. The significant growth in the number of fabless semiconductor companies
has been driven in large part by the ability of such companies to effectively
outsource virtually every significant step of the semiconductor manufacturing
process. This development has allowed fabless semiconductor companies to
introduce new semiconductors very quickly without committing significant
amounts of capital and other resources to manufacturing. We believe that
increases in the number of fabless semiconductor companies will continue to be
a significant driver of growth in the independent semiconductor manufacturing
industry.
Sophisticated Expertise and Technological Innovation Are
Necessary. Semiconductor companies are facing ever-increasing demands for
miniaturization, higher lead counts for more connections and improved thermal
and electrical performance from IC packaging. As a result, semiconductor
packaging is now viewed as an enabling technology requiring sophisticated
expertise and technological innovation. Independent providers of packaging and
test services have developed substantial expertise in packaging and test
technology. Moreover, the multitude of packaging and test options required to
support the proliferation of new semiconductor technologies makes it extremely
difficult for semiconductor companies to invest their time and resources in
packaging research and development and capacity. Semiconductor companies,
having found it difficult to keep pace using their internal resources, have
come to rely increasingly on the independent packaging and test services
providers as a key source for a new technology development and innovation.
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BUSINESS
Company Overview
We are one of the world's largest providers of packaging and test services
for manufacturers in the semiconductor industry. We offer complete portfolios
of packaging and test solutions and are one of the largest providers of high-
margin, ball grid array, or BGA, packages, the most advanced mass-produced
semiconductor package. A semiconductor package is a container that protects and
insulates the enclosed semiconductor chip and attaches to a printed circuit
board. As a result, packages are an integral part of the basic functionality of
semiconductors and contribute to their overall performance. We provide
packaging and test services to approximately 70 customers worldwide, including
approximately 40 customers in the United States who represented 92.8% of our
sales during 1998. Our customers include some of the world's largest and most
prominent semiconductor manufacturers, such as Atmel Corporation, Intel,
International Business Machines Corporation, LSI Logic Corp., Lucent
Technologies, Inc., Samsung Electronics Co., Ltd. and STMicroelectronics N.V.
Today, most major semiconductor manufacturers use independent packaging and
test service providers for at least a portion of their packaging and test
needs. We expect this outsourcing trend to continue as semiconductor
manufacturers focus on their core strengths, such as chip design and wafer
fabrication. Our executive and sales headquarters are in the United States and
our packaging facilities are in Korea and China. During 1998, we packaged over
792.9 million units and generated $334 million in revenues and $86 million in
EBITDA. For the nine-month period ended September 30, 1999, we packaged over
885.2 million units and generated $267.7 million in revenues and $58.4 million
in EBITDA.
In 1984, our packaging business began operating as a separate division of
Hyundai Electronics, one of the world's largest semiconductor manufacturers and
a member of the Hyundai Group, the Korean conglomerate. At that time, we began
providing packaging and test services to third parties. In 1995, we identified
an opportunity to become a leader in providing high-margin, advanced substrate
packaging services, such as BGA. From 1995 to 1997, Hyundai Electronics
invested approximately $300 million in plant and equipment in order to give us
the capacity necessary to provide advanced packaging and test services. As a
result of this strategic shift to high-margin, BGA packaging services, we have
developed strong relationships with leading semiconductor companies in the
various market segments of the semiconductor industry and have become a leader
in BGA technology. In 1997, ChipPAC, Inc. was established as a stand-alone,
worldwide business and was incorporated as a distinct entity. Since the year
ended December 31, 1995 through September 30, 1999, our revenues have grown at
a compound annual growth rate of 41.1%, and our EBITDA has grown at a compound
annual growth rate of 49.3%.
Competitive Strengths
Demonstrated technology leadership. We are the world's second largest
provider of outsourced, high-margin, advanced BGA packaging services. We offer
one of the most complete portfolios of packaging and test solutions in the
industry, focusing on high end solutions, with approximately 61.8% of our
revenues in 1998 derived from BGA packaging services. BGA is currently the
industry's most advanced mass produced packaging technology and outsourced BGA
revenues are currently expected to grow at a compound annual growth rate of
32.6% from 1998 through 2003. We also continue to invest in research and
development of next-generation packaging such as flip chip technology. We
believe that maintaining our technology leadership is critical to meet the
needs of our high-end customers, like Intel, who often require advanced
packaging techniques. Intel was an early adopter of BGA technology, and in
1998, we estimate that Intel accounted for more than 40.0% of independent
worldwide BGA packaging consumption. Packaging services provided to Intel
accounted for approximately 67.0% of our revenues during 1998. The recent
opening of our state-of-the-art research and development facilities in
Chandler, Arizona and Santa Clara, California demonstrate our commitment to
maintaining a technology leadership position. These facilities allow us to
better service our customers through the development of new packaging
solutions.
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Growing blue chip customer base. We are a leading supplier of packaging
services to a number of tier one customers, including Intel, LSI Logic and
Atmel and are expanding our list of customers to include additional industry
leaders. New customers include IBM, Lucent, nVIDIA, Level One and NEC. These
customers are expected to generate significant revenues in 1999. Leading IDMs
require early access to advanced packaging services because they manufacture
products which require first-to-market technologies. Our close relationships
with IDMs help to further develop our technology and position us to benefit
from the high unit volumes of these major semiconductor manufacturers.
Additionally, to become a qualified packager, a packaging company must pass a
lengthy and rigorous qualification process that can take up to nine months for
each packaging type. As a result, we believe semiconductor companies are
generally reluctant to switch packaging suppliers once such suppliers have been
qualified.
Low-cost infrastructure. Our packaging facilities are located in Korea and
China, affording us a highly competitive cost structure. Currently, high-end
BGA packaging services are provided in Korea, while most of our higher volume
leaded packaging services are provided in China. In addition, we believe that
our early entry into the BGA market and our subsequent investment in capacity
for these services have allowed us to achieve significant economies of scale
through higher utilization rates and lower materials costs.
Efficiency and quality leader. We consistently rank among the top service
providers to our customers. We have received numerous quality awards from our
customers, including supplier of the year recognition from Atmel and LSI Logic
and, most recently, Intel's Preferred Quality Supplier Award. We are one of the
most efficient packagers as measured by yields, cycle time, delivery and
quality. Throughout 1998, we maintained a 99.8% yield on BGA packaging services
which management believes is the highest for BGA packaging services. Our
customers monitor the yield we are achieving on their ICs on a real time basis.
Our strength separates us from our competition for two primary reasons: (1)
management believes no other independent packaging company can ramp up from the
R&D phase to full scale production faster than us; (2) once at full scale
production levels, no other independent packaging company maintains the same
level of yield and cycle time performance as us. This efficiency is due to:
. our engineers' skills in providing our customers with unique,
specialized solutions;
. our operational excellence program, which focuses on quality, cycle
time and continuous improvement; and
. our state-of-the-art facilities and equipment.
Major investments in packaging facilities. Most of our major investments in
plant and capital equipment are already in place. From 1995 to 1997, Hyundai
Electronics invested approximately $300 million in our plant and equipment in
order to give us the necessary capacity to provide advanced packaging and test
services. Investments included the purchase of advanced capital equipment and
the construction of our packaging facility in China, which allows us to move
most of our high-volume leaded packaging services operations to China from
Korea. As a result, we believe that our facilities have sufficient capacity to
allow us to grow without significant capital expenditures in the near future.
Experienced management team. Our management team averages over 23 years of
semiconductor industry experience. Our President and Chief Executive Officer,
Dennis McKenna, has over 26 years of industry experience and has held various
management positions at TRW, Inc., Oki Semiconductor (a division of Oki
America, Inc.) and Hyundai Electronics. Under his tenure, which began in 1995,
we have significantly increased our revenues and earnings and also procured the
Intel account, our largest customer. As a result, we are one of the world's top
two providers of BGA packaging services.
Business Strategy
Maintain high-quality customer service. We approach our customer
relationships with the knowledge that we are an integral part of their design
process and technology strategy. To achieve the highest possible customer
satisfaction, we employ a high concentration of resources for each customer
through a team approach. Each team is comprised of business development,
technical solutions and order management professionals who
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are familiar with a customer's specific organization, product, procedural and
logistical requirements. In addition, we plan to engage in electronic commerce
with many of our customers to transfer documents, collaborate on product design
and development, receive detailed forecasts from our customers, receive
customer orders, track our customers' work-in-process and furnish invoices to
our customers. Also, in late 1997, we established a design and materials
characterization center to provide BGA and leaded packaging designs, as well as
electrical and thermal modeling services, in order to better assist our
customers in shortening their product development cycles.
Increase penetration with existing customers. Our goal is to increase our
share of our customers' packaging business by providing superior customer
service, providing quality packaging with the highest yield rates and providing
new and advanced, high-quality packaging services, like BGA. Our customers
today are leading semiconductor companies, including AMD, IBM, Intel, LSI
Logic, Lucent, Samsung Electronics and STMicroelectronics, which are leaders in
multiple semiconductor market segments, including flash memory, personal
computer chipsets, memory chips, system ICs, wireless ICs, communications ICs,
and mass storage ICs. According to The McClean Report (1999 edition), these
companies accounted for approximately 38% of worldwide semiconductor revenues
in 1998. All of these customers compete in large segments within the
semiconductor industry and are on the leading edge of the trend to smaller,
thinner, lighter and higher performance packaging. Our customers and these
market applications also drive the next generation of packaging technology.
Seamless integration with our customers' research and development efforts can
further strengthen our customer relationships.
Expand customer base through technology leadership. The key to expanding our
customer base will be the development of new packaging technology. Within the
last two years, we have introduced six new packages: mBGA(TM) (micro BGA),
PBGA, TBGA, M/2/BGA(TM), EconoCSP(TM) and FBGA-T. In the last six months, we
have either qualified or begun the qualification process for 13 new customers,
including nVIDIA Corporation and Broadcom Corporation. In 1999, we established
a U.S. research and development center that allows customers to validate future
packaging options early in the development process. Research and development
spending was approximately 2.3% of revenues during 1998, which is comparable to
that of the independent packaging industry, but is significantly lower than
that of most semiconductor manufacturing companies. We have 80 engineers
dedicated to new packaging development.
Maintain low-cost structure. We believe that a low-cost infrastructure is
critical to our ongoing success in a highly competitive marketplace. As a
result, we have initiated several programs to further increase the efficiency
of our packaging processes, such as adopting a standard set of equipment to
handle and process existing and potential packaging types. This equipment set
strategy will reduce our requirements for space, utilities, materials and
manpower.
We are also taking steps to streamline our cost structure for existing
processes, including initiating a materials cost reduction program, including
gold wire diameter reduction, process simplification and use of quick cure mold
compound; and adopting new inventory management, materials procurement and
logistics procedures.
Our Services
We offer semiconductor packaging and test services to the semiconductor
industry. During 1998, approximately 97.2% and 2.8% of our revenues were
derived from packaging and test services, respectively. During the nine month
period ended September 30, 1999, approximately 97.5% and 2.5% of our revenues
were derived from packaging and test services, respectively.
Packaging
We have provided semiconductor packaging and test services to third parties
since 1984, and offer a broad range of packaging formats for a wide variety of
electronics applications. Our two types of packaging services, leaded and
substrate (BGA), contributed to approximately 61.8% and 35.5% of revenues,
respectively, for 1998.
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Leaded Packaging. Leaded packaging is the most widely recognized packaging
type and is used in almost every electronics application, including
automobiles, household appliances, desktop and notebook computers, and
telecommunications. Leaded packages have been in existence since semiconductors
were first produced, and in 1998 comprised over half of the total industry
packaging volume. Leaded packages are characterized by a semiconductor die
encapsulated in a plastic mold compound with metal leads surrounding the
perimeter of the package. With leaded packages the die is attached to a
leadframe, which is a flat lattice of wires. The die is then encapsulated in a
plastic or ceramic package, with the ends of the leadframe wires protruding
from the edges of the package to enable connection to a printed circuit board.
This packaging type has evolved from packages designed to be plugged into the
printed circuit board by inserting the leads into holes on the printed circuit
board to the more modern surface-mount design, in which the leads or pins are
soldered to the surface of the printed circuit board. Specific packaging
customization and evolutionary improvements are continually being engineered to
improve electrical and thermal performance, shrink package sizes and enable
multi-chip capability.
We offer a wide range of lead counts and body sizes within this packaging
group to satisfy customer die size variations. Our traditional leaded packages
are at least three millimeters in thickness and include MQFP, PDIP, PLCC and
SOIC. Our advanced leaded packages are thinner than our traditional leaded
packages, approximately 1.4 millimeters in thickness, and have a finer pitch
because the leads are closer together, allowing for a higher pin count and
greater functionality in a smaller package size. Our advanced leaded packages
include TQFP, TSOP, TSSOP and SSOP.
Leaded Package Profile
(LOGO OF LEADED PACKAGE PROFILE])
(LOGO OF ChipPAC)
Substrate, or BGA, Packaging. BGA packaging represents the newest and
fastest growing area in the packaging industry and is used primarily in high-
growth end markets, including computing platforms and networks, hand held
consumer products such as wireless technologies, personal digital assistants
and video cameras, and home electronics, such as DVDs and home video game
machines. BGA technology was first introduced as a solution to problems
associated with the increasingly high lead counts required for advanced
semiconductors. As the number of leads surrounding the integrated circuit
increased, high lead count packages experienced significant electrical shorting
problems. The BGA methodology solved this problem by effectively creating leads
on the bottom surface of the package in the form of small bumps or balls. In a
typical BGA package, the semiconductor die is placed on top of a plastic or
tape laminate substrate rather than a leadframe. The die is connected to the
circuitry in the substrate by a series of fine gold wires that are bonded to
the top of the substrate near its edges. On the bottom of the substrate is a
grid of metal balls that connect the packaged device to a printed circuit
board. Benefits of BGA packaging over leaded packaging include:
. smaller size;
. greater pin count, or number of connections to the printed circuit
board;
. greater reliability;
. better electrical signal integrity; and
. easier attachment to a printed circuit board.
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We supply our customers with substantially the entire family of BGA
packaging services offered in the marketplace today, including:
. Standard BGA. Standard BGA packaging has a grid array of balls on the
underside of the integrated circuit, and is utilized in high-
performance applications, such as personal computer chipsets, graphic
controllers and microprocessors. A standard BGA package generally has
a high pin count, usually greater than 100 pins. Standard BGA
packages have better thermal and electrical performance than leaded
packages. They also feature more advanced surface mount technology,
allowing for easier handling in the packaging process. Standard BGA
packaging services accounted for all of our BGA packaging revenues in
1998.
BGA Package Profile
(LOGO OF BGA PACKAGE PROFILE)
(LOGO OF ChipPAC)
. Chip Scale BGA. Chip scale BGA packaging includes all packages where
the package is less than 1.2 times the size of the silicon die. Chip
scale BGA is a substrate-based package that is designed for memory
devices and other high pin count semiconductors, which generally
contain fewer than 100 pins, and require dense ball arrays in very
small package sizes, such as wireless telephones and personal digital
assistants, video cameras, digital cameras and wireless pagers. We
recently secured a three-year contract with Hyundai Electronics to
package their RDRAM devices using mBGA(TM), or micro BGA, packaging,
a chip scale BGA packaging technology. Although none of our 1998 BGA
revenues were derived from chip scale BGA packaging, we expect that
chip scale packaging will contribute to our future revenues as a
result of the Hyundai Electronics mBGA(TM), or micro BGA, contract
and contracts with other customers requiring the smaller chip scale
BGA package.
We are continually developing new BGA technologies and BGA packaging
techniques. One of our research and development facilities is working to
develop prototypes of flip chip BGA packaging whereby the silicon die is
directly attached to the substrate using solder rather than wire bonds. This
improves heat dissipation and the electrical performance of the chip. Flip chip
BGA technology can be used in a wide array of applications ranging from
consumer products to highly sophisticated application specific integrated
circuits, referred to as "ASIC," digital signal processors, referred to as
"DSPs," and memory packages. While we believe that flip chip BGA represents the
next generation of BGA packaging technology, we believe that standard BGA and
chip scale BGA packaging will continue to experience long life cycles like many
of our leaded packaging solutions.
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The following chart summarizes the packaging services we offer:
<TABLE>
<CAPTION>
Percentage
of 1998
Packaging
Revenues Packaging Types* Applications Pin Count
---------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
Leaded 31.8% Traditional: PDIP, PLCC, QFP, Telecommunications, 8-304
MQFP, SOIC, SOJ, automobiles, household
TSOC, LQFP, SSOP appliances, and desktop and
and iQUAD(TM) notebook computers
6.1% Advanced: TQFP, TSOP and TSSOP Personal computers and 32-176
telecommunications
BGA 61.8% Standard BGA: PBGA, Personal computer chipsets, 119-371
M/2/BGA(TM), graphic controllers and
TBGA, EPBGA microprocessors
-- Chip Scale BGA: EconoCSP(TM), 36-280
eBGA(TM), Wireless telephones,
M2CSP(TM) and personal digital assistants,
FBGA-T video cameras and wireless
pagers
0.2% Flip Chip BGA: FlipPAC(TM), 36-1732
RamPAC(TM) and High-end consumer products,
FlashPAC(TM) application specific
integrated circuits, digital
signal processors and memory
packages
</TABLE>
- --------
*The full names of these packages are set forth in the "Glossary."
Testing Services
We also provide our customers with semiconductor test services for a number
of device types, including logic, mixed signal and memory devices.
Semiconductor testing measures and ensures the performance, functionality and
reliability of a packaged device, and requires knowledge of the specific
applications and functions of the devices being tested. In order to enable
semiconductor companies to improve their time-to-market, streamline their
operations and reduce costs, there has been an increasing trend toward
outsourcing both packaging and test services. We have begun to capitalize on
this trend by enhancing our test service capabilities.
In order to test the capability of a semiconductor device, a semiconductor
company will provide us with its proprietary test program and specify the test
equipment to run that program. In some instances, our customers may consign
their test equipment to us. Our test operators place devices to be tested on a
socketed load board and insert the load board into the test equipment which
then tests the devices using software programs developed and supplied by our
customers. The cost of any specific test and the time, usually measured in
seconds, to run a test vary depending on the complexity of the semiconductor
device and the customer's test program. When we provide test services for a
packaging type, we run the test against every device it packages.
In addition to final test services, we also provide "burn in" test services.
Through "burn in," a semiconductor is inserted into a socket and subjected to
extreme hot and cold temperatures over a period of time. "Burn in" tests are
typically conducted to determine overall reliability under extreme conditions.
We expect test services to become an important component of our revenues
during the next several years as customers seek to reduce the time-to-market
for their products by outsourcing both their packaging and test services.
Other Services
We also provide a full range of other related services, including:
Design and Characterization Services. We offer design and characterization
services at our Chandler, Arizona and Ichon, Korea facilities. When the
selection of a package is critical to the overall development of a
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semiconductor device, our design engineers at these facilities select, design
and develop the appropriate package for that device by simulating the
semiconductor's performance and end-use environment.
Dry Pack Services. In order to prevent the failure of any semiconductors due
to exposure to moisture during shipping, we "dry pack" most of our packaged
integrated circuits in specially-sealed, environmentally-secure containers.
Tape and Reel Services. Many electronic assembly lines utilize "tape and
reel" methods whereby semiconductors are attached to a tape to enable faster
attachment to the printed circuit board. We offer a service whereby we ship
packaged and tested devices on a tape and reel mechanism rather than on a tray,
to facilitate the assembly process.
Drop Shipment. In order to enable semiconductor companies to improve their
time-to-market and reduce supply chain and management costs, we offer drop
shipment services whereby we ship packaged semiconductor devices directly to
those companies that purchase such devices from our customers.
Customers
We provide packaging and test services to over 70 customers worldwide,
including approximately 40 in the United States. Our customers include some of
the world's largest and most prominent semiconductor manufacturers such as
Atmel Corporation, Intel Corporation, International Business Machines
Corporation, LSI Logic Corp., Lucent Technologies, Inc., Samsung Electronics
Co., Ltd. and STMicroelectronics N.V. In 1998, approximately 67.0% of our
revenues were derived from Intel, and 10.1% and 9.8% of our revenues were
derived from Atmel and LSI, respectively. For the nine month period ended
September 30, 1999, approximately 7.2% and 6.2% of our revenues were derived
from Atmel and LSI, respectively. We anticipate that this customer
concentration will decrease as new customers for which we have already become
qualified and customers with which we are undergoing qualification, such as
International Business Machines, Lucent Technologies Inc. and nVIDIA
Corporation, begin to ship semiconductor devices to us for packaging. In 1998,
we derived approximately 92.8% of our revenues from sales in the U.S., 5.1% in
Asia and 2.1% in Europe.
In general, our customers principally rely on at least two independent
packagers. A packaging company must pass a lengthy and rigorous qualification
process that can take up to three months for a typical leaded package and cost
the customer $100,000 to $200,000 or can take more than six months for a
typical BGA package and cost the customer $250,000 to $300,000. Once a primary
packager has been selected, that packager gains insight into its customer's
business operations and an understanding of its products while strengthening
the overall working relationship. These factors, combined with the pressures of
a semiconductor company to meet the time-to-market demands of its customers,
results in high switching costs for semiconductor companies, making them
adverse to changing suppliers or adding additional suppliers. We have been
successful in attracting new customers because we are one of a few independent
packaging and test companies that offers a complete line of BGA packaging
services.
Our success in becoming one of the world leaders in BGA technology is due in
significant part to our being selected as one of the key suppliers to Intel.
BGA technology is used in almost every personal computer that is built today,
and Intel was the first semiconductor company to demand BGA technology
solutions from independent packagers. In 1998, Intel accounted for
approximately 90.0% of the industry's worldwide personal computer chipset
revenues and approximately 80.0% of worldwide personal computer chipset units.
Due to the significant volume of Intel semiconductors sold worldwide, in 1998,
we believe Intel accounted for more than 40.0% of worldwide BGA packaging
consumption. We are currently one of two suppliers of BGA packaging technology
to Intel. In 1999, we were awarded Intel's Preferred Quality Supplier award.
As a result of the Intel account, we have been able to grow our
infrastructure to support the development of advanced BGA technology. In doing
so, we have gained an early advantage relative to our competitors in:
. packaging capability;
. yield enhancement;
. quality; and
. reliability.
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Furthermore, we have developed the expertise to use BGA technology across
almost all Intel business groups, including personal computer chipsets, graphic
controllers, memory, networking and communications. Intel does not currently
outsource packaging services for any of its microprocessors, including the
Pentium and Celeron lines. Both Intel and ChipPAC have resources dedicated to
continuing the support of BGA packaging.
Marketing, Sales and Customer Support
We provide sales support to our customers through an international network
of offices located in:
. United States
. Santa Clara, California (our executive offices)
. San Diego, California
. Chandler, Arizona
. Boston, Massachusetts
. Dallas, Texas
. Kampen, The Netherlands
. Tokyo, Japan
. Shanghai, China
. Ichon, Korea
. Singapore
Our account managers, applications engineers, customer service
representatives and sales support personnel form teams that focus on a specific
customer or geographic region. Our 60 marketing, sales support and customer
service personnel's performance is measured by each team's revenue achievements
and number of design "wins," providing a new service to an existing customer or
signing up a new customer. In 1998, approximately 92.8% of our revenues were
derived from U.S.-based customers. As is industry practice, we have no long-
term customer contracts; rather, customers deliver near-term forecasts to guide
us on anticipated volumes. As a result, we have no meaningful backlog
statistics. Because substantially all of our materials inventory is purchased
based on customer forecasts, we carry small quantities of such inventory and we
have relatively low finished goods inventory.
Our marketing efforts focus on creating a brand awareness and familiarity
with ChipPAC and its advanced device packaging technologies and an
understanding of its end-user market applications in networking, memory,
storage, graphics and wireless. We emphasize that we are a leader in advanced
packaging and test technology, supplying a broad line of packaging and test
services to the semiconductor industry. We target engineers and executive level
decision makers through the delivery of "white papers" at industry conferences,
quarterly mailings of technical brochures and newsletters, advertisements in
trade journals and our website.
We engage in semi-annual and quarterly reviews of all of our customers; we
regularly collect data from different segments of the semiconductor industry,
for example, personal computers, wireless telephony, video and digital cameras,
etc.. When possible, we work closely with our customers to design and develop
packaging and test solutions for their new products. These "co-development" or
"sponsorship" projects can be critical when customers seek large scale early
market entry with a significant, new product. Task teams assigned by both
ChipPAC and its customers work together to design and develop new solutions and
to analyze and review the outcomes to ascertain if a project's objectives are
being met in a cost-effective manner. Depending on the project, the cost of
development may be borne entirely by us or may be shared with the customer.
Suppliers
Our packaging operations depend upon obtaining adequate supplies of
materials on a timely basis. The principal materials used in our packaging
process are lead frames, rigid and flexible substrates, gold wire and
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molding compound. We purchase materials based on the stated demand forecasts of
our customers. Our customers are responsible for the costs of unique materials
which go unused, particularly those lead frames and substrates that are ordered
on the basis of customer-supplied forecasts. We work closely with our primary
materials suppliers to insure the availability and timeliness of materials
supplies, and we are not dependent on any one supplier for a substantial
portion of our materials requirements. We have no significant supply contracts
or arrangements with any supplier of materials, and we typically purchase
materials by entering into written purchase orders. Historically, over half of
our substrate costs were incurred from the purchase of materials from Japan. We
expect that a growing portion of these substrate materials in the next several
years will be supplied by sources in Korea and, to some extent, Taiwan.
Our packaging operations and expansion plans also depend on obtaining
adequate supplies of equipment on a timely basis. To that end, we work closely
with our major equipment suppliers to insure that equipment deliveries are on
time and the equipment meets our stringent performance specifications.
Operations and Facilities
Our packaging process begins by cutting customer supplied wafers into
individual die using a high speed precision saw. For leaded packaging, the
individual die are then mounted onto metal strips called lead frames, which are
generally made of copper with selective silver plating on which a pattern of
input/output, or I/O, leads has been cut. For BGA packaging, individual die are
placed onto plastic or tape laminate substrates which are miniature printed
circuit boards. Next, very fine gold wires, with an average diameter of about
0.001 inch, are attached to the die and the lead frame or substrate, as
applicable. These gold wires provide the electrical connection between the
electronic circuits on the die and the I/O points of the lead frame or
substrate. Each die is then encapsulated in a plastic casing and marked.
For leaded packaging, the next step consists of plating the protruding leads
with a tin alloy which facilitates soldering when the finished chips are placed
onto a printed circuit board. The die then go through a series of mechanical
stamping processes where the leads are then trimmed and formed into the
requisite finished shape. For BGA packaging, the next step consists of
attaching tiny solder balls to the bottom of the substrates. The completed
devices then undergo a final inspection before being packed and shipped to
customers according to customers' specifications. We are not responsible for
shipping customer packaged products; customers either retrieve their finished
packaged products directly from our facilities or third parties deliver the
finished packaged products to the airport to be retrieved by customers.
Our operations are conducted through five operating facilities pursuant to
contracts entered into by ChipPAC Limited, our British Virgin Islands operating
subsidiary. Our corporate headquarters are located in Santa Clara, California,
and we provide all packaging, warehousing and test services through our
facilities in Ichon and Chungju, Korea and Shanghai, China. Our Chungju
facility provides electroplating services on chips from the Ichon facility. Our
Chungju facility was founded in 1983 and is both ISO-9002 and QS-9000
certified. The Ichon facility was founded in 1985 and is both ISO-9002 and QS-
9000 certified. The Shanghai facility was founded in 1994 and is also ISO-9002
certified and QS-9000 certified. The following chart summarizes our packaging
and research and development facilities:
<TABLE>
<CAPTION>
Principal Packaging or
Service
Owned/ Provided or Being
Facility Location Leased Sq. Ft. Functions/Services Developed
----------------- ------ ------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Santa Clara, California. Leased 40,000 Executive offices, Flip Chip BGA and Quick-
Research and Turn BGA Development
Development, Sales and
Marketing
Chandler, Arizona....... Leased 5,000 Research and Development, Design and
Sales and Marketing Characterization Services
Shanghai, China......... Owned 442,000 Packaging and Test Traditional Leaded BGA
Services Packaging and Test
Services
Ichon, Korea............ Leased 474,000 Packaging and Test Advanced Leaded and BGA
Services; Research and Packaging and Test
Development Services
Chungju, Korea.......... Leased 129,000 Electroplating chips from --
Ichon, Korea
</TABLE>
57
<PAGE>
Competition
The packaging and test industry is highly fragmented. Our primary
competitors and their locations are as follows:
. Advanced Semiconductor Engineering, Inc. -- Taiwan
. ASE Test Limited -- Taiwan and Malaysia
. Amkor Technology, Inc. -- USA
. ASAT, Ltd. -- Hong Kong
. Hana Microelectronics Public Co., Ltd. -- Hong Kong and Thailand
. Siliconware Precision Industries Co., Ltd. -- Taiwan
. Shinko Electric Industries Co., Ltd. -- Japan
. ST Assembly Test Services Limited -- Singapore
Each of these companies has significant packaging capacity, financial
resources, research and development operations, marketing and other
capabilities, and has been operating for some time. These companies also have
established relationships with many large semiconductor companies which are
current or potential customers of ours. We also compete with the internal
packaging and test capabilities of many of our largest customers. We believe
the principal elements of competition in the independent semiconductor
packaging market include time-to-market, breadth of packaging services,
technical competence, design services, quality, yield, customer service and
price. We believe that we generally compete favorably in these areas.
Due in significant part to the lengthy and costly process of qualifying a
supplier, most semiconductor manufacturers generally have two sources of
packaging services.
Research and Development
Our research and development efforts are focused on developing new packaging
designs and process capabilities and on improving the efficiency and
capabilities of our existing packaging and test services. We believe that
technology development is one of the key success factors in the packaging
market and we believe that we have a distinct advantage in this area. Within
the last two years, we have introduced six new packages: mBGA(TM), PBGA, TBGA,
M/2/BGA(TM), EconoCSP(TM) and FBGA-T.
In 1999, we established a U.S. research and development center that allows
customers to validate future flip chip packaging options early in the
development process by giving such customers direct access to flip chip
materials, equipment and our engineering expertise.
As of September 30, 1999, we employed approximately 70 full-time research
and development personnel. Since we partner with the semiconductor
manufacturers that are our customers, research and development costs have not
historically represented a material percentage of our revenues. During 1998, we
spent approximately $7.7 million on research and development.
Employees
As of September 30, 1999, we employed 3,795 full-time employees, of whom
approximately 80 were employed in research and development, 3,575 in packaging
and test services and 236 in marketing, sales, customer service and
administration.
Approximately 1,806 of our employees at the Ichon, Korea facility are
represented by ChipPAC Korea Labor Union and are subject to a collective
bargaining agreement which provides for provisions with respect to salary and
wages through May 1, 2000 and expires on May 1, 2001. We believe that we have
good relationships with our employees and unions.
58
<PAGE>
Intellectual Property
Our ability to develop and provide advanced packaging technologies and
designs for our customers depends in part on our proprietary know-how, trade
secrets and other non-patented, confidential technologies, which we either own
or license from third parties. We also have licenses to use numerous third
party patents, patent applications and other technology rights, as well as
certain trademark rights, in the operation of our business. Pursuant to the
patent and technology license agreement that ChipPAC Limited entered into with
Hyundai Electronics, which we refer to as the Hyundai Electronics License, in
connection with the recapitalization, we obtained a non-exclusive license to
use certain intellectual property in connection with our packaging activities.
Following expiration of its initial term on December 31, 2003, the Hyundai
Electronics License may be extended by us from year to year upon payment of a
nominal annual license fee. Hyundai Electronics may terminate the Hyundai
Electronics License prior to December 31, 2003 if we breach the Hyundai
Electronics License and do not cure within the applicable time period, or in
the event of our bankruptcy or similar event, or if a force majeure event
prevents performance of the agreement.
ChipPAC Limited has entered into a License Agreement with Tessera, Inc.
which we refer to as the Tessera License, pursuant to which we have obtained a
worldwide, royalty-bearing, non-exclusive license under certain Tessera
patents, technical information and trademarks relating to Tessera's proprietary
IC packages, most significantly its mBGA(TM), or micro BGA, packages. The
Tessera License will run until the expiration of the last Tessera patent
licensed thereunder.
Further, in connection with the recapitalization, ChipPAC Limited obtained a
non-exclusive, royalty-free sub license from Hyundai Electronics under certain
patents owned by Motorola for use in connection with our BGA packaging process.
The initial term of our sub license under the Motorola patents will expire on
December 31, 2002. This sublicense requires Hyundai Electronics to use
commercially reasonable efforts to extend or renew its license from Motorola
prior to expiration thereof on December 31, 2002 and obtain from Motorola the
right to grant ChipPAC Limited a sublicense on the same terms and conditions as
those of any such extended or renewed license.
Our primary trademark and trade name is "ChipPAC." We own or are licensed to
use other secondary trademarks, but none of these trademarks are considered of
primary importance to our business.
Environmental Matters
We are subject to liabilities and compliance obligations arising under
environmental, health and safety laws. These laws impose various controls on
the quality of our air and water discharges and on the generation, storage,
handling, discharge, treatment, transportation and disposal of chemicals which
we use, and on employee exposure to hazardous substances in the workplace. It
is our policy to comply with all applicable environmental, health and safety
laws and regulations, and we believe we are currently in material compliance
with all such applicable laws and regulations. In September 1996, we received
ISO 14001 certification for our facilities in Ichon and Chongju by Lloyd's
Register Quarterly Assurance.
Significant regulatory and public attention has been focused on the
environmental impact of semiconductor packaging operations and the risk of
chemical releases from such operations. Environmental, health and safety laws
could require us to incur capital and operational costs to maintain compliance
and could impose liability to remedy the effects of hazardous substance
contamination. We do not anticipate making material environmental capital
expenditures in fiscal years 1999 and 2000. There can be no assurance that
applicable environmental, health and safety laws will not in the future impose
the need for additional capital equipment or other process requirements upon
us, curtail our operations, or restrict our ability to expand operations. The
adoption of new environmental, health and safety laws, the failure to comply
with new or existing laws, or issues relating to hazardous substances could
subject to future material liability.
59
<PAGE>
Legal Proceedings
We are not involved in any legal proceedings, the outcome of which we
believe would have a material adverse effect on our business, financial
condition or results of operations. From time to time, however, we are subject
to claims that arise in the ordinary course of business, and we maintain
insurance that we believe to be adequate to cover these claims.
60
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information about the persons who are
the directors and executive officers of ChipPAC, Inc.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Dennis P. McKenna 49 President, Chief Executive Officer and Director,
ChipPAC, Inc.
Tony Lin 50 Chief Financial Officer, ChipPAC, Inc.
Gregory S. 42 Vice President, Worldwide Sales, ChipPAC, Inc.
Bronzovic
Marcos Karnezos 55 Vice President, Technology, ChipPAC, Inc.
(Peter) Phang Guk 51 President, ChipPAC Assembly
Bing and Test (Shanghai) Company Ltd.
S. N. Lee 55 President and Chief Executive Officer, ChipPAC
Korea Company, Ltd.
David Dominik 43 Director, ChipPAC, Inc.
Edward Conard 42 Director, ChipPAC, Inc.
Prescott Ashe 32 Director, ChipPAC, Inc.
Michael A. Delaney 45 Director, ChipPAC, Inc.
Paul C. Schorr IV 32 Director, ChipPAC, Inc.
Joseph Martin 51 Director, ChipPAC, Inc.
Chong Sup Park 51 Director, ChipPAC, Inc.
</TABLE>
Dennis P. McKenna has been President and Chief Executive Officer of ChipPAC,
Inc. since October 1997; he was appointed to these positions when ChipPAC, Inc.
was incorporated as a separate United States corporation. From October 1995 to
January 1997, he served as Senior Vice President of the Components Group for
Hyundai Electronics. He joined Hyundai Electronics in January 1993 and served
as Vice President and General Manager of the Semiconductor Group until October
1995. Prior to joining Hyundai Electronics, Mr. McKenna, who has over 26 years
of industry experience, held management positions at TRW, Inc. and Oki
Semiconductor, a division of Oki America, Inc.
Tony Lin has served as Chief Financial Officer of ChipPAC, Inc. since
November 1997. From June 1993 to September 1997, he was the Chief Financial
Officer and Vice President, Finance at Integrated Packaging Assembly Corp.
Gregory S. Bronzovic joined ChipPAC, Inc. in April 1998 and has served as
Vice President North American Sales, ChipPAC, Inc. since that time. From
September 1998 to the present he has also served as Vice President, Worldwide
Sales, ChipPAC, Inc. From January 1995 until April 1998, he was Director of
Sales, Hyundai America; prior to that time he served as Western Area Manager,
Hyundai America from February 1994.
Marcos Karnezos has been Vice President, Technology of ChipPAC, Inc. since
October 1998. From December 1996 to October 1998, he served as Vice President,
Technology at Signetics KP. Prior to that, he was Vice President, Technology at
ASAT, Ltd. from October 1992 to December 1996.
(Peter) Phang Guk Bing was appointed as President, ChipPAC Assembly and Test
(Shanghai) Company Ltd. in November 1999. He was also recently appointed as
President, Chief Executive Officer and Chief Financial Officer of ChipPAC
International Company Limited, ChipPAC (Barbados) Ltd and ChipPAC Limited. From
July 1998 to October 1999, he served as Vice President of Operations at ChipPAC
(Shanghai) Company Ltd. From September 1994 to June 1998, he was employed by
Silicon Systems Singapore, where he was Director of Manufacturing Support
Engineering and, prior to that, Director of Assembly Operations.
61
<PAGE>
S. N. Lee has been President and Chief Executive Officer, ChipPAC Korea
Company, Ltd. since July 1998. Mr. Lee served as Senior Vice President from
April 1986 through December 1995, and as Executive Vice President from October
1996 through June 1998 of the Assembly and Test Division of Hyundai
Electronics, the predecessor of ChipPAC Korea Company, Ltd. From January 1996
to October 1996, Mr. Lee served as Senior Vice President of the LCD Division of
Hyundai Electronics.
David Dominik joined Bain Capital in 1990 as a Managing Director. Prior to
joining Bain Capital, Mr. Dominik was a general partner of Zero Stage Capital,
a venture capital firm focused on early-stage companies. Previously, Mr.
Dominik was a venture capital investor and assistant to the Chairman of Genzyme
Corporation, a biotechnology firm. From 1982 to 1984, Mr. Dominik was a
management consultant at Bain & Company. Mr. Dominik serves on the board of
directors of Therma-Wave, Inc., Dynamic Details, Incorporated and OneSource
Information Services, Inc.
Edward Conard joined Bain Capital in 1993 as a Managing Director. Prior to
joining Bain Capital, Mr. Conard was a director of Wasserstein Perella from
1990 to 1992 where he headed the firm's Transaction Development Group.
Previously, Mr. Conard was a Vice President at Bain & Company, where he headed
the firm's operations practice and managed major client relationships in the
industrial manufacturing and consumer goods industries. Mr. Conard currently
serves on the boards of Waters Corporation, Cambridge Industries, Dynamic
Details Inc., Medical Specialties Group, Inc., Alliance Commercial Laundry,
Inc. and U.S. Synthetics, Inc.
Prescott Ashe joined Bain Capital in 1991 and has been a Principal of Bain
Capital since 1998. Prior to Bain Capital, Mr. Ashe was a management consultant
at Bain & Company. Mr. Ashe currently serves on the board of directors of
Dynamic Details, Incorporated.
Michael A. Delaney has been Managing Director of Citicorp Venture Capital
Ltd., an investor in the SXI Group LLC, since 1989. Mr. Delaney is also a
director of GVC Holding, JAC Holdings, CORT Business Services, Inc., Palomar
Technologies, Inc., SC Processing, Inc., Triumph Group, Inc., CLARK Material
Handling Inc., MSX International, Delco Remy International, Inc., International
Knife and Saw, Inc., Fabri-Steel Products, Inc., Aetna Inc., AmeriSource Health
Corporation and Allied Digital Technologies Inc.
Paul C. Schorr IV has been Vice President, Equity Investments for Citicorp
Venture Capital Ltd., an investor in the SXI Group LLC, since June 1996. Prior
to that, Mr. Schorr was Engagement Manager in Management Consulting at McKinsey
& Company. Mr. Schorr serves on the board of directors of KEMET Corporation,
Sybron Chemicals and Fairchild Semiconductor Corporation.
Joseph Martin has been Executive Vice President and Chief Financial Officer
of Fairchild Semiconductor Corp. since 1997, prior to which time he was Vice
President of Finance, Worldwide Operations for National Semiconductor Corp.
since 1989. Mr. Martin is also a director of Fairchild Semiconductor Corp.
Chong Sup Park joined Hyundai Electronics in 1983 and has been Chairman of
Hyundai Electronics America since November 1999. From February 1995 to October
1999, he served as President and Chief Executive Officer of Hyundai Electronics
America and Maxtor Corporation. Mr. Park is also a director of Maxtor
Corporation, Dot Hill Systems Corporation, and Viador, Inc.
Compensation of Directors
We reimburse members of the board of directors for any out-of-pocket
expenses incurred by them in connection with services provided in such
capacity.
In addition, we pay Mr. Martin and Dr. Park compensation that is
commensurate with arrangements offered to directors of companies that are
similar to ChipPAC, Inc. for their services as directors.
We will also enter into agreements with Mr. Martin and Dr. Park for the
grant of stock options to purchase shares of our Class A common stock. The
options granted pursant to these agreements will be subject to vesting
beginning in August 2000.
62
<PAGE>
Executive Compensation
Summary Compensation Table
The following table sets forth, for the year ended December 31, 1998, the
compensation paid to the Chief Executive Officer and the four next most highly
compensated executive officers of ChipPAC whose total annual salary and bonus
was in excess of $100,000 for fiscal year 1998. For ease of reference, we refer
to each of these executive officers throughout this section as a "named
executive officer" and collectively as the "named executive officers."
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation(2)
---------------------------------- ----------------
Securities All Other
Name and Principal Year Other Annual Underlying Compensation
Position Ended Salary Bonus Compensation (1) Options/SARS (#) (3)
- ------------------ ----- ------ -------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis P. McKenna....... 1998 $325,012 $165,925 $7,200 300,000 $6,565
President and Chief
Executive Officer,
ChipPAC, Inc.
Tony Lin................ 1998 175,805 50,925 6,000 100,000 6,059
Chief Financial
Officer, ChipPAC, Inc.
Richard L. Groover(4)... 1998 167,205 32,886 6,000 75,000 5,767
Vice President,
Engineering, ChipPAC,
Inc.
Gary J. Breton(4)....... 1998 167,967 44,686 45,073(5) 75,000 3,659
Vice President,
China Operations,
ChipPAC, Inc.
Gregory S. Bronzovic.... 1998 136,210 42,137 4,500 75,000 2,850
Vice President,
Worldwide Sales,
ChipPAC, Inc.
</TABLE>
- --------
(1) Includes a car allowance but excludes perquisites and other personal
benefits or property aggregating less than the lesser of either: (i)
$50,000 or (ii) 10% of the total annual salary and bonus reported for the
applicable named officer.
(2) At the closing of the recapitalization on August 5, 1999, all options held
by the named executive officers were canceled in the case of unexercised
options, or converted into the right to receive cash, in the case of vested
options. The options set forth in this summary compensation table are no
longer outstanding. See "Option Grants" below for more information on
option grants to our management.
(3) Includes amounts contributed (a) under our 401(k) plan for 1998 as follow:
Mr. McKenna--$4,999; Mr. Lin--$4,317; Mr. Groover--$4,126; Mr. Bronzovic--
$2,388; and Mr. Breton--$2,009 and (b) for premiums for a life insurance
policy as follow: Mr. McKenna--$1,566; Mr. Lin--$1,742; Mr. Groover--$1641;
Mr. Bronzovic--$462; and Mr. Breton--$1,650.
(4) Mr. Groover and Mr. Breton are no longer employed by us.
(5) Includes an overseas allowance of $22,800 and relocation reimbursement of
$22,273.
Employment Agreements
Mr. McKenna
Mr. McKenna is employed pursuant to an employment agreement with us. The
agreement provides that Mr. McKenna will serve as our President and Chief
Executive Officer. The initial term of the agreement terminates on December 31,
2001 and automatically renews for successive one-year periods unless either
party notifies the other of his or its intention not to renew the agreement.
Under the agreement, we pay Mr. McKenna a base salary of $400,000 per year,
subject to increases approved by the board of directors, plus a bonus of up
63
<PAGE>
to 80% of his base salary upon attainment by us of financial performance
targets set forth in the agreement. Mr. McKenna will receive a pro rated bonus
for the remainder of 1999. The agreement also provides for customary fringe
benefits.
We have agreed to pay Mr. McKenna a bonus equal to twice his base salary
plus a portion of his annual bonus if we terminate Mr. McKenna for any reason
other than cause, or if Mr. McKenna terminates his employment for good reason.
If Mr. McKenna dies before the end of his employment period, we will pay his
estate a pro rated portion of the bonus he would have earned in the year of his
death.
The agreement also provides that, should Mr. McKenna continue to serve as
President and Chief Executive Officer following a change of control of ChipPAC,
the provisions of the employment agreement shall remain in force and effect
following the change of control.
Mr. Lin and Mr. Bronzovic
Mr. Lin and Mr. Bronzovic are employed pursuant to letter agreements with
us. Each letter agreement provides that Mr. Lin and Mr. Bronzovic are
employees-at-will and that either party has the right to terminate the
employment relationship at anytime with or without cause.
Mr. Lin's letter agreement provides that he serves as Chief Financial
Officer. Mr. Lin's current base salary is $181,597. In addition to his base
salary, Mr. Lin is eligible to earn an annual bonus targeted at 30% of his base
salary based on the attainment of certain ChipPAC and personal performance
goals.
Mr. Bronzovic's letter agreement provides that he serves as Vice President,
Worldwide Sales. Mr. Bronzovic's current base salary is $178,180. In addition
to his base salary, Mr. Bronzovic is eligible to earn an annual bonus targeted
at $100,000.
Mr. Lin's and Mr. Bronzovic's letter agreements provides for certain
perquisites, such as automobile allowances, and customary personal benefits.
Management Incentive Agreements
Mr. Lin and Mr. Bronzovic are parties to management incentive agreements
with us under which they are entitled to receive payments from us in the event
of a change of control or, subject to conditions described in the management
incentive agreements, in the event their employment is terminated or they
resign. The recapitalization was a change of control as defined in the
management incentive agreements. Mr. Groover and Mr. Breton were parties to
such agreements prior to termination of their employment with us. Mr. McKenna's
employment agreement, described above, amended and restated the management
incentive agreement to which he was a party.
Following the recapitalization, we paid cash to the named executive officers
in return for the vested options held by each of these officers. The amount of
those cash payments was $40,500, $15,750, $11,813, $11,813 and $8,438 in the
case of Messrs. McKenna, Lin, Groover, Breton and Bronzovic, respectively.
In addition, if Mr. Lin's or Mr. Bronzovic's employment is terminated
without cause or if they resign for good reason, in each case before February
5, 2000, we are required to pay Mr. Lin or Mr. Bronzovic cash in an amount
equal to a percentage of their annual base salary and target bonus, together
with unpaid vacation, salary and unreimbursed expenses. The applicable
percentage of annual base salary and bonus is 50.0% for Mr. Lin and 25.0% for
Mr. Bronzovic. No such payment was made to Mr. Groover or Mr. Breton upon their
termination of employment with us.
Mr. McKenna and Mr. Lin also received special bonuses of $100,000 and
$50,000, respectively, in connection with the closing of the recapitalization.
64
<PAGE>
Option Grants
Pursuant to the recapitalization agreement, each option to purchase our
common stock that was outstanding prior to the recapitalization was, in the
case of unvested options, canceled, and in the case of vested options,
converted into the right to receive cash from ChipPAC, Inc. immediately prior
to the recapitalization.
1999 Stock Purchase and Option Plan
Our board of directors has adopted the ChipPAC, Inc. 1999 Stock Purchase and
Option Plan, or the "1999 Stock Plan," which authorizes the granting of stock
options and the sale of Class A common stock or Class L common stock to current
or future employees, directors, consultants or advisors of ChipPAC, Inc. or its
subsidiaries. Under the 1999 Stock Plan, a committee of the board of directors
is authorized to sell or otherwise issue Class A common stock or Class L common
stock at any time prior to the termination of the 1999 Stock Plan in such
quantity, at such price, on such terms and subject to such conditions as
established by the committee up to an aggregate of 15,500,000 shares of Class A
common stock and 500,000 shares of Class L common stock, including shares of
common stock with respect to which options may be granted, subject to
adjustment upon the occurrence of specified events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events. As of September 30, 1999, no shares of Class A
common stock or Class L common stock or options to purchase such stock were
outstanding under the 1999 Stock Plan.
Qualified 401(k) and Profit Sharing Plan
We maintain a qualified 401(k) and profit sharing plan. Employees are
permitted to contribute up to 15.0% of their annual compensation to our 401(k)
plan, not to exceed $10,000 per year. Under the plan, we make matching
contributions of up to 50.0% of the first 6.0% of annual deferral per
participant, subject to the IRS limits. We contributed and expensed $119,000 in
1998, $49,000 in 1997 and $11,000 in 1996.
Pension Plans and Deferred Compensation Plans
We do not maintain any pension plans or deferred compensation plans other
than the 401(k) and profit sharing plan described above. In connection with the
recapitalization, certain members of management may receive deferred
compensation arrangements. The terms of these arrangements have not yet been
finalized.
Management Equity Sale
Under the 1999 Stock Plan, we intend to enter into purchased stock
agreements, which we refer to as purchase agreements, with certain of our
senior employees, including Mr. McKenna, Mr. Lin and Mr. Bronzovic, among
others. Under these purchase agreements, some of our senior-level employees may
purchase shares of our Class A common stock and Class L common stock. We may
loan some of these senior-level employees up to 50% of the purchase price of
the common stock purchased under these purchase agreements. These loans will be
represented by promissory notes between the employee and us. The common stock
purchased under the purchase agreements will be subject to vesting and is also
subject to repurchase upon termination of the employee's employment with us.
65
<PAGE>
PRINCIPAL SHAREHOLDERS
ChipPAC International Company Limited is a wholly-owned subsidiary of
ChipPAC, Inc. ChipPAC, Inc.'s outstanding equity securities consist of Class A
common stock, Class L common stock, Hyundai Preferred Stock and Intel Preferred
Stock. The shares of Class A common stock entitle the holder to one vote per
share on all other matters to be voted upon by shareholders. The Class L common
stock is identical to the Class A common stock except that the Class L common
stock is nonvoting and is entitled to a preference over the Class A common
stock with respect to any distribution to holders of our capital stock, equal
to the original cost of such share plus an amount which accrues at a rate of
12.5% per annum, compounded quarterly. The Class L Common Stock is convertible
into Class A Common Stock upon an initial public offering. See "Certain
Relationships and Related Transactions."
Hyundai Electronics and Hyundai Electronics America own all of the issued
and outstanding Hyundai Preferred Stock. Intel owns all of the issued and
outstanding Intel Preferred Stock. Holders of the Hyundai Preferred Stock and
the Intel Preferred Stock have no right to vote on any matters to be voted on
by the stockholders of ChipPAC, Inc.
The following table sets forth certain information as of September 30, 1999
regarding the approximate beneficial ownership of (1) each person known to us
to own more than 5% of the outstanding voting securities of ChipPAC, Inc. and
(2) the voting securities of ChipPAC, Inc. held by each director of ChipPAC,
Inc., each named executive officer and all of such directors and named
executive officers as a group. Unless otherwise noted, to our knowledge, each
of such stockholders has sole voting and investment power as to the shares
shown. Unless otherwise indicated, the address of each director and named
executive officer is 3151 Coronado Drive, Santa Clara, California 95054.
<TABLE>
<CAPTION>
Class A Common Stock
Shares Beneficially
Owned
------------------------
Number of Percentage
Name and Address Shares of Class
- ---------------- ------------- ----------
<S> <C> <C>
Principal Stockholders:
Bain Capital Funds (1)................................ 40,995,003.17 44.7%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
SXI Group LLC (2)..................................... 40,500,000 44.1%
c/o Citicorp Venture Capital, Ltd. 399 Park Avenue
New York, NY 10043
Hyundai Electronics America........................... 9,000,000 9.8%
3101 North First Street
San Jose, California 95134
Directors and Executive Officers: -- --
Dennis P. McKenna..................................... -- --
Tony Lin.............................................. -- --
Gregory S. Bronzovic.................................. -- --
Marcas Karnezos....................................... -- --
David Dominik (3)..................................... 8,468,975.98 9.2%
Edward Conard (4)..................................... 8,468,975.98 9.2%
Prescott Ashe (5)..................................... 8,468,975.98 9.2%
Michael A. Delaney (6)................................ 40,500,000 44.1%
Paul C. Schorr IV(7).................................. 40,500,000 44.1%
Joseph Martin (8).....................................
Chong Sup Park........................................
All Directors and named executive officers as a group
(11 persons)......................................... 48,968,975.98 53.3%
</TABLE>
66
<PAGE>
- --------
(1) Includes: (a) 31,520,958.49 shares of Class A common stock owned by Bain
Capital Fund VI, L.P. ("Fund VI"), whose sole general partner is Bain
Capital Partners VI, L.P., whose sole general partner is Bain Capital
Investors VI, Inc., a Delaware corporation wholly owned by W. Mitt Romney;
(b) 4,617,715.49 shares of Class A common stock owned by BCIP Associates II
("BCIP II"), whose managing partner is Bain Capital, Inc., a Delaware
corporation wholly owned by W. Mitt Romney; (c) 728,085.59 shares of Class
A common stock owned by BCIP Associates II-B ("BCIP II-B"), whose managing
partner is Bain Capital, Inc., a Delaware corporation wholly owned by W.
Mitt Romney; (d) 1,156,306.49 shares of Class A common stock owned by BCIP
Trust Associates II, L.P. ("BCIP Trust II"), whose general partner is Bain
Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (e)
329,309.41 shares of Class A common stock owned by BCIP Trust Associates
II-B ("BCIP Trust II-B"), whose general partner is Bain Capital, Inc., a
Delaware corporation wholly owned by W. Mitt Romney; (f) 1,637,559 shares
of Class A common stock owned by BCIP Associates II-C ("BCIP II-C"), whose
managing partner is Bain Capital, Inc., a Delaware corporation wholly owned
by W. Mitt Romney; (g) 105,068.70 shares of Class A common stock owned by
PEP Investments Pty, Ltd. ("PEP"), whose controlling persons are Timothy J.
Sims, Richard J. Gardell, Simon D. Pillar and Paul J. McCullagh; and (h)
Sankaty High Yield Asset Partners, L.P. ("Sankaty"), whose sole general
partner is Sankaty High Yield Asset Investors, LLC, whose managing member
is Sankaty High Yield Asset Investors, Ltd., a Bermuda corporation wholly
owned by W. Mitt Romney.
(2) SXI Group LLC is a portfolio concern of Citicorp Venture Capital Ltd.
(3) Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP II,
a Delaware general partnership of which Mr. Dominik is a general partner;
(b) 1,156,306.49 shares of Class A common stock owned by BCIP Trust II, a
Delaware limited partnership of which Mr. Dominik is a general partner; (c)
105,068.70 shares of Class A common stock owned by PEP, a New South Wales
limited company for which Mr. Dominik has a power of attorney. Mr. Dominik
disclaims beneficial ownership of any such shares in which he does not have
a pecuniary interest. Mr. Dominik's address is c/o Bain Capital, Inc., Two
Copley Place, Boston, Massachusetts 02116.
(4) Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP II,
a Delaware general partnership of which Mr. Conard is a general partner,
(b) 1,156,306.49 shares of Class A common stock owned by BCIP Trust II, a
Delaware limited partnership of which Mr. Conard is a general partner; (c)
105,068.70 shares of Class A common stock owned by PEP, a New South Wales
limited company for which Mr. Conard has a power of attorney. Mr. Conard
disclaims beneficial ownership of any such shares in which he does not have
a pecuniary interest. Mr. Conard's address is c/o Bain Capital, Inc., Two
Copley Place, Boston, Massachusetts 02116.
(5) Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP II,
a Delaware general partnership of which Mr. Ashe is a general partner, (b)
728,085.59 shares of Class A common stock owned by BCIP II-B, a Delaware
limited partnership of which Mr. Ashe is a general partner; (c)
1,156,306.49 shares of Class A common stock owned by BCIP Trust II, a
Delaware limited partnership of which Mr. Ashe is a general partner; and
(d) 329,301.41 shares of Class A common stock owned by BCIP Trust II-B, a
Delaware limited partnership of which Mr. Ashe is a general partner. Mr.
Ashe disclaims beneficial ownership of any such shares in which he does not
have a pecuniary interest. Mr. Ashe's address is c/o Bain Capital, Inc.,
Two Copley Place, Boston, Massachusetts 02116.
(6) Includes all shares of Class A common stock owned by SXI Group LLC, a
portfolio concern of Citicorp Venture Capital, Ltd. Mr. Delaney is both an
investor in SXI Group LLC, a member of its Board of Representatives and a
Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr.
Delaney may be deemed to beneficially own all such shares held by SXI Group
LLC. Mr. Delaney disclaims beneficial ownership of any such shares in which
he does not have a pecuniary interest. Mr. Delaney's address is c/o
Citicorp Venture Capital, Ltd., 399 Park Avenue, New York, New York 10043.
(7) Includes all shares of Class A common stock owned by SXI Group LLC, a
portfolio concern of Citicorp Venture Capital, Ltd. Mr. Schorr is both an
investor in SXI Group LLC, a member of its Board of Representatives and a
Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr. Schorr
may
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be deemed to beneficially own all such shares held by SXI Group LLC. Mr.
Schorr disclaims beneficial ownership of any such shares in which he does
not have a pecuniary interest. Mr. Schorr's address is c/o Citicorp Venture
Capital, Ltd., 399 Park Avenue, New York, New York 10043.
(8) Includes all shares of Class A common stock owned by SXI Group LLC, a
portfolio concern of Citicorp Venture Capital, Ltd. Mr. Martin is an
investor in SXI Group LLC and, accordingly, may be deemed to beneficially
own all such shares held by SXI Group LLC. Mr. Martin disclaims beneficial
ownership of any such shares in which he does not have a pecuniary
interest. Mr. Martin's address is c/o Fairchild Semiconductor Corporation,
333 Western Avenue, South Portland, Maine 04106.
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THE RECAPITALIZATION
The recapitalization and related transactions resulted in, among other
things:
. the Equity Investors and other parties owning approximately 90.2% of
the outstanding common stock of ChipPAC, Inc. and Hyundai Electronics
and Hyundai Electronics America owning approximately 9.8% of the
outstanding common stock;
. the creation of several new foreign subsidiaries of ChipPAC, Inc.,
including ChipPAC International Company Limited, the issuer of the
exchange notes;
. the organization of the new direct and indirect subsidiaries and the
existing direct and indirect subsidiaries of ChipPAC, Inc. into a
distinct group of operating subsidiaries and a distinct group of
borrowing subsidiaries; and
. the issuance of the preferred stock to Hyundai and the implementation
of the new senior credit facilities described under "Description of
Other Financing Arrangements--Senior Credit Facilities."
Prior to the recapitalization, Hyundai Electronics owned: (1) all of the
outstanding equity of ChipPAC Korea Company, Ltd., which we refer to as ChipPAC
Korea, and which leases our Ichon, Korea and Chungju, Korea facilities; and (2)
all of the outstanding equity of Hyundai Electronics (Shanghai) Company Ltd.
which was renamed ChipPAC (Shanghai) Company Limited after the recapitalization
and which we refer to as ChipPAC China I and which owns, among other things,
ChipPAC's Shanghai, China facility and (3) 82.0% of the outstanding equity of
Hyundai Electronics America. The remaining 18% was owned by another 100% owned
Hyundai subsidiary. Hyundai Electronics directly owns certain intellectual
property rights used in our business.
Hyundai Electronics America, in turn, owned all of the outstanding stock of
ChipPAC, Inc. prior to the recapitalization. ChipPAC, Inc. owned all of the
outstanding equity of ChipPAC Assembly and Test (Shanghai) Company, Ltd., which
we refer to as ChipPAC China II.
The steps described below were taken in order to complete the
recapitalization. Please refer to the diagram at the end of this section for
information on our current corporate structure.
. Through a series of restructuring transactions involving entities
controlled by Hyundai Electronics and Hyundai Electronics America,
ChipPAC, Inc. became the indirect owner of all of the outstanding
equity of ChipPAC Korea, ChipPAC China I and ChipPAC China II.
. Hyundai Electronics formed ChipPAC Limited as a new subsidiary and
ChipPAC (Barbados) Ltd. as a new subsidiary of ChipPAC, Inc. ChipPAC
(Barbados) Ltd. is now a wholly-owned subsidiary of ChipPAC, Inc. and
ChipPAC Limited is now a wholly-owned subsidiary of ChipPAC
(Barbados) Ltd. ChipPAC Limited owns all of the outstanding equity of
ChipPAC China I and ChipPAC China II and 99.9% of the outstanding
equity of ChipPAC Korea. ChipPAC (Barbados) Ltd. owns the remaining
0.1% of the outstanding equity of ChipPAC Korea.
. Hyundai sold the rights to substantially all of the intellectual
property used in our business, including rights under our agreements
with Intel Corporation, to ChipPAC Limited.
. Hyundai Electronics formed a subsidiary of ChipPAC, Inc. named
ChipPAC Operating Limited, which owned all of the outstanding equity
of two additional entities formed by Hyundai Electronics, ChipPAC
Luxembourg S.a.R.L. and ChipPAC Liquidity Management.
. The Equity Investors, together with other investors, invested an
aggregate of approximately $92.0 million cash in ChipPAC, Inc.
through the merger of ChipPAC Merger Corp., a newly-formed, wholly-
owned subsidiary of the Equity Investors, in exchange for
approximately 90.2% of the common stock of ChipPAC, Inc. after the
completion of the recapitalization steps.
. ChipPAC International Limited, the issuer of the outstanding notes
and the exchange notes was merged with and into ChipPAC Operating
Limited and renamed ChipPAC International Company Limited.
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. Concurrently with the recapitalization described above, we borrowed
$150 million under the term loan facilities. We used all the proceeds
from the term loan facilities, the issuance of the outstanding notes
and the equity issuance to repay existing third party indebtedness
and to purchase most of Hyundai Electronics and Hyundai Electronics
America's equity interest in us and our subsidiaries and the
intellectual property used in our business and to pay certain other
accounts in conjunction with the recapitalization.
Our current corporate structure is as follows:
[CORPORATE STRUCTURE CHART APPEARS HERE]
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Because this is a summary, it does not contain all of the information that
maybe important to you. You should read the complete document before making an
investment decision. These documents have been filed as exhibits to the
registration statement of which this prospectus forms a part. See "Where You
Can Find Additional Information."
Recapitalization Agreement
On March 13, 1999, ChipPAC, Inc., ChipPAC Merger Corp., Hyundai Electronics
and Hyundai Electronics America entered into the recapitalization agreement, as
amended. Pursuant to the recapitalization agreement, the transactions described
in "The Recapitalization" section were consummated. As part of the
recapitalization, we also paid fees and expenses related to the financing of
the recapitalization.
Pursuant to the recapitalization agreement, Hyundai Electronics and Hyundai
Electronics America agreed to jointly indemnify us against any and all losses
resulting from any misrepresentation or breach of warranty made by ChipPAC in
the recapitalization agreement, a claim for which must be made (in most cases)
no later than 24 months after the closing of the recapitalization. The
indemnification obligations of Hyundai Electronics and Hyundai Electronics
America under the recapitalization agreement are generally subject to a $3.85
million minimum aggregate threshold amount and limited to a maximum aggregate
amount payable of no more than $38.5 million; provided, however, that in
certain cases where indemnification obligations are not subject to such payment
limitation, if the amount of any indemnification obligation would exceed 50.0%
of the total consideration to be paid to Hyundai Electronics and Hyundai
Electronics America, then the recapitalization may be rescinded. In addition,
Hyundai Electronics and Hyundai Electronics America have jointly agreed to
indemnify us for any and all losses and liabilities:
. that are owed to third parties and are in the nature of "successor
liability" or which are caused by the pre-closing conduct of Hyundai
Electronics or its affiliates (with certain exceptions); and
. that (i) we may incur within ten years of the recapitalization and
(ii) which relate to patent infringement claims brought by specified
third parties (the indemnification obligations are limited to $5.0
million in this instance).
In addition, we will indemnify Hyundai Electronics and Hyundai Electronics
America against any and all losses arising out of a breach of any of ChipPAC
Merger Corp.'s representations or warranties, covenants or agreements set forth
in the recapitalization agreement, subject to limitations set forth therein.
Hyundai Electronics and Hyundai Electronics America have also agreed for a
period of four years after the closing of the recapitalization not to provide
semiconductor packaging or test services to any person or any entity anywhere
in the world, except for fabricated products for its semiconductor units.
Hyundai Electronics and Hyundai Electronics America have also agreed for a
period of two years after the closing of the recapitalization not to offer
employment to (or hire) any of our current or former employees, other than any
employee that was terminated by us on or prior to December 1, 1998.
In conjunction with the transfer of control of ChipPAC, Inc. and its
subsidiaries in the recapitalization, Hyundai Electronics and Hyundai
Electronics America, or their affiliates, entered into or amended a number of
ancillary agreements with certain of our subsidiaries, including:
. utility and service agreements with ChipPAC Korea to provide it with
utility service at its Ichon and Chungju, Korea facilities;
. an information technology services agreement relating to maintenance
and support of our computer hardware and software; and
. a lease for our Ichon and Chungju, Korea facilities and a sublease
for our Santa Clara, California facility.
All of these ancillary agreements are on terms we believe are market and
customary.
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Advisory Agreements
In connection with the recapitalization, we entered into advisory agreements
with the Equity Investors pursuant to which the Equity Investors may provide
financial, advisory and consulting services to us. In exchange for such
services (if and when provided), the Equity Investors will be entitled to
receive fees billed at the Equity Investors' customary rates for actual time
spent performing such services plus reimbursement for out-of-pocket expenses;
provided that, commencing with the quarter ended March 31, 2000, when and if we
achieve EBITDA, as calculated through the twelve-month period ended March 31,
2000, in excess of $81.2 million, the Equity Investors will each be entitled to
an annual advisory fee, the amount of which will be limited by our senior
credit agreements, for the remaining term of the advisory agreement. There are
no minimum levels of service required to be provided pursuant to the advisory
agreements. In connection with the recapitalization, the Equity Investors
received a one-time fee of 1.0% of the aggregate value of the recapitalization,
which fees are included in the $32.7 million of fees and expenses identified in
"Use of Proceeds." In addition, the Equity Investors will each receive a fee
not to exceed 1.0% of the aggregate value of any acquisition, divestiture or
financing transaction of ChipPAC, Inc. in which the Equity Investors are
involved. Each advisory agreement will remain in effect for an initial term of
ten years, subject to termination by the Equity Investors or us upon written
notice 90 days prior to the expiration of the initial term or any extension
thereof. Each advisory agreement includes customary indemnification provisions
in favor of each of the Equity Investors.
Shareholders Agreement
In connection with the recapitalization, ChipPAC, Inc., each of the Equity
Investors and all of the other non-management equity holders, including Hyundai
Electronics, Hyundai Electronics America and Intel, entered into a shareholders
agreement that, among other things, provides for restrictions on the transfer
of shares and certain preemptive rights. Also pursuant to the shareholders
agreement, our board of directors will be comprised of
. the chief executive officer of ChipPAC, Inc.,
. three representatives designated by Bain Capital,
. three representatives designated by SXI Group LLC and
. one representative designated collectively by Hyundai Electronics and
Hyundai Electronics America.
Registration Agreement
ChipPAC, Inc., the Equity Investors and certain of their designees, Hyundai
Electronics, Hyundai Electronics America and Intel entered into a registration
agreement which provides for "demand' registration rights to cause us to
register under the Securities Act all or part of the shares of our stock, as
well as "piggyback" registration rights. Specifically, the registration
agreement provides that:
(1) the holders of a majority of our registrable securities may require
us, at our expense, to register any or all of the stock held by them on a
"long-form' registration statement or, if available, a "short-form'
registration statement;
(2) after an offering of our stock to the public and subject to certain
exceptions, (a) at any time, the holders of a majority of the registrable
securities held by Hyundia Electronics or Hyundai America may require one
"long form' or "short form' registration at our expense and (b) before
August 5, 2006, the holders of a majority of the registrable securities
held by Intel may also require one "long form' or "short form' registration
at our expense; and
(3) all holders of registrable securities may request that their
eligible stock be included whenever we register any of our securities under
the Securities Act, with certain exceptions.
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We have agreed to indemnify all holders of registered securities against
certain liabilities, including liabilities under the Securities Act.
Transition Services Agreement
We entered into a transition services agreement with Hyundai Electronics and
Hyundai Electronics America whereby Hyundai Electronics and Hyundai Electronics
America will continue to provide certain administrative and other services to
us for amounts to be determined depending upon the type and number of services
performed. Services to be provided by Hyundai Electronics and Hyundai
Electronics America pursuant to the transition services agreement include:
. purchasing assistance;
. transit insurance;
. water freight services;
. uniform and travel services;
. office space in Tokyo, Japan;
. services of employees located in Tokyo, Japan; and
. consulting services.
Patent and Technology License Agreement
We entered into a patent and technology license agreement with Hyundai
Electronics, pursuant to which we received a non-exclusive license to use
intellectual property in connection with our semiconductor packaging
activities. Following the expiration of its initial term on December 31, 2003,
the patent and technology license agreement may be extended by us from year to
year upon payment of a nominal annual license fee. Hyundai Electronics may
terminate the patent and technology license agreement prior to December 31,
2003 if we breach the agreement and do not cure within the applicable time
period, or in the event of bankruptcy or similar event, or if a force majeure
event prevents performance of the agreement.
Services Agreement
We entered into an agreement with Hyundai Electronics for the packaging of
Hyundai Electronics' (mu)BGA (micro BGA) chips. Pursuant to the services
agreement, we must procure sufficient capital equipment to meet Hyundai's
packaging requests. The initial term of the agreement expires on June 30, 2002,
subject to earlier termination for cause.
Intel Materials Agreement
On August 5, 1999, ChipPAC Limited and Intel entered into the Intel
Materials Agreement pursuant to which Intel will outsource to ChipPAC Limited a
portion of its semiconductor packaging needs. In return, we will provide Intel
with rebates based upon the volume of packaging services outsourced to us.
Rebates are estimated and accrued as current liabilities based on projected
sales and the rebate percentages stated in the agreement. The Intel Materials
Agreement covers semiconductor packaging services for which Intel has an
ongoing purchasing requirement and for which we are a qualified source and
where costs, yields and quality are equal to that of the same services provided
by other semiconductor packaging companies.
The Intel Materials Agreement also provides that Intel will not enter into
other agreements for packaging services that contain provisions relating to
competitive pricing and volume guarantees similar to those contained in the
Intel Materials Agreement. This restriction only applies to agreements with
semiconductor packaging companies that (i) are qualified to provide packaging
services to Intel and (ii) provide the same type of packaging services provided
by us.
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The Intel Materials Agreement also obligates us to first offer to Intel
rights to use intellectual property related to certain new packaging services
technology developed by us. Following the expiration of its initial term on
December 31, 2001, the Intel Materials Agreement may be extended upon the
mutual consent of ChipPAC Limited and Intel.
Intel Stock Purchase Agreement
Immediately following the recapitalization, we entered into the stock
purchase agreement with Intel. Pursuant to this agreement, we issued to Intel
(i) the Intel Preferred Stock, which has an initial aggregate liquidation
preference of $10.0 million, and (ii) the Intel Warrant, which entitles Intel
to purchase $5.0 million of our common stock at a 20.0% discount to the initial
public offering price, when and if we complete an initial public offering of
our common stock. See "Description of Other Financing Arrangements--Intel
Preferred Stock; Intel Warrant."
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DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
Senior Credit Facilities
General. On August 5, 1999, in connection with the recapitalization, ChipPAC
International Company Limited entered into several senior loan facilities,
which we refer to as the senior credit facilities, with Credit Suisse First
Boston, New York Branch, or CSFB, as administrative agent, and certain other
financial institutions, which we refer to as the senior lenders. The senior
credit facilities consist of:
. two tranches of term loans, which we refer to as the term loan
facilities, of $70.0 million, which we refer to as "Term Loan A" and
$80.0 million, which we refer to as "Term Loan B";
. a revolving loan, which we refer to as the revolving credit facility,
including letters of credit, of up to $50.0 million; and
. a capital expenditure facility, which we refer to as the capex
facility, in an amount of up to $20.0 million.
Purposes. We must use the amounts available under the senior credit
facilities as follows:
. the term loan facilities must be used to pay a portion of the cash
consideration to be paid in the recapitalization and to pay related
fees and expenses;
. the revolving credit facility may be used for our working capital and
general corporate purposes;
. the capex facility may be used only for acquiring equipment or making
certain other capital expenditures.
Repayment and Final Maturity. The different senior credit facilities are due
as follows:
. Revolving Credit Facility will mature on July 31, 2005.
. CapEx Facility will mature on July 31, 2005 and will amortize
beginning 25.5 months after the closing of the recapitalization over
approximately four years.
. Term Loan A will amortize in each of the first five years according
to a schedule to be determined with the balance maturing on July 31,
2005.
. Term Loan B will amortize in each of the first six years according to
a schedule to be determined with the balance maturing on July 31,
2006.
We may repay any portion of the revolving credit facility which is
outstanding without premium or penalty from time to time, other than payment of
breakage costs and reimbursement of the senior lenders' actual re-deployment
costs under certain circumstances.
Also, it is mandatory that we repay any outstanding borrowings under the
senior credit facilities out of a portion of net cash proceeds we receive from
certain asset sales, insurance recovery and condemnation events, certain equity
issuances and annual excess cash flow.
Availability. The entire amount of the term loan facilities was drawn at the
closing of the recapitalization; any amount of the term loan facilities that we
repay may not be reborrowed by us later. We may borrow under the revolving
credit facility until final maturity and letters of credit will be available
until the fifth business day prior to final maturity of the revolving credit
facility. We may reborrow any amounts of the revolving credit facility that we
repay. We may borrow and repay under the capex facility until July 31, 2001.
Amounts of the capex facility that we repay after July 31, 2001 may not be
borrowed by us later.
Security; Guaranty. The senior credit facilities provide that all of our
indebtedness be secured as fully as is permitted by applicable law by
substantially all of the assets of ChipPAC, Inc., ChipPAC International Company
Limited, and the assets of each of ChipPAC, Inc.'s present and future direct
and indirect subsidiaries, including without limitation:
. a first priority pledge of all the capital stock of all present and
future subsidiaries; and
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. perfecting a first priority (subject to customary exceptions)
security interest in, and mortgages on, substantially all tangible
and intangible assets (to the extent permitted by applicable law) of
ChipPAC, Inc. and each of its present and future direct and indirect
subsidiaries.
In addition, in order to maximize tax benefits pursuant to certain
withholding tax treaties among several of the jurisdictions in which
subsidiaries of ours are located, we made a series of direct and indirect
intercompany loans among these subsidiaries, which we refer to as the
intercompany loans. Each of the intercompany loans is evidenced by an
intercompany note (which will be pledged to the senior lenders as part of the
assets of each of ChipPAC's subsidiaries), and each of the borrowers under the
intercompany loans has executed security agreements in favor of the lenders of
these loans.
Finally, each present and future subsidiary of ours (other than our
subsidiaries in China) has (to the extent permitted by applicable law)
guaranteed our obligations under the senior credit facilities by executing a
guaranty in favor of the senior lenders.
Interest. The interest rates under the senior credit facilities are, at our
option, either (a) the base rate, which is the higher of the Agent's prime
lending rate and the Federal Funds Effective Rate plus 0.5%, plus a margin or
(b) adjusted LIBOR plus a margin.
The margins of the different loans under the senior credit facilities,
except Term Loan B, were set initially as described below. In the future,
however, the margins on Term Loan A, the revolving credit facility and the
capex facility will vary according to a pricing grid based upon our
consolidated leverage ratio.
. the initial margin on Term Loan A, the revolving credit facility and
the capex facility are 2.25% over the base rate and 3.25% over
adjusted LIBOR; and
. the margin on Term Loan B is 3.00% over the base rate and 4.00% over
adjusted LIBOR.
Fees. We have agreed to pay certain fees in connection with the senior
credit facilities, including:
. letter of credit fees;
. agency fees; and
. commitment fees.
Covenants. The senior credit facilities require that we meet certain
financial tests, including, without limitation, a maximum leverage ratio, a
minimum interest coverage ratio and minimum fixed charge coverage ratio. The
senior credit facilities also contain covenants which, among other things and
subject to certain exceptions, restrict our ability to:
. incur liens or engage in sale-leaseback transactions;
. transact with affiliates;
. incur indebtedness and contingent obligations;
. declare dividends or redeem or repurchase capital stock;
. prepay, redeem or repurchase indebtedness;
. change the business being conducted;
. make loans and investments;
. engage in mergers, acquisitions, consolidations and asset sales; and
. make capital expenditures.
The senior credit facilities also require that we satisfy certain customary
affirmative covenants and provide certain customary indemnifications in favor
of the senior lenders.
Events of Default. The senior credit facilities contain customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties in all material respects, covenant defaults,
certain events of bankruptcy and insolvency, ERISA violations, judgment
defaults, cross-defaults to certain other indebtedness and a change in control.
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Hyundai Preferred Stock
In connection with the recapitalization, we issued to Hyundai Electronics
and Hyundai Electronics America 70,000 shares of Class B preferred stock, which
we refer to as the Hyundai Preferred Stock, which has an initial aggregate
liquidation preference of $70.0 million. Dividends on the Hyundai Preferred
Stock accrue on a daily basis from August 5, 1999 at a rate of 12.5% per annum.
Until February 5, 2005, dividends will not be paid in cash, but will be
capitalized as accumulated and unpaid dividends. All dividends accruing on the
Hyundai Preferred Stock from and after such period will be paid in cash,
semiannually, beginning after February 5, 2005. In the event we fail to pay any
such dividend when due, the dividend rate on the Hyundai Preferred Stock will
immediately increase by 2.5% per annum and the holders of a majority of the
outstanding Hyundai Preferred Stock will have the exclusive right to nominate
and elect one additional member of our board of directors, in each case until
there is no longer any such default. The Hyundai Preferred Stock has a
scheduled redemption date of August 5, 2010 and is otherwise redeemable by us
at any time in our sole discretion. All of the shares of Hyundai Preferred
Stock will be held by either Hyundai Electronics or Hyundai Electronics
America. The prior written consent of the holders of a majority of the
outstanding Hyundai Preferred Stock are required to amend, modify or waive the
terms of the Hyundai Preferred Stock. The exchange notes will be senior in
right of payment to the Hyundai Preferred Stock.
In addition, Hyundai Electronics may receive up to an additional $55.0
million in cash during the four-year period beginning January 1, 1999 if we
exceed certain levels of EBITDA as set forth in the recapitalization agreement.
Hyundai Electronics is entitled to receive 33.3% of the amount by which our
EBITDA (defined in the recapitalization agreement as net income before
interest, taxes, depreciation, amortization, extraordinary items and advisory
fees) exceeds $116.5 million, $171.3 million, $198.5 million and $231.8
million, respectively, in each of the first four years following the
recapitalization. In the event the final $20.0 million of such $55.0 million in
cash is required to be paid to Hyundai Electronics, it shall be paid by the
mandatory redemption of an equal amount of Hyundai Preferred Stock.
Intel Preferred Stock
Pursuant to the Intel Stock Purchase Agreement, we issued 10,000 shares of
Class A 10.0% preferred stock to Intel, which we refer to as the Intel
Preferred Stock.
Dividends on the Intel Preferred Stock accrue on a daily basis from the date
of issuance at a rate of 10.0% per annum, payable when and as declared by the
board of directors; provided, however, that dividends will be paid prior to the
payment of any dividends with respect to any of our capital stock or equity
securities which we refer to as junior securities, other than the Hyundai
Preferred Stock. Dividends on each share of Intel Preferred Stock will accrue
from the date of issuance of the Intel Preferred Stock to the first to occur
of:
(1) the date upon which the face value ($1,000 per share) of such share
of Intel Preferred Stock plus all accrued but unpaid dividends is paid;
(2) the date upon which such share of Intel Preferred Stock is converted
into common stock (as described below); or
(3) the date upon which such share of Intel Preferred Stock is acquired
by us.
At any time, and from time to time, holders of the Intel Preferred Stock may
convert all or any portion of such Intel Preferred Stock into shares of common
stock at an initial conversion price equal to 150.0% of the weighted average
price per share of common stock paid by the Equity Investors in connection with
the recapitalization, with the purchase price subject to certain adjustments.
The Intel Preferred Stock is convertible into not less than 6.25% of our Class
L common stock and Class A common stock, before taking into account any shares
of our common stock issued or issuable to employees, officers or directors of
ChipPAC, Inc. or our subsidiaries or financing sources.
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In the event of any liquidation, dissolution or winding up of ChipPAC, Inc.,
holders of the Intel Preferred Stock will be entitled to receive, prior to any
distribution to the holders of junior securities, an amount equal to the face
value ($1,000 per share) of the Intel Preferred Stock plus all accrued and
unpaid dividends thereon. In addition, each of the following will be deemed a
liquidation, dissolution or winding up of ChipPAC, Inc.:
. any sale by us of all or substantially all of its assets;
. any consolidation or merger of ChipPAC, Inc. as a result of which
holders of our common stock possessing the voting power to elect a
majority of the board of directors immediately prior to such
consolidation or merger cease to own capital stock of the surviving
corporation possessing the voting power to elect a majority of the
surviving corporation's board of directors; or
. any issuance, sale or transfer to any third party of our capital
stock as a result of which holders of our outstanding capital stock
possessing the voting power to elect a majority of the board of
directors immediately prior to such sale cease to own capital stock
of ChipPAC, Inc. possessing the voting power to elect a majority of
the board of directors (each of the foregoing, a "Liquidation
Event").
At any time and from time to time after August 1, 2005, we have the right to
redeem all or any portion of the Intel Preferred Stock then outstanding at a
redemption price per share equal to the greater of (i) its fair market value
and (ii) its face value ($1,000 per share) plus all accrued and unpaid
dividends thereon plus a redemption premium of 10.0%. The premium shall
decrease ratably from year to year and shall be zero on or after August 1,
2010. In addition, in the event that we do not complete an underwritten initial
public offering of shares of our common stock with gross proceeds in excess of
$50.0 million on or prior to August 1, 2001, holders of not less than a
majority of the Intel Preferred Stock may require us to redeem all or a portion
of the Intel Preferred Stock at a price per share equal to such stock's face
value ($1,000 per share) plus all accrued and unpaid dividends thereon;
provided, however, that any such redemption will be subject to all restrictions
of applicable law and our debt and equity financing arrangements.
Each share of Intel Preferred Stock has that number of votes equal to the
number of shares of voting common stock then issuable upon the conversion of
that share of Intel Preferred Stock. Except as required by law or as provided
in the following sentence, holders of the Intel Preferred Stock are entitled to
vote on all matters submitted to the stockholders for a vote and will vote
together with holders of our common stock as a single class. The prior written
consent of the holders of at least 66.7% of the outstanding Intel Preferred
Stock is required for:
. any amendment or change of the rights, preferences, privileges or
powers of, or the restrictions provided for the benefits of, the
Intel Preferred Stock;
. any action that authorized, created or issued any new shares of any
class of stock having preferences superior to the Intel Preferred
Stock, other than any issuance of the Hyundai Preferred Stock; or
. any action that reclassifies any outstanding shares of capital stock
into shares having preferences or priority as to dividends or assets
senior to the preference of the Intel Preferred Stock.
The exchange notes are senior in right of payment to the Intel Preferred
Stock.
Intel Warrant
Pursuant to the Intel Stock Purchase Agreement we issued the Intel Warrant
to Intel. The Intel Warrant provides that, for 180 days after we have completed
our first underwritten public offering, Intel is entitled to purchase $5.0
million of our common stock at a 20.0% discount to its initial public offering
price. This right is subject to expiration prior to completion of such 180 day
period in the event that we are sold. Intel, at its election, may exercise the
Intel Warrant in whole or in part and on one or more occasions.
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DESCRIPTION OF THE EXCHANGE NOTES
General
You can find the definition of certain terms used in this description under
the subheading of "Certain Definitions." In this description, unless the
context requires otherwise, the words "ChipPAC," "Company," "we," "our," "ours"
and "us" refer only to ChipPAC, Inc. and not to any of its subsidiaries. The
"Issuer" refers to ChipPAC International Company Limited, a wholly owned
subsidiary of ChipPAC, Inc.
ChipPAC International Company Limited will issue the exchange notes pursuant
to an indenture dated July 29, 1999 by and among itself, ChipPAC, Inc. and
Firstar Bank of Minnesota, N.A., as trustee. The terms of the exchange notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939, as amended.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the outstanding notes except that:
. the exchange notes will bear a Series B designation;
. the exchange notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
. the holders of the exchange notes will not have some of the rights
under the registration rights agreement, including the provision
providing for liquidated damages relating to the timing of this
exchange offer.
The exchange notes will evidence the same debt as the outstanding notes and
will be entitled to the benefits of the indenture. The exchange notes will rank
equally with the outstanding notes if all of the outstanding notes are not
exchanged in this exchange offer.
The following description is only a summary of the material provisions of
the indenture, which is filed as an exhibit to the registration statement of
which this prospectus forms a part. We urge you to read the indenture because
it, and not this description, defines your rights as holders of the exchange
notes. You may request copies of these agreements at our address set forth
under "Where You Can Find More Information."
Brief Description of the Exchange Notes and the Guaranties
The Exchange Notes
These exchange notes:
. are unsecured senior subordinated obligations of ChipPAC
International Company Limited;
. rank equally in right of payment with any future senior subordinated
Indebtedness of ChipPAC International Company Limited;
. are subordinated in right of payment to all existing and future
Senior Indebtedness of ChipPAC International Company Limited; and
. are senior in right of payment to any future Subordinated Obligations
of ChipPAC International Company Limited.
The Guaranties
The Company Guaranty and each Subsidiary Guaranty:
. unconditionally guarantee the obligations of ChipPAC International
Company Limited under the exchange notes;
. rank equally in right of payment with any future senior subordinated
Indebtedness of the Guarantor; and
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. are senior subordinated obligations of the Company and the relevant
Subsidiary Guarantor, as the case may be.
Principal, Maturity and Interest
The exchange notes will be limited in aggregate principal amount to $150.0
million. ChipPAC International Company Limited will issue the exchange notes in
denominations of $1,000 and any integral multiple of $1,000. The exchange notes
will mature on August 1, 2009. Subject to our compliance with the covenant
described under the caption "--Certain Covenants--Limitation on Indebtedness,"
we are permitted to issue more notes, which we refer to as Additional Notes,
under the indenture in an unlimited principal amount. Any such Additional Notes
that are actually issued will be treated as issued and outstanding exchange
notes and as the same class as the existing notes for all purposes of the
indenture and this "Description of the Exchange Notes," unless the context
indicates otherwise.
Interest on these exchange notes will accrue at the rate of 12 3/4% per
annum and will be payable semiannually in arrears on August 1 and February 1,
commencing on February 1, 2000. We will make each interest payment to the
holders of record of these exchange notes on the immediately preceding July 15
and January 15. We will pay interest on overdue principal at 1% per annum in
excess of the above rate and will pay interest on overdue installments of
interest at such higher rate to the extent lawful.
Interest on these exchange notes will accrue from the last interest payment
date on which interest was paid on the existing note surrendered in exchange
thereof, or, if no interest has been repaid on such existing note, from the
date of the original issue. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Optional Redemption
Except as set forth below under this section or under the section
"Redemption for Changes in British Virgin Islands Withholding Taxes," we will
not be entitled to redeem the exchange notes at our option prior to August 1,
2004.
On and after August 1, 2004, we will be entitled at our option to redeem all
or a portion of these exchange notes upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon, if any, to
the applicable redemption date, if redeemed during the 12-month period
beginning on August 1 in the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 106.375%
2005........................................................... 104.250
2006........................................................... 102.125
2007 and thereafter............................................ 100.000%
</TABLE>
In addition, prior to August 1, 2002, we may at our option on one or more
occasions redeem exchange notes (which includes Additional Notes, if any) in an
aggregate principal amount not to exceed 35% of the aggregate principal amount
of exchange notes (which includes Additional Notes, if any) originally issued
under the indenture at a redemption price of 112 3/4% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net cash proceeds from one or more Equity Offerings (provided
that if the Equity Offering is an offering by the Company, a portion of the Net
Cash Proceeds thereof equal to the amount required to redeem any such exchange
notes is contributed to the equity capital of ChipPAC International Company
Limited); provided, however, that:
(1) at least 65% of such aggregate principal amount of exchange notes,
which includes Additional Notes, if any, remains outstanding immediately
after the occurrence of each such redemption, other than exchange notes
held, directly or indirectly, by the Company or its Affiliates; and
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(2) each such redemption occurs within 60 days after the date of the
closing of the related Equity Offering.
Selection and Notice of Redemption
If we are redeeming less than all the exchange notes at any time, the
trustee will select exchange notes on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate.
Exchange notes redeemed in part will be redeemed only in principal amounts
of $1,000. We will cause notices of redemption to be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each holder
of exchange notes to be redeemed at its registered address.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that note shall state the portion of the principal
amount thereof to be redeemed. We will issue a new exchange note in principal
amount equal to the unredeemed portion of the original exchange note in the
name of the holder thereof upon cancellation of the original exchange note.
Exchange notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
exchange notes or portions of them called for redemption.
Withholding Taxes
All payments made under or with respect to the exchange notes or under or
with respect to the Guaranties must be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge of whatever nature
(including penalties, interest and other liabilities related thereto) imposed
or levied by or on behalf of any jurisdiction from or through which payment is
made or in which the payor is organized, resident or engaged in business for
tax purposes or any province or territory thereof or by any taxing authority
therein, which we refer to as taxes, unless any of ChipPAC International
Company Limited or the guarantors is required to withhold or deduct such Taxes
by law or by the interpretation or administration thereof. If ChipPAC
International Company Limited or a guarantor is so required to withhold or
deduct any amount for or on account of Taxes from any payment made under or
with respect to the exchange notes or under or with respect to a Guaranty,
ChipPAC International Company Limited or such guarantor, as the case may be,
will pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by each Holder after such withholding or deduction
(including any withholding or deduction with respect to Additional Amounts)
will not be less than the amount the Holder would have received if such Taxes
had not been withheld or deducted; provided, however, that no Additional
Amounts will be payable with respect to payments made to a Holder (an "Excluded
Holder") to the extent such Holder is subject to such Taxes by reason of its
being connected with the British Virgin Islands or any province or territory
thereof otherwise than by the mere holding of the exchange notes or the receipt
of payments thereunder or the enforcement of its rights and obligations under
the exchange notes or a Guaranty. ChipPAC International Company Limited and the
guarantors will make such withholding or deduction and remit the full amount
deducted or withheld to the relevant authority as and when required in
accordance with applicable law. ChipPAC International Company Limited or the
guarantor will furnish to the Holder, within 30 days after the payment of any
Taxes, certified copies of tax receipts evidencing such payment by ChipPAC
International Company Limited or a guarantor. ChipPAC International Company
Limited will upon written request of each Holder (other than an Excluded
Holder), reimburse each such Holder for the amount of (1) any Taxes (including
penalties, interest and expenses arising therefrom or with respect thereto)
imposed or levied and paid by such Holder as a result of payments made under or
with respect to the exchange notes or under or with respect to a Guaranty and
(2) any Taxes so levied or imposed and paid by such Holder with respect to any
reimbursement under the foregoing clause (1) , but excluding any such Taxes on
such Holder's net income, so that the net amount received by such Holder after
such reimbursement will not be less than the net amount the Holder would have
received if Taxes (other than such Taxes on such Holder's net income) on such
reimbursement had not been imposed.
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At least 30 days prior to each date on which payment under or with respect
to the exchange notes or the Guaranties is due and payable (unless such
obligation to pay Additional Amounts arises shortly before or after the 30th
day prior to such date, in which case promptly thereafter), if any of ChipPAC
International Company Limited or the guarantors is obligated to pay Additional
Amounts with respect to such payment, ChipPAC International Company Limited or
such guarantor will deliver to the trustee an Officers' Certificate stating the
fact that such Additional Amounts will be payable and the amounts so payable
and setting forth such other information as necessary to enable the trustee to
pay such Additional Amounts to Holders of the exchange notes on the payment
date.
ChipPAC International Company Limited or the guarantors will pay any present
or future stamp, court or documentary taxes or any other excise or property
taxes, charges or similar levies that arise in any jurisdiction from the
execution, delivery, enforcement or registration of the exchange notes or a
Guaranty, the indenture or any other document or instrument in relation
thereof, or the receipt of any payments with respect to the exchange notes or a
Guaranty, excluding such taxes, charges or similar levies imposed by any
jurisdiction other than (1) the British Virgin Islands, (2) any other
jurisdiction in which any of ChipPAC International Company Limited or the
guarantors is organized, resident or engaged in business for tax purposes, (3)
any jurisdiction in which any successor to ChipPAC International Company
Limited or the guarantors is organized, resident or engaged in business for tax
purposes or (4) any jurisdiction in which a paying agent is located. In
addition, ChipPAC International Company Limited and the guarantors will agree
to indemnify the Holders (on an after-tax basis) for any such taxes paid by
such Holders.
The obligations described under this heading shall survive any termination,
defeasance or discharge of the Indenture.
Redemption for Changes in British Virgin Islands Withholding Taxes
The exchange notes may be redeemed, at the option of ChipPAC International
Company Limited, at any time as a whole but not in part, on not less than 30
nor more than 60 days' notice, at 100% of the principal amount thereof, plus
accrued and unpaid interest if any, to the date of redemption (subject to the
right of a Holder of record on the relevant record date to receive interest due
on the relevant interest payment date), in the event ChipPAC International
Company Limited has become or will become obligated to pay for reasons outside
its control, and after taking reasonable measures to avoid such obligation, on
the next date on which any amount would be payable with respect to the exchange
notes, any Additional Amounts as a result of a change in or an amendment to the
laws, including any regulations promulgated thereunder, of the British Virgin
Islands, or any political subdivision or taxing authority thereof or therein,
or any change in or amendment to any official position regarding the
application or interpretation of such laws or regulations, which change or
amendment is announced or becomes effective on or after the Issue Date;
provided, however, that (1) no such notice of redemption may be given earlier
than 60 days prior to the earliest date on which Additional Amounts are due and
payable in respect of the exchange notes and (2) at the time any such
redemption notice is given, such obligation to pay Additional Amounts remains
in effect. Prior to giving any notice of redemption pursuant to this provision,
ChipPAC International Company Limited will deliver to the applicable trustee
(1) an Officers' Certificate stating that it is entitled to effect such
redemption and setting forth a statement of facts showing that the conditions
precedent to its right to so redeem have occurred and (2) an Opinion of Counsel
in the British Virgin Islands to the effect that ChipPAC International Company
Limited has become or will become obligated to pay such Additional Amounts as a
result of such amendment or change.
Guaranties
The Company and each of the Subsidiary Guarantors will jointly and severally
guarantee, on a senior subordinated basis, our obligations under the exchange
notes. Each Subsidiary Guaranty will be limited as necessary to prevent such
Subsidiary Guaranty from being rendered voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. See "Risk Factors--Federal and state laws allow
courts, under specific circumstances, to void debts and require holders of some
high yield securities to return payments received from debtors."
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Each Subsidiary Guarantor that makes a payment under its Subsidiary Guaranty
will be entitled to a contribution from each other Subsidiary Guarantor in an
amount equal to such other Subsidiary Guarantor's pro rata portion of such
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.
If a Subsidiary Guaranty were to be rendered voidable, it could be
subordinated by a court to all other indebtedness (including guarantees and
other contingent liabilities) of the applicable Subsidiary Guarantor and,
depending on the amount of such indebtedness, a Subsidiary Guarantor's
liability on its Subsidiary Guaranty could be reduced to zero.
Pursuant to the indenture, ChipPAC International Company Limited, the
Company or a Subsidiary Guarantor may consolidate with, merge with or into, or
transfer all or substantially all its assets to any other Person to the extent
described below under "--Certain Covenants--Merger and Consolidation;"
provided, however, that if the surviving Person is not ChipPAC International
Company Limited, the Company or such Subsidiary Guarantor, as the case may be,
ChipPAC International Company Limited's obligations with respect to the
exchange notes, the Company's obligations under the Company Guaranty or such
Subsidiary Guarantor's obligations under its Subsidiary Guaranty, as the case
may be, must be expressly assumed by such surviving Person.
A Subsidiary Guarantor will be released and relieved from all its
obligations under its Subsidiary Guaranty:
(1) upon the sale or other disposition (including by way of
consolidation or merger) of all or substantially all the capital stock of
such Subsidiary Guarantor in one or more related transactions; or
(2) upon the sale, assignment, transfer or disposition of all or
substantially all the assets of such Subsidiary Guarantor in one or more
related transactions;
in each case other than to ChipPAC International Company Limited or an
Affiliate of ChipPAC International Company Limited and as permitted by the
indenture.
Ranking
Exchange Notes and Guaranties versus Senior Indebtedness.
The indebtedness evidenced by the exchange notes, the Company Guaranty and
the Subsidiary Guaranties will be senior subordinated obligations of ChipPAC
International Company Limited, the Company and the Subsidiary Guarantors, as
the case may be. The payment of the principal of, premium, if any, and interest
on the exchange notes and the payment of the Company Guaranty and any
Subsidiary Guaranty is subordinate in right of payment, as set forth in the
indenture, to the prior payment in full in cash when due of all Obligations
with respect to Senior Indebtedness of ChipPAC International Company Limited,
the Company or the relevant Subsidiary Guarantor, as the case may be, whether
outstanding on the Issue Date or thereafter incurred, including the obligations
of ChipPAC International Company Limited, the Company and such Subsidiary
Guarantor under the Credit Agreement.
As of September 30, 1999,
(1) the Senior Indebtedness of ChipPAC International Company Limited is
approximately $150.0 million, all of which is secured indebtedness under
the Credit Agreement;
(2) the Senior Indebtedness of the Company is approximately $150.0
million, consisting of the Company's senior guaranty of ChipPAC
International Company Limited's obligations under the Credit Agreement; and
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(3) the Senior Indebtedness of the Subsidiary Guarantors is
approximately $150.0 million, consisting of the Subsidiary Guarantors'
senior guaranty of ChipPAC International Company Limited's obligations
under the Credit Agreement.
In addition, ChipPAC International Company Limited has additional availability
of $70.0 million for borrowings of Senior Indebtedness under the Credit
Agreement. Although the indenture contains limitations on the amount of
additional Indebtedness that ChipPAC International Company Limited, the Company
and the Subsidiary Guarantors may incur, under certain circumstances the amount
of such Indebtedness is substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness."
Guaranties versus Other Liabilities of Subsidiaries.
All of our operations are conducted through our subsidiaries that are not
subsidiaries of ChipPAC International Company Limited. Our Chinese subsidiaries
are not guaranteeing the exchange notes or ChipPAC International Company
Limited's obligations under the Credit Agreement. Claims of creditors of such
non-guarantor subsidiaries, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by such non-guarantor
subsidiaries, and claims of preferred stockholders, if any, of such non-
guarantor subsidiaries generally will have priority with respect to the assets
and earnings of such non-guarantor subsidiaries over the claims of creditors of
ChipPAC International Company Limited, including holders of the exchange notes,
even if such obligations do not constitute Senior Indebtedness. The exchange
notes, the Company Guaranty and each Subsidiary Guaranty, therefore, will be
effectively subordinated to creditors (including trade creditors) and preferred
stockholders of such non-guarantor subsidiaries of the Company. See "Risk
Factors--Your right to receive payments on these exchange notes is junior to
ChipPAC International Company Limited's existing Senior Indebtedness and
possibly all of its future borrowings. Further, the Guaranties of these
exchange notes are junior to all the guarantors' existing senior indebtedness
and possibly to all of their future borrowings."
As of September 30, 1999, the total liabilities of our non-guarantor
subsidiaries are approximately $69.1 million. Although the indenture limits the
incurrence of Indebtedness and preferred stock of certain of our subsidiaries,
such limitation is subject to a number of significant qualifications. Moreover,
the indenture does not impose any limitation on the incurrence by such
subsidiaries of liabilities that are not considered Indebtedness or Preferred
Stock under the indenture. See "--Certain Covenants--Limitation on
Indebtedness."
Exchange Notes and Guaranties versus Other Senior Subordinated Indebtedness.
Only Indebtedness of ChipPAC International Company Limited, the Company or a
Subsidiary Guarantor that is Senior Indebtedness will rank senior to the
exchange notes, the Company Guaranty and the relevant Subsidiary Guaranty in
accordance with the provisions of the indenture. The exchange notes, the
Company Guaranty and each Subsidiary Guaranty will in all respects rank equally
with all other Senior Subordinated Indebtedness of ChipPAC International
Company Limited, the Company and the relevant Subsidiary Guarantor,
respectively. All Indebtedness of a Subsidiary of ours that is not a Subsidiary
Guarantor will be structurally senior to the exchange notes.
ChipPAC International Company Limited, the Company and each Subsidiary
Guarantor have agreed in the indenture that they will not Incur, directly or
indirectly, any Indebtedness that is subordinate or junior in ranking in right
of payment to its Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be
subordinated or junior to Secured Indebtedness merely because it is unsecured.
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Payment of Exchange Notes.
We are not permitted to pay principal of, premium, if any, or interest on,
the exchange notes or make any deposit pursuant to the provisions described
under "--Defeasance" below and may not repurchase, redeem or otherwise retire
any exchange notes (collectively, "pay the exchange notes") if either of the
following (each, a "Payment Default") occurs:
(1) any Obligations with respect to Senior Indebtedness are not paid in
full when due; or
(2) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms;
unless, in either case, the Payment Default has been cured or waived and any
such acceleration has been rescinded in writing or such Senior Indebtedness has
been paid in full in cash. Regardless of the foregoing, we are permitted to pay
the exchange notes without regard to the foregoing if ChipPAC International
Company Limited and the trustee receive written notice approving such payment
from the Representative of the Senior Indebtedness with respect to which the
Payment Default has occurred and is continuing.
During the continuance of any default (other than a Payment Default) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, we are not permitted to pay the exchange notes for a
period (a "Payment Blockage Period") commencing upon the receipt by the trustee
(with a copy to ChipPAC International Company Limited) of written notice (a
"Blockage Notice") of such default from the Representative of the holders of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter. The Payment Blockage Period
will end earlier if such Payment Blockage Period is terminated:
(1) by written notice to the trustee and ChipPAC International Company
Limited from the Person or Persons who gave such Blockage Notice;
(2) because no defaults continue in existence which would permit the
acceleration of the maturity of any Designated Senior Indebtedness at such
time; or
(3) because such Designated Senior Indebtedness has been repaid in full
in cash.
Notwithstanding the provisions described above, unless the holders of such
Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, or any Payment
Default otherwise exists, we are permitted to resume payments on the exchange
notes after the end of such Payment Blockage Period. The exchange notes shall
not be subject to more than one Payment Blockage Period in any consecutive 360-
day period, irrespective of the number of defaults with respect to Designated
Senior Indebtedness during such period, except that if any Blockage Notice is
delivered to the trustee by or on behalf of holders of Designated Senior
Indebtedness (other than holders of the Bank Indebtedness), a Representative of
holders of Bank Indebtedness may give another Blockage Notice within such
period. However, in no event may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period, and there must be 181 days
during any 360-day consecutive period during which no Payment Blockage Period
is in effect.
Upon any payment or distribution by ChipPAC International Company Limited
upon any liquidation, dissolution, winding up, assignment for the benefit of
creditors or marshaling of assets of ChipPAC International Company Limited or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to ChipPAC International Company Limited or its property:
(1) the holders of Senior Indebtedness will be entitled to receive
payment in full in cash of all Obligations with respect to such Senior
Indebtedness before the Noteholders are entitled to receive any payment or
distribution; and
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(2) until all Obligations with respect to Senior Indebtedness are paid
in full in cash, any payment or distribution to which Noteholders would be
entitled but for the subordination provisions of the indenture will be made
to holders of such Senior Indebtedness as their interests may appear,
except that holders of exchange notes may receive certain Capital Stock and
subordinated debt obligations.
If a distribution is made to Noteholders that, due to the subordination
provisions, should not have been made to them, such Noteholders are required to
hold it in trust for the holders of Senior Indebtedness and pay it over to them
as their interests may appear.
If payment of the exchange notes is accelerated because of an Event of
Default, we or the trustee shall promptly notify the holders of Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
If any Designated Senior Indebtedness is outstanding at the time of such
acceleration, none of ChipPAC International Company Limited, the Company or any
Subsidiary Guarantor may pay the exchange notes until five Business Days after
the Representatives of all the issues of Designated Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the exchange notes only if
the Indenture otherwise permits payment at that time.
The obligations of the Company under the Company Guaranty and of a
Subsidiary Guarantor under its Subsidiary Guaranty are senior subordinated
obligations. As such, the rights of Noteholders to receive payment by the
Company or by a Subsidiary Guarantor pursuant to the Company Guaranty or a
Subsidiary Guaranty will be subordinated in right of payment to the rights of
holders of Senior Indebtedness of the Company or such Subsidiary Guarantor, as
the case may be. The terms of the subordination provisions described above with
respect to ChipPAC International Company Limited's obligations under the
exchange notes apply equally to the Company and a Subsidiary Guarantor and the
obligations of the Company and such Subsidiary Guarantor under the Company
Guaranty or a Subsidiary Guaranty, as the case may be.
By reason of the subordination provisions contained in the indenture, in the
event of insolvency, creditors of ChipPAC International Company Limited, the
Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of
ChipPAC International Company Limited, the Company or a Subsidiary Guarantor,
as the case may be, may recover more, ratably, than the Noteholders, and
creditors of ChipPAC International Company Limited who are not holders of
Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in
trust by the trustee for the payment of principal of and interest on the
exchange notes pursuant to the provisions described under "--Defeasance," if
the foregoing subordination provisions were not violated at the time the
respective amounts were deposited pursuant to such defeasance provisions.
Book-Entry, Delivery and Form
We will initially issue the exchange notes in the form of one or more global
exchange notes, which we refer to as the Global Note. The Global Note will be
deposited with, or on behalf of, the Depository and registered in the name of
the Depository or its nominee. Except as set forth below, the Global Note may
be transferred, in whole and not in part, only to the Depository or another
nominee of the Depository. You may hold your beneficial interests in the Global
Note directly through the Depository if you have an account with the Depository
or indirectly through organizations which have accounts with the Depository.
The Depository has advised ChipPAC International Company Limited as follows:
the Depository is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
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and "a clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depository was created to hold securities of institutions
that have accounts with the Depository ("participants") and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (which may include the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies (collectively, the "indirect
participants") that clear through or maintain a custodial relationship with a
participant, whether directly or indirectly.
ChipPAC International Company Limited expects that pursuant to procedures
established by the Depository, upon the deposit of the Global Note with the
Depository, the Depository will credit, on its book-entry registration and
transfer system, the principal amount of exchange notes represented by such
Global Note to the accounts of participants. The accounts to be credited shall
be designated by the initial purchasers. Ownership of beneficial interests in
the Global Note will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in the Global
Note will be shown on, and the transfer of those ownership interests will be
effected only through, records maintained by the Depository, with respect to
participants' interests, the participants and the indirect participants, with
respect to the owners of beneficial interests in the Global Note other than
participants. The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of any related exchange
notes evidenced by the Global Note for all purposes of such exchange notes and
the Indenture. Except as set forth below, as an owner of a beneficial interest
in the Global Note, you will not be entitled to have the exchange notes
represented by the Global Note registered in your name, will not receive or be
entitled to receive physical delivery of certificated exchange notes and will
not be considered to be the owner or holder of any exchange notes under the
Global Note. We understand that under existing industry practice, in the event
an owner of a beneficial interest in the Global Note desires to take any action
that the Depository, as the holder of the Global Note, is entitled to take, the
Depository would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
We will make payments of principal of, premium, if any, and interest on
exchange notes represented by the Global Note registered in the name of and
held by the Depository or its nominee to the Depository or its nominee, as the
case may be, as the registered owner and holder of the Global Note.
We expect that the Depository or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. We also expect that
payments by participants or indirect participants to owners of beneficial
interests in the Global Note held through such participants or indirect
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants or indirect participants.
We will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Note for any note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depository and its participants or indirect
participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in the Global Note owning
through such participants or indirect participants.
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Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor ChipPAC International Company Limited will have any responsibility
or liability for the performance by the Depository or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Exchange Notes
Subject to certain conditions, the exchange notes represented by the Global
Note are exchangeable for certificated exchange notes in definitive form of
like tenor in denominations of $1,000 and integral multiples thereof if:
(1) the Depository notifies ChipPAC International Company Limited that
it is unwilling or unable to continue as Depository for the Global Note or
if at any time the Depository ceases to be a clearing agency registered
under the Exchange Act and, in either case, we are unable to appoint a
qualified successor within 90 days;
(2) we in our discretion at any time determine not to have all the
exchange notes represented by the Global Note; or
(3) a default entitling the holders of the exchange notes to accelerate
the maturity thereof has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated
exchange notes issuable in authorized denominations and registered in such
names as the Depository shall direct. Subject to the foregoing, the Global Note
is not exchangeable, except for a Global Note of the same aggregate
denomination to be registered in the name of the Depository or its nominee.
Same-Day Payment
The indenture requires us to make payments in respect of exchange notes
(including principal, premium, if any, and interest) by wire transfer of
immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address.
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that ChipPAC
International Company Limited repurchase such Holder's exchange notes at a
purchase price in cash equal to 101% of the principal amount thereof plus any
accrued and unpaid interest to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total voting power
of the Voting Stock of the Company (for the purposes of this clause (1),
such person shall be deemed to beneficially own any Voting Stock of a
Person held by any other Person (the "parent entity"), if such person is
the beneficial owner (as defined in this clause (1)), directly or
indirectly, of more than 50% of the voting power of the Voting Stock of
such parent entity;
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(2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors (A) whose election by such Board
of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors on the Issue Date or
whose election or nomination for election was previously so approved or (B)
who were elected to the Board of Directors pursuant to the Shareholders
Agreement, as amended, modified or supplemented from time to time) cease
for any reason to constitute a majority of the Board of Directors then in
office; or
(3) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (in each case other than a Person that is controlled by the
Permitted Holders), if the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Company are changed into
or exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving Person or
transferee that represent, immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
Person or transferee.
Within 30 days following any Change of Control (but subject to compliance
with the immediately succeeding paragraph), ChipPAC International Company
Limited shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require ChipPAC International Company Limited to purchase such
Holder's notes at a purchase price in cash equal to 101% of the principal
amount thereof plus any accrued and unpaid interest to the date of purchase
(subject to the right of holders of record on the relevant record date to
receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by ChipPAC International Company
Limited, consistent with the covenant described hereunder, that a Holder
must follow in order to have its notes purchased.
If the terms of the Credit Agreement prohibit ChipPAC International Company
Limited from making the foregoing offer upon a Change of Control or from
purchasing any notes pursuant thereto, prior to the mailing of the notice to
Holders described in the preceding paragraph, but in any event within 30 days
following any Change of Control, ChipPAC International Company Limited
covenants to:
(1) repay in full all indebtedness outstanding under the Credit
Agreement or offer to repay in full all such indebtedness and repay the
indebtedness of each lender who has accepted such offer; or
(2) obtain the requisite consent under the Credit Agreement to permit
the purchase of the notes as described above.
ChipPAC International Company Limited must first comply with the covenant
described above before it will be required to purchase notes in the event of a
Change of Control; provided, however, that ChipPAC International Company
Limited's failure to comply with the covenant described in the preceding
sentence or to make a Change of Control offer because of any such failure shall
constitute a Default described in clause (4) under "--Defaults" below (and not
under clause (2) thereof). As a result of the foregoing, a holder of the notes
may not be able to compel ChipPAC International Company Limited to purchase the
notes unless ChipPAC International Company Limited is able at the time to
refinance all indebtedness outstanding under the Credit Agreement or obtain
requisite consents under the Credit Agreement.
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ChipPAC International Company Limited shall comply, to the extent
applicable, with the requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the repurchase of notes
pursuant to the covenant described hereunder. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
covenant described hereunder, ChipPAC International Company Limited shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the covenant described hereunder
by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
ChipPAC International Company Limited and the initial purchasers. We have no
present intention to engage in a transaction involving a Change of Control,
although we could decide to do so in the future. Subject to the limitations
discussed below, we could, in the future, enter into certain transactions,
including acquisitions, refinances or other recapitalizations, that would not
constitute a Change of Control under the indenture, but that could increase the
amount of indebtedness outstanding at such time or otherwise affect our capital
structure or credit ratings. Restrictions on our ability to incur additional
Indebtedness are contained in the covenants described under "--Certain
Covenants--Limitation on Indebtedness." Such restrictions can only be waived
with the consent of the holders of a majority in principal amount of the notes
then outstanding. Except for the limitations contained in such covenants,
however, the indenture will not contain any covenants or provisions that may
afford holders of the notes protection in the event of a highly leveraged
transaction.
The Credit Agreement will prohibit us from purchasing any notes, and will
also provide that the occurrence of certain change of control events with
respect to the Company would constitute a default thereunder. In the event a
Change of Control occurs at a time when ChipPAC International Company Limited
is prohibited from purchasing notes, ChipPAC International Company Limited
could seek the consent of its lenders to the purchase of notes or could attempt
to refinance the borrowings that contain such prohibition. If ChipPAC
International Company Limited does not obtain such a consent or repay such
borrowings, ChipPAC International Company Limited will remain prohibited from
purchasing notes. In such case, ChipPAC International Company Limited's failure
to comply with this covenant would constitute a Default under the Indenture
which would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payment to the Holders of notes.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the
notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on us.
Finally, our ability to pay cash to the holders of notes following the
occurrence of a Change of Control may be limited by our then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any required repurchases. The provisions under the
Indenture relative to our obligation to make an offer to repurchase the notes
as a result of a Change of Control may be waived or modified with the written
consent of the holders of a majority in principal amount of the notes.
Certain Covenants
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) We shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness,
except that ChipPAC and ChipPAC International Company Limited may Incur
Indebtedness if, after giving pro forma effect thereto, the Consolidated
Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), ChipPAC and its Restricted
Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness of us or any Restricted Subsidiary Incurred pursuant to
any Revolving Credit Facility; provided, however, that, immediately after
giving effect to any such Incurrence, the aggregate
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principal amount of all Indebtedness incurred under this clause (1) and
then outstanding does not exceed the greater of (A) $50.0 million and (B)
the sum of (x) $20.0 million, (y) 50% of the book value of our inventory
and that of our Restricted Subsidiaries and (z) 80% of the book value of
our accounts receivables and that of our Restricted Subsidiaries; provided,
however, that such Indebtedness may only be Incurred by a Restricted
Subsidiary if such Indebtedness, when added together with the amount of all
other Indebtedness Incurred by Restricted Subsidiaries pursuant to this
clause (1) and then outstanding, does not exceed an amount equal to 50% of
the greater of (x) the amount in clause (A) above and (y) the amount
determined in clause (B) above;
(2) Indebtedness of ChipPAC International Company Limited Incurred
pursuant to any Term Loan Facilities; provided, however, that, after giving
effect to any such Incurrence, the aggregate principal amount of all
Indebtedness Incurred under this clause (2) and then outstanding does not
exceed $190.0 million less the aggregate sum of all principal payments
actually made from time to time after the Issue Date with respect to such
Indebtedness pursuant to paragraph (a)(3)(A) of the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock";
(3) Indebtedness of ChipPAC International Company Limited Incurred prior
to August 5, 2001 pursuant to any Capital Expenditure Facility (and
Refinancing Indebtedness in respect thereof) in an aggregate principal
amount not to exceed $20.0 million;
(4) Indebtedness of us or any Restricted Subsidiary owed to and held by
us or a Restricted Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or
another Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the issuer thereof;
(5) Indebtedness consisting of the exchange notes (other than Additional
Notes);
(6) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2), (3), (4) or (5) of this covenant);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4), (5), (6), (8) or this
clause (7); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (8), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;
(8) Indebtedness of a Person Incurred and outstanding on or prior to the
date on which such Person was acquired by the Company or a Restricted
Subsidiary (other than Indebtedness Incurred in anticipation of, in
connection with, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Person was acquired by the Company or a
Restricted Subsidiary); provided, however, that after giving pro forma
effect thereto, (a) the Consolidated Coverage Ratio increases as a
consequence of such incurrence and related acquisition and (b) the
Consolidated Coverage Ratio is at least 1.5 to 1.0;
(9) Hedging Obligations of ours or any Restricted Subsidiary under or
with respect to Interest Rate Agreements and Currency Agreements entered
into in the ordinary course of business and not for the purpose of
speculation;
(10) Indebtedness of ours or any Restricted Subsidiary in respect of
performance bonds, completion guarantees and surety or appeal bonds entered
into by us and the Restricted Subsidiaries in the ordinary course of their
business;
(11) Indebtedness consisting of the Guaranties and Guarantees of other
Indebtedness otherwise permitted to be Incurred pursuant to the Indenture;
(12) Indebtedness of ours or any Restricted Subsidiary arising from the
honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business, provided that such Indebtedness is satisfied within five business
days of Incurrence;
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(13) Indebtedness (including Capital Lease Obligations) Incurred by us
or any of our Restricted Subsidiaries to finance the purchase, lease or
improvement of property (real or personal) or equipment (whether through
the direct purchase of assets or the Capital Stock of any Person owning
such assets) in an aggregate principal amount which, when added together
with the amount of Indebtedness Incurred pursuant to this clause (13) and
then outstanding, does not exceed the greater of (A) $15.0 million and (B)
5% of Total Assets (in each case including any Refinancing Indebtedness
with respect thereto);
(14) Indebtedness Incurred by us or any of our Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of credit
issued in the ordinary course of business including, without limitation,
letters of credit to procure raw materials, or in respect of workers'
compensation claims or self-insurance, or other Indebtedness with respect
to reimbursement type obligations regarding workers' compensation claims;
(15) Indebtedness of ours issued to any of our directors, employees,
officers or consultants or a Restricted Subsidiary in connection with the
redemption or purchase of Capital Stock that, by its terms, is subordinated
to the exchange notes, is not secured by any of our assets or our
Restricted Subsidiaries and does not require cash payments prior to the
Stated Maturity of the exchange notes and Refinancing Indebtedness in
respect thereof, in an aggregate principal amount which, when added
together with the amount of Indebtedness Incurred pursuant to this clause
(15) and then outstanding, does not exceed $5.0 million;
(16) Indebtedness arising from agreements of our or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price,
earn out or other similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Restricted
Subsidiary of ours, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition; provided that the
maximum assumable liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds actually received by us and our Restricted
Subsidiaries in connection with such disposition;
(17) Indebtedness arising from the Recapitalization Agreement providing
for indemnification, adjustment of purchase price, earn out or other
similar business obligations; and
(18) Indebtedness of ours or a Restricted Subsidiary in an aggregate
principal amount which, together with all other Indebtedness of ChipPAC and
the Restricted Subsidiaries outstanding on the date of such Incurrence
(other than Indebtedness permitted by clauses (1) through (17) above or
paragraph (a) above) does not exceed $20.0 million.
(c) Notwithstanding the foregoing, we shall not, and shall not permit any
Restricted Subsidiary to, Incur any Refinancing Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such Indebtedness
shall be subordinated to the exchange notes or the relevant Guaranty, as
applicable, to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing covenant, (1)
in the event that an item of Indebtedness meets the criteria of more than one
of the types of Indebtedness described above, ChipPAC International Company
Limited, in its sole discretion, will classify such item of Indebtedness at the
time of its Incurrence and only be required to include the amount and type of
such Indebtedness in one of the above clauses and (2) an item of Indebtedness
may be divided and classified in more than one of the types of Indebtedness
described above.
(e) Notwithstanding paragraphs (a) and (b) above, neither we nor ChipPAC
International Company Limited shall, and we shall not permit any Subsidiary
Guarantor to, Incur (1) any Indebtedness if such Indebtedness is subordinate or
junior in ranking in any respect to any Senior Indebtedness of ChipPAC
International Company Limited, the ChipPAC or such Subsidiary Guarantor, as
applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness
or (2) any Secured Indebtedness (other than trade payables incurred in
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the ordinary course of business) that is not Senior Indebtedness unless
contemporaneously therewith effective provision is made to secure the
exchange notes or the relevant Guaranty, as applicable, equally and ratably
with such Secured Indebtedness for so long as such Secured Indebtedness is
secured by a Lien.
(f) For purposes of determining compliance with any U.S. dollar denominated
restriction on the Incurrence of Indebtedness where the Indebtedness Incurred
is denominated in a different currency, the amount of such Indebtedness will be
the U.S. Dollar Equivalent determined on the date of the Incurrence of such
Indebtedness, provided, however, that if any such Indebtedness denominated in a
different currency is subject to a Currency Agreement with respect to U.S.
dollars, covering all principal, premium, if any, and interest payable on such
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to
the extent that (i) such U.S. Dollar Equivalent was determined based on a
Currency Agreement, in which case the Refinancing Indebtedness will be
determined in accordance with the preceding sentence, and (ii) the principal
amount of the Refinancing Indebtedness exceeds the principal amount of the
Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such
excess will be determined on the date such Refinancing Indebtedness is
Incurred.
Limitation on Restricted Payments. (a) We shall not, and shall not permit
any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment
if at the time that we or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) we are not able to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation on
Indebtedness;" or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum (without
duplication) of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
exchange notes are originally issued to the end of the most recent
fiscal quarter for which internal financial statements are available on
or prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by us from the issuance
or sale of, or capital contribution in respect of, its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other
than an issuance or sale to a Subsidiary of ours and other than an
issuance or sale to an employee stock ownership plan or to a trust
established by us or any of our Subsidiaries for the benefit of
employees to the extent that the purchase by such plan or trust is
financed by Indebtedness of such plan or trust to us or any Subsidiary
or Indebtedness Guaranteed by us or any Subsidiary) and the fair market
value (as determined in good faith by resolution of our Board of
Directors) of property (other than cash that would constitute Temporary
Cash Equivalents or a Related Business) received by us or a Restricted
Subsidiary subsequent to the Issue Date as a contribution to its common
equity capital (other than from a Subsidiary or that was financed with
loans from us or any Restricted Subsidiary);
(C) the amount by which Indebtedness of ours or any Restricted
Subsidiary is reduced on our consolidated balance sheet upon the
conversion or exchange (other than by a Subsidiary of ours subsequent
to the Issue Date of any Indebtedness ours or any Restricted Subsidiary
convertible or exchangeable for our Capital Stock (other than
Disqualified Stock) (less the amount of any cash, or the fair value of
any other property, distributed by us or any Restricted Subsidiary upon
such conversion or exchange); and
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(D) an amount equal to the sum of (i) the net reduction in
Investments in any Person resulting from dividends, repayments of loans
or advances or other transfers of assets subsequent to the Issue Date,
in each case to us or any Restricted Subsidiary from such Person, and
(ii) the portion (proportionate to our equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Person, the amount
of Investments previously made (and treated as a Restricted Payment) by
us or any Restricted Subsidiary in such Person.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(1) any Restricted Payment made by exchange for, or out of the proceeds
of the substantially concurrent sale of, or capital contribution in respect
of, our Capital Stock (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of ours or an employee stock ownership
plan or to a trust established by us or any of our Subsidiaries for the
benefit of employees to the extent that the purchase by such plan or trust
is financed by Indebtedness of such plan or trust to us or any Subsidiary
of ours or Indebtedness Guaranteed by us or any Subsidiary of ours);
provided, however, that (A) such Restricted Payment shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness which is permitted to be Incurred pursuant to the covenant
described under "--Limitation on Indebtedness;" provided, however, that
such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments;
(3) any purchase or redemption of Disqualified Stock of ChipPAC or a
Restricted Subsidiary made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock of ChipPAC or a
Restricted Subsidiary which is permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness;" provided, however,
that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(4) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"CLimitation on Sales of Assets and Subsidiary Stock;" provided, however,
that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(5) upon the occurrence of a Change of Control and within 60 days after
the completion of the offer to repurchase the exchange notes pursuant to
the covenant described under "Change of Control" above (including the
purchase of the exchange notes tendered), any purchase or redemption of
Subordinated Obligations required pursuant to the terms thereof as a result
of such Change of Control at a purchase or redemption price not to exceed
the outstanding principal amount thereof, plus any accrued and unpaid
interest; provided, however, that
(A) at the time of such purchase or redemption no Default shall have
occurred and be continuing (or would result therefrom);
(B) we would be able to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation
on Indebtedness" after giving pro forma effect to such Restricted
Payment; and
(C) such purchase or redemption shall be included in the calculation
of the amount of Restricted Payments.
(6) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; provided, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
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(7) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, consultants, former consultants,
directors or former directors of the Company or any of its Subsidiaries (or
permitted transferees of such employees, former employees, consultants,
former consultants, directors or former directors), pursuant to the terms
of the agreements (including employment and consulting agreements) or plans
(or amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount
of such repurchases shall not exceed the sum of:
(x) $5.0 million;
(y) the Net Cash Proceeds from the sale of Capital Stock to members
of management or directors of the Company and its Subsidiaries that
occurs after the Issue Date (to the extent the Net Cash Proceeds from
the sale of such Capital Stock have not otherwise been applied to the
payment of Restricted Payments by virtue of clause (3)(B) of paragraph
(a) above); and
(z) the cash proceeds of any "Key man" life insurance policies that
are used to make such repurchases; provided further, however, that (A)
such repurchases shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under clause (3)(B) of
paragraph (a) above.
(8) payments required pursuant to the terms of the Recapitalization
Agreement to consummate the recapitalization pursuant to the terms of the
Recapitalization Agreement; provided, however, that such payments shall be
excluded in the calculation of the amount of Restricted Payments;
(9) payments in respect of the Hyundai Earn-out pursuant to the terms of
the Recapitalization Agreement as in effect on the Issue Date; provided,
however, that such payments shall be excluded in the calculation of the
amount of Restricted Payments;
(10) payments of in-kind dividends when due or the accrual or cumulation
of dividends on the Hyundai Preferred Stock pursuant to the terms of such
Hyundai Preferred Stock as in effect on the Recapitalization Closing Date;
provided, however, that such payments shall be excluded in the calculation
of the amount of Restricted Payments;
(11) payments of cash dividends when due on and after 5 1/2 years from
the Recapitalization Closing Date on the Hyundai Preferred Stock pursuant
to the terms of such Hyundai Preferred Stock as in effect on the
Recapitalization Closing Date; provided, however, that such payments shall
be included in the calculation of the amount of Restricted Payments;
(12) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price thereof; provided, however, that such payments shall be excluded in
the calculation of the amount of Restricted Payments;
(13) payments not to exceed $200,000 in the aggregate solely to enable
us to make payments to holders of its Capital Stock in lieu of the issuance
of fractional shares of its Capital Stock; provided, however, that such
payments shall be excluded in the calculation of the amount of Restricted
Payments;
(14) Restricted Payments not to exceed $15.0 million payable on
Capital Stock (including Disqualified Stock) issued to customers, clients,
suppliers or purchasers or sellers of goods or services of ours or a
Restricted Subsidiary in connection with a strategic investment in us or a
Restricted Subsidiary by such customers, clients, suppliers or purchasers
or sellers of goods or services; provided, however, that such payments
shall be included in the calculation of the amount of Restricted Payments;
(15) Restricted Payments not exceeding $15.0 million in the aggregate
for any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Obligations; provided, however,
that (A) at the time of such Restricted Payments, no Default shall have
occurred and be continuing (or result therefrom) and (B) such Restricted
Payments shall be included in the calculation of the amount of Restricted
Payments; or
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(16) the distribution, as a dividend or otherwise, of shares of Capital
Stock or assets of an Unrestricted Subsidiary provided that the fair market
value (as determined in good faith by our Board of Directors) of such
shares of Capital Stock or assets shall not exceed the amount of the
Investments that were made (and not subsequently reduced pursuant to clause
(3)(D) of paragraph (a) above) by us in such Unrestricted Subsidiary and
were treated as Restricted Payments or were included in the calculation of
the amount of Restricted Payments previously made; provided, however, that
(A) such distributions shall be excluded in the calculation of the amount
of Restricted Payments and (B) any net reduction in Investments in such
Unrestricted Subsidiary resulting from such distribution shall be excluded
from the calculation of amounts under clause (3)(D) of paragraph (a) above;
(17) Restricted Payments not exceeding $7.5 million in the aggregate;
provided, however, that (A) at the time of such Restricted Payments, no
Default shall have occurred and be continuing (or result therefrom) and (B)
such Restricted Payments shall be included in the calculation of the amount
of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries. We
shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to us or any
Restricted Subsidiary or pay any Indebtedness owed to ChipPAC International
Company Limited or us, (b) make any loans or advances to ChipPAC International
Company Limited or us or (c) transfer any of its property or assets to ChipPAC
International Company Limited or us, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date (including the Indenture, the exchange
notes and the Guaranties), or, in the case of the Credit Agreement, as in
effect on the Recapitalization Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by us (other than Indebtedness Incurred
as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by us) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement (A)
evidencing Indebtedness Incurred without violation of the Indenture or (B)
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this covenant or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2)
of this covenant or this clause (3); provided, however, that in the case of
clauses (A) and (B), the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or
amendment are, in the good faith judgment of the Board of Directors, no
more restrictive in any material respect than the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in
agreements of such Restricted Subsidiary in effect at, or entered into on,
the Issue Date or the Recapitalization Closing Date;
(4) any such encumbrance or restriction consisting of customary non-
assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder or in licenses entered into in the ordinary course of business
to the extent such licenses restrict the transfer of the license or the
property licensed thereunder;
(5) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to
the extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages;
(6) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien;
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(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (c) above;
(8) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(9) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(10) any restriction arising under applicable law, regulation or order;
(11) any agreement or instrument governing Capital Stock (other than
Disqualified Stock) of any Person that is in effect on the date such Person
is acquired by us or a Restricted Subsidiary;
(12) any restriction on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
and
(13) any restriction in any agreement that is not more restrictive than
the restrictions under the terms of the Credit Agreement as in effect on
the Recapitalization Closing Date.
Limitation on Sales of Assets and Subsidiary Stock. (a) We shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless:
(1) we or such Restricted Subsidiary receives consideration at the time
of such Asset Disposition at least equal to the fair market value
(including as to the value of all non-cash consideration), as determined in
good faith by the Board of Directors, of the shares and assets subject to
such Asset Disposition;
(2) at least 75% of the consideration thereof received by us or such
Restricted Subsidiary is in the form of cash or cash equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by us or such Restricted Subsidiary, as the case may
be, pursuant to one or more of the following:
(A) to the extent we elect (or are required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness
of ChipPAC International Company Limited or Indebtedness (other than
any Disqualified Stock) of ours or another Restricted Subsidiary of
ours (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within one year from the later of the closing
date of such Asset Disposition and the receipt of such Net Available
Cash;
(B) to the extent we elect, to acquire Additional Assets within one
year from (or enter into a binding commitment to acquire Additional
Assets, provided that such commitment shall be subject only to
customary conditions (other than financing) and such acquisition shall
be consummated within two years from) the later of the closing date of
such Asset Disposition and the receipt of such Net Available Cash; and
(C) to the extent we elect, or to the extent of the balance of such
Net Available Cash after application in accordance with clauses (A) and
(B), to make an offer to the holders of the exchange notes (and to
holders of other Senior Subordinated Indebtedness of ChipPAC
International Company Limited designated by ChipPAC International
Company Limited) to purchase exchange notes (and such other Senior
Subordinated Indebtedness) pursuant to and subject to the conditions
contained in the Indenture;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (C) above, we or such
Restricted Subsidiary shall permanently retire such Indebtedness and, in the
case of any revolving facility, shall cause the related loan commitment, if
any, to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, we and the Restricted Subsidiaries shall not be required to apply
any Net Available Cash in accordance with this paragraph except to the extent
that the aggregate Net Available Cash
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from all Asset Dispositions which are not applied in accordance with this
paragraph exceeds $10.0 million. Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments or used to temporarily reduce loans outstanding under
any revolving credit facility.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of ours or any Restricted
Subsidiary and the release of us or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset Disposition,
(y) securities, exchange notes or other obligations received by us or
any Restricted Subsidiary from the transferee that are promptly converted
by us or such Restricted Subsidiary into cash; and
(z) any Additional Assets (so long as such Additional Assets were
acquired for fair market value in connection with the transaction giving
rise to such Asset Disposition, as determined in good faith by the board of
directors of the Company or such Restricted Subsidiary, as applicable),
which Additional Assets shall be deemed to have been acquired pursuant to
clause (A) of the preceding paragraph in connection with such Asset
Disposition.
(b) In the event of an Asset Disposition that requires the purchase of the
exchange notes (and other Senior Subordinated Indebtedness) pursuant to clause
(a)(3)(C) above, ChipPAC International Company Limited will be required to
purchase exchange notes tendered pursuant to an offer by ChipPAC International
Company Limited for the exchange notes (and other Senior Subordinated
Indebtedness) at a purchase price of 100% of their principal amount (without
premium) plus accrued but unpaid interest (or, in respect of such other Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for
by the terms of such Senior Subordinated Indebtedness) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Indenture. If the aggregate purchase price of the exchange notes (and any
other Senior Subordinated Indebtedness) tendered exceeds the Net Available
Cash allotted to the purchase thereof, ChipPAC International Company Limited
will select the exchange notes (and any other Senior Subordinated
Indebtedness) to be purchased on a pro rata basis but in denominations of
$1,000 or multiples thereof. ChipPAC International Company Limited shall not
be required to make such an offer to purchase exchange notes (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor is less than $10.0 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to the Net Available Cash from any subsequent Asset Disposition).
(c) ChipPAC International Company Limited shall comply, to the extent
applicable, with the requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the repurchase of
exchange notes pursuant to this covenant. To the extent that the provisions of
any securities laws or regulations conflict with provisions of this covenant,
ChipPAC International Company Limited shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) We shall not, and shall not
permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of ours involving aggregate consideration in excess of $2.5 million
(an "Affiliate Transaction") unless the terms thereof:
(1) are no less favorable to us or such Restricted Subsidiary than those
that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate;
(2) have been approved by a majority of the disinterested members of the
Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of $10.0
million, have been determined by (A) a nationally recognized investment
banking firm to be fair, from a financial standpoint, to us and our
Restricted Subsidiaries or (B) an accounting or appraisal firm nationally
recognized in making such determinations to be on terms that are not less
favorable to us and our Restricted Subsidiaries than the terms that could
be obtained in an arms-length transaction from a Person that is not an
Affiliate of ours.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit;
(1) any Restricted Payment permitted to be paid pursuant to the covenant
described under "--Limitation on Restricted Payments;"
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors;
(3) the grant of stock options or similar rights to our employees and
directors or those of our Restricted Subsidiaries pursuant to plans or
agreements approved by the Board of Directors;
(4) loans or advances to employees, directors, officers or consultants
(A) in the ordinary course of business or (B) otherwise in an aggregate
amount not to exceed $5.0 million in the aggregate outstanding at any one
time;
(5) reasonable fees, compensation or employee benefit arrangements to
and indemnity provided for the benefit of employees, directors, officers or
consultants of ours or any Subsidiary in the ordinary course of business;
(6) any transaction exclusively between or among us and our Restricted
Subsidiaries or between or among Restricted Subsidiaries; provided,
however, that such transactions are not otherwise prohibited by the
Indenture;
(7) the payment of management, consulting and advisory fees and related
expenses made pursuant to the Advisory Agreements as in effect on the
Recapitalization Closing Date and the payment of other customary
management, consulting and advisory fees and related expenses to the
Principals and their Affiliates made pursuant to any financial advisory,
financing, underwriting or placement agreement or in respect of other
investment banking activities, including, without limitation, in connection
with acquisitions or divestitures which fees and expenses are made pursuant
to arrangements approved by our board of directors or that of such
Restricted Subsidiary in good faith;
(8) any Affiliate Transaction with Hyundai Electronics and its
Affiliates pursuant to written agreements in effect on the Recapitalization
Closing Date and as amended, renewed or extended from time to time;
provided, however, that any such amendment, renewal or extension shall not
contain terms which are materially less favorable to us and our Restricted
Subsidiaries than those in the agreements in effect on the Recapitalization
Closing Date;
(9) any agreement with us or any Restricted Subsidiary as in effect as
of the Recapitalization Closing Date or any amendment or replacement
thereto or any transaction contemplated thereby (including pursuant to any
amendment or replacement thereto) so long as any such amendment or
replacement agreement is not more disadvantageous to us or such Restricted
Subsidiary in any material respect than the original agreement as in effect
on the Recapitalization Closing Date;
(10) the existence of, or the performance by us or any of our Restricted
Subsidiaries of obligations under the terms of, the Shareholders Agreement
and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by us or any of our
Restricted Subsidiaries of obligations under, any future amendment to any
such existing agreement or under any similar agreement entered into after
the Recapitalization Closing Date shall only be permitted by this clause
(10) to the extent that the terms of any such amendment or new agreement
are not more disadvantageous to us or any such Restricted Subsidiary in any
material respect;
(11) transactions with customers, clients, suppliers, joint venture
partners or purchasers or sellers of goods or services, in each case in the
ordinary course of business (including, without limitation, pursuant to
joint venture agreements) and otherwise in compliance with the terms of the
Indenture which are fair to us and our Restricted Subsidiaries, in the
reasonable determination of the board of directors or the senior management
thereof, or are on terms at least as favorable as might reasonably have
been obtained at such time from an unaffiliated party; and
(12) the issuance or sale of any of our Capital Stock (other than
Disqualified Stock).
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Merger and Consolidation. Neither ChipPAC International Company Limited nor
we shall consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of related transactions, all or substantially
all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
British Virgin Islands or of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not us or
ChipPAC International Company Limited) shall expressly assume, by an
indenture supplemental thereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of ChipPAC
International Company Limited or us, as applicable, under the Indenture and
the Company Guaranty or the exchange notes, as applicable;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction, (A) the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under "--
Limitation on Indebtedness" or (B) the Consolidated Coverage Ratio for the
Successor Company and its Restricted Subsidiaries would be equal to or
greater than such ratio for us and our Restricted Subsidiaries immediately
prior to such transaction;
(4) ChipPAC International Company Limited or us, as applicable, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and any
supplemental indenture comply with the Indenture;
(5) In the event that the merging corporation (i.e., the Company or
ChipPAC International Company Limited, as applicable) is organized and
existing under the laws of the British Virgin Islands and the Successor
Company is organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia or in the event that
the merging corporation is organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company is organized and existing under the laws of the
British Virgin Islands (any of the foregoing events are referred to herein
as a "Foreign Jurisdiction Merger"), ChipPAC International Company Limited
or ChipPAC, as applicable, shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders will not recognize income, gain
or loss for U.S. Federal income tax purposes as a result of such
transaction and will be subject to U.S. Federal income tax on the same
amounts and at the same times as would have been the case if such
transaction had not occurred; and
(6) In the event of a Foreign Jurisdiction Merger, ChipPAC International
Company Limited or ChipPAC, as applicable, shall have delivered to the
Trustee an Opinion of Counsel in the British Virgin Islands (or other
applicable jurisdiction) to the effect that (A) any payment of interest or
principal under or with respect to the exchange notes or the Guaranties
will, after the consolidation, merger, conveyance, transfer or lease of
assets, be exempt from the Taxes described under "--Withholding Taxes" and
(B) no other taxes on income (including capital gains) will be payable
under the laws of the British Virgin Islands or any other jurisdiction
where the Successor Company is or becomes organized, resident or engaged in
business for tax purposes in respect of the acquisition, ownership or
disposition of the exchange notes, including the receipt of interest or
principal thereon, provided that such Holder does not use or hold, and is
not deemed to use or hold the exchange notes in carrying on a business in
the British Virgin Islands or other jurisdiction where the Successor
Company is or becomes organized, resident or engaged in business for tax
purposes.
provided, however, that clause (3) above shall not apply (x) if, in the good
faith determination of the Board of Directors, whose determination shall be
evidenced by a resolution of the Board of Directors, the principal purpose and
effect of such transaction is to change the jurisdiction of incorporation of
ChipPAC International
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Company Limited or the Company or (y) in the case of a merger of ChipPAC
International Company Limited or the Company with or into a Wholly Owned
Subsidiary of ours.
The Successor Company shall be the successor to us or ChipPAC International
Company Limited, as the case may be, and shall succeed to, and be substituted
for, and may exercise every right and power of, ChipPAC International Company
Limited or us under the Indenture, and the predecessor Issuer or Company,
except in the case of a lease, shall be automatically released from its
obligations under the Company Guaranty, the exchange notes and the Indenture.
We will not permit any Subsidiary Guarantor to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of
the United States of America, or any State thereof or the District of
Columbia, and such Person shall expressly assume, by executing a
supplemental indenture or Guaranty Agreement, as applicable, all the
obligations of such Subsidiary under the Indenture or its Subsidiary
Guaranty and under the exchange notes and the Indenture;
(2) immediately after giving effect to such transaction or transactions
on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result of
such transaction as having been issued by such Person at the time of such
transaction), no Default shall have occurred and be continuing; and
(3) we deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture or Guaranty Agreement, if any, complies with the
Indenture.
The provisions of clauses (1) and (2) above shall not apply to any one or
more transactions involving a Subsidiary Guarantor which constitute an Asset
Disposition if we have complied with the applicable provisions of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock" above.
Future Guarantors. In the event that, after the Issue Date, we form or
otherwise acquire, directly or indirectly, any Restricted Subsidiary, we shall
cause such Restricted Subsidiary to Guarantee the exchange notes pursuant to a
Subsidiary Guaranty on the terms and conditions set forth in the Indenture and
the Subsidiary Guaranty Agreement; provided, however, in the event we or a
Restricted Subsidiary forms or otherwise acquires, directly or indirectly, a
Restricted Subsidiary organized under the laws of a jurisdiction other than the
United States and such jurisdiction prohibits by law, regulation or order such
Restricted Subsidiary from providing a Guarantee, we shall use all commercially
reasonable efforts (including pursuing required waivers) over a period up to
one year, to provide such Guarantee; provided, however, that we shall not be
required to use such commercially reasonable efforts with respect to such
subsidiaries for more than a one-year period or such shorter period as we shall
determine in good faith that we have used all commercially reasonable efforts.
If we or such Restricted Subsidiary is unable during such period to obtain an
enforceable Guarantee in such jurisdiction, then such Restricted Subsidiary
shall not be required to provide a Guarantee of the exchange notes pursuant to
the Subsidiary Guaranty so long as such Restricted Subsidiary does not
Guarantee any other Indebtedness of ours and our Restricted Subsidiaries.
Limitation on Assets of Non-Subsidiary Guarantors. We shall not permit our
Restricted Subsidiaries that are not Subsidiary Guarantors, excluding ChipPAC
Assembly and Test (Shanghai) Company, Ltd. and ChipPAC (Shanghai) Company Ltd.
or any successors thereto, to collectively hold at any one time more than 33
1/3% of the consolidated assets of ours and our Restricted Subsidiaries.
Limitation on Sale of the Capital Stock of ChipPAC International Company
Limited. For so long as any of the exchange notes are outstanding, ChipPAC
International Company Limited will continue to be, directly or indirectly, a
Wholly Owned Subsidiary of ours.
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SEC Reports. Whether or not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, we will file with the SEC and provide the
Trustee and Noteholders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections at
the times specified for such filings under such Sections. However, we will not
be required to file any reports, documents or other information if the SEC will
not accept such a filing.
Defaults
Each of the following is an Event of Default:
(1) a default in the payment of interest or any Additional Amounts on
the exchange notes when due, continued for 30 days;
(2) a default in the payment of principal of any note when due at its
Stated Maturity, upon redemption, upon required repurchase, upon
declaration or otherwise;
(3) the failure by us, ChipPAC International Company Limited or any
Subsidiary Guarantor to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above;
(4) the failure by us or any Restricted Subsidiary to comply for 30 days
after notice with any of its obligations in the covenants described above
under "--Change of Control" (other than a failure to purchase the exchange
notes) or under "--Certain Covenants" under "--Limitation on Indebtedness,"
"--Limitation on Restricted Payments," "--Limitation on Restrictions on
Distributions from Restricted Subsidiaries," "--Limitation on Sales of
Assets and Subsidiary Stock" (other than a failure to purchase the exchange
notes), "--Limitation on Affiliate Transactions," "--Future Guarantors,"
"--Limitation on Assets of Non-Subsidiary Guarantors," "--Limitation on
Sale of the Capital Stock of ChipPAC International Company Limited" or "--
SEC Reports;"
(5) the failure by us or any Restricted Subsidiary to comply for 60 days
after notice with its other agreements contained in the Indenture;
(6) Indebtedness of ours, ChipPAC International Company Limited or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated
exceeds $10.0 million (the "cross acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of us,
ChipPAC International Company Limited or a Significant Subsidiary (the
"bankruptcy provisions");
(8) any judgment or decree for the payment of money in excess of $10.0
million is entered against us, ChipPAC International Company Limited or a
Significant Subsidiary, remains outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within 10
days after notice (the "judgment default provision"); or
(9) the Company Guaranty or any Subsidiary Guaranty of a Significant
Subsidiary ceases to be in full force and effect (other than in accordance
with the terms of the Company Guaranty or such Subsidiary Guaranty) or the
ChipPAC or any Significant Subsidiary that is a Subsidiary Guarantor denies
or disaffirms its obligations under the Company Guaranty or its Subsidiary
Guaranty, as the case may be.
However, a default under clauses (4), (5) and (8) will not constitute an
Event of Default until the Trustee or the holders of 25% in principal amount of
the outstanding exchange notes notify ChipPAC International Company Limited and
us of the default and ChipPAC International Company Limited or ChipPAC does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding exchange notes may
declare the principal of and accrued but unpaid interest on all the exchange
notes to be due and payable. Upon such a declaration, such principal and
interest shall be due and
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payable immediately; provided, however, that if upon such declaration there are
any amounts outstanding under the Credit Agreement and the amounts thereunder
have not been accelerated, such principal and interest shall be due and payable
upon the earlier of the time such amounts are accelerated or five Business Days
after receipt by ChipPAC International Company Limited and us and the
Representative under the Credit Agreement of such declaration. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of us or ChipPAC International Company Limited occurs and is continuing, the
principal of and interest on all the exchange notes will ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holders of the exchange notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
exchange notes may rescind any such acceleration with respect to the exchange
notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the exchange
notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium, if any, or interest when due, no holder
of a note may pursue any remedy with respect to the Indenture or the exchange
notes unless:
(1) such holder has previously given the Trustee notice that an Event of
Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding
exchange notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after
the receipt thereof and the offer of security or indemnity; and
(5) the holders of a majority in principal amount of the outstanding
exchange notes have not given the Trustee a direction inconsistent with
such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding exchange notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the
rights of any other holder of a note or that would involve the Trustee in
personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the exchange
notes notice of the Default within 90 days after it occurs. Except in the case
of a Default in the payment of principal of or interest on any note, the
Trustee may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is not opposed to the interest of the
holders of the exchange notes. In addition, ChipPAC International Company
Limited is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. ChipPAC International
Company Limited also is required to deliver to the Trustee, within 30 days
after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action ChipPAC International
Company Limited is taking or proposes to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the exchange notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the exchange notes) and any past default or compliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the exchange notes then
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outstanding. However, without the consent of each holder of an outstanding note
affected thereby, no amendment may, among other things:
(1) reduce the amount of exchange notes whose holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on any
note;
(3) reduce the principal of or extend the Stated Maturity of any note;
(4) reduce the premium payable upon the redemption of any note or change
the time at which any note may be redeemed as described under "--Optional
Redemption" or "--Redemption for Changes in British Virgin Islands
Withholding Taxes" above;
(5) make any note payable in money other than that stated in the note;
(6) impair the right of any holder of the exchange notes to receive
payment of principal of and interest on such holder's exchange notes on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such holder's exchange notes;
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions; or
(8) make any change in the Company Guaranty or any Subsidiary Guaranty
that would adversely affect the Noteholders.
In addition, any amendment to the subordination provisions of the Indenture
that would adversely affect the Holders of the exchange notes will require the
consent of the Holders of at least 75% in aggregate principal amount of the
exchange notes then outstanding. However, no amendment may be made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or their Representative) consents to such change.
Without the consent of any holder of the exchange notes, ChipPAC
International Company Limited and Trustee may amend the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by
a successor corporation of the obligations of ChipPAC International Company
Limited under the Indenture (provided, that ChipPAC International Company
Limited or ChipPAC delivers to the Trustee the Opinions of Counsel described in
clauses five and six of "Certain Covenants--Merger and Consolidation" if such
opinions are required pursuant to the provisions of such clauses), to provide
for uncertificated exchange notes in addition to or in place of certificated
exchange notes (provided that the uncertificated exchange notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated exchange notes are described in Section 163(f)(2)(B) of
the Code), to add guarantees with respect to the exchange notes, to release a
Subsidiary Guaranty when permitted by the Indenture, to secure the exchange
notes, to add to our covenants and those of our Restricted Subsidiaries for the
benefit of the holders of the exchange notes or to surrender any right or power
conferred upon us and our Restricted Subsidiaries, to make any change that does
not adversely affect the rights of any holder of the exchange notes or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the Trust Indenture Act.
The consent of the holders of the exchange notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, ChipPAC
International Company Limited is required to mail to holders of the exchange
notes a notice briefly describing such amendment. However, the failure to give
such notice to all holders of the exchange notes, or any defect therein, will
not impair or affect the validity of the amendment.
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Transfer
The exchange notes will be issued in registered form and will be
transferable only upon the surrender of the exchange notes being transferred
for registration of transfer. ChipPAC International Company Limited may require
payment of a sum sufficient to cover any tax, assessment or other governmental
charge payable in connection with certain transfers and exchanges.
Defeasance
ChipPAC International Company Limited and ChipPAC at any time may terminate
all of our obligations under the exchange notes and the Indenture ("legal
defeasance"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of the
exchange notes, to replace mutilated, destroyed, lost or stolen exchange notes
and to maintain a registrar and paying agent in respect of the exchange notes.
ChipPAC International Company Limited or ChipPAC at any time may terminate our
obligations under "--Change of Control" and under the covenants described under
"--Certain Covenants" (other than the covenant described under "--Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Significant Subsidiaries and the judgment
default provision described under "--Defaults" above and the limitations
contained in clause (3) of the first paragraph under "--Certain Covenants--
Merger and Consolidation" above ("covenant defeasance").
ChipPAC International Company Limited and ChipPAC may exercise our legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option. If ChipPAC International Company Limited or ChipPAC exercises our legal
defeasance option, payment of the exchange notes may not be accelerated because
of an Event of Default with respect thereto. If ChipPAC International Company
Limited or ChipPAC exercises our covenant defeasance option, payment of the
exchange notes may not be accelerated because of an Event of Default specified
in clause (4), (6), (7) (with respect only to Significant Subsidiaries) or (8)
under "--Defaults" above or because of the failure of us to comply with clause
(3) of the first paragraph under "--Certain Covenants--Merger and
Consolidation" above or the failure of ChipPAC International Company Limited or
any Subsidiary Guarantor to comply with the limitation under the third
paragraph under "--Certain Covenants--Merger and Consolidation" above. If
ChipPAC International Company Limited or ChipPAC exercises our legal defeasance
option or our covenant defeasance option, we and each Subsidiary Guarantor will
be released from all of its obligations with respect to the Company Guaranty or
its Subsidiary Guaranty, as the case may be.
In order to exercise either defeasance option, ChipPAC International Company
Limited or ChipPAC must irrevocably deposit in trust (the "defeasance trust")
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the exchange notes to redemption or maturity, as the
case may be, and must comply with certain other conditions, including delivery
to the Trustee of (i) an Opinion of Counsel to the effect that Holders of the
exchange notes will not recognize income, gain or loss for U.S. Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
U.S. Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable U.S. Federal income tax law) and (ii) an Opinion of Counsel in each
of the British Virgin Islands and any other jurisdiction in which ChipPAC
International Company Limited or ChipPAC is organized, resident or engaged in
business for tax purposes to the effect that (A) Holders of the exchange notes
will not recognize income gain or loss for purposes of the tax laws of such
jurisdiction as a result of such legal defeasance or covenant defeasance, as
applicable, and will be subject for purposes of the tax laws of such
jurisdiction to income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance or covenant
defeasance had not occurred and (B) payments from the defeasance trust will be
free or exempt from any and all withholding and other taxes of whatever nature
of such jurisdiction or any political subdivision or taxing authority thereof
or therein, except in the case of a payment made to a Holder which is subject
to such tax by reason of such Holder's carrying on a business in the British
Virgin Islands or such other jurisdiction.
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Concerning the Trustee
Firstar Bank of Minnesota, N.A. is to be the Trustee under the Indenture and
has been appointed by us as Registrar and Paying Agent with regard to the
exchange notes.
The Holders of a majority in principal amount of the outstanding exchange
notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
exchange notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense and
then only to the extent required by the terms of the Indenture.
Governing Law
The Indenture provides that it and the exchange 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 to the extent that
the application of the law of another jurisdiction would be required thereby.
Enforceability of Judgments
Since substantially all the operating assets of ChipPAC International
Company Limited, ChipPAC and their Subsidiaries are outside the United States,
any judgment obtained in the United States against ChipPAC International
Company Limited, ChipPAC or a Subsidiary Guarantor, including judgments with
respect to the payment of principal, interest, Additional Amounts, redemption
price and any purchase price with respect to the exchange notes, may not be
collectible within the United States.
ChipPAC International Company Limited has been informed by its British
Virgin Island counsel, Harney Westwood & Riegels, that in such counsel's
opinion the laws of the British Virgin Islands applicable therein permit an
action to be brought in a court of competent jurisdiction in the British Virgin
Islands on a final and conclusive judgment in personam of a United States
federal court or a court of the State of New York sitting in the Borough of
Manhattan in The City of New York (the "New York Court"), respecting the
enforcement of the exchange notes or the Indenture (including the Company
Guaranty and the Subsidiary Guaranties), that is not impeachable as void or
voidable under the laws of the State of New York and that is for a sum certain
in money if (i) the New York Court that rendered such judgment has jurisdiction
over the judgment debtor, as recognized by the courts of the British Virgin
Islands and in accordance with the British Virgin Islands' conflict of laws
rules (and submission by ChipPAC International Company Limited, the Company and
the Subsidiary Guarantors in the Indenture to the jurisdiction of the New York
Court will be sufficient for this purpose); (ii) such judgment was not obtained
by fraud or in a manner contrary to natural justice and the enforcement thereof
would not be inconsistent with public policy, as such term is understood under
the laws of the British Virgin Islands applicable therein; (iii) the
enforcement of such judgment does not constitute, directly or indirectly, the
enforcement of foreign revenue, expropriator, public or penal laws; (iv) no new
admissible evidence relevant to the action is discovered prior to the rendering
of judgment by the British Virgin Islands; and (v) the action to enforce such
judgment is commenced within six years after the date of such judgment.
Furthermore, ChipPAC International Company Limited has been advised by such
counsel that they do not know of any reason under present laws of the British
Virgin Islands for avoiding recognition of such judgment of New York Court
under the Indenture (including the Company Guaranty and the Subsidiary
Guaranties) or on the exchange notes based upon a reasonable interpretation of
public policy.
Consent to Jurisdiction and Service
The Indenture provides that ChipPAC International Company Limited, ChipPAC
and each Subsidiary Guarantor will appoint CT Corporation System, 1633
Broadway, New York, New York 10019 as its agent for actions brought under
Federal or state securities laws brought in any Federal or state court located
in the Borough of Manhattan in The City of New York and will submit to such
jurisdiction.
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Certain Definitions
"Additional Assets" means (1) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (2) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (3)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (2) or (3) above is primarily engaged in a
Related Business.
"Advisory Agreements" mean each of the advisory agreements by and between
ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and each
Principal entered into on the Recapitalization Closing Date, as the same may be
amended from time to time in a manner that is not more disadvantageous to us in
any material respect than the original agreement as in effect on the
Recapitalization Closing Date.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of our Voting
Stock (on a fully diluted basis) or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would
be an Affiliate of any such beneficial owner pursuant to the first sentence
hereof.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by us or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (1) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than us or a Restricted
Subsidiary), (2) all or substantially all the assets of any division or line of
business of ours or any Restricted Subsidiary or (3) any other assets of ours
or any Restricted Subsidiary outside of the ordinary course of our business or
that of such Restricted Subsidiary (other than, in the case of (1), (2) and (3)
above, (w) a disposition by a Restricted Subsidiary to us or by us or a
Restricted Subsidiary to a Restricted Subsidiary, (x) for purposes of the
covenant described under "--Certain Covenants--Limitation on Sales of Assets
and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under "--Certain Covenants--Limitation on
Restricted Payments," (y) sales or other dispositions of obsolete,
uneconomical, negligible, worn-out or surplus assets in the ordinary course of
business (including but not limited to equipment and intellectual property) and
(z) disposition of assets with a fair market value of less than $1,000,000);
provided, however, that a disposition of all or substantially all of our assets
and our Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption "--Merger and
Consolidation" and not by the provisions of the "--Limitation on Sales of
Assets and Subsidiary Stock" covenant.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the exchange notes, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (1) the sum
of the products of the numbers of years from the date of
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determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (2) the sum of all
such payments.
"Bain" means Bain Capital, Inc.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit Agreement.
"Board of Directors" means the Board of Directors of ChipPAC or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law to
close in New York City.
"Capital Expenditure Facility" means the capital expenditure facility
contained in the Credit Agreement.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"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, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Guaranty" means the Guarantee by us of ChipPAC International
Company Limited's obligations with respect to the exchange notes contained in
the Indenture.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (a) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available ending on or prior to the date of such determination to (b)
Consolidated Interest Expense for such four fiscal quarters; provided,
however, that:
(1) if ChipPAC or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period;
(2) if ChipPAC or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of
such period or if any Indebtedness is to be repaid, repurchased, defeased
or otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and has not been replaced) on the date of the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio, EBITDA and Consolidated Interest Expense for such period shall be
calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if ChipPAC or such Restricted
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Subsidiary has not earned the interest income actually earned during such
period in respect of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period we or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of ours or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to us and our continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent we and our
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
(4) if since the beginning of such period ChipPAC or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction requiring a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period; and
(5) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into us or any
Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition, any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (3) or (4) above if made by
us or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to
an acquisition or disposition of assets, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated
with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of ChipPAC (and shall include any applicable Pro Forma Cost
Savings). If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, our total interest
expense and that of our consolidated Restricted Subsidiaries determined in
accordance with GAAP, plus, to the extent not included in such total interest
expense, and to the extent incurred by us or our Restricted Subsidiaries,
without duplication:
(1) interest expense attributable to Capital Lease Obligations and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, in each case, determined in accordance with
GAAP;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing;
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(6) net costs associated with Hedging Obligations involving any Interest
Rate Agreement (including amortization of fees) determined in accordance
with GAAP;
(7) dividends paid in cash or Disqualified Stock in respect of (A) all
Preferred Stock of Restricted Subsidiaries and (B) all of our Disqualified
Stock, in each case held by Persons other than us or a Wholly Owned
Subsidiary;
(8) interest actually paid by us or a Restricted Subsidiary under any
Guarantee of Indebtedness of any other Person; and
(9) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than us) in connection
with Indebtedness Incurred by such plan or trust;
and less, to the extent included in such total interest expense, (A) the
amortization during such period of capitalized financing costs associated with
the recapitalization and the financing thereof and (B) the amortization during
such period of other capitalized financing costs.
"Consolidated Net Income" means, for any period, the net income of us and
our consolidated Subsidiaries determined in accordance with GAAP; provided,
however, that there shall not be included in such Consolidated Net Income:
(1) any net income of any Person (other than us) if such Person is not a
Restricted Subsidiary, except that (A) subject to the exclusion contained
in clause (4) below, our equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to us or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a
Restricted Subsidiary, to the limitations contained in clause (3) below)
and (B) our equity in a net loss of any such Person for such period shall
be included in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by us or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to us, except that (A) subject to the
exclusion contained in clause (4) below, our equity in the net income of
any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary consistent with such
restrictions during such period to us or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) our equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(4) any gain (or loss) realized upon the sale or other disposition of
any of our assets or those of our consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or
loss) realized upon the sale or other disposition of any Capital Stock of
any Person;
(5) any extraordinary or unusual gains or losses and the related tax
effect in accordance with GAAP;
(6) any translation gains and losses due solely to fluctuations in
currency values and the related tax effect in accordance with GAAP;
(7) any cash charges resulting from the recapitalization to the extent
such cash charges are paid or payable by Hyundai Electronics, Hyundai
Electronics America or any of their Affiliates;
(8) the cumulative effect of a change in accounting principles.
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Notwithstanding the foregoing, for the purposes of the covenant described
under "--Certain Covenants--Limitation on Restricted Payments" only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to us or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Credit Agreement" means the Credit Agreement entered into by and among
ChipPAC International Company Limited, ChipPAC, certain of its Subsidiaries,
the lenders referred to therein and Credit Suisse First Boston, as
Administrative Agent, together with the related documents thereto (including
without limitation the term loans and revolving loans thereunder, any
guarantees and security documents), as amended, extended, renewed, restated,
supplemented or otherwise modified (in whole or in part, and without limitation
as to amount, terms, conditions, covenants and other provisions) from time to
time, and any agreement (and related document) governing Indebtedness incurred
to refund or refinance, in whole or in part, the borrowings and commitments
then outstanding or permitted to be outstanding under such Credit Agreement or
a successor Credit Agreement, whether by the same or any other lender or group
of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or beneficiary.
"CVC" means Citicorp Venture Capital, Ltd.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" with respect to any Person means (1) the
Bank Indebtedness; provided, however, that Bank Indebtedness outstanding under
any Credit Agreement that is Refinanced in part, but not in whole, the
previously outstanding Bank Indebtedness shall only constitute Designated
Senior Indebtedness if it meets the requirements of succeeding clause (2); and
(2) any other Senior Indebtedness of such Person which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $10.0 million and is specifically designated by such Person in
the instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (2) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (3) is redeemable at the option of the holder thereof, in
whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the exchange notes; provided, however, that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
exchange notes shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions described
under "--Change of Control" and under "--Certain Covenants--Limitation on Sales
of Assets and Subsidiary Stock." Notwithstanding the foregoing, the Intel
Preferred Stock as in effect on the date of issuance will be deemed not to
constitute Disqualified Stock.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income, without duplication:
(1) all income tax expense of ours and our consolidated Restricted
Subsidiaries;
(2) depreciation expense of ours and our consolidated Restricted
Subsidiaries;
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(3) amortization expense of ours and our consolidated Restricted
Subsidiaries (excluding amortization expense (other than the amortization
of capitalized financing costs) attributable to a prepaid cash item that
was paid in a prior period); and
(4) all other non-cash charges of ours and our consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash expenditures in any future
period);
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to us by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Equity Offering" means a primary offering of our Capital Stock (other than
Disqualified Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (1)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (2) statements and
pronouncements of the Financial Accounting Standards Board and (3) such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (1) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (2) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit or standard contractual indemnities, in
each case in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guaranty" means the Company Guaranty and each Subsidiary Guaranty, as
applicable.
"Guaranty Agreement" means a supplemental indenture, in a form reasonably
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor becomes
subject to the applicable terms and conditions of the Indenture.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a note is
registered on the Registrar's books.
"Hyundai Earn-out" means the cash payment to Hyundai Electronics of up to
an additional $55.0 million during the four-year period following January 1,
1999 in the event we exceed certain levels of EBITDA as set forth in the
Recapitalization Agreement; provided, however, in the event the final $20.0
million of such $55.0
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million in cash is required to be paid to Hyundai Electronics, it shall be
paid by the mandatory redemption of an equal amount of Hyundai Preferred
Stock.
"Hyundai Electronics" means Hyundai Electronics Industries Company Ltd., a
Republic of Korea corporation.
"Hyundai Preferred Stock" means the 12.5% mandatorily redeemable Preferred
Stock issued to Hyundai Electronics and/or Hyundai Electronics America in
connection with the recapitalization.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of
principal of a non-interest bearing or other discount security, and the
issuance as interest or dividend payments of pay-in-kind securities having
identical terms to the underlying security and which pay-in-kind securities
were contemplated on the issue date of such underlying security, in each case
shall not be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by
exchange notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts and accrued expenses payable arising in the
ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through (3)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date; provided, however,
that the amount outstanding at any time of any Indebtedness issued with
original issue discount shall be deemed to be the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such indebtedness at such time as determined in accordance with
GAAP.
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"Intel" means Intel Corporation.
"Intel Preferred Stock" means the 10.0% convertible Preferred Stock issuable
to Intel pursuant to the Stock Purchase Agreement dated August 5, 1999 by and
between Intel and ChipPAC, Inc.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" with respect to any Person means all investments by such person
in other persons in the forms of any direct or indirect advance, loan (other
than (A) advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender and (B)
commission, travel and similar advances to officers and employees made in the
ordinary course of business) or other extensions of credit (including by way of
Guarantee or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such other
Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments:"
(1) "Investment" shall include the portion (proportionate to our equity
interest in such Subsidiary) of the fair market value of the net assets of
any Subsidiary of our at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, we shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) our "Investment" in such Subsidiary at
the time of such redesignation less (y) the portion (proportionate to our
equity interest in such Subsidiary) of the fair market value of the net
assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the exchange notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and
proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law be, repaid out of the proceeds
from such Asset Disposition;
(3) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition; and
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(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Permitted Holders" means the Principals and any Related Party thereto and
(2) any group of investors if deemed to be a "person" (as such terms is used in
Section 13(d)(3) of the Exchange Act) by virtue of the Shareholders Agreement,
as the same may be amended, modified or supplemented from time to time,
provided that
(1) a Principal is party to such Shareholders Agreement,
(2) the persons party to the Shareholders Agreement, as so amended,
supplemented or modified from time to time that were not parties and are
not Affiliates of persons who were parties, to the Shareholders Agreement
as of the Recapitalization Closing Date, together with their respective
Affiliates (collectively, the "New Investors"), are not direct or indirect
beneficial owners (determined without reference to the Shareholders
Agreement) of more than 50% of the Voting Stock owned by all parties to the
Stockholders' Agreement as so amended, supplemented or modified, and
(3) the New Investors, individually or in the aggregate, do not,
directly or indirectly, have the right, pursuant to the Shareholders
Agreement (as so amended, supplemented or modified from time to time) or
otherwise to designate more than 50% of the members of our Board of
Directors or any direct or indirect parent entity of ours.
"Permitted Investment" means an Investment by us or any Restricted
Subsidiary in:
(1) a Restricted Subsidiary or a Person that will, upon the making of
such Investment, become a Restricted Subsidiary; provided, however, that
the primary business of such Restricted Subsidiary is a Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, us or a Restricted Subsidiary; provided,
however, that such Person's primary business is a Related Business;
(3) Temporary Cash Investments;
(4) receivables owing to us or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade
terms may include such concessionaire trade terms as ChipPAC or any such
Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees, directors, officers or consultants
made in the ordinary course of our business or that of such Restricted
Subsidiary;
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(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to us or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Sales of Assets and Subsidiary Stock;"
(9) Currency Agreements and Interest Rate Agreements entered into in the
ordinary course of our business and otherwise in compliance with the
Indenture; and
(10) so long as no Default shall have occurred and be continuing (or
result therefrom), any Person in an aggregate amount which, when added
together with the amount of all the Investments made pursuant to this
clause (10) which at such time have not been repaid through repayments of
loans or advances or other transfers of assets, does not exceed the greater
of (A) $30.0 million and (B) 7.5% of Total Assets (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a note means the principal of the note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Principal" means Bain and SXI Holders.
"Pro Forma Cost Savings" means, with respect to any period, the reduction in
costs that were
(1) directly attributable to an asset acquisition and calculated on a
basis that is consistent with Regulation S-X under the Securities Act in
effect and applied as of the Issue Date, or
(2) implemented by the business that was the subject of any such asset
acquisition within six months of the date of the asset acquisition and that
are supportable and quantifiable by the underlying accounting records of
such business,
as if, in the case of each of clause (1) and (2), all such reductions in costs
had been effected as of the beginning of such period.
"Recapitalization" means the plan of recapitalization and merger pursuant to
the Agreement and Plan of Recapitalization and Merger dated as of March 13,
1999 as amended on or prior to the Issue Date, among Hyundai Electronics
Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC
Merger Corp.
"Recapitalization Closing Date" means August 5, 1999.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of ours or any Restricted Subsidiary existing on the Issue Date or
Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that
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(1) such Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being Refinanced,
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount (or
if Incurred with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance
costs) under the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary that Refinances Indebtedness of ours or (y)
Indebtedness of ours or a Restricted Subsidiary that Refinances Indebtedness of
an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
our businesses and those of our Restricted Subsidiaries on the Issue Date.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, or 80% (or more) owned Subsidiary of
such Principal;
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately
preceding clause (1); or
(3) any Affiliate of any Principal.
"Representative" means any trustee, agent or representative (if any) for an
issue of our Senior Indebtedness; provided, however, that if and for so long as
any Senior Indebtedness lacks such a representative, then the Representative
for such Senior Indebtedness shall at all times be the holders of a majority in
outstanding principal amount of such Senior Indebtedness.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock in their capacity as such (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to us or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders
(or owners of an equivalent interest in the case of a Subsidiary that is an
entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any of our Capital Stock held by any Person or of any Capital
Stock of a Restricted Subsidiary held by any Affiliate of ours (other than
a Restricted Subsidiary), including the exercise of any option to exchange
any Capital Stock (other than into our Capital Stock that is not
Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition); or
(4) the making of any Investment in any Person (other than a Permitted
Investment).
In determining the amount of any Restricted Payment made in property other
than cash, such amount shall be the fair market value of such property at the
time of such Restricted Payment, as determined in good faith by the Board of
Directors.
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"Restricted Subsidiary" means any Subsidiary of ours (including ChipPAC
International Company Limited) that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances or replaces, in whole or in part, any such revolving credit
facility.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby ChipPAC or a Restricted Subsidiary
transfers such property to a Person and ChipPAC or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of ours secured by a Lien.
"Senior Indebtedness" of any Person means all (1) Bank Indebtedness of or
guaranteed by such Person, whether outstanding on the Issue Date or thereafter
Incurred, and (2) Indebtedness of such Person, whether outstanding on the Issue
Date or thereafter Incurred, including interest thereon, in respect of (A)
Indebtedness for money borrowed, (B) Indebtedness evidenced by exchange notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable and (C) Hedging Obligations, unless, in the
case of (1) and (2), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are subordinate in right of payment to the obligations under the exchange
notes; provided, however, that Senior Indebtedness shall not include (i) any
obligation of such Person to any subsidiary of such Person, (ii) any liability
for Federal, state, local or other taxes owed or owing by such Person, (iii)
any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (iv) any Indebtedness of such Person (and any
accrued and unpaid interest in respect thereof) which is subordinate or junior
by its terms to any other Indebtedness or other obligation of such Person or
(v) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the Indenture (but as to any such Indebtedness under
the Credit Agreement, no such violation shall be deemed to exist if the
Representative of the Lenders thereunder shall have received an officers'
certificate of ChipPAC to the effect that the issuance of such Indebtedness
does not violate such covenant and setting forth in reasonable detail the
reasons therefor).
"Senior Subordinated Indebtedness" means (1) with respect to ChipPAC
International Company Limited, the exchange notes and any other Indebtedness of
ChipPAC International Company Limited that specifically provides that such
Indebtedness is to rank pari passu with the exchange notes in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of ChipPAC International Company Limited which is not Senior
Indebtedness of ChipPAC International Company Limited and (2) with respect to
ChipPAC or a Subsidiary Guarantor, their respective Guarantees of the exchange
notes and any other Indebtedness of such Person that specifically provides that
such Indebtedness ranks pari passu with such Guaranty in respect of payment and
is not subordinated by its terms in respect of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such
Person.
"Shareholders Agreement" means the Shareholders Agreement entered into on
the Recapitalization Closing Date by and among Hyundai Electronics, Hyundai
Electronics America, SXI Group LLC, certain Bain Related Parties and ChipPAC,
Inc.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of ours within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
118
<PAGE>
"Subordinated Obligation" means any Indebtedness of ChipPAC International
Company Limited, of us or any Subsidiary Guarantor (whether outstanding on the
Issue Date or thereafter Incurred) which is subordinate or junior in right of
payment to, in the case of ChipPAC International Company Limited, the exchange
notes or, in the case of ChipPAC or such Subsidiary Guarantor, its Guaranty,
pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) 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 (1) such Person, (2) such
Person and one or more Subsidiaries of such Person or (3) one or more
Subsidiaries of such Person.
"Subsidiary Guarantor" means each of ChipPAC (Barbados) Ltd., ChipPAC
Limited, ChipPAC Korea Company Ltd., ChipPAC Luxembourg S.a.R.L. and ChipPAC
Liquidity Management Hungary Limited Liability Company and any other subsidiary
of ours that Guarantees ChipPAC International Company Limited's obligations
with respect to the exchange notes.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of
Issuer's obligations with respect to the exchange notes.
"Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement,
dated the Recapitalization Closing Date between the Subsidiary Guarantors and
ChipPAC International Company Limited.
"SXI Group LLC" means SXI Group LLC, a Delaware limited liability company.
"SXI Holders" means (1) CVC, (2) SXI Group LLC and (3) any officer, employee
or director of CVC or any trust, partnership or the entity established solely
for the benefit of such officers, employers or directors.
"Temporary Cash Investments" means any of the following:
(1) any evidence of indebtedness, maturing not more than one year after
the date of investment by us, ChipPAC International Company Limited or any
other Restricted Subsidiary, issued by the United States of America or any
instrumentality agency thereof, or by the Republic of Korea or any
instrumentality or agency thereof, or by the Asian Development Bank, the
World Bank or any other supranational organization (collectively,
"Government Entities") and guaranteed or otherwise backed, directly or
indirectly fully as to principal, premium, if any, and interest, by the
Government Entity issuing such indebtedness;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $250.0
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money-market fund sponsored by
a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of ours) organized and in existence under the laws of the United
States of America or any foreign country recognized by 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 Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's Ratings Group; and
119
<PAGE>
(5) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part any such term loan facility.
"Total Assets" means our total consolidated assets and those of our
Restricted Subsidiaries, as set forth on our most recent consolidated balance
sheet.
"Unrestricted Subsidiary" means (1) any Subsidiary of ours that at the time
of determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (2) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
ours (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of,
ChipPAC or any other Subsidiary of ChipPAC that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, such designation would be
permitted under the covenant described under "--Certain Covenants--Limitation
on Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) we could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (y) no Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a
currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
Except as described under "--Certain Covenants--Limitation on Indebtedness,"
whenever it is necessary to determine whether we have complied with any
covenant in the Indenture or a Default has occurred and an amount is expressed
in a currency other than U.S. dollars, such amount will be treated as the U.S.
Dollar Equivalent determined as of the date such amount is initially determined
in such currency.
"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 at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary the Capital Stock of
which (other than directors' qualifying shares) is at least 95% owned by us or
one or more Wholly Owned Subsidiaries.
120
<PAGE>
MATERIAL INCOME TAX CONSEQUENCES
United States Federal Income Taxation
The following discussion, including the opinion of counsel described below,
is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. The Internal Revenue Service may take a contrary view,
and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the following statements and conditions. Any changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Some holders, including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States, may be subject to special rules not discussed below. We recommend that
each holder consult his own tax advisor as to the particular tax consequences
of exchanging such holder's existing notes for exchange notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, U.S. counsel to ChipPAC International Company Limited, has
advised us that in its opinion, the exchange of the existing notes for exchange
notes pursuant to the exchange offer will not be treated as an "exchange" for
federal income tax purposes because the exchange notes will not be considered
to differ materially in kind or extent from the existing notes. Rather, the
exchange notes received by a holder will be treated as a continuation of the
existing notes in the hands of such holder. As a result, there will be no
federal income tax consequences to holders exchanging existing notes for
exchange notes pursuant to the exchange offer.
British Virgin Islands Taxation
The following discussion is based upon the Income Tax Ordinance (Cap. 206),
as amended, the International Business Companies Act (Cap. 291), as amended,
and administrative and judicial interpretations thereof, all as of the date
hereof and all of which are subject to change, possibly on a retroactive basis.
In general, there is no British Virgin Islands income, corporation or
profits tax, withholding tax, capital gains tax, or capital transfer tax
payable by Holders of the exchange notes other than Holders ordinarily resident
in the British Virgin Islands. The exchange notes and documents relating to the
issue, transfer or redemption are not subject to any stamp or similar duty in
the British Virgin Islands.
121
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with the resale of exchange notes received in exchange for existing
notes where such existing notes were acquired as a result of market-making
activities or other trading activities. We have agreed that for a period of 180
days from the consummation of the exchange offer, we will make this prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until 90 days after the
commencement of the exchange offer, all dealer effecting transactions in the
exchange notes may be required to delivery a prospectus.
We will not receive any proceeds from any sales of the exchange notes by
broker dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any broker-
dealer that resells the exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal.
122
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 with respect to the
exchange notes offered in this prospectus. This prospectus, which forms part of
the registration statement, does not contain all of the information that is
included in the registration statement. You will find additional information
about our company, the subsidiary guarantors and the exchange notes in the
registration statement. Any statements made in this prospectus concerning the
provisions of legal documents are not necessarily complete and you should read
the documents that are filed as exhibits to the registration statement for a
more complete understanding of the document or matter.
After the registration statement becomes effective, we will be subject to
the informational requirements of the Exchange Act of 1934, and will file
periodic reports, registration statements and other information with the SEC.
You may read and copy the registration statement and any of the other documents
we file with the SEC at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the SEC's regional offices located at 7 World Trade Center, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms. In addition, reports and other
filings are available to the public on the SEC's web site at
http://www.sec.gov.
If for any reason we are not subject to the reporting requirements of the
Securities Exchange Act of 1934 in the future, we will still be required under
the indenture governing the notes to furnish the holders of such notes with
certain financial and reporting information. See "Description of the Exchange
Notes--Covenants--Reports" for a description of the information we are required
to provide.
LEGAL MATTERS
Certain legal matters with regard to the validity of the exchange notes will
be passed upon for us by Kirkland & Ellis (a partnership including professional
corporations), Chicago, Illinois. Certain partners of Kirkland & Ellis are
partners in Randolph Street Partners, which acquired less than 1.0% of our
common stock in connection with the closing of the recapitalization. Kirkland &
Ellis has, from time to time, represented, and may continue to represent, Bain
Capital and certain of its affiliates (including ChipPAC and its direct and
indirect subsidiaries) in connection with certain legal matters.
EXPERTS
The financial statements as of December 31, 1998, 1997, and 1996 and for
each of the four years in the period ended December 31, 1998 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
123
<PAGE>
Index to Combined Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Combined Balance Sheets.................................................. F-3
Combined Statements of Operations........................................ F-4
Combined Statement of Shareholders' and Divisional Equity................ F-5
Combined Statements of Cash Flows........................................ F-6
Notes to Combined Financial Statements................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors and Shareholders
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of shareholders' and divisional equity, and
of cash flows present fairly, in all material respects, the financial position
of ChipPAC at December 31, 1996, 1997, and 1998, and the results of their
operations and their cash flows for each of the years in the four year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 3 to the financial statements, the Company's ultimate
parent, Hyundai Electronics Industries, Co. Ltd. (HEI) is located in the
Republic of Korea. The Republic of Korea has experienced volatility in its
currency and interest rates which has affected the operations of most Korean
companies, including HEI. HEI has provided certain financial support to the
Company in the past and is a guarantor of the Company's debt.
May 17, 1999, except for the
last paragraph of Note 14
as to which the date is
June 11, 1999
San Jose, California
F-2
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
COMBINED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997 1998
-------- -------- --------
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 2,323 $ 3,067 $ 68,767
Receivable from shareholder.................... -- -- 4,922
Accounts receivable, less allowance for
doubtful accounts of $85, $375, and $1,162.... 20,694 30,156 37,729
Inventories.................................... 10,896 14,149 10,325
Deferred taxes................................. 696 4,193 803
Prepaid expenses and other current assets...... 1,149 957 2,923
-------- -------- --------
Total current assets......................... 35,758 52,522 125,469
Property, plant and equipment, net............... 172,291 170,226 229,002
Other assets..................................... 7,883 10,493 5,001
-------- -------- --------
Total assets................................. $215,932 $233,241 $359,472
======== ======== ========
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable............................... $ 15,190 $ 17,468 $ 61,853
Accrued expenses and other liabilities......... 4,337 5,824 7,677
Short-term debt................................ 12,075 34,479 18,777
Current portion of long-term debt.............. 16,351 13,256 31,954
Current portion of HEI long-term debt.......... 1,597 4,473 2,610
Payables to affiliates......................... 6,448 6,659 22,918
-------- -------- --------
Total current liabilities.................... 55,998 82,159 145,789
-------- -------- --------
Long-term debt, less current portion............. 81,772 116,694 80,943
HEI long-term debt, less current portion......... 9,333 17,987 18,208
Other long-term liabilities...................... 15,137 6,929 1,341
-------- -------- --------
Total liabilities............................ 162,240 223,769 246,281
-------- -------- --------
Commitments and contingencies (Notes 8, 9 and 14)
Shareholders' and divisional equity..............
Divisional equity, preferred stock and paid in
capital....................................... 70,769 97,075 180,091
Shareholder receivable-HEA..................... -- (7,466) (37,626)
Accumulated deficit............................ (16,236) (62,354) (39,752)
Accumulated other comprehensive income (loss).. (841) (17,783) 10,478
-------- -------- --------
Total shareholders' and divisional equity.... 53,692 9,472 113,191
-------- -------- --------
Total liabilities and equity................. $215,932 $233,241 $359,472
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1995 1996 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue................................ $170,164 $174,119 $275,503 $328,877
Revenue from affiliates................ 9,070 17,536 13,926 5,204
-------- -------- -------- --------
Total revenue.......................... 179,234 191,655 289,429 334,081
Cost of revenue........................ 158,527 166,665 229,238 270,365
-------- -------- -------- --------
Gross profit........................... 20,707 24,990 60,191 63,716
Operating expenses:
Selling, general & administrative.... 11,805 11,431 15,853 15,067
Research & development............... 1,724 2,617 4,052 7,692
Management fees charged by affiliate. 138 3,322 3,199 528
Write down of impaired assets........ -- -- 11,569 --
-------- -------- -------- --------
Total operating expenses........... 13,667 17,370 34,673 23,287
-------- -------- -------- --------
Operating income....................... 7,040 7,620 25,518 40,429
Non-operating income (expenses):
Interest income...................... -- 108 96 1,276
Interest expense..................... (3,151) (5,780) (10,972) (13,340)
Foreign currency gains (losses)...... (1,012) (5,041) (69,669) 24,670
Other income (expenses), net......... (802) 351 (762) (168)
-------- -------- -------- --------
Non-operating income (expenses).... (4,965) (10,362) (81,307) 12,438
-------- -------- -------- --------
Income (loss) before income taxes...... 2,075 (2,742) (55,789) 52,867
Provision for (benefit from) income
taxes................................. 1,977 2,883 (9,671) 20,564
-------- -------- -------- --------
Net income (loss)...................... $ 98 $ (5,625) $(46,118) $ 32,303
======== ======== ======== ========
Other comprehensive income:
Currency translation gain (loss)..... 387 (1,318) (16,942) 28,261
-------- -------- -------- --------
Comprehensive income (loss)............ $ 485 $ (6,943) $(63,060) $ 60,564
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
COMBINED STATEMENT OF SHAREHOLDERS' AND DIVISIONAL EQUITY
(In thousands)
<TABLE>
<CAPTION>
Divisional
Equity, Accumulated
Preferred Share- Other Com-
Stock and holder prehensive Accum-
Paid-in Receivable Income ulated
Capital HEA (Loss) Deficit Total
---------- ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
Balances at January 1,
1995..................... $44,685 -- $ 90 $(10,709) $34,066
Capital decrease........ (22,992) -- -- -- (22,992)
Currency translation
gain................... -- -- 387 -- 387
Net income.............. -- -- -- 98 98
------- ------- -------- -------- -------
Balances at December 31,
1995..................... 21,693 -- 477 (10,611) 11,559
Capital increase........ 49,076 -- -- -- 49,076
Currency translation
loss................... -- -- (1,318) -- (1,318)
Net loss................ -- -- -- (5,625) (5,625)
------- ------- -------- -------- -------
Balances at December 31,
1996..................... 70,769 -- (841) (16,236) 53,692
Capital increase........ 26,306 -- -- -- 26,306
Advances to HEA......... -- $(7,466) -- -- (7,466)
Currency translation
loss................... -- -- (16,942) -- (16,942)
Net loss................ -- -- -- (46,118) (46,118)
------- ------- -------- -------- -------
Balances at December 31,
1997..................... 97,075 (7,466) (17,783) (62,354) 9,472
Capital increase........ 82,953 -- -- -- 82,953
Advances to HEA......... -- (30,160) -- -- (30,160)
Amortization of stock
option compensation.... 63 -- -- -- 63
Currency translation
gain................... -- -- 28,261 -- 28,261
Dividends declared by
CPK.................... -- -- -- (9,701) (9,701)
Net income.............. -- -- -- 32,303 32,303
------- ------- -------- -------- -------
Balances at December 31,
1998..................... 180,091 (37,626) 10,478 (39,752) 113,191
======= ======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1996 1997 1998
------- -------- -------- -------
<S> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net income (loss)...................... $ 98 ($ 5,625) ($46,118) $32,303
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization........ 27,917 26,632 40,682 45,855
Write down of impaired assets........ -- -- 11,569 --
Provision for inventory and accounts
receivable.......................... 799 120 3,502 (425)
Foreign currency (gains) losses...... 1,012 5,041 69,669 (24,670)
(Gain) loss on sale of equipment..... 791 (16) 515 26
Changes in assets and liabilities:...
Accounts receivable................ (3,149) (4,025) (10,092) (12,740)
Inventories........................ (2,025) (354) (16,122) 9,089
Prepaid expenses and other assets.. (3,803) (1,077) (16,471) 11,859
Advances (to) from affiliates...... (1,679) 1,933 2,418 4,671
Accounts payable................... (4,876) (908) 5,006 39,979
Accrued expenses and other current
liabilities....................... 7,401 (3,872) (2,569) 126
Other long-term liabilities........ 5,774 1,403 1,226 (7,326)
------- -------- -------- -------
Net cash provided by operating
activities....................... 28,260 19,252 43,215 98,747
------- -------- -------- -------
Cash flows used in investing activities:
Acquisition of property and equipment.. (39,695) (104,359) (110,693) (61,332)
Proceeds from sale of equipment........ 51 240 17 1,635
------- -------- -------- -------
Net cash used in investing
activities....................... (39,644) (104,119) (110,676) (59,697)
------- -------- -------- -------
Cash flows provided by financing
activities:
Advances (to) from HEA................. -- -- (7,466) (30,160)
Proceeds from short-term loans......... 93,942 83,513 86,014 63,391
Repayment of short-term loans.......... (78,990) (90,800) (63,612) (79,093)
Proceeds from term loans............... 20,749 49,396 39,511 10,185
Repayment of long-term debt and capital
leases................................ (2,047) (7,110) (17,181) (31,795)
Dividend paid.......................... -- -- -- --
Contributions to (withdrawals from)
paid in capital....................... (22,992) 49,076 26,306 82,953
------- -------- -------- -------
Net cash provided by financing
activities....................... 10,662 84,075 63,572 15,481
------- -------- -------- -------
Effect on cash from changes in exchange
rates (2,092) 513 4,633 11,169
------- -------- -------- -------
Net increase (decrease) in cash (2,814) (279) 744 65,700
Cash and cash equivalents at beginning
of period.............................. 5,416 2,602 2,323 3,067
------- -------- -------- -------
Cash and cash equivalents at end of
period $ 2,602 $ 2,323 $ 3,067 $68,767
======= ======== ======== =======
Supplemental disclosure of noncash
investing and financing activities
Acquisition of equipment under capital
leases................................ $11,767 $ 14,612 $ 25,901 $ 2,191
======= ======== ======== =======
Dividend declared and accrued as
affiliate payable..................... -- -- -- ($9,701)
======= ======== ======== =======
Supplemental disclosure of cash flow
information
Income taxes paid in cash -- -- -- $ 195
======= ======== ======== =======
Interest paid in cash.................. $ 2,999 $ 5,338 $ 10,364 $12,708
======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1: Business and Basis of Presentation
Business and Organization
ChipPAC (the "Company") is a provider of packaging and testing services to
the worldwide semiconductor industry. The Company packages and tests integrated
circuits from wafers provided by its customers. The Company markets its
services worldwide, with emphasis on the North American market. The Company's
packaging and testing operations are located in the Republic of Korea ("South
Korea" or "Korea") and People's Republic of China ("China").
The Company represents the combination of three business units of Hyundai
Electronics Industries Co., Ltd. ("HEI") which operate collectively as HEI's
worldwide packaging and testing operations. These three business units
historically consisted of the Assembly and Test Division of HEI, Hyundai
Electronics Co. (Shanghai) Ltd. ("HECS"), and the Assembly and Test Division of
Hyundai Electronics America ("HEA"), a majority owned subsidiary of HEI. Sales
and marketing services were primarily performed by the Assembly and Test
Division of HEA, and packaging and testing services were performed by HECS and
the Assembly and Test Division of HEI.
On September 30, 1997, HEA transferred its Assembly and Test Division into a
separate corporation, known as ChipPAC, Inc. ("CPI"). On June 30, 1998, HEI
transferred its Assembly and Test Division into a separate company known as
ChipPAC Korea Co., Ltd. ("CPK"). These transfers were accounted for at
historical cost and the accompanying financial statements include the accounts
of these business units for all periods presented. In December 1998, CPI formed
a subsidiary in China, known as ChipPAC Assembly and Test Co., Ltd. ("CATS").
CATS and HECS operate as a single business unit and the Company intends to
merge the two subsidiaries into a single legal entity in the future. For
purposes of this report, references to HECS include CATS.
HEI intends to reorganize the ownership of the four legal entities so that
they operate under single ownership by CPI, as the parent company. On March 13,
1999 HEI and HEA entered into an agreement with a U.S. investment group to
recapitalize the Company. See Note 14: Subsequent Events.
Basis of Presentation
The accompanying combined financial statements include the accounts of CPI,
CPK, HECS and CATS, or the divisional accounts of the predecessor Assembly and
Test Divisions for periods prior to the business transfers referred to above,
and reflect the combined financial position, results of operations, and cash
flows of these entities. All inter-company or inter-divisional transactions
have been eliminated in the combination.
The combined statements of operations include all revenue and costs
attributable to the Company including an allocation of the costs of shared
facilities, costs of general and administrative services and overhead costs of
HEI and HEA. For the periods prior to the legal formations of CPI and CPK, such
allocated expenses were determined according to allocation bases deemed
appropriate for the nature of each expense item, including relative headcount,
relative occupancy of shared facilities, and relative sales volume. Costs
allocated by HEI and HEA after the legal formations were based on services
rendered, the costs of which were specified by affiliate agreements. In
addition, subsequent to the legal formations, CPI and CPK established internal
administrative and support functions, significantly reducing their reliance on
HEI and HEA for such services. Since inception, HECS has generally maintained
its own internal administrative and support functions and was not allocated any
costs by HEI. Management fees charged by HEI to HECS have been included in the
combined results of operations and varied based on the level of services
provided by HEI.
F-7
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Management believes that the allocation methods used are reasonable.
However, the financial information included herein may not be representative of
the combined financial position, results of operations, and cash flows of the
Company in the future or what they would have been had the Company operated as
a separate entity during the periods presented.
Note 2: Summary of Significant Accounting Policies
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses in the financial statements and accompanying notes.
Significant estimates made by management include those related to the useful
lives of property, plant and equipment, allowances for doubtful accounts and
customer returns, inventory realizability, contingent assets and liabilities
and allocated expenses, among others. Actual results could differ from those
estimates, and such differences may be material to the combined financial
statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments, purchased with an
original maturity of six months or less to be cash equivalents.
Financial Instruments
The amounts reported for cash and cash equivalents, accounts receivable,
certain other assets, accounts payable, certain accrued and other liabilities,
and short-term and long-term debt approximate fair value due to their short
maturities or market interest rates. Obligations due to or receivable from
related parties have no ascertainable fair value as no market exists for such
instruments.
Inventories
Inventories are stated at the lower of cost (computed using first-in, first-
out method) or market value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets, which
generally range from three to ten years except for building facilities and
building improvements in Shanghai, China which are depreciated over thirty and
fifteen years, respectively. In addition, land use rights in Shanghai, China
are amortized over fifty years. Assets under capital leases and leasehold
improvements are amortized over the shorter of the asset life or the remaining
lease term. Amortization of assets under capital leases is included with
depreciation expense. Upon disposal or sale, the Company removes the asset and
accumulated depreciation from its records and recognizes the gain or loss in
operations.
During 1996, CPK revised the estimated~ useful lives used in computing
depreciation of equipment acquired on and after July 1, 1996. The effects of
the change are reported prospectively. Had the revised estimated useful lives
been used, depreciation expense would have been approximately $300,000 and $1.2
million less than the amounts presented in the combined financial statements
for the years ended December 31, 1995 and 1996, respectively.
F-8
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
In calculating depreciation, CPK has estimated a residual value of
approximately 10% of the cost of assets acquired on or before December 31,
1994. For assets acquired on or after January 1, 1995, CPK has estimated no
residual values to more accurately reflect annual depreciation. The residual
values of assets acquired on or before December 31, 1994 are depreciated over
three years following the year in which the assets were otherwise fully
depreciated. For each of the years ended December 31, 1995, 1996 and 1997,
depreciation of residual values of $1.2 million was charged to operations.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for Impairment of Long-Lived Assets and Long- Lived Assets to
be Disposed of" effective January 1, 1996. The Company reviews property, plant
and equipment and other long lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. There was no impact in the year of adoption. The Company
recognized an impairment write down in 1997, see Note 4.
Concentration of Credit Risk and Major Customers
Financial instruments which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts receivable
and cash and cash equivalents.
The Company's customers are comprised of companies in the semiconductor
industry located primarily in the United States. Credit risk with respect to
the Company's trade receivables is mitigated by selling to well established
companies, performing ongoing credit evaluations and maintaining frequent
contact with customers. The allowance for doubtful accounts is based upon the
expected collectibility of the Company's accounts receivable. At December 31,
1996, two customers accounted for 32% and 30% of the outstanding trade
receivables, respectively. At December 31, 1997, three customers accounted for
27%, 23%, and 17% of the outstanding trade receivables, respectively. At
December 31, 1998, two customers accounted for 68% and 13% of outstanding trade
receivables, respectively. Loss of or default by these customers could have an
adverse effect upon the Company's financial position, results of operations and
cash flows.
During the year ended December 31, 1995, two customers accounted for 13% and
12% of the Company's revenue, respectively. During the year ended December 31,
1996, two customers accounted for 24% and 13% of the Company's revenue,
respectively. During the year ended December 31, 1997, two customers accounted
for 45% and 15% of the Company's revenue, respectively. During the year ended
December 31, 1998, two customers accounted for 67% and 10% of the Company's
revenue, respectively.
Cash and cash equivalents are deposited with banks in the United States,
Korea and China. Deposits in these banks may exceed the amount of insurance
provided on such deposits; however, the Company is exposed to loss only to the
extent of the amount of cash reflected on its balance sheet. The Company has
not experienced any losses on its bank cash deposits.
Revenue Recognition
The Company recognizes revenue upon shipment of packaged semiconductors to
its customers. The Company does not take ownership of customer-supplied
semiconductors as these materials are sent to the Company on a consignment
basis. Accordingly, the customer supplied materials are not reflected in
revenue or in cost of revenue.
Research and Development Costs
Research and development costs are charged to expense as incurred.
F-9
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Accounting for Income Taxes
The accompanying combined financial statements present income taxes as if
each of the combined companies filed its income taxes on a separate return
basis. The Company accounts for deferred income taxes using the liability
method whereby deferred tax assets and liabilities are recorded for temporary
differences between amounts reported in the financial statements and amounts
that would have been reported had the combined companies filed separate income
tax returns. A valuation allowance is provided for deferred tax assets when it
is more likely than not that all or a portion of the deferred tax assets will
not be realized through future operations. The provision for income taxes
represents taxes that would have been payable for the current period, plus the
net change in deferred tax amounts.
Foreign Exchange Contracts
In the ordinary course of business the Company enters into foreign exchange
forward contracts to mitigate the effect of foreign currency movements
associated with its international operations. The contracts entered into
require the purchase of Korean won or Japanese yen, and the delivery of US
dollars, and generally have maturities which do not exceed six months. To date
contracts entered into by the Company do not qualify as hedges and therefore
are included in foreign currency gains and losses in the period in which the
exchange rates change. There were no deferred gains or losses at December 31,
1998. At December 31, 1998 the Company had outstanding forward contracts to
purchase Japanese yen totaling $25.5 million.
Foreign Currency Translation
The Company's functional currencies of its foreign operations are the local
currencies. The assets and liabilities, and revenues and expenses of these
foreign combined companies have been translated using the exchange rate at the
balance sheet date and the weighted average exchange rate for the period,
respectively. The net effect of the translation of the accounts of the
Company's foreign combined companies has been included in equity as a
cumulative translation adjustment. The net effect of adjustments that arise
from exchange rate changes on transactions denominated in a currency other than
local currency are reported as foreign currency gains or losses in the
accompanying combined statements of operations.
Stock-Based Compensation
Under the contemplated reorganization plan described below, CPI's current
stock option plan will be terminated at the closing of the reorganization, and
each option holder will receive from the Company, cash compensation for each
vested share in accordance with the reorganization agreement.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," in accounting for CPI's
employee stock purchase options. Accordingly, compensation for stock purchase
options is measured by the excess of the fair market value of CPI's stock at
the date of the grant over the amount an employee must pay to acquire the
stock. The Company has adopted the disclosure of pro-forma information required
under SFAS No. 123, "Accounting for Stock-Based Compensation".
Recent Accounting Pronouncements
June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 requires the Company to recognize all derivatives on the balance sheet at
fair value. Derivatives which are not hedges must be adjusted to fair value
through net income. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives are either offset against
the change in fair value of assets, liabilities, or firm commitments
F-10
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. SFAS 133 is
effective for years beginning after June 15, 1999, but companies can early
adopt as of the beginning of any fiscal quarter that begins after June 1998.
The Company is evaluating the requirements of SFAS 133, but does not expect
this pronouncement to materially impact the Company's financial position or
results of operations.
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", issued in June 1997. This statement
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic area and major customers. This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise". The Company
operates in one segment and accordingly, does not report product segment
information but will report geographic and significant customer revenue.
The Company has adopted Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use", issued
in March 1998 by the Accounting Standards Executive Committee. SOP 98-1
provides guidance on when costs related to software developed or obtained for
internal use should be capitalized or expensed. The adoption of this statement
has not had a material effect upon the Company's combined results of
operations, financial position or cash flows.
Note 3: Risks and Uncertainties
The Company's business involves certain risks and uncertainties. Factors
that could affect the Company's future operating results and cause actual
results to vary materially from expectations include, but are not limited to,
dependence on a cyclical industry that is characterized by rapid technological
changes, fluctuations in end-user demands, evolving industry standards,
competitive pricing and declines in average selling prices, risks associated
with foreign currencies, and enforcement of intellectual property rights.
Additionally, the market in which the Company operates is very competitive. As
a result of these industry and market characteristics, key elements of
competition in the independent semiconductor packaging market include breadth
of packaging offerings, time-to-market, technical competence, design services,
quality, production yields, reliability customer service and price. The
Company's customer base is highly concentrated with one customer accounting for
67% of revenue for the year ended December 31, 1998. As a result, any de-
commitment from major customers for products could have an adverse impact on
the Company's financial position, results of operations and cash flows.
Korea
The Korean economy suffered a period of economic turmoil beginning in 1997
which has resulted in the devaluation of the Korean currency and volatility in
interest rates. A significant portion of the Company's assets and operations
are located in Korea. Also, a significant portion of the Company's debt is
guaranteed by HEI and its Chairman, and the Company has relied upon the these
guarantees. It is reasonably possible that further deterioration in the Korean
economy and a decline in the value of the Korean currency could have an adverse
effect on the ability of the ultimate parent and its Chairman to continue to
guarantee the debt of and otherwise provide support for the Company.
The Korean government has recently announced restructuring plans directed at
rationalizing certain industries. Based on such a government directive, HEI has
recently announced plans to acquire LG Semicon Company, a leading competitor of
HEI.
F-11
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The majority of CPK's employees are represented by an organized labor union
and are subject to a collective bargaining agreement.
China
A significant portion of the Company's assets and operations are owned by
HECS and are located in China. HECS is subject to the laws and regulations of
China including regulations governing the maintenance of business permits and
operating licenses. HECS operates under a business license granted by the local
municipal government. It is reasonably possible that additional business
licensure requirements may be applied by the National government that would
pertain to HECS.
Liquidity
At December 31, 1998, the Company had current liabilities in excess of
current assets amounting to $20.3 million. Additionally, the Company has
experienced significant currency devaluations in South Korea which has
increased its cost to procure materials manufactured outside South Korea and
increased its cost to service obligations payable in United States dollars. HEI
has provided certain financial support to the Company in the past and is a
guarantor of the Company's debt.
Other
Korean and Chinese foreign currency exchange regulations place restrictions
on the flow of foreign funds into and out of those countries. The Company is
required to comply with these regulations when entering into transactions in
foreign currencies in Korea and China.
ChipPAC, through CPK, procures materials from local vendors in the ordinary
course of business. Three vendors in South Korea supply approximately 40% of
the Company's component parts used in performing packaging services. Management
believes that they have sufficient suppliers such that the loss of these
concentrated suppliers would not have a material impact on the Company's
combined financial position, results of operations or cash flows.
Note 4: Selected Balance Sheet Accounts
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Inventories
Raw materials................................... $ 6,652 $10,420 $ 6,002
Work in process................................. 1,785 2,015 2,159
Finished goods.................................. 2,459 1,714 2,164
------- ------- -------
$10,896 $14,149 $10,325
======= ======= =======
</TABLE>
F-12
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Property, plant and equipment are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
Property, Plant and Equipment
Land use rights........................ $ 3,915 $ 4,041 $ 4,041
Buildings and improvements............. 39,108 44,911 51,720
Equipment.............................. 233,464 199,079 319,382
--------- -------- ---------
276,487 248,031 375,143
Less accumulated depreciation and
amortization.......................... (104,196) (77,805) (146,141)
--------- -------- ---------
$ 172,291 $170,226 $ 229,002
========= ======== =========
</TABLE>
Land use rights represents payments made to secure on a fully paid up basis
the use of the property where the Company's facilities are located in Shanghai
China for a period of 50 years.
Interest costs of $152,000, $510,000, and $1.1 million were capitalized as
part of the cost of buildings and improvements in 1995, 1996, and 1997
respectively. No interest costs were capitalized in 1998.
As discussed in Notes 6, 7 and 8, certain equipment is pledged or encumbered
under borrowing arrangements of the Company or HEI.
Property, plan and equipment under capital leases (see Notes 7 and 8) are as
follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Property, Plant and Equipment under capital
leases
Cost..................................... $31,082 $32,369 $ 44,501
Less accumulated amortization............ (8,758) (9,533) (20,970)
------- ------- --------
$22,324 $22,836 $ 23,531
======= ======= ========
</TABLE>
Capital lease assets include equipment with a cost of $19.6 million, which
the leasing companies have not granted to HEI the right to transfer such
equipment to the Company. (See Note 8.)
Management reviews fixed assets for impairment in accordance with SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". Effective December 31, 1997, and based on management
changes and deteriorating economic conditions in Asia, the Company undertook a
detailed asset impairment analysis. Based on this analysis the Company recorded
a change of $11.6 million to recognize the impairment of certain equipment. The
impairment arose from a combination of management's decision to discontinue
certain product lines which were projected to have limited future growth
potential, and from the write down of production equipment judged to be in
excess of foreseeable requirements. After recognition of the impairment write-
down, the carrying value of the impaired assets was effectively reduced to
$650,000 at December 31, 1997.
F-13
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Other assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1997 1998
------ ------- ------
<S> <C> <C> <C>
Other Assets
Deposits for severance benefits.................. $5,909 $ 3,123 $1,618
Long-term employee loans......................... 1,971 1,252 1,478
Deferred taxes................................... -- 6,115 1,889
Other............................................ 3 3 16
------ ------- ------
$7,883 $10,493 $5,001
====== ======= ======
</TABLE>
Accrued expenses and other liabilities are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Accrued Expenses & Other Liabilities
Accrued personnel expenses........................ $3,609 $2,606 $3,645
Accrued interest payable.......................... 290 318 950
Other accrued expenses............................ 438 2,900 3,082
------ ------ ------
$4,337 $5,824 $7,677
====== ====== ======
</TABLE>
F-14
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 5: Segments and Geographic Information
The Company is engaged in one industry segment, the packaging and testing of
integrated circuits. Finanical data, summarized by geographic area, is as
follows (in thousands):
<TABLE>
<CAPTION>
United
States Korea China Eliminations Combined
-------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1995
Revenue from unaffiliated
customers............... $ 67,230 $102,934 -- -- $170,164
Revenue from affiliates.. 78 71,488 -- $ (62,496) 9,070
-------- -------- -------- --------- --------
Total revenue.......... $ 67,308 $174,422 -- $ (62,496) $179,234
======== ======== ======== ========= ========
Interest expense......... $ 20 $ 3,131 -- -- $ 3,151
Depreciation and
amortization expense.... 3 27,848 $ 66 -- 27,917
Income tax expense....... 1,053 924 -- -- 1,977
Income (loss) from
operations.............. 2,585 5,403 (948) -- 7,040
Acquisition of equipment
under capital leases.... -- 11,767 -- -- 11,767
Identifiable assets...... $ 10,174 $ 95,370 $ 36,104 $ (13,664) $127,984
======== ======== ======== ========= ========
Year ended December 31,
1996
Revenue from unaffiliated
customers............... $110,943 $ 63,176 -- -- $174,119
Revenue from affiliates.. 2,277 122,704 $ 6,889 $(114,334) 17,536
-------- -------- -------- --------- --------
Total revenue.......... $113,220 $185,880 $ 6,889 $(114,334) $191,655
======== ======== ======== ========= ========
Interest expense......... $ 8 $ 5,268 $ 504 -- $ 5,780
Depreciation and
amortization expense.... 4 24,039 2,589 -- 26,632
Income tax expense....... 1,401 1,482 -- -- 2,883
Income (loss) from
operations.............. 3,421 12,597 (8,398) -- 7,620
Acquisition of equipment
under capital leases.... -- 14,612 -- -- 14,612
Identifiable assets...... $ 17,237 $163,908 $ 62,398 $ (27,611) $215,932
======== ======== ======== ========= ========
Year ended December 31,
1997
Revenue from unaffiliated
customers............... $231,615 $ 43,888 -- -- $275,503
Revenue from affiliates.. 4,206 232,381 $ 21,611 $(244,272) 13,926
-------- -------- -------- --------- --------
Total revenue.......... $235,821 $276,269 $ 21,611 $(244,272) $289,429
======== ======== ======== ========= ========
Interest expense......... -- $ 9,858 $ 1,114 -- $ 10,972
Depreciation,
amortization, and asset
impairment expense...... $ 75 40,515 11,661 -- 52,251
Income tax expense
(benefit)............... 2,290 (11,961) -- -- (9,671)
Income (loss) from
operations.............. 5,538 33,639 (13,659) -- 25,518
Acquisition of equipment
under capital leases.... -- 25,901 -- -- 25,901
Identifiable assets...... $ 28,613 $190,818 $ 87,108 $ (73,298) $233,241
======== ======== ======== ========= ========
</TABLE>
F-15
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
United
States Korea China Eliminations Combined
-------- -------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Revenue from unaffiliated
customers.................. $317,348 $ 11,529 -- -- $328,877
Revenue from affiliates..... 2,330 305,334 $13,759 $(316,219) 5,204
-------- -------- ------- --------- --------
Total revenue............. $319,678 $316,863 $13,759 $(316,219) $334,081
======== ======== ======= ========= ========
Interest expense............ -- $ 9,973 $ 3,367 -- $ 13,340
Depreciation and
amortization expense....... $ 489 35,584 9,782 -- 45,855
Income tax expense
(benefit).................. 954 19,610 -- -- 20,564
Income (loss) from
operations................. 1,885 51,334 (12,790) -- 40,429
Acquisition of equipment
under capital leases....... -- 2,191 -- -- 2,191
Identifiable assets......... $ 62,724 $316,288 $97,085 $(116,625) $359,472
======== ======== ======= ========= ========
</TABLE>
Revenue from unaffiliated and affiliated customers is based on the origin of
the sale. Identifiable assets are those assets that can be directly associated
with a particular geographic area. In determining each geographic location's
income (loss) from operations and identifiable assets, the expenses and assets
relating to general corporate activities are included in the amounts for the
geographical area where they were incurred, acquired or utilized.
Note 6: Short-Term Debt and Credit Facilities
Korea
CPK maintains credit facilities with two Korean banks that provide a total
of $45 million of short-term credit against export invoices. The credit
facilities allow CPK to borrow money at an interest rate of LIBOR plus 3.2%,
against specific export invoices presented on the basis of document against
acceptance ("D/A"). There were no outstanding borrowings under these facilities
at December 31, 1998. The credit facility with one of the banks, which provides
$30 million of credit, is guaranteed personally by the chairman of HEI.
CPK has a $2.5 million overdraft facility with a Korean bank, collateralized
by the personal guarantee of the chairman of HEI. Interest is charged against
amounts borrowed at the rate of 12.8%. No amounts were outstanding under this
facility at December 31, 1998.
CPK has a credit facility of $17.7 million with a Korean bank for the
issuance of sight letters of credit. A total of $11.7 million of this facility
is restricted to letters of credit issued to Korean suppliers. The use of this
credit facility is limited to providing guarantees to CPK's vendors for
payment. It does not provide for the lending of money. At December 31, 1998,
the portion allocated to Korean suppliers was overdrawn by $2.6 million. The
amount outstanding under the portion allocated to foreign suppliers was
$300,000 at December 31, 1998. This credit facility is personally guaranteed by
the chairman of HEI and collateralized by CPK's bank deposits of $10 million.
CPK also maintains credit facilities with two Korean banks that provide a
total of $25 million of short-term credit, available for the issuance of
bankers' usance and shippers' usance letters of credit. In both cases, the
banks extend credit by making payment to the vendors upon document acceptance
and by providing payment terms to CPK ranging from 30 to 120 days from document
acceptance.
F-16
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Under the bankers' usance letters of credit, interest is paid by CPK. Under
the shippers' usance letters of credit, interest is paid by CPK's vendors.
Amounts outstanding under the shippers' usance letters of credit are recorded
as accounts payable as they represent money borrowed by the vendors. Amounts
outstanding under bankers' usance are recorded as short-term debt of the
Company.
At December 31, 1998, CPK also had shippers' usance and bankers' usance
letters of credit outstanding against credit facilities of HEI. The following
table summarizes the bankers' and shippers' usance outstanding at December 31,
1998 (in thousands):
<TABLE>
<CAPTION>
Under CPK
Credit Under HEI
Line Credit Line Total
--------- ----------- -------
<S> <C> <C> <C>
Shippers' usance recorded as accounts
payable.................................. $25,136 $7,413 $32,549
Bankers' usance recorded as short-term
debt..................................... 2,360 714 3,074
------- ------ -------
$27,496 $8,127 $35,623
======= ====== =======
</TABLE>
The $3.1 million of the Company's short-term debt consisted of borrowings
under bankers' usance letters of credit, carrying an interest rate of LIBOR
plus 5.0% to 6.0%.
The credit facility provided by one of the banks, which totals $10 million,
has been personally guaranteed by the chairman of HEI.
United States
CPI has a short-term credit facility of $10 million from an American bank.
The credit facility allows the bank to take a security interest in CPI's
accounts receivable upon notification from CPI of its intent to utilize the
credit facility. The credit facility provides for borrowing at the rate of the
bank's prime rate plus 0.5%. As CPI has not notified the bank of its intent to
utilize this facility as of December 31, 1998, no security interest in any of
CPI's assets has been granted. The credit facility has certain covenants based
on financial measurements. CPI was in compliance with the covenants at December
31, 1998; however, the plan of recapitalization as described below, may result
in a violation of the covenants of this facility.
China
At December 31, 1998, HECS had a $9.7 million loan due a Korean bank, which
bears interest at the six month LIBOR rate plus 0.43%. This loan was due in
January 1999 and is guaranteed by HEI. In January 1999, this loan was renewed
for another year. At December 31, 1998, HECS also had loans totaling $6 million
due to a Korean bank, which bears interest at 6%. These loans are guaranteed by
Hyundai Electronics Co. (Dalian), a Hyundai affiliate company. A total of $3
million is due in March 1999, and the balance is due in April 1999.
F-17
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 7: Long-Term Debt and Capital Lease Obligations
The following is a summary of the Company's long-term debt and capital
lease obligations (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Notes payable to a Korean bank, principal
maturing at various dates from December 9,
1998 to June 18, 2005, payable in aggregate
monthly or quarterly installments together
with interest at rates ranging from LIBOR
(5.72% at December 31, 1998) plus 0.12% to
1.5% per annum, collateralized by certain
machinery and equipment, guaranteed by HEI.. $ 54,307 $ 76,009 $ 69,363
Notes payable to a Japanese bank, principal
payable in aggregate semi-annual
installments beginning March 28, 1999,
maturing September 28, 2000, together with
interest at the 6-month LIBOR rate (5.5% at
December 31, 1998) plus 0.4% per annum
guaranteed by HEI........................... 14,400 12,342 8,228
Note payable to a Korean bank, principal
payable in aggregate semi-annual
installments beginning May 22, 1999 maturing
November 22, 2001 together with interest at
the 3-month LIBOR rate (5.08% at December
31, 1998) plus 3% per annum, guaranteed by
HEI......................................... 9,000 20,000 20,000
Capital lease obligations to institutions
with interest at rates ranging from LIBOR
(5.72% at December 31, 1998) plus .58% to
2.2% per annum, collateralized by certain
machinery and equipment, guaranteed by HEI.. 13,323 17,064 10,945
Less current maturities...................... (16,351) (13,256) (31,954)
-------- -------- --------
$ 81,772 $116,694 $ 80,943
======== ======== ========
</TABLE>
Capital lease obligations in Korean Won to
institutions with interest at rates ranging
from 11% per annum to 14.58% per annum,
collateralized by certain machinery and
equipment, guaranteed by HEI................ 7,093 4,535 4,361
The debt repayment is guaranteed by HEI and certain Hyundai affiliated
companies. Substantially all property, plant and equipment are pledged as
collateral for the above loans. HEI has not yet received permission to
transfer certain of the capital lease obligations included above to CPK. While
HEI is endeavoring to transfer such leases, there is no assurance that the
lessors will authorize transfer of these leases.
Future maturities of long-term debt outstanding, excluding capital lease
obligations, at December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1999............................. $23,792
2000............................. 34,172
2001............................. 18,068
2002............................. 9,515
2003............................. 7,684
2004............................. 4,360
</TABLE>
F-18
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The Company has entered into lease agreements with several leasing companies
which are recorded as capital leases. Future annual payments under capital
lease obligations as of December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1999............................. $ 8,852
2000............................. 5,601
2001............................. 2,033
2002............................. 45
-------
16,531
Less amounts representing
interest........................ (1,225)
-------
$15,306
=======
</TABLE>
Note 8: Term Loans and HEI Capital Leases
During the periods through June 30, 1998, HEI transferred certain machinery
and equipment that it leased, amounting to $17.0 million at cost, with related
accumulated depreciation of $6.8 million, to CPK; these leases qualify as
capital lease obligations. HEI assumed all obligations under these leases and
no amounts will be serviced by CPK; however, title to these assets used by CPK
is held by the leasing companies under these agreements. Total capital lease
obligations at December 31, 1996, 1997 and 1998, were $4.0 million, $16.7
million and $16.1 million, respectively. The lessors have not authorized HEI to
transfer the leases to CPK, and a change of ownership of CPK without prior
written consent may cause a technical default under the terms of the
agreements. The assets and the related obligations have been reflected in the
accompanying combined financial statements. The Company has recorded lease
payments made by HEI as a reduction of the Company's capital lease obligations
and a corresponding increase in capital amounting to $3.4 million, $7.2
million, and $10.0 million for the years ended December 31, 1996, 1997, and
1998, respectively.
During the periods through June 30, 1998, HEI also transferred to CPK
certain machinery and equipment which are pledged as collateral under dollar
denominated loan agreements with banks. HEI has not transferred the debt
obligations to CPK and remains the named borrower. Since the assets used by CPK
are pledged as collateral for the related loan obligations, the Company has
recorded these loan obligations as a liability due to HEI in the accompanying
financial statements. At December 31, 1998 the outstanding balance on these
loans amounted to $4.7 million. The Company has recorded payments made by HEI
on these loans as a reduction of the liability to HEI and a corresponding
increase in capital amounting to $1.2 million for the year ended December 31,
1998.
Note 9: Commitments and Contingencies
During the periods through June 30, 1998, HEI transferred to CPK certain
machinery and equipment acquired by HEI and which had been originally financed
through dollar denominated loan agreements between HEI and Korean banks. HEI is
named as the borrower under the loan agreements and the debt has not been
transferred to CPK or reflected in the accompanying combined financial
statements. As of December 31, 1998, approximately $38.0 million is outstanding
under these loans. The loan agreements provide that the banks may request a
collateral security interest in the assets transferred to CPK; however, as of
December 31, 1998, no security agreements have been executed or requested with
respect to the outstanding borrowings. Management believes that the lenders
would be required to seek assets other than those held by CPK if they wish to
assert a security interest. Also, HEI has represented to CPK that it has the
ability and the intention to service repayment
F-19
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
of the borrowings from assets other than those transferred to CPK.
Notwithstanding, it is reasonably possible that the banks may attempt to exert
a security interest in the assets transferred to CPK. In the event that the
lenders establish such a collateral security interest in CPK's assets, the
Company will reflect such borrowings in its financial statements as a reduction
of contributed capital.
The Company's executive offices in the United States and its facilities in
Korea are leased from HEA and HEI respectively, under noncancelable operating
lease arrangements through 2001. Rent expense for the years ended December 31,
1995, 1996, 1997, and 1998 was $5.2 million, $5.0 million, $4.3 million and
$7.6 million, respectively. Future annual minimum lease payments under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year at December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999............................. $ 4,683
2000............................. $ 4,859
2001............................. $ 2,427
-------
$11,969
=======
</TABLE>
Note 10: Related Party Transactions
The Company has sold packaging and testing services to HEI and to a
subsidiary of HEA. The Company recorded sales of $9.0, $15.2, $9.7, and $2.9
million to HEI for the years ended December 31, 1995, 1996, 1997, and 1998
respectively. The Company recorded sales of $2.3, $4.2, and $2.3 million to a
subsidiary of HEA for the years ended December 31, 1996, 1997, and 1998
respectively.
During the periods prior to June 30, 1998, HEI reimbursed CPK for the use of
a metal plating facility. After June 30, 1998, HEI entered into an agreement
with CPK, whereby CPK charged for plating services on a per piece basis. During
fiscal years 1995, 1996, 1997, and 1998 the Company recognized $6.8 million,
$5.4 million, $8.5 million, and $6.2 million from HEI as reimbursement for
plating services, respectively. These amounts exceeded actual costs by
$623,000, $519,000, $832,000, and $57,000 for the years ended December 31,
1995, 1996, 1997, and 1998, respectively. The total amount receivable from HEI
for plating services and from the sale of packaging services was $4.7 million
at December 31, 1998, and additionally CPK had a receivable balance of $202,000
at December 31, 1998 for advances made to HEI.
HEI has provided certain support functions for CPK, including sales,
administration, finance and treasury management. In connection with these
functions, HEI incurred certain expenses on behalf of CPK, which consist
primarily of general, selling and administrative expenses. During the years
ended December 31, 1995, 1996, 1997 and the six months ended June 30, 1998, HEI
allocated $5.6 million, $5.3 million, $4.0 million and $1.2 million,
respectively, which are included as an operating expense by the Company. No
allocation of operating expenses was made after June 30, 1998, as CPK
established its own administration functions.
In addition, HEI allocated to CPK, $4.9 million, $4.8 million, and $4.3
million and $1.7 million for facilities and utilities costs during fiscal years
ended December 31, 1995, 1996, 1997, and the six-month period ended June 30,
1998, respectively. CPK expenses which were paid by HEI during the periods
prior to June 30, 1998, are recorded as capital contributions. For the six
month period from June 30, 1998 to December 31, 1998, CPK paid HEI a total of
$5.5 million for facilities, utilities, and employee welfare. During the
periods prior to June 30, 1998, a portion of these costs was included in the
operating expenses allocated to CPK.
In December 1998, CPK declared a dividend payable of $9.7 million to HEI,
which was paid in February 1999.
F-20
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
HEI entered into an agreement with the Company to provide technical services
and manufacturing support for the Company's facility in China. This agreement
was terminated on June 30, 1998. Under this agreement, the Company owed HEI
approximately, $4.2 million, $6.7 million and $7.2 million at December 31,
1996, 1997 and 1998, respectively. Through December 31, 1998, no payments had
been made under this agreement.
During 1995 through 1998, HECS contracted with Hyundai Engineering and
Construction Co. Ltd. ("HEC"), a Hyundai affiliated company, to construct the
Company's packaging and testing facilities in Shanghai, China. From inception
through December 31, 1998, charges from HEC amounted to approximately $43.7
million. Amounts payable to HEC, included in the accompanying balance sheets,
were $2.2 million and $1.2 million at December 31, 1996 and December 31, 1998
respectively. No amounts were due to HEC at December 31, 1997.
At December 31, 1998, HECS had a payable of $4.4 million due HEI for the
cost of certain equipment which had been transferred to HECS. This amount is
included as a current liability in payables to affiliates.
The following table summarized the payables to affiliates at December 31,
1996, 1997, and 1998 (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
Payables to Affiliates
Dividend payable to HEI by CPK................... -- -- $ 9,701
Management fee due HEI........................... $4,241 $6,659 7,187
Payable to HEI from HECS for equipment purchases. -- -- 4,430
Payable to HEA from CPI for current tax
obligations..................................... -- -- 443
Payable to HEC from HECS for construction work... 2,207 -- 1,157
------ ------ -------
$6,448 $6,659 $22,918
====== ====== =======
</TABLE>
Since May 1998, CPI's primary office facility has been located on premises
which it has subleased from HEA. During the year ended December 31, 1998, HEA
charged $467,000 to CPI for rent and building related taxes, insurance, and
maintenance.
At December 31, 1997 and 1998, the Company had advances receivable of $7.5
million and $37.6 million, respectively, due from HEA. These advances are non-
interest bearing and have no fixed repayment date. These advances have been
classified as deductions from shareholders' equity in these financial
statements. Amounts advanced between CPI and HEA prior to 1997 were not
material.
At June 30, 1998, Hyundai Information Technology ("HIT") entered into a
three year agreement with CPK to provide information technology services.
Substantially all of CPK's major information technology services are provided
by HIT. HIT also entered into a six month agreement at October 1998 to provide
CPK with services for Year 2000 remediation. For the six month period from June
30, 1998 to December 31, 1998, HIT charged CPK $1.0 million. Prior to June 30,
1998, while HIT provided substantially all of CPK's information technology
services, such charges were included with the general allocation of general,
selling and administrative operating expenses made by HEI.
During 1998, CPI entered into an agreement with HIT for the installation of
a significant portion of a modular software system. The installation of this
portion of the software system was completed in February 1999. For the year
ended December 31, 1998, CPI incurred charges of $700,000 from HIT.
F-21
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 11: Shareholders' and Divisional Equity
The Company's equity includes the preferred stock, and for earlier periods
the divisional equity, of CPI, paid-in-capital of HECS, and the common stock or
divisional equity of CPK.
Preferred Stock
CPI is authorized to issue up to 45,500,000 shares of no par value preferred
stock. The Company issued 33,333,333 shares of Series A Preferred Stock to HEA
upon inception on September 30, 1997. As of June 30, 1998, 33,333,333 shares of
Series A Preferred Stock were issued and outstanding.
The holders of Series A Preferred Stock are entitled to receive a dividend
as and when declared of $0.05 per share per year, before any distribution is
paid on common stock or any other class of capital stock that is junior in
right or priority of payment of dividends. Additionally, the holders of Series
A Preferred Stock are entitled to receive dividends equal to those dividends
paid on common or any other class of capital stock. Such dividend rights are
not cumulative. No dividends have been declared.
The Series A Preferred Stock is convertible, at the option of the holder,
into such whole number of common stock as is determined by dividing $0.30 plus
all declared but unpaid dividends on each share of Series A Preferred Stock by
the Series A conversion price, in effect at the time of the conversion. The
Series A conversion price will be adjusted for stock dividends, stock splits,
capital reorganization or reclassification and in situations where the Company
issues additional stock at a price less than $0.30, subject to the terms of an
adjustment formula. Preferred stockholders vote with common stockholders on an
as if converted basis. The Series A Preferred Stock has a liquidation
preference equal to $0.30 per share plus any declared but unpaid dividends.
In the event of a public offering in which the gross proceeds exceed $7.5
million and in which the offering price exceeds $5.00 per share, all Series A
Preferred Stock will automatically convert into fully paid nonassessable shares
of common stock.
Common Stock
CPI is authorized to issue up to 40,000,000 shares of no par value Common
Stock. As of December 31, 1997 and December 31, 1998, no shares of Common Stock
were issued or outstanding. CPI has authorized the issuance of up to 2,508,960
shares of Common Stock through the exercise of stock options under CPI's 1997
Stock Option Plan (the "Plan"). CPI is required to reserve and keep available
out of authorized but unissued common stock, that number necessary to affect
the conversion of Preferred Stock.
CPK is authorized to issue up to 80,000,000 shares of U.S. dollar equivalent
$3.64 par value Common Stock. As of December 31, 1998, CPK issued 40,000,000
shares of Common Stock.
Pursuant to Chinese commercial practices, no capital shares are issued by
HECS. The registered capital invested in HECS amounted to approximately $53.3
million as of December 31, 1998.
Stock Options
In November 1997, CPI's Board of Directors adopted a stock purchase plan,
which provides for the grant of incentive stock purchase options, and non-
qualified stock purchase options. In March 1999, HEI and HEA entered into an
agreement to reorganize the Company and to terminate the CPI stock purchase
plan. Under the
F-22
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
reorganization, option folders will receive $0.36 for each vested share. At
December 31, 1998, options for 1,467,750 shares were outstanding, of which
160,239 options were vested.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". Had compensation cost been
determined based on the fair value at the grant date, the impact on net
operations as reported for the year ended December 31, 1997 and 1998 would have
been $0 and $9,000, respectively.
The following table summarizes stock option activity of CPI through December
31, 1998:
<TABLE>
<CAPTION>
Weighted
Options Average
Available Options Exercise Aggregate
for Grant Outstanding Price Value
--------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Balances at October 1, 1997.... -- -- --
Options reserved............. 2,508,960 -- --
Options granted.............. (952,750) 952,750 $0.30 $285,825
--------- --------- ----- --------
Balances at December 31, 1997.. 1,556,210 952,750 $0.30 285,825
Options granted.............. (793,500) 793,500 $0.30 238,050
Options canceled............. 278,500 (278,500) $0.30 (83,550)
--------- --------- ----- --------
Balances at December 31, 1998.. 1,041,210 1,467,750 $0.30 $440,325
========= ========= ===== ========
</TABLE>
As of December 31, 1998, options for 160,239 shares were vested. No options
were vested at December 31, 1997. The weighted average contractual life is
approximately 9.7 years.
Note 12: Income Taxes
The provision for (benefit from) income taxes is comprised of the following
(in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997 1998
------ ------ -------- -------
<S> <C> <C> <C> <C>
Current
Federal................................ $ 813 $1,082 $ 1,768 $ 1,099
State.................................. 239 317 519 279
Foreign................................ -- 574 4,817 3,012
Deferred
Federal................................ -- -- -- (358)
State.................................. -- -- -- (62)
Foreign................................ 925 910 (16,775) 16,594
------ ------ -------- -------
Tax expense............................ $1,977 $2,883 $ (9,671) $20,564
====== ====== ======== =======
</TABLE>
Income (loss) before taxes is comprised of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1995 1996 1997 1998
------ ------- -------- -------
<S> <C> <C> <C> <C>
Domestic............................... $2,565 $ 3,413 $ 5,579 $ 2,165
Foreign................................ (490) (6,155) (61,368) 50,702
------ ------- -------- -------
$2,075 $(2,742) $(55,789) $52,867
====== ======= ======== =======
</TABLE>
F-23
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
A summary of the composition of net deferred income tax assets
(liabilities) is as follows (in thousands):
<TABLE>
<CAPTION>
At December 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Assets:
Foreign currency transaction losses.......... $ 12 $13,356 $ 388
Foreign lease obligations.................... -- 1,806 1,366
Impaired loss................................ -- 1,355 1,484
Provision for slow moving inventory.......... 688 1,027 657
Capitalized interest......................... -- 1,242 2,427
Accrued expenses -- -- 420
------- ------- -------
700 18,786 6,742
------- ------- -------
Less liabilities:
Foreign currency transaction gains........... (3) (3,614) (3,182)
Foreign lease obligations.................... (651) -- --
Reserves deducted for tax, not for books..... (1,262) (4,864) (868)
Depreciation................................. (630) -- --
------- ------- -------
(2,546) (8,478) (4,050)
------- ------- -------
$(1,846) $10,308 $ 2,692
======= ======= =======
</TABLE>
The differences between provision for (benefit from) income taxes at the
statutory Federal income tax rate and income taxes reported in the combined
statements of operations are as follows:
<TABLE>
<CAPTION>
Years Ended December
31,
---------------------------
1995 1996 1997 1998
---- ----- ----- ----
<S> <C> <C> <C> <C>
Federal statutory tax rate................. 35.0% (35.0)% (35.0)% 35.0%
State tax, net of Federal benefit.......... 7.5% 7.5% 0.6% 0.3%
Losses not benefitted, China............... 60.7% 128.8% 12.5% 11.4%
Korean operations rate difference.......... (7.9)% 3.8% 4.6% (7.8)%
---- ----- ----- ----
95.3% 105.1% (17.3)% 38.9%
==== ===== ===== ====
</TABLE>
Since inception on September 30, 1997, CPI has been a party to a tax
sharing agreement with its parent company HEA with which it has filed a
consolidated US Federal income tax return, and various consolidated and
separate state income tax returns. Under the tax sharing agreement CPI will
remit to HEA its tax liability calculated on a separate company basis. For the
year ended December 31, 1998, CPI recorded an income tax provision of
$954,000, of which $443,000 was recorded as a current liability due to HEA.
The balance of prior tax charges was accounted for as a reduction of
shareholder receivable-HEA, and included in shareholders' and divisional
equity.
HECS operates under a business license in China whereby a tax holiday is
granted to the Company. The tax holiday will result in reduced statutory tax
rates being applied to taxable income generated in the five year period
commencing from the first year HECS generates taxable income, after
utilization of operating losses carried forward. Operating losses may be
carried over for five years. No benefit for income taxes has been reflected in
the accompanying combined financial statements for losses incurred by HECS,
thereby increasing the effective tax rate.
F-24
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Under Korean tax law, CPK is allowed certain income tax deductions for the
appropriation of retained earnings and the Company has established a deferred
tax liability for such appropriations. In addition, CPK incurred certain
unrealized foreign currency translation gains and losses, included in
operations, which must be deferred for tax reporting purposes. The accompanying
combined financial statements reflect the provision or benefit for such gains
and losses and are reflected as deferred income tax assets and liabilities.
Included in contributions to capital is approximately $4.2 million comprised
primarily of income tax liability assumed by the Company's parent through
December 31, 1998.
Note 13: Employee Benefit Plans
Retirement and Deferred Savings Plan--United States
CPI has maintained a retirement and deferred savings plan for its employees
(the "401(k) Plan") through its immediate parent company, HEA. The 401(k) Plan
is intended to qualify as a tax qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to 15% of tax
gross compensation (up to a statutory limit). Under the 401(k) Plan, the
Company is required to make contributions based on contributions made by
employees. The Company's contributions to the 401(k) Plan for the years ended
December 31, 1996, 1997 and 1998 were approximately $11,300, $49,100 and
$118,600 respectively. No amounts were contributed during 1995. All amounts
contributed by participants and related earnings are fully vested at all times.
Employee Welfare and Social Insurance Plan--China
In accordance with the National and Shanghai Municipal Regulations on labor
administration, HECS is required to provide a certain percentage of total
employee salaries as a welfare and social insurance reserve. The rates of
provision are as follows:
<TABLE>
<S> <C>
Pension fund........................................................ 25.5%
Welfare fund........................................................ 5.5%
Housing fund........................................................ 6.0%
Unemployment insurance fund......................................... 2.0%
</TABLE>
Employee welfare and social insurance expense for the years ended December
31, 1995, 1996, 1997 and 1998 amounted to approximately $13,300, $32,800,
$449,100 and $820,900 respectively. The Company is under a statutory
requirement in China to establish and maintain a general reserve fund and an
enterprise expansion fund by way of appropriations from net income. The board
of directors determines the amount of the appropriations. There were no amounts
appropriated for these funds during the periods presented.
Severance Benefits--Korea
Employees and directors with more than one year of service are entitled to
receive a lump-sum payment upon termination of their employment with CPK, based
on their length of service and rate of pay at the time of termination. Accrued
severance benefits are adjusted annually for all eligible employees based on
their employment as of the balance sheet date.
In accordance with the National Pension Act, a certain portion of severance
benefits is required to be remitted to the National Pension Fund and deducted
from accrued severance benefits. The amounts contributed will be refunded to
employees from the National Pension Fund upon retirement. The provision for
severance
F-25
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
benefits for the years ended December 31, 1995, 1996, 1997 and 1998 amounted to
approximately $5.0 million, $2.4 million, $3.0 million, and $2.9 million,
respectively.
Severance benefits are funded approximately 44%, 41% and 79% at December 31,
1996, 1997, and 1998, respectively through deposits to a group severance
insurance plan with several life insurance companies. The amounts funded under
this insurance plan are classified as long-term severance deposits. CPK may
fund subsequent accruals at its discretion.
Included in other long-term liabilities are accrued severance benefits of
$12.5 million, $7.0 million, and $1.3 million at December 31, 1996, 1997 and
1998, respectively. All accrued severance benefits totaling $8.8 million were
paid at June 30, 1998 in conjunction with the initiation of CPK as the legal
employer of the former employees of the HEI Assembly and Test Division.
Note 14: Subsequent Events
In January 1999, HEI made an additional equity investment of $20.0 million
in HECS.
On March 13, 1999, HEI and HEA (collectively "Hyundai") entered into an
agreement and plan of recapitalization and merger (the "Recapitalization
Agreement") with an outside investor group (the "Equity Investors"). The
following steps are contemplated by the Recapitalization Agreement in order to
consummate the recapitalization:
. Under a series of planned transactions under common control Hyundai
restructures the Company, such that ChipPAC, Inc. indirectly owns all of
the outstanding equity of CPK, HECS, and CATS.
. Hyundai forms ChipPAC (Barbados) Ltd. and ChipPAC Limited. ChipPAC
(Barbados) Ltd. is to be wholly owned by ChipPAC, Inc. and is to own all
of the outstanding equity of ChipPAC Limited, which is to own all the
outstanding equity of CPK, HECS, and CATS.
. Hyundai forms ChipPAC Operating Limited, which is to be wholly owned by
ChipPAC, Inc. ChipPAC Operating Limited is to own all of the outstanding
equity of two additional entities formed by Hyundai, ChipPAC Luxembourg
S.a.R.L. and ChipPAC Liquidity Management.
. The ChipPAC Operating Limited borrows approximately $320 million through
certain term loan facilities and the issuance of senior subordinated
notes and, in connection with the equity investment discussed below,
purchases from Hyundai 90% of the outstanding equity of the ~Company and
repays previously existing indebtedness.
. The Equity Investors invest an aggregate $90 million in cash in ChipPAC,
Inc. in exchange for 90% of the common equity. Hyundai receives 10% of
the common equity of ChipPAC, Inc. and redeemable preferred stock.
The Company and HEI negotiated the terms of a special one-time change of
control bonus and a compensation payment with the CPK labor union totaling
approximately $12 million. According to the recapitalization agreement, certain
termination payments will be paid by HEI, or if directly paid by CPK will be
reimbursed to the Company by HEI, and therefore to the extent such payments are
reimbursed, it is expected that there will be no net cash impact to the
Company. The charges for these payments will be reflected as an operating
expense of the Company.
F-26
<PAGE>
ChipPAC
(Direct and Indirect Subsidiaries of Hyundai Electronics Industries Co., Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 15: Supplemental Financial Statements of Guarantor/Non-Guarantor Entities
In connection with the recapitalization, the Company anticipates that
ChipPAC Operating Limited will issue senior subordinated debt securities which
will be fully and unconditionally guaranteed, jointly and severally, on a
senior subordinated basis, by CPI, ChipPAC (Barbados) Ltd., ChipPAC Limited,
CPK, ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management (the
"Guarantor Subsidiaries"). HECS and CATS (collectively the Chinese entities),
will not provide guarantees (the "Non-Guarantor Subsidiaries"). The following
is combining financial information for CPI, CPK, HECS and CATS, segregated
between the Guarantor and Non-Guarantor Subsidiaries. Separate financial
statements and other disclosures concerning the Guarantor Subsidiaries are not
presented herein because management has determined that they are not material
to investors. Financial information for ChipPAC Operating Limited has not been
presented as this entity has no historical financial results and future
transactions and balances will primarily relate to issuance of debt, payment of
principal and interest, and inter-company transactions. Financial information
for ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L. and
ChipPAC Liquidity Management has not been presented as these entities have no
historical financial results and future transactions will primarily consist of
inter-company transactions. The following HECS financial statements in the
condensed combining financial statements include the accounts of CATS.
F-27
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Year Ended December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
----------------- ---------
CPI CPK HECS Eliminations Combined
------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue..... $ -- $ 62,496 $ -- $(62,496) $ --
Customer revenue......... 67,308 111,926 -- -- 179,234
------- -------- ------- -------- --------
Revenue.................. 67,308 174,422 -- (62,496) 179,234
Cost of revenue............ 62,566 157,647 810 (62,496) 158,527
------- -------- ------- -------- --------
Gross profit............... 4,742 16,775 (810) -- 20,707
Operating expenses:
Selling, general &
administrative.......... 2,157 9,648 -- -- 11,805
Research & development... -- 1,724 -- -- 1,724
Management fees charged
by affiliate............ -- -- 138 -- 138
Writedown of impaired
assets.................. -- -- -- -- --
------- -------- ------- -------- --------
Total operating
expenses.............. 2,157 11,372 138 -- 13,667
------- -------- ------- -------- --------
Operating income........... 2,585 5,403 (948) -- 7,040
Non-operating income
(Expense)
Interest income.......... -- -- -- -- --
Interest expense......... (20) (3,131) -- (3,151)
Foreign currency gains
(losses)................ -- (980) (32) (1,012)
Other income (expenses),
net..................... -- 1,814 (2,616) -- (802)
------- -------- ------- -------- --------
Non-operating income
(expenses).............. (20) (2,297) (2,648) -- (4,965)
------- -------- ------- -------- --------
Income (loss) before income
taxes..................... 2,565 3,106 (3,596) -- 2,075
Provision for (benefit
from) income taxes........ 1,053 924 -- -- 1,977
------- -------- ------- -------- --------
Net Income (loss)...... $ 1,512 $ 2,182 $(3,596) $ -- $ 98
======= ======== ======= ======== ========
</TABLE>
F-28
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
----------------- -------------
CPI CPK HECS Eliminations Combined
------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net Income........... $ 1,512 $ 2,182 $ (3,596) $ -- $ 98
Adjustments to recon-
cile net income
(loss) to net cash
provided by operat-
ing activities:
Depreciation and
amortization...... 3 27,848 66 -- 27,917
Write down of
impaired assets... -- -- -- -- --
Provision for
inventory and
receivables....... -- 799 -- -- 799
Foreign currency
(gains) losses.... -- 1,012 -- -- 1,012
(Gain) loss on
intercompany sales
of equipment...... -- (2,603) -- 2,603 --
(Gain) loss on
external sales of
equipment......... -- 791 -- -- 791
Changes in assets and
liabilities:
Intercompany
accounts
receivable........ -- (9,934) -- 9,934 --
Accounts
receivable........ (3,187) 38 -- -- (3,149)
Inventories........ -- (1,426) (599) -- (2,025)
Prepaid expenses
and other assets.. 1,053 (4,700) (156) -- (3,803)
Advances (to) from
affiliates........ (1,817) -- 138 -- (1,679)
Intercompany
accounts payable.. 2,326 -- 7,608 (9,934) --
Accounts payable... 103 (4,979) -- -- (4,876)
Accrued expenses &
other liabilities. 8 658 6,735 -- 7,401
Other long-term
liabilities....... -- 5,774 -- -- 5,774
------- -------- -------- ------- --------
Net cash provided
by operating
activities...... 1 15,460 10,196 2,603 28,260
------- -------- -------- ------- --------
Cash flows used in
investing activities:
Acquisition of
property and
equipment........... (1) (17,998) (28,542) 6,846 (39,695)
Proceeds,
intercompany equip-
ment sales.......... -- 9,449 -- (9,449) --
Proceeds, external
equipment sales..... -- 51 -- -- 51
------- -------- -------- ------- --------
Net cash used in
investing
activities...... (1) (8,498) (28,542) (2,603) (39,644)
------- -------- -------- ------- --------
Cash flows provided by
financing activities:
Advances to HEA...... -- -- -- -- --
Proceeds from short-
term loans.......... -- 93,942 -- -- 93,942
Repayment of short-
term loans.......... -- (78,990) -- -- (78,990)
Proceeds from term
loans............... -- 7,049 13,700 -- 20,749
Repayment, term loans
and capital leases.. -- (2,047) -- -- (2,047)
Contributions (with-
drawals) of capital. -- (24,792) 1,800 -- (22,992)
------- -------- -------- ------- --------
Net cash provided
by financing
activities...... -- (4,838) 15,500 -- 10,662
------- -------- -------- ------- --------
Effect from changes in
exchange rates........ -- (2,124) 32 -- (2,092)
------- -------- -------- ------- --------
Net increase (decrease)
in cash............... -- -- (2,814) -- (2,814)
Cash and equivalents at
beginning of period... -- -- 5,416 -- 5,416
------- -------- -------- ------- --------
Cash and equivalents at
end of period......... $ -- $ -- $ 2,602 $ -- $ 2,602
======= ======== ======== ======= ========
</TABLE>
F-29
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS
December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
----------------- -------------
CPI CPK HECS Eliminations Combined
------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........ $ -- $ 31 $ 2,292 $ -- $ 2,323
Receivable from
shareholder........ -- -- -- -- --
Intercompany
accounts
receivable......... -- 21,790 5,821 (27,611) --
Accounts receivable
from customers..... 17,175 3,519 -- -- 20,694
Inventories......... -- 9,767 1,129 -- 10,896
Deferred taxes...... -- 696 -- -- 696
Prepaid expenses &
other current
assets............. 30 209 910 -- 1,149
------- -------- ------- -------- --------
Total current
assets........... 17,205 36,012 10,152 (27,611) 35,758
Property, plant and
equipment, net....... 28 120,017 52,246 -- 172,291
Other assets.......... 4 7,879 -- -- 7,883
------- -------- ------- -------- --------
Total assets...... $17,237 $163,908 $62,398 $(27,611) $215,932
======= ======== ======= ======== ========
Liabilities and Equity
Current liabilities:
Intercompany
accounts payable... $10,895 $ 5,821 $10,895 $(27,611) $ --
Accounts payable.... 301 14,889 -- -- 15,190
Accrued expenses and
other liabilities.. 114 3,344 879 -- 4,337
Short-term debt..... -- 10,267 1,808 -- 12,075
Current portion of
long-term debt..... -- 14,293 2,058 -- 16,351
Current portion of
HEI long-term debt. -- 1,597 -- -- 1,597
Payables to
affiliates......... 781 -- 5,667 -- 6,448
------- -------- ------- -------- --------
Total current
liabilities...... 12,091 50,211 21,307 (27,611) 55,998
Long-term debt, less
current portion.... -- 60,429 21,343 -- 81,772
HEI long-term debt,
less current
portion............ -- 9,333 -- -- 9,333
Other long-term
liabilities........ -- 15,137 -- -- 15,137
------- -------- ------- -------- --------
Total liabilities. 12,091 135,110 42,650 (27,611) 162,240
------- -------- ------- -------- --------
Shareholders' and
divisional equity:
Preferred stock and
paid in capital...... 13,382 24,094 33,293 -- 70,769
Shareholder
receivable-HEA....... -- -- -- -- --
Accumulated earnings
(deficit)............ (8,236) 5,983 (13,983) -- (16,236)
Accumulated other
comprehensive income
(loss)............... -- (1,279) 438 -- (841)
------- -------- ------- -------- --------
Shareholders' and
divisional
equity........... 5,146 28,798 19,748 -- 53,692
------- -------- ------- -------- --------
Total liabilities
and equity....... $17,237 $163,908 $62,398 $(27,611) $215,932
======= ======== ======= ======== ========
</TABLE>
F-30
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Year Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
------------------ ---------
CPI CPK HECS Eliminations Combined
-------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue.... $ -- $107,445 $ 6,889 $(114,334) $ --
Customer revenue........ 113,220 78,435 -- -- 191,655
-------- -------- -------- --------- --------
Revenue................. 113,220 185,880 6,889 (114,334) 191,655
Cost of revenue........... 107,471 161,563 11,965 (114,334) 166,665
-------- -------- -------- --------- --------
Gross profit.............. 5,749 24,317 (5,076) -- 24,990
Operating expenses:
Selling, general &
administrative......... 2,328 9,103 -- -- 11,431
Research & development.. -- 2,617 -- -- 2,617
Management fees charged
by affiliate........... -- -- 3,322 -- 3,322
Writedown of impaired
assets................. -- -- -- -- --
-------- -------- -------- --------- --------
Total operating
expenses............. 2,328 11,720 3,322 -- 17,370
-------- -------- -------- --------- --------
Operating income.......... 3,421 12,597 (8,398) -- 7,620
Non-operating Income
(Expense)
Interest income......... 1 1 106 -- 108
Interest expense........ (8) (5,268) (504) -- (5,780)
Foreign currency gains
(losses)............... -- (5,005) (36) -- (5,041)
Other income (expenses),
net.................... -- 1,606 (1,255) -- 351
-------- -------- -------- --------- --------
Non-operating income
(expenses)............. (7) (8,666) (1,689) -- (10,362)
-------- -------- -------- --------- --------
Income (loss) before
income taxes............. 3,414 3,931 (10,087) -- (2,742)
Provision for (benefit
from) income taxes....... 1,401 1,482 -- -- 2,883
-------- -------- -------- --------- --------
Net Income (loss)..... $ 2,013 $ 2,449 $(10,087) $ -- $ (5,625)
======== ======== ======== ========= ========
</TABLE>
F-31
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
----------------- ---------
CPI CPK HECS Eliminations Combined
------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net Income.............. $ 2,013 $ 2,449 $(10,087) $ -- $ (5,625)
Adjustments to reconcile
net income
Depreciation and
amortization......... 4 24,039 2,589 -- 26,632
Write down of impaired
assets............... -- -- -- -- --
Provision for
inventory and
receivables.......... 1,401 (1,281) -- -- 120
Foreign currency
(gains) losses....... -- 5,041 -- -- 5,041
(Gain) loss on
intercompany sales of
equipment............ -- (1,283) -- 1,283 --
(Gain) loss on
external sales of
equipment............ -- (16) -- -- (16)
Changes in assets and
liabilities:
Intercompany accounts
receivable........... -- (8,113) (5,809) 13,922 --
Accounts receivable... (7,047) 3,022 -- -- (4,025)
Inventories........... -- 172 (526) -- (354)
Prepaid expenses and
other assets......... -- (363) (714) (1,077)
Advances (to) from
affiliates........... (1,389) -- 3,322 -- 1,933
Intercompany accounts
payable.............. 4,859 5,821 3,242 (13,922) --
Accounts payable...... 132 (1,040) -- -- (908)
Accrued expenses &
other liabilities.... 47 (233) (3,686) -- (3,872)
Other long-term
liabilities.......... -- 1,403 -- -- 1,403
------- -------- -------- -------- ---------
Net cash provided by
operating
activities......... 20 29,618 (11,669) 1,283 19,252
------- -------- -------- -------- ---------
Cash flows used in
investing activities:
Acquisition of property
and equipment.......... (20) (86,666) (22,011) 4,338 (104,359)
Proceeds, intercompany
equipment sales........ -- 5,621 -- (5,621) --
Proceeds, external
equipment sales........ -- 240 -- -- 240
------- -------- -------- -------- ---------
Net cash used in
investing
activities......... (20) (80,805) (22,011) (1,283) (104,119)
------- -------- -------- -------- ---------
Cash flows provided by
financing activities:
Advances to HEA......... -- -- -- -- --
Proceeds from short-term
loans.................. -- 81,709 1,804 -- 83,513
Repayment of short-term
loans.................. -- (90,800) -- -- (90,800)
Proceeds from term
loans.................. -- 39,696 9,700 -- 49,396
Repayment, term loans
and capital leases..... -- (7,111) 1 -- (7,110)
Contributions
(withdrawals) of
capital................ -- 27,176 21,900 -- 49,076
------- -------- -------- -------- ---------
Net cash provided by
financing
activities......... -- 50,670 33,405 -- 84,075
------- -------- -------- -------- ---------
Effect from changes in
exchange rates........... -- 548 (35) -- 513
------- -------- -------- -------- ---------
Net increase (decrease) in
cash..................... -- 31 (310) -- (279)
Cash and equivalents at
beginning of period...... -- -- 2,602 -- 2,602
------- -------- -------- -------- ---------
Cash and equivalents at
end of period............ $ -- $ 31 $ 2,292 $ -- $ 2,323
======= ======== ======== ======== =========
</TABLE>
F-32
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS
December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
----------------- ---------
CPI CPK HECS Eliminations Combined
------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 973 $ 1,091 $ 1,003 $ -- $ 3,067
Receivable from
shareholder........... -- -- -- -- --
Intercompany accounts
receivable............ -- 67,775 5,523 (73,298) --
Accounts receivable
from customers........ 26,822 3,334 -- -- 30,156
Inventories............ -- 11,902 2,247 -- 14,149
Deferred taxes......... -- 4,193 -- -- 4,193
Prepaid expenses &
other current assets.. 24 69 864 -- 957
------- -------- -------- -------- --------
Total current assets. 27,819 88,364 9,637 (73,298) 52,522
Property, plant and
equipment, net.......... 790 91,965 77,471 -- 170,226
Other assets............. 4 10,489 -- -- 10,493
------- -------- -------- -------- --------
Total assets......... $28,613 $190,818 $ 87,108 $(73,298) $233,241
======= ======== ======== ======== ========
Liabilities and Equity
Current liabilities:
Intercompany accounts
payable............... $24,360 $ 5,521 $ 43,417 $(73,298) $ --
Accounts payable....... 506 16,962 -- -- 17,468
Accrued expenses and
other liabilities..... 488 3,479 1,857 -- 5,824
Short-term debt........ -- 31,478 3,001 -- 34,479
Current portion of
long-term debt........ -- 11,199 2,057 -- 13,256
Current portion of HEI
long-term debt........ -- 4,473 -- -- 4,473
Payables to affiliates. -- -- 6,659 -- 6,659
------- -------- -------- -------- --------
Total current
liabilities......... 25,354 73,112 56,991 (73,298) 82,159
Long-term debt, less
current portion....... -- 86,408 30,286 -- 116,694
HEI long-term debt,
less current portion.. -- 17,987 -- -- 17,987
Other long-term
liabilities........... -- 6,929 -- -- 6,929
------- -------- -------- -------- --------
Total liabilities.... 25,354 184,436 87,277 (73,298) 223,769
------- -------- -------- -------- --------
Shareholders' and
divisional equity
Preferred stock and paid
in capital.............. 15,672 48,110 33,293 -- 97,075
Shareholder receivable-
HEA..................... (7,466) -- -- -- (7,466)
Accumulated earnings
(deficit)............... (4,947) (23,469) (33,938) -- (62,354)
Accumulated other
comprehensive income
(loss).................. -- (18,259) 476 -- (17,783)
------- -------- -------- -------- --------
Shareholders' and
divisional equity... 3,259 6,382 (169) -- 9,472
------- -------- -------- -------- --------
Total liabilities and
equity.............. $28,613 $190,818 $ 87,108 $(73,298) $233,241
======= ======== ======== ======== ========
</TABLE>
F-33
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
----------------- -------------
CPI CPK HECS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue.. $ -- $222,661 $ 21,611 $(244,272) $ --
Customer revenue...... 235,821 53,608 -- -- 289,429
-------- -------- -------- --------- --------
Revenue............... 235,821 276,269 21,611 (244,272) 289,429
Cost of revenue......... 222,628 227,041 23,841 (244,272) 229,238
-------- -------- -------- --------- --------
Gross profit............ 13,193 49,228 (2,230) -- 60,191
Operating expenses:
Selling, general &
administrative....... 6,814 9,039 -- -- 15,853
Research &
development.......... 841 3,211 -- -- 4,052
Management fees
charged by affiliate. -- -- 3,199 -- 3,199
Writedown of impaired
assets............... -- 3,339 8,230 -- 11,569
-------- -------- -------- --------- --------
Total operating
expenses........... 7,655 15,589 11,429 -- 34,673
-------- -------- -------- --------- --------
Operating income 5,538 33,639 (13,659) -- 25,518
Non-operating income
(Expense)
Interest income....... 41 -- 55 -- 96
Interest expense...... -- (9,858) (1,114) -- (10,972)
Foreign currency gains
(losses)............. -- (69,691) 22 -- (69,669)
Other income
(expenses), net...... -- 4,497 (5,259) -- (762)
-------- -------- -------- --------- --------
Non-operating income
(expenses)........... 41 (75,052) (6,296) -- (81,307)
-------- -------- -------- --------- --------
Income (loss) before
income taxes........... 5,579 (41,413) (19,955) -- (55,789)
Provision for (benefit
from) income taxes..... 2,290 (11,961) -- -- (9,671)
-------- -------- -------- --------- --------
Net Income (loss)... $ 3,289 $(29,452) $(19,955) $ -- $(46,118)
======== ======== ======== ========= ========
</TABLE>
F-34
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
------------------ -------------
CPI CPK HECS Eliminations Combined
------- --------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net Income........... $ 3,289 $ (29,452) $(19,955) $ -- $ (46,118)
Adjustments to
reconcile net income
Depreciation and
amortization...... 75 37,176 3,431 -- 40,682
Write down of
impaired assets... -- 3,339 8,230 -- 11,569
Provision for
inventory and
receivables....... 3,502 -- -- 3,502
Foreign currency
(gains) losses.... -- 69,669 -- -- 69,669
(Gain) loss on
intercompany sales
of equipment...... -- (4,709) -- 4,709 --
(Gain) loss on
external sales of
equipment......... -- 515 -- -- 515
Changes in assets and
liabilities:
Intercompany
accounts
receivable........ -- (45,898) 308 45,590 --
Accounts
receivable........ (9,647) (445) -- -- (10,092)
Inventories........ -- (15,006) (1,116) -- (16,122)
Prepaid expenses
and other assets.. 6 (16,526) 49 -- (16,471)
Advances (to) from
affiliates........ (781) -- 3,199 -- 2,418
Intercompany
accounts payable.. 13,465 (300) 32,425 (45,590) --
Accounts payable... 205 4,801 -- -- 5,006
Accrued expenses &
other liabilities. 2,665 (4,053) (1,181) -- (2,569)
Other long-term
liabilities....... -- 1,226 -- -- 1,226
------- --------- -------- -------- ---------
Net cash provided
by operating
activities...... 9,277 3,839 25,390 4,709 43,215
------- --------- -------- -------- ---------
Cash flows used in
investing activities:
Acquisition of
property and
equipment........... (838) (101,747) (36,749) 28,641 (110,693)
Proceeds,
intercompany
equipment sales..... -- 33,350 -- (33,350) --
Proceeds, external
equipment sales..... -- 17 -- 17
------- --------- -------- -------- ---------
Net cash used in
investing
activities...... (838) (68,380) (36,749) (4,709) (110,676)
------- --------- -------- -------- ---------
Cash flows provided by
financing activities:
Advances to HEA...... (7,466) -- -- -- (7,466)
Proceeds from short-
term loans.......... -- 83,014 3,000 -- 86,014
Repayment of short-
term loans.......... -- (61,804) (1,808) -- (63,612)
Proceeds from term
loans............... -- 28,511 11,000 -- 39,511
Repayment, term loans
and capital leases.. -- (15,124) (2,057) -- (17,181)
Contributions
(withdrawals) of
capital............. -- 26,306 -- -- 26,306
------- --------- -------- -------- ---------
Net cash provided
by financing
activities...... (7,466) 60,903 10,135 -- 63,572
------- --------- -------- -------- ---------
Effect from changes in
exchange rates........ -- 4,698 (65) -- 4,633
------- --------- -------- -------- ---------
Net increase (decrease)
in cash............... 973 1,060 (1,289) -- 744
Cash and equivalents at
beginning of period... -- 31 2,292 -- 2,323
------- --------- -------- -------- ---------
Cash and equivalents at
end of period......... $ 973 $ 1,091 $ 1,003 $ -- $ 3,067
======= ========= ======== ======== =========
</TABLE>
F-35
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
------------------ -------------
CPI CPK HECS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........ $ 10,827 $ 44,292 $ 13,648 $ -- $ 68,767
Receivable from
shareholder........ -- 4,922 -- -- 4,922
Intercompany
accounts
receivable......... 10,845 103,833 1,947 (116,625) --
Accounts receivable
from customers..... 34,741 2,988 -- -- 37,729
Inventories......... -- 10,110 215 -- 10,325
Deferred taxes...... 420 383 -- -- 803
Prepaid expenses &
other current
assets............. 74 2,504 345 -- 2,923
-------- -------- -------- --------- --------
Total current
assets........... 56,907 169,032 16,155 (116,625) 125,469
Property, plant and
equipment, net....... 5,807 142,265 80,930 -- 229,002
Other assets.......... 10 4,991 -- -- 5,001
-------- -------- -------- --------- --------
Total assets...... $ 62,724 $316,288 $ 97,085 $(116,625) $359,472
======== ======== ======== ========= ========
Liabilities and Equity
Current liabilities:
Intercompany
accounts payable... $ 83,556 $ (1,052) $ 34,121 $(116,625) $ --
Accounts payable.... 2,284 57,761 1,808 -- 61,853
Accrued expenses and
other liabilities.. 1,128 3,537 3,012 -- 7,677
Short-term debt..... -- 3,077 15,700 -- 18,777
Current portion of
long-term debt..... -- 21,173 10,781 -- 31,954
Current portion of
HEI long-term debt. -- 2,610 -- -- 2,610
Payables to
affiliates......... 443 10,858 11,617 -- 22,918
-------- -------- -------- --------- --------
Total current
liabilities...... 87,411 97,964 77,039 (116,625) 145,789
Long-term debt, less
current portion.... -- 63,495 17,448 -- 80,943
HEI long-term debt,
less current
portion............ -- 18,208 -- -- 18,208
Other long-term
liabilities........ -- 1,341 -- -- 1,341
-------- -------- -------- --------- --------
Total liabilities. 87,411 181,008 94,487 (116,625) 246,281
-------- -------- -------- --------- --------
Shareholders' and
divisional equity
Preferred stock and
paid in capital...... 16,674 110,124 53,293 -- 180,091
Shareholder
receivable-HEA....... (37,626) -- -- -- (37,626)
Accumulated earnings
(deficit)............ (3,735) 15,149 (51,166) -- (39,752)
Accumulated other
comprehensive income
(loss)............... -- 10,007 471 -- 10,478
-------- -------- -------- --------- --------
Shareholders' and
divisional
equity........... (24,687) 135,280 2,598 -- 113,191
-------- -------- -------- --------- --------
Total liabilities
and equity....... $ 62,724 $316,288 $ 97,085 $(116,625) $359,472
======== ======== ======== ========= ========
</TABLE>
F-36
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Year Ended December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
----------------- -------------
CPI CPK HECS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue.. $ -- $302,460 $ 13,759 $(316,219) $ --
Customer revenue...... 319,678 14,403 -- -- 334,081
-------- -------- -------- --------- --------
Revenue............... 319,678 316,863 13,759 (316,219) 334,081
Cost of revenue......... 303,937 256,626 26,021 (316,219) 270,365
-------- -------- -------- --------- --------
Gross profit............ 15,741 60,237 (12,262) -- 63,716
Operating expenses:
Selling, general &
administrative....... 10,252 4,815 -- -- 15,067
Research &
development.......... 3,604 4,088 -- -- 7,692
Management fees
charged by affiliate. -- -- 528 -- 528
Writedown of impaired
assets............... -- -- -- -- --
-------- -------- -------- --------- --------
Total operating
expenses........... 13,856 8,903 528 -- 23,287
-------- -------- -------- --------- --------
Operating income........ 1,885 51,334 (12,790) -- 40,429
Non-operating Income
(Expense)
Interest income....... 265 967 44 -- 1,276
Interest expense...... -- (9,973) (3,367) -- (13,340)
Foreign currency gains
(losses)............. -- 24,699 (29) -- 24,670
Other income
(expenses), net...... 15 903 (1,086) -- (168)
-------- -------- -------- --------- --------
Non-operating income
(expenses)........... 280 16,596 (4,438) -- 12,438
-------- -------- -------- --------- --------
Income (loss) before
income taxes........... 2,165 67,930 (17,228) -- 52,867
Provision for (benefit
from) income taxes..... 954 19,610 -- -- 20,564
-------- -------- -------- --------- --------
Net Income (loss)... $ 1,211 $ 48,320 $(17,228) $ -- $ 32,303
======== ======== ======== ========= ========
</TABLE>
F-37
<PAGE>
ChipPAC
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
------------------ ---------
CPI CPK HECS Eliminations Combined
-------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net Income.............. $ 1,211 $ 48,320 $(17,228) $ -- $ 32,303
Adjustments to reconcile
net income
Depreciation and
amortization......... 489 35,584 9,782 -- 45,855
Write down of impaired
assets............... -- -- -- -- --
Provision for
inventory and
receivables.......... 448 (873) -- -- (425)
Foreign currency
(gains) losses....... -- (24,670) -- -- (24,670)
(Gain) loss on
intercompany sales of
equipment............ -- (686) -- $ 686 --
(Gain) loss on
external sales of
equipment............ -- 26 -- -- 26
Changes in assets and
liabilities: --
Intercompany accounts
receivable........... (10,845) (39,058) 3,576 46,327 --
Accounts receivable... (8,367) (4,373) -- -- (12,740)
Inventories........... -- 7,056 2,033 -- 9,089
Prepaid expenses and
other assets......... (475) 11,761 519 54 11,859
Advances (to) from
affiliates........... 443 (730) 4,958 -- 4,671
Intercompany accounts
payable.............. 59,196 (3,573) (9,242) (46,381) --
Accounts payable...... 1,777 36,395 1,807 -- 39,979
Accrued expenses &
other liabilities.... 642 (1,615) 1,099 -- 126
Other long-term
liabilities.......... -- (7,326) -- -- (7,326)
-------- -------- -------- -------- --------
Net cash provided by
operating
activities......... 44,519 56,238 (2,696) 686 98,747
-------- -------- -------- -------- --------
Cash flows used in
investing activities:
Acquisition of property
and equipment.......... (5,443) (52,514) (13,240) 9,865 (61,332)
Proceeds, intercompany
equipment sales........ -- 10,551 -- (10,551) --
Proceeds, external
equipment sales........ -- 1,635 -- 1,635
-------- -------- -------- -------- --------
Net cash used in
investing
activities......... (5,443) (40,328) (13,240) (686) (59,697)
-------- -------- -------- -------- --------
Cash flows provided by
financing activities:
Advances to HEA......... (30,160) -- -- -- (30,160)
Proceeds from short-term
loans.................. -- 50,735 12,656 -- 63,391
Repayment of short-term
loans.................. -- (79,136) 43 -- (79,093)
Proceeds from term
loans.................. -- 185 10,000 -- 10,185
Repayment, term loans
and capital leases..... -- (17,681) (14,114) -- (31,795)
Contributions
(withdrawals) of
capital................ 938 62,014 20,001 -- 82,953
-------- -------- -------- -------- --------
Net cash provided by
financing
activities......... (29,222) 16,117 28,586 -- 15,481
-------- -------- -------- -------- --------
Effect from changes in
exchange rates........... -- 11,174 (5) -- 11,169
-------- -------- -------- -------- --------
Net increase (decrease) in
cash..................... 9,854 43,201 12,645 -- 65,700
Cash and equivalents at
beginning of period...... 973 1,091 1,003 -- 3,067
-------- -------- -------- -------- --------
Cash and equivalents at
end of period............ $ 10,827 $ 44,292 $ 13,648 $ -- $ 68,767
======== ======== ======== ======== ========
</TABLE>
F-38
<PAGE>
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Consolidated Balance Sheets.................................... F-40
Condensed Consolidated Statements of Operations.......................... F-41
Condensed Consolidated Statements of Cash Flows.......................... F-42
Notes to Condensed Consolidated Financial Statements..................... F-43
</TABLE>
F-39
<PAGE>
ChipPAC Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 68,767 $ 33,142
Accounts receivable, less allowance for doubtful
accounts of $1,001 and $1,162.................. 42,651 34,679
Inventories..................................... 10,325 12,420
Deferred taxes.................................. 803 2,107
Prepaid expenses and other current assets....... 2,923 8,141
-------- ---------
Total current assets.......................... 125,469 90,489
Property, plant and equipment, net................ 229,002 213,269
Other assets...................................... 5,001 18,703
-------- ---------
Total assets.................................. $359,472 $ 322,461
======== =========
Liabilities and Equity
Current liabilities:
Accounts payable................................ $ 61,853 $ 39,985
Accrued expenses and other liabilities.......... 7,677 17,807
Short-term debt................................. 18,777 --
Current portion of long-term debt............... 31,954 2,600
Current portion of HEI long-term debt........... 2,610 --
Payable~s to affiliates......................... 22,918 --
-------- ---------
Total current liabilities..................... 145,789 60,392
-------- ---------
Long-term debt, less current portion............ 80,943 297,400
HEI long-term debt, less current portion........ 18,208 --
Other long-term liabilities..................... 1,341 3,052
-------- ---------
Total liabilities............................. 246,281 360,844
-------- ---------
Commitments and contingencies
Mandatorily redeemable preferred stock.............. -- 71,366
Shareholders' and divisional equity (deficit)
Common and preferred stock, and paid in capital... 180,091 (75,927)
Shareholder receivable--HEA....................... (37,626) --
Accumulated deficit............................... (39,752) (44,357)
Accumulated other comprehensive income............ 10,478 10,535
-------- ---------
Total shareholders' and divisional equity
(deficit).................................... 113,191 (109,749)
-------- ---------
Total liabilities and equity.................. $359,472 $ 322,461
======== =========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements.
F-40
<PAGE>
ChipPAC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended September Nine Months Ended
30, September 30,
----------------- ------------------
1998 1999 1998 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue............................ $82,818 $101,270 $237,969 $267,671
Cost of revenue.................... 66,907 84,492 186,000 227,792
------- -------- -------- --------
Gross profit....................... 15,911 16,778 51,969 39,879
Operating expenses:
Selling, general &
administrative.................. 3,803 5,083 10,396 14,416
Research & development........... 1,923 2,640 4,895 8,628
Management fees charged by
affiliate....................... -- -- 528 --
Change of control expense........ -- 11,842 -- 11,842
------- -------- -------- --------
Total operating expenses....... 5,726 19,565 15,819 34,886
------- -------- -------- --------
Operating income................... 10,185 (2,787) 36,150 4,993
Non-operating income (expenses)
Interest income.................. 345 595 491 2,334
Interest expense................. (3,265) (6,295) (10,037) (12,089)
Foreign currency~ gains (losses). 972 (869) 20,427 506
Other income (expenses), net..... (80) 384 50 566
------- -------- -------- --------
Non-operating income
(expenses).................... (2,028) (6,185) 10,931 (8,683)
------- -------- -------- --------
Income (loss) before income taxes,
and extraordinary item............ 8,157 (8,972) 47,081 (3,690)
Provision for (benefit from) income
taxes............................. 3,529 (4,771) 17,933 (1,823)
------- -------- -------- --------
Income before extraordinary item... 4,628 (4,201) 29,148 (1,867)
Extraordinary item:
Loss from early extinguishment of
debt, net of related income tax
benefit......................... -- 1,372 -- 1,372
------- -------- -------- --------
Net income (loss).................. $ 4,628 $ (5,573) $ 29,148 $ (3,239)
======= ======== ======== ========
Other comprehensive income:
Currency translation gain (loss)... (2,741) (5,978) (2,741) (5,978)
------- -------- -------- --------
Comprehensive income (loss)........ $ 1,887 $(11,551) $ 26,407 $ (9,217)
======= ======== ======== ========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements.
F-41
<PAGE>
ChipPAC Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
---------------------
1998 1999
--------- ----------
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss)..................................... $ 29,148 $ (3,239)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization....................... 32,280 41,850
Provision for inventory and accounts receivable..... (407) (427)
Loss from early debt retirement..................... -- 1,372
Foreign currency gains ............................. (20,427) (506)
(Gain) loss on sale of equipment.................... 74 (241)
Changes in assets and liabilities:
Accounts receivable................................. (8,651) 9,843
Inventories......................................... 7,843 (1,889)
Prepaid expenses and other assets................... 3,772 (20,780)
Advances (to) from affiliates....................... 4,593 (6,190)
Accounts payable.................................... 27,522 (22,193)
Accrued expenses and other current liabilities...... 5,599 7,040
Other long-term liabilities......................... (7,807) 2,617
--------- ----------
Net cash provided by operating activities......... 73,539 7,257
--------- ----------
Cash flows used in investing activities:
Acquisition of property and equipment................. (52,211) (29,062)
Proceeds from sale of equipment....................... 122 1,263
--------- ----------
Net cash used in investing activities............. (52,089) (27,799)
--------- ----------
Cash flows provided by financing activities:
Advances (to) from affiliates ........................ (30,514) (4,430)
Proceeds from short-term loans........................ 37,585 1,169
Repayment of short-term loans......................... (50,745) (19,469)
Proceeds from term loans.............................. 10,185 300,000
Repayment of long-term debt and capital leases........ (26,039) (134,987)
Dividend paid......................................... -- (9,435)
Proceeds from stock issuance.......................... -- 123,415
Contributions to (withdrawals from) paid in capital... 68,546 (270,918)
--------- ----------
Net cash provided by (used in) financing
activities....................................... 9,018 (14,655)
--------- ----------
Effect on cash from changes in exchange rates........... (522) (428)
--------- ----------
Net increase (decrease) in cash......................... 29,946 (35,625)
Cash and cash equivalents at beginning of period........ 3,067 68,767
--------- ----------
Cash and cash equivalents at end of period.............. $ 33,013 $ 33,142
========= ==========
Supplemental disclosure of noncash investing and
financing activities
Acquisition of equipment under capital leases......... $ 724 $ --
========= ==========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements.
F-42
<PAGE>
ChipPAC, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Business and Basis of Presentation
Business and Organization
ChipPAC Inc. and its subsidiaries (the "Company") provide packaging and
testing services to the worldwide semiconductor industry. The Company packages
and tests integrated circuits from wafers provided by its customers. The
Company markets its services worldwide, with emphasis on the North American
market. The Company's packaging and testing operations are located in the
Republic of Korea ("South Korea" or "Korea") and People's Republic of China
("China").
Interim Statements
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
solely of normal recurring adjustments) necessary to present fairly the
financial information included therein. The Company believes that the
disclosures are adequate to make the information not misleading. However, it is
suggested that this financial data be read in conjunction with the audited
consolidated financial statements and the related notes thereto for the years
ended December 31, 1996, 1997, and 1998. The results of operations for the
three month and nine month periods ended September 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", issued in June 1997. This statement
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic area and major customers. This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise". The Company
operates in one segment and accordingly, does not report product segment
information but will report geographic and significant customer revenue in its
annual financial report.
Note 2: Inventories
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(unaudited)
<S> <C> <C>
Inventories
Raw materials................................ $ 6,002 $ 9,148
Work in process.............................. 2,159 2,515
Finished goods............................... 2,164 757
------- -------
$10,325 $12,420
======= =======
</TABLE>
Note 3: Recapitalization
On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a
portfolio concern of Citicorp Venture Capital Ltd., which we refer to
collectively as the "Equity Investors," and management acquired a controlling
interest in the Company from Hyundai Electronics and Hyundai Electronics
America through a series of transactions, including a merger into ChipPAC, Inc.
of a special purpose corporation organized by the Equity Investors. The merger
was structured to be accounted for as a recapitalization. Specifically:
. the Equity Investors, management and other parties, including members of
our management, invested $92.0 million to acquire common stock of
ChipPAC, Inc. which represented approximately 90.2% of its common stock
outstanding immediately following the recapitalization;
F-43
<PAGE>
ChipPAC, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. the prior stockholders of ChipPAC, Inc. retained a portion of their
common stock in ChipPAC, Inc. equal to $10.0 million, or approximately
9.8% of ChipPAC, Inc.'s common stock outstanding immediately following
the recapitalization; and
. the prior stockholders received as consideration for the remainder of
their common stock (i) an aggregate of $385.0 million in cash and (ii)
mandatorily redeemable convertible preferred stock payable for up to an
aggregate of $70.0 million.
As a result of the Recapitalization, the Company was contractually required
to make a one-time change of control payment to its unionized Korean employees
of approximately $11.8 million. The payment was recorded as an operating
expense during the quarter ended September 30, 1999.
Note 5: New Debt
To finance part of the recapitalization, the Company borrowed $300.0 million
of new debt, comprising $150.0 million of term loans and $150.0 million of
senior subordinated notes. At September 30, 1999 our debt consisted of $300.0
million of borrowings which were comprised of $150.0 million in term loan
facilities and $150.0 million of senior subordinated notes. The term loans bear
interest at base rate plus 2.25% to 3.0% and the senior subordinated notes bear
interest at 12.75% per annum. An amount of $70.0 million of the term loans
matures on July 31, 2005, the remainder matures on July 21, 2006. The senior
subordinated notes mature on July 21, 2009.
We have a borrowing facility of $50.0 million for working capital and
general corporate purposes under the revolving credit facility. In addition,
borrowings of up to $20.0 million are available for acquiring equipment and
making certain other capital expenditures under the capex facility. We may
borrow and repay under the capex facility until August 5, 2001. Amounts that we
repay under the capex facility after August 5, 2001 may not be borrowed by us
later. The final maturity of these facilities will be on August 5, 2005. We
have not drawn on these facilities at September 30, 1999.
Note 6: 1999 Stock Purchase and Option Plan
Our board of directors has adopted the ChipPAC, Inc. 1999 Stock Purchase and
Option Plan, or the "1999 Stock Plan," which authorizes the granting of stock
options and the sale of Class A common stock or Class L common stock to current
or future employees, directors, consultants or advisors of ChipPAC, Inc. or its
subsidiaries. Under the 1999 Stock Plan, a committee of the board of directors
is authorized to sell or otherwise issue Class A common stock or Class L common
stock at any time prior to the termination of the 1999 Stock Plan in such
quantity, at such price, on such terms and subject to such conditions as
established by the committee up to an aggregate of 15,500,000 shares of Class A
common stock and 500,000 shares of Class L common stock, including shares of
common stock with respect to which options may be granted, subject to
adjustment upon the occurrence of specified events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events. As of September 30, 1999, no shares of Class A
common stock or Class L common stock or options to purchase such stock were
outstanding under the 1999 Stock Plan.
Note 7: Intel Materials Agreement
On August 5, 1999, ChipPAC Limited and Intel entered into the Intel
Materials Agreement pursuant to which Intel will outsource to ChipPAC Limited a
portion of the semiconductor packaging needs. In return, we will provide Intel
with rebates based upon the volume of packaging services outsourced to us.
Rebates are estimated and accrued as current liabilities based on projected
sales and the rebate percentages stated in the
F-44
<PAGE>
ChipPAC, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
agreement. The Intel Materials Agreement covers semiconductor packaging
services for which Intel has an ongoing purchasing requirement and for which we
are a qualified source and where costs, yields and quality are equal to that of
the same services provided by other semiconductor packaging companies
The Intel Materials Agreement also provides that Intel will not enter into
other agreements for packaging services that contain provisions relating to
competitive pricing and volume guarantees similar to those contained in the
Intel Materials Agreement. This restriction only applies to agreements with
semiconductor packaging companies that (i) are qualified to provide packaging
services to Intel and (ii) provide the same type of packaging services provided
by us. The Intel Materials Agreement also obligates us to first offer to Intel
rights to use intellectual property related to certain new packaging services
technology developed by us. Following the expiration of its initial term on
December 31, 2001, the Intel Materials Agreement may be extended upon the
mutual consent of ChipPAC Limited and Intel.
Note 8: Supplemental Financial Statements of Guarantor/Non-Guarantor Entities
In connection with the recapitalization, ChipPAC International Company
Limited has issued senior subordinated debt securities which are fully and
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis, by ChipPAC Inc. (CPI), ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC
Korea Co., Ltd, ("CPK"), ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity
Management (the "Guarantor Subsidiaries'). ChipPAC Shanghai Co. Ltd. ("CPS")
and ChipPAC Assembly and Test (Shanghai) Co. Ltd, ("CATS"), (collectively the
Chinese entities), will not provide guarantees (the "Non-Guarantor
Subsidiaries"). The following is combining financial information for CPI and
its subsidiaries, segregated between the issuer, the Guarantor and Non-
Guarantor Subsidiaries. The following CPS financial statements in the condensed
combining financial statements include the accounts of CATS.
F-45
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Balance Sheets
September 30, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
------------------ -------------
CPI CPK CPS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........ $ 11,604 $ 19,615 $ 1,791 -- $ 33,010
Intercompany
accounts
receivable......... 8,237 106,676 1,909 $(116,822) --
Accounts receivable
from customers..... 35,056 8,870 -- -- 43,926
Inventories......... -- 9,423 389 -- 9,812
Deferred taxes...... 281 1,026 -- -- 1,307
Prepaid expenses &
other current
assets............. 975 2,225 353 -- 3,553
-------- -------- -------- --------- --------
Total current
assets........... 56,153 147,835 4,442 (116,822) 91,608
Property, plant and
equipment, net....... 2,684 127,932 82,990 -- 213,606
Other assets.......... 195 7,411 -- -- 7,606
-------- -------- -------- --------- --------
Total assets...... $ 59,032 $283,178 $ 87,432 $(116,822) $312,820
======== ======== ======== ========= ========
Liabilities and Equity
Current liabilities:
Intercompany
accounts payable... $ 82,996 $ 1,908 $ 31,918 $(116,822) --
Accounts payable.... 1,165 44,230 24 -- $ 45,419
Accrued expenses and
other liabilities.. 710 6,458 1,934 -- 9,102
Short-term debt..... -- 2,541 18,778 -- 21,319
Current portion of
long-term debt..... -- 15,575 7,449 -- 23,024
Current portion of
HEI long-term debt. -- 3,076 -- -- 3,076
Payables to
affiliates......... -- 1 17,276 -- 17,276
-------- -------- -------- --------- --------
Total current
liabilities...... 84,871 73,788 77,379 (116,822) 119,216
Long-term debt, less
current portion.... -- 73,304 20,449 -- 93,753
HEI long-term debt,
less current
portion............ -- 18,153 -- -- 18,153
Other long-term
liabilities........ -- 687 -- -- 687
-------- -------- -------- --------- --------
Total liabilities. 84,871 165,932 97,828 (116,822) 231,809
-------- -------- -------- --------- --------
Mandatorily redeemable
preferred stock........ -- -- -- -- --
Shareholders' and
divisional equity
Preferred stock and
paid in capital...... 16,729 110,489 33,292 -- 160,510
Shareholder
receivable--HEA...... (37,981) -- -- -- (37,981)
Accumulated earnings
(deficit)............ (4,587) 15,545 (44,165) -- (33,207)
Accumulated other
comprehensive income
(loss)............... -- (8,788) 477 -- (8,311)
-------- -------- -------- --------- --------
Shareholders' and
divisional equity
(deficit)........ (25,839) 117,246 (10,396) -- 81,011
-------- -------- -------- --------- --------
Total liabilities
and equity....... $ 59,032 $283,178 $ 87,432 $(116,822) $312,820
======== ======== ======== ========= ========
</TABLE>
F-46
<PAGE>
ChipPAC, Inc.
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
------------------ -------------
CPI CPK CPS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenue:
Intercompany revenue.. -- $215,755 $ 11,168 $(226,923) --
Customer revenue...... $226,916 11,053 -- -- $237,969
-------- -------- -------- --------- --------
Revenue............... 226,916 226,808 11,168 (226,923) 237,969
Cost of revenue......... 216,537 178,516 17,870 (226,923) 186,000
-------- -------- -------- --------- --------
Gross profit............ 10,379 48,292 (6,702) -- 51,969
Operating expenses:
Selling, general &
administrative....... 7,273 3,123 -- -- 10,396
Research &
development.......... 2,434 2,461 -- -- 4,895
Management fees
charged by affiliate. -- -- 528 -- 528
Change of control
expenses............. -- -- -- -- --
-------- -------- -------- --------- --------
Total operating
expenses........... 9,707 5,584 528 -- 15,819
-------- -------- -------- --------- --------
Operating income........ 672 42,708 (7,230) -- 36,150
Non-operating income
(expense):
Interest income....... 171 295 25 -- 491
Interest expense...... -- (7,676) (2,361) -- (10,037)
Foreign currency gains
(losses)............. -- 20,427 -- -- 20,427
Other income
(expenses), net...... (4) 715 (661) -- 50
-------- -------- -------- --------- --------
Non-operating income
(expenses)......... 167 13,761 (2,997) -- 10,931
-------- -------- -------- --------- --------
Income (loss) before
income taxes........... 839 56,469 (10,227) -- 47,081
Provision for (benefit
from) income taxes..... 479 17,454 -- -- 17,933
-------- -------- -------- --------- --------
Net income (loss)....... $ 360 $ 39,015 $(10,227) $ -- $ 29,148
======== ======== ======== ========= ========
</TABLE>
F-47
<PAGE>
ChipPAC, Inc.
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Guarantors Non-Guarantor
------------------ -------------
CPI CPK CPS Eliminations Combined
-------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net Income........... $ 360 $ 39,015 $(10,227) -- $ 29,148
Adjustments to
reconcile net
income:
Depreciation and
amortization...... 292 25,693 6,295 -- 32,280
Provision for
inventory and
receivables....... 374 (781) -- -- (407)
Foreign currency
(gains) losses.... -- (20,427) -- -- (20,427)
(Gain) loss on
external sales of
equipment......... -- 74 -- -- 74
Changes in assets and
liabilities:
Intercompany
accounts
receivable........ (8,238) (38,904) 3,614 43,528 --
Accounts
receivable........ (9,156) 505 -- -- (8,651)
Inventories........ -- 5,986 1,857 -- 7,843
Prepaid expenses
and other assets.. (1,426) 4,688 510 -- 3,772
Advances (to) from
affiliates........ -- (5,493) 10,086 -- 4,593
Intercompany
accounts payable.. 59,187 (1,951) (13,708) (43,528) --
Accounts payable... 659 26,839 24 -- 27,522
Accrued expenses &
other liabilities. 221 2,558 2,820 -- 5,599
Other long-term
liabilities....... -- (7,807) -- -- (7,807)
-------- -------- -------- -------- --------
Net cash provided
by operating
activities...... 42,273 29,995 1,271 -- 73,539
-------- -------- -------- -------- --------
Cash flows used in
investing activities:
Acquisition of
property and
equipment........... (2,121) (38,273) (11,817) -- (52,211)
Proceeds, equipment
sales............... -- 122 -- -- 122
-------- -------- -------- -------- --------
Net cash used in
investing
activities...... (2,121) (38,151) (11,817) -- (52,089)
-------- -------- -------- -------- --------
Cash flows provided by
financing activities:
Advances to HEA...... (30,514) -- -- -- (30,514)
Proceeds from short-
term loans.......... -- 21,929 15,656 -- 37,585
Repayment of short-
term loans.......... -- (50,867) 122 -- (50,745)
Proceeds from term
loans............... -- 185 10,000 -- 10,185
Repayment, term loans
and capital leases.. -- (11,595) (14,444) -- (26,039)
Contributions
(withdrawals) of
capital............. 993 67,553 -- -- 68,546
-------- -------- -------- -------- --------
Net cash provided
by financing
activities...... (29,521) 27,205 11,334 -- 9,018
-------- -------- -------- -------- --------
Effect from changes in
exchange rates........ -- (525) -- -- (525)
-------- -------- -------- -------- --------
Net increase (decrease)
in cash............... 10,631 18,524 788 -- 29,943
Cash and equivalents at
beginning of period... 973 1,091 1,003 -- 3,067
-------- -------- -------- -------- --------
Cash and equivalents at
end of period......... $ 11,604 $ 19,615 $ 1,791 -- $ 33,010
======== ======== ======== ======== ========
</TABLE>
F-48
<PAGE>
ChipPAC, Inc.
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS
September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
------------------------------- ---------
CPI Int'l CPI CPK CPS Eliminations Combined
--------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........ $ 1 $ 10,622 $ 12,822 $ 9,697 -- $ 33,142
Intercompany
accounts
receivable......... 3,416 30,088 77,162 4,830 (115,496) --
Accounts receivab~le
from customers..... -- 20,971 13,708 -- -- 34,679
Inventories......... -- 5 12,102 313 -- 12,420
Deferred taxes...... -- 420 1,687 -- -- 2,107
Prepaid expenses &
other current
assets............. -- 416 7,344 381 -- 8,141
--------- --------- --------- ------- ---------- ---------
Total current
assets........... 3,417 62,522 124,825 15,221 (115,496) 90,489
Property, plant and
equipment, net....... 6,168 129,133 77,968 -- 213,269
Intercompany loans
receivable........... 271,000 145,000 -- -- (416,000) --
Other assets.......... 42,307 5,087 5,139 -- (33,830) 18,703
--------- --------- --------- ------- ---------- ---------
Total assets...... $ 316,724 $ 218,777 $ 259,097 $93,189 $ (565,326) $ 322,461
========= ========= ========= ======= ========== =========
Liabilities and Equity
Current liabilities:
Intercompany
accounts payable... -- $ 77,162 $ 8,148 $30,186 $ (115,496) --
Accounts payable.... $ 40 2,580 36,284 1,081 -- $ 39,985
Accrued expenses and
other liabilities.. 3,861 5,002 5,127 3,817 -- 17,807
Short-term debt..... -- -- -- -- -- --
Current portion of
long-term debt..... 2,600 -- -- -- -- 2,600
--------- --------- --------- ------- ---------- ---------
Total current
liabilities...... 6,501 84,744 49,559 35,084 (115,496) 60,392
Long-term debt, less
current portion.... 297,400 -- -- -- 297,400
Intercompany loans
payable............ -- 237,000 145,000 34,000 (416,000) --
Other long-term
liabilities........ -- -- 3,052 -- -- 3,052
--------- --------- --------- ------- ---------- ---------
Total liabilities. 303,901 321,744 197,611 69,084 (531,496) 360,844
--------- --------- --------- ------- ---------- ---------
Mandatorily redeemable
preferred stock........ -- 71,366 -- -- -- 71,366
Shareholders' and
divisional equity
Preferred stock and
paid in capital...... 13,399 (169,040) 29,627 85,283 (33,830) (74,561)
Accumulated earnings
(deficit)............ (576) (5,293) 23,154 (61,642) -- (44,357)
Accumulated other
comprehensive income
(loss)............... -- -- 8,705 464 -- 9,169
--------- --------- --------- ------- ---------- ---------
Shareholders' and
divisional
equity........... 12,823 (174,333) 61,486 24,105 (33,830) (109,749)
--------- --------- --------- ------- ---------- ---------
Total liabilities
and equity....... $ 316,724 $ 218,777 $ 259,097 $93,189 $ (565,326) $ 322,461
========= ========= ========= ======= ========== =========
</TABLE>
F-49
<PAGE>
ChipPAC, Inc.
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
---------------------------- ---------
CP Int'l CPI CPK CPS Eliminations Combined
-------- -------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue.. -- -- $231,903 $ 11,057 $ (242,960) --
Customer revenue...... -- $247,535 20,004 131 -- $267,671
------- -------- -------- -------- ---------- --------
Revenue............... -- 247,535 251,907 11,189 (242,960) 267,671
Cost of revenue......... -- 231,794 219,230 19,728 (242,960) 227,792
------- -------- -------- -------- ---------- --------
Gross profit............ -- 15,741 32,677 (8,539) -- 39,879
Operating expenses:
Selling, general &
administrative....... -- 10,019 4,397 -- -- 14,416
Research &
development.......... -- 4,278 4,350 -- -- 8,628
Change of control
expenses............. -- 180 11,662 -- -- 11,842
------- -------- -------- -------- ---------- --------
Total operating
expenses........... -- 14,477 20,409 -- -- 34,886
------- -------- -------- -------- ---------- --------
Operating income........ -- 1,264 12,268 (8,539) -- 4,993
Non-operating Income
(Expense)
Interest income....... $ 119 588 1,275 352 -- 2,334
Interest (expense).... (5,330) (1) (4,914) (1,844) -- (12,089)
Intercompany interest
income (expense)..... 4,685 (1,522) (2,626) (538) -- --
------- -------- -------- -------- ---------- --------
Interest expense...... (645) (1,523) (7,540) (2,382) -- (12,089)
Foreign currency gains
(losses)............. -- -- 516 (10) -- 506
Other income
(expenses), net...... -- (568) 1,031 103 -- 566
------- -------- -------- -------- ---------- --------
Non-operating income
(expenses)......... (526) (1,503) (4,718) (1,937) -- (8,683)
------- -------- -------- -------- ---------- --------
Income (loss) before
income taxes........... (526) (239) 7,550 (10,476) -- (3,690)
Provision for (benefit
from) income taxes..... 50 (47) (1,827) -- -- (1,823)
------- -------- -------- -------- ---------- --------
Income before
extraordinary item..... (576) (192) 9,377 (10,476) -- (1,867)
Extraordinary item:
Loss from early
extinguishment of
debt, net of related
income tax benefit... -- -- 1,372 -- -- 1,372
------- -------- -------- -------- ---------- --------
Net Income (loss)....... $ (576) $ (192) $ 8,005 $(10,476) -- $ (3,239)
======= ======== ======== ======== ========== ========
</TABLE>
F-50
<PAGE>
ChipPAC, Inc.
SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-
Guarantors Guarantor
---------------------------- ---------
CP Int'l CPI CPK CPS Eliminations Combined
-------- -------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income........... $ (576) $ (192) $ 8,005 $ (10,476) -- $ (3,239)
Adjustments to
reconcile net income
Depreciation and
amortization...... 250 1,070 32,726 7,804 -- 41,850
Provision for
inventory and
receivables....... -- (110) (317) -- -- (427)
Non-operating early
debt
extinguishment
loss.............. -- -- 1,372 -- -- 1,372
Foreign currency
(gains) losses.... -- -- (516) 10 -- (506)
(Gain) loss on
external sales of
equipment......... -- -- (241) -- -- (241)
Changes in assets and
liabilities:
Intercompany
accounts
receivable........ (3,416) (19,243) 21,638 (2,882) 3,903 --
Accounts
receivable........ -- 13,881 (4,038) -- -- 9,843
Inventories........ -- (5) (1,785) (99) -- (1,889)
Prepaid expenses
and other assets.. (11,027) (5,522) (4,195) (36) -- (20,780)
Advances (to) from
affiliates........ -- 791 (6,981) -- -- (6,190)
Intercompany
accounts payable.. -- (6,563) 14,401 (3,935) (3,903) --
Accounts payable... 40 296 (21,803) (726) -- (22,193)
Accrued expenses &
other liabilities. 3,911 2,756 (399) 772 -- 7,040
Other long-term
liabilities....... -- -- 2,617 -- -- 2,617
-------- -------- -------- --------- ------ --------
Net cash
provided/(used)
by operating
activities...... (10,818) (12,841) 40,484 (9,568) -- 7,257
-------- -------- -------- --------- ------ --------
Cash flows used in
investing activities:
Acquisition of
property and
equipment........... -- (1,430) (26,990) (6,651) 6,009 (29,062)
Proceeds, external
equipment sales..... -- -- 5,447 1,825 (6,009) 1,263
Investment in
subsidiaries........ (29,030) 29,030 -- -- -- --
-------- -------- -------- --------- ------ --------
Net cash used in
investing
activities...... (29,030) 27,600 (21,543) (4,826) -- (27,799)
-------- -------- -------- --------- ------ --------
Cash flows provided by
financing activities:
Loans & advances with
affiliates.......... -- (178,900) 144,900 29,570 -- (4,430)
Proceeds from short-
term loans.......... -- 476 693 -- -- 1,169
Repayment of short-
term loans.......... -- -- (3,769) (15,700) -- (19,469)
Proceeds from term
loans............... 300,000 -- -- -- -- 300,000
Repayment, term loans
and capital leases.. -- -- (105,387) (28,228) -- (133,615)
Intercompany loan
(advances) payments. (271,000) 271,000 -- -- -- --
Payments made to
extinguish debt
early............... -- -- (1,372) -- -- (1,372)
Dividend paid........ -- -- (9,435) -- -- (9,435)
Issuance of stock.... 10,849 110,066 2,500 -- -- 123,415
Contributions
(withdrawals) of
capital............. -- (217,606) (78,114) 24,802 -- (270,918)
-------- -------- -------- --------- ------ --------
Net cash provided
by financing
activities...... 39,849 (14,964) (49,984) 10,444 -- (14,655)
-------- -------- -------- --------- ------ --------
Effect from changes in
exchange rat~es....... -- -- (428) -- -- (428)
-------- -------- -------- --------- ------ --------
Net increase (decrease)
in cash............... 1 (205) (31,471) (3,950) -- (35,625)
Cash and equivalents at
beginning of period... -- 10,827 44,293 13,647 -- 68,767
-------- -------- -------- --------- ------ --------
Cash and equivalents at
end of period......... $ 1 $ 10,622 $ 12,822 $ 9,697 -- $ 33,142
======== ======== ======== ========= ====== ========
</TABLE>
F-51
<PAGE>
GLOSSARY
Array...................... A group of items (elements, leads, bonding pads,
circuits, etc.) arranged in rows and columns.
ASIC ...................... Application Specific Integrated Circuit. A
custom-designed integrated circuit that performs
specific functions which would otherwise require
a number of off-the-shelf integrated circuits to
perform. The use of an ASIC in place of a
conventional integrated circuit reduces product
size and cost and also improves reliability.
Back-End Processing........ The packaging and testing portion of the
semiconductor manufacturing process.
BGA........................ Ball grid array. A semiconductor package
consisting of an encapsulated die mounted on top
of a substrate. The bottom of the package has a
matrix of solder balls; this matrix is attached
to a printed circuit board by solder reflow. Its
advantages over leaded packages include smaller
size, greater assembly yield and better
electrical performance. See "Business--Our
Services."
Bonding.................... The process of attaching the chip (die) to a
package substrate is called die bonding, or die
attach. The next step is to attach the bonding
pads of the die to a lead frame, using wire
bonding or tape automated bonding techniques.
Bonding Wire............... Fine wires, usually aluminum or gold, connecting
the metal bonding pads on an integrated circuit
to the internal terminations of the leads of the
package.
Burn-In.................... Pretest operation of semiconductor devices,
frequently at high temperatures, which stabilizes
characteristics and identifies early failures.
Chip....................... Usually refers to a single integrated circuit
die, but also used as a generic term for
semiconductor devices.
Chipset.................... Two or more chips designed to perform as a unit
for one or more functions.
Chip-Scale Packages (CSP).. Any semiconductor package in which the package is
no more than 1.2 times the size of the bare
semiconductor die.
Die........................ Individual integrated circuits, transistors, or
diodes, separated from the original whole silicon
wafer but not yet packaged. They vary in size
from 20 mils on a side to larger than 250 mils on
a side. The number of dice on a wafer may vary
from tens to thousands. Also called a chip.
Refers to a semiconductor that has not yet been
packaged.
Die Attachment............. A step in the packaging process of an integrated
circuit in which the individual chip (or die) is
mounted in a package in preparation for wire
bonding. This step is usually accomplished using
either an epoxy resin or a welding process to
attach the chip to the substrate.
DRAM....................... Dynamic Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. It is the
most common type of RAM and must be refreshed
with electricity thousands of times per send or
else it will fade away.
G-1
<PAGE>
DSP........................ Digital Signal Processor. A type of integrated
circuit that processes and manipulates digital
information after it has been converted from an
analog source.
EconoCSP(TM)............... A low cost version of CSP with construction
similar to that of PBGA.
Fab........................ Short for wafer fabrication.
Fabless Semiconductor A new class of semiconductor companies that
Companies.................. design, test and sell ICs, but subcontract wafer
manufacturing by forming alliances with silicon
wafer manufacturers.
FBGAT...................... Fine Pitch Ball Grid Array--Tape. A version of a
BGA package, mounted on tape substrate, that has
a solder ball pitch of less than 1.0mm.
Flash...................... A type of non-volatile memory product that is
used in electronic systems to store data and
program instructions.
FlashPAC(TM)............... A version of CSP where the silicon die is
attached to the package using FlipChip
interconnect intended for Flash.
FlipChip................... Package type where silicon die is attached to the
packaging substrate using solder balls instead of
wires. See "Business--Our Services."
FlipPAC(TM) ............... A version of a BGA package where the silicon die
is attached to the package using a FlipChip
interconnect.
IC......................... Integrated circuit. A combination of two or more
transistors on a base material, usually silicon.
All semiconductor chips, including memory chips
and logic chips, are very complicated ICs with
thousands of transistors.
IDMs....................... Integrated Device Manufacturers. A semiconductor
device manufacturer that has its own
manufacturing facilities.
I/O........................ A connector which interconnects the chip to the
package or one package level to the next level in
the hierarchy. Also referred to as pin out
connections or terminals.
iQUAD(TM) ................. Package type with superior thermal performance to
that of the conventional Plastic Quad Flat
Package.
ISDN....................... Integrated Services Digital Network. An
international telecommunications standard for
transmitting voice, video and data over digital
lines running at 64 Kbps.
Leadframe.................. A metal frame, connected to the bonding pads of
the die by leads, that provides electrical
connection to the outside world.
Logic Device............... A device that contains digital integrated
circuits that process, rather than store,
information.
LQFP....................... A thinner version of the Quad Flat Package (1.4mm
thick). See "Business--Our Services."
M/2/BGA(TM) ...............
Molded Multi Die Ball Grid Array. A version of a
BGA package that contains 2 or more silicon die.
G-2
<PAGE>
M/2/CSP(TM) ............... Molded Multi Die Chip Scale Package. A version of
a CSP that contains 2 or more silicon die.
BGA(TM) ................... Micro Ball Grid Array. A version of a BGA package
that is adapted to chip scale size. This is a
proprietary package trademarked by the Tessera
Corporation. See "Business--Our Services."
1/25,000 of an inch. Circuitry on an IC typically
Micron..................... follows lines that are less than one micron wide.
Microprocessor (MPU)....... A standard circuit design that provides, in one
or more chips, functions equivalent to those
contained in the central processing unit of a
computer. A microprocessor interprets and
executes instructions and usually incorporates
arithmetic capabilities. The CPU of a personal
computer along with main memory and other
components, typically contained on a single
board.
MOS........................ A device which consists of three layers (metal,
oxide and semiconductors) and operates as a
transistor.
MQFP....................... Metric Quad Flat Package. See "Business--Our
Services."
Package.................... The protective container for an electronic
component that connects it to the printed circuit
board. The most common IC package is a DIP, or
dual-in-line package--a rectangular plastic or
ceramic package in which the leads run along the
two longer edges.
Packaging.................. A process whereby a wafer is diced into
individual die which are then separated from the
wafer and attached to a substrate via an epoxy
adhesive. Leads on the substrate are then
connected by extremely fine gold wires to the
input/output ("I/O") terminals on the chips
through the use of automated machines known as
"wire bonders". Each die is then encapsulated in
a plastic molding compound, thus forming the
package. Semiconductor packaging serves to
protect the chip, facilitate integration into
electronic systems, and enable the dissipation of
heat from the devices.
PBGA....................... Plastic Ball Grid Array. See "Business--Our
Services."
Personal Computer Board.... See "Glossary--Printed Circuit Board."
PDA........................ Personal Digital Assistant.
PDIP....................... Plastic Dual In-Line Packages. A semiconductor
package with leads on two sides, bent vertically,
so that the leads can be inserted into holes
drilled through the printed circuit board. See
"Business--Our Services."
PGA........................ Pin Grid Array. An IC package that has multiple
rows of pins on the bottom.
Pitch...................... The center-to-center distance between adjacent
leads on a package.
PLCC.......................
Plastic Leaded Chip Carrier. See "Business--Our
Services."
PLD........................
A logic chip that is programmed at the customer's
site.
G-3
<PAGE>
PQFP....................... Plastic Quad Flat Packages. See "Business--Our
Services."
Printed Circuit Board...... A laminate sheet into which integrated circuits
are soldered. Wires in the board connect the
circuits with each other, forming a larger
functional unit. Printed circuit boards generally
contain a subsystem of a larger electronic
system, e.g., one board might hold the
semiconductor memory of a computer.
QFP........................ Quad Flat Pack. A semiconductor package with
leads on all four sides and which is attached to
a printed circuit board by surface mounting.
RamPAC(TM) ................ A version of a CSP where the die is attached to
the package using FlipChip interconnect intended
for DRAM.
SIP........................ Single In-line Package. See "Business--Our
Services."
SOIC....................... Small Outline IC packages. See "Business--Our
Services."
SOJ........................ An SOIC package with J-leads for high density
memory.
SRAM....................... Static Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. Unlike
the more common DRAM, it does not need to be
refreshed.
SSOP....................... Shrink Small Outline Packages. See "Business--Our
Services."
Substrate.................. The underlying material upon which a device,
circuit, or epitaxial layer is fabricated,
normally a silicon wafer.
Surface Mount Technology... A circuit board packaging technique in which the
leads (pins) on the chips and components are
soldered on top of the board.
TBGA....................... Thermally Enhanced Ball Grid Array. A version of
a BGA package with superior thermal properties
compared to that of the conventional PBGA.
TQFP....................... Thin Quad Flat Packages. See "Business--Our
Services."
TSOC....................... Thin Small Outline IC packages. See "Business--
Our Services."
TSOP....................... Thin Small Outline Packages. See "Business--Our
Services."
TSSOP...................... Thin Shrink Small Outline Packages. See
"Business--Our Services."
Wafer...................... Thin, round, flat piece of silicon that is the
base of most integrated circuits.
Wafer Fabrication.......... The sequence of oxidation, diffusion, deposition
and photolithographic process steps by which
semiconductor devices are batch fabricated on
wafers.
Wire Bonding...............
The method used to attach very fine wire to
semiconductor components in order to provide
electrical continuity between the semiconductor
die and a terminal.
G-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$150,000,000
[ChipPAC International Company Limited Logo]
ChipPAC International
Company Limited
Offer to Exchange
$150,000,000 Series B 12 3/4% Senior Subordinated Notes due 2009
for any and all outstanding
12 3/4% Senior Subordinated Notes due 2009
-----------------------
PROSPECTUS
-----------------------
Subject to completion, , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
ChipPAC International Company Limited
As in most United States jurisdictions, the board of directors of a British
Virgin Islands company is charged with the management and affairs of the
company, and subject to any limitations to the contrary in the Memorandum of
Association of a company, the Board of Directors is entrusted with the power to
manage the business and affairs of the company (hereinafter, the "Issuer"). In
most United States jurisdictions, directors owe a fiduciary duty to a company
and its shareholders, including a duty of care, pursuant to which directors
must properly apprise themselves of all reasonably available information, and a
duty of loyalty, pursuant to which they must protect the interests of the
company and refrain from conduct that injures the company or its shareholders
or that deprives the company or its shareholders of any profit or advantage.
Many United States jurisdictions have enacted various statutory provisions
which permit the monetary liability of directors to be eliminated or limited.
Under British Virgin Islands law, liability of a director or officer of a
company director is, for the most part, limited to cases of willful malfeasance
in the performance of duties or to cases where such director or officer, as
applicable, has not acted honestly, in good faith and with a view to the
company's best interests.
Under its Memorandum of Association, the Issuer is authorized to indemnify
any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or liquidator
of the Issuer, provided such person acted honestly and in good faith and with a
view to the best interests of the Issuer and, in the case of a criminal
proceeding, such person had no reasonable cause to believe that his conduct was
unlawful. The Issuer's Memorandum of Association also permits it to indemnify
any director, officer or liquidator of the Issuer who was successful in any
proceeding against expenses and judgments, fines and amounts paid in settlement
and reasonably incurred in connection with the proceeding, where such person
met the standard of conduct described in the preceding sentence. The Issuer has
provisions in its Memorandum of Association that insure or indemnify, to the
full extent allowed by the laws of the Territory of the British Virgin Islands,
directors, officers, employees, agents or persons serving in similar capacities
in other enterprises at the request of the Issuer. The Issuer may obtain a
directors' and officers' insurance policy.
ChipPAC, Inc.
ChipPAC, Inc. ("ChipPAC") is incorporated under the laws of the State of
California. Section 317 of the General Corporation Law of the State of
California provides that a California corporation may indemnify any person who
is, or is threatened to be made, party to any proceeding (other than an action
by or in the right of the corporation to procure a judgment in its favor) by
reason of the fact that the person is or was an agent of the corporation,
against expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful. A
corporation has power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action
by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was an agent of the corporation,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of the action if the person acted in good faith,
in a manner the person believed to be in the best interests of the corporation
and its shareholders.
Under Article V of ChipPAC's Amended and Restated By-Laws, ChipPAC will
indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
corporation) by reason of the fact that such person is or was an agent of
ChipPAC, against expenses,
II-1
<PAGE>
judgments, fines, settlements or other amounts actually and reasonably incurred
in connection with such proceeding if that person acted in good faith and in a
manner that person reasonably believed to be in the best interests of ChipPAC
and, in the case of a criminal proceeding, if that person had no reasonable
cause to believe his conduct was unlawful. Such right of indemnification will
be a contract right and will not be exclusive of any other right which such
directors, officers or representatives may have or hereafter acquire under any
contract or otherwise. For purposes of the foregoing discussion, "agent" means
any person who is or was a director, officer, employee or other agent of
ChipPAC, or is or was serving at the request of ChipPAC as a director, officer,
employee, or agent of another foreign or domestic corporation, limited
liability company, partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of ChipPAC or of another enterprise at the
request of such predecessor corporation
In addition, Section 204 of the General Corporation Law of the State of
California allows a corporation to eliminate the personal liability of a
director of a corporation to the corporation or to any of its stockholders for
monetary damages for a breach of fiduciary duty as a director, provided,
however, that:
(A) such a provision may not eliminate or limit the liability of
directors:
(1) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law;
(2) for acts or omissions that a director believes to be contrary to
the best interests of the corporation or its shareholders or that
involve the absence of good faith on the part of the director;
(3) for any transaction from which a director derived an improper
personal benefit;
(4) for acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances
in which the director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of serious
injury to the corporation or its shareholders;
(5) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders;
(6) under Section 310; or
(7) under Section 316;
(B) no such provision will eliminate or limit the liability of a
director for any act or omission occurring prior to the date when the
provision becomes effective; and
(C) no such provision will eliminate or limit the liability of an
officer for any act or omission as an officer, notwithstanding that the
officer is also a director or that his or her actions, if negligent or
improper, have been ratified by the directors.
Article IV of ChipPAC's Amended and Restated Articles of Incorporation
includes a provision which eliminates directors' personal liability to the full
extent permitted under the General Corporation Law of the State of California.
ChipPAC maintains a policy of directors and officers liability insurance
covering certain liabilities incurred by its directors and officers in
connection with the performance of their duties.
ChipPAC (Barbados) Ltd.
Paragraph 10 of ChipPAC (Barbados) Ltd.'s ("ChipPAC Barbados") By-Laws
provides for the indemnification of its officers and directors (and such
persons' executors and administrators) against any and all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred by such person in connection with any claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director or officer of ChipPAC
Barbados, or is or
II-2
<PAGE>
was serving at the request of ChipPAC Barbados as a director or officer, of any
other corporation, partnership, joint venture, trust, enterprise or
organization, except with respect to any matter for which indemnification would
be void pursuant to the Companies Act, 1982 of Barbados (the "Companies Act").
Under the Companies Act, indemnification of the officers and directors of
ChipPAC Barbados against any liability which would attach by reason of any
contract entered into or act or thing done or omitted to be done by them in
performance of their office or in any way in the discharge of their duties, if
the same happens through their not acting in good faith and in the best
interest of ChipPAC Barbados is void.
ChipPAC Limited
As in most United States jurisdictions, the board of directors of a British
Virgin Islands company is charged with the management and affairs of the
company, and subject to any limitations to the contrary in the Memorandum of
Association of a company, its Board of Directors is entrusted with the power to
manage the company's business and affairs. In most United States jurisdictions,
directors owe a fiduciary duty to the company and its shareholders, including a
duty of care, pursuant to which directors must properly apprise themselves of
all reasonably available information, and a duty of loyalty, pursuant to which
they must protect the interests of the company and refrain from conduct that
injures the company or its shareholders or that deprives the company or its
shareholders of any profit or advantage. Many United States jurisdictions have
enacted various statutory provisions which permit the monetary liability of
directors to be eliminated or limited. Under British Virgin Islands law,
liability of a director or officer of a company is basically limited to cases
of willful malfeasance in the performance of his duties or to cases where the
director has not acted honestly and in good faith and with a view to the best
interests of the company.
Under its Memorandum of Association, ChipPAC Limited is authorized to
indemnify any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or liquidator
of ChipPAC Limited, provided such person acted honestly and in good faith and
with a view to the best interests of ChipPAC Limited and, in the case of a
criminal proceeding, such person had no reasonable cause to believe that his
conduct was unlawful. ChipPAC Limited's Memorandum of Association also permits
it to indemnify any director, officer or liquidator who was successful in any
proceeding against expenses and judgments, fines and amounts paid in settlement
and reasonably incurred in connection with the proceeding, where such person
met the standard of conduct described in the preceding sentence. ChipPAC
Limited has provisions in its Memorandum of Association that insure or
indemnify, to the full extent allowed by the laws of the Territory of the
British Virgin Islands, directors, officers, employees, agents or persons
serving in similar capacities in other enterprises at the request of ChipPAC
Limited. ChipPAC Limited may obtain a directors' and officers' insurance
policy.
ChipPAC Korea Company Ltd.
The Republic of Korea Commercial Act (the "Commercial Act") governs the
liability relationship between companies and their officers and directors in
both joint stock companies (chusik hoesa) and limited liability companies
(yuhan hoesa). Articles 399 and 400 of the Commercial Act describe the
circumstances in which officers and directors may be held liable to the
company, while Article 401 of the Commercial Act outlines the circumstances in
which officers and directors may be held liable to third parties. The latter
provides that third parties which are harmed by a wilful act or gross
negligence of an officer or director may have recourse against both the
applicable officer or director and the company. In the event that third parties
are harmed through the mere negligence of an officer or director, such third
party may only have recourse against the company. In the event the company
incurs damages as a result of the negligence of its directors and officers, it
may the seek indemnification from the negligent party.
The organizational documents of ChipPAC Korea Company Ltd. ("ChipPAC Korea")
are silent as to the issue of indemnification of officers and directors. In
addition, ChipPAC Korea, like many Korean companies, does not carry directors
and officers liability insurance.
II-3
<PAGE>
ChipPAC Luxembourg S.a.R.L.
Under Luxembourg law, civil liability of directors both to ChipPAC
Luxembourg S.a.R.L. ("ChipPAC Luxembourg") and to third parties is generally
considered to be a matter of public policy. It is possible that Luxembourg
courts would declare void an explicit or even implicit contractual limitation
on directors' liability to ChipPAC Luxembourg. ChipPAC Luxembourg, however,
can validly agree to indemnify its directors against the consequences of
liability actions brought by third parties (including shareholders if such
shareholders have personally suffered a damage which is independent of and
distinct from the damage caused to the company).
Under Luxembourg law, an employee of ChipPAC Luxembourg can only be liable
to ChipPAC Luxembourg for damages brought about by his or her willful acts or
gross negligence. Any arrangement providing for the indemnification of
officers against claims of ChipPAC Luxembourg would be contrary to public
policy. Employees are liable to third parties under general tort law and may
enter into arrangements with ChipPAC Luxembourg providing for indemnification
against third party claims.
Under Luxembourg law, an indemnification agreement can never cover a
willful act or gross negligence.
ChipPAC Luxembourg's Articles of Incorporation are silent as to the issue
of indemnification of its officers and directors.
ChipPAC Liquidity Management Hungary Limited Liability Company
The organizational documents of ChipPAC Liquidity Management Hungary
Limited Liability Company ("ChipPAC Hungary") are silent as to the issue of
indemnification of the managing director. ChipPAC Hungary has no other
officers or directors. Therefore, in the event any case arises which involves
the liability of a managing director, such case must be settled in accordance
with the applicable provisions of the Hungarian Companies Act (the "Companies
Act") and the Hungarian Civil Code (the "Civil Code").
Under the Companies Act, a managing director must conduct himself in
respect of the management of a company with "increased care," as opposed to
the standard of "general care" which is prescribed by the Civil Code. A
managing director may be held liable in the event of a culpable breach of any
provision of the Companies Act, a company's Deed of Foundation or any validly
enacted resolutions of the company's Founder. If the aforementioned duty of
care is breached, a managing director may be held liable under the rules of
the Civil Code for any damages to the company where such managing director's
actions were (i) in contravention of Hungarian law, (ii) caused damage to the
company and (iii) were not undertaken with the requisite degree of care
specified in the Companies Act.
Enforcement of liability claims against a managing director is in the sole
discretion of the Founder. A Founder may exercise his or her rights against a
managing director within one year of the company's deletion from the Company
Registry. A managing director is only obliged to compensate the company for
damages, and is not liable to third parties for acts that are within the scope
of his or her role or responsibility as a managing director. Third parties may
only seek damages from the company. Should the company be required to pay
damages to a third party for acts of the managing director, however, it may
have recourse against the managing director for damages incurred as a result
of third party claims.
II-4
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------- ---
<C> <S> <C>
2.1 Agreement and Plan of Recapitalization and Merger, dated as
of March 13, 1999, by and among Hyundai Electronics
Industries Co., Ltd., Hyundai Electronics America, ChipPAC,
Inc. and ChipPAC Merger Corp.
2.2 First Amendment to Agreement and Plan of Recapitalization
and Merger, dated as of June 16, 1999 by and among Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics
America, ChipPAC, Inc. and ChipPAC Merger Corp.
2.3 Second Amendment to Agreement and Plan of Recapitalization
and Merger, dated as of August 5, 1999, by and among Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics
America, ChipPAC, Inc. and ChipPAC Merger Corp.
3.1 Amended and Restated Articles of Incorporation of ChipPAC,
Inc.
3.2 Amended and Restated By-Laws of ChipPAC, Inc.
3.3 Memorandum of Association of ChipPAC International Company
Limited (formerly known as ChipPAC Finance Limited).
3.4 Articles of Association of ChipPAC International Company
Limited (formerly known as ChipPAC Finance Limited).
3.5 Articles of Incorporation of ChipPAC (Barbados) Ltd.
3.6 By-Law No. 1 of ChipPAC (Barbados) Ltd.
3.7 Memorandum of Association of ChipPAC Limited.
3.8 Articles of Association of ChipPAC Limited.
3.9 Articles of Incorporation of ChipPAC Luxembourg S.a.R.L.
3.10 Deed of Foundation of ChipPAC Liquidity Management Hungary
Limited Liability Company.
3.11 Policy and Operating Guidelines of ChipPAC Liquidity
Management Hungary Limited Liability Company (abbreviated as
ChipPAC Ltd.)
3.12 Articles of Incorporation of ChipPAC Korea Company Ltd.
4.1 Purchase Agreement, dated as of July 22, 1999, by and among
ChipPAC International Limited, ChipPAC Merger Corp., Credit
Suisse First Boston Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation (executed in counterpart on
August 5, 1999 by ChipPAC (Barbados) Ltd., ChipPAC Limited,
ChipPAC Korea Company Ltd., ChipPAC Luxembourg S.a.R.L. and
ChipPAC Liquidity Management Hungary Limited Liability
Company).
4.2 Indenture, dated as of July 29, 1999, by and among ChipPAC
International Limited, ChipPAC Merger Corp. and Firstar Bank
of Minnesota, N.A., as trustee.
4.3 First Supplemental Indenture, dated as of August 5, 1999, by
and among ChipPAC International Company Limited, ChipPAC,
Inc. and Firstar Bank of Minnesota, N.A., as trustee.
4.4 12 3/4% Senior Subordinated Notes Due 2009.
4.5 Form of Series B 12 3/4% Senior Subordinated Notes Due
2009.*
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------- ---
<C> <S> <C>
4.6 Registration Rights Agreement, dated as of July 29, 1999,
by and among ChipPAC International Limited, ChipPAC Merger
Corp., and Credit Suisse First Boston Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation, as
Initial Purchasers.
5.1 Opinion of Kirkland & Ellis
8.1 Opinion of Kirkland & Ellis.
10.1 Credit Agreement, dated as of August 5, 1999, by and among
ChipPAC International Company Limited, ChipPAC, Inc., the
Lenders listed therein and Credit Suisse First Boston, as
Administrative Agent, Sole Lead Manager and Collateral
Agent.
10.2 Guaranty, dated as of August 5, 1999, by and among
ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc.,
in favor of Credit Suisse First Boston.
10.3 Subsidiary Guaranty Agreement, dated as of August 5, 1999,
by and among ChipPAC Korea Company Ltd., ChipPAC Limited,
ChipPAC (Barbados) Ltd., ChipPAC Luxembourg S.a.R.L.,
ChipPAC Liquidity Management Hungary Limited Liability
Company and ChipPAC International Company Limited, in
favor of Firstar Bank of Minnesota, N.A.
10.4 Amended and Restated Shareholders Agreement, dated as of
August 5, 1999, by and among ChipPAC, Inc. the Hyundai
Group (as defined therein), the Bain Group (as defined
therein), the SXI Group (as defined therein), Intel
Corporation, ChipPAC Equity Investors LLC, and Sankaty
High Yield Asset Partners, L.P.
10.5 Amended and Restated Registration Agreement, dated as of
August 5, 1999, by and among ChipPAC, Inc., the Hyundai
Shareholders (as defined therein), the Bain Shareholders
(as defined therein), the SXI Shareholders (as defined
therein), Intel Corporation, ChipPAC Equity Investors LLC,
and Sankaty High Yield Asset Partners, L.P.
10.6 Transition Services Agreement, dated as of August 5, 1999,
by and among Hyundai Electronics Industries Co., Ltd.,
Hyundai Electronics America, ChipPAC, Inc., ChipPAC Korea
Company Ltd., Hyundai Electronics Company (Shanghai) Ltd.,
ChipPAC Assembly and Test (Shanghai) Company Ltd., ChipPAC
Barbados Limited and ChipPAC Limited.
10.7 Lease Agreement, dated as of June 30, 1998, by and between
Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea
Ltd.
10.7.1 Amendment Agreement, dated September 30, 1998, to Lease
Agreement, dated June 30, 1998, by and between Hyundai
Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.
10.7.2 Amendment Agreement 2, dated September 30, 1999, to Lease
Agreement, dated June 30, 1998, by and between Hyundai
Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.
10.8 Agreement Concerning Supply of Utilities, Use of Welfare
Facilities and Management Services for Real Estate, dated
as of June 30, 1998, by and between Hyundai Electronics
Industries Co., Ltd. and ChipPAC Korea Ltd.
10.9 Service Agreement, dated as of August 5, 1999, by and
between Hyundai Electronics Industries Co. Ltd. and
ChipPAC Limited.*+
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
10.10 Sublease Agreement, dated as of May 1, 1998, by and between
Hyundai Electronics America and ChipPAC, Inc.
10.11 Patent Sublicense Agreement, dated as of August 5, 1999, by
and between Hyundai Electronics Industries Co., Ltd. and
ChipPAC Limited.*+
10.12 TCC License Agreement, dated December 22, 1998, between
Tessera Inc., the Tessera Affiliates (as defined therein),
ChipPAC, Inc. and the Licensee Affiliates (as defined
therein).*+
10.12.1 Letter Agreement, dated July 15, 1999, by and among ChipPAC,
Inc., Hyundai Electronics America, ChipPAC Limited and
Tessera, Inc.*
10.13 Materials Agreement, dated as of July 1, 1999, by and
between ChipPAC Limited and Intel Corporation.*+
10.14 Assembly Services Agreement, dated as of August 5, 1999, by
and between Intel Corporation and ChipPAC Limited.*+
10.15 Stock Purchase Agreement, dated as of August 5, 1999, by and
between ChipPAC, Inc. and Intel Corporation.*
10.16 Warrant to Purchase Class B Common Stock of ChipPAC, Inc.,
dated as of August 5, 1999, issued to Intel Corporation.*
10.17 Advisory Agreement, dated as of August 5, 1999, by and among
ChipPAC, Inc., ChipPAC Limited, ChipPAC Operating Limited
and Bain Capital, Inc.
10.18 Advisory Agreement, dated as of August 5, 1999, by and among
ChipPAC, Inc., ChipPAC Limited, ChipPAC Operating Limited
and SXI Group LLC.
10.19 Employment Agreement, dated as of October 1, 1999, between
ChipPAC, Inc. and Dennis McKenna.*
10.20 ChipPAC, Inc. 1999 Stock Purchase and Option Plan.
10.21 Form of Key Employee Purchased Stock Agreement.
10.22 Form of Key Employee Purchased Stock Agreement (with Loan).
10.23 Form of Directors Tranche I Stock Option Agreement.
10.24 Form of Employees Tranche I Stock Option Agreement.
10.25 Form of Tranche II Stock Option Agreement.
12.1 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges.
21.1 Subsidiaries of ChipPAC, Inc., ChipPAC International Company
Limited, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC
Liquidity Management Limited Liability Company, ChipPAC
Luxembourg S.a.R.L. and ChipPAC Korea Company Ltd.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in Part II to the Registration
Statement).
25.1 Statement of Eligibility on Form T-1 of Firstar Bank of
Minnesota, N.A., as trustee, under the Indenture.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
*To be filed by amendment
+Confidential treatment requested.
II-7
<PAGE>
(b) Financial Statement Schedules.
The following financial statement schedules for the three years ended
December 31, 1998 are included in this registration statement.
Schedule II--Valuation and Qualifying Accounts and Reserves--Allowance for
Doubtful Accounts
(in thousands)
<TABLE>
<CAPTION>
Additions charged
Year Ended Balance at to Costs and Deductions and Balance at End of
December 31 beginning of year Expenses Write-offs Period
- ----------- ----------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
1998.................... 375 787 -- 1,162
1997.................... 85 404 (114) 375
1996.................... 74 16 (5) 85
</TABLE>
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 or otherwise,
the registrants have 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 registrants of expenses incurred or paid by a director, officer or
controlling person of the registrants 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 registrants will,
unless in the opinion of their 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 registrants hereby undertake:
(1) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(2) 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 of 1933.
(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 the 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 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% 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.
II-8
<PAGE>
(3) That, for the purpose of determining liability under the Securities
Act of 1933, each such post-effective amendment 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.
(4) 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 exchange offer.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
International Company Limited has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tortola, British Virgin Islands, on November 24, 1999.
ChipPAC International Company
Limited
/s/ Phang Guk Bing
By: _________________________________
(Peter) Phang Guk Bing
President, Chief Executive
Officer and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments including post-effective amendments to this registration statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<C> <S>
/s/ Phang Guk Bing President, Chief Executive Officer, Chief
____________________________________ Financial Officer and Director
(Peter) Phang Guk Bing (Principal Executive, Financial and
Accounting Officer)
/s/ Curt Mason Director
____________________________________
Curt Mason
/s/ Richard Parsons Director
____________________________________
Richard Parsons
/s/ P.J. Kim Director
____________________________________
P.J. Kim
Authorized Representative in
the
United States:
/s/ Dennis P. McKenna
____________________________________
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC,
Inc. has duly caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Santa
Clara, State of California, on November 24, 1999.
ChipPac, Inc.
/s/ Dennis P. McKenna
By: _________________________________
Dennis P. McKenna
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments, to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the capacities indicated on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<S> <C>
/s/ Dennis P. McKenna President, Chief Executive
____________________________________ Officer and Director
Dennis P. McKenna (Principal Executive
Officer)
/s/ Tony Lin Chief Financial Officer
____________________________________ (Principal Financial
Tony Lin Officer)
/s/ Curt Mason Vice President of Finance
____________________________________ and Corporate Controller
Curt Mason (Principal Accounting
Officer)
/s/ David Dominik Director
____________________________________
David Dominik
/s/ Edward Conard Director
____________________________________
Edward Conard
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<S> <C>
/s/ Prescott Ashe Director
____________________________________
Prescott Ashe
/s/ Michael A. Delaney Director
____________________________________
Michael A. Delaney
/s/ Paul C. Schorr IV Director
____________________________________
Paul C. Schorr IV
/s/ Joseph Martin Director
____________________________________
Joseph Martin
/s/ Chong Sup Park Director
____________________________________
Chong Sup Park
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
Korea Company Ltd. has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Ichon-Shi, Kyungai-Do, Korea, on November 24, 1999.
ChipPAC Korea Company Ltd.
/s/ Soo Nam Lee
By: _________________________________
Soo Nam Lee
President and Managing Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments, to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<S> <C>
/s/ Soo Nam Lee Director, President and Managing Director
____________________________________ (Principal Executive Officer)
Soo Nam Lee
/s/ Dong Woo Lee Chief Financial Officer (Principal Financial
____________________________________ and Accounting Officer)
Dong Woo Lee
/s/ Dennis P. McKenna Director
____________________________________
Dennis P. McKenna
Authorized Representative in the United States:
/s/ Dennis P. McKenna
____________________________________
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
(Barbados) Ltd. has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Barbados, West Indes, on November 24, 1999.
ChipPAC (Barbados) Ltd.
/s/ Phang Guk Bing
By: _________________________________
(Peter) Phang Guk Bing
President, Chief Executive Officer
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments, to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities and on November 24, 1999.
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<C> <S>
/s/ Phang Guk Bing President, Chief Executive Officer and
____________________________________ Chief Financial Officer (Principal
(Peter) Phang Guk Bing Executive,
Financial and Accounting Officer)
/s/ Eulalie Greenaway Director
____________________________________
Eulalie Greenaway
/s/ Trevor Carmichael Director
____________________________________
Trevor Carmichael
/s/ Curt Mason Director
____________________________________
</TABLE> Curt Mason
Authorized Representative in the United States
/s/ Dennis P. McKenna
- --------------------------------
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
Luxembourg S.a.R.L. has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Luxembourg, on November 24, 1999.
ChipPAC Luxembourg S.a.R.L.
/s/ Michele Musty
By: _________________________________
Michele Musty
Corporate Manager
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments, to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities and on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<C> <S>
/s/ Michele Musty Corporate Manager
____________________________________ (Co-Principal Executive, Financial and Accounting Officer
Michele Musty and Director)
/s/ Eric Vanderkerken Corporate Manager
____________________________________ (Co-Principal Executive, Financial and Accounting Officer
Eric Vanderkerken and Director)
/s/ Phang Guk Bing Corporate Manager
____________________________________ (Co-Principal Executive, Financial and Accounting Officer
ChipPAC International Company and Director)
Limited by: (Peter) Phang Guk Bing
President and Chief Executive
Officer
</TABLE>
Authorized Representative in the United States:
/s/ Dennis P. McKenna
- --------------------------------
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
Liquidity Management Hungary Limited Liability Company has duly caused this
Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in Budapest, Hungary on November 24,
1999.
ChipPAC Liquidity Management Hungary
Limited Liability Company
/s/ Jozsef Veress
By: _________________________________
Jozsef Veress
Managing Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments, to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<C> <S>
/s/ Jozsef Veress Managing Director (Principal Executive,
____________________________________ Financial and Accounting Officer
Jozsef Veress and Sole Director)
Authorized Representative in the United States:
/s/ Dennis P. McKenna
____________________________________
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
Limited has duly caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in Tortola, British
Virgin Islands, on November 24, 1999.
ChipPAC Limited
/s/ Phang Guk Bing
By: _________________________________
(Peter) Phang Guk Bing
President, Chief Executive
Officer and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis McKenna, Tony Lin, Curt Mason, David
Dominik and Paul C. Schorr IV, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including post-effective amendments to this registration statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
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 on Form S-4 and Power of Attorney have been signed by
the following persons in the indicated capacities on November 24, 1999:
<TABLE>
<CAPTION>
Signatures Capacity
---------- --------
<C> <S>
/s/ Phang Guk Bing President, Chief Executive
____________________________________ Officer, Chief Financial
(Peter) Phang Guk Bing Officer and
Director
(Principal Executive, Financial
and Accounting Officer)
/s/ Curt Mason Director
____________________________________
Curt Mason
/s/ P.J. Kim Director
____________________________________
P.J. Kim
/s/ Richard Parsons Director
____________________________________
Richard Parsons
Authorized Representative in the United States:
/s/ Dennis P. McKenna
____________________________________
Dennis P. McKenna
President and Chief Executive
Officer, ChipPAC, Inc.
</TABLE>
II-17
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
dated as of March 13, 1999
by and among
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.,
HYUNDAI ELECTRONICS AMERICA,
CHIPPAC, INC.,
and
CHIPPAC MERGER CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I CERTAIN DEFINITIONS ............................................... 1
Section 1.1 Definitions................................................. 1
ARTICLE II RECAPITALIZATION AND CLOSING ..................................... 13
Section 2.1 Closing..................................................... 13
Section 2.2 Recapitalization ........................................... 14
Section 2.3 The Merger ................................................. 19
Section 2.4 Purchase Price Adjustment .................................. 22
Section 2.5 Hyundai Earn-Out ........................................... 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HEI AND HEA.................... 29
Section 3.1 Corporate Existence and Authority........................... 29
Section 3.2 Authorization; Binding Effect............................... 30
Section 3.3 Capital Stock............................................... 30
Section 3.4 Subsidiaries................................................ 30
Section 3.5 Absence of Conflicts........................................ 31
Section 3.6 Governmental Approvals and Filings.......................... 32
Section 3.7 Financial Statements and Condition.......................... 32
Section 3.8 Taxes....................................................... 33
Section 3.9 Legal Proceedings........................................... 33
Section 3.10 Compliance With Laws and Orders............................ 34
Section 3.11 Benefit Plans; ERISA....................................... 34
Section 3.12 Real Property.............................................. 35
Section 3.13 Tangible Personal Property................................. 35
Section 3.14 Intellectual Property Rights............................... 35
Section 3.15 Contracts.................................................. 36
Section 3.16 Permits.................................................... 37
Section 3.17 Affiliate Transactions..................................... 37
Section 3.18 Environmental Matters...................................... 38
Section 3.19 Accounts Receivable; Inventory............................. 38
Section 3.20 Insurance.................................................. 38
Section 3.21 No Brokers................................................. 38
Section 3.22 No Other Representations................................... 39
Section 3.23 Assets..................................................... 39
Section 3.24 Product Warranty........................................... 39
Section 3.25 Customers.................................................. 40
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Section 3.26 Interim Operations of ChipPAC BVI, ChipPAC BVI II,
ChipPAC Barbados, ChipPAC Hungary and ChipPAC Luxembourg................ 40
Section 3.27 Transition Services........................................ 40
Section 3.28 Closing Date............................................... 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB ..................... 41
Section 4.1 Corporate Existence and Authority........................... 41
Section 4.2 Authorization; Binding Effect............................... 41
Section 4.3 Absence of Conflicts........................................ 41
Section 4.4 Governmental Approvals and Filings ......................... 41
Section 4.5 Legal Proceedings .......................................... 42
Section 4.6 Purchase for Investment..................................... 42
Section 4.7 Financing................................................... 42
Section 4.8 No Brokers ................................................. 43
Section 4.9 Investment Company Status................................... 43
Section 4.10 Interim Operations of Merger Sub and Certain Other Entities 43
ARTICLE V COVENANTS OF HEI AND HEA........................................... 43
Section 5.1 Regulatory and Other Approvals.............................. 43
Section 5.2 Investigation by Merger Sub................................. 44
Section 5.3 Financial Statements and Reports............................ 44
Section 5.4 Conduct of Business ........................................ 45
Section 5.5 Certain Restrictions ....................................... 45
Section 5.6 Affiliate Transactions ..................................... 47
Section 5.7 Fulfillment of Conditions .................................. 47
ARTICLE VI COVENANTS OF MERGER SUB........................................... 48
Section 6.1 Regulatory and Other Approvals.............................. 48
Section 6.2 Fulfillment of Conditions................................... 48
Section 6.3 Certain Actions............................................. 48
ARTICLE VII ADDITIONAL AGREEMENTS............................................ 49
Section 7.1 Stock Option Plans and Options ............................. 49
Section 7.2 ChipPAC Employees .......................................... 49
Section 7.3 Ancillary Agreements........................................ 50
Section 7.4 Release of Guarantees....................................... 50
Section 7.5 Change of Name.............................................. 50
Section 7.6 Indemnification of Directors and Officers................... 51
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Section 7.7 Grant of Sublicenses........................................ 52
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF THE PARTIES ....................... 52
Section 8.1 Obligations of Both Parties ................................ 52
Section 8.2 Obligations of Merger Sub................................... 53
Section 8.3 Obligations of HEI and HEA ................................. 54
ARTICLE IX TERMINATION....................................................... 55
Section 9.1 Termination................................................. 55
Section 9.2 Effect of Termination....................................... 56
Section 9.3 Effect of Breach............................................ 56
ARTICLE X INDEMNIFICATION.................................................... 56
Section 10.1 Survival of Representations and Warranties;
Indemnification Period ............................................... 56
Section 10.2 Indemnification by HEI and HEA............................. 57
Section 10.3 Limitation of HEI's and HEA's Liability.................... 58
Section 10.4 Indemnification by the Company............................. 60
Section 10.5 Limitation of the Company's Liability...................... 60
Section 10.6 Defense of Third Party Claims ............................. 61
Section 10.7 Procedure and Dispute Resolution .......................... 62
Section 10.8 Arbitration................................................ 63
Section 10.9 Adjustment to Cash Consideration .......................... 64
Section 10.10 Set-off................................................... 64
ARTICLE XI TAX MATTERS....................................................... 64
Section 11.1 Returns: Indemnification; Liability for Taxes.............. 64
Section 11.2 Refunds and Credits........................................ 65
Section 11.3 Termination of Tax Sharing Agreements...................... 66
Section 11.4 Conduct of Audits and Other Procedural Matters............. 66
Section 11.5 Assistance and Cooperation................................. 66
ARTICLE XII MISCELLANEOUS.................................................... 67
Section 12.1 Notices.................................................... 67
Section 12.2 Entire Agreement........................................... 69
Section 12.3 Expenses................................................... 69
Section 12.4 Public Announcements....................................... 69
Section 12.5 Confidentiality............................................ 70
Section 12.6 Further Assurances; Post-Closing Cooperation............... 71
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Section 12.7 Waiver..................................................... 72
Section 12.8 Amendment.................................................. 72
Section 12.9 No Third-Party Beneficiary ................................ 72
Section 12.10 No Assignment: Binding Effect............................. 72
Section 12.11 Invalid Provisions ....................................... 72
Section 12.12 Governing Law............................................. 72
Section 12.13 Counterparts ............................................. 73
Section 12.14 Construction ............................................. 73
Section 12.15 Specific Performance...................................... 73
Section 12.16 Non-Competition; Non-Solicitation ........................ 73
Section 12.17 Financial Information..................................... 74
Section 12.18 Other Agreements.......................................... 74
-iv-
<PAGE>
Table of Schedules
------------------
<TABLE>
<CAPTION>
No. Description
<S> <C>
2.2(g)(ii) Certain Obligations of ChipPAC Korea and Certain Obligations of HEI Secured
by Assets of ChipPAC Korea
2.2(g)(iii) Certain Obligations of ChipPAC Shanghai
2.2(g)(iv) Certain Payables and Liabilities
2.2(g)(vi) Certain Obligations of HEI secured by assets of ChipPAC Korea
7.2 Certain Employment Agreements and Commitments
8.2(e) Matters to be Covered by Opinions of U.S. and Korean Legal Counsel to
HEI and HEA
8.3(e) Matters to be Covered by Opinion of Legal Counsel to Merger Sub
</TABLE>
<PAGE>
Table of Annexes
----------------
<TABLE>
<CAPTION>
No. Description
<S> <C>
I Building Lease Agreement between Hyundai Electronics Industries Co.,
Ltd. and ChipPAC Korea dated June 30, 1998, as amended (English
translation and summary included for informational purposes only).
II Utilities and Services Agreement between Hyundai Electronics
Industries Co., Ltd. and ChipPAC Korea dated June 18/30, 1998, as
amended (providing for utilities and services from HEI to ChipPAC
Korea) (English translation and summary included for informational
purposes only).
III Utilities and Services Agreement between ChipPAC Korea and Hyundai
Electronics Industries Co., Ltd. dated June 18/30, 1998 (providing for
utilities and services from ChipPAC Korea to HEI) (English summary
included for informational purposes only).
IV Equipment Lease Agreement between Hyundai Electronics Industries Co.,
Ltd. and ChipPAC Korea dated June 30, 1998, as amended (English
translation included for informational purposes only).
V Information System Management Service Agreement between Hyundai
Information Technology and ChipPAC Korea dated October 1998 (English
translation included for informational purposes only).
VI Sublease Agreement between the Company and HEA (unexecuted draft).
VII Patent and Technology License Agreement between Hyundai Electronics
Industries Co., Ltd. and ChipPAC Korea dated June 30, 1998, as amended
(English translation included for informational purposes only).
VIII Form of Shareholders Agreement to be dated as of the Closing Date by
and among HEA, the Bain Group, the MSX Group and the Company.
IX Form of Transition Services Agreement to be dated as of the Closing
Date by and among HEI, HEA, the Company, ChipPAC Korea and ChipPAC
Shanghai.
XI Form of Service Agreement to be dated as of the Closing Date between
HEI and ChipPAC BVI.
XI Form of Registration Agreement to be dated as of the Closing Date by
and among the Company and the shareholders of the Company named
therein
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
XII Form of Equity Commitment Letter Agreement
XIII Debt Commitment Letter
XIV Highly Confident Letter
XV ChipPAC Korea Note
XVI Intellectual Property Note
</TABLE>
-ii-
<PAGE>
Table of Exhibits
-----------------
No. Description
A California Agreement of Merger
B Delaware Certificate of Merger
C Articles of Incorporation
D Bylaws
E Capital Budget
F Research and Development Budgets
<PAGE>
This AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER, dated as of March
13, 1999, is made and entered into by and among Hyundai Electronics Industries
Company, Ltd., a Republic of Korea corporation ("HEI"), Hyundai Electronics
America, a California corporation ("HEA"), ChipPAC, Inc., a California
corporation (the "Company"), and ChipPAC Merger Corp., a Delaware corporation
("Merger Sub"). Capitalized terms not otherwise defined herein have the meanings
set forth in Section 1.1.
Recitals
--------
HEI is the owner of all of the issued and outstanding shares of capital
stock of ChipPAC Korea Company Ltd., a corporation incorporated under the laws
of the Republic of Korea ("ChipPAC Korea") and all of the outstanding equity
interests of Hyundai Electronics (Shanghai) Company Ltd. ("ChipPAC Shanghai I"),
and the Company is the owner of all of the outstanding equity interests of
ChipPAC Assembly and Test (Shanghai) Company, Ltd. ("ChipPAC Shanghai II"),
each of which is a company limited and a wholly foreign owned entity under the
laws of the People's Republic of China (collectively "ChipPAC Shanghai"), and
HEA is the owner of 100% of the issued and outstanding capital stock of the
Company. HEI and HEA desire to recapitalize the Company, and the stockholders of
Merger Sub desire, through Merger Sub, to invest in the Company (and, through
the Company, in ChipPAC Korea and ChipPAC Shanghai), such recapitalization and
investment to be effected as set forth in detail in this Agreement, in each case
on the terms and subject to the conditions set forth in this Agreement.
HEI owns certain of the intellectual property rights currently used by the
Company, ChipPAC Korea and ChipPAC Shanghai in the conduct of their business.
Certain of those intellectual property rights shall be transferred to ChipPAC
BVI, as set forth in Section 2.2.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1. 1 Definitions.
(a) Defined Terms. As used in this Agreement, the following
defined terms have the meanings indicated below:
"Action or Proceeding" and "Actions or Proceedings" mean any action, suit,
proceeding, arbitration or publicly disclosed Governmental or Regulatory
Authority investigation.
"Actual Capital Expenditures" has the meaning assigned in Section
2.4(a)(ii).
1
<PAGE>
"Actual R&D Expenditures" has the meaning assigned in Section 2.4(a)(ii).
"Advisory Agreements" means the Advisory Agreement to be dated as of the
Closing Date by and among the Company, ChipPAC BVI, ChipPAC Operating and Bain
Capital, Inc. and the Advisory Agreement to be dated as of the Closing Date by
and among the Company, ChipPAC BVI, ChipPAC Operating and MSX Holdings LLC,
forms of which are annexed as exhibits to the Shareholders Agreement. MSX
Holdings LLC plans to change its name to SXI Group LLC.
"Affiliate" means any person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the person specified. A "controlled Affiliate" means any person that is
controlled by the person specified.
"Aggregate Consideration" means collectively, the Cash Consideration, the
Common Stock Consideration, the Preferred Stock Consideration and the HEI
Earn-Out.
"Agreement" means this Agreement and Plan of Recapitalization and Merger
dated as of March 13, 1999 by and among HEI, HEA, the Company, and Merger Sub.
"Ancillary Agreements" means (i) the Building Lease Agreement between HEI
and ChipPAC Korea dated June 30, 1998, as amended in accordance with Section
12.18, in substantially the form of Annex I hereto; (ii) the Utilities and
Services Agreement between HEI and ChipPAC Korea dated June 18/30, 1998, as
amended, in substantially the form of Annex II hereto; (iii) the Utilities and
Services Agreement between ChipPAC Korea and HEI dated June 18/30, 1998, as
amended, in substantially the form of Annex III hereto; (iv) the Equipment Lease
Agreement between HEI and ChipPAC Korea dated June 30, 1998, as amended in
accordance with Section 12.18, in substantially the form of Annex IV hereto; (v)
the Information System Management Service Agreement between Hyundai Information
Technology and ChipPAC Korea dated June 1998, as amended, in substantially the
form of Annex V hereto; (vi) the Sublease to 3151 Coronado Drive, Santa Clara,
CA 95054 dated as of May 1, 1998, as amended, by and among HEA and the Company,
in substantially the form of Annex VI hereto; (vii) the Patent and Technology
License Agreement between HEI and ChipPAC BVI to be dated as of the Closing
Date, in substantially the form of Annex VII hereto and as amended in accordance
with Section 12.18; (viii) a Shareholders Agreement to be dated as of the
Closing Date by and among HEA, the Bain Group, the MSX Group and the Company
with respect to ChipPAC Inc., in substantially the form of Annex VIII hereto;
(ix) a Transition Services Agreement to be dated as of the Closing Date by and
among HEI, HEA, the Company, ChipPAC Korea, ChipPAC Shanghai and ChipPAC BVI, in
substantially the form of Annex IX hereto providing for transition service
arrangements for the Company and its Subsidiaries; (x) a Service Agreement to be
dated as of the Closing Date between HEI and ChipPAC BVI in substantially the
form of Annex X hereto, and (xi) a Registration Agreement to be dated as of the
Closing Date between the Company and the shareholders of the Company named
therein, in substantially the form of Annex XI hereto.
"Associated Covenants and Agreements" means, with respect to (i) HEI and
HEA, the covenants and agreements of HEI and HEA set forth in the first sentence
of Section 5.4, Section
2
<PAGE>
5.5(m) and Section 5.7 which affect the continued accuracy of the specified
representations and warranties of HEI and HEA as brought down to the Closing
pursuant to Section 8.2(a), and (ii) Merger Sub, the covenants and agreements of
Merger Sub set forth in Section 6.2 and Section 6.3 which affect the continued
accuracy of the specified representations and warranties of Merger Sub as
brought down to the Closing pursuant to Section 8.3(a).
"Bain Group" has the meaning set forth in the Shareholders Agreement.
"Balance Sheet" has the meaning assigned in Section 3.7(a).
"Benefit Plan" means any Plan established by the Company, ChipPAC Korea,
ChipPAC Shanghai or any of their respective Subsidiaries, or any predecessor or
Affiliate of any of the foregoing, existing at the date hereof or at the Closing
Date to which the Company, ChipPAC Korea or ChipPAC Shanghai contributes or has
contributed, or under which any employee, former employee or director of the
Company, ChipPAC Korea or ChipPAC Shanghai or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights in such person's
capacity as an employee or former employee or director of the Company, ChipPAC
Korea or ChipPAC Shanghai or any of their respective Subsidiaries.
"Business Day" means a day that is not a Saturday, a Sunday or a statutory
or civic holiday in the State of California or the Republic of Korea, or any
other day on which the principal offices of HEI, HEA, or the Company are closed
or become closed prior to 2 p.m. local time whether in accordance with
established company policy or as a result of unanticipated events, including
adverse weather conditions.
"California Agreement of Merger" has the meaning assigned in Section 2.3.
"Capital Budget" means the capital expenditure budget of the Company,
ChipPAC Korea and ChipPAC Shanghai heretofore provided to Merger Sub and
attached hereto as Exhibit E.
"Cash Consideration" means an aggregate total of four hundred twenty-five
million dollars ($425,000,000), comprised of (i) the Korean Stock Sale Proceeds
before adding or subtracting the Korean Stock Sale Adjustments, (ii) the Chinese
Equity Sale Proceeds before subtracting the Chinese Debt Payoff and the Chinese
Intercompany Payoff, (iii) the ChipPAC Korea Note payment plus the Estimated
Korean Debt Payoff, and (iv) the Intellectual Property Note payment.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"CERCLIS" means the Comprehensive Environmental Response and Liability
Information System, as provided by 40 C.F.R. (S) 300.5.
"CGCL" has the meaning assigned in Section 2.3.
3
<PAGE>
"Change-In-Control Payments" has the meaning assigned in Section 2.3(d).
"Chinese Debt Payoff" has the meaning assigned in Section 2.2(g)(iii).
"Chinese Equity Sale Proceeds" has the meaning assigned in Section
2.2(f)(ii).
"Chinese Intercompany Payoff" has the meaning assigned in Section
2.2(g)(iv).
"ChipPAC Barbados" means ChipPAC Barbados, Inc., a corporation incorporated
or to be incorporated under the laws of Barbados which immediately prior to the
Closing shall be a wholly owned subsidiary of the Company.
"ChipPAC BVI" means ChipPAC Limited, a corporation incorporated or to be
incorporated under the laws of the Territory of the British Virgin Islands which
immediately prior to the Closing shall be wholly owned subsidiary of HEI.
"ChipPAC BVI II" means ChipPAC Operating Limited, a corporation
incorporated or to be incorporated under the laws of the Territory of the
British Virgin Islands which immediately prior to the Closing shall be a wholly
owned subsidiary of the Company.
"ChipPAC Hungary" means ChipPAC Hungary Kft, a corporation incorporated or
to be incorporated under the laws of Hungary as a subsidiary of ChipPAC BVI II.
"ChipPAC Korea" means ChipPAC Korea Company Ltd., a corporation
incorporated under the laws of the Republic of Korea.
"ChipPAC Korea Note" has the meaning assigned in Section 2.2(a).
"ChipPAC Korea Shareholders Agreement" has the meaning assigned in Section
2.2(f)(i).
"ChipPAC Luxembourg" means ChipPAC Luxembourg S.a.r.l., a corporation
incorporated or to be incorporated under the laws of Luxembourg as a subsidiary
of ChipPAC BVI II.
"ChipPAC Shanghai" means ChipPAC Shanghai I and ChipPAC Shanghai II, or
either of them, as the context may require.
"ChipPAC Shanghai I" means Hyundai Electronics (Shanghai) Company Ltd., a
company limited and a wholly foreign owned entity under the laws of the People's
Republic of China.
"ChipPAC Shanghai II" means ChipPAC Assembly and Test (Shanghai) Company,
Ltd., a company limited and wholly foreign owned entity under the laws of the
People's Republic of China.
"Claim Notice" has the meaning assigned in Section 10.7(a).
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"Class A Common" means the Class A Common Stock, par value $.01 per share,
of the Company.
"Class L Common" means the Class L Common Stock, par value $.01 per share,
of the Company.
"Closing" has the meaning assigned in Section 2.1.
"Closing Balance Sheet" has the meaning assigned in Section 2.4(a)(ii).
"Closing Financial Statements" has the meaning assigned in Section
2.4(a)(ii).
"Closing Working Capital" has the meaning assigned in Section 2.4(a)(ii).
"Closing Date" has the meaning assigned in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Common Stock Consideration" has the meaning assigned in Section
2.3(a)(i)(x).
"Company" means ChipPAC, Inc., a California corporation.
"Company Common Stock" means the shares of common stock, no par value, of
the Company.
"Company Disclosure Schedule" has the meaning assigned in the forepart of
Article III.
"Company Option" and "Company Options" mean options to acquire Company
Common Stock.
"Company Preferred Stock" means the shares of Series A preferred stock, no
par value, of the Company.
"Company Senior Preferred Stock" means the Series B senior preferred stock,
par value $.01 per share, with the terms set forth in the Amended and Restated
Articles of Incorporation attached hereto as Exhibit C.
"Company Tax Returns" has the meaning assigned in Section 11.1(a).
"Contract" means any contract, agreement or other document (including any
oral contract or agreement) setting forth an agreement or understanding between
two or more parties intended by such parties to be legally binding.
"Conversion Date" has the meaning assigned in Section 2.2(b).
"Counter-Notice of Disagreement" has the meaning assigned in Section
2.4(d).
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"CPA Firm" has the meaning assigned in Section 2.4(d).
"Delaware Certificate of Merger" has the meaning assigned in Section 2.3.
"Designee" has the meaning assigned in Section 2.2(b).
"DGCL" has the meaning assigned in Section 2.3.
"Earn-Out Maximum" has the meaning assigned in the forepart of Section 2.5.
"Earn-Out Payment" has the meaning assigned in the forepart of Section 2.5.
"Earn-Out Period" has the meaning assigned in Section 2.5.
"Earn-Out Ratio" has the meaning assigned in Section 2.5(a).
"Earn-Out Spread" has the meaning assigned in Section 2.5(a).
"EBITDA" has the meaning assigned in Section 2.5(a).
"Effective Time" has the meaning assigned in Section 2.3.
"Encumbrances" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing.
"Environmental Law" means any statute, enactment, administrative agency
rule or promulgation, regulation, ordinance, or other law or Order relating to
the regulation or protection of human health, safety or the environment or to
emissions, discharges, generation, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Estimated Closing Balance Sheet" has the meaning assigned in Section
2.4(a)(i).
"Estimated Closing Working Capital" has the meaning assigned in Section
2.4(a)(i).
"Estimated Korean Debt Payoff" has the meaning assigned in Section 2.2(a).
"Estimated Pre-Closing Capital Expenditures" has the meaning assigned in
Section 2.4(a)(i).
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"Estimated Pre-Closing R&D Expenditures" has the meaning assigned in
Section 2.4(a)(i).
"Excess Cash" has the meaning assigned in Section 2.4(a)(i).
"FEMR" means the Foreign Exchange Management Regulation of the Republic of
Korea.
"FIFCIL" means the Foreign Investment and Foreign Capital Inducement Law of
the Republic of Korea.
"Financial Statement Date" has the meaning assigned in Section 3.7(a).
"Financial Statements" has the meaning assigned in Section 3.7(a).
"Financing Source" has the meaning assigned in Section 12.5.
"Furnishing Party" has the meaning assigned in Section 12.5.
"GAAP" means United States generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any other country, any state, provincial, county, city,
municipal or other political subdivision in the United States or any other
country, or any supranational body established pursuant to international law or
treaty exercising similar powers.
"Hazardous Material" means (i) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any friable form, urea
formaldehyde foam insulation and transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (ii) any
chemicals or other materials or substances which are now or hereafter become
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes" "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import under any Environmental Law; and (iii) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated by any Governmental or Regulatory Authority under any Environmental
Law.
"HEA" means Hyundai Electronics America, a California corporation.
"HEI" means Hyundai Electronics Industries Company Ltd., a Republic of
Korea corporation.
"HEI Earn-Out" has the meaning assigned in Section 2.5.
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"HEI License Agreement" means the Patent and Technology License Agreement
between HEI and ChipPAC BVI to be dated as of the Closing Date, in substantially
the form of Annex VII hereto, as amended in accordance with Section 12.18(d)
hereof, pursuant to which HEI shall grant ChipPAC BVI the rights in the subject
intellectual property described therein.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hyundai Compliance Certificate" has the meaning assigned in Section
10.2(a).
"Indebtedness" of any person means (a) each and every obligation of such
person which is either (i) an obligation for borrowed money, (ii) an obligation
evidenced by notes, bonds, debentures or similar instruments (including banker's
usances), (iii) an obligation for the deferred purchase price of goods or
services (other than trade payables or accruals incurred in the ordinary course
of business), (iv) an obligation under capital leases, or (v) any accrued but
unpaid interest or prepayment or other penalties upon any of the foregoing or
any lease termination charges or payments required to take title to property
under a lease, and (b) an obligation in the nature of a guarantee by such
person, or a pledge of assets of such person, in support of any obligation of
any other person that is within the scope of the immediately preceding clauses
(a)(i) through (a)(v).
"Indemnity Claim" has the meaning assigned in Section 10.7(a).
"Intellectual Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand names, inventions,
copyrights and copyright rights, processes, formulae, trade dress, business and
product names, logos, slogans, trade secrets, industrial models, processes,
designs, methodologies, computer programs (including all source codes) and
related documentation, technical information, manufacturing, engineering and
technical drawings, know-how, all pending applications for and registrations of
patents, trademarks, service marks and copyrights, and all other intellectual
property rights of every kind or nature.
"Intellectual Property Note" has the meaning assigned in Section
2.2(c)(iv).
"Intercompany Technical Fees" has the meaning assigned in Schedule
2.2(g)(iv).
"Intercompany Interest" has the meaning assigned in Schedule 2.2(g)(iv).
"IP Rights" has the meaning assigned in Section 3.14(a).
"IRS" means the United States Internal Revenue Service.
"Knowledge", when used with respect to HEI or HEA, means the knowledge,
after due inquiry, of the directors, the chief executive officer and chief
financial officer of the Company, and the chief executive officer (or equivalent
managing officer) of ChipPAC Korea and the chief executive officer (or
equivalent managing officer) of ChipPAC Shanghai, and, when used with
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respect to Merger Sub, means the knowledge, after due inquiry, of the executive
officers of Merger Sub.
"Korean Debt Payoff" has the meaning assigned in Section 2.3(g)(ii).
"Korean Stock Sale Adjustments" has the meaning assigned in Section
2.2(f)(iii).
"Korean Stock Sale Proceeds" has the meaning assigned in Section
2.2(f)(iii).
"Lemelson Estate" has the meaning assigned in Section 10.2(b)(ii).
"Lemelson Foundation" has the meaning assigned in Section 10.2(b)(ii).
"Lemelson License Agreement" has the meaning assigned in Section
10.2(b)(ii).
"Liability" and "Liabilities" mean any and all Indebtedness, obligations
and other liabilities of a person (whether absolute, accrued, contingent, fixed
or otherwise, or whether due or to become due).
"License" has the meaning assigned in Section 7.7.
"Loss" and "Losses" mean any and all damages, fines, penalties,
deficiencies, losses and expenses (including interest, court costs, reasonable
fees of attorneys, accountants and other experts and other reasonable expenses
of litigation or other proceedings or of any claim, default or assessment).
"Material Adverse Effect" with respect to any person means a material
adverse change in or effect on the business, financial condition, assets,
properties, operations or results of operations of such person and all
Subsidiaries of such person, taking such person together with such person's
Subsidiaries as a whole; provided, however, that a "Material Adverse Effect"
with respect to the Company, ChipPAC Korea and ChipPAC Shanghai shall not
include any of the following or any combination of the following: any change or
effect resulting from (A) general national, international, or regional economic
or financial conditions or currency exchange rates, (B) other developments which
are not unique to the Company, ChipPAC Korea, ChipPAC Shanghai and their
Subsidiaries but also affect other persons who participate or are engaged in the
lines of business in which they and their Subsidiaries participate or are
engaged, and (C) any change or effect resulting from the failure in and of
itself of results of operations of the Company, ChipPAC Korea, ChipPAC Shanghai
or any of their respective Subsidiaries, for a given quarterly period, to meet
any internal or external predictions, projections, estimates or expectations,
unless such failure reflects an ongoing long-term change in the business rather
than near-term timing of orders or payments that will be realized in the
subsequent quarterly period.
"Merger" has the meaning assigned in Section 2.3.
"Merger Sub" has the meaning assigned in the forepart of this Agreement.
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<PAGE>
"Merger Sub Compliance Certificate" has the meaning assigned in Section
10.4 of this Agreement.
"Merger Sub Disclosure Schedule" has the meaning assigned in the forepart
of Article IV.
"MOFE" means the Ministry of Finance and Economy of the Republic of Korea.
"MOFTEC" means Ministry of Foreign Trade and Economic Cooperation of the
People's Republic of China.
"Motorola License Agreement" has the meaning assigned in Section
2.2(c)(iii).
"MSX Group" has the meaning assigned in the Shareholders Agreement. MSX
Holdings LLC, a member of the MSX Group, plans to change its name to SXI Group
LLC.
"New Shares" means the shares of Company common stock to be issued to the
shareholders of Merger Sub in the Merger pursuant to Article II.
"Note Payments" has the meaning assigned in Section 2.2(g)(v).
"Notice of Disagreement" has the meaning assigned in Section 2.4(d).
"NPL" means the National Priorities List under CERCLA.
"Officers' Certificates" has the meaning assigned in Section 2.3.
"Olin License Agreement" has the meaning assigned in Section 2.2(c)(iii).
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (whether preliminary or final).
"Packaging-Related IP Rights" means, with respect to the Motorola License
Agreement and the Olin License Agreement, those rights thereunder which are
necessary for the Company and its Subsidiaries after the Closing to conduct the
businesses of the Company, ChipPAC Korea, and ChipPAC Shanghai as presently
conducted.
"Peg Amount" has the meaning assigned in the forepart of Section 2.4.
"Pension Benefit Plan" means each Benefit Plan which is a pension benefit
plan within the meaning of Section 3(2) of ERISA.
"Permit" and "Permits" mean any and all permits, licenses, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
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"Permitted Encumbrance" means any of the following: (i) any Encumbrance for
Taxes not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP, (ii) any statutory Encumbrance arising in the ordinary course of business
by operation of law with respect to a Liability that is not yet due or
delinquent, or (iii) any minor imperfection of title or similar Encumbrance
which does not materially impair the Company's use of the property subject to
such Encumbrance.
"Per Share Amount" means the amount determined by dividing (i) the sum of
(A) the Cash Consideration plus (B) the value as of the Closing of the Common
Stock Consideration, the Preferred Stock Consideration and the HEI Earn-Out, by
(ii) the sum of (A) the number of shares of Company Common Stock deemed to be
outstanding pursuant to the Management Incentive Agreement dated as of August 1,
1998 by and between ChipPAC, Inc., and Dennis McKenna (i.e., 755,549,999) and
(B) the number of shares of Common Stock which would have been issuable upon
exercise of all vested Company Options.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Pre-Closing Period" has the meaning assigned in Section 11.1(a).
"Pre-Existing Test Business" has the meaning assigned in Section 12.16(a).
"Preferred Stock Consideration" has the meaning assigned in Section
2.3(a)(i)(y).
"Purchaser Party" has the meaning assigned in Section 10.2(a).
"R&D Budgets" has the meaning assigned in Section 2.4(b).
"Recapitalization Transactions" has the meaning assigned in Section 2.2.
"Receiving Party" has the meaning assigned in Section 12.5.
"Redemption Date" has the meaning assigned in Section 2.2(a).
"Reduction in Capital" has the meaning assigned in Section 2.2(a).
"Registration Agreement" means the Registration Agreement to be dated as of
the Closing Date between the Company and the shareholders of the Company named
therein, in substantially the form of Annex XI hereto.
"Regulation S-X has the meaning assigned in Section 2.5(b).
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"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water, wetlands, land
or subsurface strata.
"Representatives" has the meaning assigned in Section 5.2.
"Required Working Capital" has the meaning assigned in Section 2.4(b).
"Shareholders Agreement" means the Shareholders Agreement to be dated as of
the Closing Date by and among HEA, the Bain Group, the MSX Group and the Company
with respect to ChipPAC, Inc.
"Stock Plan" means the ChipPAC, Inc. 1997 Stock Option Plan.
"Straddle Period" has the meaning assigned in Section 11.1(a).
"Subsidiary" and "Subsidiaries" mean any and all corporations or other
entities more than fifty percent (50%) of the voting power of which is owned
directly, or indirectly through one or more intermediate corporations or
entities which are so owned, by a party or other relevant person, as the context
requires.
"Surviving Corporation" has the meaning assigned in Section 2.3.
"Tax Proceedings" has the meaning assigned in Section 11.4.
"Tax Returns" means a report, return or other information required to be
supplied to a governmental entity with respect to Taxes including combined or
consolidated returns for any group of entities that includes the Company,
ChipPAC Korea or ChipPAC Shanghai.
"Tax Sharing Agreement" means that certain Tax Allocation Agreement, dated
July 21, 1995, by and among HEA, the Company and certain other direct or
indirect Subsidiaries of HEA, as amended, to be terminated as to the Company as
of the Closing Date.
"Taxes" means any national, federal, provincial, state, county, local or
other taxes, charges, fees, levies, duties or other assessments, including all
net income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipt, capital stock,
production, business and occupation, disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or charges
imposed by a governmental entity, and includes any interest and penalties (civil
or criminal) on or additions to any such taxes and any expenses incurred in
connection with the determination, settlement or litigation of any tax
liability.
"Tessera License Agreement" has the meaning assigned in Section
2.2(c)(iii).
"Third Party" means any person (including a Governmental or Regulatory
Authority) not an Affiliate of the referenced person or persons.
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"Third Party Claim" has the meaning assigned in Section 10.6(a).
"US Debt Payoff" has the meaning assigned in Section 2.2(g)(i).
"US Intercompany Payoff" has the meaning assigned in Section 2.2(g)(iv).
"Working Capital" has the meaning assigned in Section 2.4.
"YH Conversion" has the meaning assigned in Section 2.2(b).
"YH Purchase Price" has the meaning assigned in Section 2.2(b).
(b) Construction of Certain Terms and Phrases. Unless the context of
this Agreement otherwise requires: (i) words of any gender include each other
gender; (ii) all references to monetary amounts are in U.S. dollars, unless
expressly stated to refer to another currency; (iii) the terms "hereof,"
"herein," "hereby," "hereunder," and similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (v) the phrase "ordinary course of business"
refers to the businesses of the Company, ChipPAC Korea and ChipPAC Shanghai;
(vi) whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation";
(vii) whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified; (viii) the phrases
"the date of this Agreement," "the date hereof," and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to March 13,
1999; (ix) all accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP; (x) any representation or
warranty contained herein as to the enforceability of a Contract shall be
subject to the effect and limitations of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and (xi) the table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
ARTICLE II
RECAPITALIZATION AND CLOSING
Section 2.1 Closing. The closing of the Recapitalization Transactions (as
defined in Section 2.2) (the "Closing") shall take place as promptly as
practicable after the date of this Agreement, subject only to the satisfaction
or waiver of the conditions set forth in Article VIII, and in any event no later
than August 15, 1999, or such other date as Merger Sub, HEI and HEA mutually
agree upon in writing (the "Closing Date"). The Closing shall take place at 8
a.m. local time on the Closing Date and shall be held at the offices of Cravath
Swaine & Moore, 825 Eighth Avenue, New York, New York, or at such other place as
Merger Sub, HEI and HEA mutually agree. At the Closing:
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(a) the Recapitalization Transactions shall be consummated;
(b) the opinions, certificates and other documents and instruments
required to be delivered pursuant to Article VIII shall be delivered;
and
(c) each of HEI, the Company, ChipPAC Korea and ChipPAC Shanghai shall
provide payoff letters from the creditors of all Indebtedness and
obligations which are to be repaid pursuant to Section 2.2, which
payoff letters shall indicate that such creditors have agreed to
immediately release all Encumbrances in favor of such creditors
relating to the assets of the Company, ChipPAC Korea, ChipPAC Shanghai
and any of their respective Subsidiaries upon receipt of the amounts
indicated in such payoff letters.
Section 2.2 Recapitalization. On the terms and subject to the conditions
set forth in this Agreement, the Company will be recapitalized through the steps
set forth in subsections (a) through (g) of this Section 2.2. The transactions
set forth in subsections (a) through (g) of this Section 2.2, together with the
Merger described in Section 2.3, are collectively referred to herein as the
"Recapitalization Transactions" and shall be deemed to have taken place in the
order set forth herein.
(a) Reduction of ChipPAC Korea Capital. Upon such date as Merger Sub
shall determine following consultation with HEI (which date shall be more than
thirty (30) but not more than thirty-five (35) days prior to the anticipated
Closing Date), HEI shall cause ChipPAC Korea to publish notice, in accordance
with the applicable requirements of Korean law, of its intention to effect a
reduction in the capital of ChipPAC Korea (the "Reduction in Capital"),
effective on the date specified therein (which date shall be the earliest date
permitted by applicable law after the notice date) (the "Redemption Date"), in
an amount equal to (A) one hundred seventy five million dollars ($175,000,000)
minus (B) the amount which Merger Sub and HEI mutually agree to be the estimated
amount of the Korean Debt Payoff (the "Estimated Korean Debt Payoff"). On the
Redemption Date, the Reduction in Capital shall be effected, unless (i) ChipPAC
Korea shall then be required, prior to and as a condition to the completion of
the Reduction in Capital, to pay creditor claims in an aggregate amount in
excess of $10 million, and (ii) the other Recapitalization Transactions are not
likely, in the reasonable good faith judgment of HEI following consultation with
Merger Sub, to be consummated within thirty (30) days after the Redemption Date,
in which case the Reduction in Capital may, prior to the effectiveness thereof,
at the election of HEI, be postponed or withdrawn and a new Redemption Date
fixed which is reasonably likely to occur on or prior to the anticipated Closing
Date. Upon the effectiveness of the Reduction in Capital, ChipPAC Korea shall
issue to HEI a non-interest-bearing demand promissory note substantially in the
form of Annex XV (the "ChipPAC Korea Note") in the initial principal amount
equal to the amount of the Reduction in Capital.
(b) Conversion of the Corporate Form of ChipPAC Korea. Promptly
after the date of this Agreement (and not less than forty-five (45) days before
the anticipated Closing Date), HEI shall, and shall cause ChipPAC Korea to,
undertake all necessary corporate
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formalities required for the conversion of the corporate form of ChipPAC Korea
from a Chusik Hosea to a Yuhan Hosea (the "YH Conversion"). Thereafter, upon
such date as Merger Sub shall determine following consultation with HEI (which
date shall be more than thirty (30) but not more than thirty-five (35) days
prior to the anticipated Closing Date), HEI shall, and shall cause ChipPAC Korea
to, publish notice, in accordance with the applicable requirements of Korean
law, of its intention to effect the YH Conversion, effective on the date
specified therein (or such other later date occurring on or prior to the Closing
Date which is permitted pursuant to applicable law) (the "Conversion Date"). On
the Conversion Date, the YH Conversion shall be effected and HEI shall sell to
one of its Korean Subsidiaries or to another person or entity reasonably
satisfactory to Merger Sub (the "Designee") a 0.1% interest in the equity of
ChipPAC Korea for a purchase price (the "YH Purchase Price") equal to 0.1% of
the estimated Korean Stock Sale Proceeds (such purchase price estimated to be
approximately seventy thousand dollars ($70,000)).
(c) Equity Contributions and Transfers Relating to ChipPAC Barbados
and ChipPAC BVI. Prior to the Closing:
(i) the Company shall contribute one hundred dollars ($100) of
equity capital to ChipPAC Barbados in exchange for all of the capital stock of
ChipPAC Barbados;
(ii) HEI shall contribute one hundred dollars ($100) of equity
capital to ChipPAC BVI in exchange for all of the capital stock of ChipPAC BVI;
(iii) Subject, in the case of clause (A), to the retention by
HEI of the right to use those Packaging-Related IP Rights required by HEI and
its controlled Affiliates for the conduct of test, assembly and packaging
services permitted by Section 12.16, (A) HEI will assign or otherwise transfer
to ChipPAC BVI (whether by assignment, substitution of parties or novation, or
by other means reasonably satisfactory to Merger Sub) the Packaging-Related IP
Rights held by HEI under the Patent License Agreement dated December 20, 1994 by
and between Motorola, Inc. and HEI, as amended by letter agreement dated August
5, 1998 (as so amended, the "Motorola License Agreement") and the Technology
License Agreement dated as of March 28, 1994 by and between Olin Corporation and
HEI, as amended by Amendment No. 1 thereto dated November 22/30, 1994 and
Amendment No. 2 thereto dated March 1/April 11, 1996 (as so amended, the "Olin
License Agreement"), and obtain a release of HEI's obligations thereunder with
respect to such Packaging-Related IP Rights so assigned or transferred; (B) HEA
will cause ChipPAC BVI to obtain rights from Tessera, Inc. (whether by direct
license from Tessera, Inc., assignment of existing license rights from the
Company to HEA and then from HEA to ChipPAC BVI, substitution of parties or
novation, or by other means reasonably satisfactory to Merger Sub) substantially
equivalent to the rights granted to the Company in the TCC License Agreement
dated December 22, 1998 by and among Tessera Inc., the Tessera Affiliates, and
the Company (the "Tessera License Agreement"); (C) HEI will assign or otherwise
transfer to ChipPAC BVI (whether by assignment, substitution of parties or
novation, or by other means reasonably satisfactory to Merger Sub) the rights of
HEI and HEA under the Assembly Services Agreement dated September 16, 1996 by
and among Intel Corporation, HEA and HEI; and (D) HEI will assign or otherwise
transfer, or cause the Company to assign or
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otherwise transfer, to ChipPAC BVI (whether by assignment, substitution of
parties or novation, or by other means reasonably satisfactory to Merger Sub)
the Assembly and Test Services Agreement dated March 15, 1993 by and between LSI
Logic Corporation and HEI, and the Company's rights under the Assembly Agreement
dated October 23, 1998 by and between Asahi Kasei Microsystems Co., Ltd. and
the Company and to obtain a release of HEI, HEA and the Company from any and all
obligations thereunder; and
(iv) ChipPAC BVI shall issue to HEI a non-interest-bearing
demand promissory note substantially in the form of Annex XVI (the "Intellectual
Property Note") in the initial principal amount of one hundred million dollars
($100,000,000), in exchange for the HEI License Agreement and the assignment of
the agreements specified in Section 2.2(c)(iii).
(d) Equity Contributions Relating to ChipPAC BVI II, ChipPAC
Luxembourg and ChipPAC Hungary. Prior to the Closing:
(i) the Company shall contribute one hundred dollars ($100) of
equity capital to ChipPAC BVI II in exchange for all of the capital stock of
ChipPAC BVI II; and
(ii) ChipPAC BVI II shall contribute the minimum amount of
equity capital required by applicable law in Luxembourg and Hungary,
respectively, in exchange for all of the capital stock of ChipPAC Luxembourg and
ChipPAC Hungary, respectively.
(e) Merger: Borrowing of Funds and Subsequent Loans and Equity
Investments. At the Closing:
(i) Merger Sub shall merge with and into the Company and the
capital stock of the Company and Merger Sub shall be converted into the
consideration provided for in Section 2.3.
(ii) immediately following the consummation of the Merger, the
Company shall contribute not less than sixty-seven million dollars ($67,000,000)
in cash to ChipPAC Barbados;
(iii) ChipPAC BVI II shall incur indebtedness in the aggregate
amounts and upon the terms and conditions to be determined by its Board of
Directors immediately following the Merger;
(iv) ChipPAC BVI II shall loan (A) one hundred forty million
dollars ($140,000,000) to ChipPAC Luxembourg; (B) thirty-four million dollars
($34,000,000) to ChipPAC Shanghai I and (C) one hundred fifty-one million
dollars ($151,000,000) to ChipPAC BVI;
(v) ChipPAC BVI II shall increase its equity investment in
ChipPAC Hungary to at least thirty-five million dollars ($35,000,000);
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(vi) ChipPAC Luxembourg shall loan one hundred forty, million
dollars ($140,000,000) to ChipPAC Hungary; and
(vii) ChipPAC Hungary shall loan an amount equal to the sum of
the Estimated Korean Debt Payoff and the amount of the ChipPAC Korea Note (i.e.,
one hundred seventy-five million dollars ($175,000,000)) to ChipPAC Korea.
(f) Purchase of ChipPAC BVI, ChipPAC Korea and ChipPAC Shanghai. At
the Closing:
(i) ChipPAC Barbados shall: (A) purchase ChipPAC BVI from HEI
for one hundred dollars ($100) in cash, (B) purchase the Designee's 0.1%
interest in the equity of ChipPAC Korea (which interest shall be held in
accordance with the terms of the shareholders agreement to be executed and
delivered by ChipPAC Barbados and ChipPAC BVI (the "ChipPAC Korea Shareholders
Agreement")) for an amount equal to the YH Purchase Price, and (C) contribute
not less than sixty-seven million dollars ($67,000,000) in cash to ChipPAC BVI;
(ii) ChipPAC BVI shall purchase one hundred percent (100%) of
the equity capital of ChipPAC Shanghai I from HEI for an amount (the "Chinese
Equity Sale Proceeds") equal to eighty million dollars ($80,000,000) in cash
minus the sum of (A) the Chinese Debt Payoff and (B) the Chinese Intercompany
Payoff;
(iii) ChipPAC BVI shall purchase 99.9% of the then outstanding
capital stock of ChipPAC Korea from HEI (which interest shall be held in
accordance with the terms of the ChipPAC Korea Shareholders Agreement) for an
amount (the "Korean Stock Sale Proceeds") equal to seventy million dollars
($70,000,000) in cash, plus (A) the difference by which the amount of the
Estimated Korean Debt Payoff exceeds the actual amount of the Korean Debt
Payoff, if any, minus (B) the difference by which the actual amount of the
Korean Debt Payoff exceeds the amount of the Estimated Korean Debt Payoff, if
any, minus (C) the sum of the payments required to be made pursuant to Section
2.3(a)(iv) and Section 2.3(d) hereof, and minus (D) the sum of the US Debt
Payoff and the US Intercompany Payoff (clauses (A) through (D) of this Section
2.2(f)(iii) collectively, the "Korean Stock Sale Adjustments"); and
(iv) ChipPAC BVI shall purchase ChipPAC Shanghai II from the
Company for two million dollars ($2,000,000) in cash.
In addition to the cash payments at the Closing set forth in clauses (ii) and
(iii) of this Section 2.2(f), HEI shall be entitled to receive, on the terms and
conditions set forth in Section 2.5, the HEI Earn-Out (as defined in Section
2.5), it being understood and agreed that 70.185% of the HEI Earn-Out (if any)
shall be deemed to be additional consideration for the sale of ChipPAC Korea
stock pursuant to clause (iii) of this Section 2.2(f) and 29.815% of the HEI
Earn-Out (if any) shall be deemed to be additional consideration for the sale of
ChipPAC Shanghai stock pursuant to clause (ii) of this Section 2.2(f).
(g) Payoff of Debt. At the Closing:
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(i) the Company shall repay all of its Indebtedness outstanding
immediately prior to the consummation of the Merger (collectively, the "US Debt
Payoff");
(ii) ChipPAC Korea shall repay all of its Indebtedness
outstanding immediately prior to the consummation of the Merger and all
Indebtedness and Liabilities related to the items disclosed on Schedule
2.2(g)(ii) outstanding immediately prior to the consummation of the Merger
(collectively, the "Korean Debt Payoff");
(iii) ChipPAC Shanghai shall repay all of its Indebtedness
outstanding immediately prior to the consummation of the Merger and all
Indebtedness and payables disclosed on Schedule 2.2(g)(iii) outstanding
immediately prior to the consummation of the Merger (collectively, the "Chinese
Debt Payoff");
(iv) all payables and other Liabilities (other than Liabilities
created by this Agreement and the Ancillary Agreements) owed by HEI, HEA or any
of their respective Affiliates (other than the Company, ChipPAC Korea or ChipPAC
Shanghai) to the Company, ChipPAC Korea, ChipPAC Shanghai, ChipPAC BVI, ChipPAC
Barbados or any other Subsidiary of the Company, whether or not reflected in the
Balance Sheet, shall be canceled without payment, in full and complete
satisfaction of such payables and Liabilities, and (to the extent not already
paid pursuant to other provisions of this Agreement) all payables and other
Liabilities (other than Liabilities created by this Agreement and the Ancillary
Agreements) owed by the Company, ChipPAC Korea, ChipPAC Shanghai, ChipPAC BVI,
ChipPAC Barbados or any other Subsidiary of the Company to HEI, HEA or any of
their respective Affiliates shall be canceled without payment, in full and
complete satisfaction of such payables and Liabilities, except that (A) the
Company shall repay its payables and Liabilities set forth in Schedule
2.2(g)(iv) outstanding immediately prior to the consummation of the Merger (the
"US Intercompany Payoff"), (B) ChipPAC BVI shall pay to HEI (such payment to be
treated as a deduction from the gross Chinese Equity Sale Proceeds) the amount
of the Intercompany Technical Fees and the Intercompany Interest outstanding as
of the Closing Date, by delivery of checks in the amount thereof payable to HEI
(it being agreed that such payments shall be deemed made on behalf of ChipPAC
Shanghai and shall constitute full and complete satisfaction of the Intercompany
Technical Fees and Intercompany Interest owed by ChipPAC Shanghai to HEI and
that such checks shall bear a notation to such effect), and HEI shall cause the
other payables and Liabilities of ChipPAC Shanghai set forth in Schedule
2.2(g)(iv) outstanding as of the Closing Date to be paid (such payments to be
treated as a deduction from the gross Chinese Equity Sale Proceeds) (the
"Chinese Intercompany Payoff"), and (C) HEI and HEA shall indemnify and hold
harmless each Purchaser Party from and against any and all Taxes incurred as a
result of any of the transactions contemplated by this Section 2.2(g)(iv);
(v) each of ChipPAC Korea and ChipPAC BVI shall repay (the
"Note Payments") the outstanding principal amount of the ChipPAC Korea Note and
the Intellectual Property Note, respectively, to HEI; and
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(vi) HEI shall repay the amount of Indebtedness outstanding
immediately prior to the consummation of the Merger with respect to the items
disclosed in Schedule 2.2(g)(vi).
(h) Management of Regulatory Proceedings. Without limiting the
obligations of HEI and HEA pursuant to Section 5.1, Merger Sub shall have
primary responsibility for and management of all governmental and regulatory
filings, proceedings and approvals required for consummation of the
Recapitalization Transactions contemplated by Section 2.2, subject to
consultation with HEI and HEA and subject further to control by HEI and HEA of
matters affecting interests of HEI and HEA.
(i) Withholding Taxes. Merger Sub shall bear the cost of all
withholding taxes (if any) required to be paid with respect to the transactions
contemplated by Section 2.2(c)(i), Section 2.2(c)(ii), Section 2.2(c)(iii),
Section 2.2(d), Section 2.2(e)(ii), Section 2.2(e)(iii), Section 2.2(e)(iv),
Section 2.2(e)(v), Section 2.2(e)(vi), Section 2.2(e)(vii), and Section
2.2(f)(i). HEI shall bear the cost of all other withholding taxes required to be
paid with respect to the transactions contemplated by Article II of this
Agreement, including withholding taxes (if any) required to be paid with respect
to the transactions comprising the Cash Consideration.
(j) Adjustment of Amounts. To the extent permitted by applicable law
and the terms of applicable governmental and regulatory approvals, Merger Sub
shall have the right, on or prior to the Closing Date, to vary the individual
dollar amounts of the particular Recapitalization Transactions to take into
account changes as a result of business operations, exchange rate changes or
otherwise, so long as the aggregate amount of the Cash Consideration, the Common
Stock Consideration and the Preferred Stock Consideration payable to HEI and HEA
at the Closing, and the tax impact thereof to HEI and HEA, and the timing of
payment remain unchanged and so long as there is no increase in the overall
amount of payments by HEI, HEA and their Subsidiaries prior to the Closing.
Section 2.3 The Merger. At the Closing, subject to the provisions of this
Agreement and in accordance with the California General Corporation Law (the
"CGCL") and the Delaware General Corporation Law (the "DGCL"), Merger Sub shall
be merged with and into the Company (the "Merger"), with the Company continuing
as surviving corporation (the "Surviving Corporation"). To effect the Merger, at
the Closing: an agreement of merger, in substantially the form of Exhibit A
hereto (the "California Agreement of Merger"), shall be duly executed and
acknowledged by Merger Sub and by the Company as the Surviving Corporation and
shall be delivered to the Secretary of State of the State of California for
filing, along with certificates of the officers of the constituent corporations
to the Merger ("Officers' Certificates"); and a certificate of merger, in
substantially the form of Exhibit B hereto (the "Delaware Certificate of
Merger"), shall be duly executed and acknowledged by the Company and shall be
delivered to the Secretary of State of the State of Delaware for filing. The
Merger shall become effective upon the latest of: (x) the date and time of the
filing and effectiveness of the California Agreement of Merger and the Officers'
Certificates with the Secretary of State of the State of California, (y) the
date and time of the filing and effectiveness of the Delaware
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Certificate of Merger with the Secretary of State of the State of Delaware, or
(z) such other date and time as is provided in the California Agreement of
Merger (the "Effective Time").
(a) Treatment of Stock and Options; Merger Consideration. Prior to
the Effective Time, all shares of Company Preferred Stock held by HEA shall be
converted by HEA into shares of Company Common Stock in accordance with the
terms of the Company's Articles of Incorporation (it being acknowledged and
agreed that no accrued but unpaid dividends on the Company Preferred Stock are
outstanding as of the date hereof). In addition, prior to the Effective Time,
the Company's Articles of Incorporation shall be amended and restated in the
form of Exhibit C to establish the classes and amounts of authorized capital
stock set forth therein. Immediately thereafter, at the Effective Time:
(i) the issued and outstanding shares of capital stock of
Merger Sub shall be converted, in their entirety, without any action by the
stockholders of Merger Sub, into the right to receive, at the Closing, a number
of shares of Class L Common and Class A Common (in strips, such that for each
share of Class L Common to be issued to the stockholders of Merger Sub, such
persons shall be issued nine (9) shares of Class A Common) (the "New Shares"),
and the issued and outstanding shares of Company Common Stock and Company
Preferred Stock then held by HEA shall be converted in their entirety, without
any action by HEA as the holder thereof, into a right on the part of HEI or HEA
(as set forth in clause (x) and clause (y) below) to receive, at the Closing:
(x) to HEA: a number of shares of Class L Common and Class A Common
(in strips, such that for each share of Class L Common to be issued to HEA,
HEA shall be issued nine (9) shares of Class A Common) (the "Common Stock
Consideration") so that immediately following the Effective Time (before
taking into account any shares of common stock issued or issuable to
employees of the Company or its Subsidiaries or to financing sources), the
stockholders of Merger Sub shall own ninety percent (90%) and HEA shall own
ten percent (10%) of the shares of Class L Common and Class A Common then
issued and outstanding (it being agreed and understood that for purposes of
this Section 2.3(a)(i)(x), any stockholder who elects to take Class B
Common Stock, par value $0.01 per share, of the Company in lieu of Class A
Common shall be deemed to be a holder of Class A Common); and
(y) to HEA or HEI, as HEA shall direct by written notice to Merger
Sub not less than two Business Days prior to the Closing: Company Senior
Preferred Stock with an aggregate liquidation value of thirty million
dollars ($30,000,000) (the "Preferred Stock Consideration");
(ii) the Company shall issue (A) to HEA a certificate or
certificates (as HEA shall direct) representing a number of shares of Class L
Common and Class A Common equal to the Common Stock Consideration and a
certificate or certificates (as HEA shall direct) representing a number of
shares of Company Senior Preferred Stock equal to the Preferred Stock
Consideration, and (B) to the stockholders of Merger Sub a certificate or
certificates representing
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the New Shares; provided, that pending the issuance and delivery of such
certificates, the certificates that formerly represented the shares of Merger
Sub capital stock held by the stockholders of Merger Sub shall evidence and
represent the New Shares; the certificates that formerly represented the Company
capital stock held by HEA shall evidence and represent the right to receive the
Common Stock Consideration and the Preferred Stock Consideration; and each such
certificate for shares of Merger Sub capital stock and Company capital stock
shall entitle the holder thereof to all of the rights of a holder of the
applicable number of shares of Class L Common, Class A Common or Company Senior
Preferred Stock, as the case may be;
(iii) the shares of Company capital stock surrendered by HEA and the
shares of Merger Sub capital stock surrendered by the stockholders of Merger Sub
shall be canceled and retired; and
(iv) each Company Option which is outstanding and unvested
immediately prior to the Effective Time shall be canceled without any payment
or other consideration therefor, and each Company Option which is outstanding
and vested immediately prior to the Effective Time shall be converted into the
right to receive from the Company, immediately prior to the Effective Time (A)
the cash payment specified by the Management Incentive Agreement dated as of
August 1, 1998 and extended as of March 5, 1999 by and between ChipPAC, Inc.,
and Dennis McKenna (in the case of Company Options covered thereby), or (B) the
cash payment specified by the Management Incentive Agreement dated as of August
1, 1998 and extended as of March 5, 1999 by and between ChipPAC, Inc. and Tony
Lin (in the case of Company Options covered thereby), or (C) the cash payment
specified by the ChipPAC, Inc. Management Incentive Plan (in the case of Company
Options covered thereby) or (D) a cash payment equal to the product of (I) the
number of shares of Company Common Stock for which such vested Company Option is
exercisable and (II) the difference between the Per Share Amount and the
exercise price of such vested Company Option (in the case of any other vested
Company Options).
(b) Further Effects of Merger. At the Effective Time, (i) the
separate existence of Merger Sub shall cease and Merger Sub shall be merged with
and into the Company with the Company as the Surviving Corporation; (ii) the
Articles of Incorporation and Bylaws of the Surviving Corporation shall be
amended and restated in the form set forth in Exhibit C and Exhibit D,
respectively; and (iii) the Merger shall have the further effects set forth in
the CGCL and the DGCL. Without limiting the generality of the foregoing, from
and after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the constituent corporations in the Merger; and all rights, privileges,
powers and franchises of each of the constituent corporations, and all property,
real, personal and mixed, and all debts due to either of the constituent
corporations on whatever account, as well as for stock subscriptions and all
other things in action or belonging to each of the constituent corporations,
shall be vested in the Surviving Corporation, and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the constituent corporations, and the title to any real estate vested by deed
or otherwise, in either of the constituent corporations, shall not revert or be
in any
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way impaired; but all rights of creditors and all liens upon any property of
either of the constituent corporations shall be preserved unimpaired, and all
debts, liabilities and duties of the constituent corporations shall thereafter
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts and liabilities had been incurred by it.
(c) Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time, plus one director designated by HEA in
accordance with the Shareholders Agreement, shall be the initial directors and
officers of the Surviving Corporation and shall hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed. The
directors and officers of the Company, ChipPAC Korea and ChipPAC Shanghai
immediately prior to the Effective Time and each person who is or at any time
prior to the Closing Date has been an officer or director of the Company,
ChipPAC Korea or ChipPAC Shanghai shall be entitled to indemnification on the
terms, and subject to the conditions, set forth in Section 2.
(d) Change-In-Control Payments. At or immediately prior to the
Effective Time, the Company, ChipPAC Korea and ChipPAC Shanghai (as the case may
be) shall pay all additional compensation, bonuses and other amounts (if any)
required to be paid, as a result, in whole or in part, of the execution and
delivery of this Agreement or the consummation of the Recapitalization
Transactions, to employees of the Company, ChipPAC Korea or ChipPAC Shanghai
pursuant to agreements and arrangements adopted prior to the Effective Time and
all Taxes (if any) imposed on the Company, ChipPAC Korea and ChipPAC Shanghai
with respect to such additional compensation, bonuses and other amounts,
including compensation, bonuses, other amounts and Taxes (if any) which are
required to be paid by the Company as a result of (A) the Management Incentive
Agreement dated as of August 1, 1998 and extended as of March 5, 1999 by and
between ChipPAC, Inc. and Dennis McKenna, (B) the Management Incentive Agreement
dated as of August 1, 1998 and extended as of March 5, 1999 by and between
ChipPAC, Inc. and Tony Lin, or (C) the ChipPAC, Inc. Management Incentive Plan
(it being understood and agreed that nothing herein shall impose on HEI, HEA,
the Company, ChipPAC Korea or ChipPAC Shanghai any obligation to pay the Tax
liability of any recipient of such additional compensation, bonuses or other
amounts) (the "Change-In-Control Payments"). HEA (subject to proportionate
reimbursement to HEA by HEI) shall reimburse the Company after the closing for
all Change-In-Control Payments (if any) paid by the Company, ChipPAC Korea or
ChipPAC Shanghai after the Closing. Each contract pursuant to which any Change-
In-Control Payments are or may become due is listed in Section 3.11 (a) of the
Company Disclosure Schedule.
Section 2.4 Purchase Price Adjustment. For purposes of this Section 2.4:
(x) "Working Capital" means an amount equal to the difference (whether positive
or negative) between (i) the combined tangible current assets of the Company,
ChipPAC Korea and ChipPAC Shanghai (which for purposes of this Agreement shall
consist of cash and marketable securities (but not foreign exchange contracts),
accounts receivable, inventory and other current assets) and (ii) the combined
current liabilities of the Company, ChipPAC Korea and ChipPAC Shanghai (which
for purposes of this Agreement shall consist of trade accounts payable, accrued
personnel
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expenses and other accrued expenses); (y) "Peg Amount" means: (i) if the Cash
Consideration has been reduced pursuant to Section 2.4(b)(i) because Estimated
Working Capital is less than Required Working Capital, Estimated Closing Working
Capital, and (ii) if the Cash Consideration has been increased pursuant to
Section 2.4(b)(ii), the sum of Required Working Capital plus the amount by which
the Cash Consideration has been increased pursuant to Section 2.4(b)(ii); and
(z) no lease termination charge or payments required to take title to property
shall be deemed to be capital expenditures.
(a) Closing Financial Statements.
(i) At least five (5) Business Days prior to the Closing, HEI
and HEA shall prepare and deliver to Merger Sub (A) an unaudited estimated
combined balance sheet of the Company, ChipPAC Korea and ChipPAC Shanghai as of
the close of business on the Closing Date but without giving effect to any of
the Recapitalization Transactions and without accruing or reflecting the payment
of the fees and expenses of Merger Sub, Bain Capital, Inc., MSX Holdings LLC,
Citicorp Venture Capital Ltd. or any of their Affiliates contemplated by Section
12.3 (the "Estimated Closing Balance Sheet"), which shall reflect reasonable
good faith estimates of the amount of Working Capital and cash (net of book
overdrafts) that will be on the balance sheets of the Company, ChipPAC Korea and
ChipPAC Shanghai as of the close of business on the Closing Date (but without
giving effect to any of the Recapitalization Transactions) (the "Estimated
Closing Working Capital" and the "Excess Cash", respectively); (B) an unaudited
statement of estimated combined research and development expenditures made by
the Company ChipPAC Korea and ChipPAC Shanghai for the period beginning January
1, 1999 and ending as of the close of business on the Closing Date (but without
giving effect to any of the Recapitalization Transactions) (the "Estimated Pre-
Closing R&D Expenditures"); and (C) an unaudited statement of estimated combined
capital expenditures made by the Company, ChipPAC Korea and ChipPAC Shanghai for
the period beginning January 1, 1999 and ending as of the close of business on
the Closing Date (but without giving effect to any of the Recapitalization
Transactions) (the "Estimated Pre-Closing Capital Expenditures"); provided, that
if HEI and HEA, on the one hand, and Merger Sub, on the other hand, cannot agree
upon the amounts to be included in the Estimated Closing Balance Sheet
(including the amount of Estimated Closing Working Capital or Excess Cash), the
statement of Estimated Pre-Closing R&D Expenditures, or the statement of
Estimated Pre-Closing Capital Expenditures, the amounts in dispute shall be
based upon the balances reflected in the books and records of the Company,
ChipPAC Korea and ChipPAC Shanghai as of calendar month end immediately
preceding the Closing Date. The Estimated Closing Balance Sheet and the
statements of Estimated Pre-Closing R&D Expenditures and Estimated Pre-Closing
Capital Expenditures shall be prepared in accordance with GAAP in a manner
consistent with the Company's accounting policies used in the preparation of the
Balance Sheet.
(ii) As soon as practicable but in no event later than one hundred
twenty (120) days after the Closing Date, the Company shall deliver to HEI and
HEA (A) an audited combined balance sheet of the Company, ChipPAC Korea and
ChipPAC Shanghai as of the close of business on the Closing Date, but without
giving effect to any of the Recapitalization Transactions (the "Closing Balance
Sheet"), which Closing Balance Sheet shall reflect actual
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Working Capital as of the close of business on the Closing Date (the "Closing
Working Capital"); (B) an audited statement of combined research and development
expenditures made by the Company, ChipPAC Korea and ChipPAC Shanghai for the
period beginning January 1, 1999 and ending as of the close of business on the
Closing Date (the "Actual R&D Expenditures"), and (C) an audited statement of
combined capital expenditures made by the Company, ChipPAC Korea and ChipPAC
Shanghai for the period beginning January 1, 1999 and ending as of the close of
business on the Closing Date (the "Actual Capital Expenditures"). The Closing
Balance Sheet and the statements of Actual R&D Expenditures and Actual Capital
Expenditures are collectively referred to as the "Closing Financial Statements".
The Closing Financial Statements shall be audited by a PriceWaterhouseCoopers
engagement team selected by the Company (or another firm of independent public
accountants mutually acceptable to the Company, HEI and HEA) and shall be
prepared in accordance with GAAP in a manner consistent with the Company's
accounting policies used in the preparation of the Balance Sheet and the related
statements of operations, stockholders equity and cash flows for the six months
ending on the Financial Statement Date, subject to the provisions of Section
2.4(e) and without giving effect to any of the Recapitalization Transactions or
any fees and expenses of Merger Sub, Bain Capital Inc., Citicorp Venture Capital
Ltd. or their Affiliates paid or reimbursed by the Company.
(b) Adjustments at the Closing. At the Closing, (i) if Estimated
Closing Working Capital is less than thirty million dollars ($30,000,000) (the
"Required Working Capital"), or if Estimated Pre-Closing Capital Expenditures
are less than the prorated budgeted amounts (prorated on a daily basis for the
period beginning January 1, 1999 and ending on the Closing Date) for capital
expenditures set forth in the capital budget annexed hereto as Exhibit E (the
"Capital Budget"), or if Estimated Pre-Closing R&D Expenditures are less than
the prorated budgeted amounts (prorated on a daily basis for the period
beginning January 1, 1999 and ending on the Closing Date) for research and
development expenditures set forth in the quarterly research and development
budgets annexed hereto as Exhibit F (the "R&D Budgets"), then the Cash
Consideration payable at the Closing shall be reduced by the total amount of
such shortfall, (ii) if Estimated Closing Working Capital is greater than
Required Working Capital, then the Cash Consideration payable at Closing shall
be increased by the amount of such excess (not to exceed the amount of Excess
Cash) and (iii) if Estimated Pre-Closing Capital Expenditures exceed the
prorated budgeted amounts for capital expenditures set forth in the Capital
Budget, or if Estimated Pre-Closing R&D Expenditures exceed the prorated
budgeted amounts for research and development expenditures set forth in the R&D
Budgets, and if Merger Sub has consented in writing to the expenditures
resulting in such excess, then the Cash Consideration payable at the Closing
shall be increased by the total amount of such excess.
(c) Post-Closing Adjustment. Promptly following the determination of
the Closing Balance Sheet and the Closing Working Capital, the Cash
Consideration shall be adjusted as follows and payment, by wire transfer of
immediately available funds shall be made by the Company or by HEI and HEA, as
the case may be, not later than five (5) Business Days
following such determination:
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(i) if Closing Working Capital is less than the Peg Amount, or
if Actual Capital Expenditures are less than the Estimated Pre-Closing Capital
Expenditures, or if Actual R&D Expenditures are less than the Estimated Pre-
Closing R&D Expenditures, then the Cash Consideration shall be reduced, and HEI
shall pay to the Company, the aggregate amount of such shortfall, and
(ii) if Closing Working Capital is greater than the Peg Amount,
or if Actual Capital Expenditures are greater than the Estimated Pre-Closing
Capital Expenditures (and if Merger Sub has consented in writing to the
expenditures resulting in such excess), or if Actual R&D Expenditures are
greater than the Estimated Pre-Closing R&D Expenditures (and if Merger Sub has
consented in writing to the expenditures resulting in such excess), then the
Cash Consideration shall be increased, and the Company shall cause ChipPAC BVI
or ChipPAC Korea to pay to HEI the amount of such excess.
(iii) In each case, the payments provided by this Section 2.4(c)
shall include interest from the Closing Date to the date of such payment at a
rate of ten percent (10%) per annum.
(d) Resolution of Disputes. The Closing Financial Statements
(including the amount of Closing Working Capital, the amount of Actual R&D
Expenditures and the amount of Actual Capital Expenditures) shall become final
and binding on HEI, HEA and the Company unless HEI and HEA give written notice
of their disagreement (a "Notice of Disagreement") to the Company within forty-
five (45) days following receipt by HEI and HEA of the Closing Financial
Statements. Any such Notice of Disagreement shall specify in reasonable detail
the nature of any disagreement so asserted. The Company shall have twenty-five
(25) days following its receipt of the Notice of Disagreement to review the
Notice of Disagreement and to give notice of any disagreement therewith (the
"Counter-Notice of Disagreement") to HEI and HEA. If the Company does not give a
Counter-Notice of Disagreement within such period, the Closing Financial
Statements (including the amount of Closing Working Capital, Actual R&D
Expenditures and Actual Capital Expenditures) shall be adjusted as set forth in
the Notice of Disagreement and, as so adjusted, shall be final and binding upon
all parties. If the Company gives timely Counter-Notice of Disagreement, HEI,
HEA and the Company shall attempt in good faith to resolve their disagreements.
If HEI, HEA and the Company are unable to resolve all of their disagreements
with respect to the Closing Financial Statements or the amount of Closing
Working Capital or the amount of Actual R&D Expenditures or the amount of Actual
Capital Expenditures within twenty (20) days following the Company's delivery to
HEI and HEA of a Counter-Notice of Disagreement, they shall refer their
remaining differences to the U.S. national office of an internationally
recognized firm of independent accountants as to which HEI, HEA and the Company
mutually agree (the "CPA Firm"), which shall, acting as experts and not as
arbitrators, determine, and only with respect to the remaining differences so
submitted, whether, and to what extent, if any, the Closing Financial Statements
or the amount of Closing Working Capital, Actual R&D Expenditures or Actual
Capital Expenditures requires adjustment. HEI, HEA and the Company shall direct
the CPA Firm to use its best efforts to render its determination within forty-
five (45) days after the submission of any such dispute to the CPA Firm. The CPA
Firm's determination of the Closing Financial Statements (including the amount
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<PAGE>
of Closing Working Capital, Actual R&D Expenditures and Actual Capital
Expenditures) shall be conclusive and binding upon the Company, HEI and HEA. The
fees and disbursements of the CPA Firm shall be borne fifty percent (50%) by the
Company and fifty percent (50%) by HEI and HEA.
(e) No Double-Counting. In calculating the adjustments provided by
this Section 2.4, it is the intention of the parties to avoid double payment,
double-crediting or other double-counting of items (including Taxes and other
items covered by the indemnification provisions of Article X or Article XI)
which would result in an inequitable and unintended benefit to one party or
parties to the detriment of the other party or parties, and no adjustment
pursuant to this Section 2.4 shall be made for any loss contingencies for which
the Company has already recovered indemnification pursuant to Article X or
Article XI.
(f) Indebtedness. In the event of an error in the calculation of any
Indebtedness of HEI, the Company, ChipPAC Korea or ChipPAC Shanghai required to
be repaid at or prior to the Closing pursuant to Section 2.2, any underpayment
or overpayment shall be for the account of HEI and HEA and shall be treated as
an adjustment to the Cash Consideration when ultimately closed out, and in the
event of any dispute shall be subject to the dispute resolution procedure of
Section 2.4(d).
(g) Foreign Exchange Contracts. HEI and HEA shall cause the Company,
ChipPAC Korea and ChipPAC Shanghai to settle and close all foreign exchange
contracts to which the Company, ChipPAC Korea or ChipPAC Shanghai is a party,
effective prior to the Closing. Any gains or losses with respect to such foreign
exchange contracts that remain unsettled shall be for the account of HEI and HEA
and shall be treated as an adjustment to the Cash Consideration when ultimately
closed out, and in the event of any dispute shall be subject to the dispute
resolution procedure of Section 2.4(d).
(h) Physical Inventory. The Company, ChipPAC Korea and ChipPAC
Shanghai shall take and complete a 100% physical inventory as soon as
practicable following the Closing Date. HEI, HEA and Merger Sub (or their
respective representatives), shall be entitled to observe such physical
inventory.
Section 2.5 Hyundai Earn-Out. HEI will be eligible to receive from the
Company additional consideration (the "HEI Earn-Out") during the four (4) year
period commencing January 1, 1999 (the "Earn-Out Period"), payable annually, if
earned (the "Earn-Out Payment"), and calculated in the manner set forth below;
provided, however, that such HEI Earn-Out shall not exceed the aggregate amount
of thirty-five million dollars ($35,000,000) (the "Earn-Out Maximum").
(a) The Earn-Out Payment shall be calculated as the product of (i)
33.3% (the "Earn-Out Ratio") and (ii) the amount by which earnings before
interest, taxes, depreciation and amortization of the Company and its
Subsidiaries on a consolidated basis and before deduction or accrual of fees
paid or payable to Bain Capital, Inc., MSX Holdings LLC and their respective
Affiliates pursuant to the Advisory Agreements, excluding all extraordinary
gains or losses as determined by the Company's auditors ("EBITDA") during the
specified fiscal year of the Earn-
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<PAGE>
Out Period exceeds the annual EBITDA Thresholds described below for such
specified fiscal year (such difference, hereinafter referred to as the "Earn-Out
Spread".)
(b) The Earn-Out Spread in any one year shall be calculated by
deducting from actual EBITDA for a fiscal year period (such actual EBITDA, as
determined by the Company's independent auditors on a basis consistent with
Regulation S-X promulgated under the Securities Act of 1933 ("Regulation S-X"),
the EBITDA Thresholds set forth below for each respective fiscal year. If HEI or
HEA or the Company recovers any amount by way of indemnification pursuant to
Article X hereof, such amount shall be disregarded for purposes of determining
EBITDA for such fiscal year.
<TABLE>
<CAPTION>
Fiscal Year EBITDA Threshold
- ----------- ----------------
<S> <C>
1999....... $116.5 million
2000....... $171.3 million
2001....... $198.5 million
2002....... $231.8 million
</TABLE>
To the extent that the calculated Earn-Out Spread is negative, it shall be
deemed to be zero and HEI shall not at any time be entitled to the Earn-Out
Payment for such fiscal year.
(c) The amount of the Earn-Out Payment shall be calculated by the
independent auditors of the Company annually, and shall be notified to HEI
within one hundred twenty (120) days of the end of each fiscal year. Except as
provided in the following sentence, the Earn-Out Payment shall be made by the
Company to HEI in cash in immediately available funds within ten (10) days of
the notification by the auditors. If, notwithstanding the exercise of the
Company's good faith commercially reasonable best efforts to secure less
restrictive terms or a waiver of the applicable restrictions, terms required by
creditors in credit agreements or indentures with the Company or any of its
Subsidiaries have the effect of prohibiting the Company or any of its
Subsidiaries in any fiscal year from making the Earn-Out Payment (either in
whole or in part) in cash, the Company shall (i) so notify HEI and shall furnish
copies of such agreements and indentures and a detailed explanation of the
effect thereof on the Company's ability to pay the Earn-Out Payment in cash, and
(ii) make the Earn-Out Payment for such fiscal year in cash up to the maximum
extent permitted by such agreements and indentures and, for all amounts in
excess of such maximum, by issuing to HEI shares of Company Senior Preferred
Stock with an aggregate liquidation value equal to the balance of the Earn-Out
Payment. If the Earn-Out Payment is made in whole or in part in shares of
Company Senior Preferred Stock, then the Company shall notify HEI promptly after
it becomes able to make such payment, either in whole or in part, in cash and
shall forthwith redeem such shares of Company Senior Preferred Stock, for cash,
in the full amount of the liquidation value of such shares together with accrued
and unpaid dividends thereon. No Non-Liquidating Distribution (as defined in the
Articles of Incorporation), shall be declared or paid to the holders of the
Company's Common Stock or any class thereof (i) if such Non-Liquidating
Distribution would impair in any manner the ability of
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<PAGE>
the Company to pay any portion of the Earn-Out Payment in cash and (ii) until
HEI's entitlement to an Earn-Out Payment for the preceding fiscal given year has
been calculated pursuant to this Section 2.5(c) and the full amount of the Earn-
Out Payment (if any) earned for such preceding fiscal year has been paid in cash
in full. Subject to the foregoing, and subject to the restrictions set forth in
the Company's Articles of Incorporation, Non-Liquidating Distributions may be
made to holders of the Company's common stock after HEI's entitlement to an
Earn-Out Payment for the preceding fiscal year has been calculated pursuant to
this Section 2.5(c) and either no Earn-Out Payment is due or the full amount of
all Earn-Out Payments due for all prior periods has been paid in cash.
(d) During the Earn-Out Period, the Company's and its Subsidiaries'
financial records shall be maintained in accordance with GAAP (it being agreed
that to the extent that any change in GAAP from and after the date hereof
requires the Company to modify its accounting policies to conform with GAAP and
such change in GAAP results in an increase or decrease in actual EBITDA, such
change in GAAP will be ignored for purposes of computing the HEI Earn-Out).
During the Earn-Out Period, the Company shall provide to HEI all financial
statements to be delivered to HEI pursuant to the Shareholders Agreement.
(e) The Company shall allow an auditing firm of international standing
selected by HEI to review appropriate records of the Company in order to verify
the accuracy of the calculation of the Earn-Out Payment hereunder. Any such
review shall be conducted during normal business hours and shall be commenced
within ten (10) days after the Company's receipt of written request by HEI
therefor (which request shall be made, if at all, no later than sixty (60) days
after receipt by HEI of the calculation of the Earn Out Payment for 1999, 2000
and 2001 and no later than ninety (90) days after receipt of the calculation of
the final Earn-Out Payment, pursuant to Section 2.5(c)), it being agreed that
after the expiration of any such period, no "look-back" to the calculation of
any prior year's Earn-Out Payments shall be allowed unless the financial
statements for such period are restated. The cost of such review shall be borne
by HEI unless the parties agree (or the decision of the independent accountant
referred to in the last sentence of this paragraph establishes) that the Company
has underpaid the Earn-Out Payment by the greater of ten percent (10%) or two
hundred fifty thousand dollars ($250,000), in which case such costs shall be
born by the Company. No such review shall be conducted more often than once per
year. Any disagreement by the Company with the calculation of the Earn-Out
Payment based on such review shall be referred to an internationally recognized
firm of independent accountants selected by reasonable mutual agreement of HEI
and the Company (which shall each bear fifty percent (50%) of the fees and
disbursements of such firm), which firm shall, acting as experts and not as
arbitrators, determine, and only with respect to the remaining differences so
submitted, whether and to what extent the calculation of the Earn-Out Payment
should be adjusted.
(f) If (x) the Company sells, leases, licenses or otherwise disposes
of a majority of its assets (on a consolidated basis), or holders of the
Company's capital stock sell or transfer to any third party (whether by sale of
stock, merger, consolidation or otherwise) shares of the Company's capital stock
and, as a result of such sale of transfer, the holders of Company capital stock
possessing the voting power (under ordinary circumstances) to elect a majority
of
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<PAGE>
the Company's Board of Directors immediately prior to such sale or transfer
cease to own Company capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Company's Board of Directors, and (y)
the Earn-Out Payment for each of the two years immediately preceding such
transaction has been earned, and based on the Company's results of operations
as of the date of such transaction, a pro rata portion of the EBITDA Threshold
has been exceeded, then the amount of the remaining Earn-Out Maximum which has
not theretofore been paid to HEI as of such date shall, upon closing of such
transaction, be paid to HEI in full. If the Company acquires another entity or
entities, or if the Company acquires or discontinues or disposes of or sells any
line or lines of business or assets, in each case (i) in exchange for aggregate
consideration with a value of fifty million dollars ($50,000,000) or more or
(ii) with an aggregate value in excess of ten percent (10%) of the consolidated
assets of the Company and its Subsidiaries (but not less fifty million dollars
($50,000,000)) (determined based on fair value as determined by the Board of
Directors of the Company in good faith), or if the Company otherwise takes any
material action that could reasonably be expected to affect the amount, timing
or ability of the Company to pay the Earn-Out Payment, then in each case the
Company and HEI shall in good faith determine the pro forma effect of such
transaction on the results of operations of the Company and its Subsidiaries on
a consolidated basis, and negotiate in good faith mutually agreeable adjustments
in the calculation of the EBITDA Thresholds to reflect such pro forma economic
effect. Should the parties fail to agree on the pro forma effect of such
transaction, or on the resulting changes to the EBITDA Threshold, the parties
shall refer their disagreement to the CPA Firm, which shall determine the pro
forma effect of such transaction and the resulting adjustments to EBITDA
Threshold.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HEI AND HEA
Except as set forth in or contemplated by this Agreement, the Financial
Statements delivered to Merger Sub pursuant to Section 3.7 or the disclosure
schedule of HEI and HEA delivered to Merger Sub herewith (the "Company
Disclosure Schedule"), HEI and HEA hereby jointly and severally represent and
warrant to Merger Sub as follows:
Section 3.1 Corporate Existence and Authority. HEI is a corporation duly
incorporated and validly existing under the laws of the Republic of Korea; HEA
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of California; and the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California. Each of HEI, HEA and the Company has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. The Company has
full corporate power and authority to conduct its business as and to the extent
now conducted and to own, use and lease its assets and properties, and is duly
qualified, licensed or admitted to do business and is in good standing in those
jurisdictions in which the ownership, use or leasing of its assets and
properties or the conduct of its business makes such qualification, licensing,
or admission necessary, except
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<PAGE>
where the failure to be so qualified, licensed, admitted or in good standing
could not reasonably be expected to have a Material Adverse Effect on the
Company.
Section 3.2 Authorization; Binding Effect. The execution and delivery by
HEI, HEA and the Company of this Agreement and the Ancillary Agreements to which
HEI, HEA or the Company is a party, and the performance by HEI, HEA and the
Company of their respective obligations hereunder and thereunder, have been duly
and validly authorized by their respective Boards of Directors, no other
corporate action on their part or on the part of their respective shareholders
being necessary, except shareholder approval of the Merger by the shareholders
of the Company, which approval HEI and HEA agree they shall effect promptly
following the date hereof and shall not thereafter revoke or rescind. This
Agreement has been and the Ancillary Agreements have been (or prior to the
Closing will be) duly and validly executed and delivered by HEI, HEA and the
Company and, upon the execution and delivery thereof by the other parties
thereto, will constitute, their legal, valid and binding obligations enforceable
against them in accordance with the terms thereof.
Section 3.3 Capital Stock. The authorized capital stock of the Company
consists of eighty five million five hundred thousand (85,500,000) shares of
capital stock of which not more than forty million (40,000,000) shares may be
shares of common stock, no par value ("Company Common Stock") and not more than
forty five million five hundred thousand (45,500,000) shares may be shares of
preferred stock, no par value. As of the date of this Agreement, (i) thirty
three million three hundred thirty three thousand three hundred thirty three and
thirty-three hundredths (33,333,333.33) shares of Series A Preferred Stock, no
par value, of the Company ("Company Preferred Stock") were issued and
outstanding, all of which were validly issued, fully paid and nonassessable;
(ii) no shares of Company Common Stock were issued or outstanding; and (iii) two
million five hundred eight thousand nine hundred sixty (2,508,960) shares of
Company Common Stock were reserved for issuance under the Stock Plan, one
million four hundred forty thousand eight hundred seventy-six (1,440,876) shares
of which were subject to outstanding options and one million sixty-eight
thousand eighty-four (1,068,084) shares of which were available for future
grants. Immediately prior to the Closing (and prior to the consummation of the
Recapitalization Transactions), subject to HEA's right to convert its shares of
Company Preferred Stock into Company Common Stock, thirty three million three
hundred thirty three thousand three hundred thirty three and thirty-three
hundredths (33,333,333.33) shares of Company Preferred Stock will be issued and
outstanding, all of which will be owned by HEA. Except for this Agreement, and
Company Options outstanding pursuant to the Stock Plan, there are no outstanding
options or rights in favor of any person to purchase shares of any class or
series of capital stock from the Company. Set forth in Section 3.3 of the
Company Disclosure Schedule is a table showing the number of Company Options
outstanding as of the date of this Agreement, the number of Company Options held
by non-employee directors of the Company and the exercise price and vesting
schedule of all such Company Options.
Section 3.4 Subsidiaries. ChipPAC Korea is a corporation duly incorporated
and validly existing under the laws of the Republic of Korea. Each of ChipPAC
Shanghai I and ChipPAC Shanghai II is a company limited and a wholly foreign
owned entity duly formed and validly existing under the laws of the People's
Republic of China. ChipPAC Korea, ChipPAC
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<PAGE>
Shanghai I and ChipPAC Shanghai II each has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. The authorized capital stock of ChipPAC Korea
consists of eighty million (80,000,000) shares of ChipPAC Korea common stock,
of which forty million (40,000,000) shares are issued and outstanding, all of
which are fully paid and nonassessable. As of February 26, 1999, ChipPAC Korea
had paid-up capital of two hundred billion (200,000,000,000) Korean won and
between such date and the date of this Agreement there has been no material
change in the amount of such paid-up capital. All outstanding shares of capital
stock of ChipPAC Korea will be owned by HEI or ChipPAC BVI prior to the Closing
as part of the Recapitalization Transactions. The registered capital of ChipPAC
Shanghai I consisted as of the date of this Agreement of seventy three million
three hundred thousand dollars ($73,300,000). The authorized capital of ChipPAC
Shanghai II consisted as of the date of this Agreement of twelve million dollars
($12,000,000), of which one million eight hundred thousand dollars ($1,800,000)
in registered capital is legally required to be contributed, and will be
contributed, before March 31, 1999. The Company does not directly or indirectly
own any rights or interests in any other person or entity, other than ChipPAC
Korea and ChipPAC Shanghai. All of the equity interests of ChipPAC Shanghai I
and ChipPAC Shanghai II will be owned by HEI or a direct or indirect Subsidiary
of HEI prior to the Closing as part of the Recapitalization Transactions. There
are no outstanding options or rights in favor of any person to purchase shares
of any class or series of capital stock of ChipPAC Korea or ChipPAC Shanghai.
Section 3.5 Absence of Conflicts. The execution and delivery by HEI, HEA
and the Company of this Agreement and the Ancillary Agreements do not, and the
performance by HEI, HEA and the Company of their respective obligations under
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not, (a) conflict with or
result in a violation or breach of the articles of incorporation, by-laws or
other similar charter documents of HEI, HEA or the Company, ChipPAC Korea or
ChipPAC Shanghai; (b) subject to obtaining the consents, approvals and actions,
and making the filings and giving the notices described in Section 3.6 and
Section 4.4, conflict with or result in a violation or breach of any law or
Order applicable to (i) HEI, HEA, the Company, ChipPAC Korea or ChipPAC
Shanghai, or any of their respective assets and properties; (c) (i) conflict
with or result in a violation or breach of, (ii) constitute (with or without
notice or lapse of time or both) a default under, (iii) require HEI, HEA, the
Company, ChipPAC Korea or ChipPAC Shanghai to obtain any consent or approval of
any person as a result or under the terms of, (iv) result in or give to any
person any right of termination, cancellation, acceleration or modification in
or with respect to, or (v) result in the creation or imposition of any
Encumbrance upon the Company, ChipPAC Korea or ChipPAC Shanghai, or any of their
respective assets or properties under, any agreement to which HEI, HEA, the
Company, ChipPAC Korea or ChipPAC Shanghai is a party or by which any of their
respective assets or properties is bound, other than, in the case of clauses (b)
and (c), such conflicts, violations, breaches and other consequences within the
scope of clauses (b) and (c) which would occur solely as a result of the
identity or the legal or regulatory status of Merger Sub or any of its
Affiliates. Notwithstanding any provision in the Agreement or any schedule or
exhibit to the Agreement to the contrary, HEI's and HEA's obligations to
consummate the transactions contemplated by the Agreement shall not be
conditioned upon the waiver or amendment of any instrument governing any
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<PAGE>
Indebtedness for Borrowed Money or any Encumbrance granted in connection
therewith. In furtherance of the foregoing, on or prior to the Closing Date. HEI
and HEA hereby covenant and agree to obtain the release of any Encumbrance
(other than Permitted Encumbrances) on any of the assets of the Company, ChipPAC
Korea or ChipPAC Shanghai, including any such item listed in the Company
Disclosure Schedule.
Section 3.6 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of HEI, HEA, the Company, ChipPAC Korea or ChipPAC Shanghai is required
in connection with the execution, delivery and performance of this Agreement or
any of the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby, except (i) the filing of a Notification and
Report Form pursuant to the HSR Act and the expiration or early termination of
the waiting period thereunder; (ii) approvals by government of the Republic of
Korea, including approval of the Ministry of Finance and Economy of the Republic
of Korea (the "MOFE") under the Korean Foreign Investment and Foreign Capital
Inducement Law (the "FIFCIL"); (iii) required filing of an overseas investment
report pursuant to the Korean Foreign Exchange Management Regulation ("FEMR");
(iv) approvals by the local Foreign Investment Commission of the municipal
government of Shanghai and/or, if required, the Ministry of Foreign Trade of
Economic Cooperation of the People's Republic of China ("MOFTEC"); (v) any
required filings under applicable antitrust and similar laws of any country
(other than the United States) or supranational authority and the expiration or
termination of waiting periods thereunder; (vi) the filing of the Delaware
Certificate of Merger with the Secretary of State of the State of Delaware and
the California Agreement of Merger and the Officers' Certificates with the
Secretary of State of the State of California, and (vii) where required solely
as a result of the identity or the legal or regulatory status of Merger Sub or
any of its Affiliates.
Section 3.7 Financial Statements and Condition.
-----------------------------------
(a) HEI and HEA have delivered to Merger Sub the audited pro forma
combined balance sheets of the Company, ChipPAC Korea and ChipPAC Shanghai I as
of June 30, 1998 (the "Financial Statement Date"), and December 31, 1997 and
1996 and the unaudited pro forma combined balance sheet as of September 30,
1998, as if the Company, ChipPAC Korea and ChipPAC Shanghai I had existed on a
combined basis as of such dates and the related audited pro forma combined
statements of operations, stockholders' equity and cash flows for the six months
ended on the Financial Statement Date and the years ended December 31, 1997,
1996 and 1995 and unaudited pro forma combined statement of operations,
stockholders' equity and cash flows for the nine months ended September 30,
1998, together with a true and correct copy of the report on such financial
statements by PriceWaterhouseCoopers (the June 30, 1998 pro forma combined
balance sheet hereinafter referred to as the "Balance Sheet" and all of the
aforementioned financial statements are collectively referred to herein as the
"Financial Statements"). Except as set forth in the notes thereto, all such pro
forma combined financial statements were prepared in accordance with GAAP and
fairly present in all material respects the combined financial condition and
results of operations of the Company, ChipPAC Korea and ChipPAC Shanghai I as of
the respective dates thereof and for the respective periods covered thereby,
subject, in the case of the unaudited
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financial statements, to normal year-end adjustments and the absence of notes.
Schedule 2.2(g)(ii), Schedule 2.2(g)(iii), Schedule 2.2(g)(iv) and Schedule
2.2(g)(vi) reflect the Company's best estimates of the Indebtedness of the
Company, ChipPAC Korea and ChipPAC Shanghai as of the dates set forth therein.
(b) Since the Financial Statement Date there has been no Material
Adverse Effect on the Company and no event has occurred which could reasonably
be expected to result in a Material Adverse Effect on the Company.
(c) Except as set forth on the Balance Sheet, the Company, ChipPAC
Korea and ChipPAC Shanghai are not subject to any Liability other than trade
payables and accrued expenses incurred in the ordinary course of business of the
Company, ChipPAC Korea and ChipPAC Shanghai.
(d) Since the Financial Statement Date, neither the Company, ChipPAC
Korea nor ChipPAC Shanghai has taken any action described in clause (a) through
(n), inclusive, of Section 5.5 of this Agreement.
Section 3.8 Taxes. The Company, ChipPAC Korea and ChipPAC Shanghai have
filed or caused to be filed all Tax Returns required to be filed in all
jurisdictions under applicable law and all such Tax Returns are complete and
correct in all material respects. The Company, ChipPAC Korea and ChipPAC
Shanghai have, within the time and in the manner prescribed by law, paid
directly or indirectly (and until the Closing will pay directly or indirectly
within the time and in the manner prescribed by law) all Taxes that are due and
payable. No examination of any Tax Return of the Company, ChipPAC Korea or
ChipPAC Shanghai is underway of which notice has been provided to HEI, HEA, the
Company, ChipPAC Korea or ChipPAC Shanghai. There are no outstanding (a) powers
of attorney granted by the Company, ChipPAC Korea or ChipPAC Shanghai concerning
any Tax matter, (b) agreements or waivers extending the statutory period of
limitation applicable to any Tax Return or Taxes of the Company, ChipPAC Korea
or ChipPAC Shanghai, or (c) agreements entered into with any taxing authority
that would have a continuing effect on the Company, ChipPAC Korea and ChipPAC
Shanghai taken together as a whole after the Closing Date. The Company, ChipPAC
Korea and ChipPAC Shanghai have no liability for the Taxes of any other person
other than the Company, ChipPAC Korea and ChipPAC Shanghai under Treasury
Regulation Section 1.1502-6 (or any similar provision of national, state,
provincial, local or other law of any country).
Section 3.9 Legal Proceedings. There are no Orders outstanding and no
Actions or Proceedings pending or, to the Knowledge of HEI and HEA, threatened
(i) against the Company, ChipPAC Korea or ChipPAC Shanghai or any of their
respective assets and properties, or (ii) against, relating to or affecting HEI,
HEA or the Company or ChipPAC Korea or ChipPAC Shanghai, or any of their
respective assets and properties, which could reasonably be expected to delay or
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements, or otherwise
to impair the ability of HEI, HEA or the Company to perform its respective
obligations under this Agreement and the Ancillary Agreements and to
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<PAGE>
consummate the transactions contemplated hereby and thereby or otherwise to
impair the ability of the Company, ChipPAC Korea or ChipPAC Shanghai to conduct
their business after the Closing.
Section 3.10 Compliance With Laws and Orders. Neither the Company, ChipPAC
Korea nor ChipPAC Shanghai has been or is in violation of or in default under
any law applicable to the Company, ChipPAC Korea or ChipPAC Shanghai, or any of
their respective assets and properties (i) in any material respect or (ii) in
any respect that restricts the operation of the business of the Company or its
Subsidiaries.
Section 3.11 Benefit Plans; ERISA.
(a) Set forth in Section 3.11 of the Company Disclosure Schedule is a
list of all Benefit Plans of the Company, ChipPAC Korea and ChipPAC Shanghai or
pursuant to which any employee of the Company, ChipPAC Korea and ChipPAC
Shanghai is entitled to benefits. Each Benefit Plan which is listed in Section
3.11 of the Company Disclosure Schedule is in compliance in all material
respects with all applicable laws, including, if applicable, provisions of
ERISA, the Code and all other U.S. federal and U.S. state laws and all local
laws applicable in the jurisdiction in which the Benefit Plan is maintained.
There are no proceedings, claims (other than for benefits payable in the normal
course of business) or suits pending or, to the Knowledge of HEI or HEA,
threatened by any Governmental or Regulatory Authority or any participant or
beneficiary against any of the Benefit Plans, the assets of any of the trusts
under any of the Benefit Plans or the plan sponsor or any fiduciary of any of
the Benefit Plans. All contributions required to be made with respect to the
Benefit Plans relating to any employee of the Company, ChipPAC Korea and ChipPAC
Shanghai have been made (or have been accrued for in the Balance Sheet or will
be accrued for in the Closing Balance Sheet). None of the Company, ChipPAC Korea
or ChipPAC Shanghai (i) has any obligation to pay any separation, severance,
termination or similar benefit as a result of the execution and delivery of this
Agreement or the consummation of the Recapitalization Transactions (other than
the obligations set forth in the management incentive plan and agreements
described in Section 2.3(a)(iv)); (ii) maintains, participates in or contributes
to any employee pension benefit plan within the meaning of Section 3(2) of ERISA
which is subject to Title IV of ERISA or Section 412 of the Code or any similar
plan providing for the payment of pension or post-retirement benefits under the
laws of the Republic of Korea or the People's Republic of China (other than the
ChipPAC Korea "severance indemnity plan" and the ChipPAC Shanghai "pension plan"
described in Section 3.11 of the Company Disclosure Schedule); or (iii) as of
the Closing Date, will have any unfunded obligations under any Benefit Plan
providing for pension or post-retirement benefits or similar payments (other
than obligations that will be reflected in accruals in the Closing Balance Sheet
with respect to the ChipPAC Korea "severance indemnity plan" and the ChipPAC
Shanghai "pension plan").
(b) There are no (i) unfair labor practice charges pending against any
of the Company, ChipPAC Korea or ChipPAC Shanghai or (ii) pending or, to the
best of HEI's and HEA's Knowledge, threatened strikes or arbitration proceedings
involving labor matters affecting the Company, ChipPAC Korea or ChipPAC
Shanghai. Neither the Company,
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ChipPAC Korea nor ChipPAC Shanghai has experienced any strikes, work stoppage or
other significant labor difficulties of any nature.
Section 3.12. Real Property.
(a) Section 3.12(a) of the Company Disclosure Schedule contains a list
of each parcel of real property leased or subleased by the Company, ChipPAC
Korea or ChipPAC Shanghai (as lessor or lessee). Neither the Company, ChipPAC
Korea nor ChipPAC Shanghai owns any real property.
(b) The Company, ChipPAC Korea and ChipPAC Shanghai have or will have
at Closing valid and subsisting leasehold or subleasehold estates in the
respective real properties leased by them as lessee or sublessee under leases or
subleases referred to in paragraph (a) of this Section 3.12. Each such lease or
sublease is a legal, valid and binding agreement, enforceable in accordance with
its terms.
Section 3.13 Tangible Personal Property. The Company, ChipPAC Korea and
ChipPAC Shanghai are or at the Closing will be in possession of, and have or at
the Closing will have marketable title to, valid leasehold interests in or valid
and enforceable rights to use, all tangible personal property which is used in
and material to their business, subject to any Permitted Encumbrance.
Section 3.14 Intellectual Property Rights.
(a) Section 3.14 of the Company Disclosure Schedule contains a list of
(i) all patented and registered Intellectual Property and all patent
applications and applications for registration of Intellectual Property, in each
case owned by the Company, ChipPAC Korea or ChipPAC Shanghai; (ii) Intellectual
Property licenses to which the Company, ChipPAC Korea or ChipPAC Shanghai is a
party; (iii) Intellectual Property subject to the HEI License Agreement; and
(iv) all material unregistered trademarks, service marks, copyrights and trade
names used by the Company, ChipPAC Korea or ChipPAC Shanghai, or subject to the
HEI License Agreement. At the Closing, giving effect to the Ancillary
Agreements, the Company, ChipPAC Korea and ChipPAC Shanghai will have all
requisite right, title and interest in or valid and enforceable rights under
Contract to use all Intellectual Property necessary to the conduct of their
business as presently conducted (the "IP Rights") and after the Closing such IP
Rights will be available for use by the Company, ChipPAC Korea, ChipPAC Shanghai
or ChipPAC BVI as provided in the HEI License Agreement and the licenses listed
in Section 3.14 of the Company Disclosure Schedule. None of HEI, HEA, the
Company, ChipPAC Korea, or ChipPAC Shanghai has received notice that the
Company, ChipPAC Korea or ChipPAC Shanghai is infringing or misappropriating any
Intellectual Property of any other person. None of the Company, ChipPAC Korea,
or ChipPAC Shanghai is infringing or misappropriating any Intellectual Property
of any other person, and no claim against the Company, ChipPAC Korea, or ChipPAC
Shanghai is pending or has been threatened asserting any such infringement or
contesting the validity, enforceability, use or ownership of any IP Rights. No
"right to use" study or similar investigation with respect to the Intellectual
Property of any third party has been conducted by HEI, HEA, the Company,
ChipPAC Korea, or ChipPAC Shanghai. To the Knowledge of HEI
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and HEA, no Third Party is infringing or misappropriating the IP Rights. HEI and
HEA make no representation or warranty with respect to (i) any post-Closing use
of the IP Rights different from the use of such IP Rights by HEI, HEA, the
Company, ChipPAC Korea and ChipPAC Shanghai prior to the Closing; (ii) any use
of the IP Rights to manufacture or assemble products other than those of the
type manufactured or assembled by HEI, HEA, the Company, ChipPAC Korea and
ChipPAC Shanghai prior to the Closing; or (iii) the use by the Company after the
Closing of Intellectual Property other than the IP Rights used by HEI, HEA, the
Company, ChipPAC Korea and ChipPAC Shanghai prior to the Closing.
(b) All computer systems used in (or to be used in, pursuant to the
Information System Management Service Agreement) the business of the Company,
ChipPAC Korea and ChipPAC Shanghai recognize and shall recognize the advent of
the year 2000 and can correctly recognize and manipulate date information
relating to dates before, on or after January 1, 2000 and the operation and
functionality of such computer systems will not be adversely affected by the
advent of the year 2000 or any manipulations of data featuring date information
relating to dates before, on or after January 1, 2000.
Section 3.15 Contracts.
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(a) Section 3.15(a) of the Company Disclosure Schedule contains a list
of each of the following Contracts (other than this Agreement and the Ancillary
Agreements and Contracts no longer in force or effect) to which the Company,
ChipPAC Korea or ChipPAC Shanghai is a party or by which any of their respective
assets and properties is bound, as of the date hereof:
(i) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consulting services for a specified term and
payments at any one time or in any one year in excess of two hundred thousand
dollars ($200,000), and all labor union contracts;
(ii) all Contracts with any person containing any provision or
covenant prohibiting or materially limiting the ability of the Company, ChipPAC
Korea or ChipPAC Shanghai to engage in any business activity or compete with any
person or prohibiting or materially limiting the ability of any person to
compete with the Company, ChipPAC Korea or ChipPAC Shanghai;
(iii) all partnership or joint venture agreements and all
Contracts relating to Intellectual Property (other than licenses of software
readily available and having a total license fee of less than fifty thousand
dollars ($50,000));
(iv) all Contracts governing Indebtedness of the Company, ChipPAC
Korea or ChipPAC Shanghai;
(v) all Contracts providing for (A) the future disposition or
acquisition of any assets or properties other than dispositions or acquisitions
in the ordinary course of business, and (B) any merger or other business
combination;
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(vi) all Contracts between or among the Company, ChipPAC Korea or
ChipPAC Shanghai, on the one hand, and HEI, HEA, or any of their other
respective Affiliates, or any other entity in which HEI or HEA has any direct or
indirect interest, on the other hand, and that by their terms call for the
payment by the Company, ChipPAC Korea or ChipPAC Shanghai of more than five
hundred thousand dollars ($500,000) in the future in any one year;
(vii) all Contracts (other than this Agreement) that (A) limit or
contain restrictions on the ability of the Company, ChipPAC Korea or ChipPAC
Shanghai to declare or pay dividends on, to make any other distribution in
respect of or to issue or purchase, redeem or otherwise acquire its capital
stock, to incur Indebtedness, to incur or suffer to exist any Encumbrance, to
purchase or sell any assets and properties, to change the lines of business in
which it participates or engages or to engage in any merger or other business
combination or (B) require the Company, ChipPAC Korea or ChipPAC Shanghai to
maintain specified financial ratios or levels of net worth or other indicia of
financial condition;
(viii) all other Contracts that (A) by their terms call for the
payment by or to the Company, ChipPAC Korea or ChipPAC Shanghai of more than
five hundred thousand dollars ($500,000) in the future in any one year and (B)
cannot be terminated within ninety (90) days after giving notice of termination
without resulting in any material cost or penalty to the Company, ChipPAC Korea
or ChipPAC Shanghai in excess of one hundred thousand dollars ($100,000); and
(ix) all Contracts between the Company, ChipPAC Korea or ChipPAC
Shanghai, on the one hand, and Intel Corp., on the other hand.
(b) Each Contract required to be disclosed in Section 3.15(a) of the
Company Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, of each
other party thereto; neither the Company, ChipPAC Korea or ChipPAC Shanghai nor,
to the Knowledge of HEI and HEA, any other party to such Contract is in
violation of or default under any material provision of any such Contract (or
with notice or lapse of time or both, would be in violation of or default under
any material provision of any such Contract).
Section 3.16 Permits. The Company, ChipPAC Korea and ChipPAC Shanghai have
all Permits required for the conduct of their business as presently conducted.
Each such Permit valid, binding and in full force and effect; and to the
Knowledge of HEI and HEA the Company, ChipPAC Korea and ChipPAC Shanghai are not
in default (or with the giving of notice or lapse of time or both, would be in
default) under any such Permit in any material respect. ChipPAC Korea's
manufacturing facility and ChipPAC Shanghai's manufacturing facility hold the QS
and ISO certifications set forth in Section 3.16 of the Company Disclosure
Schedule.
Section 3.17 Affiliate Transactions. Except as reflected in the Financial
Statements and except for the Ancillary Agreements, there is no Indebtedness
between the Company, ChipPAC Korea or ChipPAC Shanghai, on the one hand, and
HEI, HEA or any of their other Affiliates, on the other hand.
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Section 3.18 Environmental Matters.
---------------------
(a) No written notification of a Release of a Hazardous Material has
been filed by or on behalf of the Company, ChipPAC Korea or ChipPAC Shanghai,
and no site or facility, or related offsite disposal site, is listed or is
proposed for listing on the NPL, CERCLIS or any similar list of sites requiring
investigation or clean-up under the laws of any other country.
(b) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or that are in the possession HEI
or HEA, or the Company, ChipPAC Korea or ChipPAC Shanghai, in relation to any
site or facility now or previously owned, operated or leased by the Company,
ChipPAC Korea or ChipPAC Shanghai which have not been made available to Merger
Sub prior to the execution of this Agreement.
(c) Neither the Company nor any of its Subsidiaries has treated,
stored, disposed of, handled or released any Hazardous Material or owned or
operated any property or facility (and no such property or facility is
contaminated by any Hazardous Material) in any manner that has given or would
give rise to any liabilities or remedial obligations pursuant to any
Environmental Law.
Section 3.19 Accounts Receivable; Inventory. The accounts receivable shown
in the Balance Sheet arose in the ordinary course of business; subject to any
allowances set forth in the Balance Sheet, were not, as of the Financial
Statement Date, subject to any material discount, contingency, claim of offset
or recoupment or counterclaim; and represented, as of the Financial Statement
Date, bona fide claims against debtors for sales, leases, licenses and other
charges. All accounts receivable of the Company, ChipPAC Korea and ChipPAC
Shanghai arising after the Financial Statement Date through the date of this
Agreement arose in the ordinary course of business consistent with past credit
extension and other practices and, as of the date of this Agreement, are not
subject to any discount, contingency, claim of offset or recoupment or
counterclaim, except for normal allowances consistent with past practice. The
amount carried for doubtful accounts and allowances disclosed in the Balance
Sheet is sufficient to provide for any material Losses which may be sustained on
realization of the accounts receivable shown in the Balance Sheet. The
inventories shown on the Balance Sheet consisted in all material respects of
items of a quantity and quality usable or salable in the ordinary course of
business. All such inventories are valued on the Balance Sheet in accordance
with GAAP and allowances have been established on the Balance Sheet, in each
case in an amount which is adequate for slow-moving, obsolete or unusable
inventories.
Section 3.20 Insurance. HEI and HEA have made available or caused to be
made available to Merger Sub copies of each insurance policy (including policies
providing property, casualty, liability, and worker's compensation coverage and
bond and surety arrangements, but excluding policies no longer in force) with
respect to which the Company, ChipPAC Korea or ChipPAC Shanghai is a party, or
named insured, or otherwise the beneficiary of coverage as of the date of this
Agreement.
Section 3.21 No Brokers. Except for Merrill Lynch & Co., whose fees,
commissions and expenses are the sole responsibility of HEI and HEA, all
negotiations relative to this
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Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby have been carried out by HEI and HEA directly with Merger Sub
without the intervention of any person on behalf of HEI or HEA in such a manner
as to give rise to any valid claim by any person against Merger Sub, or against
the Company, ChipPAC Korea or ChipPAC Shanghai, for a finder's fee, brokerage
commission or similar payment.
Section 3.22 No Other Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent, understanding
and agreement of each party hereto that neither HEI nor HEA is making any
representation or warranty whatsoever, express or implied, except those
representations and warranties contained in this Article III and in any
certificate delivered pursuant to Section 8.2(g). In particular, neither HEI nor
HEA makes any representation or warranty to Merger Sub with respect to (a) the
information set forth in the Confidential Descriptive Memorandum relating to the
Company, ChipPAC Korea and/or ChipPAC Shanghai or made available to Merger Sub
or any of its Representatives in connection with Merger Sub's consideration of
the transactions contemplated by this Agreement, and (b) any financial
projection or forecast furnished to Merger Sub by, or otherwise relating to, the
Company, ChipPAC Korea and/or ChipPAC Shanghai, other than the fact that such
projections and forecasts were prepared in good faith and based upon assumptions
believed to be reasonable. With respect to all such projections and forecasts,
Merger Sub hereby acknowledges and agrees that (i) there are uncertainties
inherent in attempting to make such projections and forecasts, (ii) Merger Sub
is aware of such uncertainties, (iii) Merger Sub is taking full responsibility
for making its own evaluation of the adequacy and accuracy of all such
projections and forecasts, including projections and forecasts relating to the
businesses and operations of the Company, ChipPAC Korea and ChipPAC Shanghai
that were previously conducted by HEI, HEA or other Affiliates of HEI or HEA,
and (iv) Merger Sub shall have no claim against HEI, HEA or any of their
respective Representatives or Affiliates with respect to such projections or
forecasts.
Section 3.23 Assets. All of the Company's, ChipPAC Korea's and ChipPAC
Shanghai's buildings, improvements, machinery, equipment and other tangible
personal property and assets are in good condition and repair in all material
respects, ordinary wear and tear excepted, and are usable in the ordinary course
of business and, as of the Closing, giving effect to the Chinese Debt Payoff,
the Korean Debt Payoff, the US Debt Payoff and the other repayments and
cancellations of Indebtedness and payments of payables to occur as part of the
Recapitalization Transactions, all of the assets of each of the Company, ChipPAC
Korea and ChipPAC Shanghai will be free and clear of all Encumbrances other than
Permitted Encumbrances. The assets of the Company, ChipPAC Korea and ChipPAC
Shanghai (together with the services to be made available to the Company,
ChipPAC Korea and ChipPAC Shanghai pursuant to the Ancillary Agreements) include
all assets (including all Intellectual Property) necessary to the conduct of the
business of the Company, ChipPAC Korea and ChipPAC Shanghai as presently
conducted.
Section 3.24 Product Warran1y. No products heretofore sold by the Company,
ChipPAC Korea or ChipPAC Shanghai are now subject to any guarantee or warranty
other than the Company's standard terms and conditions of sale, a copy of which
has previously been made available to Merger Sub. The amount carried in the
Balance Sheet is sufficient to provide for
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replacement of any product designed, manufactured, merchandised, serviced.
distributed or sold by the Company, ChipPAC Korea, or ChipPAC Shanghai, or other
damages in connection with such sales" or deliveries at any time prior to the
Closing Date.
Section 3.25 Customers. None of HEI, HEA, the Company, ChipPAC Korea or
ChipPAC Shanghai has received any notice prior to the date of this Agreement
that any of the top twenty (20) customers set forth in Section 3.25 of the
Company Disclosure Schedule (which lists the top twenty (20) customers of the
Company, ChipPAC Korea and ChipPAC Shanghai for calendar year 1997 and calendar
year 1998) intends to terminate or materially reduce its business with the
Company, ChipPAC Korea or ChipPAC Shanghai, and no such material customer has
terminated or materially reduced its business with the Company, ChipPAC Korea or
ChipPAC Shanghai in the twelve (12) months immediately preceding the date of
this Agreement (it being understood and agreed that nothing herein shall be
construed as a guarantee of any future level of business by any such customer
with the Company, ChipPAC Korea or ChipPAC Shanghai, and no claim for
indemnification shall be made and no indemnification shall be available, under
Article X or otherwise, for breach or alleged breach of the representation and
warranty in this Section 3.25 (except for failure to disclose any such notices
received as required by the first sentence of this Section 3.25).
Section 3.26 Interim Operations of ChipPAC BVI, ChipPAC BVI II, ChipPAC
Barbados, ChipPAC Hungary and ChipPAC Luxembourg. Since their acquisition by HEI
or the Company, each of ChipPAC BVI, ChipPAC BVI II, ChipPAC Barbados, ChipPAC
Hungary and ChipPAC Luxembourg has engaged in no other business activities and
has incurred no Liabilities (except as contemplated by this Agreement), and has
conducted its respective operations only in furtherance of the transactions
contemplated by this Agreement.
Section 3.27 Transition Services. The level and category of services to be
provided to the Company, ChipPAC Korea, ChipPAC Shanghai and ChipPAC BVI
pursuant to the Ancillary Agreements, together with the separate assets and
operations of the Company, ChipPAC Korea and ChipPAC Shanghai and ChipPAC BVI,
are sufficient to operate the business of the Company, ChipPAC Korea and ChipPAC
Shanghai as currently conducted in all material respects (taken as whole).
Section 3.28 Closing Date. The representations and warranties of HEI and
HEA contained in this Article III shall be true and correct on the date of the
Closing as though then made, other than (i) representations and warranties made
as of a specified date earlier than the Closing Date, which shall be true and
correct as of such earlier date, or (ii) as HEI and HEA have otherwise advised
Merger Sub in writing prior to the Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Except as set forth in this Agreement or the disclosure schedule of Merger
Sub delivered to HEI and HEA herewith (the "Merger Sub Disclosure Schedule"),
Merger Sub hereby represents and warrants to HEI and HEA as follows:
Section 4.1 Corporate Existence and Authority. Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. Merger Sub has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
Section 4.2 Authorization, Binding Effect. The execution and delivery by
Merger Sub of this Agreement and the Ancillary Agreements to which it is a
party, and the performance by Merger Sub of its obligations hereunder and
thereunder, have been duly and validly authorized by the Board of Directors of
Merger Sub, no other corporate action on the part of Merger Sub or any of its
stockholders being necessary (including stockholder approval of the Merger,
which is not required pursuant to Section 251(f) of the DGCL). This Agreement
has been duly and validly executed by Merger Sub, and contemporaneously with the
Closing, Merger Sub shall cause its shareholders to duly and validly execute the
Shareholders Agreement, and upon the execution and delivery by the other parties
thereto, will constitute legal, valid and binding obligations of Merger Sub and,
in the case of the Shareholders Agreement, its shareholders, enforceable against
Merger Sub and its shareholders, respectively, in accordance with their terms.
Section 4.3 Absence of Conflicts. The execution and delivery by Merger Sub
of this Agreement does not, and the execution and delivery by Merger Sub of the
Ancillary Agreements to which it is a party, the performance by Merger Sub of
its obligations under this Agreement and such Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not: (a)
conflict with or result in a violation or breach of the certificate of
incorporation or bylaws of Merger Sub; (b) conflict with or result in a
violation or breach of any law or Order applicable to Merger Sub or any of its
assets or properties; or (c)(i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require Merger Sub to obtain any consent or approval of any
person as a result or under the terms of, or (iv) result in or give to any
person any right of termination, cancellation, acceleration or modification with
respect to, or (v) result in the creation or imposition of any Encumbrance upon
Merger Sub or any of its assets or properties under, any Contract or license to
which Merger Sub is a party or by which any of its assets and properties is
bound.
Section 4.4 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Merger Sub or any of its stockholders is required in connection with
the execution, delivery and performance of this Agreement or the Ancillary
Agreements to which any of them is a party or the
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consummation of the transactions contemplated hereby or thereby, except (i) the
filing of a Notification and Report Form pursuant to the HSR Act and the
expiration or early termination of the waiting periods thereunder, (ii) any
required filings under any applicable antitrust or similar laws of any country
(other than the United States) or supranational authority and the expiration or
termination of waiting periods thereunder, or (iii) approvals by the government
of the Republic of Korea, including approval of MOFE under FIFCIL; (iv) required
filing of an overseas investment report pursuant to FEMR; (v) approvals by the
local Foreign Investment Commission of the municipal government of Shanghai
and/or, if required, MOFTEC; (vi) the filing of the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware and the California
Agreement of Merger and the Officers' Certificates with the Secretary of State
of the State of California; or (vii) where the failure to obtain any such
consent, approval or action, to make any such filing or to give any such notice
could not reasonably be expected to have a Material Adverse Effect on the
Company after the Closing or to delay or have a material adverse effect on the
ability of Merger Sub to consummate the transactions contemplated by this
Agreement or any of the Ancillary Agreements or to perform any of their
respective obligations hereunder or thereunder or where required solely as a
result of the identity or the legal or regulatory status of HEI or any of its
Affiliates.
Section 4.5 Legal Proceedings. There are no Orders outstanding and no
Actions or Proceedings pending or, to the Knowledge of Merger Sub, threatened
against, relating to or affecting Merger Sub or any of its stockholders or any
of their respective assets and properties which could reasonably be expected to
have a Material Adverse Effect on Merger Sub (or on the Company after the
Closing), to delay or to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements, or otherwise to impair the ability of Merger Sub or its stockholders
to perform their respective obligations under this Agreement and the Ancillary
Agreements and to consummate the transactions contemplated hereby and thereby.
Section 4.6 Purchase for Investment. The New Shares will be acquired by
the stockholders of Merger Sub for their own account for the purpose of
investment. The stockholders of Merger Sub shall refrain from transferring or
otherwise disposing of any of the New Shares, or any interest therein, and the
stockholders of Merger Sub shall refrain from transferring or otherwise
disposing of their interests in Merger Sub or the Company in such manner as to
cause HEI, HEA or the Company, or any of their directors or officers, to be in
violation of the registration requirements of the Securities Act of 1933, as
amended, or applicable U.S. state securities or blue sky laws or applicable
securities laws of any other country. Subject to the foregoing limitations, the
right to dispose of the New Shares shall otherwise be within the sole discretion
of the stockholders of Merger Sub.
Section 4.7 Financing. Merger Sub has previously delivered to HEI copies
of the equity commitment, debt commitment and highly confident letters (copies
of which are annexed as Annexes XII, XIII and XIV hereto) pursuant to which
Merger Sub intends to obtain the funds necessary to deliver the Cash
Consideration due and payable at Closing and to make all other necessary
payments of fees and expenses due and payable at Closing (including the fees,
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commissions and expenses of any investment bank or financial adviser to Merger
Sub) in connection with the transactions contemplated by this Agreement and the
Ancillary Agreements. Bain Capital, Inc. and MSX Holdings LLC have entered into
a commitment with Merger Sub (and Citicorp Venture Capital Ltd. has entered into
a commitment letter with MSX Holdings LLC, to which each of HEI and HEA is a
third party beneficiary of each such letter, to make an equity investment in
Merger Sub, on the terms and conditions and in the form set forth in Annex XII
attached hereto.
Section 4.8 No Brokers. Subject to Section 12.3 hereof, all negotiations
relative to this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby have been carried out by Merger Sub directly
with HEI and HEA without the intervention of any person on behalf of Merger Sub
in such a manner as to give rise to any valid claim by any person against the
Company, ChipPAC Korea, ChipPAC Shanghai, HEI, HEA or any of their respective
Subsidiaries for a finder's fee, brokerage commission or similar payment.
Section 4.9 Investment Company Status. Merger Sub is not, and will not
become as a result of the transactions contemplated by this Agreement,
registered or regulated as an investment company pursuant to the U.S. Investment
Company Act of 1940, as amended.
Section 4.10 Interim Operations of Merger Sub and Certain Other Entities.
Merger Sub was formed solely for the purpose of engaging in the Merger, has
engaged in no other business activities, has incurred no Liabilities (except as
contemplated by this Agreement), and has conducted its operations only in
furtherance of the transactions contemplated by this Agreement. Each of ChipPAC
BVI, ChipPAC BVI II, ChipPAC Barbados, ChipPAC Luxembourg and ChipPAC Hungary
has been or will be formed solely for the purpose of engaging in the
Recapitalization Transactions, and until their acquisition by HEI or the Company
have engaged in no other business activities and has incurred no Liabilities
(except as contemplated by this Agreement), and has conducted its respective
operations only in furtherance of the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF HEI AND HEA
HEI and HEA covenant and agree with Merger Sub that, at all times from and
after the date hereof until the Closing, HEI and HEA shall comply with all
covenants and provisions of this Article V, except to the extent Merger Sub may
otherwise consent in writing.
Section 5.1 Regulatory and Other Approvals. Subject to the responsibility
and management of Merger Sub contemplated by Section 2.2(h), HEI and HEA shall,
and shall cause the Company and each of its Subsidiaries to, (a) take
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith, to obtain, as promptly as practicable, all consents, approvals or
actions of, to make all filings with and to give all notices to Governmental or
Regulatory Authorities or any other person (including under the HSR Act)
required of HEI and HEA, the Company, ChipPAC Korea, ChipPAC Shanghai or any of
their respective
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Subsidiaries to consummate the transactions contemplated by this Agreement and
by the Ancillary Agreements, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other persons
as such Governmental or Regulatory Authorities or other persons may reasonably
request in connection therewith, (c) provide reasonable cooperation and support
to Merger Sub in obtaining all consents, approvals or actions of, making all
filings with and giving all notices to Governmental or Regulatory Authorities or
other persons required of Merger Sub to consummate the transactions
contemplated by this Agreement and by the Ancillary Agreements, and (d) provide,
and cause their respective officers, employees and advisors to provide,
reasonable cooperation in connection with arranging any financing to be
consummated contemporaneously or substantially contemporaneously with the
Closing and as contemplated by the Recapitalization Transactions. HEI and HEA
shall provide prompt notification to Merger Sub when any such consents,
approvals, actions, filings or notices referred to in clause (a) of this Section
5.1 are obtained, taken, made or given, as applicable, and shall advise Merger
Sub of any communications (and, unless precluded by law, provide copies of any
such communications that are in writing) with any Governmental or Regulatory
Authority or other person regarding any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements. HEI and HEA shall proceed
diligently and in good faith to obtain all consents required by Section 8.2(d)
to be delivered at the Closing and shall use commercially reasonable efforts to
obtain other consents (not identified in Section 8.2(d)) that may be reasonably
requested by Merger Sub in connection with the transactions contemplated by this
Agreement or by any of the Ancillary Agreements. Nothing in this Section 5.1,
Section 5.7 or any other provision of this Agreement shall require HEI, HEA or
the Company to make any extraordinary payment, or to agree to any extraordinary
terms, as a condition to receiving the Third Party consents, approvals, waivers
and other action contemplated by Section 2.2(c)(iii).
Section 5.2 Investigation by Merger Sub. HEI and HEA shall, and shall
cause the Company and its Subsidiaries to, (a) provide Merger Sub and the
officers, employees, counsel, accountants, financial advisors, consultants,
investors, financing sources and other representatives (together,
"Representatives") of Merger Sub with access, upon reasonable prior notice and
during normal business hours, to all officers, employees, agents and accountants
(including independent accountants) of the Company, ChipPAC Korea and ChipPAC
Shanghai and their respective assets, properties, books and records, but only to
the extent that such access does not unreasonably interfere with the business
and operations of the Company, ChipPAC Korea and ChipPAC Shanghai, and (b) make
available to Merger Sub and its Representatives all such information and data
concerning the business and operations of the Company, ChipPAC Korea and ChipPAC
Shanghai as Merger Sub or any of its Representatives reasonably may request in
connection with such investigation, except to the extent that furnishing any
such information or data would violate any law, Order, Contract or Permit
applicable to HEI, HEA, the Company, ChipPAC Korea or ChipPAC Shanghai or by
which any of their respective assets or properties is bound.
Section 5.3 Financial Statements and Reports. As promptly as practicable
and in any event no later than forty-five (45) days after the end of each fiscal
quarter ending after the date hereof and before the Closing Date (other than the
fourth quarter) or ninety (90) days after the end of the year ending December
31, 1998, as the case may be, HEI and HEA shall (or shall
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cause the Company to) deliver to Merger Sub copies of (in the case of any such
fiscal year) the audited and (in the case of any such fiscal quarter) the
unaudited consolidated balance sheet, and the related audited or unaudited pro
forma or actual (as the case may be) consolidated statements of operations,
stockholders' equity and cash flows, of the Company, ChipPAC Korea and ChipPAC
Shanghai, in each case as of and for the fiscal year then ended or as of and for
each such fiscal quarter and the portion of the fiscal year then ended, as the
case may be, together with the notes, if any, relating thereto, which financial
statements (subject, in the case of the quarterly financial statements, to
normal year-end adjustments and except for the omission of notes) shall be
prepared in accordance with GAAP and shall fairly present in all material
respects the financial condition and results of operations of the Company,
ChipPAC Korea and ChipPAC Shanghai as of their respective dates thereof and for
the respective periods covered thereby, and which shall be in a form meeting the
requirements of Regulation S-X and shall be accompanied by the consent of HEI's
and the Company's independent accountants to the use of their reports thereon
and such accountants' unqualified opinion thereon.
Section 5.4 Conduct of Business. Except as set forth in or contemplated by
this Agreement or any of the Ancillary Agreements, HEI and HEA shall cause the
Company, ChipPAC Korea and ChipPAC Shanghai to conduct business only in the
ordinary course, and, without limiting the generality of the foregoing, shall
cause the Company, ChipPAC Korea and ChipPAC Shanghai to use commercially
reasonable efforts to (a) preserve intact the present business organization and
reputation of the Company, ChipPAC Korea and ChipPAC Shanghai in all material
respects, (b) keep available (subject to dismissals and retirements in the
ordinary course of business) the services of the key officers and employees of
the Company, ChipPAC Korea and ChipPAC Shanghai, (c) maintain the assets and
properties of the Company, ChipPAC Korea and ChipPAC Shanghai in good working
order and condition, subject to ordinary wear and tear, and (d) maintain the
goodwill of key customers, suppliers and lenders and other persons with whom the
Company, ChipPAC Korea or ChipPAC Shanghai otherwise has significant business
relationships. ChipPAC Shanghai II shall not have less than one million eight
hundred thousand dollars ($1,800,000) in paid-in capital prior to the Closing.
Section 5.5 Certain Restrictions. Except as set forth in or contemplated
by this Agreement, any of the Ancillary Agreements or Section 5.5 of the Company
Disclosure Schedule, and subject further to the additional express exceptions
set forth below, HEI and HEA shall cause the Company, ChipPAC Korea and ChipPAC
Shanghai to refrain from:
(a) amending their respective certificates or articles of
incorporation or bylaws (or other comparable corporate charter documents) in any
respect or taking any action with respect to any such amendment or any
recapitalization, reorganization, liquidation or dissolution of any such
corporation;
(b) other than upon conversion or exercise of rights under the terms
of securities outstanding on the date of this Agreement, authorizing, issuing,
selling or otherwise disposing of any shares of their respective capital stock
of or any option or other right with respect thereto, or modifying or amending
any right of any holder of outstanding shares of their respective capital stock
of or options or other rights with respect thereto;
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(c) declaring, setting aside or paying any dividend or other
distribution in respect of their respective capital stock, or directly or
indirectly redeeming, purchasing or otherwise acquiring any capital stock of or
any option with respect thereto, other than for the purpose of eliminating any
minority interests not contemplated by this Agreement or upon conversion or
exercise of rights under the terms of securities outstanding on the date of this
Agreement;
(d) except as set forth in Sections 3.7 and 3.9 of the Company
Disclosure Schedule and other than inventory acquired or disposed of in the
ordinary course of business, acquiring or disposing of, or incurring any
Encumbrance (other than a Permitted Encumbrance) on, any assets (including any
IP Rights) or properties;
(e) other than in the ordinary course of business, amending,
modifying, terminating (partially or completely), granting any waiver under or
giving any consent with respect to any material term of any Contract or license;
(f) except as required by law or by the terms of Contracts with any
Third Party entered into before the date of this Agreement, (i) voluntarily
incurring any Indebtedness or (ii) purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge or repayment with respect to, or
waiving any right under, any Indebtedness (including intercompany Indebtedness
(x) owed to the Company, ChipPAC Korea or ChipPAC Shanghai by HEI, HEA or any of
their other controlled Affiliates, or (y) owed by the Company, ChipPAC Korea or
ChipPAC Shanghai to HEI, HEA or any of their respective other Affiliates);
provided, that, subject to Section 2.2(j), if for any reason the anticipated
amounts of Indebtedness of ChipPAC Korea or ChipPAC Shanghai to be repaid at the
Closing pursuant to Section 2.2(g)(ii) and Section 2.2(g)(iii) would otherwise
be less than approximately eighty-two million dollars ($82,000,000) and thirty-
four million dollars ($34,000,000), respectively, HEI and HEA will, in
consultation with and at the request of Merger Sub, cause ChipPAC Korea and
ChipPAC Shanghai to incur additional short-term Indebtedness such that the
anticipated amounts of Indebtedness to be repaid at the Closing pursuant to
Section 2.2(g)(ii) and Section 2.2(g)(iii) are approximately eighty-two million
dollars ($82.000,000) and thirty-four million dollars ($34,000,000),
respectively.
(g) engaging with any person in any merger or other business
combination;
(h) making research and development expenditures or capital
expenditures or commitments for additions to property, plant or equipment
constituting capital assets (except as set forth in the quarterly research and
development budget annexed hereto as Exhibit F and the Capital Budget,
respectively);
(i) except to the extent required by applicable law, making any
material change in (A) any pricing, investment, accounting, financial reporting,
inventory, credit, allowance or Tax practice or policy, or (B) any method of
calculating any bad debt, contingency or other reserve for accounting, financial
reporting or Tax purposes;
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(j) other than in the ordinary course of business or to the extent
required by applicable law or as disclosed in Schedule 7.2, adopting, entering
into or becoming bound by any material Benefit Plan, employment-related Contract
or collective bargaining agreement, or amending, modifying or terminating
(partially or completely) any such Benefit Plan, employment-related Contract or
collective bargaining agreement, or reassigning or transferring (including by
termination and rehiring) any employee of the Company, ChipPAC Korea or ChipPAC
Shanghai to HEI, HEA or any of their other Affiliates;
(k) making any change in its fiscal year;
(l) other than in the ordinary course of business or as required by
law or existing Contract, increase or otherwise modify any employee's
compensation, benefits or bonus;
(m) take any action which, or fail to take any action the omission of
which, could reasonably be expected to have a Material Adverse Effect; or
(n) entering into any Contract to do or engage in any of the
foregoing.
Section 5.6 Affiliate Transactions. Except for the (i) payments by the
Company, ChipPAC Korea or ChipPAC Shanghai to HEI or HEA under the Tax Sharing
Agreement, (ii) the Ancillary Agreements and, payments by the Company, ChipPAC
Korea, ChipPAC Shanghai or ChipPAC BVI under the Ancillary Agreements and
payments by HEI or HEA under the Ancillary Agreements, (iii) the Plating
Services Agreement referred to in Section 12.18(e) and in Section 3.15 of the
Company Disclosure Schedule, and (iv) contracts mutually agreed by the parties
hereto as necessary to the Company's, ChipPAC Korea's or ChipPAC Shanghai's
business, HEI and HEA shall, on or before the Closing Date, terminate and shall
cause any such officer, director, or Affiliate to terminate any Contract between
the Company, ChipPAC Korea or ChipPAC Shanghai, on the one hand, and HEI, HEA or
any of their Affiliates or any of their respective officers, directors,
employees or representatives, on the other hand, including any Contract noted in
the Company Disclosure Schedule to be terminated as of the Closing.
Section 5.7 Fulfillment of Conditions. HEI and HEA shall use all requisite
commercially reasonable efforts and proceed diligently and in good faith to
satisfy each condition to the obligations of Merger Sub contained in Section 8.1
and Section 8.2 that depends on action by HEI or HEA for its satisfaction and,
to the extent commercially reasonable, shall not, and shall not permit the
Company, ChipPAC Korea or ChipPAC Shanghai to, take any action that, or fail to
take any action the omission of which, could reasonably be expected to result in
the nonfulfillment of any such condition. HEI and HEA shall give prompt written
notice to Merger Sub of any event, condition or circumstance coming to their
Knowledge occurring from the date hereof through the Closing Date that, if
uncured, would cause any of the conditions set forth in Section 8.1 or Section
8.2 not to be satisfied.
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ARTICLE VI
COVENANTS OF MERGER SUB
Merger Sub covenants and agrees with HEI and HEA that, at all times from
and after the date hereof until the Closing, it shall comply, and to the extent
applicable after the Closing shall cause the Company, ChipPAC Korea, ChipPAC
Shanghai and their respective Affiliates to comply, with the covenants
applicable to or made by them in this Article VI, except to the extent HEI and
HEA may otherwise consent in writing.
Section 6.1 Regulatory and Other Approvals. Merger Sub shall (a) take
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other person (including under the HSR Act) required of Merger Sub to consummate
the transactions contemplated by this Agreement and by the Ancillary Agreements,
(b) provide such other information and communications to such Governmental or
Regulatory Authorities or other persons as such Governmental or Regulatory
Authorities or other persons may reasonably request in connection therewith,
and (c) provide reasonable cooperation and support to HEI, HEA, the Company,
ChipPAC Korea and ChipPAC Shanghai in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to Governmental or
Regulatory Authorities or other persons required of HEI, HEA, the Company,
ChipPAC Korea or ChipPAC Shanghai to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements. Merger Sub shall provide prompt
notification to HEI and HEA when any such consent, approval, action, filing or
notice referred to in clause (a) of this Section 6.1 is obtained, taken, made or
given, as applicable, and shall advise HEI and HEA of any communications (and,
unless precluded by law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other person regarding
any of the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
Section 6.2 Fulfillment of Conditions. Merger Sub shall use all requisite
commercially reasonable efforts and proceed diligently and in good faith to
satisfy each condition to the obligations of HEI and HEA contained in Section
8.1 and Section 8.3 that depends on Merger Sub for its satisfaction and, to the
extent commercially reasonable, shall not take any action that, or fail to take
any action the omission of which, could reasonably be expected to result in the
nonfulfillment of any such condition. Merger Sub shall give prompt written
notice to HEI and HEA of any event, condition or circumstance coming to its
Knowledge occurring from the date hereof through the Closing Date that, if
uncured, would cause any of the conditions set forth in Section 8.1 and Section
8.3 not to be satisfied.
Section 6.3 Certain Actions. Merger Sub shall not engage in any activity
other than the activities contemplated by and in furtherance of the
Recapitalization Transactions and the Ancillary Agreements to which Merger Sub
is a party. Without limiting the generality of the foregoing, except as provided
by, or as necessary or desirable for the performance of its
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obligations under or for the consummation of the transactions contemplated by,
this Agreement, Merger Sub shall not, prior to the Closing without the prior
written consent of HEI and HEA:
(a) amend its certificate of incorporation or bylaws;
(b) issue, sell or otherwise dispose of any shares of its capital
stock or any option or other right with respect thereto;
(c) declare, set aside or pay any dividend or other distribution in
respect of its capital stock, or directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock or any option or other right with
respect thereto;
(d) cancel, discharge, waive, release or forebear from the exercise
of any rights under any debt or equity commitment letter, or enter into or agree
to any amendment thereof, in each case where such action would adversely affect
the consummation of the Recapitalization Transactions;
(e) incur any Liabilities;
(f) engage with any person in any merger or other business
combination; or
(g) enter into any Contract to do or engage in any of the
foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Stock Option Plans and Options. The Company Options shall be
canceled or paid out as described in Section 23(a)(iv) hereof, and in connection
therewith, HEI and HEA in their sole discretion may, at or prior to the Closing,
cause the Company to require any or all holders of Company Options to execute
and deliver a general release of claims including any and all stock-, option- or
equity-related claims against the Company, HEI, HEA, Merger Sub, and their
respective Affiliates, as a condition to the receipt of the payment described in
Section 2.3(a)(iv), it being understood and agreed that receipt of all or any of
such releases shall not be a condition to any party's obligation to consummate
the Recapitalization Transactions.
Section 7.2 ChipPAC Employees.
(a) Subject to HEI's and HEA's obligations set forth in Section
2.3(a)(iv) and Section 2.3(d) hereof, the Company shall unconditionally honor
and perform, and shall unconditionally cause ChipPAC Korea and ChipPAC Shanghai
after the Closing to honor and perform, all of their obligations under all (i)
employment, incentive and severance agreements (including the agreement in
principle with the ChipPAC labor unions in Korea set forth in Schedule 7.2);
(ii) agreements, arrangements, commitments and resolutions heretofore adopted
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governing employee rights and benefits set forth in Schedule 7.2; (iii)
collective bargaining or other union agreements or arrangements, set forth in
Schedule 7.2. and (iv) provisions of applicable law governing employee rights or
benefits, in favor of all employees of the Company, ChipPAC Korea and ChipPAC
Shanghai in effect from time to time in accordance with the terms thereof,
subject, in each case, to any rights any of the Company, ChipPAC Korea or
ChipPAC Shanghai may have pursuant to law, contract or otherwise to alter or
modify the terms of any such agreement, arrangement, commitment or resolution.
(b) The Company shall recognize all service with HEI, HEA, the
Company. ChipPAC Korea or ChipPAC Shanghai, including service with any
predecessor employer that was recognized by HEI, HEA, the Company, ChipPAC Korea
or ChipPAC Shanghai thereof, for purposes of post-Closing benefits, including,
but not limited to, vacation entitlement and retirement plan participation and
vesting (but not for benefit accruals), welfare plan participation and
eligibility and severance pay. No pre-existing condition exclusions or waiting
periods may be imposed under the Company's employee welfare benefit plans within
the meaning of Section 3(l) of ERISA upon any employee of the Company, ChipPAC
Korea or ChipPAC Shanghai.
(c) HEI and HEA shall cause the Company to fully vest each of its
employees in all applicable 401(k) plan contributions (including employer
contributions) under the Company's 401(k) plan as of the Closing.
Section 7.3 Ancillaa Agreements. The parties to this Agreement shall cause
the Ancillary Agreements to be executed and delivered by such party and/or their
Affiliates, in substantially the form set forth in the annexes to this
Agreement, at or prior to the Closing.
Section 7.4 Release of Guarantees. Before the Closing, to the extent
reasonably requested by HEI and HEA, Merger Sub shall provide commercially
reasonable cooperation to HEI, HEA, the Company, ChipPAC Korea and ChipPAC
Shanghai in obtaining releases of HEI and HEA from guarantees (if any) that HEI
or HEA has given or retained in respect of obligations of the Company, ChipPAC
Korea and ChipPAC Shanghai (other than obligations required by this Agreement
and the Ancillary Agreements to be borne by HEI or HEA and other than
obligations in respect of Indebtedness required to be repaid at or prior to the
Closing); provided, that nothing in this Section 7.4 shall require Merger Sub to
make any payment or give any item of value.
Section 7.5 Change of Name.
(a) Promptly following the Closing, the Company shall take all
action required to change the name of ChipPAC Shanghai from "Hyundai Electronics
(Shanghai) Company Ltd." to a name which does not include the name "Hyundai" or
any confusingly similar name. Subject only to such continued use of the Hyundai
name by ChipPAC Shanghai as is required by law pending the name change
contemplated by the immediately preceding sentence, and except as contemplated
by the Ancillary Agreements and as otherwise contemplated herein, Merger Sub,
the Company, ChipPAC Korea, ChipPAC Shanghai and their Affiliates shall refrain
after the Closing from using the Hyundai name, any other name of HEI,
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HEA or their Affiliates (other than the ChipPAC name), any confusingly similar
name, and any other trademarks, service marks or trade names of HEI, HEA or
their Affiliates, without the prior written consent of HEI and HEA. The Company,
ChipPAC Korea and/or ChipPAC Shanghai may have after the Closing a quantity of
work-in-process, preprinted stationery, invoices, receipts, forms, packaging
materials and other supplies in inventory which bear the Hyundai name. Except as
limited or prohibited by applicable law (as to which no representation or
warranty is made by HEI or HEA or any of their Affiliates), HEI and HEA hereby
grant, and shall cause their Affiliates to grant, to the Company, ChipPAC Korea
and ChipPAC Shanghai a paid-up license, to remain in effect until the exhaustion
of such inventory and supplies in the ordinary course of business (up to a
maximum of one hundred eighty (180) days), to use any trademarks, trade names,
trade dress, copyright or other intellectual property rights of HEI, HEA or
their Affiliates necessary for such use of such inventory or supplies. The
Company, on behalf of itself and ChipPAC Korea and ChipPAC Shanghai, agrees to
exhaust such inventory and supplies in the ordinary course of business as soon
as is reasonably practicable after the Closing, and in any event within one
hundred eighty (180) days after the Closing; provided, however, that should the
Company, ChipPAC Korea or ChipPAC Shanghai be required to requalify with any of
its customers as a result of such change of name, Merger Sub and, following the
Closing, the Company, ChipPAC Korea and ChipPAC Shanghai shall use their
commercially reasonable best efforts to requalify with any such customers as
promptly as practicable and, subject to the continued exercise of such efforts,
HEI and HEA shall extend, and cause their Subsidiaries to extend, such license
to the extent necessary until the Company, ChipPAC Korea or ChipPAC Shanghai has
obtained such requalification.
(b) The parties hereto acknowledge and agree that any remedy at law
for any breach of the provisions of this Section 7.5 would be inadequate, and
the Company hereby consents (and shall cause ChipPAC Korea and ChipPAC Shanghai
to consent) to the granting by any court of an injunction or other equitable
relief, without the necessity of actual monetary loss being proved, in order
that the breach or threatened breach of such provisions may be effectively
restrained.
Section 7.6 Indemnification of Directors and Officers. Except with respect
to any matter which is the subject of HEI's and HEA's indemnification pursuant
to Section 10.2, until the tenth (10th) anniversary of the Closing Date: (a) the
Company shall indemnify and hold harmless, to the fullest extent permitted by
law, each person who is or at any time prior to the Closing Date has been an
officer or director of the Company, ChipPAC Korea or ChipPAC Shanghai from and
against all Losses and Liabilities incurred by such person by reason of the fact
that he is or was a director, officer or agent of the Company, ChipPAC Korea or
ChipPAC Shanghai, except to the extent any such Loss or Liability is caused by
the gross negligence or willful misconduct of any such person; and (b) the
Company shall not, and shall not cause or permit any of their respective
Subsidiaries or Affiliates to, take any action with the purpose or effect of
amending, circumventing or rendering the Company unable (whether legally,
financially or otherwise) to perform and satisfy its obligations hereunder or
under any provision of the Articles of Incorporation, by-laws or other
comparable corporate charter documents of the Company, ChipPAC Korea or ChipPAC
Shanghai, or any agreement between the Company, ChipPAC Korea or ChipPAC
Shanghai and any of their respective directors, officers or
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employees, that provides for indemnification of any director, officer or
employee (including an amendment effected through a merger, consolidation, sale
of all or substantially all the assets, liquidation or dissolution of any such
corporation), if the effect of such amendment would be to have an adverse effect
on any right provided thereby to any person who shall have served as a director
or officer of the Company, ChipPAC Korea or ChipPAC Shanghai prior to the
Closing Date in respect of actions taken in such capacity on or prior to the
Closing Date, unless such person would immediately thereafter be entitled to
indemnification by the Company comparable to that provided by the affected
provision prior to any such amendment.
Section 7.7 Grant of Sublicenses. In the event HEI, HEA or any of their
controlled Affiliates obtains a license or comparable right, including but not
limited to any cross-licensing arrangement that HEI, HEA or any of their
controlled Affiliates may enter into with Texas Instruments and/or Hitachi or
any covenant not to sue granted by Texas Instruments and/or Hitachi
(collectively, a "License") from Texas Instruments and/or Hitachi in order to
resolve infringement charges made against them, HEI, HEA and/or their controlled
Affiliates shall seek in good faith and use commercially reasonable efforts to
obtain the right from Texas Instruments or Hitachi, as applicable, to grant to
ChipPAC BVI and its Affiliates a sublicense under any such License and shall
grant such sublicense ChipPAC BVI and its Affiliates on the same terms and
conditions as the License, provided, however, that any such sublicense shall
apply only to those patent, utility, design and computer program rights licensed
from Texas Instruments or Hitachi that are relevant to business of the Company,
ChipPAC Korea or ChipPAC Shanghai. Notwithstanding the foregoing, to the extent
the License requires payment by HEI, HEA or their controlled Affiliates to Texas
Instruments and/or Hitachi, the payment obligation under the sublicense shall be
prorated in a commercially reasonable manner as agreed to between ChipPAC BVI
(on behalf of itself and its Affiliates) and HEI, HEA or their Affiliates, as
applicable. Nothing in this Section 7.7 shall require HEI, HEA or any of their
Affiliates to pay or agree to pay for the right to grant such a sublicense or
prevent HEI, HEA or any of their Affiliates from entering into an agreement or
arrangement with Texas Instruments and/or Hitachi that does not provide for a
right to grant such a sublicense; provided, however, that HEI or HEA, as
applicable, shall promptly notify ChipPAC BVI of any payment required by Texas
Instruments and/or Hitachi for the right to grant such a sublicense, and ChipPAC
BVI shall have the option to pay such amount in return for receiving such
sublicense.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 8.1 Obligations of Both Parties. The obligation of each party to
consummate the Recapitalization Transactions is subject to the fulfillment, at
or before the Closing, of each of the following conditions:
(a) Orders and Laws. There shall not be in effect as of the Closing
any Order or law restraining, enjoining or otherwise prohibiting or making
illegal the
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Recapitalization Transactions, or any pending application or motion for a
preliminary injunction or temporary restraining order against the
Recapitalization Transactions.
(b) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the consummation of the Recapitalization Transactions shall
have been duly obtained, made or given and shall be in full force and effect,
and all waiting periods imposed by any Governmental or Regulatory Authority
necessary for the consummation of the Recapitalization Transactions, including
the waiting period under the HSR Act and any applicable waiting periods under
any other antitrust or similar laws of any other country or supranational
authority, shall have expired or been terminated.
(c) Shareholders and Registration Agreements. The Shareholders
Agreement and the Registration Agreement shall have been executed and delivered
by the parties thereto and shall be in full force and effect, subject only to
the conditions precedent to effectiveness (if any) set forth therein.
Section 8.2 Obligations of Merger Sub. The obligation of Merger Sub to
consummate the Recapitalization Transactions is subject to the fulfillment, at
or before the Closing, of each of the following additional conditions (all or
any of which may be waived in whole or in part by Merger Sub in its sole
discretion):
(a) Representations and Warranties. The representations and
warranties made by HEI and HEA in this Agreement, taken as a whole, shall be
true and correct in all respects on and as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, without taking into account any disclosures made by HEI or HEA to
Merger Sub after the date hereof, except where the failure of such
representations and warranties to be true and correct could not reasonably be
expected to have a Material Adverse Effect on the Company (it being agreed that
for purposes of determining such "Material Adverse Effect" for purposes of this
Section 8.2(a), all references to "materiality," "Material Adverse Effect," "in
all material respects" or "materially" contained in the representations and
warranties of HEI and HEA in this Agreement shall be disregarded).
(b) Performance. HEI and HEA in all material respects shall have
performed and complied with the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by HEI and HEA at or
before the Closing, without taking into account any disclosures made by HEI or
HEA to Merger Sub after the date hereof
(c) Officers' Certificates. HEI and HEA shall have delivered to
Merger Sub (i) a certificate, dated the Closing Date and executed by an
Executive Vice President of HEI and the President of HEA, certifying to the
satisfaction of the conditions set forth in Section 8.2(a) and Section 8.2(b)
and (ii) a certificate, dated the Closing Date and executed by an Executive Vice
President of HEI and the Secretary or any Assistant Secretary of HEA, attaching
and certifying the accuracy and completeness of the certificate or articles of
incorporation, bylaws or comparable charter documents of the Company, ChipPAC
Korea and ChipPAC Shanghai and all
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board resolutions adopted in connection with this Agreement and the Ancillary
Agreements by the respective Boards of Directors of HEI and HEA and the Company.
(d) Third-Party Consents. The consents, waivers and agreements of
Intel Corp., Motorola, Inc., Tessera Inc. and Olin Corp. required (if any) for
the transactions contemplated by Section 2.2(c)(iii) shall have been obtained
and shall be in full force and effect.
(e) Opinion of Counsel. Merger Sub shall have received the opinions
of Korean and U.S. counsel to HEI, HEA and the Company, dated the Closing Date,
as to the matters set forth in Schedule 8.2(e) hereto, in a form and subject to
such assumptions, exceptions and limitations as are customary for such counsel
in connection with transactions such as those contemplated by this Agreement.
(f) Ancillary Agreements. Each of the Ancillary Agreements shall
have been executed and delivered by the parties thereto and shall be in full
force and effect, subject only to the consummation of the Recapitalization
Transactions and the other conditions precedent to effectiveness (if any) set
forth in such Ancillary Agreements.
(g) Financing. Merger Sub, the Company, ChipPAC Korea, ChipPAC
Shanghai, ChipPAC BVI, ChipPAC BVI II and their respective Subsidiaries shall
have received financing proceeds on terms not materially less favorable than the
terms set forth in the commitment and highly confident letters described in
Section 4.7 and annexed hereto as Annexes XIII and XIV.
Section 8.3 Obligations of HEI and HEA. The obligations of HEI and HEA to
consummate, and to cause the Company to consummate, the Recapitalization
Transactions are subject to the fulfillment, at or before the Closing, of each
of the following conditions (all or any of which may be waived in whole or in
part by HEI and HEA in their sole discretion):
(a) Representations and Warranties. The representations and
warranties made by Merger Sub in this Agreement, taken as a whole, shall be true
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on and as
of such earlier date, except where the failure of such representations and
warranties to be true and correct could not reasonably be expected to have a
Material Adverse Effect on HEI or HEA (or on the Company after the Closing).
(b) Performance. Merger Sub in all material respects shall have
performed and complied with the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by it at or before the
Closing.
(c) Officers' Certificates. Merger Sub shall have delivered to HEI
and HEA (i) a certificate, dated the Closing Date and executed by the President
or any Executive or Senior Vice President of Merger Sub, certifying as to the
satisfaction of the conditions set forth in Section 8.3(a) and Section 8.3(h),
and (ii) a certificate, dated the Closing Date and executed by the Secretary or
any Assistant Secretary of Merger Sub, attaching and certifying the accuracy and
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completeness of the copies of the articles or certificate of incorporation,
bylaws and all resolutions adopted in connection with this Agreement and the
Ancillary Agreements, of Merger Sub.
(d) Opinion of Counsel. HEI and HEA shall have received the opinion
of counsel to Merger Sub, dated the Closing Date, with respect to the matters
set forth in Schedule 8.3(c) hereto, in a form and subject to such assumptions,
exceptions and limitations as are customary for such counsel in connection with
transactions such as those contemplated by this Agreement.
ARTICLE IX
TERMINATION
-----------
Section 9.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
HEI and HEA, on the one hand, and Merger Sub, on the other hand;
(b) at any time before the Closing, by HEI and HEA or by Merger
Sub, in the event that any final, non-appealable Order or law becomes effective
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Ancillary Agreements, upon notice to the nonterminating party by the
terminating party;
(c) at any time after July 15, 1999, by HEI and HEA, by notice to
Merger Sub if the Closing shall not have occurred on or before such date and the
failure of the Closing to occur is not caused by a material breach of this
Agreement by HEI and HEA, provided, that such date shall be extended to August
15, 1999 if on or prior to July 15, 1999 Merger Sub certifies to HEI and HEA
that Merger Sub believes in good faith that all conditions to Closing will be
satisfied or waived on or before such extended date;
(d) at any time after July 15, 1999, by Merger Sub, by notice to
HEI and HEA if the Closing shall not have occurred on or before such date and
the failure of the Closing to occur is not caused by a material breach of this
Agreement by Merger Sub, provided, that such date shall be extended to August
15, 1999 if on or prior to July 15, 1999 HEI and HEA certify to Merger Sub that
HEI and HEA believe in good faith that all conditions to Closing will be
satisfied or waived on or before such extended date;
(e) at any time before the Closing, by HEI and HEA, by notice to
Merger Sub, in the event of a material breach of this Agreement by Merger Sub
which if uncured would cause one or more of the conditions to Closing set forth
in Section 8.1 or Section 8.3 not to be satisfied and which is incapable of
being cured prior to the latest date set forth in Section 9.1(c); and
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(f) at any time before the Closing, by Merger Sub, by notice to
HEI and HEA, in the event of a material breach of this Agreement by HEI, HEA or
the Company which if uncured would cause one or more of the conditions to
Closing set forth in Section 8.1 or Section 8.2 not to be satisfied and which is
incapable of being cured prior to the latest date set forth in Section 9.1(d).
Section 9.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.1, this Agreement shall forthwith become null and void,
and there shall be no liability or obligation on the part of any party hereto
(or any of their respective officers, directors, employees, agents or other
Representatives or Affiliates), except as set forth in this Article IX and
except that the provisions with respect to fees and expenses in Section 12.3 and
confidentiality in Section 12.5 shall continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 9.1 (other than
pursuant to Section 9.1 (a)), HEI and HEA shall remain liable to Merger Sub for
any willful breach by HEI or HEA of their respective obligations to consummate
the Recapitalization Transactions upon satisfaction or waiver of the conditions
set forth in Article VIII or of their respective obligations under Section 5.7
("Fulfillment of Conditions") existing at the time of such termination, and
Merger Sub shall remain liable to HEI and HEA for any willful breach by Merger
Sub of its obligations to consummate the Recapitalization Transactions upon
satisfaction or waiver of the conditions set forth in Article VIII or its
obligations under Section 6.2 ("Fulfillment of Conditions") existing at the time
of such termination, and each party hereto may seek such remedies, including
damages and fees of attorneys, against the other parties with respect to any
such breach as are provided in this Agreement or as are otherwise available at
law or in equity.
Section 9.3 Effect of Breach. In the event that HEI and HEA, on the one
hand, or Merger Sub, on the other hand, elect (i) to terminate this Agreement
pursuant to Section 9.1 and/or (ii) not to proceed with the Closing of this
Agreement because the conditions to Closing specified in Article VIII are not
satisfied, any such election shall be without prejudice to the rights of the
party making such election to recover any actual reasonable documented out-
- -of-pocket costs and expenses incurred by such party if the nonsatisfaction of
such conditions results from the breach or violation of any of the
representations, warranties, covenants or agreements of the other party; but
otherwise such election shall terminate all obligations and liabilities of the
parties hereunder except as provided in Section 9.2.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties; Indemnification
Period. The representations and warranties of HEI, HEA and Merger Sub contained
in this Agreement and in the certificates delivered pursuant to Section 8.2(c)
and Section 8.3(c) shall survive the Closing for a period of (i) in the case of
Section 3.3, Section 3.4, Section 3.8, Section 3.13, Section 3.21 and Section
4.8, for the applicable statute of limitations, (ii) in the case of
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Section 3.18 and insofar as it addresses environmental matters, Section 3.10,
for a period of three (3) years after the Closing Date and (iii) otherwise, for
a period of two (2) years from the Closing Date, provided, however, that
the representations and warranties set forth in Section 3.25 shall not survive
the Closing (except for failure to disclose any notices received as required by
the first sentence thereof), and provided, further, that in the case of a breach
of the representations and warranties contained in Section 3.28, where the
subject matter of the breach is addressed by one of the representations and
warranties referred to in clause (i), (ii) or (iii) of this Section 10.1, the
time limitation set forth in the relevant item of such clauses (i) through (iii)
shall control the survival period of Section 3.28 as to such subject matter and
the time when written notice of such breach must be given. The covenants and
agreements of HEI and HEA set forth in Section 5.4 and Section 5.5 shall survive
the Closing for a period ending on the delivery of the financial statements of
the Company and its Subsidiaries for the fiscal year ending December 31, 1999
audited by the Company's independent auditors. All other covenants and
agreements of the parties in this agreement which by their terms are to be
performed or observed after the Closing shall survive the Closing (until fully
performed or observed) in accordance with their terms but in no event longer
than for a period of ten (10) years (except for covenants relating to the
Company Senior Preferred Stock which shall survive until all shares of Company
Senior Preferred Stock have been redeemed, and all dividends thereon have been
paid in full). Except as provided in Article IX and Article XI, the provisions
of this Article X shall be the sole and exclusive remedy after the Closing for
the breach of any representation or warranty of HEI, HEA or Merger Sub contained
in this Agreement or any of the certificates delivered pursuant to Section
8.2(c) and Section 8.3(c). No party shall have any liability whatsoever with
respect to any such representation or warranty, covenant or agreement after the
expiration of the relevant survival period, except for claims then pending or
theretofore asserted in writing by any party and delivered to the other party in
accordance with the terms and conditions of this Agreement.
Section 10.2 Indemnification by HEI and HEA.
(a) Subject to the provisions and limitations in this Agreement,
HEI and HEA hereby agree to indemnify, defend and hold harmless each Purchaser
Party from and against any and all Losses and Liabilities which any Purchaser
Party may at any time sustain or incur which are occasioned by, caused by or
arise out of any breach of any representation or warranty made by HEI and HEA in
this Agreement or any covenant or agreement of HEI and HEA set forth in this
Agreement or the certificate delivered by HEI and HEA pursuant to Section 8.2(c)
(the "Hyundai Compliance Certificate"), in each case to the extent not waived
by such Purchaser Party. "Purchaser Party" means the Company, a Korea,
ChipPAC Shanghai, ChipPAC BVI and their respective Subsidiaries and their
respective officers, directors, shareholders, employees, agents, and
representatives in their capacities as such.
(b) Until the expiration of the applicable statutes of limitation
(or such shorter period as may be specified below), HEI and HEA hereby agree to
indemnify, defend and hold harmless the Company and each of its Subsidiaries
from and against:
(i) any and all Losses and Liabilities to Third Parties which the
Company or any of its Subsidiaries may at any time sustain or incur, which are
based upon the
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assertion of any claim, or the commencement of any Action or Proceeding, by any
Third Party which (A) is in the nature of successor liability or (B) is caused
by or arises out of pre-Closing conduct of any business of HEI or any of its
controlled Affiliates (other than businesses of the Company, ChipPAC Korea or
ChipPAC Shanghai), except, in each case, to the extent any such Losses or
Liabilities are attributable to any action or fault on the part of the Company
or any of its Subsidiaries;
(ii) any and all Losses and Liabilities which the Company or any of
its Subsidiaries may at any time sustain or incur, which are caused by or arise
out of any claim or action brought on or prior to the tenth anniversary of the
Closing Date by or on behalf of Lemelson Medical, Education and Research
Foundation (the "Lemelson Foundation", Jerome H. Lemelson, the estate of Jerome
H. Lemelson (the "Lemelson Estate") or any entity to which the Lemelson
Foundation, Jerome H. Lemelson or the Lemelson Estate has assigned its patents
or patent applications with respect to infringement or contributory
infringement, alleged or otherwise, by the Company or any of its Subsidiaries,
of any patent or patent application for which Jerome H. Lemelson is a named
inventor and which is the subject of the License Agreement dated August 17, 1994
by and between the Lemelson Foundation and HEI (the "Lemelson License
Agreement" (provided, that the Company and its Subsidiaries (and each of them)
shall comply with all applicable terms of the Lemelson License Agreement; that
neither the Company nor any of its Subsidiaries shall have any right to
indemnification by HEI or any of its Subsidiaries for any breach by the Company
or any of its Subsidiaries after the Closing Date of any term of the Lemelson
License Agreement; and that HEI's indemnification obligations pursuant to this
Section 10.2(b)(ii) shall not exceed, in the aggregate, the sum of five million
dollars ($5,000,000)); and
(iii) any and all Losses and Liabilities which the Company or any of
its Subsidiaries may at any time sustain or incur, which are caused by or arise
out of any claim or action brought by any person or entity with respect to the
transactions set forth in Section 2.3(a)(iv) or Section 2.3(d).
Section 10.3 Limitation of HEI's and HEA's Liabilily. The liability of
HEI and HEA under Section 10.2(a) and Section 10.2(b) shall be limited as
follows:
(a) The maximum aggregate amount payable by HEI and HEA in respect of
all claims for indemnification for breach of any representation or warranty by
HEI or HEA, the Associated Covenants and Agreements of HEI and HEA and the
associated portions of the Hyundai Compliance Certificate (other than the
representations and warranties in Section 3.3, Section 3.4, Section 3.7(a),
Section 3.8, Section 3.13 or Section 3.21, the Associated Covenants and
Agreements of HEI and HEA or the associated portions of the Hyundai Compliance
Certificate) under this Agreement shall not exceed ten percent (10%) of the Cash
Consideration. In no event shall the maximum aggregate amount payable by HEI and
HEA in respect of claims for inderrinification for breach of any of the
representations or warranties set forth in Section 3.7(a), the Associated
Covenants and Agreements of HEI and HEA or the associated portions of the
Hyundai Compliance Certificate exceed the Aggregate Consideration (plus the
actual reasonable documented expenses theretofore paid by Merger Sub in
connection with the
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negotiation of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby and each of the financing
transactions contemplated hereby), and in no event shall the maximum aggregate
amount payable able by HEI and HEA in respect of claims for indemnification for
breach of any of the representations or warranties set forth in Section 3.3,
Section 3.4 or Section 3.13, the Associated Covenants and Agreements of HEI and
HEA or the associated portions of the Hyundai Compliance Certificate exceed the
Aggregate Consideration (plus the actual reasonable documented expenses
theretofore paid by Merger Sub in connection with the negotiation of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby and each of the financing transactions
contemplated hereby); provided, that if the aggregate amount of otherwise
indemnifiable Losses or Liabilities sustained by any Purchaser Party in respect
of claims for breach of the representations or warranties set forth in Section
3.3, Section 3.4 and Section 3.13, the Associated Covenants and Agreements of
HEI and HEA or the associated portions of the Hyundai Compliance Certificate and
for indemnification under Section 10.2(b) would exceed fifty percent (50%) of
the Aggregate Consideration, then (i) the Recapitalization Transactions shall,
at the election of HEI and HEA, be rescinded, the Aggregate Consideration shall
be returned by HEI and HEA and ownership of the Company, ChipPAC Korea and
ChipPAC Shanghai restored to HEI and HEA, to the extent then feasible, and (ii)
the expenses of effecting such rescission shall be borne by HEI and HEA.
(b) No claim shall be made against HEI or HEA for indemnification for
any breach of any representation or warranty by HEI and HEA under this Agreement
or the Associated Covenants and Agreements of HEI and HEA or the associated
portions of Hyundai Compliance Certificate (other than the representations and
warranties in Section 3.3, Section 3.4, Section 3.7(a), and 3.8, Section 3.13 or
Section 3.21, the Associated Covenants and Agreements of HEI and HEA and the
associated portions of the Hyundai Compliance Certificate) until the aggregate
amount of all Losses and Liabilities indeninifiable for such breaches of
representations and warranties, the Associated Covenants and Agreements of HEI
and HEA and the associated portions of the Hyundai Compliance Certificate
exceeds one percent (1%) of the Cash Consideration, and then only to the extent
of such excess.
(c) No Purchaser Party shall be entitled to recover under Section
10.2 or otherwise with respect to:
(i) the breach of any representation or warranty unless such
claim has been asserted by written notice, specifying the details of such
breach, delivered to HEI and HEA on or prior to the expiration of the relevant
survival period set forth in Section 10.1;
(ii) the breach of any representation or warranty, if before the
Closing HEI or HEA or the Company provided notification to Merger Sub in writing
of the fact or facts which cause such breach; or
(iii) any claim, to the extent the claim has been satisfied by
insurance proceeds (the Company, ChipPAC Korea, ChipPAC Shanghai and their
respective Subsidiaries
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(if any) hereby agreeing to use, all requisite commercially reasonable efforts
to collect the maximum amount of insurance proceeds to which each of them may be
entitled).
(d) The amount of any recovery to which any Purchaser Party may be
entitled pursuant to Section 10.2 shall be net of (i.e., after deducting), as
and when realized, all national, federal, state, provincial and local income tax
benefits and insurance proceeds inuring to such person as a result of the set of
facts which entitle such Purchaser Party to recover from HEI and HEA pursuant to
Section 10.2.
(e) HEI and HEA shall not be liable under the indemnification
provisions of Section 10.2 or otherwise to the extent that any Loss or Liability
results from an indemnified party's bad faith or willful or intentional tortious
misconduct.
Section 10.4 Indemnification by the Company. Subject to the provisions
and limitations herein contained, the Company hereby agrees to indemnify,
defend and hold harmless HEI and HEA and their respective Affiliates and their
respective, officers, directors, employees, agents and representatives, in their
capacity as such, from and against any and all Losses and Liabilities which HEI,
HEA or any of their Affiliates may at any time sustain or incur which are
occasioned by, caused by or arise out of any breach of any of the
representations or warranties made by Merger Sub in this Agreement or any
covenant or agreement of Merger Sub set forth in this Agreement or the
certificate delivered by Merger Sub pursuant to Section 8.3(c) with respect to
the satisfaction of the conditions set forth in Section 8.3(a) (the "Merger Sub
Compliance Certificate"), in each case to the extent not waived by HEI or HEA.
Section 10.5 Limitation of the Company's Liability. The liability of the
Company under Section 10.4 shall be limited as follows:
(a) The maximum aggregate amount payable by the Company in respect of
all claims for indemnification for any breach of any representation or warranty
by Merger Sub, the Associated Covenants and Agreements of Merger Sub and the
associated portions of the Merger Sub Compliance Certificate shall not exceed
ten percent (10%) of the Cash Consideration.
(b) No claim shall be made for indemnification under Section 10.4
until the aggregate amount of all Losses and Liabilities indemnifiable for such
breaches of representations and warranties, the Associated Covenants and
Agreements of Merger Sub and the associated portions of the Merger Sub
Compliance Certificate exceeds one percent (1%) of the Cash Consideration, and
then only to the extent of such excess.
(c) HEI and HEA shall not be entitled to recover under Section 10.4
with respect to:
(i) the breach of any representation, warranty, covenant or
agreement unless such claim has been asserted by written notice, specifying the
details of such breach, delivered to Merger Sub on or prior to the first
anniversary of the Closing Date;
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(ii) the breach of any representation or warranty, or of any
covenant to be performed prior to the Closing, if before the Closing Merger Sub
provided written notification to HEI and HEA of the fact or facts which caused
such breach, or
(iii) any claim, to the extent the claim has been satisfied by
insurance proceeds (HEI and HEA hereby agreeing to all requisite commercially
reasonable efforts to collect the maximum amount of insurance proceeds to which
they may be entitled).
(d) The amount of any recovery to which HEI and HEA may be entitled
pursuant to Section 10.4 shall be net of (i.e., after deducting) any national,
federal, state, provincial and local income tax benefits and insurance proceeds
inuring to such person as a result of the set of facts which entitle HEI and HEA
to recover from the Company pursuant to Section 10.4.
(e) The Company shall not be liable under the indemnification
provisions of Section 10.4 to the extent that any Loss or Liability results from
an indemnified party's bad faith, or willful or intentional tortious misconduct.
Section 10.6 Defense of Third Party Claims.
(a) The indemnified party seeking indemnification under this
Agreement shall promptly notify the indemnifying party of the assertion of any
claim, or the commencement of any Action or Proceeding by any Third Party, in
respect of which indemnity may be sought hereunder and shall give the
indemnifying party such information with respect thereto as the indemnifying
party may reasonably request, but failure to give such notice shall not relieve
the indemnifying party of any liability hereunder (except to the extent that the
indemnifying party has suffered actual prejudice by such failure). The
indemnifying party shall have the right, but not the obligation, exercisable by
written notice to (which shall contain the unconditional undertaking by the
indemnifying party to bear all Liabilities, obligations and Losses with respect
to such Third Party Claim) the indemnified party within thirty (30) days of
receipt of notice from the indemnified party of the commencement of or
assertion of any claim, Action or Proceeding by a Third Party in respect of
which indemnity may be sought hereunder (a "Third-Party Claim" to assume the
defense at its sole expense such Third-Party Claim that (i) involves (and
continues to involve) solely money damages or (ii) involves (and continues to
involve) claims for both money damages and equitable relief against the
indemnified party that cannot be severed, where the claims for money damages are
the primary claims asserted by the Third Party and the claims for equitable
relief are incidental to the claims for money damages, and where the indemnified
party reasonably determines (and continues to reasonably determine) that defense
of the claim by the indemnifying party will not have a material adverse effect
on the indemnified party. If the indemnifying party does not assume the defense
of any such Third-Party Claim, the indemnifying party shall, in addition to any
other amounts due under this Article X, indemnify the indemnified party for all
actual expenses of the defense of such Third-Party Claim (including court costs,
reasonable fees of attorneys, accountants and other experts and other reasonable
expenses of litigation), including with respect to any Third Party Claim which,
if the facts alleged therein were proven to be true, would otherwise constitute
an indemnifiable claim.
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(b) The indemnifying party or the indemnified party, as the case may
be, shall have the right to participate in (but not control), at its own
expense, the defense of any Third-Party Claim that the other is defending
pursuant to this Agreement.
(c) The indemnifying party, if it has assumed the defense of any such
Third-Party Claim pursuant to this Agreement, shall not, without the indemnified
party's prior written consent (not to be unreasonably withheld), enter into any
compromise or settlement, it being agreed that no such compromise or settlement
may be entered into that (i) results in any liability to the indemnified party,
(ii) commits the indemnified party to take, or to forbear to take, any action or
(iii) does not provide for a complete release by such Third Party of the
indemnified party. The indemnifying party shall not, without the indemnified
party's prior written consent, enter into any compromise or settlement where the
amount of such compromise or settlement would cause the applicable cap on the
indemnifying party's liability, as provided herein, to be exceeded. The
indemnified party shall have the sole and exclusive right to settle any Third-
Party Claim, with the consent of the indemnifying party, which shall not be
unreasonably withheld or delayed, on such terms and conditions as it deems
reasonably appropriate, to the extent such Third-Party Claim involves equitable
or other nonmonetary relief against the indemnified party, and shall have the
right to settle, at the indemnifying party's sole expense, any Third-Party Claim
involving money damages for which the indemnifying party has not assumed the
defense pursuant to this Section 10.6 with the written consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the indemnified party shall have the right to
employ separate counsel at the indemnifying party's expense and to control its
own defense of any such asserted liability if (i) there are or may be legal
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party or (ii) in the
reasonable opinion of counsel to such indemnified party, conflict or potential
conflict exists between the indemnifying party and such indemnified party that
would make such separate representation advisable.
Section 10.7 Procedure and Dispute Resolution.
(a) If an indemnified party shall have a claim of indemnification
pursuant to this Article X (an "Indemnity Claim"), it shall promptly give
written notice thereof (the "Claim Notice" to the indemnifying party or parties,
including therein a brief description of the facts upon which such claim is
based and the amount thereof, to the extent that it can be ascertained,
provided, however, that failure to provide such prompt notice shall not affect
any rights or remedies of the indemnified party except to the extent of any
actual prejudice caused thereby.
(b) In the event that the indemnifying party disputes the validity or
amount of any Indemnity Claim, prior to taking any other action, the matter
shall be referred to responsible executives of the affected parties for
consideration and resolution. If the parties have not otherwise resolved the
dispute, they shall meet in person in a mutually agreeable location within
thirty (30) days after the delivery of the Claim Notice and exercise their best
efforts to settle the matter amicably.
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(c) If any such dispute is not settled within thirty (30) days from
the delivery of the Claim Notice, such dispute shall, at the demand of either
party, be referred to and decided by arbitration in accordance with the
provisions of Section 10.8.
Section 10.8 Arbitration.
(a) Within thirty (30) days after notice of a dispute or claim is
given by any party, appropriate senior executives of the parties shall meet and
make a good faith attempt to negotiate an amicable resolution of such dispute or
claim before initiating arbitration proceedings. Nothing herein, however, shall
prohibit either party from initiating arbitration proceedings during such 30-day
period if such party would be substantially prejudiced by delay.
(b) Any dispute or claim arising under this Article X shall be
finally settled by binding arbitration conducted in the English language in San
Francisco, California, under the International Chamber of Commerce arbitration
rules, by three arbitrators. Each party shall appoint one arbitrator; the third
arbitrator, who shall be the chair of the arbitration tribunal, shall be
appointed by the other two arbitrators.
(c) The arbitrators shall have the power to decide all questions of
arbitrators. The arbitrators shall have the power to order pre-hearing
discovery of documents, witness lists, and a limited number of discovery
depositions, not to exceed three per side. At the request to either party, the
arbitrators shall enter an appropriate protective order to maintain the
confidentiality of information produced or exchanged in the course of the
arbitration proceedings. The arbitrators shall be instructed that time is of the
essence in resolving all arbitration matters and, to the extent a schedule
cannot be mutually agreed to by the parties, directed to resolve such
arbitration within sixty (60) days after the initiation thereof.
(d) The parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without any abridgment of the powers of the arbitrators. The arbitrators
shall also have the power to grant temporary or permanent injunctive or other
equitable relief, including any interim or conservatory relief, as necessary.
(e) The arbitrators may award to the prevailing party, if any, as
determined by the arbitrators, its costs and fees incurred in connection with
any arbitration or related judicial proceeding hereunder. Cost and fees awarded
may include, without limitation, reasonable attorneys' fees, expert and other
witness fees, travel expenses, and out-of-pocket expenses (including, without
limitation, such expenses as copying, telephone, facsimile, postage, and courier
fees). Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
(f) Subject to the provisions of Section 10.8(d), the parties agree
not to submit a dispute subject to this Section 10.8 to any federal, national,
state, provincial, local or other court except as may be necessary to enforce
the arbitration procedures of this Section 10.8 or to enforce the award of the
arbitrator.
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Section 10.9 Adjustment to Cash Consideration. Subject to Section 10.10,
amounts paid in respect of the parties' indemnification obligations shall be
paid in cash and shall be treated as an adjustment to the Cash Consideration.
Section 10.10 Set-off. To the extent that (x) any Purchaser Party, on the
one hand, or HEI, HEA or any of their controlled Affiliates, on the other hand.
is obligated to pay or is entitled to receive indemnification pursuant to this
Article X, and (y) any dispute concerning the validity or amount of such
indemnification has been resolved pursuant to Section 10.7 or has been finally
determined pursuant to Section 10.8, or the time for disputing the validity or
amount of such indemnification has expired, then: (a) the indemnifying party may
set off the amount of such indemnification against any amounts then due and
owing and unpaid, within the time period allowed for payment (to the extent
theretofore admitted in writing or established by contract, finally adjudicated
by court judgment or finally determined by arbitral award) to such indemnifying
party by the indemnified party and (b) the indemnified party may set off the
amount of such indemnification against any amounts then due and owing and unpaid
within the time period allowed for payment (to the extent so admitted, so
adjudicated or so determined) to such indemnified party by such indemnifying
party. In the case of any amounts set off against HEI or HEA, such amounts shall
be set off in the following order: (i) first, against any amount then due and
owing in cash, (ii) second, against the HEI Earn-Out, (iii) third, against any
accrued and unpaid dividends or redemption payments with respect to the Company
Senior Preferred Stock, and (iv) fourth, against any, accrued and unpaid cash
dividends, distributions or redemption payments with respect to other capital
stock of the Company.
ARTICLE XI
TAX MATTERS
Section 11.1 Returns: Indemnification: Liability for Taxes.
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(a) HEI and HEA shall prepare and file (or cause to be prepared and
filed) on a timely basis all Tax Returns with respect to the Company, ChipPAC
Korea, ChipPAC Shanghai and their respective Subsidiaries (if any) for all
taxable periods ending on or before the Closing Date ("Company Tax Returns" and
shall pay directly or promptly reimburse the Company, and shall indemnify and
hold the Company harmless against and from, (i) all Taxes of the Company,
ChipPAC Korea, ChipPAC Shanghai and their respective Subsidiaries (if any) for
all taxable years or periods which end on or before the Closing Date; (ii) all
Taxes for all taxable years or periods of all other members or Subsidiaries of
any affiliated, unitary or combined group of which the Company, ChipPAC Korea or
ChipPAC Shanghai is or has been a member on or prior to the Closing Date; and
(iii) with respect to any taxable period commencing before the Closing Date and
ending after the Closing Date (a "Straddle Period," all Taxes of the Company,
ChipPAC Korea, ChipPAC Shanghai and their respective Subsidiaries (if any)
attributable to the portion of the Straddle Period prior to and including the
Closing Date (the "Pre-Closing Period"). For purposes of this Agreement, the
portion of any Tax that is attributable to the Pre-Closing Period shall be (i)
in the case of a Tax that is not based on net
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income, gross income, sales, premiums or gross receipts, the total amount of
such Tax for the period in question multiplied by a fraction, the numerator of
which is the number of days in the Pre-Closing Period, and the denominator of
which is the total number of days in such Straddle Period, and (ii) in the case
of a Tax that is based on any of net income, gross income, sales, premiums or
gross receipts, the Tax that would be due with respect to the Pre-Closing,
Period if such Pre-Closing Period were a separate taxable period, except that
exemptions, allowances, deductions or credits that are calculated on an annual
basis without respect to the amount of net income, gross income, sales, premiums
or gross receipts (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per them basis.
(b) Company shall prepare and file (or cause to be prepared and
filed) on a timely basis all Tax Returns of Company relating to periods ending
after the Closing Date and shall cause the Company to pay, and shall cause the
Company to indemnify and hold HEI and HEA harmless against and from (i) all
Taxes of the Company, ChipPAC Korea, ChipPAC Shanghai and their respective
Subsidiaries (if any) for any taxable year or period commencing after the
Closing Date; and (ii) all Taxes of the Company, ChipPAC Korea, ChipPAC Shanghai
and their respective Subsidiaries (if any) for any Straddle Period (other than
Taxes attributable to the Pre-Closing Period which if paid by the Company
pursuant to this Section 11.1(b) shall be promptly reimbursed by HEI and HEA
to the extent provided by Section 11.1(a).
(c) Notwithstanding any other provision of this Section 11.1, the
Company shall pay, and shall indemnify and hold HEI and HEA harmless against and
from any Taxes (i) attributable to transactions occurring on the Closing Date
affecting the Company and its Subsidiaries at any time after the consummation of
all of the Recapitalization Transactions or (ii) imposed as a result of any
election under Section 338(g) of the Code (or any comparable election under
state law) with respect to the acquisition of New Shares contemplated hereby.
Section 11.2 Refunds and Credits.
(a) All refunds or credits of Taxes for or attributable to taxable
years or periods of the Company, ChipPAC Korea, ChipPAC Shanghai and their
respective Subsidiaries (if any) ending on or before the Closing Date (or the
Pre-Closing Period, in the case of a Straddle Period) shall be for the account
of HEI and HEA; all other refunds or credits of Taxes, for or attributable to
the Company or any of its Subsidiaries, including refunds or credits arising
from the carryback or carryforward of losses, credits or similar items, shall be
for the account of the Company. Following the Closing, the Company shall forward
to HEI and HEA any such refunds or credits due HEI and HEA pursuant to this
Section 11.2 after receipt or realization thereof by the Company, and HEI and
HEA shall promptly forward (or cause to be forwarded) to the Company any refunds
or credits due to the Company pursuant to this Section 11.2 after receipt or
realization thereof by HEI and HEA, in each case in accordance with the
provisions of subsection (b) of this Section 11.2.
(b) Any payments or refunds or credits for Taxes required to be paid
under this Agreement shall be made within ten (10) Business Days of the receipt
of any refund or
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credit, as the case may be. Any payments not made within such time period shall
be subject to an interest charge of seven percent (7%) per annum.
Section 11.3 Termination of Tax Sharing, Agreements. HEI and HEA hereby
agree and covenant that obligations of or to the Company and its Subsidiaries
(including ChipPAC Korea and ChipPAC Shanghai) pursuant to the Tax Sharing
Agreement shall be extinguished as of the Closing Date.
Section 11.4 Conduct of Audits and Other Procedural Matters. Each party
shall, at its own expense, control any audit or examination by any taxing
authority, and have the right to initiate any claim for refund or amended
return, and contest, resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment of Taxes ("Tax
Proceedings" for any taxable period for which that party is charged with
payment or indemnification responsibility under this Agreement, subject, in the
case of any Pre-Closing Period, to the prior written consent of the Company (not
to be unreasonably withheld). Each party shall promptly forward to the other in
accordance with Section 12.1 all written notifications and other written
communications, including if available the original envelope showing any
postmark, from any taxing authority received by such party or its Affiliates
relating to any liability for Taxes for any taxable period for which such other
party or any of its Affiliates is charged with payment or indemnification
responsibility under this Agreement and each indemnifying party shall promptly
notify, and consult with, each indemnified party as to any action it proposes to
take with respect to any liability for Taxes for which it is required to
indemnify another party and shall not enter into any closing agreement or final
settlement with any taxing authority with respect to any such liability without
the written consent of the indemnified parties, which consent shall not be
unreasonably withheld. In the case of any Tax Proceedings relating to any
Straddle Period, the Company (if the post-Closing portion of the Straddle Period
constitutes a majority in time of the Straddle Period) and HEI and HEA (if the
pre-Closing portion of the Straddle Period constitutes a majority in time of the
Straddle Period) shall control such Tax Proceedings and shall consult in good
faith with the other party as to the conduct of such Tax Proceedings. The party
not controlling such Tax proceedings shall reimburse the party controlling such
Tax proceedings for such portion of the costs, including reasonable legal costs,
of conducting such Tax Proceedings as is represented by the portion of the Tax
with respect to such Straddle Period for which the non-controlling party is
liable pursuant to this Agreement. Each party shall, at the expense of the
requesting party, execute or cause to be executed any powers of attorney or
other documents reasonably requested by such requesting party to enable it to
take any and all actions such party reasonably requests with respect to any Tax
Proceedings which the requesting party controls. The failure by a party to
provide timely notice under this Section 11.4 shall relieve the other party from
its obligations under this Article XI with respect to the subject matter of any
notification not timely forwarded, to the extent the other party has been
materially prejudiced because of such failure to provide notification in a
timely fashion.
Section 11.5 Assistance and Cooperation. After the Closing Date, HEI, HEA
and the Company shall (and cause their respective Affiliates to):
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(a) assist the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing in accordance with Section
11.1.
(b) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Company, ChipPAC Korea,
ChipPAC Shanghai and their respective Subsidiaries (if any);
(c) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the Company, ChipPAC Korea, ChipPAC Shanghai and their respective
Subsidiaries (if any);
(d) provide timely notice to the other in writing of any pending or
threatened Tax audits or assessments of the Company, ChipPAC Korea, ChipPAC
Shanghai and their respective Subsidiaries (if any) for taxable periods for
which the other may have a liability under this Article XI; and
(e) furnish the other with copies of all correspondence received from
any taxing authority in connection with any Tax audit with respect to any
taxable period for which the other may have a liability under this Article XI.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or sent by reputable overnight
courier to the parties at the following addresses or facsimile numbers:
If to Merger Sub, or, after the Closing, c/o Bain Capital, Inc.
to the Company, One Embarcadero, Suite 2260
San Francisco, CA 94111
Facsimile: (415) 627-1333
Attn: David Dominik
Prescott Ashe
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Facsimile: (617) 572-3274
Attn: Edward Conard
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c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Facsimile: (212) 888-2940
Attn: Michael Delaney
Paul C. Schorr, IV
and in each case with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Facsimile: (312) 861-2200
Attn: Jeffrey C. Hammes, Esq.
Gary M. Holihan, Esq.
and to: Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Facsimile: (215) 994-2222
Attn: G. Daniel O'Donnell, Esq.
Geraldine Sinatra, Esq.
If to HEI, to: Hyundai Electronics Industries, Co., Ltd.
San 136-1
Amri-ri, Bubal-eub
Ichon-si
Kyoungki-do, 467-701 Korea
Facsimile No.: 82-2-7335486
Attn: Y.H. Kim, Chief Executive Officer
if to HEA, or, prior to the Closing, Hyundai Electronics America
to the Company, to: 3101 North First Street
San Jose, California 95134
Facsimile No.: 408-232-8194
Attn: Dr. C.S. Park
and in each case with a copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Facsimile No.: (650) 327-3699
Attn: Gregory M. Gallo, Esq.
Rod J. Howard, Esq.
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All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 12.1, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 12.1, be deemed given upon delivery
(transmission confirmed), and (iii) if delivered by an overnight courier service
in the manner described above to the address as provided in this Section 12.1,
be deemed given one business day after timely deposit with the courier for
delivery with instructions to deliver on the following business day (in each
case regardless of whether such notice, request or other communication is
received by any other person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section 12.1, but subject, in
the case of delivery by courier, to confirmation of the actual date of delivery
by such courier). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
Section 12.2 Entire Agreement. This Agreement and the Ancillary Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof, and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof.
Section 12.3 Expenses. Except as otherwise expressly provided in this
Agreement (including as provided in Article IX, Section 10.8, Section 11.1,
Section 11.4, and elsewhere in this Section 12.3), whether or not the
Recapitalization Transactions are consummated, each party shall pay its own
costs and expenses incurred in connection with the negotiation, execution and
performance of this Agreement and the Ancillary Agreements (including all
regulatory filings and proceedings and all filings with all Governmental or
Regulatory Authorities); provided that if the Recapitalization Transactions are
consummated, then subject to the occurrence of the Closing, and subject further
to the provisions of Section 2.4, all such actual documented out-of-pocket costs
and expenses of Merger Sub, Bain Capital, Inc., MSX Holdings LLC and Citicorp
Venture Capital Ltd. (including fees to the investors of Merger Sub up to a
maximum aggregate amount equal to two percent (2%) of the proceeds of the
financings required for the consummation of the transactions contemplated by
this Agreement) shall be borne by the Company and shall, for purposes of Section
2.4, be deemed paid immediately after the close of business on the Closing Date
and shall not be accrued or reflected in the Closing Balance Sheet. Except as
otherwise provided in Section 2.4, the costs of the audits of the Financial
Statements contemplated by Section 2.4 shall be borne by the Company and paid
after the Closing. Notwithstanding any other provision of this Agreement to the
contrary, all filing fees, fees of incorporation or formation, transfer taxes,
stamp taxes, corporate franchise taxes and capital registration taxes, notice
publication costs and other similar out-of-pocket charges of any Governmental
or Regulatory Authority (but not legal and other advisory fees and
disbursements) incurred after the date of this Agreement in the consummation (or
reversal) of the transactions contemplated by subsections (a), (b), (c)(i),
(c)(ii) and (d) of Section 2.2 shall be borne and paid (or, if advanced by HEI,
HEA, the Company, ChipPAC Korea or ChipPAC Shanghai, reimbursed upon demand) by
Merger Sub.
Section 12.4 Public Announcements. At no time before the Closing shall
HEI, HEA, the Company, Merger Sub or any of their respective Affiliates or
Representatives issue or make
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any report, statement or release to the public or generally to the employees,
customers, suppliers or other persons to whom HEI, HEA, the Company, ChipPAC
Korea or ChipPAC Shanghai sells goods or provides services or with whom HEL HEA,
the Company, ChipPAC Korea or ChipPAC Shanghai otherwise has significant
business relationships with respect to this Agreement, or the transactions
contemplated hereby without first consulting with and obtaining the prior
written consent of the other, which consent shall not be unreasonably withheld.
If any party is unable to obtain the approval of its public report, statement or
release from the other party and such report, statement or release is, in the
opinion of legal counsel to such party, required by law in order to discharge
such party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the other
party with a copy thereof. HEI, HEA and Merger Sub shall also obtain the other
party's prior written approval of any press release to be issued immediately
following the Closing announcing the consummation of the transactions
contemplated by this Agreement.
Section 12.5 Confidentiality. Unless (i) compelled to disclose by judicial
or administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of law, or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, each party (a "Receiving Party") shall hold, and shall cause its
Affiliates and Representatives and, in the case of Merger Sub, each person
providing (or considering providing) financing for any portion of the Aggregate
Consideration (a "Financing Source"), to hold, in strict confidence all
documents and information furnished by or on behalf of each other party (a
"Furnishing Party" in connection with this Agreement, the Ancillary Agreements
or any of the transactions contemplated hereby or thereby, except to the extent
that such documents or information can be shown by the receiving party to have
been (a) previously known by the receiving party, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of the receiving party, or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to keep such documents and information
confidential; provided that following the Closing the foregoing restrictions
shall not apply to use by Bain Capital, Inc. or Citicorp Venture Capital, Ltd.
or their Affiliates of documents and information concerning the Company, ChipPAC
Korea, ChipPAC Shanghai and their respective Subsidiaries (if any) furnished by
HEI, HEA, the Company, ChipPAC Korea, ChipPAC Shanghai or any of their
Representatives or Affiliates. In the event the transactions contemplated hereby
are not consummated, upon the request of a furnishing party, each receiving
party shall, and shall cause its Representatives, Affiliates, and Financing
Sources to, promptly (and in no event later than three (3) Business Days after
such request) redeliver or cause to be redelivered all copies of confidential
documents and information furnished by or on behalf of the furnishing party in
connection with this Agreement, the Ancillary Agreements or any of the
transactions contemplated hereby or thereby, and to destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the receiving party or any
of its Affiliates, Representatives or Financing Sources.
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Section 12.6 Further Assurances: Post-Closing Cooperation.
(a) At any time or from time to time after the Closing, each of the
parties hereto shall execute and deliver such other documents and instruments,
provide such materials and information and take such other actions as may
reasonably be necessary to fulfill its obligations under this Agreement and the
Ancillary Agreements to which it is a party.
(b) Following the Closing, each party shall afford the other party,
its counsel and its accountants, during normal business hours, reasonable access
to the books, records and other data relating to the Company, ChipPAC Korea,
ChipPAC Shanghai and their respective Subsidiaries (if any) in its possession
with respect to periods prior to the Closing and the right to make copies and
extracts therefrom at the cost of the requesting party, to the extent that such
access may be reasonably required by the requesting party in connection with (i)
the preparation of Tax Returns, (ii) the determination or enforcement of rights
and obligations under this Agreement, (iii) compliance with the requirements of
any Governmental or Regulatory Authority, or (iv) in connection with any actual
or threatened Action or Proceeding. Further, each party agrees for a period
extending six (6) years after the Closing Date not to destroy or otherwise
dispose of any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party shall not agree in writing to take possession thereof
during the ten (10) Business Days after notice of such offer is given.
(c) If, in order properly to prepare its Tax Returns, other documents
or reports required to be filed with Governmental or Regulatory Authorities or
its financial statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information, documents or
records relating to the Company, ChipPAC Korea, ChipPAC Shanghai or any of their
respective Subsidiaries not referred to in Section 12.6(b), and such
information, documents or records are in the possession or control of the other
party, such other party agrees to use its best efforts to furnish or make
available such information, documents or records (or copies thereof) at the
recipient's request, cost and expense. Any information obtained by HEI and HEA
in accordance with this paragraph shall be held confidential by HEI and HEA in
accordance with Section 12.5.
(d) Notwithstanding anything to the contrary contained in this Section
12.6, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section 12.6 shall be subject to applicable rules
relating to discovery.
(e) Neither Merger Sub nor any of its Affiliates, nor the Company and
its Subsidiaries following the Closing, shall take any position at any time, in
any litigation, arbitration or claim, any Tax Return, any filing with or
submission to or statement before any Governmental or Regulatory Authority, any
financial statement or any other writing, that is inconsistent with (i) the
calculation adopted by the Board of Directors of the Company prior to the
Closing as to the amounts due pursuant to the agreements and plan described in
Section 2.3(a)(iv); (ii) the interpretation of such agreements and plan adopted
by the Board of
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Directors of the Company prior to the Closing; or (iii) the calculation adopted
by the Board of Directors of the Company prior to the Closing as to the amounts
described in Section 2.3(d). No party nor any of its Affiliates shall take any
position at any time, in any Tax Return, any filing with or submission to or
statement before any Governmental or Regulatory Authority, any financial
statement or any other writing, that is inconsistent with the allocations
reflected in Section 2.2.
Section 12.7 Waive. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party against whom such waiver is asserted. No waiver by
any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. Except as
expressly provided by this Agreement or the Ancillary Agreements, all remedies,
either under this Agreement or by law or otherwise afforded, shall be cumulative
and not alternative.
Section 12.8 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
Section 12.9 No Third-Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person other
than any person entitled to indemnification under Section 7.6.
Section 12.10 No Assignment: Binding Effect. Except for any assignment by
Merger Sub or the Company to any of their financing sources for collateral
security purposes, neither this Agreement nor any right, interest or obligation
hereunder may be assigned by any party hereto without the prior written consent
of the other parties hereto and any attempt to do so shall be void. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
Section 12.11 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially affected thereby, (a) such provision shall be fully severable,
(b) this Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in economic and legal effect
to such illegal, invalid or unenforceable provision as may be possible.
Section 12.12 Governing Law. Except with respect to the amendments set
forth in Section 12.18 (which shall be governed by the law governing the
Ancillary Agreements and Contracts to which such amendments relate), this
Agreement shall be governed by and construed in accordance with the laws of the
State of California applicable to a contract executed and
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performed entirely in such state, without giving effect to the conflicts of laws
principles thereof, and each of the parties hereto submits to jurisdiction in
any state or federal court located in the State of California and waives any
claim of improper jurisdiction or lack of venue in connection with any claim or
controversy which may be brought in connection with this Agreement.
Section 12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.14 Construction. The parties hereby acknowledge and agree that
the drafting of this Agreement has been a collaborative effort and that no party
shall be deemed to be the sole or primary drafter. Any rule or provision of law
which provides that a contract or agreement is to be construed against the
author of the contract or agreement shall not apply to this Agreement, the
Ancillary Agreements or the documents attached hereto as exhibits or schedules
hereto or thereto.
Section 12.15 Specific Performance. Each of the parties hereto acknowledges
and agrees that the other parties hereto would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached. Accordingly, each of the
parties hereto agrees that the other parties shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court in the United States or in any state having
jurisdiction over the parties and the matter in addition to any other remedy to
which such party may be entitled pursuant hereto.
Section 12.16 Non-Competition; Non-Solicitation. Each of HEI and HEA
agrees, on behalf of itself and its affiliates, that:
(a) For a period of four (4) years after the Closing Date, neither
HEI, HEA nor any of their controlled Affiliates shall, directly or indirectly,
either for itself or for any other person, participate in providing products or
services in the merchant semiconductor packaging or test businesses to any
person or entity anywhere in the world, it being understood and agreed that
nothing in this Section 12.16 shall prohibit HEI, HEA or any of their controlled
Affiliates from performing packaging or test services for Hyundai fabricated
product for Hyundai semiconductor units. For purposes of this Agreement, the
term "participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, owner or otherwise. In the
event that HEI or HEA is acquired (whether through (i) sale of substantial
assets, or (ii) merger, sale of stock or otherwise pursuant to which the
shareholders immediately prior to such transaction hold less than a majority of
the voting securities of the surviving or acquiring corporation after such
transaction), by an independent third party with operations in the merchant
semiconductor packaging or test businesses at the time of such transaction (a
"Pre-Existing Test Business"), this prohibition shall not apply to such Pre-
Existing Test Business. In the event that HEI acquires ownership or control of
the stock, business or assets of LG Semicon Co., Ltd. nothing in this Agreement
shall be construed to limit the ability of LG Semicon Co., Ltd. and its
Affiliates
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(as determined immediately prior to such acquisition) following such acquisition
to continue to conduct the merchant semiconductor packaging and test businesses
(if any) conducted by LG Semicon Co., Ltd. and its Affiliates prior to such
acquisition to the extent theretofore conducted and with the customers
theretofore served, it being understood and agreed that any expansion of such
business following such acquisition shall be,subject to the prohibitions of this
Section 12.16(a).
(b) From and after the date hereof and continuing for a period of two
(2) years after the Closing Date, neither HEI, HEA nor any of their Subsidiaries
shall directly or indirectly offer employment to or hire any employee or former
employee of the Company, ChipPAC Korea or ChipPAC Shanghai other than any
employee whose employment is terminated by the Company or any of its
Subsidiaries or Affiliates and other than former employees whose employment was
terminated on or prior to December 1, 1998.
(c) If, at the time of enforcement of this Section 12.16, a court
shall hold that the duration, scope or other restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or other restrictions deemed reasonable under such
circumstances by such court shall be substituted for the stated restrictions
contained herein.
(d) Each of HEI and HEA acknowledges and agrees that in the event of a
breach of this Section 12.16, money damages may be an inadequate remedy.
Accordingly, each of HEI and HEA, on behalf of itself and its affiliates, agrees
that the Company shall have the right, in addition to any other existing rights,
to enforce the rights granted pursuant to this Section 12.16 not only by an
action for damages, but also by an action for specific performance and/or other
equitable relief to prevent any violations of this Section 12.16. In the event
of a breach by HEI, HEA or any of their affiliates of any of the provisions of
this Section 12.16, the running of the non-compete period and no hire period set
forth herein (but not of HEI's, HEA's or their Affiliates' obligations
hereunder) shall be tolled with respect to HEI, HEA and their Affiliates during
the continuance of any actual breach.
Section 12.17 inancial Information. The Company shall furnish to Merger
Sub the Financial Statements required by Section 3.7 in a form meeting the
requirements of Regulation S-X of the Securities Act of 1933, as amended,
together with the consent of the Company's independent accountants to the use of
their reports thereon.
Section 12.18 Other Agreements. Notwithstanding any provision in this
Agreement or any of the Ancillary Agreements to the contrary, on or prior to the
Closing Date, HEI and HEA shall, and shall cause each of their controlled
Affiliates (including the Company, ChipPAC Korea and ChipPAC Shanghai), to make
the following modifications to the following Ancillary Agreements and the
Contract with respect to the Chung Ju plating facility:
(a) with respect to the Building Lease Agreement attached hereto as
Annex 1: (i) the term of the lease shall be for an initial term of five (5)
years commencing on the Closing Date; (ii) ChipPAC Korea shall have an option to
extend the Building Lease Agreement for an additional five (5) year term,
exercisable by ChipPAC Korea at any time prior to the expiration
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of the initial term; (iii) the initial monthly rent during such five (5)-year
option term shall be fixed at the market rate for comparable space prevailing at
the commencement of such option term and the monthly rent thereafter shall be
further adjusted as set forth in Article 4 Section (5) of the Building Lease
Agreement; (iv) HEI's discretionary right (set forth in Article 3 Section (2)
of the Building Lease Agreement) to terminate such Building Lease Agreement
during the initial term or the option term shall be eliminated (it being
understood and agreed that nothing herein shall limit HEI's termination rights
under Article 10 of the Building Lease Agreement and applicable laws); and (v)
ChipPAC Korea shall have the discretionary right, at any time following the
third anniversary of the Closing Date on not less than six (6) months prior
notice, to terminate all or any portion of such Lease, and, in the case of any
partial termination, the monthly rent shall be proportionately reduced based on
the reduction in the amount of rentable square meters;
(b) the Equipment Lease Agreement attached hereto as Annex IV shall be
terminated effective as of the Closing, all Indebtedness and Liabilities related
to the equipment and property which is the subject thereof shall be repaid as
provided in Article II and the ownership of such equipment and property shall be
conveyed to ChipPAC Korea at no additional cost;
(c) with respect to the Information System Management Service
Agreement attached hereto as Annex V, HEI shall obtain from Hyundai Information
Technology Co. Ltd. (and shall deliver to Merger Sub) unconditional written
confirmation that all systems described therein will be Y2K compliant on or
prior to September 30, 1999;
(d) with respect to the Patent and Technology License Agreement
attached hereto as Annex VII, (i) such agreement shall be amended to make
ChipPAC BVI the licensee thereof; (ii) Section 4.3.4 of Article 4 thereof (and
any other provisions thereof which provide that HEI shall have the right to
terminate such agreement if HEI ceases to hold 50% or less of the outstanding
shares of ChipPAC Korea or the licensee) shall be eliminated; and (iii) Articles
3 and 4 thereof shall be amended so that the term of such agreement may be
extended from year to year by ChipPAC BVI by written notice to HEI and payment
of an annual license fee of forty million Korean Won; and
(e) with respect to the Contract for the Chung Ju plating facility,
HEI hereby covenants and agrees to place not less than ninety percent (90%) of
its third-party plating requirements with the Chung Ju facility during the three
year period immediately following the Closing Date, it being acknowledged and
agreed that there shall be no specific volume commitment by or volume
requirement on the part of HEI.
75
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each party hereto as of the date first written above.
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
By: /s/ Y.H. Kim
------------------------------------
Name: Y.H. Kim
Title: President
HYUNDAI ELECTRONICS AMERICA
By: /s/ Dr. C.S. Park
------------------------------------
Name: Dr. C.S. Park
Title: President
CHIPPAC, INC.
By: /s/ Dr. C.S. Park
------------------------------------
Name: Dr. C.S. Park
Title: Chairman of the Board
CHIPPAC MERGER CORP.
By: /s/ David Dominik
------------------------------------
Name: David Dominik
Title: Chief Executive Officer
76
<PAGE>
Exhibit 2.2
AMENDMENT NO. 1
dated as of June 16, 1999
to the
AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
dated as of March 13, 1999
by and among
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.,
HYUNDAI ELECTRONICS AMERICA,
CHIPPAC, INC.,
and
CHIPPAC MERGER CORP.
<PAGE>
This AMENDMENT NO. 1 dated as of June 16, 1999 ("Amendment No. 1") to the
AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER, dated as of March 13, 1999
(the "Original Recapitalization Agreement"), is made and entered into by and
among Hyundai Electronics Industries Company, Ltd., a Republic of Korea
corporation ("HEI"), Hyundai Electronics America, a California corporation
("HEA"), ChipPAC, Inc., a California corporation (the "Company"), and ChipPAC
Merger Corp., a Delaware corporation ("Merger Sub"). Capitalized terms not
otherwise defined herein have the meanings set forth in the Original
Recapitalization Agreement.
Recitals
--------
The parties have heretofore entered into the Original Recapitalization
Agreement. The parties now wish to amend certain provisions of the Original
Recapitalization Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment No. 1, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. The definition of "Cash Consideration" in Section 1.1 of the
Original Recapitalization Agreement is hereby amended and restated so as to read
in its entirety as follows:
""Cash Consideration" means an aggregate total of three hundred
eighty-five million dollars ($385,000,000), comprised of (i) the sum of (A)
the Korean Stock Sale Proceeds before adding or subtracting the Korean
Stock Sale Adjustments, (B) the Chinese Equity Sale Proceeds before
subtracting the Chinese Debt Payoff and the Chinese Intercompany Payoff,
(C) the ChipPAC Korea Note payment plus the Estimated Korean Debt Payoff,
and (D) the Intellectual Property Note payment, minus (ii) forty million
dollars ($40,000,000) (constituting the amount of the HEA Investment)."
Section 2. The following definition is hereby added to Section 1.1 of the
Original Recapitalization Agreement:
""HEA Investment" has the meaning assigned in Section 2.2(k)."
Section 3. The introductory paragraph of Section 2.2 of the Original
Recapitalization Agreement is hereby amended to insert the words "and subsection
(k)" immediately following each appearance of the phrase "subsections (a)
through (g)".
Section 4. The reference in each of Section 2.2(e)(ii) and Section
2.2(f)(i) to "sixty-seven million dollars ($67,000,000)" is hereby deleted and
replaced with "one hundred seven million dollars ($107,000,000)".
Section 5. Section 2.2(e)(iv)(C) of the Original Recapitalization
Agreement is hereby
-2-
<PAGE>
amended and restated so as to road in its entirety as follows:
"(C) one hundred eleven million dollars ($111,000,000) to ChipPAC BVI;"
Section 6. The following Section 2.2(k) is hereby added to the Original
Recapitalization Agreement:
"(k) Purchase of Company Senior Preferred Stock. At the Closing, HEA
shall purchase from the Company, for forty million dollars ($40,000,000) in
cash, Company Senior Preferred Stock with an aggregate liquidation value of
forty million dollars ($40,000,000) (the "HEA Investment")."
Section 7. Section 2.3(a)(i)(y) of the Original Recapitalization Agreement
is hereby amended and restated so as to read in its entirety as follows:
"(y) to HEA or HEI, as HEA shall direct by written notice to Merger
Sub not less than two Business Days prior to the Closing: Company Senior
Preferred Stock with an initial aggregate liquidation value of thirty
million dollars ($30,000,000) (together with the HEA Investment, the
"Preferred Stock Consideration"), up to twenty million dollars
($20,000,000) of which shall be subject to redemption pursuant to the earn-
out provisions of the first sentence of Section 2.5;"
Section 8. The first sentence of Section 2.5 of the Original
Recapitalization Agreement is hereby amended and restated so as to read in its
entirety as follows:
"HEI will be eligible to receive from the Company additional consideration
(the "HEI Earn-Out") during the four (4) year period commencing January 1,
1999 (the "Earn-Out Period"), payable annually, if earned (the "Earn-Out
Payment"), and calculated in the manner set forth below; provided, however,
that the HEI Earn-Out shall not exceed the aggregate amount of fifty-five
million dollars ($55,000,000) (the "Earn-Out Maximum"); provided further,
that, subject to Section 2.5(f), if aggregate Earn-Out Payments shall
exceed the sum of thirty-five million dollars ($35,000,000), the portion of
the HEI Earn-Out in excess of thirty-five million dollars ($35,000,000)
shall be paid by, and applied to, the redemption of a number of shares of
Company Senior Preferred Stock with an aggregate Liquidation Preference as
defined in the Amended and Restated Articles of Incorporation annexed as
Exhibit C to this Agreement (including accrued and unpaid dividends to the
time of such redemption) equal to the amount of such excess (which shares
of Company Senior Preferred Stock shall then be canceled and retired); and
provided further, that the Earn-Out Maximum and the Company's obligation to
pay the Earn-Out Payment in the manner described in the immediately
preceding proviso shall be reduced on a dollar-for-dollar basis to the
extent of the last twenty million dollars ($20,000,000) of then-outstanding
Company Senior Preferred Stock issued to HEA (measured on the basis of
-3-
<PAGE>
Liquidation Preference at the time of redemption) which is redeemed other
than pursuant to the terms of this Section 2.5. It is the intention of the
parties to avoid double payment of (A) the twenty million dollars
($20,000,000) of Company Senior Preferred Stock (measured on the basis of
Liquidation Preference) which is subject to redemption as provided in the
preceding sentence and (B) the final twenty million dollars ($20,000,000)
of the HEI Earn-Out, and no such double payment shall be required or
permitted."
Section 9. Article III Part A and Article III Part A Section 1 of the
Amended and Restated Articles of Incorporation of ChipPAC, Inc. annexed as
Exhibit C to the Original Recapitalization Agreement are hereby amended and
restated in their entirety as follows:
"Part A. Authorized Shares. The total number of shares of capital
stock which the Corporation has authority to issue is 485,000 shares,
consisting of:
1. 105,000 shares of Class B Preferred Stock, par value $.01 per
share ("Senior Preferred Stock");"
Section 10. Except as expressly set forth herein, all terms and conditions
of the Original Recapitalization Agreement shall remain unchanged.
-4-
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first written above.
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
By: /s/ Dr. C. S. Park
------------------------------------------
Name: Dr. C. S. Park
Title: Executive Vice President
HYUNDAI ELECTRONICS AMERICA
By: /s/ Dr. C. S. Park
------------------------------------------
Name: Dr. C. S. Park
Title: President & CEO
CHIPPAC, INC.
By: /s/ Dr. C. S. Park
------------------------------------------
Name: Dr. C. S. Park
Title: Chairman of the Board
CHIPPAC MERGER CORP.
By: /s/ David Dominik
------------------------------------------
Name: David Dominik
Title: Chief Executive Officer
-4-
<PAGE>
Exhibit 2.3
AMENDMENT NO. 2
dated as of August 5, 1999
to the
AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
dated as of March 13, 1999
by and among
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.,
HYUNDAI ELECTRONICS AMERICA,
CHIPPAC, INC.,
and
CHIPPAC MERGER CORP.
<PAGE>
This AMENDMENT NO. 2 dated as of August 5, 1999 ("Amendment No. 2") to the
AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER, dated as of March 13, 1999,
as amended to date (the "Original Recapitalization Agreement"), is made and
entered into by and among Hyundai Electronics Industries Company, Ltd., a
Republic of Korea corporation ("HEI"), Hyundai Electronics America, a California
corporation ("HEA"), ChipPAC, Inc., a California corporation (the "Company"),
and ChipPAC Merger Corp., a Delaware corporation ("Merger Sub"). Capitalized
terms not otherwise defined herein have the meanings set forth in the Original
Recapitalization Agreement.
Recitals
--------
The parties have heretofore entered into the Original Recapitalization
Agreement. The parties now wish to amend certain provisions of the Original
Recapitalization Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment No. 2, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. The following definition is hereby added to Section 1.1 of the
Original Recapitalization Agreement:
'"ChipPAC BVI 111" means ChipPAC International Limited, a corporation
incorporated or to be incorporated under the laws of the Territory of the
British Virgin Islands which immediately prior to the Closing shall be a wholly
owned subsidiary of Merger Sub;'
Section 2. Section 2.2(c)(iii)(A) of the Original Recapitalization
Agreement is hereby amended by deleting the words "and the Technology License
Agreement dated as of March 28, 1994 by and between Olin Corporation and HEL as
amended by Amendment No. 1 thereto dated November 22/30, 1994 and Amendment No.
2 thereto dated March 1/April 11, 1996 (as so amended, the "Olin License
Agreement")", and each of the parties hereto acknowledges and agrees that HEI
shall retain all rights and obligations under the aforesaid Olin License
Agreement, none of which shall be transferred to the Company or any of its
Subsidiaries.
Section 3. Section 2.2(c)(iii)(D) of the Original Recapitalization
Agreement is hereby amended to delete therefrom the phrase", and the Company's
rights under the Assembly Agreement dated October 23, 1998 by and between Asahi
Kasei Microsystems Co., Ltd. and the Company and to obtain a release of HEI, HEA
and the Company from any and all obligations thereunder".
Section 4. Section 2.2(e)(iii) of the Original Recapitalization Agreement
is hereby amended and restated in its entirety as follows:
-1-
<PAGE>
"(iii) ChipPAC BVI 11 shall incur indebtedness in the aggregate
amounts and upon the terms and conditions to be determined by its Board of
Directors immediately following the Merger and, prior to the Closing, ChipPAC
BVI III shall incur indebtedness in the aggregate amounts and upon the terms and
conditions to be determined by its Board of Directors and, simultaneously with
the consummation of the Merger, ChipPAC BVI III shall merge with and into
ChipPAC BVI 11 upon the terms and conditions approved by their respective boards
of directors and shareholders; provided that the terms and conditions of the
merger of ChipPAC BVI III with and into ChipPAC BVI 11 shall not alter or
adversely affect the rights or obligations of HEI or HEA pursuant to this
Agreement or the form or amount of consideration to be paid to HEI or HEA under
this Agreement or the timing of the payment of any such consideration, without
the prior written consent of HEI and HEA;"
Section 5. Section 2.2(e)(iv) of the Original Recapitalization Agreement
is hereby amended and restated in its entirety as follows:
"(iv) ChipPAC BVI 11 shall loan (A) one hundred sixteen million
dollars ($116,000,000) to ChipPAC Luxembourg; (B) thirty-four million dollars
($34,000,000) to ChipPAC Shanghai I and (C) one hundred twenty-one million
dollars ($121,000,000) to ChipPAC BVI;"
Section 6. Section 2.2(e)(v) of the Original Recapitalization Agreement is
hereby amended and restated in its entirety as follows:
"(v) ChipPAC BVI 11 shall increase its equity investment in ChipPAC
Hungary to at least twenty-nine million dollars ($29,000,000);"
Section 7. Section 2.2(e)(vi) of the Original Recapitalization Agreement
is hereby amended and restated in its entirety as follows:
"(vi) ChipPAC Luxembourg shall loan one hundred sixteen million
dollars ($116,000,000) to ChipPAC Hungary; and"
Section 8. Section 2.2(e)(vii) of the Original Recapitalization Agreement
is hereby amended and restated in its entirety as follows:
"(vii) ChipPAC Hungary shall loan one hundred forty-five million
dollars ($145,000,000) to ChipPAC Korea."
Section 9. Section 2.2(f)(iii) of the Original Recapitalization Agreement
is hereby amended and restated in its entirety as follows:
"(iii) ChipPAC BVI shall purchase 99.9% of the then outstanding
capital stock of ChipPAC Korea from HEI (which interest shall be held in
accordance with the terms of the ChipPAC Korea Shareholders Agreement) for an
amount (the "Korean Stock Sale Proceeds") equal to seventy million dollars
($70,000,000) in cash, minus (A) the sum of the actual amount
-2-
<PAGE>
of the Reduction in Capital, as reflected in the ChipPAC Korea Note, plus the
actual amount of the Korea Debt Payoff, minus one hundred seventy five million
dollars ($175,000,000), minus (B) the sum of the payments required to be made
pursuant to Section 2.3(a)(iv) and Section 2.3(d) hereof, minus (C) the sum of
the US Debt Payoff and the US Intercompany Payoff, and minus (D) the amount of
the YH Purchase Price (clauses (A) through (D) of this Section 2.2(f)(iii)
collectively, the "Korean Stock Sale Adjustments"); and"
Section 10. Section 2.2(g)(iv) of the Original Recapitalization Agreement
is hereby amended by inserting the phrase "except for $40,445.72 in accounts
payable to Hyundai Electronics Japan (which shall be paid by ChipPAC Korea to
Hyundai Electronics Japan the first Business Day following the Closing Date, and
which, for purposes hereof, shall be treated as comprising a portion of the
Korean Debt Payoff)," at the beginning of said Section 2.2(g)(iv).
Section 11. Section 2.3(a) of the Original Recapitalization Agreement is
hereby amended by deleting the first sentence thereof.
Section 12. The first sentence of Section 2.3(c) of the Original
Recapitalization Agreement is hereby amended and restated as follows:
"The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the initial directors and officers of the Surviving
Corporation and shall hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed, it being understood and
agreed that immediately following the consummation of each of the
Recapitalization Transactions and related financings and borrowings to be
consummated on the Closing Date, one director designated by HEA in accordance
with the Shareholders Agreement shall be appointed to the board of directors of
the Surviving Corporation and shall hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation, until his respective
successor is duly elected or appointed."
Section 13. Section 2.4(h) of the Original Recapitalization Agreement is
hereby deleted. The physical inventory procedures previously contemplated
therein may have been effected as of July 31, 1999. However, in the event such
physical inventory procedures were not conducted as of July 31, 1999, any
required physical inventory procedures shall be determined by the Company in
conjunction with its independent accountants, PriceWaterhouseCoopers.
Section 14. Section 10.2(b)(iii) of the Original Recapitalization Agreement
is hereby amended by adding the following words to the end of said subsection
(immediately prior to the appearance of the period (.) therein):
"or the subleasing of space by HEA to the Company pursuant to the
Sublease Agreement for 3151 Coronado Drive, Santa Clara, CA 95054 in the absence
of any required written consent of the Master Lessor thereof pursuant to the
Master Lease (in each case as such terms are defined in such Sublease)"
-3-
<PAGE>
Section 15. Appendix 11 to that certain side letter agreement among each of
the parties hereto dated June 17, 1999 is hereby amended as set forth in the
copy of said Appendix 11 attached hereto.
Section 16. Notwithstanding any provision to the contrary in the Original
Recapitalization Agreement, the form of Transition Services Agreement to be
entered into among each of the parties indicated in such agreement shall be the
form appended hereto as Exhibit 1. Notwithstanding any provision to the contrary
in the Original Recapitalization Agreement, the Amended and Restated Articles of
Incorporation of the Company to be filed with the California Agreement of Merger
and the Bylaws of the Company to be adopted as of the Effective Time shall be in
the forms attached hereto as Exhibit 2 and Exhibit 3, respectively.
Section 17. The parties hereto agree that the amount of Estimated Working
Capital in the letter dated July 26, 1999 from Merrill Lynch & Co., Inc. shall
be decreased by $2,295,551 (the estimated amount owed to ChipPAC Korea by HEI
for packaging services, other than with respect to any amounts owed pursuant to
any Ancillary Agreement, which are included within the Estimated Closing Working
Capital). The foregoing packaging service amounts owed by HEI (other than those
arising pursuant to any Ancillary Agreement) shall be cancelled pursuant to
Section 2.2(f)(iv) of the Original Recapitalization Agreement. Accordingly, the
net increase to the Cash Consideration as a result of the purchase price
adjustments contemplated by Section 2.4(b) of the Original Recapitalization
Agreement is $1,978,114.
Section 18. HEI's obligations pursuant to Section 2.3(a)(iv) and Section
2.3(d) of the Original Recapitalization Agreement shall be deemed satisfied to
the extent of the amount accrued therefor in the Estimated Closing Balance Sheet
and the calculation of the purchase price adjustments pursuant to Section 2.4(a)
and 2.4(b) of the Original Recapitalization Agreement.
Section 19. Except as expressly set forth herein, all terms and conditions
of the Original Recapitalization Agreement shall remain unchanged.
-4-
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 2 has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first written above.
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
By: /s/ Baxon S. Kim
-------------------------------------
Name: Baxon S. Kim
Title: General Manager
HYUNDAI ELECTRONICS AMERICA
By: /s/ Baxon s. Kim
-------------------------------------
Name: Baxon S. Kim
Title: Director
CHIPPAC, INC.
By: /s/ Tony Lin
-------------------------------------
Name: Tony Lin
Title: Chief Financial Officer
CHIPPAC MERGER CORP.
By: /s/ Marshall Haines
-------------------------------------
Name: Marshall Haines
Title: Vice President
-5-
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CHIPPAC, INC.
Tony Lin certifies that:
ONE: He is the duly elected and acting Vice President and Secretary of
ChipPAC, Inc., a California corporation (the "Corporation").
-----------
TWO: The Articles of Incorporation of the Corporation shall be amended and
restated to read in full as follows:
I
NAME
----
The name of the Corporation is ChipPAC, Inc.
II
PURPOSE
-------
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
CAPITAL STOCK
-------------
Part A. Authorized Shares. The total number of shares of capital stock
-----------------
which the Corporation has authority to issue is 380,115,000 shares, consisting
of:
1. 10,000 shares of Class A Convertible Preferred Stock, par value $.01
per share ("Class A Preferred");
-----------------
<PAGE>
2. 105,000 shares of Class B Preferred Stock, par value $.01 per share
("Senior Preferred Stock");
----------------------
3. 20,000,000 shares of Class L Common Stock, par value $.01 per share
("Class L Common");
--------------
4. 180,000,000 shares of Class A Common Stock, par value $.01 per share
("Class A Common"); and
--------------
5. 180,000,000 shares of Class B Common Stock, par value $.01 per share
("Class B Common").
--------------
The Class L Common, the Class A Common and the Class B Common, and any
other common stock issued hereafter are referred to collectively as the "Common
------
Stock." The Class A Preferred shall be junior to the Senior Preferred Stock and
- -----
senior to the Common Stock as to dividends and liquidation rights and
liquidation preferences and shall have the other rights, preferences and
limitations set forth in Part D hereto. The Senior Preferred Stock and the
Common Stock shall have the rights, preferences and limitations set forth below.
Capitalized terms used but not otherwise defined in Part A or Part B of this
Article III are defined in Part C.
Part B. Senior Preferred Stock and Common Stock.
---------------------------------------
Except as otherwise provided in this Part B or as otherwise required by
applicable law and subject to the rights, preferences and limitations of the
Class A Preferred specified in Part D hereto, all shares of Senior Preferred
Stock, Class L Common, Class A Common and Class B Common shall be identical in
all respects and shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and restrictions.
1. Voting Rights. Except as otherwise provided in this Part B or as
-------------
otherwise required by applicable law, the holders of Class A Common shall be
entitled to one vote per share on all matters to be voted on by the
Corporation's stockholders, and the holders of Senior Preferred Stock, the
holders of Class L Common and the holders of the Class B Common shall have no
right to vote on any matters to be voted on by the stockholders of the
Corporation. Each holder of Class A Common shall be entitled at all elections
of directors to as many votes as shall equal one vote per share held by such
holder multiplied by the number of directors to be elected, and such holder may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them as such holder may see
fit, and to one vote for each share upon all other matters.
2. Dividends.
---------
(a) General Obligation. When and as declared by the
------------------
Corporation's Board of Directors and to the extent permitted under the General
Corporation Law of California, the
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<PAGE>
Corporation shall pay preferential dividends to the holders of the Senior
Preferred Stock as provided in this Section 2. Dividends on each share of the
Senior Preferred Stock (a "Share") shall accrue on a daily basis at the rate of
-----
12.5% per annum of the sum of the Stated Value thereof plus all accumulated and
unpaid dividends thereon from and including the date of issuance of such Share
to and including the first to occur of (i) the date on which the Stated Value of
such Share (plus all accrued and unpaid dividends thereon) is paid to the holder
thereof in connection with the liquidation of the Corporation or the redemption
of such Share by the Corporation or (ii) the date on which such Share is
otherwise acquired by the Corporation. Such dividends shall accrue whether or
not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
(b) Accumulation of Dividends; Dividend Payment Dates. All
-------------------------------------------------
dividends which have accrued on each Share of Senior Preferred Stock outstanding
during each six-month period ending February 1 and August 1, commencing February
1, 2000 and on or prior to August 1, 2004 will not be paid in cash, but will be
capitalized as accumulated and unpaid dividends on the Senior Preferred Stock
with respect to each Share until paid to the holder thereof. All dividends
accruing on each Share of Senior Preferred Stock from and after August 1, 2004,
shall be paid in cash, semi-annually on February 1 and August 1, beginning
February 1, 2005.
(c) Distribution of Partial Dividend Payments. Except as
-----------------------------------------
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Senior Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Shares held by each
such holder.
(d) In Event of Default. In the event the Corporation fails,
-------------------
either in whole or in part, to pay, when due, any dividend or other amount
required by these Articles to be paid with respect to the Senior Preferred Stock
(an "Event of Default"), then from and after the due date of such dividend or
----------------
other payment until such dividend or other payment has been paid in full: (i)
the dividend rate on the Senior Preferred Stock shall increase immediately by an
increment of two and one-half percent (2.5%) per annum (the "Default Rate") and
------------
(ii) the holders of a majority of the Senior Preferred Stock then outstanding
shall have the sole and exclusive right to nominate, and the holders of the
Senior Preferred Stock voting as a separate class will have the sole and
exclusive right to elect, one member of the Corporation's Board of Directors,
which right shall be in addition to any other rights of the holders of the
Senior Preferred Stock in any other capacity to nominate, elect or vote with
respect to the election of the directors of the Corporation pursuant to these
Articles or any agreement with the Corporation and/or its shareholders.
Dividends shall accrue at the Default Rate, and the director so nominated and
elected by the holders of the Senior Preferred Stock shall serve, until such
time as there is no longer any Event of Default in existence, at which time the
special right of the holders of the Senior Preferred Stock to nominate and elect
one member of the Corporation's
-3-
<PAGE>
Board of Directors shall terminate subject to revesting upon the occurrence and
continuation of any Event of Default which gives rise to such special right
hereunder.
3. Liquidating Distributions. At the time of each Liquidating
-------------------------
Distribution, such Liquidating Distribution shall be made to the holders of the
Senior Preferred Stock, Class L Common, Class A Common and Class B Common in the
following priority:
(a) The holders of the Senior Preferred Stock shall be entitled
to receive all or a portion of such Liquidating Distribution (ratably among such
holders based upon the number of Shares of Senior Preferred Stock held by each
such holder as of the time of such Liquidating Distribution) equal to the
aggregate Liquidation Preference on the outstanding Shares of Senior Preferred
Stock as of the time of such Liquidating Distribution, and no Liquidating
Distribution or any portion thereof shall be made under paragraphs 3(b), (c) or
(d) below until the entire amount of the Liquidation Preference on the
outstanding Shares of Senior Preferred Stock as of the time of such Liquidating
Distribution has been paid in full. The Liquidating Distributions made pursuant
to this paragraph 3(a) to the holders of the Senior Preferred Stock shall
constitute a payment of Liquidation Preference on Senior Preferred Stock.
(b) After the required amount of a Liquidating Distribution has
been made in full pursuant to paragraph 3(a) above, the holders of Class L
Common shall be entitled to receive all or a portion of such Liquidating
Distribution (ratably among such holders based upon the number of shares of
Class L Common held by each such holder as of the time of such Distribution)
equal to the aggregate Unpaid Yield on the outstanding shares of Class L Common
as of the time of such Liquidating Distribution, and no Liquidating Distribution
or any portion thereof shall be made under paragraphs 3(c) or (d) below until
the entire amount of the Unpaid Yield on the outstanding shares of Class L
Common as of the time of such Liquidating Distribution has been paid in full.
The Liquidating Distributions made pursuant to this paragraph 3(b) to holders of
Class L Common shall constitute a payment of Yield on Class L Common.
(c) After the required amount of a Liquidating Distribution has
been made in full pursuant to paragraph 3(b) above, the holders of Class L
Common shall be entitled to receive all or a portion of such Liquidating
Distribution (ratably among such holders based upon the number of shares of
Class L Common held by each such holder as of the time of such Liquidating
Distribution) equal to the aggregate Unreturned Original Cost of the outstanding
shares of Class L Common as of the time of such Liquidating Distribution, and no
Liquidating Distribution or any portion thereof shall be made under paragraph
3(d) below until the entire amount of the Unreturned Original Cost of the
outstanding shares of Class L Common as of the time of such Liquidating
Distribution has been paid in full. The Liquidating Distributions made pursuant
to this paragraph 3(c) to holders of Class L Common shall constitute a return of
Original Cost of Class L Common.
-4-
<PAGE>
(d) After the required amount of a Liquidating Distribution has
been made pursuant to paragraphs 3(a), (b) and (c) above, the holders of Common
Stock as a group, shall be entitled to receive the remaining portion of such
Liquidating Distribution (ratably among such holders based upon the number of
shares of Common Stock held by each such holder as of the time of such
Liquidating Distribution).
4. Non-Liquidating Distributions. At the time of each Non-
-----------------------------
Liquidating Distribution, such Non-Liquidating Distribution shall be made to the
holders of the Senior Preferred Stock, Class L Common, Class A Common and Class
B Common in the following priority:
(a) The holders of the Senior Preferred Stock shall be entitled
to receive all or a portion of such Non-Liquidating Distribution (ratably among
such holders based upon the number of Shares of Senior Preferred Stock held by
each such holder as of the time of such Non-Liquidating Distribution) equal to
the aggregate amount of accrued but unpaid cash dividends required to be paid
pursuant to the last sentence of paragraph 2(b) of this Part B of this Article
III on the outstanding Shares of Senior Preferred Stock as of the time of such
Non-Liquidating Distribution, and no Non-Liquidating Distribution or any portion
thereof shall be made under paragraph 4(b) below until the entire amount of the
accrued but unpaid cash dividends required to be paid pursuant to the last
sentence of paragraph 2(b) of this Part B of this Article III on the outstanding
Shares of Senior Preferred Stock as of the time of such Non-Liquidating
Distribution have been paid in full. The Non-Liquidating Distributions made
pursuant to this paragraph 4(a) to the holders of the Senior Preferred Stock
shall constitute a payment of dividends on Senior Preferred Stock.
(b) After the required amount of a Non-Liquidating Distribution
has been made in full pursuant to paragraph 4(a) above, the holders of Common
Stock shall be entitled to receive all or a portion of such Non-Liquidating
Distribution in the manner and in the priority set forth in paragraphs 3(b), (c)
and (d) hereof.
(c) Notwithstanding any other provision in these Articles of
Incorporation to the contrary, prior to the date on which the Stated Value of
each Share of Senior Preferred Stock, plus all accrued and unpaid dividends
thereon, is paid in full to the holder thereof in connection with the redemption
of such Share or otherwise or such Share is otherwise acquired by the
Corporation, the Corporation shall not make Non-Liquidating Distributions which
would result in cash, property or securities of the Corporation in excess of $25
million being distributed to the holders of the Common Stock.
5. Redemption.
----------
(a) Optional Redemption. The Corporation shall have the right
-------------------
to redeem all or any portion of the Shares of Senior Preferred Stock then
outstanding from the holders thereof by notice to such holders at a redemption
price per Share, to be paid in cash, equal to the Liquidation Preference.
-5-
<PAGE>
(b) Mandatory Redemption. On August 1, 2010 (the "Mandatory
-------------------- ---------
Redemption Date"), the Corporation shall redeem all of the Senior Preferred
- ---------------
Stock then outstanding from the holders thereof, at a redemption price per
Share, to be paid in cash, equal to the Liquidation Preference.
(c) Redemption Procedures. In the event of a redemption
---------------------
pursuant to Subsection (a) or Subsection (b) of this Section 5, the Corporation
shall deliver notice of such redemption to each holder of record of the Senior
Preferred Stock to be redeemed (determined as of the close of business on the
business day next preceding the day on which such notice is given), at the
address shown on the records of the Corporation for such holder or given by such
holder to this Corporation for notice purposes, or if no such address appears or
is given, at the address of the Corporation's principal executive offices. Such
notice (i) shall notify such holder of the redemption to be effected, specify
the number of Shares to be redeemed from such holder, the date of the redemption
(which date shall be not less than thirty (30) nor more than sixty (60) days
after the date the notice is given) (the "Redemption Date"), and the manner in
---------------
which payment may be obtained, and (ii) shall call upon such holder to surrender
to the Corporation, at the Corporation's principal executive offices, in the
manner designated, the certificate or certificates representing the Shares of
Senior Preferred Stock to be redeemed (the "Redemption Notice"). On or after the
-----------------
Redemption Date, (x) each holder of Senior Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing such
Shares in the manner and at the place designated in the Redemption Notice, (y)
the applicable redemption price shall forthwith be paid to the order of the
person whose name appears on such certificate or certificates as the owner
thereof, either by wire transfer of immediately available funds to such account
as the holder may direct or by delivery of a check (drawn on the New York City
or San Francisco, California branch of a bank chartered under the laws of the
United States of America or any state thereof) to the holder in the manner
prescribed for notices in this Article III and (z) each certificate so
surrendered shall be canceled. In the event that fewer than all of the Shares
represented by any certificate surrendered pursuant to clause (x) of this
Section 5(c) are redeemed, a new certificate representing the unredeemed Shares
shall forthwith be issued and delivered to the holder in the manner prescribed
for notices in this Article III.
(d) Insufficient Funds. If the funds of the Corporation legally
------------------
available for redemption of the Senior Preferred Stock on the Mandatory
Redemption Date are insufficient to redeem the total number of Shares of Senior
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such Shares
ratably among the holders of such Shares to be redeemed. The Shares of Senior
Preferred Stock not redeemed shall remain outstanding and shall be entitled to
dividends at the Default Rate and shall otherwise be entitled to all the rights
and preferences provided in these Articles. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
the previously unredeemed Shares of Senior Preferred Stock, such funds will
immediately be used to redeem the balance of the Shares which the Corporation
has become obligated to redeem on the Mandatory Redemption Date but which it has
not redeemed. For purposes of Section 2(d) of Part B of Article III, the
failure to redeem all of the Shares of Senior Preferred Stock to be redeemed at
the Mandatory Redemption Date and to pay in full the Liquidation Preference for
such Shares of
-6-
<PAGE>
Senior Preferred Stock on such date shall be treated as an Event of Default
entitling the holders of the Senior Preferred Stock to the rights set forth
therein until such Shares have been redeemed, and the Liquidation Preference has
been paid in full.
(e) Status of Redeemed Stock. In the event that any Shares of
------------------------
Senior Preferred Stock are redeemed pursuant to this Section 5, the Shares so
redeemed shall be canceled. No Share of Senior Preferred Stock is entitled to
any Distributions accruing after the date on which the Liquidation Preference is
paid to the holder thereof. On such date all rights of the holder of such Share
of Senior Preferred Stock shall cease, and such Share of Senior Preferred Stock
shall not be deemed to be outstanding.
6. Stock Splits and Stock Dividends. The Corporation shall not in
--------------------------------
any manner subdivide (by stock split, stock dividend or otherwise) or combine
(by stock split, stock dividend or otherwise) the outstanding shares of Common
Stock of one class unless the outstanding shares of Common Stock of the other
classes shall be proportionately subdivided or combined. All such subdivisions
and combinations shall be payable only in shares of Class L Common to the
holders of Class L Common, in shares of Class A Common to the holders of Class A
Common and in shares of Class B Common to the holders of Class B Common. In no
event shall a stock split or stock dividend constitute a payment of Yield or a
return of Original Cost.
7. Conversion Right. Each record holder of Class A Common will be
----------------
entitled to convert any or all of such holder's Class A Common into the same
number of shares of Class B Common and each record holder of Class B Common will
be entitled to convert any or all of the shares of such holder's Class B Common
into the same number of shares of Class A Common; provided, however, that at the
-------- -------
time of conversion of shares of Class B Common into shares of Class A Common
such holder would be permitted, pursuant to applicable law, to hold the total
number of shares of Class A Common which such holder would hold after giving
effect to such conversion; and provided, further, that the determination of a
-------- -------
holder of Class B Common that such holder is permitted pursuant to applicable
law to convert Class B Common into Class A Common pursuant to this Section 7
shall be final and binding upon the Corporation.
Each conversion of shares of one class of Common Stock into shares of
another class of Common Stock will be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal executive office of the Corporation at any time during normal business
hours, together with a written notice by the holder of such shares stating the
number of shares that any such holder desires to convert into the other class of
Common Stock. Such conversion will be deemed to have been effected as of the
close of business on the date on which such certificate or certificates have
been surrendered and such notice has been received by the Corporation, and at
such time the rights of any such holder with respect to the converted class of
Common Stock will cease and the person or persons in whose name or names the
certificate or certificates for shares of the other class of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of such other class of Common Stock represented
thereby.
-7-
<PAGE>
So long as any shares of any class of Common Stock are outstanding,
the Corporation will at all times reserve and keep available out of its
authorized but unissued shares of Class A Common and Class B Common (or any
shares of Class A Common or Class B Common which are held as treasury shares),
the number of shares sufficient for issuance upon conversion.
8. Protective Provisions. As long as any Shares of Senior Preferred
---------------------
Stock are outstanding, the Corporation shall not without first obtaining the
written consent of the holders of at least a majority of the then outstanding
Shares of Senior Preferred Stock:
(a) alter or change the rights, preferences or privileges of any
shares of Senior Preferred Stock;
(b) except as may be required pursuant to Section 2.5 of that
certain Recapitalization Agreement dated as of March 13, 1999, as the same be
amended from time to time, by and among the Corporation, Hyundai Electronics
Industries Co., Ltd., Hyundai Electronics America and ChipPAC Merger Corp.,
increase the total number of authorized shares of Senior Preferred Stock or
issue or authorize the issuance of any additional Shares of Senior Preferred
Stock; or
(c) authorize or issue, or obligate itself to issue, any other
equity security (including any other security convertible into or exercisable
for any equity security) having a preference over or being on a parity with the
Senior Preferred Stock with respect to dividends or liquidation rights or
liquidation preferences.
9. No Impairment. The Corporation shall not, by amendment of its
-------------
Articles of Incorporation or Bylaws or through any reorganization,
recapitalization, transfer of assets, consolidation, merger or other business
combination transaction, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under Part B of this Article III by the
Corporation, but will at all times in good faith assist in the carrying out of
all provisions of Part B of Article III and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
the Senior Preferred Stock under these Articles against impairment.
10. Registration of Transfer. The Corporation shall keep at its
------------------------
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of the Senior Preferred Stock and the Common
Stock. Upon the surrender of any certificate representing shares of Senior
Preferred Stock or any class of Common Stock at such place, the Corporation
shall, at the request of the registered holder of such certificate, execute and
deliver a new certificate or certificates in exchange therefor (either of the
same class, or as directed by the holder in connection with a conversion from
one class to another) representing in the aggregate the number of shares of such
class represented by the surrendered certificate and the Corporation forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and
-8-
<PAGE>
shall be substantially identical in form to the surrendered certificate. The
issuance of new certificates shall be made without charge to the holders of the
surrendered certificates for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such issuance. The Corporation
will not close its books against the transfer of any share of Common Stock, or
of any share of Common Stock issued or issuable upon conversion of shares of
another class of Common Stock, in any manner that would interfere with the
timely conversion of such shares of Common Stock.
11. Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Senior Preferred Stock or Common
Stock, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation, or, in the case of any
such mutilation upon surrender of such certificate, the Corporation shall (at
its expense) execute and deliver in lieu of such certificate a new certificate
of like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
12. Notices. All notices referred to herein shall be in writing,
-------
shall be delivered personally or by first class mail, postage prepaid, and shall
be deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's address
as it appears in the stock records of the Corporation (unless otherwise
specified in a written notice to the Corporation by such holder).
13. Amendment and Waiver. No amendment or waiver of any provision of
--------------------
this Article III shall be effective without the prior written consent of the
holders of not less than a majority of the then outstanding Class A Common,
voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, the Senior Preferred Stock or any class of
Common Stock that adversely affects the powers, preferences or special rights of
the Senior Preferred Stock or such class of Common Stock shall be effective
without the prior consent of the holders of a majority of the then outstanding
shares of such affected class of Common Stock or the affected shares of Senior
Preferred Stock, as the case may be, voting as a single class.
Part C. Definitions.
-----------
"Distribution" means each distribution made by the Corporation to holders
------------
of capital stock, whether in cash, property, or securities of the Corporation
and whether by dividend, liquidating distributions or otherwise; provided that
none of the following shall be a Distribution: (a) any redemption or repurchase
by the Corporation of any capital stock held by an employee, director or former
employee or director of the Corporation or any of its subsidiaries or (b) any
recapitalization or exchange of any capital stock, or any subdivision (by stock
split, stock dividend or otherwise) or any combination (by stock split, stock
dividend or otherwise) of any outstanding shares of capital stock.
-9-
<PAGE>
"Hyundai Group" means Hyundai Electronics Industries Co., Ltd., Hyundai
-------------
Electronics America and their respective affiliates.
"Liquidating Distribution" mean any Distribution made upon a Liquidation
------------------------
Event.
"Liquidation Event" means (i) any liquidation, dissolution or winding up of
-----------------
the Corporation, whether voluntary or involuntary, (ii) any sale or transfer by
the Corporation of all or substantially all (as defined in the Revised Model
Business Corporation Act) of its assets on a consolidated basis, (iii) any
consolidation, merger or reorganization of the Corporation with or into any
other entity or entities as a result of which the holders of the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors
immediately prior to such consolidation, merger or reorganization cease to own
the outstanding capital stock of the surviving corporation possessing the voting
power (under ordinary circumstances) to elect a majority of the surviving
corporation's board of directors or (iv) any sale or transfer to any third party
of shares of the Corporation's capital stock by the holders thereof as a result
of which the holders of the Corporation's outstanding capital stock possessing
the voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors immediately prior to such sale or transfer
cease to own the outstanding capital stock of the Corporation possessing the
voting power (under ordinary circumstances) to elect a majority of the
Corporation's board of directors.
"Liquidation Preference" means an amount per Share of Senior Preferred
----------------------
Stock equal to the sum of (A) the Stated Value plus (B) the amount of all
accrued but unpaid dividends on such Share of Senior Preferred Stock as provided
in Section 2 of Part B of Article III.
"Non-Liquidating Distribution" means each Distribution other than a
----------------------------
Liquidating Distribution.
"Original Cost" of each share of Class L Common shall be equal to $9.00 (as
-------------
proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting the Class L Common).
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a government or any branch,
department, agency, political subdivision or official thereof.
"Stated Value" of each share of Senior Preferred Stock shall be equal to
------------
$1,000 (as proportionally adjusted for all stock splits, stock dividends and
other recapitalizations affecting the Senior Preferred Stock).
"Unpaid Yield" of any share of Class L Common means an amount equal to the
------------
excess, if any, of (a) the aggregate Yield accrued on such share, over (b) the
aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
-10-
<PAGE>
"Unreturned Original Cost" of any share of Class L Common means an amount
------------------------
equal to the excess, if any, of (a) the Original Cost of such share, over (b)
the aggregate amount of Distributions made by the Corporation that constitute a
return of Original Cost of such share.
"Yield" means, with respect to each share of Class L Common for each
-----
calendar quarter, the amount accruing on such share each day during such quarter
at the rate of 12.0% per annum of the sum of (a) such share's Unreturned
Original Cost, plus (b) Unpaid Yield thereon for all prior quarters. In
calculating the amount of any Distribution to be made during a calendar quarter,
the portion of a Class L Common share's Yield for such portion of such quarter
elapsing before such Distribution is made shall be taken into account.
Part D. Class A Preferred Stock Terms.
-----------------------------
10,000 shares of the Corporation's Preferred Stock shall be designated
as Class A Convertible Preferred Stock, par value $.01 per share (the "Class A
-------
Preferred").
- ---------
The Class A Preferred shall have the following rights, preferences and
privileges, subject to the following restrictions, limitations and
qualifications.
Section 1. Dividends.
---------
1A. General Obligation. When and as declared by the Corporation's
------------------
Board of Directors (the "Board") and to the extent permitted under the General
-----
Corporation Law of California, the Corporation shall pay preferential dividends
in cash to the holders of the Class A Preferred as provided in this Section 1.
Dividends on each share of the Class A Preferred (a "Share") shall accrue on a
-----
daily basis at the rate of 10% per annum of the sum of the Liquidation Value
thereof plus all accumulated and unpaid dividends thereon from and including the
date of issuance of such Share to and including the first to occur of (i) the
date on which the Liquidation Value of such Share (plus all accrued and unpaid
dividends thereon) is paid to the holder thereof in connection with the
liquidation of the Corporation or the redemption of such Share is effected by
the Corporation, (ii) the date on which such Share is converted into shares of
Conversion Stock hereunder or (iii) the date on which such Share is otherwise
acquired by the Corporation. Such dividends shall accrue whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends, and such
dividends shall be cumulative. The date on which the Corporation initially
issues any Share shall be deemed to be its "date of issuance" regardless of the
number of times transfer of such Share is made on the stock records maintained
by or for the Corporation and regardless of the number of certificates which may
be issued to evidence such Share.
1B. Dividend Reference Dates. To the extent not paid on August 1 of
------------------------
each year, beginning August 1, 2000 (the "Dividend Reference Date"), all
-----------------------
dividends which have accrued on each Share outstanding during the twelve-month
period (or other period in the case of the initial
-11-
<PAGE>
Dividend Reference Date) ending upon each such Dividend Reference Date shall be
accumulated and shall remain accumulated dividends with respect to such Share
until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Class A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the aggregate
accrued but unpaid dividends on the Shares held by each such holder.
1D. Participation in Non-Cash Dividends. In addition to the
-----------------------------------
dividends accruing on the Class A Preferred under paragraph 1A above, if the
Corporation declares or pays any dividends upon the Common Stock other than cash
dividends or dividends payable solely in shares of Common Stock, the Corporation
shall also declare and pay to the holders of the Class A Preferred at the same
time that it declares and pays such dividends to the holders of the Common
Stock, the dividends which would have been declared and paid with respect to the
Common Stock issuable upon conversion of the Class A Preferred had all of the
outstanding Class A Preferred been converted immediately prior to the record
date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
Section 2. Liquidation.
-----------
Upon any liquidation, dissolution or winding up of the Corporation
(whether voluntary or involuntary), each holder of Class A Preferred shall be
entitled to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation Value of all
Shares held by such holder (plus all accrued and unpaid dividends thereon), and
the holders of Class A Preferred shall not be entitled to any further payment.
If upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Class A
Preferred hereunder are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid upon any liquidation,
dissolution or winding up of the Corporation, then the entire assets available
to be distributed to the Corporation's stockholders shall be distributed pro
rata among such holders based upon the aggregate Liquidation Value (plus all
accrued and unpaid dividends) of the Class A Preferred held by each such holder.
Prior to the liquidation, dissolution or winding up of the Corporation, the
Corporation shall declare for payment all accrued and unpaid dividends with
respect to the Class A Preferred, but only to the extent of funds of the
Corporation legally available for the payment of dividends. Not less than 30
days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each record
holder of Class A Preferred, setting forth in reasonable detail the amount of
proceeds to be paid with respect to each Share and each share of Common Stock in
connection with such liquidation, dissolution or winding up. Any (i) sale or
transfer by the Corporation of all or substantially all (as defined in the
Revised Model Business Corporation Act) of its assets on a consolidated basis,
(ii) consolidation, merger or reorganization of the Corporation with or into any
other entity or entities as a result of which the holders of the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances)
-12-
<PAGE>
to elect a majority of the Board immediately prior to such consolidation, merger
or reorganization cease to own the outstanding capital stock of the surviving
corporation possessing the voting power (under ordinary circumstances) to elect
a majority of the surviving corporation's board of directors (any such
transaction described in clause (i) or (ii), a "Fundamental Change") or (iii)
------------------
issuance by the Corporation or sale or transfer to any third party of shares the
Corporation's capital stock by the holders thereof as a result of which the
holders of the Corporation's outstanding capital stock possessing the voting
power (under ordinary circumstances) to elect a majority of the Board
immediately prior to such sale or transfer cease to own the outstanding capital
stock of the Corporation possessing the voting power (under ordinary
circumstances) to elect a majority of the Board (any such transaction in this
clause (iii), a "Change in Control") shall be deemed to be a liquidation,
-----------------
dissolution or winding up of the Corporation within the meaning of this Section
2, and the holders of the Class A Preferred shall be entitled to receive payment
from the Corporation of the amounts payable with respect to the Class A
Preferred upon a liquidation, dissolution or winding up of the Corporation under
this Section 2 in cancellation of their Shares upon the consummation of any such
transaction.
Section 3. Priority of Class A Preferred on Dividends and
----------------------------------------------
Redemptions.
- -----------
So long as any Class A Preferred remains outstanding, without the
prior written consent of the holders of at least a majority of the outstanding
Shares, the Corporation shall not, nor shall it permit any Subsidiary to,
redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities, if at the time of
or immediately after any such redemption, purchase, acquisition, dividend or
distribution the Corporation has failed to pay the full amount of dividends
accrued on the Class A Preferred or the Corporation has failed to make any
redemption of the Class A Preferred required hereunder; provided that (i) the
Corporation may redeem or repurchase any capital stock held by an employee,
director or former employee or director of the Corporation or any of its
Subsidiaries, (ii) any recapitalization or exchange of any capital stock, or any
subdivision (by stock split, stock dividend or otherwise) or any combination (by
stock split, stock dividend or otherwise) of any outstanding shares of the
Corporation's capital stock shall not be deemed a redemption, purchase,
acquisition, dividend or distribution within the meaning of this Section 3 and
(iii) the Corporation may redeem, purchase or otherwise acquire Common Stock for
cash or pay or declare dividends or distributions on the Common Stock in cash in
an aggregate amount not to exceed $25 million (provided that the aggregate
amount of such redemptions, purchases, acquisitions, dividends or distributions
paid or payable in any one calendar year shall not exceed the amount of
dividends paid on the Class A Preferred in such year multiplied by a fraction,
----------
the numerator of which shall be equal to the total number of shares of Common
Stock then outstanding immediately prior to any such redemption, purchase,
acquisition, dividend or distribution and the denominator of which shall be
equal to the total number of shares of Common Stock issuable upon conversion of
all of the Shares of Class A Preferred immediately prior to any such redemption,
purchase, acquisition, dividend or distribution).
-13-
<PAGE>
Section 4. Redemptions.
-----------
4A. Optional Redemptions. The Corporation may at any time and from
--------------------
time to time after August 1, 2005 redeem all or any portion of the Shares of
Class A Preferred then outstanding. Upon any such redemption, the Corporation
shall pay a price per Share equal to the greater of (i) the Market Price thereof
and (ii) the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) and a premium equal to the following percentage of the Liquidation
Value:
Redemption
Occurs On or After But Prior to % Premium
------------------ ------------ ---------
August 1, 2005 August 1, 2006 10%
August 1, 2006 August 1, 2007 8%
August 1, 2007 August 1, 2008 6%
August 1, 2008 August 1, 2009 4%
August 1, 2009 August 1, 2010 2%
August 1, 2010 0%
4B. Redemption upon Request. If the Corporation does not consummate
-----------------------
a Qualifying IPO on or prior to August 1, 2001, the holders of not less than a
majority of the then outstanding Class A Preferred may request redemption of all
of their Shares of Class A Preferred by delivering written notice of such
request to the Corporation. Within five days after receipt of such request, the
Corporation shall give written notice of such request to all other holders of
Class A Preferred, and such other holders may request redemption of their Shares
of Class A Preferred by delivering written notice to the Corporation within ten
days after receipt of the Corporation's notice. The Corporation shall be
required to redeem all Shares with respect to which such redemption requests
have been made at a price per Share equal to the Liquidation Value thereof (plus
all accrued and unpaid dividends thereon) within 30 days after receipt of the
initial redemption request. The provisions of this paragraph 4B shall terminate
automatically and be of no further force and effect upon the consummation of a
Qualifying IPO.
4C. Redemption Payments. For each Share which is to be redeemed
-------------------
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash determined
in accordance with paragraph 4A or paragraph 4B, as the case may be.
Notwithstanding anything to the contrary contained herein, all redemptions
pursuant to this Section 4 will be subject to applicable restrictions contained
in the General Corporation Law of California and in the Corporation's and its
Subsidiaries' debt and equity financing agreements. If, due to any of the
aforementioned restrictions, the funds of the Corporation available for
redemption of Shares on any Redemption Date are insufficient to redeem the total
number of Shares to be redeemed on such date, those funds which are available
free of such restrictions shall be used to redeem the maximum possible number of
Shares pro rata among the holders of the Shares to be
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<PAGE>
redeemed based upon the aggregate Liquidation Value of such Shares held by each
such holder (plus all accrued and unpaid dividends thereon). At any time
thereafter when additional funds of the Corporation are available free of such
restrictions for the redemption of Shares, such funds shall immediately be used
to redeem the balance of the Shares which the Corporation has become obli gated
to redeem on any Redemption Date but which it has not redeemed. Prior to any
redemption of Class A Preferred, the Corporation shall declare for payment all
accrued and unpaid dividends with respect to the Shares which are to be
redeemed, but only to the extent of funds of the Corporation available free of
such restrictions for the payment of dividends.
4D. Notice of Redemption. Except as otherwise provided herein, the
--------------------
Corporation shall mail written notice of each redemption of any Class A
Preferred (other than a redemption at the request of a holder or holders of
Class A Preferred) to each record holder thereof not more than 60 nor less than
30 days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
4E. Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. Except as otherwise provided herein, the number of Shares of Class A
- --------
Preferred to be redeemed from each holder thereof in redemptions hereunder shall
be the number of Shares determined by multiplying the total number of Shares to
be redeemed times a fraction, the numerator of which shall be the total number
of Shares then held by such holder and the denominator of which shall be the
total number of Shares then outstanding.
4F. Dividends After Redemption Date. No Share shall be entitled to
-------------------------------
any dividends accruing after the date on which the Liquidation Value of such
Share (plus all accrued and unpaid dividends thereon) is paid to the holder of
such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
Section 5. Voting Rights.
-------------
The holders of the Class A Preferred shall be entitled to notice of
all stockholders meetings in accordance with the Corporation's bylaws, and the
holders of the Class A Preferred shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the holders of the Class
A Common voting together as a single class, with each share of Class A Common
entitled to one vote per share and each Share of Class A Preferred entitled to
one vote for each share of Class A Common issuable upon conversion of the Class
A Preferred as of the record date for such vote or, if no record date is
specified, as of the date of such vote.
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<PAGE>
Section 6. Conversion.
----------
6A. Conversion Procedure.
--------------------
(i) At any time and from time to time, any holder of Class A
Preferred may convert all or any portion of the Class A Preferred held by such
holder into a number of shares of Conversion Stock computed by multiplying the
number of Shares to be converted by $1,000.00 and dividing the result by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of
Class A Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Class A Preferred to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such conversion has been
effected, the rights of the holder of the Shares converted as a holder of Class
A Preferred shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof all amounts due to such
holder in connection with any such redemption.
(iv) Notwithstanding any other provision hereof, if a
conversion of Class A Preferred is to be made in connection with an Initial
Public Offering or other transaction affecting the Corporation, the conversion
of any Shares of Class A Preferred may, at the election of the holder thereof,
be conditioned upon the consummation of such transaction, in which case such
conversion shall not be deemed to be effective until such transaction has been
consummated.
(v) As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(b) payment in an amount equal to all accrued dividends with
respect to each Share converted which have not been paid prior thereto,
plus the amount payable under subparagraph (x) below with respect to such
conversion; and
(c) a certificate representing any Shares of Class A Preferred
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
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<PAGE>
(vi) The Corporation shall declare the payment of all dividends
payable under subparagraph (v)(b) above. If the Corporation is not permitted
under applicable law or any restriction contained in the Corporation's and its
Subsidiaries' debt and equity financing agreements to pay any portion of the
accrued and unpaid dividends on the Class A Preferred being converted, the
Corporation shall pay such dividends to the converting holder as soon thereafter
as funds of the Corporation are available free of any such restrictions or
prohibition of applicable law for such payment.
(vii) The issuance of certificates for shares of Conversion
Stock upon conversion of Class A Preferred shall be made without charge to the
holders of such Class A Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock. Upon conversion of each
Share of Class A Preferred, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
(viii) The Corporation shall not close its books against the
transfer of Class A Preferred or of Conversion Stock issued or issuable upon
conversion of Class A Preferred in any manner which interferes with the timely
conversion of Class A Preferred.
(ix) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion Stock, solely
for the purpose of issuance upon the conversion of the Class A Preferred, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Class A Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
not take any action which would cause the number of authorized but unissued
shares of Conversion Stock to be less than the number of such shares required to
be reserved hereunder for issuance upon conversion of the Class A Preferred.
(x) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon any
conversion of the Class A Preferred, the Corporation, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal to
the Market Price of such fractional interest as of the date of conversion.
(xi) If the shares of Conversion Stock issuable by reason of
conversion of Class A Preferred are convertible into or exchangeable for any
other stock or securities of the Corporation, the Corporation shall, at the
converting holder's option, upon surrender of the Shares to be converted by such
holder as provided herein together with any notice, statement or payment
required to effect such conversion or exchange of Conversion Stock, deliver to
such holder or as otherwise specified by such holder a certificate or
certificates representing the stock or securities into which the shares of
Conversion Stock issuable by reason of such conversion are so convertible or
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<PAGE>
exchangeable, registered in such name or names and in such denomination or
denominations as such holder has specified.
6B. Conversion Price.
----------------
(i) The initial Conversion Price shall be $1.50, which is 150%
of the weighted average price per share of Class L Common and Class A Common
paid by Bain and CVC in connection with the Recapitalization Agreement, of which
90% is attributable to the shares of Class L Common and 10% is attributable to
the shares of Class A Common. Ninety percent (90%) of the initial and any
subsequent Conversion Price shall be deemed attributable to the shares of Class
L Common and ten percent (10%) of the initial and any subsequent Conversion
Price shall be deemed attributable to the shares of Class A Common. In order to
prevent dilution of the conversion rights granted under this Section 6, the
Conversion Price shall be subject to adjustment from time to time pursuant to
this paragraph 6B.
(ii) If and whenever on or after the original date of issuance
of the Class A Preferred the Corporation issues or sells, or in accordance with
paragraph 6C is deemed to have issued or sold, any shares of its Common Stock
for a consideration per share less than the portion of the Conversion Price
attributable to such class of Common Stock (as set forth in Section 6B(i)) in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale the Conversion Price shall be
reduced to the Conversion Price determined (in accordance with Section 6B(i)) by
dividing (a) the sum of (1) the product derived by multiplying the Conversion
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus
(2) the consideration, if any, received by the Corporation upon such issue or
sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price as a result of any issue or sale (or deemed
issue or sale) of any shares of Common Stock to (A) employees, officers or
directors of the Corporation and its Subsidiaries pursuant to stock option
plans, stock ownership plans or agreements or other incentive stock arrangements
approved by the Board or (B) unaffiliated third party financing sources, so long
as such issuances or sales (or deemed issuances or sales) to unaffiliated third
party financing sources for a consideration per share less than the portion of
the Conversion Price attributable to such class of Common Stock (as set forth in
Section 6B(i)) does not exceed 10% of the Corporation's Common Stock.
6C. Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under paragraph 6B, the following
shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any
-----------------------------
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon
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<PAGE>
exercise of such Options, is less than the portion of the Conversion Price
attributable to such class of Common Stock (as set forth in Section 6B(i)) in
effect immediately prior to the time of the granting or sale of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the granting or sale of such Options for such price
per share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in
----------------------------------
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the portion of the Conversion Price attributable to such class of Common
Stock (as set forth in Section 6B(i)) in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Corporation at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this paragraph, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this Section 6, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Conversion Rate. If the
-----------------------------------------
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
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<PAGE>
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially
granted, issued or sold. For purposes of paragraph 6C, if the
terms of any Option or Convertible Security which was outstanding as of the date
of issuance of the Class A Preferred are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change.
(iv) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any right to
- ----------
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued. For purposes of paragraph 6C, the expiration or termination
of any Option or Convertible Security which was outstanding as of the date of
issuance of the Class A Preferred shall not cause the conversion Price hereunder
to be adjusted unless, and only to the extent that, a change in the terms of
such Option or Convertible Security caused it to be deemed to have been issued
after the date of issuance of the Class A Preferred.
(v) Calculation of Consideration Received. If any Common
-------------------------------------
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or Convertible
Security is issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of the non-
surviving entity in connection with any merger in which the Corporation is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities shall be determined by the Board in its reasonable good
faith judgment.
(vi) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or
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<PAGE>
any Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of the
-----------
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D. Subdivision or Combination of Common Stock. If the Corporation
------------------------------------------
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced (in accordance with Section
6B(i)), and if the Corporation at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased (in accordance with Section
6B(i)).
6E. Notices. Immediately upon any adjustment of the Conversion
-------
Price, the Corporation shall give written notice thereof to all holders of Class
A Preferred, setting forth in reasonable detail and certifying the calculation
of such adjustment.
6F. Mandatory Conversion. Upon the consummation of a Qualifying
--------------------
IPO, all of the then outstanding Shares of Class A Preferred shall be
automatically converted into Conversion Stock at the then effective Conversion
Price. Any such automatic conversion shall only be effected at the time of and
subject to the closing of such Qualifying IPO and upon written notice of such
automatic conversion delivered to all holders of Class A Preferred at least
seven days prior to such closing.
Section 7. Protective Provisions.
---------------------
As long as any Shares of Class A Preferred are outstanding, the
Corporation shall not without first obtaining the written consent of the holders
of at least 662/3% of the then outstanding Shares of Class A Preferred:
(a) amend or change the rights, preferences, privileges or powers of,
or the restrictions provided for the benefit of, the Class A Preferred;
(b) authorize, create or issue any new shares of any class of capital
stock or any security convertible into or exercisable for any such class of
capital stock having a preference superior to the Class A Preferred with respect
to dividends or liquidation rights or liquidation
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<PAGE>
preferences, other than the issuance of any shares of the Corporation's Class B
Preferred Stock, par value $.01 per share; or
(c) reclassify any outstanding shares of capital stock into any class
of capital stock or any security convertible into or exercisable for any such
class of capital stock having a preference superior to the Class A Preferred
with respect to dividends or liquidation rights or liquidation preferences.
Section 8. Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of Class A Preferred. Upon the surrender of any certificate
representing Class A Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Class A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Class A Preferred represented by the surrendered certificate.
Section 9. Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
Shares of Class A Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
Shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Class A Preferred represented by
such new certificate from the date to which dividends have been fully paid on
such lost, stolen, destroyed or mutilated certificate.
Section 10. Definitions.
-----------
"Bain" means Bain Capital, Inc. and its affiliates.
----
"Class A Common" means the Corporation's Class A Common Stock, par
--------------
value $.01 per share and the Corporation's Class B Common Stock, par value $.01
per share.
"Class L Common" means the Corporation's Class L Common Stock, par
--------------
value $.01 per share.
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<PAGE>
"Common Stock" means, collectively, the Corporation's Class A Common,
------------
Class L Common and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the number
-------------------------------
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock issuable upon the exercise or conversion of any Options
or Convertible Securities, including, without limitation, the Class A Preferred
(whether or not, in the case of any Options or Convertible Securities, any such
Options or Convertible Securities are actually exercisable at such time).
"Conversion Stock" means the total number of shares of the
----------------
Corporation's Common Stock issuable upon conversion of the Class A Preferred,
such issuance to be effected in strips, such that for each share of Class L
Common to be issued upon any conversion, nine (9) shares of Class A Common shall
be issued; provided that if there is a change such that such securities issuable
upon conversion of the Class A Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of securities so issuable,
then the term "Conversion Stock" shall mean a number of shares of the securities
to which the aforementioned shares of Common Stock are convertible.
"Convertible Securities" means any stock or securities directly or
----------------------
indirectly convertible into or exchangeable for Common Stock.
"CVC" means Citicorp Venture Capital, Ltd. and its affiliates.
---
"Initial Public Offering" means a public offering and sale of the
-----------------------
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, if immediately thereafter the Corporation has publicly
held Common Stock listed on a national securities exchange or the NASD automated
quotation system.
"Junior Securities" means any capital stock or other equity securities
-----------------
of the Corporation, except for the Class A Preferred and the Corporation's Class
B Preferred Stock, par value $.01 per share (together, in each case, with all
accumulated dividends thereon).
"Liquidation Value" of any Share as of any particular date shall be
-----------------
equal to $1,000.00 (as proportionately adjusted for all stock splits, stock
dividends and other recapitalizations affecting such Share).
"Market Price" of any security means the average of the closing prices
------------
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
-23-
<PAGE>
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which "Market Price" is being determined and the 20 consecutive
business days prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Market Price" shall be the fair value thereof determined by the
Board and the holders of not less than a majority of the Class A Preferred, each
in the exercise of their good faith judgment; provided that if the Board and
such holders cannot agree on such value, such value shall be determined by an
independent valuation firm experienced in valuing businesses such as the
Corporation and jointly selected by the Board and such holders. The fees and
expenses of the valuation firm shall be borne by the Corporation and the holders
of the Class A Preferred.
"Options" means any rights, warrants or options to subscribe for or
-------
purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Qualifying IPO" means an Initial Public Offering in which the gross
--------------
proceeds to the Corporation exceed $50 million.
"Recapitalization Agreement" means that certain Agreement and Plan of
--------------------------
Recapitalization and Merger, dated as of March 13, 1999, as amended, by and
among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, the
Corporation and ChipPAC Merger Corp.
"Redemption Date" as to any Share means the date specified in the
---------------
notice of any redemption at the Corporation's option or the applicable date
specified herein in the case of any other redemption; provided that no such date
shall be a Redemption Date unless the redemption payment required to be made
pursuant to Section 4 of this Part D is actually paid in full on such date, and
if not so paid in full, the Redemption Date shall be the date on which such
amount is fully paid.
"Subsidiary" means any corporation of which the shares of outstanding
----------
capital stock possessing the voting power (under ordinary circumstances) in
electing the board of directors are, at the time as of which any determination
is being made, owned by the Corporation either directly or indirectly through
Subsidiaries.
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<PAGE>
Section 11. Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective
with respect to any provision of this Part D to Article III hereof without the
prior written consent of the holders of at least 662/3% of the Class A Preferred
outstanding at the time such action is taken.
Section 12. Notices.
-------
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
IV
DIRECTORS' LIABILITY AND INDEMNIFICATION OF AGENTS
--------------------------------------------------
1. The liability of the directors of the Corporation for monetary
damage shall be eliminated to the fullest extent permitted by California law.
2. The Corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) through
bylaw provisions, agreements with agents, vote of shareholders or disinterested
directors, or otherwise, in excess of that otherwise permitted by Section 317 of
the California Corporations Code, subject only to the limits set forth in
Section 204 of the California Corporations Code with respect to actions for
breach of duty to the Corporation or it shareholders.
3. Any amendment, repeal or modification of the foregoing provisions
of this Article IV by the shareholders of the Corporation shall not adversely
affect any right or protection of an agent or director of this Corporation
existing at the time of such amendment, repeal or modification.
* * * * *
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<PAGE>
THREE: The foregoing Amended and Restated Articles of Incorporation have
been duly approved by the Board of Directors.
FOURTH: The foregoing Amended and Restated Articles of Incorporation have
been duly approved by the required vote of the shareholders of this Corporation
in accordance with Sections 603 and 903 of the California General Corporation
Law. The total number of outstanding shares of this Corporation entitled to
vote with respect to the foregoing Amended and Restated Articles was 90,000,000
shares of Class A Common Stock, par value $.01 per share, 10,00,000 shares of
Class L Common Stock, par value $.01 per share and 70,000 shares of Class B
Preferred Stock, par value $.01 per share. The number of shares voting in favor
of the amendment equaled or exceeded the vote required, such required vote being
a majority of the total number of outstanding shares of Class A Common Stock,
par value $.01 per share, Class L Common Stock, par value $.01 per share and
Class B Preferred Stock, par value $.01 per share.
The undersigned certifies under penalty of perjury that he has read the
foregoing Amended and Restated Articles of Incorporation and knows the contents
thereof, and that the statements therein are true.
/s/ Tony Lin
Executed at Santa Clara, ____________________________________
California, on August 5, 1999. Tony Lin, Vice President
/s/ Tony Lin
____________________________________
Tony Lin, Secretary
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
CHIPPAC, INC.
A California corporation
(Adopted as of August 5, 1999)
ARTICLE I
---------
OFFICES
-------
Section 1. Principal Office. The board of directors shall fix the
--------- ----------------
location of the principal office of the corporation.
Section 2. Other Offices. The corporation may also have offices at such
--------- -------------
other places, both within and without the State of California, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. Place of Meetings. Meeting of the shareholders shall be held
--------- -----------------
at any place within or outside the State of California designated by the board
of directors. In the absence of any such designation, shareholders meetings
shall be held at the corporation's principal executive office.
Section 2. Annual Meeting. The annual meeting of shareholders shall be
--------- --------------
held on the second Friday of the month of May of each year, or at any other time
designated by the board of directors provided that the annual meeting in any
year shall be held not longer than 15 months after the preceding annual meeting.
At each annual meeting, directors shall be elected and any other proper business
may be transacted which it is within the power of the shareholders to conduct.
Section 3. Special Meetings. Special meetings of shareholders may be
--------- ----------------
called for any purpose and may be held at such time and place, within or without
the State of California, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors or the chief executive officer and shall be called by the
chief executive officer upon the written request of holders of shares entitled
to cast not less than twenty five percent (25%) of the votes at the meeting.
Such written request shall state the purpose or purposes of the meeting and
shall be delivered to the chief executive officer. Upon
<PAGE>
receipt of such written request, the chief executive officer shall fix a date
and time for such meeting within two days of the date requested for such meeting
in such written request.
Section 4. Notice. Whenever shareholders are required or permitted to
--------- ------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each shareholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the chief executive officer or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
shareholder at his, her or its address as the same appears on the records of the
corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Shareholders List. The officer having charge of the stock
--------- -----------------
ledger of the corporation shall make, at least ten (10) days before every
meeting of the shareholders, a complete list of the shareholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days nor more than sixty (60) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
--------- ------
capital stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders, except as otherwise
provided by statute or by the articles of incorporation. If a quorum is not
present, the holders of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
--------- ------------------
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which might
have been
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<PAGE>
transacted at the original meeting. If the adjournment is for more than forty-
five (45) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
--------- -------------
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless the question is one upon which by express provisions of an
applicable law, the Shareholders Agreement, dated as of August 5, 1999, by and
among the corporation and certain of its shareholders (the "Shareholders
------------
Agreement"), or the articles of incorporation a different vote is required, in
- ---------
which case such express provision shall govern and control the decision of such
question.
Section 9. Voting Rights. Except as otherwise provided by the
--------- -------------
Corporations Code of the State of California or by the articles of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every shareholder shall at every meeting of the shareholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such shareholder.
Section 10. Proxies. Each shareholder entitled to vote at a meeting of
---------- -------
shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of shareholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
shareholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
---------- -------------------------
articles of incorporation, any action required to be taken at any annual or
special meeting of shareholders of the corporation, or any action which may be
taken at any annual or special meeting of such shareholders, may be taken
without a meeting, without prior
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<PAGE>
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken and bearing the dates of the signature of the shareholders
who signed the consent or consents, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its principal executive office, or an officer or
agent of the corporation having custody of the book or books in which
proceedings of meetings of the shareholders are recorded. All consents properly
delivered in accordance with this section shall be deemed to be recorded when so
delivered. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those shareholders who
have not consented in writing. Any action taken pursuant to such written consent
or consents of the shareholders shall have the same force and effect as if taken
by the shareholders at a meeting thereof.
If the consents of all shareholders entitled to vote have not been
solicited in writing or if the unanimous written consents of all such
shareholders have not been received, the secretary shall give prompt notice of
the corporate action approved by the shareholders without a meeting. Such
notice shall be given in the manner specified in Section 4 of this Article II.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
--------- -----------------------------------
which shall constitute the board shall be established from time to time in
accordance with the provisions of the Shareholders Agreement. Except as
otherwise provided in the corporation's articles of incorporation, the directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote in the election of
directors. The directors shall be elected in this manner at the annual meeting
of the shareholders, except as provided in Section 4 of this Article III or in
the Shareholders Agreement. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
--------- -----------------------
directors shall be removed in accordance with the provisions of the Shareholders
-4-
<PAGE>
Agreement. Any director may resign at any time upon written notice to the
corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
--------- ---------
from any increase in the authorized number of directors shall be filled in
accordance with the provisions of the Shareholders Agreement. Each director so
chosen shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
--------- ---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of shareholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the chief executive officer or two directors on at least twenty-
four (24) hours notice to each director, either personally, by telephone, by
mail, by telegraph or by facsimile. A notice, or waiver of notice, need not
specify the purpose of any regular or special meeting of the board.
Section 7. Quorum. A majority of the total number of directors shall
--------- ------
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 9 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors if any action taken is approved by
at least a majority of the required quorum for that meeting. Notwithstanding
the foregoing, no action shall be taken without the affirmative vote of a
majority of the Bain Directors and a majority of the SXI Directors (as each such
term is defined in the Shareholders Agreement) with respect to:
(A) any merger of the corporation into any other corporation or
merger of any other corporation into the corporation, or any
consolidation of the corporation with any other corporation (other
than the merger of a wholly-owned subsidiary into the corporation),
the liquidation or dissolution of the corporation, or the sale,
assignment, lease, transfer or other disposition of all or
substantially all of the assets of the corporation as, or
substantially as, an entirety to any other corporation or other entity
or person;
(B) the amendment or repeal of any provision of, or the addition
-5-
<PAGE>
of any provision to the corporation's Articles of Incorporation or the
corporation's Bylaws;
(C) the expenditure by the corporation of an amount of funds in
excess of $5,000,000 for a purpose which is not within the then
current strategic and operating plan referred to in clause (H) hereof;
(D) any declaration or payment of any dividend on, or other
distribution in respect of, the corporation's capital stock, or any
payment in cash of interest on indebtedness that by its terms may be
paid in kind or accrued;
(E) any issuance, redemption, repurchase or other transaction
involving the capital stock of the corporation (other than in
connection with the exercise of stock options granted pursuant to any
plan or arrangement approved under clause (N) hereof, or the issuance
of no more than $3,000,000 in shares of the corporation's common stock
(determined for this purpose by the price allocated to shares of
common stock acquired pursuant to the Recapitalization Agreement (as
such term is defined in the Shareholders Agreement)) issued to members
of the corporation's management within 120 days after the date
hereof);
(F) any borrowings (or guarantees thereof) in excess of
$5,000,000 from any bank or other person or entity, other than
drawings on borrowings or lines of credit existing as of the date
hereof (or any extensions, renewals or refinancings thereof) or as
previously approved as provided herein;
(G) any loans to any persons or entities by the corporation,
other than advances to employees of the corporation or its
subsidiaries for ordinary and necessary business expenses consistent
with past practice or to purchase the corporation's common stock
described in the parenthetical in clause (E) above;
(H) the annual strategic and operating plan of the corporation,
which shall be prepared by the officers of the corporation and shall
include a summary of expected capital expenditures and expenditures in
respect of acquisitions, and any material departures from such plan;
(I) any sale or encumbrance of assets in excess of $5,000,000;
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<PAGE>
(J) any business acquisition by the corporation, by purchase of
assets, capital stock, merger or otherwise, for purchase consideration
exceeding $5,000,000;
(K) the selection of commercial or investment bankers for the
corporation;
(L) the selection of the public accountants for the corporation;
(M) the selection of the Chief Executive Officer of the
corporation;
(N) the approval of compensation payable to the corporate
officers of the corporation, including executive bonus and incentive plans
and arrangements of such officers; or
(O) the approval of any action by a subsidiary of the corporation
in respect of any matter of the nature set forth in this Section
7 with respect to such subsidiary.
Section 8. Waiver of Notice. The transactions of any meeting of the board
--------- ----------------
of directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting or an
approval of the minutes. The waiver of notice or consent need not specify the
purpose of the meeting. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Notice of a meeting shall also be deemed given to any director who attends the
meeting without protesting, before or at its commencement, the lack of notice to
that director.
Section 9. Adjournment. A majority of the directors present, whether or
--------- -----------
not constituting a quorum, may adjourn any meeting to another time and place.
Section 10. Notice of Adjournment. Notice of the time and place of
---------- ---------------------
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 6 of this Article III, to the directors who were not present at the
time of adjournment.
Section 11. Action without Meeting. Any action required or permitted to
---------- ----------------------
be taken at any meeting of the board of directors, or of any committee thereof,
may be taken without a meeting if all members of the board or committee, as the
case may be,
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<PAGE>
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 12. Committees. The board of directors may, by resolution passed
---------- ----------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 13. Committee Rules. Each committee of the board of directors may
---------- ---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 12 of this Article III, of such committee is or are absent
or disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 14. Communications Equipment. Members of the board of directors
---------- ------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 15. Waiver of Notice and Presumption of Assent. Any member of the
---------- ------------------------------------------
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary
-8-
<PAGE>
of the meeting before the adjournment thereof or shall be forwarded by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to any member
who voted in favor of such action.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
--------- ------
the board of directors and shall consist of a chairman of the board, chief
executive officer, president, chief financial officer, one or more vice-
presidents, secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of chief executive officer and secretary
shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
--------- ---------------------------
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of shareholders or as soon thereafter as conveniently
may be. The chief executive officer shall be elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of shareholders or as soon thereafter as conveniently may be. The chief
executive officer shall appoint other officers to serve for such terms as he or
she deems desirable. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until
a successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
--------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
--------- ---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
--------- ------------
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
-9-
<PAGE>
Section 6. Chairman of the Board. The chairman of the board, if such an
--------- ---------------------
officer is elected, shall, if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him or her by the board of directors or prescribed by
the by-laws. If there is no chief executive officer, the chairman of the board
shall in addition be the chief executive officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
Section 7. The Chief Executive Officer. The chief executive officer shall
--------- ---------------------------
be the chief executive officer of the corporation and shall have the powers and
perform the duties incident to that position. Subject to the powers and
direction of the board of directors, the chief executive officer shall have
general charge of the business, affairs and property of the corporation, shall
have control over the corporation's officers, agents and employees and shall be
its chief policy making officer. Except as set forth in Section 6 of this
Article IV, the chief executive officer shall preside at all meetings of the
shareholders and board of directors at which he is present and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or as may be provided in these by-laws.
Section 8. The President. The president shall, subject to the powers and
---------- -------------
direction of the Board and the chief executive officer, be in the general and
active charge of all day-to-day activities and affairs of the corporation and
shall be responsible for implementing the policies of the board of directors and
the chief executive officer. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors or the chief executive officer to some other officer or
agent of the corporation. The president shall have such other powers and
perform such other duties as may be prescribed by the board of directors,
chairman of the board, the chief executive officer or as may be provided in
these by-laws. The president shall, in the absence or disability of the chief
executive officer, act with all of the powers and be subject to all of the
restrictions of the chief executive officer.
Section 9. Chief Financial Officer. The chief financial officer shall
--------- -----------------------
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated
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<PAGE>
by the board of directors. The chief financial officer shall disburse the funds
of the corporation as may be ordered by the board of directors, shall render to
the chief executive officer and directors, whenever they request it, an account
of all his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors, the chief executive
officer or the by-laws.
Unless the board of directors has elected a separate treasurer, the chief
financial officer shall be deemed to be the treasurer for purposes of giving any
reports or executing any certificates or other documents.
Section 10. Vice-presidents. The vice-president, or if there shall be
---------- ---------------
more than one, the vice-presidents in the order determined by the board of
directors or by the chief executive officer, shall, in the absence or disability
of the president, act with all of the powers and be subject to all the
restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the board of directors, chief
executive officer, the president or these by-laws may, from time to time,
prescribe.
Section 11. The Secretary and Assistant Secretaries. The secretary shall
---------- ---------------------------------------
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the shareholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the chief executive officer,
the president or these by-laws may, from time to time, prescribe; and shall have
custody of the corporate seal of the corporation. The secretary, or an
assistant secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such assistant secretary. The board of directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his signature. The assistant secretary, or if there
be more than one, the assistant secretaries in the order determined by the board
of directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the chief executive
officer, the president, or secretary may, from time to time, prescribe.
Section 12. The Treasurer and Assistant Treasurer. The treasurer shall
---------- -------------------------------------
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be
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<PAGE>
disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the chief executive officer
and the board of directors, at its regular meeting or when the board of
directors so requires, an account of the corporation; shall have such powers and
perform such duties as the board of directors, the chief executive officer or
these by-laws may, from time to time, prescribe. If required by the board of
directors, the treasurer shall give the corporation a bond (which shall be
rendered every six (6) years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chief executive
officer, the president or treasurer may, from time to time, prescribe.
Section 13. Other Officers, Assistant Officers and Agents. Officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 14. Absence or Disability of Officers. In the case of the absence
---------- ---------------------------------
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Agents, Proceedings, and Expenses. For the purposes of this
--------- ---------------------------------
Article, "agent" means any person who is or was a director, officer, employee or
other agent of this corporation, or is or was serving at the request of this
corporation as a director, officer, employee, or agent of another foreign or
domestic corporation, limited liability company, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of this
corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed
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<PAGE>
action or proceeding, whether civil, criminal, administrative, or investigative;
and "expenses" include, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under Section 4 or Section 5(c) of this
Article V.
Section 2. Actions Other Than by the Corporation. This corporation shall
--------- -------------------------------------
indemnify any person who was or is a party, or is threatened to be made a party,
to any proceeding (other than an action by or in the right of this corporation)
by reason of the fact that such person is or was an agent of this corporation,
against expenses, judgments, fines, settlements or other amounts actually and
reasonably incurred in connection with such proceeding if that person acted in
good faith and in a manner that person reasonably believed to be in the best
interests of this corporation and, in the case of a criminal proceeding, if that
person had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of this corporation or
that the person had reasonable cause to believe that his conduct was unlawful.
Section 3. Actions by the Corporation. This corporation shall indemnify
--------- --------------------------
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of this corporation
to procure a judgment in its favor by reason of the fact that that person is or
was an agent of this corporation, against expenses actually and reasonably
incurred by that person in connection with the defense or settlement of that
action if that person acted in good faith, in a manner that that person believed
to be in the best interests of this corporation, and with such care, including
reasonably inquiry, as a reasonable person would exercise under similar
circumstances. No indemnification shall be made under this Section 3:
(a) in respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable to this corporation in the performance of
that person's duty to this corporation, unless and only to the extent that the
court in which that action was brought shall determine upon application that, in
view of all the circumstances of the case, that person is fairly and reasonably
entitled to indemnity for the expenses which the court shall determine;
(b) of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval; or
(c) of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.
Section 4. Successful Defense by Agent. To the extent that an agent of
--------- ---------------------------
this
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<PAGE>
corporation has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article, or in defense of any claim,
issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. Required Approval. Except as provided in Section 4 of this
--------- -----------------
Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article, by:
(a) a majority vote of a quorum consisting of directors who are not
parties to the proceeding;
(b) approval by the affirmative vote of a majority of the shares of
this corporation entitled to vote represented at a duly held meeting at which a
quorum is present or by the written consent of holders of a majority of the
outstanding shares entitled to vote. For this purpose, the shares owned by the
person to be indemnified shall not be considered outstanding or entitled to vote
thereon; or
(c) the court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the agent, attorney, or other person is opposed by this
corporation.
Section 6. Advance of Expenses. Expenses incurred in defending any
--------- -------------------
proceeding may be advanced by this corporation before the final disposition of
the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. Other Contractual Rights. Nothing contained in this Article
--------- ------------------------
shall affect any right to indemnification to which persons other than directors
and officers of this corporation or any subsidiary hereof may be entitled by
contract or otherwise.
Section 8. Limitations. No indemnification or advance shall be made under
--------- -----------
this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
(a) that it would be inconsistent with a provision of the articles, a
resolution of the shareholders, or an agreement in effect at the time of the
accrual of the alleged cause of action asserted in the proceeding in which the
expenses were
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<PAGE>
incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) that it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 9. Insurance. Upon and in the event of a determination by the
--------- ---------
board of directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this section.
Section 10. Fiduciaries of Corporate Employee Benefit Plan. This Article
---------- ----------------------------------------------
does not apply to any proceeding against any trustee, investment manager, or
other fiduciary of an employee benefit plan in that person's capacity as such
even though that person may also be an agent of the corporation as defined in
Section 1 of this Article. Nothing contained in this Article shall limit any
right to indemnification to which such a trustee, investment manager or other
fiduciary may be entitled by contract or otherwise, which shall be enforceable
to the extent permitted by applicable law other than this Article.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
--------- ----
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman of the board, chief executive officer, president, chief financial
officer, or a vice-president and the secretary or an assistant secretary of the
corporation, certifying the number of shares of a specific class or series owned
by such holder in the corporation. If such a certificate is countersigned (1)
by a transfer agent or an assistant transfer agent other than the corporation or
its employee or (2) by a registrar other than the corporation or its employee,
the signature of any such chairman of the board, chief executive officer,
president, chief financial officer, vice-president, secretary, or assistant
secretary may be facsimiles. In case any officer or officers who have signed,
or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
-15-
<PAGE>
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the certificate or
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer,
authorization, and other matters as the corporation may reasonably require, and
accompanied by all necessary stock transfer stamps. In that event, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate or certificates, and record the transaction
on its books. The board of directors may appoint a bank or trust company
organized under the laws of the United States or any state thereof to act as its
transfer agent or registrar, or both in connection with the transfer of any
class or series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Shareholder Meetings. In order that
--------- ---------------------------------------------
the corporation may determine the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by
the board of directors, the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
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<PAGE>
Section 4. Fixing a Record Date for Action by Written Consent. In order
--------- --------------------------------------------------
that the corporation may determine the shareholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining shareholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of California, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of shareholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by statute, the record date for determining shareholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the shareholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the shareholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining shareholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Shareholders. Prior to the surrender to the
--------- -----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
--------- -----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in
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<PAGE>
such installments and at such times, as shall be determined by the board of
directors. Any call made by the board of directors for payment on subscriptions
shall be uniform as to all shares of the same class or as to all shares of the
same series. In case of default in the payment of any installment or call when
such payment is due, the corporation may proceed to collect the amount due in
the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Checks, Drafts or Orders. All checks, drafts, or other orders
--------- ------------------------
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 2. Contracts. The board of directors may authorize any officer or
--------- ---------
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 3. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
--------- -----------
by resolution of the board of directors.
Section 5. Corporate Seal. The board of directors shall provide a
--------- --------------
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, California".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
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<PAGE>
Section 6. Voting Securities Owned By Corporation. Voting securities in
--------- --------------------------------------
any other corporation held by the corporation shall be voted by the chief
executive officer, unless the board of directors specifically confers authority
to vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
Section 7. Inspection of Books and Records. Any shareholder of record, in
--------- -------------------------------
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
shareholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a shareholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand under oath shall be directed to the corporation at its
registered office in the State of California or at its principal place of
business.
Section 8. Section Headings. Section headings in these by-laws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
---------- -----------------------
these by-laws is or becomes inconsistent with any provision of the Shareholders
Agreement, the articles of incorporation, the Corporations Code of the State of
California or any other applicable law, the provision of these by-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the shareholders of the same powers.
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<PAGE>
EXHIBIT 3.3
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(CAP 291)
MEMORANDUM OF ASSOCIATION
OF
ChipPAC FINANCE LIMITED
NAME
1. The name of the Company is ChipPAC Finance Limited.
REGISTERED OFFICE
2. The Registered Office of the Company will be at Craigmuir Chambers,
P.O. Box 71, Road Town, Tortola, British Virgin Islands.
REGISTERED AGENT
3. The Registered Agent of the Company will be HWR Services Limited of
Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin
Islands.
GENERAL OBJECTS AND POWERS
4. (1) The object of the Company is to engage in any act or activity that is
not prohibited under any law for the time being in force in the
British Virgin Island;
(2) The Company may not
(a) carry on business with persons resident in the British Virgin
Islands;
(b) own an interest in real property situate in the British Virgin
Islands, other than a lease referred to in paragraph (e) of
Subclause (3);
(c) carry on banking or trust business, unless it is licensed to do
so under the Banks and Trust Companies Act, 1990;
(d) carry on business as an insurance or reinsurance company,
insurance agent or insurance broker unless it is licensed under
an enactment authorizing it to carry on that business.
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(e) carry on the business of company management, unless it is licensed
under the Company Management Act, 1990; or
(f) carry on the business of providing the registered office or the
registered agent for companies incorporated in the British Virgin
Islands.
(3) For purposes of paragraph (a) of subclause (2), the Company shall not be
treated as carrying on business with persons resident in the British Virgin
Islands if
(a) it makes or maintains deposits with a person carrying on banking
business within the British Virgin Islands.
(b) it makes or maintains professional contact with solicitors,
barristers, accountants, bookkeepers, trust companies, administration
companies, investment advisers or other similar persons carrying on
business within the British Virgin Islands;
(c) it prepares or maintains books and records within the British Virgin
Islands;
(d) it holds, within the British Virgin Islands, meetings of its directors
or members;
(e) it holds a lease of property for use as an office from which to
communicate with members or where books and records of the Company are
prepared or maintained;
(f) it holds shares, debt, obligations or other securities in a company
incorporated under the International Business Companies Act or under
the Companies Act; or
(g) shares, debt obligations or other securities in the Company are owned
by any person resident in the British Virgin Islands or by any company
incorporated under the International Business Companies Act or under
the Companies Act.
(4) The Company shall have all such powers as are permitted by law for the time
being in force in the British Virgin Islands, irrespective of corporate
benefit, to
2
<PAGE>
perform all acts and engage in all activities necessary or conducive
to the conduct, promotion or attainment of the object of the Company.
CURRENCY
5. Shares in the Company shall be issued in the currency of the United States
of America.
AUTHORIZED CAPITAL
6. The authorized capital of the Company is US$50,000.00.
CLASSES, NUMBER AND PAR VALUE OF SHARES
7. The authorized capital is made up of one class and one series of shares
divided into 50,000 shares of US$1.00 per value.
DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES
8. All shares shall
(a) have one vote each;
(b) be subject to redemption, purchase or acquisition by the Company for
fair value; and
(c) have the same rights with regard to dividends and distributions upon
liquidation of the Company.
VARIATION OF CLASS RIGHTS
9. If at any time the authorized capital is divided into different classes or
series of shares, the rights attached to any class or series (unless
otherwise provided by the terms of issue of the shares of that class or
series) may, whether or not the Company is being wound up, be varied with
the consent in writing of the holders of not less than three-fourths of the
issued shares of that class or series and of the holders of not less than
three-fourths of the issued shares of any other class or series of shares
which may be affected by such variation.
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
10. The rights conferred upon the holders of the shares or any class issued
with preferred or other rights shall not
3
<PAGE>
unless otherwise expressly provided by the terms of issue of the shares of
that class, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.
REGISTERED SHARES AND BEARER SHARES
11. Shares may be issued as registered shares or to bearer as may be determined
by a resolution of directors.
EXCHANGE OF REGISTERED SHARES AND BEARER SHARES
12. Registered shares may be exchanged for bearer shares and bearer shares may
be exchanged for registered shares.
TRANSFER OF REGISTERED SHARE
13. Subject to the provisions relating to the transfer of shares set forth in
the Articles of Association annexed hereto (the "Articles of Association")
registered shares in the Company may be transferred subject to the prior or
subsequent approval of the Company as evidenced by a resolution of
directors or by a resolution of members.
SERVICE OF NOTICE ON HOLDERS OF BEARER SHARES
14. Where shares are issued to bearer, the bearer, identified for this purpose
by the number of the share certificate, shall be requested to provide the
company with the name and address of an agent for service of any notice,
information or written statement required to be given to members, and
services upon such agent shall constitute service upon the bearer of such
shares until such time as a new name and address for service is provided to
the Company. In the absence of such name and address being provided it
shall be sufficient for the purposes of service for the Company to publish
the notice, information or written statement or a summary thereof in one or
more newspapers published or circulated in the British Virgin Islands and
in such other place, if any, as the Company shall from time to time by a
resolution of directors or a resolution of members determine. The directors
of the Company must give sufficient notice of meetings to members holding
shares issued to bearer to allow a reasonable opportunity for them to
secure or exercise the right or privilege that is the subject of the notice
other than the right or privilege to vote, as to which the period of notice
shall be governed by the Articles of Association. What amounts to
sufficient notice is a
4
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matter of fact to be determined after having regard to all the
circumstances.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
15. The Company may amend its Memorandum of Association and Articles of
Association by a resolution of members or directors.
DEFINITIONS
16. The meanings of words in this Memorandum of Association are as defined in
the Articles of Association.
We, HWR SERVICES LIMITED, of Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands for the purpose of incorporating an International
Business Company under the laws of the British Virgin Islands hereby subscribe
our name to this Memorandum of Association the 5th day of February, 1999 in the
presence of:
Witness Subscriber
/s/ Ibn K. Thomas /s/ Adel K. Clyne
- -------------------------- --------------------------
Ibn K. Thomas Adel K. Clyne
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
5
<PAGE>
EXHIBIT 3.4
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(Cap. 291)
ARTICLES OF ASSOCIATION
OF
ChipPAC FINANCE LIMITED
PRELIMINARY
1. In these Articles, if not inconsistent with the subject or context, the
words and expressions standing in the first column of the following table
shall bear the meanings set opposite them respectively in the second column
thereof.
Words Meaning
----- -------
capital The sum of the aggregate par value of all
outstanding shares with par value of the Company and
shares with par value held by the Company as
treasury shares plus
(a) the aggregate of the amounts designated as
capital of all outstanding shares without par
value of the Company and shares without par
value held by the Company as treasury shares,
and
(b) the amounts as are from time to time
transferred from surplus to capital by a
resolution of directors.
member A person who holds shares in the Company.
person An individual, a corporation, a trust, the estate of
a deceased individual, a partnership or an
unincorporated association of persons.
resolution of (a) A resolution approved at a duly convened and
directors constituted meeting of directors of the Company
or of a committee of directors of the Company
by the affirmative vote of a simple majority of
the directors present at the meeting who voted
and did not abstain; or
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(b) a resolution consented to in writing by all
directors or of all members of the committee,
as the case may be;
except that where a director is given more than one
vote, he shall be counted by the number of votes he
casts for the purpose of establishing a majority.
resolution of (a) A resolution approved at a duly convened
members and constituted meeting of the members of the
Company by the affirmative vote of
(i) a simple majority of the votes of the
shares entitled to vote thereon which were
present at the meeting and were voted and
not abstained, or
(ii) a simple majority of the votes of each
class or series of shares which were
present at the meeting and entitled to
vote thereon as a class or series and were
voted and not abstained and of a simple
majority of the votes of the remaining
shares entitled to vote thereon which were
present at the meeting and were voted and
not abstained; or
(b) a resolution consented to in writing by
(i) an absolute majority of the votes of
shares entitled to vote thereon, or
(ii) an absolute majority of the votes of each
class or series of shares entitled to vote
thereon as a class or series and of an
absolute majority
2
<PAGE>
of the votes of the remaining shares
entitled to vote thereon;
securities Shares and debt obligations of every kind, and
options, warrants and rights to acquire shares, or
debt obligations.
surplus The excess, if any, at the time of the determination
of the total assets of the Company over the
aggregate of its total liabilities, as shown in its
books of account, plus the Company's capital.
the Act The International Business Companies Act (CAP 291)
including any modification, extension, re-enactment
or renewal thereof and any regulations made
thereunder.
the Memorandum The Memorandum of Association of the Company as
originally framed or as from time to time amended.
the Seal Any Seal which has been duly adopted as the Seal of
the Company.
these Articles These Articles of Association as originally framed
or as from time to time amended.
treasury shares Shares in the Company that were previously issued
but were repurchased, redeemed or otherwise acquired
by the Company and not cancelled.
2. "Written" or any term of like import includes words typewritten, printed,
painted, engraved, lithographed, photographed or represented or reproduced
by any mode of reproducing words in a visible form, including telex,
facsimile, telegram, cable or other form of writing produced by electronic
communication.
3. Save as aforesaid any words or expressions defined in the Act shall bear
the same meaning in these Articles.
4. Whenever the singular or plural number, or the masculine, feminine or
neuter gender is used in these articles it shall equally, where the context
admits, include the others.
3
<PAGE>
5. A reference in these Articles to voting in relation to shares shall be
construed as a reference to voting by members holding the shares except
that it is the votes allocated to the shares that shall be counted and not
the number of members who actually voted and a reference to shares being
present at a meeting shall be given a corresponding construction.
6. A reference to money in these Articles is, unless otherwise stated, a
reference to the currency in which shares in the Company shall be issued
according to the provisions of the Memorandum.
REGISTERED SHARES
7. Every member holding registered shares in the Company shall be entitled to
a certificate signed by a director or officer of the Company and under the
Seal specifying the share or shares held by him and the signature of the
director or officer and the Seal may be facsimiles.
8. Any member receiving a share certificate for registered shares shall
indemnify and hold the Company and its directors and officers harmless from
any loss or liability which it or they may incur by reason of any wrongful
or fraudulent use or representation made by any person by virtue of the
possession thereof. If a share certificate for registered shares is worn
out or lost it may be renewed on production of the worn out certificate or
on satisfactory proof of its loss together with such indemnity as may be
required by a resolution of directors.
9. If several persons are registered as joint holders of any shares, any one
of such persons may give an effectual receipt for any dividend payable in
respect of such shares.
BEARER SHARES
10. Subject to a request for the issue of bearer shares and to the payment of
the appropriate consideration for the shares to be issued, the Company may,
to the extent authorized by the Memorandum, issue bearer shares to, and at
the expense of, such person as shall be specified in the request. Bearer
shares may not be issued for debt obligations, promissory notes or other
obligations to contribute money or property and registered shares issued
for debt obligations, promissory notes or other obligations to contribute
money or property shall not be exchanged for bearer shares unless such debt
obligations, promissory notes or other obligations to contribute money or
property have been satisfied. The Company may also upon receiving a request
in writing accompanied by the share certificate for the shares in question,
exchange registered shares for bearer shares or may exchange bearer shares
for registered shares. Such request served on the Company by the holder of
bearer shares shall specify the name and address of the person to be
registered and unless the request is delivered in person by
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the bearer shall be authenticated as hereinafter provided. Such request
served on the Company by the holder of bearer shares shall also be
accompanied by any coupons or talons which at the date of such delivery
have not become due for payment of dividends or any other distribution by
the Company to the holders of such shares. Following such exchange the
share certificate relating to the exchanged shares shall be delivered as
directed by the member requesting the exchange.
11. Bearer share certificates shall be under the Seal and shall state that the
bearer is entitled to the shares therein specified, and may provide by
coupons, talons or otherwise for the payment of dividends or other moneys
on the shares included therein.
12. Subject to the provisions of the Act and of these Articles, the bearer of a
bearer share certificate shall be deemed to be a member of the Company and
shall be entitled to the same rights and privileges as he would have had if
his name had been included in the share register of the Company as the
holder of the shares.
13. Subject to any specific provisions in these Articles, in order to exercise
his rights as a member of the Company, the bearer of a bearer share
certificate shall produce the bearer share certificate as evidence of his
membership of the Company. Without prejudice to the generality of the
foregoing, the following rights may be exercised in the following manner:
(a) for the purpose of exercising his voting rights at a meeting, the
bearer of a bearer share certificate shall produce such certificate to
the chairman of the meeting;
(b) for the purpose of exercising his vote on a resolution in writing, the
bearer of a bearer share certificate shall cause his signature to any
such resolution to be authenticated as hereinafter set forth;
(c) for the purpose of requisitioning a meeting of members, the bearer of
a bearer share certificate shall address his requisition to the
directors and his signature thereon shall be duly authenticated as
hereinafter provided; and
(d) for the purpose of receiving dividends, the bearer of a bearer share
certificate shall present at such places as may be designated by the
directors any coupons or talons issued for such purpose, or shall
present the bearer share certificate to any paying agent authorized to
pay dividends.
14. The signature of the bearer of a bearer share certificate shall be deemed
to be duly authenticated if the bearer of the bearer share certificate
shall produce such certificate
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to a notary public or a bank manager or a director or officer of the
Company (herein referred to as an "authorized person") and the authorized
person endorses the document bearing such signature with a statement:
(a) identifying the bearer share certificate produced to him by number and
date and specifying the number of shares and the class of shares (if
appropriate) comprised therein;
(b) confirming that the signature of the bearer of the bearer share
certificate was subscribed in his presence and that if the bearer is
representing a body corporate he has so acknowledged and has produced
satisfactory evidence thereof; and
(c) specifying the capacity in which he is qualified as an authorized
person and, if a notary public, affixing his seal thereto or, if a
bank manager, attaching an identifying stamp of the bank of which he
is a manager.
15. Notwithstanding any other provisions of these Articles, at any time, the
bearer of a bearer share certificate may deliver the certificate for such
shares into the custody of the Company at its registered office, whereupon
the Company shall issue a receipt therefor under the Seal signed by a
director or officer identifying by name and address the person delivering
such certificate and specifying the date and number of the bearer share
certificate so deposited and the number of shares comprised therein. Any
such receipt may be used by the person named therein for the purpose of
exercising the rights vested in the shares represented by the bearer share
certificate so deposited including the right to appoint a proxy. Any bearer
share certificate so deposited shall be returned to the person named in the
receipt or his personal representative if such person be dead and thereupon
the receipt issued therefor shall be of no further effect whatsoever and
shall be returned to the Company for cancellation or, if it has been lost
or mislaid, such indemnity as may be required by resolution of directors
shall be given to the Company.
16. The bearer of a bearer share certificate shall for all purposes be deemed
to be the owner of the shares comprised in such certificate and in no
circumstances shall the Company or the chairman of any meeting of members
or the Company's registrars or any director or officer of the Company or
any authorized person be obliged to inquire into the circumstances whereby
a bearer share certificate came into the hands of the bearer thereof, or to
question the validity or authenticity of any action taken by the bearer of
a bearer share certificate whose signature has been authenticated as
provided herein.
17. If the bearer of a bearer share certificate shall be a corporation, then
all the rights exercisable by virtue of such shareholding may be exercised
by an individual duly
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authorized to represent the corporation but unless such individual shall
acknowledge that he is representing a corporation and shall produce upon
request satisfactory evidence that he is duly authorized to represent the
corporation, the individual shall for all purposes hereof be regarded as
the holder of the shares in any bearer share certificate held by him.
18. The directors may provide for payment of dividends to the holders of bearer
shares by coupons or talons and in such event the coupons or talons shall
be in such form and payable at such time and in such place or places as the
directors shall resolve. The Company shall be entitled to recognize the
absolute right of the bearer of any coupon or talon issued as aforesaid to
payment of the dividend to which it relates and delivery of the coupon or
talon to the Company or its agents shall constitute in all respects a good
discharge of the Company in respect of such dividend.
19. If any bearer share certificate, coupon or talon be worn out or defaced,
the directors may, upon the surrender thereof for cancellation, issue a new
one in its stead, and if any bearer share certificate, coupon or talon be
lost or destroyed, the directors may upon the loss or destruction being
established to their satisfaction, and upon such indemnity being given to
the Company as it shall by resolution of directors determine, issue a new
bearer share certificate in its stead, and in either case on payment of
such sum as the Company may from time to time by resolution of directors
require. In case of loss or destruction the person to whom such new bearer
share certificate, coupon or talon is issued shall also bear and pay to the
Company all expenses incidental to the investigation by the Company of the
evidence of such loss or destruction and to such indemnity.
SHARES, AUTHORIZED CAPITAL, CAPITAL AND SURPLUS
20. Subject to the provisions of these Articles and any resolution of members,
the unissued shares of the Company shall be at the disposal of the
directors who may, without limiting or affecting any rights previously
conferred on the holders of any existing shares or class or series of
shares, offer, allot, grant options over or otherwise dispose of shares to
such persons, at such times and upon such terms and conditions as the
Company may by resolution of directors determine.
21. No share in the Company may be issued until the consideration in respect
thereof is fully paid, and when issued the share is for all purposes fully
paid and non-assessable save that a share issued for a promissory note or
other written obligation for payment of a debt may be issued subject to
forfeiture in the manner prescribed in these Articles.
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22. Shares in the Company shall be issued for money, services rendered,
personal property, an estate in real property, a promissory note or other
binding obligation to contribute money or property or any combination of
the foregoing as shall be determined by a resolution of directors.
23. Shares in the Company may be issued for such amount of consideration as the
directors may from time to time by resolution of directors determine,
except that in the case of shares with par value, the amount shall not be
less than the par value, and in the absence of fraud the decision of the
directors as to the value of the consideration received by the Company in
respect of the issue is conclusive unless a question of law is involved.
The consideration in respect of the shares constitutes capital to the
extent of the par value and the excess constitutes surplus.
24. A share issued by the Company upon conversion of, or in exchange for,
another share or a debt obligation or other security in the Company, shall
be treated for all purposes as having been issued for money equal to the
consideration received or deemed to have been received by the Company in
respect of the other share, debt obligation or security.
25. Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the Company
may by resolution of directors determine.
26. The Company may issue fractions of a share and a fractional share shall
have the same corresponding fractional liabilities, limitations,
preferences, privileges, qualifications, restrictions, rights and other
attributes of a whole share of the same class or series of shares.
27. Upon the issue by the Company of a share without par value, if an amount is
stated in the Memorandum to be authorized capital represented by such
shares then each share shall be issued for no less than the appropriate
proportion of such amount which shall constitute capital, otherwise the
consideration in respect of the share constitutes capital to the extent
designated by the directors and the excess constitutes surplus, except that
the directors must designate as capital an amount of the consideration that
is at least equal to the amount that the share is entitled to as a
preference, if any, in the assets of the Company upon liquidation of the
Company.
28. The Company may purchase, redeem or otherwise acquire and hold its own
shares but only out of surplus or in exchange for newly issued shares of
equal value.
29. Subject to provisions to the contrary in
(a) the Memorandum or these Articles;
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(b) the designations, powers, preferences, rights, qualifications,
limitations and restrictions with which the shares were issued; or
(c) the subscription agreement for the issue of the shares,
the Company may not purchase, redeem or otherwise acquire its own shares
without the consent of members whose shares are to be purchased, redeemed
or otherwise acquired.
30. No purchase, redemption or other acquisition of shares shall be made unless
the directors determine that immediately after the purchase, redemption or
other acquisition the Company will be able to satisfy its liabilities as
they become due in the ordinary course of its business and the realizable
value of the assets of the Company will not be less than the sum of its
total liabilities, other than deferred taxes, as shown in the books of
account, and its capital and, in the absence of fraud, the decision of the
directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
31. A determination by the directors under the preceding Regulation is not
required where shares are purchased, redeemed or otherwise acquired
(a) pursuant to a right of a member to have his shares redeemed or to have
his shares exchanged for money or other property of the Company;
(b) by virtue of a transfer of capital pursuant to Regulation 59;
(c) by virtue of the provisions of Section 83 of the Act; or
(d) pursuant to an order of the Court.
32. Shares that the Company purchases, redeems or otherwise acquires pursuant
to the preceding Regulation may be cancelled or held as treasury shares
except to the extent that such shares are in excess of 80 percent of the
issued shares of the Company in which case they shall be cancelled but they
shall be available for reissue.
33. Where shares in the Company are held by the Company as treasury shares or
are held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the votes in the
election of directors of the other company, such shares of the Company are
not entitled to vote or to have dividends paid thereon and shall not be
treated as outstanding for any purpose except for purposes of determining
the capital of the Company.
34. The Company may purchase, redeem or otherwise acquire its shares at a price
lower than the fair value if permitted by, and then only in accordance
with, the terms of
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(a) the Memorandum or these Articles; or
(b) a written agreement for the subscription for the shares to be
purchased, redeemed or otherwise acquired.
35. The Company may by a resolution of directors include in the computation of
surplus for any purpose the unrealized appreciation of the assets of the
Company, and, in the absence of fraud, the decision of the directors as to
the value of the assets is conclusive, unless a question of law is
involved.
MORTGAGES AND CHARGES OF REGISTERED SHARES
36. Members may mortgage or charge their registered shares in the Company and
upon satisfactory evidence thereof the Company shall give effect to the
terms of any valid mortgage or charge except insofar as it may conflict
with any requirements herein contained for consent to the transfer of
shares.
37. In the case of the mortgage or charge of registered shares there may be
entered in the share register of the Company at the request of the
registered holder of such shares
(a) a statement that the shares are mortgaged or charged;
(b) the name of the mortgagee or chargee; and
(c) the date on which the aforesaid particulars are entered in the share
register.
38. Where particulars of a mortgage or charge are registered, such particulars
shall be cancelled
(a) with the consent of the named mortgagee or chargee or anyone
authorized to act on his behalf; or
(b) upon evidence satisfactory to the directors of the discharge of the
liability secured by the mortgage or charge and the issue of such
indemnities as the directors shall consider necessary or desirable.
39. Whilst particulars of a mortgage or charge are registered, no transfer of
any share comprised therein shall be effected without the written consent
of the named mortgagee or chargee or anyone authorized to act on his
behalf.
FORFEITURE
40. When shares issued for a promissory note or other written obligation for
payment of a debt have been issued subject to forfeiture, the following
provisions shall apply.
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41. Written notice specifying a date for payment to be made and the shares in
respect of which payment is to be made shall be served on the member who
defaults in making payment pursuant to a promissory note or other written
obligations to pay a debt.
42. The written notice specifying a date for payment shall
(a) name a further date not earlier than the expiration of 14 days from
the date of service of the notice on or before which payment required
by the notice is to be made; and
(b) contain a statement that in the event of non-payment at or before the
time named in the notice the shares, or any of them, in respect of
which payment is not made will be liable to be forfeited.
43. Where a written notice has been issued and the requirements have not been
complied with within the prescribed time, the directors may at any time
before tender of payment forfeit and cancel the shares to which the notice
relates.
44. The Company is under no obligation to refund any moneys to the member whose
shares have been forfeited and cancelled pursuant to these provisions. Upon
forfeiture and cancellation of the shares the member is discharged from any
further obligation to the Company with respect to the shares forfeited and
cancelled.
LIEN
45. The Company shall have a first and paramount lien on every share issued for
a promissory note or for any other binding obligation to contribute money
or property or any combination thereof to the Company, and the Company
shall also have a first and paramount lien on every share standing
registered in the name of a member, whether singly or jointly with any
other person or persons, for all the debts and liabilities of such member
or his estate to the Company, whether the same shall have been incurred
before or after notice to the Company of any interest of any person other
than such member, and whether the time for the payment or discharge of the
same shall have actually arrived or not, and notwithstanding that the same
are joint debts or liabilities of such member or his estate and any other
person, whether a member of the Company or not. The Company's lien on a
share shall extend to all dividends payable thereon. The directors may at
any time either generally, or in any particular case, waive any lien that
has arisen or declare any share to be wholly or in part exempt from the
provisions of this Regulation.
46. In the absence of express provisions regarding sale in the promissory note
or other binding obligation to contribute money or property, the Company
may sell, in such manner as the directors may by resolution of directors
determine
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share on which the Company has a lien, but no sale shall be made unless some
sum in respect of which the lien exists is presently payable nor until the
expiration of twenty-one days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the holder
for the time being of the share.
47. The net proceeds of the sale by the Company of any shares on which it has a
lien shall be applied in or towards payment of discharge of the promissory
note or other binding obligation to contribute money or property or any
combination thereof in respect of which the lien exists so far as the same
is presently payable and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the share prior to the
sale) be paid to the holder of the share immediately before such sale. For
giving effect to any such sale the directors may authorize some person to
transfer the share sold to the purchaser thereof. The purchaser shall be
registered as the holder of the share and he shall not be bound to see to
the application of the purchase money, nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings in reference
to the sale.
TRANSFER OF SHARES
48. Subject to any limitations in the Memorandum, registered shares in the
Company may be transferred by a written instrument of transfer signed by the
transferor and containing the name and address of the transferee, but in the
absence of such written instrument of transfer the directors may accept such
evidence of a transfer of shares as they consider appropriate.
49. The Company shall not be required to treat a transferee of a registered
share in the Company as a member until the transferee's name has
been entered in the share register.
50. Subject to any limitations in the Memorandum, the Company must on the
application of the transferor or transferee of a registered share in the
Company enter in the share register the name of the transferee of the share
save that the registration of transfers may be suspended and the share
register closed at such times and for such periods as the Company may from
time to time by resolution of directors determine provided always that such
registration shall not be suspended and the share register closed for more
than 6O days in any period of 12 months.
TRANSMISSION OF SHARES
51. The executor or administrator of a deceased member, the guardian of an
incompetent member or the trustee of a bankrupt member shall be the only
person recognized by the Company as having any title to his share but they
shall not
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be entitled to exercise any rights as a member of the Company until they
have proceeded as set forth in the next following three Regulations.
52. The production to the Company of any document which is evidence of probate
of the will, or letters of administration of the estate, or confirmation as
executor, of a deceased member or of the appointment of a guardian of an
incompetent member or the trustee of a bankrupt member shall be accepted by
the Company even if the deceased, incompetent or bankrupt member is
domiciled outside the British Virgin Islands if the document evidencing the
grant of probate or letters of administration, confirmation as executor,
appointment as guardian or trustee in bankruptcy is issued by a foreign
court which had competent jurisdiction in the matter. For the purpose of
establishing whether or not a foreign court had competent jurisdiction in
such a matter the directors may obtain appropriate legal advice. The
directors may also require an indemnity to be given by the executor,
administrator, guardian or trustee in bankruptcy.
53. Any person becoming entitled by operation of law or otherwise to a share or
shares in consequence of the death, incompetence or bankruptcy of any member
may be registered as a member upon such evidence being produced as may
reasonably be required by the directors. An application by any such person
to be registered as a member shall for all purposes be deemed to be a
transfer of shares of the deceased, incompetent or bankrupt member and the
directors shall treat it as such.
54. Any person who has become entitled to a share or shares in consequence of
the death, incompetence or bankruptcy of any member may, instead of being
registered himself, request in writing that some person to be named by him
be registered as the transferee of such share or shares and such request
shall likewise be treated as if it were a transfer.
55. What amounts to incompetence on the part of a person is a matter to be
determined by the court having regard to all the relevant evidence and the
circumstances of the case.
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL OR CAPITAL
56. The Company may by a resolution of directors amend the Memorandum to
increase or reduce its authorized capital and in connection therewith the
Company may in respect of any unissued shares increase or reduce the number
of such shares, increase or reduce the par value of any such shares or
effect any combination of the foregoing.
57. The Company may amend the Memorandum to
(a) divide the shares, including issued shares, of a class or series into
a larger number of shares of the same class or series; or
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(b) combine the shares, including issued shares, of a class or series into a
smaller number of shares of the same class or series,
provided, however, that where shares are divided or combined under (a)
or (b) of this Regulation, the aggregate par value of the new shares
must be equal to the aggregate par value of the original shares.
58. The capital of the Company may by a resolution of directors be increased by
transferring an amount of the surplus of the Company to capital.
59. Subject to the provisions of the two next succeeding Regulations, the
capital of the Company may by resolution of directors be reduced by
transferring an amount of the capital of the Company to surplus.
60. No reduction of capital shall be effected that reduces the capital of the
Company to an amount that immediately after the reduction is less than the
aggregate par value of all outstanding shares with par value and all shares
with par value held by the Company as treasury shares and the aggregate of
the amounts designated as capital of all outstanding shares without par
value and all shares without par value held by the Company as treasury
shares that are entitled to a preference, if any, in the assets of the
Company upon liquidation of the Company.
61. No reduction of capital shall be effected unless the directors determine
that immediately after the reduction the Company will be able to satisfy its
liabilities as they become due in the ordinary course of its business and
that the realizable assets of the Company will not be less than its total
liabilities, other than deferred taxes, as shown in the books of the Company
and its remaining capital, and, in the absence of fraud, the decision of
the directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
MEETINGS AND CONSENTS OF MEMBERS
62. The directors of the Company may convene meetings of the members of the
Company at such times and in such manner and places within or outside the
British Virgin Islands as the directors consider necessary or desirable.
63. Upon the written request of members holding 10 percent or more of the
outstanding voting shares in the Company the directors shall convene a
meeting of members.
64. The directors shall give not less than 7 days notice of meetings of members
to those persons whose names on the date the notice is given appear as
members in the share register of the Company and are entitled to vote at the
meeting
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65. The directors may fix the date notice is given of a meeting of members as
the record date for determining those shares that are entitled to vote at
the meeting.
66. A meeting of members may be called on short notice:
(a) if members holding not less than 90 percent of the total number of
shares entitled to vote on all matters to be considered at the meeting,
or 90 percent of the votes of each class or series of shares where
members are entitled to vote thereon as a class or series together with
not less than a 90 percent majority of the remaining votes, have agreed
to short notice of the meeting, or
(b) if all members holding shares entitled to vote on all or any matters to
be considered at the meeting have waived notice of the meeting and for
this purpose presence at the meeting shall be deemed to constitute
waiver.
67. The inadvertent failure of the directors to give notice of a meeting to
a member, or the fact that a member has not received notice, does not
invalidate the meeting.
68. A member may be represented at a meeting of members by a proxy who may speak
and vote on behalf of the member.
69. The instrument appointing a proxy shall be produced at the place appointed
for the meeting before the time for holding the meeting at which the person
named in such instrument proposes to vote.
70. An instrument appointing a proxy shall be in substantially the following
form or such other form as the Chairman of the meeting shall accept as
properly evidencing the wishes of the member appointing the proxy;
(Name of Company)
I/We being a member of the above Company
with shares HEREBY APPOINT of
or failing him of to be my/our proxy to
vote for me/us at the meeting of members to be held on the day of
and at any adjournment thereof.
(Any restrictions on voting to be inserted here.)
Signed this day of
---------------------------------------
Member
71. The following shall apply in respect of joint ownership of shares:
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(a) if two or more persons hold shares jointly each of them may be present
in person or by proxy at a meeting of members and may speak as a
member;
(b) if only one of the joint owners is present in person or by proxy he may
vote on behalf of all joint owners, and
(c) if two or more of the joint owners are present in person or by proxy
they must vote as one.
72. A member shall be deemed to be present at a meeting of members if he
participates by telephone or other electronic means and all members
participating in the meeting are able to hear each other.
73. A meeting of members is duly constituted if, at the commencement of the
meeting, there are present in person or by proxy not less than 50 percent of
the votes of the shares or class or series of shares entitled to vote on
resolutions of members to be considered at the meeting. If a quorum be
present, notwithstanding the fact that such quorum may be represented by
only one person then such person may resolve any matter and a certificate
signed by such person accompanied where such person be a proxy by a copy of
the proxy form shall constitute a valid resolution of members.
74. If within two hours from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of members, shall be
dissolved; in any other case it shall stand adjourned to the next business
day at the same time and place or to such other time and place as the
directors may determine, and if at the adjourned meeting there are present
within one hour from the time appointed for the meeting in person or by
proxy not less than one third of the votes of the shares or each class or
series of shares entitled to vote on the resolutions to be considered by the
meeting, those present shall constitute a quorum but otherwise the meeting
shall be dissolved.
75. At every meeting of members, the Chairman of the Board of Directors shall
preside as chairman of the meeting. If there is no Chairman of the Board of
Directors or if the Chairman of the Board of Directors is not present at the
meeting, the members present shall choose some one of their number to be the
chairman. If the members are unable to choose a chairman for any reason,
then the person representing the greatest number of voting shares present in
person or by prescribed form of proxy at the meeting shall preside as
chairman failing which the oldest individual member or representative of a
member present shall take the chair.
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76. The chairman may, with the consent of the meeting, adjourn any meeting from
time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place.
77. At any meeting of the members the chairman shall be responsible for deciding
in such manner as he shall consider appropriate whether any resolution
has been carried or not and the result of his decision shall be announced
to the meeting and recorded in the minutes thereof. If the chairman shall
have any doubt as to the outcome of any resolution put to the vote,
he shall cause a poll to be taken of all votes cast upon such resolution,
but if the chairman shall fail to take a poll then any member present in
person or by proxy who disputes the announcement by the chairman of the
result of any vote may immediately following such announcement demand that
a poll be taken and the chairman shall thereupon cause a poll to be
taken. If a poll is taken at any meeting, the result thereof shall be duly
recorded in the minutes of that meeting by the chairman.
78. Any person other than an individual shall be regarded as one member and
subject to the specific provisions hereinafter contained for the
appointment of representatives of such persons the right of any individual
to speak for or represent such member shall be determined by the law of the
jurisdiction where, and by the documents by which, the person is constituted
or derives its existence. In case of doubt, the directors may in good faith
seek legal advice from any qualified person and unless and until a court
of competent jurisdiction shall otherwise rule, the directors may rely and
act upon such advice without incurring any liability to any member.
79. Any person other than an individual which is a member of the Company may by
resolution of its directors or other governing body authorize such person
as it thinks fit to act as its representative at any meeting of the Company
or of any class of members of the Company, and the person so authorized
shall be entitled to exercise the same powers on behalf of the person which
he represents as that person could exercise if it were an individual member
of the Company.
80. The chairman of any meeting at which a vote is cast by proxy or on behalf of
any person other than an individual may call for a notarially certified copy
of such proxy or authority which shall be produced within 7 days of being so
requested or the votes cast by such proxy or on behalf of such person shall
be disregarded.
81. Directors of the Company may attend and speak at any meeting of members of
the Company and at any separate meeting of the holders of any class or
series of shares in the Company.
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82. An action that may be taken by the members at a meeting may also be taken by
a resolution of members consented to in writing or by telex, telegram,
cable, facsimile or other written electronic communication, without the need
for any notice, but if any resolution of members is adopted otherwise than
by the unanimous written consent of all members, a copy of such resolution
shall forthwith be sent to all members not consenting to such resolution.
The consent may be in the form of counterparts, each counterpart being
signed by one or more members.
DIRECTORS
83. The first directors of the Company shall be appointed by the subscribers to
the Memorandum; and thereafter, the directors shall be elected by the
members for such term as the members determine.
84. The minimum number of directors shall be one and the maximum number shall
be 7.
85. Each director shall hold office for the term, if any, fixed by resolution of
members or until his earlier death, resignation or removal.
86. A director may be removed from office, with or without cause, by a
resolution of members or, with cause, by a resolution of directors.
87. A director may resign his office by giving written notice of his resignation
to the Company and the resignation shall have effect from the date the
notice is received by the Company or from such later date as may be
specified in the notice.
88. The directors may at any time appoint any person to be a director either to
fill a vacancy or as an addition to the existing directors. A vacancy occurs
through the death, resignation or removal of a director, but a vacancy or
vacancies shall not be deemed to exist where one or more directors shall
resign after having appointed his or their successor or successors.
89. The Company may determine by resolution of directors to keep a register of
directors containing
(a) the names and addresses of the persons who are directors of the Company;
(b) the date on which each person whose name is entered in the register was
appointed as a director of the company; and
(c) the date on which each person named as a director ceased to be a
director of the Company
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90. If the directors determine to maintain a register of directors, a copy
thereof shall be kept at the registered office of the Company and the
Company may determine by resolution of directors to register a copy of the
register with the Registrar of Companies.
91. With the prior or subsequent approval by a resolution of members, the
directors may, by a resolution of directors, fix the emoluments of directors
with respect to services to be rendered in any capacity to the Company.
92. A director shall not require a share qualification and may be an individual
or a company.
POWERS OF DIRECTORS
93. The business and affairs of the Company shall be managed by the directors
who may pay all expenses incurred preliminary to and in connection with the
formation and registration of the Company and may exercise all such powers
of the Company as are not by the Act or by the Memorandum or these Articles
required to be exercised by the members of the Company, subject to any
delegation of such powers as may be authorized by these Articles and to such
requirements as may be prescribed by a resolution of members; but no
requirement made by a resolution of members shall prevail if it be
inconsistent with these Articles nor shall such requirement invalidate any
prior act of the directors which would have been valid if such requirement
had not been made.
94. The directors may, by a resolution of directors, appoint any person,
including a person who is a director, to be an officer or agent of the
Company. The resolution of directors appointing an agent may authorize the
agent to appoint one or more substitutes or delegates to exercise some or
all of the powers conferred on the agent by the Company.
95. Every officer or agent of the Company has such powers and authority of the
directors, including the power and authority to affix the Seal, as are set
forth in these Articles or in the resolution of directors appointing the
officer or agent, except that no officer or agent has any power or authority
with respect to the matters requiring a resolution of directors under the
Act.
96. Any director which is a body corporate may appoint any person its duly
authorized representative for the purpose of representing it at meetings
of the Board of Directors or with respect to unanimous written consents.
97. The continuing directors may act notwithstanding and in their body, save
that if their number is reduced to their knowledge below the number fixed
by or pursuant to these Articles as the necessary quorum for a meeting of
directors,
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the continuing directors or director may act only for the purpose of
appointing directors to fill any vacancy that has arisen or for summoning a
meeting of members.
98. The directors may by resolution of directors exercise all the powers of the
Company to borrow money and to mortgage or charge its undertakings and
property or any part thereof, to issue debentures, debenture stock and
other securities whenever money is borrowed or as security for any debt,
liability or obligation of the Company or of any third party.
99. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for moneys paid to the Company,
shall be signed, drawn, accepted, endorsed or otherwise executed, as the
case may be, in such manner as shall from time to time be determined by
resolution of directors.
100. The Company may determine by resolution of directors to maintain at its
registered office a register of mortgages, charges and other encumbrances
in which there shall be entered the following particulars regarding each
mortgage,charge and other encumbrance:
(a) the sum secured;
(b) the assets secured;
(c) the name and address of the mortgagee, chargee or other encumbrancer;
(d) the date of creation of the mortgage, charge or other encumbrance; and
(e) the date on which the particulars specified above in respect of the
mortgage, charge or other encumbrance are entered in the register.
101. The Company may further determine by a resolution of directors to register
a copy of the register of mortgages, charges or other encumbrances with the
Registrar of Companies.
PROCEEDINGS OF DIRECTORS
102. The directors of the Company or any committee thereof may meet at such
times and in such manner and places within or outside the British Virgin
Islands as the directors may determine to be necessary or desirable.
103. A director shall be deemed to be present at a meeting of directors if he
participates by telephone or other electronic means and all directors
participating in the meeting are able to hear each other.
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104. A director shall be given not less than 3 days notice of meetings of
directors, but a meeting of directors held without 3 days notice having
been given to all directors shall be valid if all the directors entitled to
vote at the meeting who do not attend, waive notice of the meeting and for
this purpose, the presence of a director at a meeting shall constitute
waiver on his part. The inadvertent failure to give notice of a meeting to
a director, or the fact that a director has not received the notice, does
not invalidate the meeting.
105. A director may by a written instrument appoint an alternate who need not be
a director and an alternate is entitled to attend meetings in the absence
of the director who appointed him and to vote or consent in place of the
director.
106. A meeting of directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate not
less than one-half of the total number of directors, unless there are only
2 directors in which case the quorum shall be 2.
107. If the Company shall have only one director the provisions herein contained
for meetings of the directors shall not apply but such sole director shall
have full power to represent and act for the Company in all matters as are
not by the Act or the Memorandum or these Articles required to be exercised
by the members of the Company and in lieu of minutes of a meeting shall
record in writing and sign a note or memorandum of all matters requiring a
resolution of directors. Such a note or memorandum shall constitute
sufficient evidence of such resolution for all purposes.
108. At every meeting of the directors the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of the
Board of Directors or if the Chairman of the Board of Directors is not
present at the meeting the Vice-Chairman of the Board of Directors shall
preside. If there is no Vice-Chairman of the Board of Directors or if the
Vice-Chairman of the Board of Directors is not present at the meeting the
directors present shall choose some one of their number to be chairman of
the meeting.
109. An action that may be taken by the directors or a committee of directors at
a meeting may also be taken by a resolution of directors or a committee of
directors consented to in writing or by telex, telegram, cable, facsimile
or other written electronic communication by all directors or all members
of the committee as the case may be, without the need for any notice. The
consent may be in the form of counterparts, each counterpart being signed
by one or more directors.
110. The directors shall cause the following corporate records to be kept:
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(a) minutes of all meetings of directors, members, committees of
directors, committees of officers and committees of members;
(b) copies of all resolutions consented to by directors,members, committees
of directors, committees of officers and committees of members; and
(c) such other accounts and records as the directors by resolution of
directors consider necessary or desirable in order to reflect the
financial position of the Company.
111. The books, records and minutes shall be kept at the registered office of
the Company, its principal place of business or at such other place as the
directors determine.
112. The directors may, by resolution of directors, designate one or more
committees, each consisting of one or more directors.
113. Each committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as are set
forth in the resolution of directors establishing the committee, except
that no committee has any power or authority to amend the Memorandum or
these Articles, to appoint directors or fix their emoluments, or to
appoint officers or agents of the Company.
114. The meetings and proceedings of each committee of directors consisting of 2
or more directors shall be governed mutatis mutandis by the provisions of
these Articles regulating the proceedings of directors so far as the same
are not superseded by any provisions in the resolution establishing the
committee.
OFFICERS
115. The Company may by resolution of directors appoint officers of the Company
at such times as shall be considered necessary or expedient. Such officers
may consist of a Chairman of the Board of Directors, a Vice-Chairman of the
Board of Directors, a President and one or more Vice-Presidents,
Secretaries and Treasurers and such other officers as may from time to time
be deemed desirable. Any number of offices may be held by the same person.
116. The officers shall perform such duties as shall be prescribed at the time
of their appointment subject to any modification in such duties as may be
prescribed thereafter by resolution of directors or resolution of members,
but in the absence of any specific allocation of duties it shall be the
responsibility of the Chairman of the Board of Directors to preside at
meetings of directors and members, the Vice-Chairman to act in the absence
of the Chairman, the President to manage the day to day affairs of the
Company, the Vice-Presidents to act in order of seniority in the
22
<PAGE>
absence of the President but otherwise to perform such duties as may be
delegated to them by the President, the Secretaries to maintain the share
register, minute books and records (other than financial records) of the
Company and to ensure compliance with all procedural requirements imposed
on the Company by applicable law, and the Treasurer to be responsible for
the financial affairs of the Company.
117. The emoluments of all officers shall be fixed by resolution of directors.
118. The officers of the Company shall hold office until their successors are
duly elected and qualified, but any officer elected or appointed by the
directors may be removed at any time, with or without cause, by resolution
of directors. Any vacancy occurring in any office of the Company may be
filled by resolution of directors.
CONFLICT OF INTERESTS
119. No agreement or transaction between the Company and one or more of its
directors or any person in which any director has a financial interest or
to whom any director is related, including as a director of that other
person, is void or voidable for this reason only or by reason only that the
director is present at the meeting of directors or at the meeting of the
committee of directors that approves the agreement or transaction or that
the vote or consent of the director is counted for that purpose if the
material facts of the interest of each director in the agreement or
transaction and his interest in or relationship to any other party to the
agreement or transaction are disclosed in good faith or are known by the
other directors.
120. A director who has an interest in any particular business to be considered
at a meeting of directors or members may be counted for purposes of
determining whether the meeting is duly constituted.
INDEMNIFICATION
121. Subject to the limitations hereinafter provided the Company may indemnify
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred in connection
with legal, administrative or investigative proceedings any person who
(a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that the person
is or was a director, an officer or a liquidation of the Company; or
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<PAGE>
(b) is or was, at the request of the Company, serving as a director,
officer or liquidator of, or in any other capacity is or was acting
for, another company or a partnership, joint venture, trust or other
enterprise.
122. The Company may only indemnify a person if the person acted honestly and in
good faith and with a view to the best interests of the Company and, in the
case of criminal proceedings, the person had no reasonable cause to believe
that his conduct was unlawful.
123. The decision of the directors as to whether the person acted honestly and
in good faith and with a view to the best interests of the Company and as
to whether the person had no reasonable cause to believe that his conduct
was unlawful is, in the absence of fraud, sufficient for the purposes of
these Articles, unless a question of law is involved.
124. The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself, create
a presumption that the person did not act honestly and in good faith and
with a view to the best interests of the Company or that the person had
reasonable cause to believe that his conduct was unlawful.
125. If a person to be indemnified has been successful in defence of any
proceedings referred to above the person is entitled to be indemnified
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred by the person
in connection with the proceedings.
126. The Company may purchase and maintain insurance in relation to any person
who is or was a director, an officer or a liquidator of the Company, or who
at the request of the Company is or was serving as a director, an officer
or a liquidator of, or in any other capacity is or was acting for, another
company or a partnership, joint venture, trust or other enterprise, against
any liability asserted against the person and incurred by the person in
that capacity, whether or not the Company has or would have had the power
to indemnify the person against the liability as provided in these
Articles.
SEAL
127. The Company may have more than one Seal and references herein to the Seal
shall be references to every Seal which shall have been duly adopted by
resolution of directors. The directors shall provide for the safe custody
of the Seal and for an imprint thereof to be kept at the Registered Office.
Except as otherwise expressly provided herein the Seal when affixed to any
written instrument shall be witnessed and attested to by the signature of a
director or any other person so authorized from time to time by resolution
of directors. Such authorization may be before or after the Seal is
affixed, may be general or specific and
24
<PAGE>
may refer to any number of sealings. The Directors may provide for a
facsimile of the Seal and of the signature of any director or authorized
person which may be reproduced by printing or other means on any instrument
and it shall have the same force and validity as if the Seal had been
affixed to such instrument and the same had been signed as hereinbefore
described.
DIVIDENDS
128. The Company may by a resolution of directors declare and pay dividends in
money, shares, or other property, but dividends shall only be declared and
paid out of surplus. In the event that dividends are paid in specie the
directors shall have responsibility for establishing and recording in the
resolution of directors authorizing the dividends, a fair and proper value
for the assets to be so distributed.
129. The directors may from time to time pay to members such interim dividends
as appear to the directors to be justified by the profits of the Company.
130. The directors may, before declaring any dividend, set aside out of the
profits of the Company such sum as they think proper as a reserve fund, and
may invest the sum so set aside as a reserve fund upon such securities as
they may select.
131. No dividend shall be declared and paid unless the directors determine that
immediately after the payment of the dividend the Company will be able to
satisfy its liabilities as they become due in the ordinary course of its
business and the realizable value of the assets of the Company will not be
less than the sum of its total liabilities, other than deferred taxes, as
shown in its books of account, and its capital. In the absence of fraud,
the decision of the directors as to the realizable value of the assets of
the Company is conclusive, unless a question of law is involved.
132. Notice of any dividend that may have been declared shall be given to each
member in manner hereinafter mentioned and all dividends unclaimed for 3
years after having been declared may be forfeited by resolution of
directors for the benefit of the Company.
133. No dividend shall bear interest as against the Company and no dividend
shall be paid on treasury shares or shares held by another company of which
the Company holds, directly or indirectly, shares having more than 50
percent of the vote in electing directors.
134. A share issued as a dividend by the Company shall be treated for all
purposes as having been issued for money equal to the surplus that is
transferred to capital upon the issue of the share.
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135. In the case of a dividend of authorized but unissued shares with par value,
an amount equal to the aggregate par value of the shares shall be
transferred from surplus to capital at the time of the distribution.
136. In the case of a dividend of authorized but unissued shares without par
value, the amount designated by the directors shall be transferred from
surplus to capital at the time of the distribution, except that the
directors must designate as capital an amount that is at least equal to the
amount that the shares are entitled to as a preference, if any, in the
assets of the Company upon liquidation of the Company.
137. A division of the issued and outstanding shares of a class or series of
shares into a larger number of shares of the same class or series having a
proportionately smaller par value does not constitute a dividend of shares.
ACCOUNTS AND AUDIT
138. The Company may by resolution of members call for the directors to prepare
periodically a profit and loss account and a balance sheet. The profit and
loss account and balance sheet shall be drawn up so as to give respectively
a true and fair view of the profit and loss of the Company for the
financial period and a true and fair view of the state of affairs of the
Company as at the end of the financial period.
139. The Company may by resolution of members call for the accounts to be
examined by auditors.
140. The first auditors shall be appointed by resolution of directors;
subsequent auditors shall be appointed by a resolution of members.
141. The auditors may be members of the Company but no director or other officer
shall be eligible to be an auditor of the Company during his continuance in
office.
142. The remuneration of the auditors of the Company
(a) in the case of auditors appointed by the directors, may be fixed by
resolution of directors; and
(b) subject to the foregoing, shall be fixed by resolution of members or
in such manner as the Company may by resolution of members determine.
143. The auditors shall examine each profit and loss account and balance sheet
required to be served on every member of the Company or laid before a
meeting of the members of the Company and shall state in a written report
whether or not
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(a) in their opinion the profit and loss account and balance sheet give a
true and fair view respectively of the profit and loss for the period
covered by the accounts, and of the state of affairs of the Company at
the end of that period; and
(b) all the information and explanations required by the auditors have
been obtained.
144. The report of the auditors shall be annexed to the accounts and shall be
read at the meeting of members at which the accounts are laid before the
Company or shall be served on the members.
145. Every auditor of the Company shall have a right of access at all times to
the books of account and vouchers of the Company, and shall be entitled to
require from the directors and officers of the Company such information and
explanations as he thinks necessary for the performance of the duties of
the auditors.
146. The auditors of the Company shall be entitled to receive notice of, and to
attend any meetings of members of the Company at which the Company's profit
and loss account and balance sheet are to be presented.
NOTICES
147. Any notice, information or written statement to be given by the Company to
members be served in the case of members holding registered shares in any
way by which it can reasonably be expected to reach each member or by mail
addressed to each member at the address shown in the share register and in
the case of members holding shares issued to bearer, in the manner provided
in the Memorandum.
148. Any summons, notice, order, document, process, information or written
statement to be served on the Company may be served by leaving it, or by
sending it by registered mail addressed to the Company, at its registered
office, or by leaving it with, or by sending it by registered mail to, the
registered agent of the Company.
149. Service of any summons, notice, order, document, process, information or
written statement to be served on the Company may be proved by showing that
the summons, notice, order, document, process, information or written
statement was delivered to the registered office or the registered agent of
the Company or that it was mailed in such time as to admit to its being
delivered to the registered office or the registered agent of the Company
in the normal course of delivery within the period prescribed for service
and was correctly addressed and the postage was prepaid.
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PENSION AND SUPERANNUATION FUNDS
150. The directors may establish and maintain or procure the establishment and
maintenance of any non-contributory or contributory pension or
superannuation funds for the benefit of, and give or procure the giving of
donations, gratuities, pensions, allowances or emoluments to, any persons
who are or were at any time in the employment or service of the Company or
any company which is a subsidiary of the Company or is allied to or
associated with the Company or with any such subsidiary, or who are or were
at any time directors or officers of the Company or of any such other
company as aforesaid or who hold or held any salaried employment or office
in the Company or such other company, or any persons in whose welfare the
Company or any such other company as aforesaid is or has been at any time
interested, and to the wives, widows, families and dependents of any such
person, and may make payments for or towards the insurance of any such
persons as aforesaid, and may do any of the matters aforesaid either alone
or in conjunction with any such other company as aforesaid. Subject always
to the proposal being approved by resolution of members, a director holding
any such employment or office shall be entitled to participate in and
retain for his own benefit any such donation, gratuity, pension allowance
or emolument.
ARBITRATION
151. Whenever any difference arises between the Company on the one hand and any
of the members or their executors, administrators or assigns on the other
hand, touching the true intent and construction or the incidence or
consequences of these Articles or of the Act, touching anything done or
executed, omitted or suffered in pursuance of the Act or touching any
breach or alleged breach or otherwise relating to the premises or to these
Articles, or to any Act or Ordinance affecting the Company or to any of the
affairs of the Company such difference shall, unless the parties agree to
refer the same to a single arbitrator, be referred to 2 arbitrators one to
be chosen by each of the parties to the difference and the arbitrators
shall before entering on the reference appoint an umpire.
152. If either party to the reference makes default in appointing an arbitrator
either originally or by way of substitution (in the event that an appointed
arbitrator shall die, be incapable of acting or refuse to act) for 10 days
after the other party has given him notice to appoint the same, such other
party may appoint an arbitrator to act in the place of the arbitrator of
the defaulting party.
VOLUNTARY WINDING UP AND DISSOLUTION
153. The Company may voluntarily commence to wind up and dissolve by a
resolution of members but if the Company has never issued shares it may
voluntarily commence to wind up and dissolve by resolution of directors.
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CONTINUATION
154. The Company may by resolution of members or by a resolution passed
unanimously by all directors of the Company continue as a company
incorporated under the laws of a jurisdiction outside the British Virgin
Islands in the manner provided under those laws.
We, HWR SERVICES LIMITED, of Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands for the purpose of incorporating an International
Business Company under the laws of the British Virgin Islands hereby subscribe
our name to these Articles of Association the 5th day of February, 1999 in the
presence of:
Witness Subscriber
/s/ Ibn K. Thomas /s/ Adel K. Clyne
- ----------------- -----------------
Ibn K. Thomas Adel K. Clyne
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
29
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EXHIBIT 3.5
[LOGO APPEARS HERE]
FORM 1
COMPANIES ACT OF BARBADOS
(Section 5)
ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
Name of Company Company No:
CHIPPAC (BARBADOS) LTD. 16701
- --------------------------------------------------------------------------------
2. The classes and any maximum number of shares that the Company is
authorized to issue
The Company is authorised to issue an unlimited number of common shares.
- --------------------------------------------------------------------------------
3. Restriction if any on share transfers
No share in the capital of the Company shall be transferred without the
approval of the Directors of the Company or of a Committee of such
Directors, evidenced by resolution and the Directors may, in their absolute
discretion and without assigning any reasons therefor, decline to register
any transfer of any share.
- --------------------------------------------------------------------------------
4. Number (or minimum and maximum number) of Directors
There shall be a minimum of 1 and a maximum of 10 Directors.
- --------------------------------------------------------------------------------
5. Restrictions if any on business the Company may carry on
The Company shall not engage in any business other than international
business as defined in the International Business Companies Act, 1991-24.
- --------------------------------------------------------------------------------
6. Other provisions if any
None
- --------------------------------------------------------------------------------
7. Incorporators Date March 15, 1999
- --------------------------------------------------------------------------------
Names Address Signature
- --------------------------------------------------------------------------------
Gail Marshall Kingsland Crescent, Christ /s/ Gail Marshall
- --------------------------------------------------------------------------------
Church, Barbados
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For Ministry use only
- --------------------------------------------------------------------------------
Company No. 16701 Filed 1999-03-15
- --------------------------------------------------------------------------------
<PAGE>
BARBADOS
[LOGO APPEARS HERE]
I, DIANA DORALENE GREENIDGE, Acting Deputy Registrar of Corporate Affairs
and Intellectual Property Office, Clarence Greenidge House, Keith Bourne
Complex, Belmont Road in the Parish of St. Michael and in the Island of
Barbados, and as such a Notary Public do hereby CERTIFY as follows:
As Acting Deputy Registrar of Corporate Affairs and Intellectual Property I
have custody of all records relating to the registration of Companies in this
Island.
The Company CHIPPAC (BARBADOS) LTD. was incorporated on the 15th day of
March, One thousand nine hundred and ninety-nine as an International Business
Company under the Companies Act Chapter 308 of the Laws of Barbados and is
registered in the Companies Register.
Given under my hand as Acting Deputy Registrar and
Seal of Office as Notary Public of this Island
[STAMP] this 9/th/ day of April One thousand nine hundred
and ninety-nine.
[STAMP] /s/ Dianna Greenidge
Acting Deputy Registrar and as such a Notary
Public in and for the Island of Barbados.
<PAGE>
Exhibit 3.6
BARBADOS
THE COMPANIES ACT OF BARBADOS
BY-LAWS NO. 1
A By-Law relating generally to the conduct of the affairs of:
CHIPPAC (BARBADOS) LTD.
BE IT ENACTED as the by-laws of CHIPPAC (BARBADOS) LTD., (hereinafter
called the "Company") as follows:
1. INTERPRETATION
1.1 In this By-Law and all other by-laws of the Company, unless the
context otherwise requires:
"Act" means the Companies Act, Cap. 308 of the laws of Barbados as
from time to time amended and every statute substituted
therefor; and in the case of such amendment or substitution,
any references in the by-laws of the Company to provisions
of the Act or to specific provisions of the Act, shall be
read as references to the provisions as amended or
substituted therefor in the amendment or the new statute or
statutes;
"Articles" means the Articles of Incorporation of the Company as may be
amended, restated or revived from time to time;
"By-Law" means this general By-Law No. 1, as from time to time
amended and every general By-Law substituted therefor as the
same consolidates the all or any of the by-laws of the
Company from time to time in force;
"by-law" mean any by-law, or other rule or regulation with regard to
the administration of the affairs of the Company having the
force of a by-law in accordance with the Act, from time to
time in force;
"Regulations" means the Companies Regulations made under the Act, and all
regulations substituted therefor and, in the case of such
substitution, any references in the by-laws of the Company
to provisions of the Regulations shall be read as references
to the provisions substituted therefor in the new
regulations;
"Shareholders means a unanimous shareholder agreement in accordance with
Agreement" section 133 of the Act, between the Company and each of the
shareholders of the Company, and binding on all the parties
thereto.
<PAGE>
The Companies Act
By-Law No. 1
CHIPPAC (BARBADOS) LTD.
1.2 The word "person" includes individuals, companies, bodies corporate,
limited liability companies, societies with restricted liability, partnerships
(whether limited or general), firms, syndicates, joint ventures, trusts, un-
incorporated associations, governmental authorities and agencies, and any legal
entity or any other association of persons; and the word "individual" means a
natural person.
1.3 All terms contained in the by-laws and not specifically defined, shall
have the meanings given to such terms in the Act or the Regulations, as such
terms may be qualified, amended or substituted in the Articles or the
Shareholders Agreement. Terms defined elsewhere in this By-Law, unless otherwise
indicated, shall have such meaning in every by-law herein.
1.4 Unless the context clearly requires otherwise, the words "hereof"
"herein" and "hereunder" and words of similar import, when used in this By-Law,
shall refer to this By-Law as a whole and not to any particular by-law
provision; wherever the word "include" "includes" or "including" is used in any
by-law provision, it shall be deemed to be followed by the words "without
limitations" unless clearly indicated otherwise, or required by the Act, the
Regulations, the Articles or the Shareholders Agreement.
1.5 The singular includes the plural and the plural includes the singular;
and the masculine gender includes the feminine and neuter genders.
1.6 The division of this By-Law into sections, clauses, articles and
paragraphs, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation hereof.
2. REGISTERED OFFICE
2.1 The registered office of the Company shall be in Barbados at such address
as the directors may fix from time to time by resolution.
3. SEAL
3.1 Common Seal: The common seal of the Company shall be such as the
directors may by resolution from time to time adopt.
3.2.1 Official Seal: The Company may have one or more official seals for use in
any country other than Barbados or for use in any district or place not situated
in Barbados. Each official seal must be a facsimile of the common seal of the
Company, with the addition on its face of every country, district or place where
that official seal is to be used.
3.2.2 The Company may by an instrument in writing under its common seal,
authorise any person (appointed by resolution of directors for that purpose) to
affix an official seal of the
2
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The Companies Act
By-Law No. 1
CHIPPAC (BARBADOS) LTD.
Company to any document to which the Company is a party in the country, district
or place where that official seal is designated for use.
3.2.3 The person who affixes an official seal of the Company to any document
shall by writing under his hand, certify on that document the date on which, and
the place at which, the official seal is affixed.
4. DIRECTORS
4.1 Number: There shall be a minimum of 1 and a maximum of 10 directors
of the Company.
4.2 Election: Directors shall be elected by the shareholders on a show of
hands unless a poll is demanded in which case such election shall be by poll.
4.3 Tenure: Unless his tenure is sooner determined, a director shall
hold office from the date on which he is elected or appointed until the close of
the annual meeting of the shareholders next following but he shall be eligible
for re-election if qualified.
4.3.1 A director shall cease to be a director:
(a) if he becomes bankrupt or compounds with his creditors or is
declared insolvent;
(b) if he is found to be of unsound mind; or
(c) if by notice in writing to the Company he resigns his office and
any such resignation shall be effective at the time it is sent to
the Company or at the time specified in the notice, whichever is
later.
4.3.2 The shareholders of the Company may, by ordinary resolution passed at
a special meeting of the shareholders, remove any director from office and a
vacancy created by the removal of a director may be filled at the meeting of
the shareholders at which the director is removed.
5. POWERS OF DIRECTORS
5.1 General: Subject to a Shareholders Agreement, the business and
affairs of the Company shall be managed by the directors.
5.2 Borrowing Powers: The directors may from time to time:
(a) borrow money upon the credit of the Company;
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(b) issue, reissue, sell or pledge debentures of the Company;
(c) subject to section 53 of the Act, give a guarantee on behalf of
the Company to secure performance of an obligation of any person;
and
(d) mortgage, charge, pledge or otherwise create a security interest
in all or any property of the Company, owned or subsequently
acquired, to secure any obligation of the Company.
5.2.1 The directors may from time to time by resolution delegate to any
officer of the Company all or any of the powers conferred on the directors by
by-law 5.2 hereof to the full extent thereof or such lesser extent as the
directors may in any such resolution provide.
5.2.2 The powers conferred by by-law 5.2 hereof shall be in supplement
of and not in substitution for any powers to borrow money for the purposes of
the Company possessed by its directors or officers independently of a borrowing
by-law.
5.3 Committee of Directors: The directors may appoint from among their
number a committee of directors, subject to the Act, the Articles the
Regulations and by-law 5.4 hereof, to be vested with such powers, authorities
and discretions as the Board of Directors may from time to time determine.
5.4 Delegation of Powers: The directors may delegate to any director,
officer, or committee of directors, any of the powers of the directors except:
(a) the submission to the shareholders of any question or matter
requiring the approval of the shareholders;
(b) the filling a vacancy among the directors (except a vacancy
resulting from an increase in the number or minimum number of
directors, or from a failure to elect the minimum number of
directors required by the Articles);
(c) the filling of a vacancy among the directors or in the office of
auditor;
(d) the issue of shares;
(e) the declaration of a dividend;
(f) the purchase, redemption or other acquisition of shares issued by
the Company;
(g) the payment of a commission to any person in consideration for
the purchase or the agreement to purchase any shares of the
Company;
(h) the approval of a management proxy circular;
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(i) the approval of the financial statements of the Company; and
(j) the adoption, amendment or repeal of any by-laws of the Company.
6. MEETINGS OF DIRECTORS
6.1 Place of Meeting: Meetings of the directors and or any committee of
the directors may be held within or outside Barbados, except in Canada.
6.2 Notice: A meeting of the directors may be convened at any time by any
director or the Secretary, when directed or authorised by any director.
6.2.1 Except for a meeting called for the transaction of the following
business:
(a) the submission to the shareholders of any question or matter
requiring the approval of the shareholders;
(b) the filling of a vacancy among the directors or in the office of
auditor;
(c) the issue of shares;
(d) the declaration of a dividend;
(e) the purchase, redemption or other acquisition of shares issued by
the Company;
(f) the payment of a commission to any person in consideration for
the purchase or the agreement to purchase any shares of the
Company;
(g) the approval of a management proxy circular;
(h) the approval of the financial statements of the Company; and
(i) the adoption, amendment or repeal of any by-laws of the Company;
the notice of any such meeting need not specify the purpose of or the business
to be transacted at the meeting. Notice of any such meeting shall be served in
the manner specified in by-law 18.1 not less than two (2) days (exclusive of the
day on which the notice is delivered or sent but inclusive of the day for which
notice is given) before the meeting is to take place. A director may in any
manner waiver notice of a meeting of the directors and attendance of a director
at a meeting of the directors shall constitute a waiver of notice of the meeting
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business on the grounds that the meeting is not
lawfully called.
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6.2.2 It shall not be necessary to give notice of a meeting of the directors to
a newly elected or appointed director for a meeting held immediately following
the election of directors by the shareholders or the appointment to fill a
vacancy among the directors.
6.3 Quorum: A majority of directors shall form a quorum for the transaction
of business and, notwithstanding any vacancy among the directors, a quorum may
exercise all the powers of the directors. No business shall be transacted at a
meeting of directors unless a quorum is present.
6.4 A meeting of directors or of any committee of the directors may be held
by means of telephone or other communications facility that permits all persons
participating in the meeting to hear each other, and a director participating in
such a meeting by such means is deemed to be present at that meeting. A meeting
of directors or of any committee of the directors held by means of telephone
or other communications facility that permits all persons participating in the
meeting to hear each other, shall be deemed to be held at the place where the
chairman of the meeting is located.
6.5 Voting: Questions arising at any meeting of the directors shall be
decided by a majority of votes. In case of an equality of votes the chairman of
the meeting, in addition to his original vote, shall have a second or casting
vote.
6.6 Alternate Director: In addition to the power vested in the shareholders
under section 66.1 of the Act, a director (not being an alternate director
appointed under section 66.1 of the Act), may by written notice to the Company
appoint any person to be his alternate to act in his place at meetings of the
directors at which he is not present or by the by-laws deemed not to be present.
A duly certified copy of the document whereby any such appointment is made shall
be filed with the Company before any such individual acts as alternate as
aforesaid. A director may at any time by written notice to the Company revoke
the appointment of an alternate appointed by him.
6.6.1 Except for an alternate who is a director of the Company, every
appointment of an alternate shall be confirmed by the meeting of the Board of
Directors for which he is appointed. Valid confirmation at the meeting of the
Board of Directors shall be given, provided that no director then present
records his objection to appointment of such person as an alternate. In the
event that any directors present at any meeting records his objection to the
appointment of a person appointed as the alternate of a director, the Chairman
of the meeting, shall adjourn the meeting for a period of not less than two (2)
days. The Secretary shall immediately thereupon give notice of the objection to
the director who appointed the alternate.
6.6.2 Every alternate appointed under by-law 6.6 shall be entitled to attend
and vote at meetings at which the person who appointed him is not present or
deemed to be present and, if he is a director, to have a separate vote on behalf
of the director he is representing in addition to his own vote.
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6.7 Corporate Representative: A person who is a director of the Company
but who is not an individual, shall by such procedure as may be appropriate for
the management of the business and affairs of such person appoint an individual
to act as such person's representative as a director of the Company with power
to exercise all of the powers of a director of the Company. The person
appointing any such individual shall remain fully liable as a director of the
Company notwithstanding any such appointment. A duly certified copy of the
resolution or document whereby any such appointment is made shall be filed with
the Company before any such individual acts as representative as aforesaid. Any
person appointing an individual under the provisions of this by-law may from
time to time revoke the appointment of any such individual and appoint another
in his place or stead.
6.8 Resolution in lieu of meeting: Notwithstanding any of the foregoing
provisions of this by-law a resolution in writing signed by all the directors
entitled to vote on that resolution at a meeting of the directors or any
committee of the directors is valid as if passed at a meeting of the directors
or any committee of the directors.
7. REMUNERATION OF DIRECTORS
7.1 The remuneration to be paid to any of the directors shall be such as the
directors may from time to time determine and such remuneration may be in
addition to the salary paid to any officer or employee of the Company who is
also a director. The directors may also award special remuneration to any
director undertaking any special services on the Company's behalf other than the
duties ordinarily required of a director and the confirmation of any such
resolution or resolutions by the shareholders shall not be required. The
directors shall also be entitled to be paid their travelling and other expenses
properly incurred by them in connection with the affairs of the Company.
8. APPROVAL OF TRANSACTIONS BY SHAREHOLDERS
8.1.1 The directors in their discretion may submit any contract, act or
transaction for approval or ratification at any annual meeting of the
shareholders or at any special meeting of the shareholders called for the
purpose of considering the same.
8.1.2 Where a director votes in a resolution of directors approving, ratifying
or confirming any contract, act or transaction, in which that director is a
party, or a director or officer or has a material interest in any body which is
a party (an "Interested Director"), other than:
(a) an arrangement by way of security for money loaned to, or
obligations undertaken by the director for the benefit of the
Company or an affiliate of the Company;
(b) is a contract that relates primarily to his remuneration as a
director, officer, employee or agent of the Company or affiliate of
the Company;
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(c) a contract for indemnity or insurance under sections 97 and 101
of the Act;
(d) a contract with an affiliate of the Company;
the approval, confirmation or ratification of the directors must be approved by
special resolution of the shareholders, to whom notice of the nature and extent
of the director's interests in the contract must be declared and disclosed in
reasonable detail, in accordance with the Act.
8.1.3 Except for a contract, act or transaction referred to in section 8.1.1
of the by-laws, any such contract, act or transaction that is approved or
ratified or confirmed by a resolution passed by a majority of the votes cast at
any such meeting (unless any different or additional requirement is imposed by
the Act or by the Company's articles or any other by-law) shall be as valid and
as binding upon the Company and upon all the shareholders as though it had been
approved, ratified or confirmed by every shareholder of the Company.
8.2 In accordance with the Act, but subject to any additional requirements
imposed by the Act or other applicable law and notwithstanding any contrary
provision in the Shareholders Agreement, a special resolution of the shareholder
of the Company shall be required to cause or permit the Company to do any of the
following actions:
(a) to amend the Articles;
(b) to amalgamate the Company;
(c) to enter into any merger or consolidation or any other manner of
reorganisation; and
(d) to sell, lease or exchange all or substantially all of the assets
of the Company, (other than in the ordinary course of business of
the Company).
9. LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
9.1 No director or officer of the Company shall be liable to the Company
for:-
(a) the acts, receipts, neglects or defaults of any other director or
officer or employee or for joining in any receipt or act for
conformity;
(b) any loss, damage or expense incurred by the Company through the
insufficiency or deficiency of title to any property acquired by
the Company or for or on behalf of the Company;
(c) the insufficiency or deficiency of any security in or upon which
any of the moneys of or belonging to the Company shall be placed
out or invested;
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(d) any loss or damage arising from the bankruptcy, insolvency or
tortious act of any person, including any person with whom any
moneys, securities or effects shall be lodged or deposited;
(e) any loss, conversion, misapplication or misappropriation of or any
damage resulting from any dealings with any moneys, securities or
other assets belonging to the Company; or
(f) any other loss, damage or misfortune whatever which may happen in the
execution of the duties of his respective office or trust or in
relation thereto;
unless the same happens by or through his failure to exercise the powers and to
discharge the duties of his office honestly and in good faith with a view to the
best interests of the Company and in connection therewith to exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
9.2 Nothing herein contained shall relieve a director or officer from the
duty to act in accordance with the Act or Regulations or relieve him from
liability for a breach thereof.
9.2.1 The directors for the time being of the Company shall not be under any
duty or responsibility in respect of any contract, act or transaction whether or
not made, done or entered into in name of or on behalf of the Company, except
such as are submitted to and authorised or approved by the directors.
9.2.2 If any director or officer of the Company is employed by or performs
services for the Company otherwise than as a director or officer or is a member
of a firm or a shareholder, director or officer of a body corporate which is
employed by or performs services for the Company, the fact of his being a
shareholder, director or officer of the Company shall not disentitle such
director or officer or such firm or body corporate, as the case may be, from
receiving proper remuneration for such services.
10. INDEMNITIES TO DIRECTORS AND OFFICERS
10.1 Subject to section 97 of the Act, except in respect of an action by or on
behalf of the Company to obtain a judgement in its favour, the Company shall
indemnify a director or officer of the Company; a former director or officer of
the Company; a person who acts or acted at the Company's request as a director
or officer of a body corporate of which the Company is or was a shareholder or
creditor; and the personal representatives of each; against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a
judgement, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of such company, provided that:
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(a) he acted honestly and in good faith with a view to the best
interests of the Company; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.
10.2 With the approval of the court, in respect of an action by or on
behalf of the Company to obtain a judgment in its favor, the Company shall
indemnify a director or officer of the Company; a former director or officer of
the Company; a person who acts or acted at the Company's request as a director
or officer of a body corporate of which the Company is or was a shareholder or
creditor; and the personal representatives of each; to which such person is made
a party by reason of being or having been a director of the Company or body
corporate, against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgement, reasonably incurred by him in respect
of any action or proceeding, provided that:
(a) he acted honestly and in good faith with a view to the best
interests of the Company; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.
10.3 The Company shall indemnify a director or officer of the Company; a
former director or officer of the Company; a person who acts or acted at the
Company's request as a director or officer of a body corporate of which the
Company is or was a shareholder or creditor, and the personal representatives of
each; to which such person is made a party by reason of being or having been a
director of the Company or body corporate, against all costs, charges and
expenses, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of such company, provided that:
(a) he was substantially successful on the merits in his defence
of the action or proceeding;
(b) he acted honestly and in good faith with a view to the best
interests of the Company; and
(c) he is fairly and reasonably entitled to an indemnity.
10.4 The Company shall insure or obtain third-party insurance for the
benefit of a director or officer of the Company; a former director or officer of
the Company; a person who acts or acted at the Company's request as a director
or officer of a body corporate of which the Company is or was a shareholder or
creditor, and the personal representatives of each; against any liability
incurred by him in his capacity of a director or officer of the Company for
failure to exercise the
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care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
11. OFFICERS
11.1 Appointment: The directors shall as often as may be required appoint a
Secretary and, if deemed advisable, may as often as may be required designate
any other offices and appoint officers of the Company, who shall have such
authority and shall perform such duties as may from time to time be prescribed
by the directors. Two or more offices may be held by the same person.
11.2 Remuneration: The remuneration of all officers appointed by the
directors shall be determined from time to time by resolution of the directors.
The fact that any officer or employee is a director or shareholder of the
Company shall not disqualify him from receiving such remuneration as may be
determined.
11.3 Powers and Duties: All officers shall sign such contracts, documents or
instruments in writing as require their respective signatures and shall
respectively have and perform all powers and duties incident to their respective
offices and such other powers and duties respectively as may from time to time
be assigned to them by the directors.
11.4 Delegation: In case of the absence or inability to act of any officer of
the Company, or for any other reason that the directors may deem sufficient the
directors may delegate all or any of the powers of such officer to any other
officer or to any director.
11.5 Secretary: The Secretary shall give or cause to be given notices for all
meetings of the directors, any committee of the directors and the shareholders
when directed to do so and shall have charge of the minute books and seal of the
Company and of the records (other than accounting records)referred to in section
170 of the Act.
11.6 Assistant Secretary: If appointed, an Assistant Secretary or, if more
than one, the Assistant Secretaries, shall respectively perform all the duties
of the Secretary, in the absence or inability or refusal to act of the
Secretary.
11.7 Vacancies: If the office of any officer of the Company becomes vacant by
reason of death, resignation, disqualification or otherwise, the directors by
resolution shall, in the case of the Secretary, and may, in the case of any
other office, appoint a person to fill such vacancy.
12. SHAREHOLDERS' MEETINGS
12.1 Annual Meeting: Subject to the provisions of section 105 of the Act, the
annual meeting of the shareholders shall be held on such day in each year and at
such time as the
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directors may by resolution determine at any place within Barbados or, if all
the shareholders entitled to vote at such meeting so agree, outside Barbados,
except in Canada.
12.1.1 For the purposes of by-law 12.1, a shareholder entitled to vote at the
annual meeting shall be deemed to agree to the convening of the annual meeting
of the Company outside of Barbados, at the place specified in the notice of such
annual meeting, unless such shareholder delivers prior to or at the annual
meeting its dissent to such meeting, or pursuant to the Act, attends the meeting
for the express purpose of objecting to the transaction of business at that
annual meeting on the grounds that such meeting is not lawfully held.
12.2 Special Meetings: Special meetings of the shareholders may be convened
at any date and time and at any place within Barbados or, if all the
shareholders entitled to vote at such meeting so agree, outside Barbados, except
in Canada.
12.2.1 For the purposes of by-law 12.2, a shareholder entitled to vote at any
special meeting shall be deemed to agree to the convening of the special meeting
of the Company outside of Barbados, at the place specified in the notice of such
special meeting, unless such shareholder delivers prior to or at the annual
meeting its dissent to such meeting, or pursuant to the Act, attends the meeting
for the express purpose of objecting to the transaction of business at that
special meeting on the grounds that such meeting is not lawfully held.
12.3 Requisitioned Meetings: The directors shall, on the requisition of the
holders of not less than five percent of the issued shares of the Company that
carry a right to vote at the meeting requisitioned, forthwith convene a meeting
of shareholders, and in the case of such requisition the following provisions
shall have effect:-
(a) the requisition must state the purposes of the meeting and must be
signed by the requisitionists and deposited at the Registered
Office, and may consist of several documents in like form each
signed by one or more of the requisitionists;
(b) if the directors do not, within twenty-one (21) days from the date
of the requisition being so deposited, proceed to convene a
meeting, the requisitionists or any of them may themselves convene
the meeting but any meeting so convened shall not be held after
three (3) months from the date of such deposit;
(c) unless section 129 (3) of the Act applies, the directors shall be
deemed not to have duly convened the meeting if they do not give
such notice as is required by the Act within fourteen (14) days
from the deposit of the requisition;
(d) any meeting convened under this by-law the requisitionists shall
be called as nearly as possible in the manner in which meetings
are to be called pursuant to the by-law and Divisions E and F of
Part 1 of the Act; and
(e) a requisition by joint holders of shares must be signed by all
such holders.
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12.4 Notice: A printed, written or typewritten notice stating the day, hour
and place of meeting shall be given by serving such notice on each shareholder
entitled to vote at such meeting, on each director and on the auditor of the
Company in the manner specified in by-law 18.1 hereof, not less than twenty-one
(21) days or more than fifty (50) days (in each case exclusive of the day for
which the notice is delivered or sent and of the day for which notice is given)
before the date of the meeting. Notice of a meeting at which special business is
to be transacted shall state (a) the nature of that business in sufficient
detail to permit the shareholder to form a reasoned judgement thereon, and (b)
the text of any special resolution to be submitted to the meeting.
12.5 Waiver of Notice: A shareholder and any other person entitled to attend a
meeting of shareholders may in any manner waive notice of a meeting of
shareholders and attendance of any such person at a meeting of shareholders
shall constitute a waiver of notice of the meeting except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called.
12.6 Omission of Notice. The accidental omission to give notice of any meeting
or any irregularity in the notice of any meeting or the non-receipt of any
notice by any shareholder, director or the auditor of the Company
shall not invalidate any resolution passed or any proceedings taken at any
meeting of the shareholders.
12.7 Votes: Every question submitted to any meeting of shareholders shall be
decided in the first instance by a show of hands unless a person entitled to
vote at the meeting has demanded a poll.
12.7.1 At every meeting at which he is entitled to vote, every shareholder,
proxy holder or individual authorised to represent a shareholder who is present
in person shall have one vote on a show of hands. Upon a poll at which he is
entitled to vote, every shareholder, proxy holder or individual authorised to
represent a shareholder shall, subject to the articles, have one vote for every
share held by the shareholder.
12.7.2 At any meeting unless a poll is demanded, a declaration by the chairman
of the meeting that a resolution has been carried or carried unanimously or by a
particular majority or lost or not carried by a particular majority shall be
conclusive evidence of the fact.
12.7.3 When the Chairman, the President and the Vice-President are absent, the
persons who are present and entitled to vote shall choose another director as
chairman of the meeting; but if no director is present or all the directors
present decline to take the chair; the persons who are present and entitled to
vote shall choose one of their number to be chairman.
12.7.4 A poll, either before or after vote by a show of hands may, be demanded
by any person entitled to vote at the meeting. If at any meeting a poll is
demanded on the election of a chairman or on the question of adjournment it
shall be taken forthwith without adjournment. If at any meeting a poll is
demanded on any other question or as to the election of directors, the vote
shall be taken by poll in such manner and either at once, later in the meeting
on after
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adjournment as the chairman of the meeting directs. The result of a poll shall
be deemed to be the resolution of the meeting at which the poll was demanded. A
demand for a poll may be withdrawn.
12.7.5 If two (2) or more persons hold shares jointly, one of those holders
present at a meeting of shareholders may, in the absence of the other, vote the
shares; but if two (2) or more of those persons who are present, in person or by
proxy vote, they must vote as one on the shares jointly held by them.
12.8 Corporate Representative: A body corporate or association which is a
shareholder of the Company, may be represented at any annual or special general
meeting of the Company, by an individual who in his capacity as a director or
officer of that body corporate or association is authorised under its governing
instruments to represent that body corporate or association or by an individual
authorised by a resolution of the directors or governing body of that body
corporate or association to represent it at meetings of shareholders of the
Company.
12.9 Proxies: Votes at meetings of shareholders may be given either personally
(in the case of a body corporate or association by an individual described in
by-law 12.8) or by proxy.
12.9.1 A proxy shall be executed by the shareholder or his attorney authorised
in writing and is valid only at the meeting in respect of which it is given or
any adjournment thereof.
12.9.2 A person appointed by proxy need not be a shareholder.
12.9.3 Subject to the provisions of Part V of the Regulations, a proxy may be
in the following form:
The undersigned shareholder of CHIPPAC (BARBADOS) LTD.
hereby appoints
of
or failing him
of
as the nominee of the undersigned to attend and act for the
undersigned and on behalf of the undersigned at the meeting of the
shareholders of the said Company to be held on [_________________] and
at any adjournment or adjournments thereof in the same manner, to the
same extent and with the same powers as if the undersigned were
present at the said meeting or such adjournment or adjournments
thereof
Dated this day of 19 .
Signature of Shareholder
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12.10 Adjournment: The chairman of any meeting may with the consent of the
meeting adjourn the same from time to time to a fixed time and place and no
notice of such adjournment need be given to the shareholders unless the meeting
is adjourned by one or more adjournments for an aggregate of thirty (30) days or
more in which case notice of the adjourned meeting shall be given as for an
original meeting. Any business that might have been brought before or dealt with
at the original meeting in accordance with the notice calling the same may be
brought before or dealt with at any adjourned meeting for which no notice is
required.
12.11 Quorum: Subject to the Act, and except in the case of a Company having
only one shareholder a quorum for the transaction of business at any meeting of
the shareholders shall be two persons present in person, each being either a
shareholder entitled to vote thereat, or a duly appointed proxy holder or
representative of a shareholder so entitled. If a quorum is present at the
opening of any meeting of the shareholders, the shareholders present or
represented may proceed with the business of the meeting notwithstanding a
quorum is not present throughout the meeting. If a quorum is not present within
thirty (30) minutes of the time fixed for a meeting of shareholders, the persons
present and entitled to vote may adjourn the meeting to a fixed time and place
but may not transact any other business.
12.12 Resolution in Lieu of Meeting: Notwithstanding any of the foregoing
provisions of this by-law a resolution in writing signed by all the shareholders
entitled to vote on that resolution at a meeting of the shareholders is, subject
to section 128 of the Act, as valid as if it had been passed at a meeting of the
shareholders.
13. SHARES
13.1 Allotment and Issuance: Subject to the Act, the Articles and the
Shareholders Agreement, shares in the capital of the Company may be allotted and
issued by resolution of the directors at such time and on such terms and
conditions and to such persons or class of persons as the directors determine.
13.2 Certificates: Share certificates and the form of share transfer shall
(subject to section 181 of the Act) be in such form as the directors may by
resolution approve, and such certificates shall be signed by any two officers or
directors of the Company.
13.2.1 The directors or any agent designated by the directors may in their or
his discretion direct the issuance of a new share certificate or other such
certificate in lieu thereof consequent upon the change of name of the registered
shareholder pursuant to an amendment to the corporate instruments of the
registered shareholder to effect a change of name; an amalgamation between the
registered shareholder and another legal entity; a transfer of shares by
operation of law; or any other change in the corporate instruments of the
registered shareholder.
13.2.2 The directors or any agent designated by the directors may in their or
his discretion direct the issuance of a new share certificate or other such
certificate in lieu of and upon cancellation of a certificate that has been
mutilated or in substitution for a certificate claimed to
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CHIPPAC (BARBADOS) LTD.
have been lost, destroyed or wrongfully taken, on payment of such reasonable fee
and on such terms as to indemnity, reimbursement of expenses and evidence of
loss and of title as the directors may from time to time prescribe, whether
generally or in any particular case.
14. TRANSFER OF SHARES AND DEBENTURES
14.1 Transfer: The shares or debentures of a company may be transferred by a
written instrument of transfer signed by the transferor and naming the
transferee;
14.2 Registers: Registers of shares and debentures issued by the Company shall
be kept at the registered office of the Company or at such other place in
Barbados as may from time to time be designated by resolution of the directors.
14.3 Surrender of Certificates: Subject to section 179 of the Act, no
transfer of shares or debentures shall be registered unless or until the
certificate representing the shares or debentures to be transferred has been
surrendered for cancellation.
14.4 Surrender in Default to the Company: If so provided in the Articles or
the Shareholders Agreement, the Company has a lien on a share registered in the
name of a shareholder or his personal representative for a debt of that
shareholder to the Company, or for any default in its obligation owing to the
Company under the Shareholders Agreement.
14.4.1 By way of enforcement of a lien under by-law 14.4, the directors may
refuse to permit the registration of a transfer of such share, and may exercise
any right to repurchase all of the shares of any defaulting shareholder. Until
completion of such repurchase in accordance with the Shareholders' Agreement
(and notwithstanding that any amounts due in respect of such repurchase remain
due and outstanding) the Company shall have the right to exercise all rights in
respect of the shares, (including without limitation the right to vote at any
annual or special general meeting of the Company and to receive all dividends
and distributions in respect thereof), and the defaulting shareholder shall have
only the rights accorded under the Shareholders Agreement.
15. DIVIDENDS
15.1 The directors may from time to time by resolution declare and the Company
may pay dividends out of realised profits of the Company, on the issued and
outstanding shares in the capital of the Company subject to the Articles and
provided that there are not reasonable ground for believing that:
(a) the Company is unable (or would after the payment) be unable to pay
its liabilities as they become due; and
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(b) the realisable value of the Company's assets would thereby be less
than the aggregate of its liabilities and stated capital of all
classes.
15.1.1 In the event that several persons are registered as the joint holders of
any shares, any one of such persons may give effectual receipts for all
dividends and payments on account of dividends.
16. VOTING IN OTHER COMPANIES
16.1 All shares or debentures carrying voting rights in any other body
corporate that are held from time to time by the Company may be voted at any and
all meetings of shareholders, debenture holders (as the case may be) of such
other body corporate and in such manner and by such person or persons as the
directors of the Company shall from time to time determine. The officers of the
Company may for and on behalf of the Company from time to time:
(a) execute and deliver proxies; and
(b) arrange for the issuance of voting certificates or other evidence of
the right to vote;
in such names as they may determine without the necessity of a resolution or
other action by the directors.
17. INFORMATION AVAILABLE TO SHAREHOLDERS
17.1 Except as provided by the Act, no shareholder shall be entitled to any
information respecting any details or conduct of the Company's business which in
the opinion of the directors it would be in-expedient in the interests of the
Company to communicate to the public.
17.2 The directors may from time to time, subject to rights conferred by the
Act, determine whether and to what extent and at what time and place and under
what conditions or regulations the documents, books and registers and accounting
records of the Company or any of them shall be open to the inspection of
shareholders and no shareholder shall have any right to inspect any document or
book or register or accounting record of the Company except as conferred by
statute or authorised by the directors or by a resolution of the shareholders.
18. NOTICES
18.1 Method of Giving Notice. Any notice or other document required by the
Act, the Regulations, the Articles or the by-laws to be sent to any shareholder,
debenture holder, director or auditor may be delivered by hand or sent by air
courier, registered mail, facsimile, telecopier electronic mail or other
instantaneous electronic means to any such person at his latest address as
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shown in the records of the Company or its transfer agent and to any such
director at his latest address as shown in the records of the Company or in the
latest notice filed under section 66 or 74 of the Act, and to the auditor at
his business address.
18.2 Waiver of Notice: Notice may be waived or the time for the notice may be
waived or abridged at any time with the consent in writing of the person
entitled thereto.
18.3 Undelivered Notices. If a notice or document is sent to a shareholder or
debenture holder by prepaid mail in accordance with this by-law and the notice
or document is returned on three (3) consecutive occasions because the
shareholder or debenture holder cannot be found, it shall not be necessary to
send any further notices or documents to the shareholder or debenture holder
until he informs the Company in writing of his new address.
18.4 Shares And Debentures Jointly Registered: All notices or other documents
with respect to any shares or debentures registered in more than one name shall
be given to whichever of such persons is named first in the records of the
Company and any notice or other document so given shall be sufficient notice or
delivery to all the holders of such shares or debentures.
18.5 Persons Entitled by Operation of Law: Subject to section 184 of the Act,
every person who by operation of law, transfer or by any other means whatsoever
becomes entitled to any share is bound by every notice or other document in
respect of such share that, previous to his name and address being entered in
the records of the Company is duly given to the person from whom he derives his
title to such share.
18.6 Deceased Shareholders: Subject to section 184 of the Act, any notice or
other document delivered or sent by air courier, registered mail, facsimile,
telecopier electronic mail or other instantaneous electronic means or left at
the address of any shareholder as the same appears in the records of the Company
shall, notwithstanding that such shareholder is deceased, and whether or not the
Company has notice of his death, be deemed to have been duly served in respect
of the shares held by him (whether held solely or with any other person) until
some other person is entered in his stead in the records of the Company as the
holder or one of the holders thereof and such service shall for all purposes be
deemed a sufficient service or such notice or document on his personal
representatives and on all persons, if any, interested with him in such shares.
18.7 Signature of Notices: The signature of any director or officer of the
Company to any notice or document to be given by the Company may be written,
stamped, typewritten or printed or partly written, stamped, typewritten or
printed.
18.8 Computation of Time: Where a notice extending over a number of days or
other period is required under any provisions of the Articles or the by-laws the
day of sending the notice shall, unless it is otherwise provided, be counted in
such number of days or other period.
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18.9 Proof of Service: Where a notice required under by-law 18.1 hereof is
delivered to the person to whom it is addressed in the manner prescribed in
by-law 18.1 hereof, notice shall be deemed to be received;
(a) if delivered by hand, at the time of delivery;
(b) if delivered by registered mail, on the fifth day after such notice
is mailed, provided that if such day of deemed receipt is not a
business day (in the jurisdiction of the recipient), then notice
shall be deemed received at the commencement of business on the
business day immediately following the day of deemed receipt; and
(c) if delivered by facsimile, telecopier, electronic mail or other
instantaneous electronic means, at the time of transmission so
stated (if any), provided that in the absence of a statement of
transmission or if such time of deemed receipt is not a business day
(in the jurisdiction of the recipient), or within the hours during
which business is normally conducted by the recipient then notice
shall be deemed received at the commencement of business on the
business day immediately following the day of transmission.
18.9.1 A certificate of an officer of the Company in office at the time of the
making of the certificate or of any transfer agent of shares of any class of the
Company as to facts in relation to the delivery or sending of any notice shall
be conclusive evidence of those facts.
19. BANKING AUTHORISATIONS
19.1 Deposit of Funds. All funds of the Company shall be deposited in the name
of the Company with such bank, bankers or trust company or other duly licensed
financial institution or intermediary as may be designated from time to time by
the Board of Directors.
19.2 Authorised Withdrawals: Withdrawals from the accounts of the Company, and
all banking authorisations may be made by commercially recognised means,
including telephone instruction, electronic funds transfer, manual signature
and facsimile signature signed and/or countersigned by such persons and in the
manner, as may be authorised by the Board of Directors to sign and/or
countersign the same, provided that no person shall be authorised to sign and
countersign the same authorisation.
19.3 Payments: All cheques or drafts shall be made payable to the order of the
person entitled to receive the money, except that cheques for cash for office
expenses may be drawn to the order of any officer, or other person as may be
authorised by the Board of Directors.
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20. EXECUTION OF INSTRUMENTS
20.1 In the absence of any resolution of the directors of the Company,
contracts, documents or instruments in writing requiring the signature of the
Company, including (subject to section 134 of the Act), all instruments that may
be necessary for the purpose of selling, assigning, transferring, exchanging,
converting or conveying any such shares, stocks, bonds, debentures, rights,
warrants or other securities, may be signed by:
(a) [Names of officer(s)];
(b) the chief executive officer of the Company, the Secretary or the
Assistant Secretary; or
(c) any two directors or officers of the Company.
All contracts, documents and instruments in writing so signed shall be binding
upon the Company without any further authorisation or formality.
20.2 The directors shall have power from time to time by resolution to
appoint any officers or persons on behalf of the Company either to sign
certificates for shares in the Company and contracts, documents and instruments
in writing generally or to sign specific contracts, documents or instruments in
writing.
20.3.1 The common seal of the Company may be affixed to contracts, documents and
instruments in writing signed as aforesaid by any director, officer or other
person specified in by-law 20.1 hereof, or by any director, officer or other
person appointed by resolution under by-law 20.2 hereof.
20.3.2 An official seal which the Company may have, as it is authorised to do by
by-law 3.2 hereof, may be affixed to any document to which the Company is part
in the country, district or place where such official seal can be used by a
person appointed for that purpose by the Company by an instrument in writing
under the common seal and a person who affixes an official seal of the Company
to a document shall do so in accordance with section 25(6) of the Act.
21. SIGNATURES
21.1 The signature of any director or officer of the Company or any other
person on behalf of the Company (whether under the authority of by-law 20.1 or
appointed by resolution of the directors pursuant to by-law 20.2) may, if
specifically authorised by resolution of the directors, be printed, engraved,
lithographed or otherwise mechanically reproduced upon any certificate for
shares in the Company or contract, documents or instrument in writing, bond,
debenture or other security of the Company executed or issued by or on behalf of
the Company.
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21.2 Any document or instrument in writing on which the signature of any such
officer or person is so reproduced shall be deemed to have been manually signed
by such officer or person whose signature is so reproduced and shall be valid to
all intents and purposes as if such document or instrument in writing had been
signed manually and notwithstanding that the officer or person whose signature
is so reproduced has ceased to hold office at the date on which such document or
instrument in writing is delivered or issued.
22. FINANCIAL YEAR
22.1 The directors may from time to time by resolution establish the
financial year of the company.
23. CONSTRUCTION OF BY-LAWS
23.1 These by-laws shall be the complete rules and regulations for the
purpose of regulating the business of the Company in accordance with the
provisions of the Act, the Regulations and the Shareholders Agreement.
23.2.1 These by-laws are subject to the Act, the Articles and the Shareholders
Agreement, and are to be read and construed to the fullest extent possible in a
manner consistent with the Act, the Articles and the Shareholders Agreement; and
to give effect to all duties, rights and obligations prescibed in the Act, the
Articles and the Shareholders Agreement.
23.2.2 Notwithstanding the foregoing, in the event that any provision herein is
inconsistent with, conflicts with or is at variance with the Act, the Articles
or the Shareholders Agreement, this document shall be deemed to be amended (and
shall be amended at the earliest opportunity by the special resolution of the
shareholders), to the extent necessary to ensure conformity between these
by-laws and that inconsistent provision of the Act, the Articles and the
Shareholders Agreement.
24. AMENDMENT OF BY-LAWS
24.1 The following by-laws (the "Restricted Clauses") of this By-Law may be
amended, varied, modified repealed or replaced only by special resolution of the
shareholders.
24.2 Subject by-law 24.1, this By-Law may be restated, repealed or amended,
and further by-laws may be enacted by resolution of the Board of Directors;
provided that such restatement, repeal or amendment of the By-Law, or the terms
of such further by-laws (the "Permitted Amendment") is submitted to the
shareholders of the Company for ratification and approval by ordinary resolution
at the next annual or special meeting of the Company.
24.2.1 Notwithstanding any omission or failure to give notice to the
shareholders in accordance with the provisions of by-law 12.4 hereof, the
shareholders entitled to vote at any annual or special
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meeting at which the Permitted Amendment must be considered in accordance with
by-law 24.2 hereof, shall be deemed to have received notice that such meeting
has been called to consider (in addition to any other matters), the Permitted
Amendment and its ratification and approval (a) in sufficient detail to
permit the shareholders to form a reasoned judgement thereon, and (b) with the
text of an approval and ratification resolution.
24.3 Where the Permitted Amendment is confirmed or further amended by the
shareholders pursuant to by-law 24.2 hereof, the Permitted Amendment (in the
form in which it was confirmed or amended), shall be effective from the date of
the resolution of the directors approving and enacting the Permitted Amendment.
In the event that the Permitted Amendment is rejected by the shareholders,
pursuant to by-law 24.2 hereof, the Permitted Amendment shall be effective from
the date of the resolution of the directors approving and enacting the Permitted
Amendment until the date rejected by the shareholders.
24.4.1 The shareholders may defer consideration of the Permitted Amendment to
an adjourned or later annual or special general meeting of the Company, and in
any such event, the Permitted Amendment in the form approved by the directors,
shall continue in effect until the date of such adjourned or later annual or
special general meeting of the Company to which consideration of the Permitted
Amendment has been deferred, and the provisions of by-law 24.3 hereof apply to
any resolution of the shareholders adopted at any such adjourned or later annual
or special general meeting of the Company.
24.4.2 Except where the shareholders expressly reject a resolution calling for
the approval and ratification of the Permitted Amendment, or expressly declare
the non-applicability of by-law 24.4.1 hereof, any failure to adopt a resolution
approving and ratifying a Permitted Amendment (with or without any modification
or further amendment), shall be deemed as a resolution to defer consideration of
the Permitted Amendment to an adjourned or later annual or special general
meeting of the Company pursuant to by-law 24.4.1.
ENACTED this 13/th/ day of APRIL _____ 1999
/s/ Eulalie Greenaway
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[Corporate Seal Appears Here]
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EXHIBIT 3.7
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(CAP 291)
MEMORANDUM OF ASSOCIATION
OF
ChipPAC LIMITED
NAME
1. The name of the Company is ChipPAC Limited.
REGISTERED OFFICE
2. The Registered Office of the Company will be at Craigmuir Chambers,
P.O. Box 71, Road Town, Tortola, British Virgin Islands.
REGISTERED AGENT
3. The Registered Agent of the Company will be HWR Services Limited of
Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin
Islands.
GENERAL OBJECTS AND POWERS
4. (1) The object of the Company is to engage in any act or activity that is
not prohibited under any law for the time being in force in the
British Virgin Islands;
(2) The Company may not
(a) carry on business with persons resident in the British Virgin
Islands;
(b) own an interest in real property situate in the British Virgin
Islands, other than a lease referred to in paragraph (e) of
subclause (3);
(c) carry on banking or trust business, unless it is licensed to do
so under the Banks and Trust Companies Act, 1990;
(d) carry on business as an insurance or reinsurance company,
insurance agent or insurance broker unless it is licensed under
an enactment authorizing it to carry on that business.
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(e) carry on the business of company management, unless it is licensed
under the Company Management Act, 1990; or
(f) carry on the business of providing the registered office or the
registered agent for companies incorporated in the British Virgin
Islands.
(3) For purposes of paragraph (a) of subclause (2), the Company shall not be
treated as carrying on business with persons resident in the British Virgin
Islands if
(a) it makes or maintains deposits with a person carrying on banking
business within the British Virgin Islands;
(b) it makes or maintains professional contact with solicitors,
barristers, accountants, bookkeepers, trust companies, administration
companies, investment advisers or other similar persons carrying on
business within the British Virgin Islands;
(c) it prepares or maintains books and records within the British Virgin
Islands;
(d) it holds, within the British Virgin Islands, meetings of its directors
or members;
(e) it holds a lease of property for use as an office from which to
communicate with members or where books and records of the Company are
prepared or maintained;
(f) it holds shares, debt obligations or other securities in a company
incorporated under the International Business Companies Act or under
the Companies Act; or
(g) shares, debt obligations or other securities in the Company are owned
by any person resident in the British Virgin Islands or by any company
incorporated under the International Business Companies Act or under
the Companies Act.
(4) The Company shall have all such powers as are permitted by law for the time
being in force in the British Virgin Islands, irrespective of corporate
benefit, to
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Perform all acts and engage in all activities necessary or conducive
to the conduct, promotion or attainment of the object of the Company.
CURRENCY
5. Shares in the Company shall be issued in the currency of the United States
of America.
AUTHORIZED CAPITAL
6. The authorized capital of the Company is US$50,000.00.
CLASSES, NUMBER AND PAR VALUE OF SHARES
7. The authorized capital is made up of one class and one series of shares
divided into 50,000 shares of US$1.00 par value.
DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES
8. All shares shall
(a) have one vote each;
(b) be subject to redemption, purchase or acquisition by the Company for
fair value; and
(c) have the same rights with regard to dividends and distributions upon
liquidation of the Company.
VARIATION OF CLASS RIGHTS
9. If at any time the authorized capital is divided into different classes or
series of shares, the rights attached to any class or series (unless
otherwise provided by the terms of issue of the shares of that class or
series) may, whether or not the Company is being wound up, be varied with
the consent in writing of the holders of not less than three-fourths of the
issued shares of that class or series and of the holders of not less than
three-fourths of the issued shares of any other class or series of shares
which may be affected by such variation.
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
10. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not,
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unless otherwise expressly provided by the terms of issue of the shares of
that class, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.
REGISTERED SHARES AND BEARER SHARES
11. Shares may be issued as registered shares or to bearer as may be determined
by a resolution of directors.
EXCHANGE OF REGISTERED SHARES AND BEARER SHARES
12. Registered shares may be exchanged for bearer shares and bearer shares may
be exchanged for registered shares.
TRANSFER OF REGISTERED SHARES
13. Subject to the provisions relating to the transfer of shares set forth in
the Articles of Association annexed hereto (the "Articles of Association")
registered shares in the Company may be transferred subject to the prior or
subsequent approval of the Company as evidenced by a resolution of
directors or by a resolution of members.
SERVICE OF NOTICE ON HOLDERS OF BEARER SHARES
14. Where shares are issued to bearer, the bearer, identified for this purpose
by the number of the share certificate, shall be requested to provide the
Company with the name and address of an agent for service of any notice,
information or written statement required to be given to members, and
service upon such agent shall constitute service upon the bearer of such
shares until such time as a new name and address for service is provided to
the Company. In the absence of such name and address being provided it
shall be sufficient for the purposes of service for the Company to publish
the notice, information or written statement or a summary thereof in one or
more newspapers published or circulated in the British Virgin Islands and
in such other place, if any, as the Company shall from time to time by a
resolution of directors or a resolution of members determine. The directors
of the Company must give sufficient notice of meetings to members holding
shares issued to bearer to allow a reasonable opportunity for them to
secure or exercise the right or privilege that is the subject of the notice
other than the right or privilege to vote, as to which the period of notice
shall be governed by the Articles of Association. What amounts to
sufficient notice is a
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matter of fact to be determined after having regard to all the
circumstances.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
15. The company may amend its Memorandum of Association and Articles of
Association by a resolution of members or directors.
DEFINITIONS
16. The meanings of words in this Memorandum of Association are as defined in
the Articles of Association.
We, HWR SERVICES LIMITED, of Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands for the purpose of incorporating an International
Business Company under the laws of the British Virgin Islands hereby subscribe
our name to this Memorandum of Association the 5th day of February, 1999 in the
presence of:
Witness Subscriber
/s/ Ibn K. Thomas /s/ Adel K. Clyne
- ------------------------ ------------------------------
Ibn K. Thomas Adel K. Clyne
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
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Exhibit 3.8
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(Cap. 291)
ARTICLES OF ASSOCIATION
OF
ChipPAC LIMITED
PRELIMINARY
1. In these Articles, if not inconsistent with the subject or context, the
words and expressions standing in the first column of the following table
shall bear the meanings set opposite them respectively in the second column
thereof.
Words Meaning
----- -------
capital The sum of the aggregate par value of all
outstanding shares with par value of the company and
shares with par value held by the Company as
treasury shares plus
(a) the aggregate of the amounts designated as
capital of all outstanding shares without par
value of the Company and shares without par
value held by the Company as treasury shares,
and
(b) the amounts as are from time to time
transferred from surplus to capital by a
resolution of directors.
member A person who holds shares in the Company.
person An individual, a corporation, a trust, the estate of
a deceased individual, a partnership or an
unincorporated association of persons.
resolution of (a) A resolution approved at a duly convened and
directors constituted meeting of directors of the Company
or of a committee of directors of the company
by the affirmative vote of a simple majority of
the directors present at the meeting who voted
and did not abstain; or
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(b) a resolution consented to in writing by all
directors or of all members of the committee,
as the case may be;
except that where a director is given more than one
vote, he shall be counted by the number of votes he
casts for the purpose of establishing a majority.
resolution of (a) A resolution approved at a duly convened and
members constituted meeting of the members of the
Company by the affirmative vote of
(i) a simple majority of the votes of the
shares entitled to vote thereon which
were present at the meeting and were
voted and not abstained, or
(ii) a simple majority of the votes of each
class or series of shares which were
present at the meeting and entitled to
vote thereon as a class or series and
were voted and not abstained and of a
simple majority of the votes of the
remaining shares entitled to Vote thereon
which were present at the meeting and
were voted and not abstained; or
(b) a resolution consented to in writing by
(i) an absolute majority of the votes of
shares entitled to vote thereon, or
(ii) an absolute majority of the votes of each
class or series of shares entitled to
vote thereon as a class or series and of
an absolute majority
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of the votes of the remaining shares
entitled to vote thereon;
securities shares and debt obligations of every kind, and
options, warrants and rights to acquire shares, or
debt obligations.
surplus The excess, if any, at the time of the determination
of the total assets of the Company over the
aggregate of its total liabilities, as shown in its
books of account, plus the Company's capital.
the act The International Business companies Act (CAP 291)
including any modification, extension, re-enactment
or renewal thereof and any regulations made
thereunder.
the Memorandum The Memorandum of Association of the Company as
originally framed or as from time to time amended.
the seal Any Seal which has been duly adopted as the Seal of
the Company.
these Articles These Articles of Association as originally framed
or as from time to time amended.
treasury shares Shares in the Company that were previously issued
but were repurchased, redeemed or otherwise acquired
by the Company and not cancelled.
2. "Written" or any term of like import includes words typewritten, printed,
painted, engraved, lithographed, photographed or represented or reproduced
by any mode of reproducing words in a visible form, including telex,
facsimile, telegram, cable or other form of writing produced by electronic
communication.
3. Save as aforesaid any words or expressions defined in the Act shall bear
the same meaning in these Articles
4. Whenever the singular or plural number, or the masculine, feminine or
neuter gender is used in these articles it shall equally, where the context
admits, includes the others
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5. A reference in these Articles to voting in relation to hares shall be
construed as a reference to voting by members holding the shares except
that it is the votes allocated to the shares that shall be counted and not
the number of members who actually voted and a reference to shares being
present at a meeting shall be given a corresponding construction.
6. A reference to money in these Articles is, unless otherwise stated, a
reference to the currency in which shares in the company shall be issued
according to the provisions of the Memorandum.
REGISTERED SHARES
7. Every member holding registered shares in the Company shall be entitled to
a certificate signed by a director or officer of the company and under the
Seal specifying the share or shares held by him and the signature of the
director or officer and the Seal may be facsimiles.
8. Any member receiving a share certificate for registered shares shall
indemnify and hold the Company and its directors and officers harmless from
any loss or liability which it or they may incur by reason of any wrongful
or fraudulent use or representation made by any person by virtue of the
possession thereof. If a share certificate for registered shares is worn,
out or lost it may be renewed on production of the worn out certificate or
on satisfactory proof of its loss together with such indemnity as may be
required by a resolution of directors.
9. If several persons are registered as joint holders of any shares, any one
of such persons may give an effectual receipt for any dividend payable in
respect of such shares.
BEARER SHARES
10. Subject to a request for the issue of bearer shares and to the payment of
the appropriate consideration for the shares to be issued, the Company may,
to the extent authorized by the Memorandum, issue bearer shares to, and at
the expense of, such person as shall be specified in the request. Bearer
shares may not be issued for debt obligations, promissory notes or other
obligations to contribute money or property and registered shares issued
for debt obligations, promissory notes or other obligations to contribute
money or property shall not be exchanged for bearer shares unless such debt
obligations, promissory notes or other obligations to contribute money or
property have been satisfied. The Company may also upon receiving a request
in writing accompanied by the share certificate for the shares in question,
exchange registered shares for bearer shares or may exchange bearer shares;
for registered shares. Such request served on the Company by the holder of
bearer shares shall specify the name and address of the person to be
registered and unless the request is delivered in person by
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the bearer shall be authenticated as hereinafter provided. Such request
served on the Company by the holder of bearer shares shall also be
accompanied by any coupons or talons which at the date of such delivery
have not become due for payment of dividends or any other distribution by
the company to the holders of such shares. Following such exchange the
share certificate relating to the exchanged shares shall be delivered as
directed by the member requesting the exchange.
11. Bearer share certificates shall be under the Seal and shall state that the
bearer is entitled to the shares therein specified, and may provide by
coupons, talons or otherwise for the payment of dividends or other moneys
on the shares included therein.
12. Subject to the provisions of the Act and of these Articles, the bearer of a
bearer share certificate shall be deemed to be a member of the Company and
shall be entitled to the same rights and privileges as he would have had if
his name had been included in the share register of the Company as the
holder of the shares.
13. Subject to any specific provisions in these Articles, in order to exercise
his rights as a member of the Company, the bearer of a bearer share
certificate shall produce the bearer share certificate as evidence of his
membership of the Company. Without prejudice to the generality of the
foregoing, the following rights may be exercised in the following manner:
(a) for the purpose of exercising his voting rights at a meeting, the
bearer of a bearer share certificate shall produce such certificate to
the chairman of the meeting;
(b) for the purpose of exercising his vote on a resolution in writing, the
bearer of a bearer share certificate shall cause his signature to any
such resolution to be authenticated as hereinafter set forth;
(c) for the purpose of requisitioning a meeting of members, the bearer of a
bearer share certificate shall address his requisition to the directors
and his signature thereon shall be duly authenticated as hereinafter
provided; and
(d) for the purpose of receiving dividends, the bearer of a bearer share
certificate shall present at such places as may be designated by the
directors any coupons or talons issued for such purpose, or shall
present the bearer share certificate to any paying agent authorized to
pay dividends.
14. The signature of the bearer of a bearer share certificate shall be deemed
to be duly authenticated if the bearer of the bearer share certificate
shall produce such certificate
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to a notary public or a bank manager or a director or officer of the
Company (herein referred to as an "authorized person") and the authorized
person endorses the document bearing such signature with a statement:
(a) identifying the bearer share certificate produced to him by number and
date and specifying the number of shares and the class of shares (if
appropriate) comprised therein;
(b) confirming that the signature of the bearer of the bearer share
certificate was subscribed in his presence and that if the bearer is
representing a body corporate he has so acknowledged and has produced
satisfactory evidence thereof; and
(c) specifying the capacity in which he is qualified as an authorized
person and, if a notary public, affixing his seal thereto or, if a bank
manager, attaching an identifying stamp of the bank of which he is a
manager.
15. Notwithstanding any other provisions of these Articles, at any time, the
bearer of a bearer share certificate may deliver the certificate for such
shares into the custody of the Company at its registered office, whereupon
the Company shall issue a receipt therefor under the Seal signed by a
director or officer identifying by name and address the person delivering
such certificate and specifying the date and number of the bearer share
certificate so deposited and the number of shares comprised therein. Any
such receipt may be used by the person named therein for the purpose of
exercising the rights vested in the shares represented by the bearer share
certificate so deposited including the right to appoint a proxy. Any bearer
share certificate so deposited shall be returned to the person named in the
receipt or his personal representative if such person be dead and thereupon
the receipt issued therefor shall be of no further effect whatsoever and
shall be returned to the Company for cancellation or, if it has been lost
or mislaid, such indemnity as may be required by resolution of directors
shall be given to the Company.
16. The bearer of a bearer share certificate shall for all purposes be deemed
to be the owner of the shares comprised in such certificate and in no
circumstances shall the Company or the chairman of any meeting of members
or the Company's registrars or any director or officer of the Company or
any authorized person be obliged to inquire into the circumstances whereby
a bearer share certificate came into the hands of the bearer thereof, or to
question the validity or authenticity of any action taken by the bearer of
a bearer share certificate whose signature has been authenticated as
provided herein.
17. If the bearer of a bearer share certificate shall be a corporation, then
all the rights exercisable by virtue of shareholding may be exercised by an
individual duly
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authorized to represent the corporation but unless such individual shall
acknowledge that he is representing a corporation and shall produce upon
request satisfactory evidence that he is duly authorized to represent the
corporation, the individual shall for all purposes hereof be regarded as
the holder of the shares in any bearer share certificate held by him.
18. The directors may provide for payment of dividends to the holders of bearer
shares by coupons or talons and in such event the coupons or talons shall
be in such form and payable at such time and in such place or places as the
directors shall resolve. The Company shall be entitled to recognize the
absolute right of the bearer of any coupon or talon issued as aforesaid to
payment of the dividend to which it relates and delivery of the coupon or
talon to the company or its agents shall constitute in all respects a good
discharge of the company in respect of such dividend.
19. If any bearer share certificate, coupon or talon be worn out or defaced,
the directors may, upon the surrender thereof for cancellation, issue a new
one in its stead, and if any bearer share certificate, coupon or talon be
lost or destroyed, the directors may upon the loss or destruction being
established to their satisfaction, and upon such indemnity being given to
the company as it shall by resolution of directors determine, issue a new
bearer share certificate in its stead, and in either case on payment of
such sum as the company may from time to time by resolution of directors
require. In case of loss or destruction the person to whom such new bearer
share certificate, coupon or talon is issued shall also bear and pay to the
Company all expenses incidental to the investigation by the Company of the
evidence of such loss or destruction and to such indemnity.
SHARES, AUTHORIZED CAPITAL, CAPITAL AND SURPLUS
20. Subject to the provisions of these Articles and any resolution of members,
the unissued shares of the Company shall be at the disposal of the
directors who may, without limiting or affecting any rights previously
conferred on the holders of any existing shares or class or series of
shares, offer, allot, grant options over or otherwise dispose of shares to
such persons, at such times and upon such terms and conditions as the
Company may by resolution of directors determine
21. No share in the Company may be issued until the consideration in respect
thereof is fully paid, and when issued the share is for all purposes fully
paid and non-assessable save that a share issued for a promissory note or
other written obligation for payment of a debt may be issued subject to
forfeiture in the manner prescribed in these Articles.
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22. Shares in the Company shall be issued for money, services rendered,
personal property, an estate in real property, a promissory note or other
binding obligation to contribute money or property or any combination of
the foregoing as shall be determined by a resolution of directors.
23. Shares in the Company may be issued for such amount of consideration as
the directors may from time to time by resolution of directors determine,
except that in the case of shares with par value, the amount shall not be
less than the par value, and in the absence of fraud the decision of the
directors as to the value of the consideration received by the Company in
respect of the issue is conclusive unless a question of law is involved.
The consideration in respect of the shares constitutes capital to the
extent of the par value and the excess constitutes surplus.
24. A share issued by the Company upon conversion of, or in exchange for,
another share or a debt obligation or other security in the Company, shall
be treated for all purposes as having been, issued for money equal to the
consideration received or deemed to have been received by the Company in
respect of the other share, debt obligation or security.
25. Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the Company
may by resolution of directors determine.
26. The Company may issue fractions of a share and a fractional share shall
have the same corresponding fractional liabilities, limitations,
preferences, privileges, qualifications, restrictions, rights and other
attributes of a whole share of the same class or series of shares.
27. Upon the issue by the Company of a share without par value, if an amount
is stated in the Memorandum to be authorized capital represented by such
shares then each share shall be issued for no less than the appropriate
proportion of such amount which shall constitute capital, otherwise the
consideration in respect of the share constitutes capital to the extent
designated by the directors and the excess constitutes surplus, except
that the directors must designate as capital an amount of the
consideration that is at least equal to the amount that the share is
entitled to as a preference, if any, in the assets of the Company upon
liquidation of the Company.
28. The Company may purchase, redeem or otherwise acquire and own shares but
only out of surplus or in exchange for newly issued shares of equal value.
29. Subject to provisions to the contrary in
(a) the Memorandum or these Articles;
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(b) the designations, powers, preferences, rights, qualifications,
limitations and restrictions with which the shares were issued; or
(c) the subscription agreement for the issue of the shares,
the company may not purchase, redeem or otherwise acquire its own shares
without the consent of members whose shares are to be purchased, redeemed
or otherwise acquired.
30. No purchase, redemption or other acquisition of shares shall be made unless
the directors determine that immediately after the purchase, redemption or
other acquisition the company will be able to satisfy its liabilities as
they become due in the ordinary course of its business and the realizable
value of the assets of the Company will not be less than the sum of its
total liabilities, other than deferred taxes, as shown in the books of
account, and its capital and, in the absence of fraud, the decision of the
directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
31. A determination by the directors under the preceding Regulation is not
required where shares are purchased, redeemed or otherwise acquired
(a) pursuant to a right of a member to have his shares redeemed or to have
his shares exchanged for money or other property of the Company;
(b) by virtue of a transfer of capital pursuant to Regulation 59;
(c) by virtue of the provisions of Section 83 of the Act; or
(d) pursuant to an order of the Court.
32. Shares that the Company purchases, redeems or otherwise acquires pursuant
to the preceding Regulation may be cancelled or held as treasury shares
except to the extent that such shares are in excess of 80 percent of the
issued shares of the Company in which case they shall be cancelled but they
shall be available for reissue.
33. Where shares in the Company are held by the company as treasury shares or
are held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the votes in the election
of directors of the other company, such shares of the company are not
entitled to vote or to have dividends paid thereon and shall not be treated
as outstanding for any purpose except for purposes of determining the
capital of the company.
34. The Company may purchase, redeem or otherwise acquire its shares at a price
lower than the fair value if permitted by, and then only in accordance
with, the terms of
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(a) the Memorandum or these Articles; or
(b) a written agreement for the subscription for the shares to be
purchased, redeemed or otherwise acquired.
35. The Company may by a resolution of directors include in the computation of
surplus for or any purpose the unrealized appreciation of the assets of the
Company, and, in the absence of fraud, the decision of the directors as to
the value of the assets is conclusive, unless a question of law is
involved.
MORTGAGES AND CHARGES OF REGISTERED SHARES
36. Members may mortgage or charge their registered shares in the Company and
upon satisfactory evidence thereof the Company shall give effect to the
terms of any valid mortgage or charge except insofar as it may conflict
with any requirements herein contained for consent to the transfer of
shares.
37. In the case of the mortgage or charge of registered shares there may be
entered in the share register of the Company at the request of the
registered holder of such shares
(a) a statement that the shares are mortgaged or charged;
(b) the name of the mortgagee or chargee; and
(c) the date on which the aforesaid particulars are entered in the share
register.
38. Where particulars of a mortgage or charge are registered, such particulars
shall be cancelled
(a) with the consent of the named mortgagee or chargee or anyone
authorized to act on his behalf; or
(b) upon evidence satisfactory to the directors of the discharge of the
liability secured by the mortgage or charge and the issue of such
indemnities as the directors shall consider necessary or desirable.
39. Whilst particulars of a mortgage or charge are registered, no transfer of
any share comprised therein shall be effected without the written consent
of the named mortgagee or chargee or anyone authorized to act on his
behalf.
FORFEITURE
40. When shares issued for a promissory note or other written obligation for
payment of a debt have been issued subject to forfeiture, the following
provisions shall apply.
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41. Written notice specifying a date for payment to be made and the shares in
respect of which payment is to be made shall be served on the member who
defaults in making payment pursuant to a promissory note or other written
obligations to pay a debt.
42. The written notice specifying a date for payment shall
(a) name a further date not earlier than the expiration of 14 days from
the date of service of the notice on or before which payment required
by the notice is to be made; and
(b) contain a statement that in the event of non-payment at or before the
time named in the notice the shares, or any of them, in respect of
which payment is not made will be liable to be forfeited.
43. Where a written notice has been issued and the requirements have not been
complied with within the prescribed time, the directors may at any time
before tender of payment forfeit and cancel the shares to which the notice
relates.
44. The Company is under no obligation to refund any moneys to the member whose
shares have been forfeited and cancelled pursuant to these provisions. Upon
forfeiture and cancellation of the shares the member is discharged from any
further obligation to the Company with respect to the shares forfeited and
cancelled.
LIEN
45. The Company shall have a first and paramount lien on every share issued for
a promissory note or for any other binding obligation to contribute money
or property or any combination thereof to the Company, and the Company
shall also have a first and paramount lien on every share standing
registered in the name of a member, whether singly or jointly with any
other person or persons, for all the debts and liabilities of such member
or his estate to the Company, whether the same shall have been incurred
before or after notice to the Company of any interest of any person other
than such member, and whether the time for the payment or discharge of the
same shall have actually arrived or not, and notwithstanding that the same
are joint debts or liabilities of such member or his estate and any other
person, whether a member of the Company or not. The Company's lien on a
share shall extend to all dividends payable thereon. The directors may at
any time either generally, or in any particular case, waive any Lien that
has arisen or declare any share to be wholly or any part exempt from the
provisions of this Regulation.
46. In the absence of express provisions regarding promissory note or other
binding obligation to contribute money or property, the Company may sell,
in such manner as the directors may by resolution of directors determine
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share on which the Company has a lien, but no sale shall be made unless some
sum in respect of which the lien exists is presently payable nor until the
expiration of twenty-one days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the holder
for the time being of the share.
47. The net proceeds of the sale by the Company of any shares on which it has a
lien shall be applied in or towards payment of discharge of the promissory
note or other binding obligation to contribute money or property or any
combination thereof in respect of which the lien exists so far as the same
is presently payable and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the share prior to the
sale) be paid to the holder of the share immediately before such sale. For
giving effect to any such sale the directors may authorize some person to
transfer the share sold to the purchaser thereof. The purchaser shall be
registered as the holder of the share and he shall not be bound to see to
the application of the purchase money, nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings in reference
to the sale.
TRANSFER OF SHARES
48. Subject to any limitations in the Memorandum, registered shares in the
Company may be transferred by a written instrument of transfer signed by the
transferor and containing the name and address of the transferee, but in the
absence of such written instrument of transfer the directors may accept such
evidence of a transfer of shares as they consider appropriate.
49. The Company shall not be required to treat a transferee of a registered
share in the Company as a member until the transferee's name has been
entered in the share register.
50. Subject to any limitations in the Memorandum, the Company must on the
application of the transferor or transferee of a registered share in the
Company enter in the share register the name of the transferee of the share
save that the registration of transfers may be suspended and the share
register closed at such times and for such periods as the Company may from
time to time by resolution of directors determine provided always that such
registration shall not be suspended and the share register closed for more
than 60 days in any period of 12 months.
TRANSMISSION OF SHARES
51. The executor or administrator of a deceased member, the guardian of an
incompetent member or the trustee of a bankrupt member shall be the only
person recognized by the Company as having any title to his share but they
shall not
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be entitled to exercise any rights as a member of the Company until they
have proceeded as set forth in the next following three Regulations.
52. The production to the Company of any document which is evidence of probate
of the will, or letters of administration of the estate, or confirmation as
executor, of a deceased member or of the appointment of a guardian of an
incompetent member or the trustee of a bankrupt member shall be accepted by
the Company even if the deceased, incompetent or bankrupt member is
domiciled outside the British Virgin Islands if the document evidencing the
grant of probate or letters of administration, confirmation as executor,
appointment as guardian or trustee in bankruptcy is issued by a foreign
court which had competent jurisdiction in the matter. For the purpose of
establishing whether or not a foreign court had competent jurisdiction in
such a matter the directors may obtain appropriate legal advice. The
directors may also require an indemnity to be given by the executor,
administrator, guardian or trustee in bankruptcy.
53. Any person becoming entitled by operation of law or otherwise to a share or
shares in consequence of the death, incompetence or bankruptcy of any member
may be registered as a member upon such evidence being produced as may
reasonably be required by the directors. An application by any such person
to be registered as a member shall for all purposes be deemed to be a
transfer of shares of the deceased, incompetent or bankrupt member and the
directors shall treat it as such.
54. Any person who has become entitled to a share or shares in consequence of
the death, incompetence or bankruptcy of any member may, instead of being
registered himself, request in writing that some person to be named by him
be registered as the transferee of such share or shares and such request
shall likewise be treated as if it were a transfer.
55. What amounts to incompetence on the part of a person is a matter to be
determined by the court having regard to all the relevant evidence and the
circumstances of the case.
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL OR CAPITAL
56. The Company may by a resolution of directors amend the Memorandum to
increase or reduce its authorized capital and in connection therewith the
Company may in respect of any unissued shares increase or reduce the number
of such shares, increase or reduce the par value of any such shares or
effect any combination of the foregoing.
57. The Company may amend the Memorandum to
(a) divide the shares, including issued shares of a class or series into a
larger number of shares of the same class or series; or
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(b) combine the shares, including issued shares, of a class or series into a
smaller number of shares of the same class or series,
provided, however, that where shares are divided or combined under (a)
or (b) of this Regulation, the aggregate par value of the new shares
must be equal to the aggregate par value of the original shares.
58. The capital of the Company may by a resolution of directors be increased by
transferring an amount of the surplus of the Company to capital.
59. Subject to the provisions of the two next succeeding Regulations, the
capital of the Company may by resolution of directors be reduced by
transferring an amount of the capital of the Company to surplus.
60. No reduction of capital shall be effected that reduces the capital of the
Company to an amount that immediately after the reduction is less than the
aggregate par value of all outstanding shares with par value and all shares
with par value held by the Company as treasury shares and the aggregate of
the amounts designated as capital of all outstanding shares without par
value and all shares without par value held by the Company as treasury
shares that are entitled to a preference, if any, in the assets of the
Company upon liquidation of the Company.
61. No reduction of capital shall be effected unless the directors determine
that immediately after the reduction the Company will be able to satisfy its
liabilities as they become due in the ordinary course of its business and
that the realizable assets of the Company will not be less than its total
liabilities, other than deferred taxes, as shown in the books of the Company
and its remaining capital, and, in the absence of fraud, the decision of
the directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
MEETINGS AND CONSENTS OF MEMBERS
62. The directors of the Company may convene meetings of the members of the
Company at such times and in such manner and places within or outside the
British Virgin Islands as the directors consider necessary or desirable.
63. Upon the written request of members holding 10 percent or more of the
outstanding voting shares in the Company the directors shall convene a
meeting of members.
64. The directors shall give not less than 7 days notice of meetings of members
to those persons whose names on the date the notice is given appear as
members in the share register of the Company and are entitled to vote at the
meeting.
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65. The directors may fix the date notice is given of a meeting of members as
the record date for determining those shares that are entitled to vote at
the meeting.
66. A meeting of members may be called on short notice:
(a) if members holding not less than 90 percent of the total number of
shares entitled to vote on all matters to be considered at the meeting,
or 90 percent of the votes of each class or series of shares where
members are entitled to vote thereon as a class or series together with
not less than a 90 percent majority of the remaining votes, have agreed
to short notice of the meeting, or
(b) if all members holding shares entitled to vote on all or any matters to
be considered at the meeting have waived notice of the meeting and for
this purpose presence at the meeting shall be deemed to constitute
waiver.
67. The inadvertent failure of the directors to give notice of a meeting to a
member, or the fact that a member has not received notice, does not
invalidate the meeting.
68. A member may be represented at a meeting of members by a proxy who may speak
and vote on behalf of the member.
69. The instrument appointing a proxy shall be produced at the place appointed
for the meeting before the time for holding the meeting at which the person
named in such instrument proposes to vote.
70. An instrument appointing a proxy shall be in substantially the following
form or such other form as the Chairman of the meeting shall accept as
properly evidencing the wishes of the member appointing the proxy;
(Name of Company)
I/We being a member of the above Company with
shares HEREBY APPOINT of or
failing him of to be
my/our proxy to vote for me/us at the meeting of members to be held on the
day of and at any adjournment thereof.
(Any restrictions on voting to be inserted here.)
Signed this day of
..........................
Member
71. The following shall apply in respect of joint ownership of shares:
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(a) if two or more persons hold shares jointly each of them may be present
in person or by proxy at a meeting of members and may speak as a member;
(b) if only one of the joint owners is present in person or by proxy he may
vote on behalf of all joint owners, and
(c) if two or more of the joint owners are present in person or by proxy
they must vote as one.
72. A member shall be deemed to be present at a meeting of members if he
participates by telephone or other electronic means and all members
participating in the meeting are able to hear each other.
73. A meeting of members is duly constituted if, at the commencement of the
meeting, there are present in person or by proxy not less than 50 percent of
the votes of the shares or class or series of shares entitled to vote on
resolutions of members to be considered at the meeting. If a quorum be
present, notwithstanding the fact that such quorum may be represented by
only one person then such person may resolve any matter and a certificate
signed by such person accompanied where such person be a proxy by a copy of
the proxy form shall constitute a valid resolution of members.
74. If within two hours from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of members, shall be
dissolved; in any other case it shall stand adjourned to the next business
day at the same time and place or to such other time and place as the
directors may determine, and if at the adjourned meeting there are present
within one hour from the time appointed for the meeting in person or by
proxy not less than one third of the votes of the shares or each class or
series of shares entitled to vote on the resolutions to be considered by the
meeting, those present shall constitute a quorum but otherwise the meeting
shall be dissolved.
75. At every meeting of members, the Chairman of the Board of Directors shall
preside as chairman of the meeting. If there is no Chairman of the Board of
Directors or if the Chairman of the Board of Directors is not present at the
meeting, the members present shall choose some one of their number to be the
chairman. If the members are unable to choose a chairman for any reason,
then the person representing the greatest number of voting shares present in
person or by prescribed form of proxy at the meeting shall preside as
chairman failing which the oldest individual member or representative of a
member present shall take the chair.
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76. The chairman may, with the consent of the meeting, adjourn any meeting from
time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took p1ace.
77. At any meeting of the members the chairman shall be responsible for deciding
in such manner as he shall consider appropriate whether any resolution
has been carried or not and the result of his decision shall be announced
to the meeting and recorded in the minutes thereof. If the chairman shall
have any doubt as to the outcome of any resolution put to the vote,
he shall cause a poll to be taken of all votes cast upon such resolution,
but if the chairman shall fail to take a poll then any member present in
person or by proxy who disputes the announcement by the chairman of the
result of any vote may immediately following such announcement demand that
a poll be taken and the chairman shall thereupon cause a poll to be
taken. If a poll is taken at any meeting, the result thereof shall be duly
recorded in the minutes of that meeting by the chairman.
78. Any person other than an individual shall be regarded as one member and
subject to the specific provisions hereinafter contained for the
appointment of representatives of such persons the right of any individual
to speak for or represent such member shall be determined by the law of the
jurisdiction where, and by the documents by which, the person is constituted
or derives its existence. In case of doubt, the directors may in good faith
seek legal advice from any qualified person and unless and until a court
of competent jurisdiction shall otherwise rule, the directors may rely and
act upon such advice without incurring any liability to any member.
79. Any person other than an individual which is a member of the Company may by
resolution of its directors or other governing body authorize such person
as it thinks fit to act as its representative at any meeting of the Company
or of any class of members of the Company, and the person so authorized
shall be entitled to exercise the same powers on behalf of the person which
he represents as that person could exercise if it were an individual member
of the Company.
80. The chairman of any meeting at which a vote is cast by proxy or on behalf of
any person other than an individual may call for a notarially certified copy
of such proxy or authority which shall be produced within 7 days of being
so requested or the votes cast by such proxy or on behalf of such person
shall be disregarded.
81. Directors of the Company may attend and speak at any meeting of members of
the Company and at any separate meeting of the holders of any class or
series of shares in the Company.
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82. An action that may be taken by the members at a meeting may also be taken
by a resolution of members consented to in writing or by telex, telegram,
cable, facsimile or other written electronic communication, without the need
for any notice, but if any resolution of members is adopted otherwise than
by the unanimous written consent of all members, a copy of such resolution
shall forthwith be sent to all members not consenting to such resolution.
The consent may be in the form of counterparts, each counterpart being
signed by one or more members.
DIRECTORS
83. The first directors of the Company shall be appointed by the subscribers to
the Memorandum; and thereafter, the directors shall be elected by the
members for such term as the members determine.
84. The minimum number of directors shall be one and the maximum number shall
be 7.
85. Each director shall hold office for the term, if any, fixed by resolution of
members or until his earlier death, resignation or removal.
86. A director may be removed from office, with or without cause, by a
resolution of members or, with cause, by a resolution of directors.
87. A director may resign his office by giving written notice of his
resignation to the Company and the resignation shall have effect from the
date the notice is received by the Company or from such later date as may be
specified in the notice.
88. The directors may at any time appoint any person to be a director either to
fill a vacancy or as an addition to the existing directors. A vacancy occurs
through the death, resignation or removal of a director, but a vacancy or
vacancies shall not be deemed to exist where one or more directors shall
resign after having appointed his or their successor or successors.
89. The Company may determine by resolution of directors to keep a register of
directors containing
(a) the names and addresses of the persons who are directors of the Company;
(b) the date on which each person whose name is entered in the register was
appointed as a director of the Company; and
(c) the date on which each person named as a director ceased to be a
director of the Company.
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90. If the directors determine to maintain a register of directors, a copy
thereof shall be kept at the registered office of the Company and the
Company may determine by resolution of directors to register a copy of the
register with the Registrar of Companies.
91. With the prior or subsequent approval by a resolution of members, the
directors may, by a resolution of directors, fix the emoluments of directors
with respect to services to be rendered in any capacity to the Company.
92. A director shall not require a share qualification and may be an individual
or a company.
POWERS OF DIRECTORS
93. The business and affairs of the Company shall be managed by the directors
who may pay all expenses incurred preliminary to and in connection with the
formation and registration of the Company and may exercise all such powers
of the Company as are not by the Act or by the Memorandum or these Articles
required to be exercised by the members of the Company, subject to any
delegation of such powers as may be authorized by these Articles and to such
requirements as may be prescribed by a resolution of members; but no
requirement made by a resolution of members shall prevail if it be
inconsistent with these Articles nor shall such requirement invalidate any
prior act of the directors which would have been valid if such requirement
had not been made.
94. The directors may, by a resolution of directors, appoint any person,
including a person who is a director, to be an officer or agent of the
Company. The resolution of directors appointing an agent may authorize the
agent to appoint one or more substitutes or delegates to exercise some or
all of the powers conferred on the agent by the Company.
95. Every officer or agent of the Company has such powers and authority of the
directors, including the power and authority to affix the Seal, as are set
forth in these Articles or in the resolution of directors appointing the
officer or agent, except that no officer or agent has any power or authority
with respect to the matters requiring a resolution of directors under the
Act.
96. Any director which is a body corporate may appoint any person its duly
authorized representative for the purpose of representing it at meetings
of the Board of Directors or with respect to unanimous written consents.
97. The continuing directors may act notwithstanding any agency in their body,
save that if their number is reduced to their knowledge below the number
fixed by or pursuant to these Articles as the necessary quorum for a meeting
of directors,
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the continuing directors or director may act only for the purpose of
appointing directors to fill any vacancy that has arisen or for summoning a
meeting of members.
98. The directors may by resolution of directors exercise all the powers of the
Company to borrow money and to mortgage or charge its undertakings and
property or any part thereof, to issue debentures, debenture stock and
other securities whenever money is borrowed or as security for any debt,
liability or obligation of the Company or of any third party.
99. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for moneys paid to the Company,
shal1 be signed, drawn, accepted, endorsed or otherwise executed as the
case may be, in such manner as shall from time to time be determined by
resolution of directors.
100. The Company may determine by resolution of directors to maintain at its
registered office a register of mortgages, charges and other encumbrances
in which there shall be entered the following particulars regarding each
mortgage, charge and other encumbrance:
(a) the sum secured;
(b) the assets secured;
(c) the name and address of the mortgagee, chargee or other encumbrancer;
(d) the date of creation of the mortgage, charge or other encumbrance; and
(e) the date on which the particulars specified above in respect of the
mortgage, charge or other encumbrance are entered in the register.
101. The Company may further determine by a resolution of directors to register
a copy of the register of mortgages, charges or other encumbrances with the
Registrar of Companies.
PROCEEDINGS OF DIRECTORS
102. The directors of the Company or any committee thereof may meet at such
times and in such manner and places within or outside the British Virgin
Islands as the directors may determine to be necessary or desirable.
103. A director shall be deemed to be present at a meeting of directors if he
participates by telephone or other electronic means and all directors
participating in the meeting are able to hear each other.
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104. A director shall be given not less than 3 days notice of meetings of
directors, but a meeting of directors held without 3 days notice having
been given to all directors shall be valid if all the directors entitled to
vote at the meeting who do not attend, waive notice of the meeting and for
this purpose, the presence of a director at a meeting shall constitute
waiver on his part. The inadvertent failure to give notice of a meeting to
a director, or the fact that a director has not received the notice, does
not invalidate the meeting.
105. A director may by a written instrument appoint an alternate who need not
be a director and an alternate is entitled to attend meetings in the
absence of the director who appointed him and to vote or consent in place
of the director.
106. A meeting of directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate
not less than one-half of the total number of directors, unless there are
only 2 directors in which case the quorum shall be 2.
107. If the Company shall have only one director the provisions herein contained
for meetings of the directors shall not apply but such sole director shall
have full power to represent and act for the Company in all matters as are
not by the Act or the Memorandum of these Articles required to be exercised
by the members of the Company and in lieu of minutes of a meeting shall
record in writing and sign a note or memorandum of all matters requiring a
resolution of directors. Such a note or memorandum shall constitute
sufficient evidence of such resolution for all purposes.
108. At every meeting of the directors the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of the
Board of Directors or if the Chairman of the Board of Directors is not
present at the meeting the Vice-Chairman of the Board of Directors shall
preside. If there is no Vice-Chairman of the Board of Directors or if the
Vice-Chairman of the Board of Directors is not present at the meeting the
directors present shall choose some one of their number to be chairman of
the meeting.
109. An action that may be taken by the directors or a committee of directors
at a meeting may also be taken by a resolution of directors or a committee
of directors consented to in writing or by telex, telegram, cable,
facsimile or other written electronic communication by all directors or all
members of the committee as the case may be without the need for any
notice. The consent may be in the form of counterparts, each counterpart
being signed by one or more directors.
110. The directors shall cause the following corporate records to be kept:
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(a) minutes of all meetings of directors, members, committees of
directors, committees of officers and committees of members;
(b) copies of all resolutions consented to by directors, members,
committees of directors, committees of officers and committees of
members; and
(c) such other accounts and records as the directors by resolution of
directors consider necessary or desirable in order to reflect the
financial position of the Company.
111. The books, records and minutes shall be kept at the registered office of
the Company, its principal place of business or at such other place as the
directors determine.
112. The directors may, by resolution of directors, designate one or more
committees, each consisting of one or more directors.
113. Each committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as are set
forth in the resolution of directors establishing the committee, except
that no committee has any power or authority to amend the Memorandum or
these Articles, to appoint directors, or fix their emoluments, or to
appoint officers or agents of the Company.
114. The meetings and proceedings of each committee of directors consisting of 2
or more directors shall be governed mutatis mutandis by the provisions of
these Articles regulating the proceedings of directors so far as the same
are not superseded by any provisions in the resolution establishing the
committee.
OFFICERS
115. The Company may by resolution of directors appoint officers of the Company
at such times as shall be considered necessary or expedient. Such officers
may consist of a Chairman of the Board of Directors, a Vice-Chairman of the
Board of Directors, a President and one or more Vice-Presidents,
Secretaries and Treasurers and such other officers as may from time to time
be deemed desirable. Any number of offices may be held by the same person.
116. The officers shall perform such duties as shall be prescribed at the time
of their appointment subject to any modification in such duties as may be
prescribed thereafter by resolution of directors or resolution of members,
but in the absence of any specific allocation of duties it shall be the
responsibility of the Chairman of the Board of Directors to preside at
meetings of directors and members, the Vice-Chairman to act in the absence
of the Chairman, the President to manage the day to day affairs of the
Company, the Vice-Presidents to act in order of seniority in the
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CONTINUATION
154. The Company may by resolution of members or by a resolution passed
unanimously by all directors of the Company continue as a company
incorporated under the laws of a jurisdiction outside the British Virgin
Islands in the manner provided under those laws.
We, HWR SERVICES LIMITED, of Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands for the purpose of incorporating an International
Business Company under the laws of the British Virgin Islands hereby subscribe
our name to these Articles of Association the 5th day of February, 1999 in the
presence of:
Witness Subscriber
/s/ Ibn K. Thomas /s/ Adel K. Clyne
- ----------------- -----------------
Ibn K. Thomas Adel K. Clyne
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
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Exhibit 3.9
- --------------------------------------------------------------------------------
"ChipPAC Luxembourg S. a R.L."
societe a responsabilite limitee
Luxembourg
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSTITUTION D'UNE SOCIETE
A RESPONSABILITE LIMITEE
du (18 mars 1999)
- --------------------------------------------------------------------------------
In the year one thousand nine hundred and ninety-nine, on the (eighteenth
of March.)
Before Maitre Joseph ELVINGER, notary public residing at Luxembourg,
Grand-Duchy of Luxembourg, undersigned.
There appeared;
ChipPAC Operating Limited, a company having its registered office at
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands;
hereby represented by Mr Dominique AUDIA, employee, residing at Luxembourg,
by virtue of a proxy given under private seal.
The beforesaid proxy, being initialled "ne varietur" by the appearing
person and the undersigned notary, shall remain annexed to the present deed to
be filed at the same time with the registration authorities.
This appearing party has incorporated a "societe a responsabilite limitee"
(limited liability partnership), the article of which it has established as
follows:
Article one.- There is hereby formed a "societe a responsabilite limitee",
limited liability company,
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governed by the present articles of incorporation and by current Luxembourg
laws, especially the laws of August 10th, 1915 on commercial companies, of
September 18th, 1933 on "societes a responsabilite limitee", as amended, and
more particularly the law of December 28th, 1992 about unipersonal companies.
At any moment, the partner may join with one or more joint partners and, in
the same way, the following partners may adopt the appropriate measures to
restore the unipersonal character of the Company.
Article two.- The Company is incorporated under the name of "ChipPAC
Luxembourg S. a R.L. ".
Article three.- The Company's purpose is to take participations, in any
form whatsoever, in other Luxembourg or foreign enterprises; to acquire any
securities and rights through participation, contribution, underwriting firm
purchase or option, negotiation or in any other way and namely to acquire
patents and licences, to manage and develop them; to grant to enterprises in
which the Company has an interest, any assistance, loans, advances or
guarantees, finally to perform any operation which is directly or indirectly
related to its purpose, however without taking advantage of the Act of July 31,
1929, on Holding Companies.
The Company can perform all commercial, technical and financial operations,
connected directly or indirectly in all areas as described above in order to
facilitate the accomplishment.
Article four.- The Company has its registered office in the City of
Luxembourg, Grand-Duchy of Luxembourg. The registered office may be transferred
to any other place within the Grand-Duchy of Luxembourg by a decision of the
partners.
Article five.- The Company is constituted for an unlimited period.
Article six.- The Company's capital is set at USD 15,000 (fifteen thousand
US dollars) represented by 300 (three hundred) shares of USD 50 (fifty US
dollars) each.
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These shares have been subscribed and fully paid in by contribution in cash
by ChipPAC Operating Limited, a company having its registered office at
Craig-muir Chambers, Road Town, Tortola, British Virgin Islands, sole
shareholder.
Article seven. - The shares are freely transferable among the partners.
No transfer of shares to a non-partner may take place without the agreement
of the other partners and without having been first offered to them.
Otherwise it is referred to the provisions of articles 189 and 190 of the
co-ordinate law on trading companies.
The shares are indivisible with regard to the Company, which admit only one
owner for each of them.
Article eight. - The life of the Company does not come to an end by death,
suspension of civil rights, bankruptcy or insolvency of any partner.
Article nine.- The creditors, representatives, rightful owner or heirs of
any partner are neither allowed, in circumstances, to require the sealing of
the assets and documents of the Company, nor to interfere in any manner in the
administration of the Company. They must for the exercise of their rights refer
to financial statements and to the decisions of the meetings.
Article ten. - The Company is managed by one or more managers either
partners or not, appointed by the partners with or without limitation of their
period of office.
Each manager shall have individually and on his single signature the full
power to bind the Company for all acts within the bounds laid down by its
purpose and by the law.
The powers and remuneration of any managers possibly appointed at a later
date in addition to or in the place of the first managers will be determined in
the act of nomination.
Article eleven. - Any manager does not contract in his function any
personal obligation concerning the
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commitments regularly taken by him in the name of the Company; as a mandatory he
is only responsible for the execution of his mandate.
Article twelve.- The sole partner exercises the powers devolved to the
meeting of partners by the dispositions of Section XII of the law of August
10th, 1915 on societes a responsabilite limitee.
As a consequence thereof, all decisions which exceed the powers of the
managers are taken by the sole partner.
In case of more partners, the decisions which exceed the powers of the
managers shall be taken by the meeting.
Resolutions are validly adopted when taken by partners representing more
than half of the capital.
However, decisions concerning a modification of the articles of
incorporation must be taken by a majority vote of partners representing the
three quarters of the capital. If this majority is not attained at a first
meeting, the partners are convened by registered letters to a second meeting
with at least thirty days notice, which will be held within three months from
the first meeting.
At this second meeting, decisions will be taken at the majority of voting
partners whatever majority of capital be represented.
Article thirteen.- The Company's financial year begins on January 1st and
closes on December 31st.
Article fourteen.- Each year, as of the 31st of December, the management
will draw up the balance sheet which will contain a record of the properties of
the Company and the profit and loss account, as also an appendix according to
the prescriptions of the law in force.
Article fifteen.- Each partner may inspect at the head office the
inventory, the balance sheet and the profit and loss account.
Article sixteen.- The credit balance of the profit and loss account, after
deduction of the expenses,
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costs, amortizations, charges and provisions represents the net profit of the
Company.
Every year five percent of the net profit will be transferred to the
statutory reserve.
This deduction ceases to be compulsory when the statutory reserve amounts
to one tenth of the issued capital but must be resumed till the reserve fund is
entirely reconstituted if, at any time and for any reason whatever, it has been
broken into.
The excess is distributed among the partners. However, the partners may
decide, at the majority vote determined by the relevant laws, that the profit,
after deduction of the reserve, be either carried forward or transferred to an
extraordinary reserve.
Article seventeen.- In the event of a dissolution of the Company, the
liquidation will be carried out by the managers or a partner upon agreement
which are vested with the broadest powers for the realization of the assets and
payment of debts.
When the liquidation of the Company is closed, the assets of the Company
will be attributed to the partners proportionally to the shares they hold.
Article eighteen.- For all matters not provided for in the present articles
of incorporation, the partners refer to the existing laws.
TRANSITORY MEASURES
Exceptionally the first financial year shall begin today and end on
December 31st, 1999.
PAYMENT - CONTRIBUTIONS
The appearing person declares and acknowledges that each subscribed share
has been fully paid up in cash so that from now on the Company has at its free
and entire disposal the contributions referred to above.
Proof thereof has been given to the undersigned notary who expressly
acknowledges it.
ESTIMATE OF COSTS
The costs, expenses, fees and charges, in whatsoever form, which are to be
borne by the Company or which shall be charged to it in connection with its in-
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corporation, have been estimated at about fifty thousand Luxembourg Francs.
EXTRAORDINARY GENERAL MEETING
Immediately after the incorporation of the Company, the above-named
person, representing the entirety of the subscribed capital and exercising the
powers of the meeting, passed the following resolutions:
1) Is appointed as manager for an undetermined duration ChipPAC Operating
Limited, a company having its registered office at Craigmuir Chambers,
Road Town, Tortola, British Virgin Islands;
2) The Company shall have its registered office at L-2453 Luxembourg, 16,
rue Eugene Ruppert.
The undersigned notary who understands and speaks English, hereby states
that on request of the above appearing persons, the present incorporation deed
is worded in English, followed by a French version; on request of the same
persons and in case of discrepancies between the English and the French text,
the English version will prevail.
In faith of which we, the undersigned notary have set hand and seal in
Luxembourg-City.
On the day named at the beginning of this document.
The document having been read to the person appearing, said person signed
with us, the Notary, the present original deed.
TRADUCTION FRANCAISE DU TEXTE QUI PRECEDE
L'an mil neuf cent quatre-vingt-dix-neuf, le (dix-huit mars) lisez dix-
neuf mars.
Pardevant Maitre Joseph ELVINGER, notaire de residence a Luxembourg,
soussigne
Ont comparu:
ChipPAC Operating Limited, une societe ayant son siege social etabli
a Craigmuir Chambers, Road Town, Tortola, Iles Vierges Britanniques;
ici representee par Monsieur Dominique AUDIA, employe prive, demeurant a
Luxembourg, en vertu d'une procuration sous seing prive lui delivree;
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Ladite procuration, paraphee "ne varietur" par le mandataire comparaissant
et le notaire instrumentant, restera annexee au present acte pour etre
formalisee avec lui.
Lequel fondateur comparant a declare avoir constitue une societe a
responsabilite limitee dont il a arrete les statuts comme suit:
Article premier.- Il est forme par les presentes une societe a
responsabilite limitee qui sera regie par les presents statuts et les lois
luxembourgeoises actuellement en vigueur, notamment par celles du 10 aout 1915
sur les societes commerciales et du 18 septembre 1933 sur les societes a
responsabilite limitee, telles que modifiees, et plus particuierement la loi du
28 decembre 1992 sur les societes unipersonnelles, ainsi que par les presents
statuts.
A tout moment, l'associe peut s'adjoindre un ou plusieurs coassocies et, de
meme, les futurs associes peuvent prendre les mesures appropriees tendant
a retablir le caractere initial unipersonnel de la Societe.
Article deux.- La Societe prend la denomination de "ChipPAC Luxembourg
S. a R.L.".
Article trois.- La Societe a pour objet la prise de participation sous
quelque forme que ce soit, dans toutes entreprises commerciales, industrielles,
financieres ou autres, luxembourgeoises ou etrangeres, l'acquisition de tous
titres et droits par voie de participation, d'apport, de souscription, de prise
ferme ou d'option d'achat, de negociation et de toute autre maniere et notamment
l'acquisition de brevets et licences, leur gestion et leur mise en valeur,
l'octroi aux entreprises auxquelles elle s'interesse, de tous concours, prets,
avances ou garanties, enfin toute activite et toutes operations generalement
quelconques se rattachant directement ou indirectement a son objet, sans vouloir
beneficier du regime fiscal particulier organise par la loi du 31 juillet 1929
sur les societes de participations financieres.
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La Societe peut realiser toutes operations commerciales, techniques ou
financieres en relation directe ou indirecte avec tous les secteurs predecrits,
de maniere a en faciliter 1'accomplissement.
Article quatre.- Le siege social est etabli a Luxembourg, Grand-Duche de
Luxembourg.
Il pourra etre transfere en tout autre lieu du Grand-Duche de Luxembourg par
simple decision des associes.
Article cinq.- La Societe est constituee pour une duree indeterminee.
Article six.- Le capital social est fixe a USD 15.000,- (quinze mille
dollars US) divise en 300 (trois cents) parts sociales de USD 50,- (cinquante
dollars US) chacune.
Ces parts ont ete integralement liberees et souscrites par la societe
ChipPAC Operating Limited, ayant son siege social etabli Craigmuir Chambers,
Road Town, Tortola, Iles Vierges Britanniques;
Article sept.- Les parts sociales sont librement cessibles entre associes.
Aucune cession de parts sociales entre vifs a un tiers non-associe ne peut
etre effectuee qu'avec l'agrement des autres associes et apres leur avoir ete
offerte en priorite.
Pour le reste il est refere aux dispositions des articles 189 et 190 de la
loi coordonnee sur les societes commerciales.
Les parts sont indivisibles a l'egard de la Societe, qui ne reconnait
qu'un seul proprietaire pour chacune d'elle
Article huit.- Le deces, l'interdiction, la faillite ou la deconfiture d'un
des associes ne mettent pas fin a la Societe
Article neuf.- Les creanciers, representants, ayants-droit ou heritiers des
associes ne pourront pour quelque motif que ce soit, requerir l'apposition de
scelles sur les biens et documents de la Societe, ni s'immiscer en aucune
maniere dans les actes de son administration. Ils doivent pour l'exercice de
leurs
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droits s'en rapporter aux inventaires sociaux et aux decisions des assemblees.
Article dix.- La Societe est administree par un ou plusieurs gerants
associes ou non, choisis par les associes avec ou sans limitation de la duree de
leur mandat.
Chaque gerant aura individuellement et sous sa seule signature les pleins
pouvoirs pour engager la Societe pour tous actes, dans les limites fixees par
son objet social ou la loi.
Les pouvoirs et remunerations des gerants eventuellement nommes
posterieurement en sus ou en remplacement des premiers gerants seront determines
dans l'acte de nomination.
Article onze.- Un gerant ne contracte en raison de ses fonctions, aucune
obligation personnelle quant aux engagements regulierement pris par lui au nom
de la Societe; simple mandataire, il n'est responsable que de l'execution de son
mandat.
Article douze.- L'associe unique exerce les pouvoirs devolus a l'assemblee
generale des associes par les dispositions de la section XII de la loi du 10
aout 1915 relatives aux societes a responsabilite limitees.
Il s'ensuit que toutes decisions qui excedent les pouvoirs reconnus aux
gerants sont prises par l'associe unique.
En cas de pluralite d'associes, les decisions qui excedent les pouvoirs
reconnus aux gerants sont prises en assemblee.
Les resolutions ne sont valablement adoptees que pour autant qu'elles soient
prises par les associes representant plus de la moitie du capital social.
Toutefois, les decisions ayant pour objet une modification des statuts ne
pourront etre prises qu'a la majorite des associes representant les trois quarts
du capital social. Si ce quorum n'est pas atteint lors de la premiere assemblee,
une seconde assemblee sera convoquee par lettres recommandees avec un preavis
d'un mois au moins et tenue dans un delai de trois mois a dater de la premiere
assemblee.
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Lors de cette deuxieme assemblee, les resolutions seront adoptees a la
majorite des associes votant quelle que soit la portion du capital represente.
Article treize.- L'exercice social commence le premier janvier et se
termine le 31 decembre.
Article quatorze. - Chaque annee avec effet au 31 decembre la gerance
etablit le bilan qui contiendra l'inventaire des avoirs de la Societe et de
toutes les dettes actives et passives, et le compte de profits et pertes ainsi
qu'une annexe conforme aux dispositions de la loi en vigueur.
Article quinze. - Tout associe peut prendre communication au siege social
de la Societe de l'inventaire, du bilan et du compte de profits et pertes.
Article seize. - L'excedent favorable du compte de profits et pertes, apres
deduction des frais, charges et amortissements et provisions, constitue le
benefice net de la Societe.
Chaque annee, cing pour cent du benefice net seront affectes a la reserve
legale.
Ces prelevements cesseront d'etre obligatoires lorsque la reserve legale
aura atteint un dixieme du capital social, mais devront etre repris jusqu'a
entiere reconstitution, si a un moment donne et pour quelque cause que ce soit,
le fonds de reserve se trouve entame.
Le solde du benefice net est distribue entre les associes. Neanmoins, les
associes peuvent, a la majorite prevue par la loi, decider qu'apres deduction de
la reserve legale, le benefice sera reporte a nouveau ou transfere a une
reserve speciale.
Article dix-sept.- En cas de dissolution de la Societe pour quelque raison
que ce soit, la liquidation sera faite par les gerants ou un associe designe et
qui auront les pouvoirs les plus larges pour realiser les actifs et regler le
passif de la Societe.
La liquidation terminee, les avoirs de la Societe seront attribues aux
associes en proportion des parts sociales qu'ils detiennent.
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Article dix-huit.- Pour tout ce qui n'est pas prevu par les presents
statuts, les associes se referent aux dispositions legales en vigueur.
DISPOSITION TRANSITOIRE
Exceptionnellement le premier exercice commencera le jour de la constitution
pour finir le 31 decembre 1999.
LIBERATION - APPORTS
Le comparant declare et reconnait que chacune des parts sociales souscrites
a ete integralement liberee en especes, de sorte que les apports susmentionnes
sont des a present a l'entiere et libre disposition de la Societe.
Preuve en a ete apportee au notaire instrumentant qui le constate
expressement.
FRAIS
Le montant des frais, depenses, remunerations ou charges, sous quelque forme
que ce soit qui incombent a la Societe ou qui sont mis a sa charge en raison de
sa constitution, s'eleve a environ cinquante mille francs luxembourgeois.
ASSEMBLEE GENERALE EXTRAORDINAIRE
Immediatement apres la constitution de la Societe, le comparant precite,
representant la totalite du capital social, exercant les pouvoirs de
l'assemblee, a pris les resolutions suivantes:
1) Est nomme gerant pour une duree indeterminee ChipPAC Operating Limited,
une societe ayant son siege social etabli a Craigmuir Chambers, Road Town,
Tortola, Iles Vierges Britanniques;
2) Le siege social de la Societe est etabli a L-2453 Luxembourg, 16, rue
Eugene Ruppert.
Le notaire soussigne qui comprend et parle l'anglais constate par le present
qu'a la requete des personnes comparantes les presents statuts sont rediges en
anglais suivis d'une version francaise, a la requete des memes personnes et en
cas de divergences entre le texte anglais et francais, la version anglaise fera
foi.
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Dont acte, fait et passe a Luxembourg, date qu'en tete des presentes.
Et apres lecture faite et interpretation donnee au comparant, il a signe
avec nous notaire la presente minute.
[NOTAIRE STAMP APPEARS HERE]
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Exhibit 3.10
------------
DEED OF FOUNDATION
THE THIS DEED OF FOUNDATION INCLUDES ALL THE MODIFICATIONS UNTIL SIGNATURE OF
THIS DEED OF
FOUNDATION IN A UNIFIED STRUCTURE
1. Name and seat of the Founder
ChipPAC Operating Limited
Craigmuir Chambers
Road Town
Tortola,. BVI
2. Name and seat of the Company
2.1 Name of the Company
in Hungarian:
ChipPAC Likviditas Menedzsment Magyarorszag Korlatolt Felelossegu
Tarsasag
in English:
ChipPAC Liquidity Management Hungary Limited Liability Company
The abbreviated form of the Company's name will be:
in Hungarian: ChipPAC Kft.
in English: ChipPAC Ltd.
2.2 Seat of the Company:
9700 Szombathely
Varkonyi u. 15.
3. Range of activities of the Company
The Company is established to carry out the following business activities
(identified by the code numbers of the Standard Sector Classification
System of Activities):
<PAGE>
5170 Other wholesale trading
7484 Service promoting other economic activities not included elsewhere
6522 Other credit granting
The scope of Other Credit Granting covers only non-bank credit granting,
which is restricted to liquidity management for controlled companies (Act
CXII of 1996, Schedule II, Section 3 on Credit Institutions and Financial
Enterprises--"CIFEA"--and which does not qualify as the granting of
monetary credit under Schedule 11, Section 10 of the CIFEA.) Therefore the
permit of the State Money and Capital Market Supervision is not required to
practice the above activities.
The Founder acknowledges the fact that the Company can only perform those
activities, which are subject to a relevant license or a registration
obligation, upon receipt of said license or following the registration. The
Managing Director will be responsible for obtaining the licenses and
registrations.
4. The share capital of the Company
4.1 The share capital of the Company is USD 115,000, that is one hundred
and fifteen thousand United States dollars, which is an entirely cash
contribution.
4.2 The Founder has fully paid the cash contribution of USD 15,000 that is
fifteen thousand United States dollars to the Company's bank account
kept at ABN AMRO Bank Rt in Budapest at the establishment of the
Company. The Founder undertakes to pay the cash contribution of USD
100,000 that is one hundred thousand United States dollars within 15
days of signature of this Deed of Foundation. The payment will be
accomplished in USD to the Company's bank account held at ABN AMRO
Bank Rt.
4.3 The business quota of the Founder is 100%.
4.4 The Founder is not obliged to provide any auxiliary services or
additional payment.
5. Duration of the Company, business year
5.1 The Company is established for an indefinite term.
5.2 The business year shall coincide with the calendar year.
6. Decisions of the Company
6.1 The Founder shall have the sole power of decision for all Company
matters listed under Section 2 of Paragraph 150 of Act No. CXLIV of
1997 on Business Associations.
6.2 The Managing Director is responsible for entering the resolutions of
the Founder into the Book of Resolutions.
<PAGE>
7. The Managing Director
7.1 The first Managing Director of the Company is:
Name: Jozsef Veress
Address: 1031 Budapest
Anyos U. 8. 11/5
Mother's maiden name: Olga Damianovich
ID no.: AN 231197
7.2 The mandate of the Managing Director begins with the signature of this
Deed of Foundation and will last for one year. The Managing Director
may be re-elected and the mandate can be extended.
7.3 The Managing Director shall manage the Company in accordance with the
Resolutions of the Founder which are made pursuant to Section 6.1 of
this Deed. In all other aspects, the Managing Director shall be
responsible for managing matters of and for the Company.
8. The auditor of the Company:
8.1 The name and address of the auditor:
Name: PricewaterhouseCoopers Auditing and Business Consulting Ltd.
Seat: 1077 Budapest
WesselAnyl u. 16.
Registration no.: 01-09-063022
Auditor permit no.: 001464
8.2 The representative appointed as auditor:
Name: IstvanPuskas
Address: 1124 Budapest
Fodor u. 109/b/2.
Mother's maiden name: Eva Vecseri
Auditor permit no.: 0041 06
8.3 The mandate of the auditor lasts for five years from the date of
signing of this Deed of Foundation.
9. Procuration and representation
9.1 The proper signature of the Company will be carried out in such a way
that the Managing Director solely signs his name under the prescribed,
pre-printed or printed name of the Company.
9.2 The Managing Director shall solely represent the Company before third
parties, courts and other authorities. The Managing Director shall
exercise the employer's rights with respect to the company's
employees.
10. Termination of the Company
<PAGE>
10.1 The Company terminates:
a) if it resolves its termination without a legal successor;
b) if it resolves its termination with legal succession (by
transformation);
c) upon being declared terminated by the court of registration;
d) upon the order of the court of registration on its cancellation
ex officio;
e) if terminated by the court of registration in liquidation
proceedings.
10.2 The Company ceases to exist upon its deletion from the Company
Register.
11. Closing provisions
11.1 The Founder hereby declares that he/she/it intends to pursue the
Company's activities as a "party acting abroad" as set forth in
Article 4(28) of Act No. LXXXI of 1996 on Corporate Tax and Dividend
Tax, as amended.
11.2 In all matters not, or not entirely governed by this Deed of
Foundation, the provisions of Act No. CXLIV on Business Associations
of 1997 and Act No. XXIV on Foreign Investments of 1988, as amended,
shall apply.
Date: August 5, 1999.
The Founder:
/s/ Paul Grocott
- ----------------------------------------------
Name of the Company: ChipPAC Operating Limited
Name of the representative: Paul Grocott
Countersigned: /s/ Dr. Horvath Dora
<PAGE>
Exhibit 3.11
------------
CHIPPAC LTD.
POLICY AND OPERATING GUIDELINES
ABSTRACT
These liquidity management, investment, hedging and administration policy and
operating guidelines ("Guidelines") set out the general principles pertaining to
the administration of the business of ChipPAC Ltd. (the "Company"). These
Guidelines were approved by Resolution of the Managing Director, dated the 5th
of August, 1999, and as amended from time to time by subsequent resolutions of
the Managing Director.
1.0 Definitions
"Auditor" is the statutory auditor appointed in accordance with the terms
of the appointment set out in the Deed of Foundation of the Company.
"Borrowing Participant" is a Participant making a Funding Request in
accordance with the applicable Liquidity Management Agreement entered into
between the Borrowing Participant and the Company, a. sample of which is
enclosed in Appendix A.
"Company" is ChipPAC Ltd., a Hungarian limited liability company.
"Director" is the managing director of the Company, with signing authority
in matters relating to the Company as set out in the Deed of Foundation.
"Financing Account" is the USD denominated account in the name of the
Company with ABN AMRO Bank, London, U.K.
"Member" is ChipPac Operating Limited, a company incorporated under the
laws of US Tortola, or its successor as set out in an amended Deed of
Foundation and whose rights and obligations in respect of the Company are
determined in accordance with the Deed of Foundation and resolutions of the
Member and the Company.
"Governing Legislation" is Act CLXI on Business Associations and other
applicable Hungarian law governing matters dealt with in these Guidelines.
"Participants" are those companies which have entered into a Liquidity
Management Agreement with the Company and whose rights and obligations are
defined therein.
"Operating Account" is the USD denominated bank account in the name of the
Company with ABN AMRO Bank in Budapest which is used for settling local
expenses and for paying Hungarian taxes.
"Service Provider" is TMF Hungary Ltd., pursuant to the terms of a Service
and Office Space Agreement, a sample of which is enclosed in Appendix B.
<PAGE>
Note: Other defined terms mentioned in these Guidelines but which are riot
specifically defined in this section have the same meaning as provided for
in the applicable Liquidity Management Agreement or the applicable Loan
Agreement/Purchased Debt as those terms are defined in the Liquidity
Management Agreement.
2.0 General Policy Objectives
2.1 To provide liquidity and treasury management services to Participants
under common control in a cost-effective manner.
2.2 To realise a reasonable return on surplus fluids, if applicable, while
maintaining adequate liquidity and a low level of overall investment
risk.
2.3 To administer the Company in a way that is consistent with and adheres
to agreements in place between the Company and other parties and to
ensure that the offshore status of the Company under Hungarian law is
preserved.
3.0 Liquidity Management re; Participants
3.1 Any and all funds of the Company should be used for one of four
purposes: financing and liquidity management of Participants,
investment of surplus funds, payment of dividends or settlement of
operational expenses.
3.2 The Company should not lend funds to an entity which is not a
Participant governed by a Liquidity Management Agreement except where
fluids are advanced to the Member for the purpose of making expected
or future dividend payments.
3.3 Actual interest and principal repayments should be made both by
accounting entries in the records of the Borrowing Participant and the
Company as well as by the physical transfer of cash to the Financing
Account of the Company. Outstanding interest or principal should not
be refinanced. Payments should be made as and when required in
accordance with the terms of any applicable Loan Agreement or
Purchased Debt.
3.4 The amount and source of funds to be used for the financing and
liquidity management activities of the Company should be determined by
the Director, from time to time, and in accordance with the guidelines
pertaining to Capitalization of the Company in section 5.0, after due
consideration of the anticipated borrowing requirements of Borrowing
Participants, balance sheet funding restrictions, if applicable, and
operational requirements of the Company.
4.0 Management of Surplus Funds
4.1 Surplus funds may accumulate in the Financing Account from time to
time as interest and/or principal receipts are received and approval
in accordance with these Guidelines has not yet been given for either
subsequent lending of the funds or their advance or payment as a
dividend to the Member.
4.2 Each year the Director should, if applicable, makes decisions or set
policies with respect to the retention and investment of surplus funds
throughout the year, including matters relating to investment
policies, currencies etc.
<PAGE>
4.3 The Company shall be responsible for the proper management of surplus
funds in accordance with the decisions of the Director.
4.4 All surplus funds available, from time to time, shall be, where
necessary, converted into and/or kept in USD unless the Company has
ascertained a specific requirement for funds in another currency in
which event the Company may, with prior authorization of the Director,
take steps in advance to acquire or maintain funds in such currency.
4.5 Any surplus funds should be placed on deposit, at the best rates
obtainable, for committed periods not exceeding two months with any
financial institution with a minimum Standard & Poor's short term
credit rating of A1. The Company may place surplus funds on deposit
for committed periods of up to 3 months or more with the express
authorization of the Director.
5.0 Capitalization of the Company
5.1 The Director shall be responsible for ensuring that the Company is
sufficiently capitalised such that it can meet its liquidity
management and financing responsibilities in respect of Participants.
5.2 The Company may be capitalized, from time to time, through equity
contributions from the Member, borrowings from financial institutions
approved by the Director or advances from Participants or other
entities approved by the Director.
5.3 The Member will usually make equity contributions to the Company
either through cash contributions to registered capital, in-kind
contributions to registered capital or cash or in-kind contributions
to capital reserve.
5.4 The Director must approve all borrowings by or credit facilities
granted to the Company.
6.0 Hedging
6.1 The Director shall be responsible for approving and providing for any
and all hedging activities of the Company.
6.2 Loans to Participants and advances from Participants and approved
entities may be made in USD or any other freely tradable currency. Any
loan or advance not denominated in USD may, at the determination of
the Director, be hedged in USD with a financial institution with a
minimum Standard & Poor's short term credit rating of Al or a minimum
Standard & Poor's long term credit rating of AA for any hedging
transaction over 12 months or as otherwise determined by the Director.
Hedging may not be necessary where the currency of the loan is matched
on the funding side.
6.3 For foreign exchange exposures, only spot and forward foreign exchange
contracts shall be entered into by the Company, upon approval by the
Director. No speculative contracts shall be entered into. Hedge
consolidation of net exposure may be undertaken.
6.4 The hedging of interest rates on loans made and borrowings received
shall be determined by the Director, on a case by case basis.
<PAGE>
7.0 Banking and Disbursements
Banking
7.1 The Company shall set up and maintain, at a minimum, one Operating
Account in Hungary denominated in USD for the purpose of settling
local expenses and paying taxes.
7.2 The following expenses must be paid from the Operating Account and
cannot be paid from any other account in the name of the HOC:
a) All remuneration of managing Director, employees etc.;
b) All statutory filing fees and other amounts paid to government
bodies in Hungary;
c) All professional advisor's fees in Hungary for services
relating to the Company;
d) All taxes payable to a Hungarian tax authority.
7.3 The Company shall set up and maintain at least one Financing Account
denominated in USD for the purpose of lending funds to Participants
and for receiving principal and interest repayments on USD
denominated, and, if necessary, other currency denominated lendings
to Participant
7.4 No funds may be disbursed from the Financing Account for purposes
stated in sections 7.1 or 7.2 or for any other expense reasonably
related to the operation or ongoing maintenance of the Company except
as specifically set oat in section 7.3.
7.5 The Company may set up arid maintain a non-USD denominated account
for specific purposes.
7.6 The Company is responsible for ensuring, by way of funds transfer
from the Financing Account and in conjunction with the Service
Provider, that sufficient funds are available in the Operating
Account for settling anticipated local expenses. Any request for a
transfer of funds from the Financing Account to the Operating Account
must be authorized on a Financing Account Transfer Request a sample
of which is enclosed in Appendix C.
7.7 Person(s) designated in the Deed of Foundation of the Company should
have signing authority over the Operating and Financing Account
unless other arrangements are agreed to by the Director.
7.8 No funds may be disbursed as a loan to a Borrowing Participant from
the Financing Account unless a Funding Request has been submitted and
approved by the Director.
7.9 No funds may be disbursed from the Operating Account pursuant to an
approved Funding Request.
7.10 The Service Provider shall provide, to the Company, originals or
reasonable copies of all invoices or supporting documentation for
approval prior to payment of expenses out of the Operating Account.
Pre-approval of such expenditures, including pre-authorized payment
or payment by standing order may be approved by the Director.
<PAGE>
8.0 Dividends to the Member
8.1 The Director shall declare and pay dividends to the Member at their
discretion and in accordance with the Deed of Foundation, any
applicable resolutions and pursuant to and in accordance with
applicable Hungarian law.
8.2 The Director should (where possible) declare and pay dividends no
more than once per year, after completion and approval of the annual
audited financial statements and submission of the audited financial
statements to the Hungarian authorities.
8.3 Interim dividend payments may be made, but must be supported by a
resolution of the Director and based on approved interim audited
financial statements showing sufficient profit reserves to support
the dividend.
8.4 During the course of the year, the Director may approve interim
advances to the Member. These advances must be paid from the
Financing Account pursuant to a completed Financing Account Transfer
Request. All advances to the Member outstanding at the end of the
year must be settled first through the declaration and payment of a
dividend in accordance with section 8.1 and Hungarian law.
8.5 The Company is responsible for withholding all taxes on dividends
paid to the Member and remitting these withholdings to the
appropriate Hungarian authorities.
8.6 The Company must file an authenticated document of domicile with the
Hungarian tax authorities enabling the Company to withhold at the
rate of withholding appropriate for the applicable treaty.
9.0 Accounting and Bookkeeping
9.1 The Service Provider shall be responsible for all record keeping and
accounting functions in respect of the Company in accordance with the
Service and Office Space Agreement.
9.2 The Service Provider shall be responsible for processing all invoices
and requests for payment in the normal course for settlement in
accordance with these Guidelines.
9.3 The Service Provider and/or other designated individual or company
shall be responsible for administering and maintaining the registered
office of the Company in accordance with the terms of the applicable
lease or rental agreement.
9.4 The Service Provider shall be responsible for administering and
maintaining a business office of the Company in accordance with the
terms of the Service and Office Space Agreement.
10.0 Financial Reporting
10.1 The Service Provider should be responsible for completion of internal
and external financial reporting requirements for the Company.
<PAGE>
10.2 A report should be provided to the Company by the Service Provider
detailing management accounts on a quarterly or other basis to be
determined by the Company and in a format to be agreed upon in
consultation with the Company.
10.3 A report should be provided to the Director by the Service Provider
detailing receipts and disbursements and reconciliations in respect
of the Operating and Financing Accounts of the Company on a monthly
or other basis to be determined by the Company and in a format to be
agreed upon in consultation with the Company.
10.4 A report should be provided to the Director by the Company in
consultation with the Service Provider which sets out the status of
all requests for funding awaiting approval on an annual or other
basis to be determined by the Company and in a format to be agreed
upon in consultation with the Company.
10.5 The Service Provider in conjunction with the Company shall prepare
final year end accounts and financial statements for presentation to
the Company within a reasonable time after year end.
10.6 The Service Provider shall be responsible for providing all necessary
and requested information on a timely basis to the Auditor for
purposes of completion of the annual audit.
10.7 The Service Provider shall provide any and all information or reports
requested by the Company or the Director.
10.8 The Service Provider should provide financial statements for the pre-
Company to the Auditor on a timely basis.
<PAGE>
ACKNOWLEDGMENT
THESE GUIDELINES including the enclosed Appendices are hereby acknowledged
as constituting the Policy and Operating Guidelines of ChipPAC Ltd. as at
the date below with retroactive effect to the date of incorporation of
ChipPAC Ltd.
Date: August 5, 1999
On behalf of ChipPAC Ltd.,
/s/ Jozsef Veress
-----------------------------
Jozsef Veress
Managing Director
<PAGE>
EXHIBIT 3.12
CHIPPAC KOREA LIMITED
==========================
ARTICLES OF INCORPORATION
=========================
CHAPTER I.
GENERAL PROVISIONS
Article 1. Corporate Name
- --------------------------
The name of the company shall be " " which shall be written in
English as "ChipPAC Korea Limited" (hereinafter referred to as the "Company").
Article 2. Objectives
- ----------------------
The objectives of the Company shall be to engage in the following business:
(1) Manufacture and sale of products relating to assembling and testing the
semiconductor elements;
(2) Manufacture and sale of equipments and appliances relating to assembling
and testing the semiconductor elements;
(3) Manufacture of machinery components and molds;
(4) Acquisition of works such as technology research and service on a
commission basis;
(5) Renting a electronic and electrical machinery components;
(6) Publication business;
(7) Foreign trade business;
(8) Forestation business;
(9) Sale and renting the real estate;
(10) Construction business; and
(11) Any and all business and investment incidental to any of the foregoings.
<PAGE>
-2-
Article 3. Location of Principal Office
- ----------------------------------------
The Principal Office of this Company shall be located at San 136-1, Ami-Ri,
Bubal-Eup, Ichon-Shi, Kyunggi-Do, Korea and branches, sub-offices, or other
business offices will be established or closed elsewhere as required according
to resolutions passed at the meetings of Board of Directors.
CHAPTER II.
CAPITAL AND UNITS OF CONTRIBUTION
Article 4. Capital
-------
The total amount of the capital of the Company shall be Seven Hundred
Eighty Eight Billion Won (W78,800,000,000).
Article 5. Amount for One Unit of Contribution
-----------------------------------
The amount for one unit of contribution shall be Five Thousand Won
(W5,000).
Article 6. Name and Address of Members of the Company; Number of Units
-----------------------------------------------------------
<TABLE>
<CAPTION>
Name Address No. of Units of
- ---- ------- Contribution
---------------
<S> <C> <C>
ChipPAC Limited Craigmuir Chambers Road Town 15,744,240 units
Tortola in the said Territory
ChipPAC (Barbados) Ltd. Chancery House, High Street 15,760 units
Bridgetown, Barbados, West Indies
</TABLE>
Article 7. Restrictions Upon Disposition
-----------------------------
A member of the Company may not dispose of the whole or any part of its
contribution unit to any person other than a member without the unanimous
written consent of all members.
<PAGE>
-3-
CHAPTER III.
GENERAL MEETING OF MEMBERS OF THE COMPANY
Article 8. Types and Times of General Meetings
- -----------------------------------------------
8.1. The general meetings of members of the Company shall be ordinary or
extraordinary.
8.2. An ordinary general meeting of members shall be convened within three
(3) months after the end of each fiscal period. Extraordinary general meetings
of members may be convened from time to time as necessary.
Article 9. Place of General Meetings
- -------------------------------------
9.1. All ordinary and extraordinary general meetings of members of the
Company may be held at the Principal Office of this Company or at such other
place as may be determined by the Board of Directors, within or outside the
Republic of Korea.
9.2. The Representative Director shall have the right to convene a general
meeting of the members with one (1) day prior written notice thereof to all the
members of the Company.
Article 10. Adoption of Resolution
- -----------------------------------
10.1. A quorum for a general meeting of members shall be the presence in
person or by proxy of the holders of more than fifty percent (50%) of the total
Units of Contribution entitled to vote. Except as otherwise required by
applicable laws and these Articles of Incorporation, all actions and resolutions
of a general meeting of members shall be adopted by the affirmative vote of a
majority of the total number of voting Units of Contribution then issued and
outstanding at a duly constituted general meeting of members.
<PAGE>
-4-
10.2. In the event that all members give written consent to any matter
that is object of a resolution, it shall be deemed that the matter has been
resolved in writing, and such resolutions shall have the same effect as
resolutions adopted at general meetings of members.
Article 11. Right to Vote, Voting by Proxy
- -------------------------------------------
11.1. In all matters, each member of the Company shall have one vote for
each unit of contribution held by him.
11.2. A member may exercise his voting right by proxy by having another
person represent him. Any such representative must submit documentation
acceptable to the Company establishing his power of representation (Power of
Attorney).
Article 12. Presiding Officer of General Meeting
- -------------------------------------------------
The representative director of the Company shall preside at all general
meetings of members. In the event that the representative director fails to
serve as presiding officer over any general meeting of members for any reason,
one of the other Directors nominated by the Board of Directors shall take his
place.
Article 13. Minutes
- --------------------
As to the substance of the course of the proceedings of the general
meetings and the results thereof, the minutes shall be prepared and the chairman
and all directors present at the meeting affix their seals or signatures
thereon.
<PAGE>
-5-
CHAPTER IV.
DIRECTORS AND AUDITORS
Article 14. Directors, Representative Director and Statutory Auditor
--------------------------------------------------------
14.1. The Company shall have three (3) directors and one (1) statutory
auditor all of whom shall be elected at a general meeting of members.
14.2. The Company shall have a representative director who shall also be
elected at a general meeting of members. The representative director shall
represent the Company and manage the daily affairs of the Company.
14.3. The term of office of a director and a statutory auditor shall be
one (1) year. That term, however, shall be extend until the closing of the
general meeting of members convened first following the last fiscal period
comprising the incumbent's term of office.
14.4. Directors and statutory auditors shall be eligible for reelection
upon the expiration of their terms of office.
CHAPTER V.
ACCOUNTING
Article 15. Composition and Powers of Board of Directors
--------------------------------------------
15.1. The Board of Directors of the Company shall consist of all the
Directors elected at a general meeting of members. Except as otherwise
provided in the Commercial Code of Korea and these Articles of Incorporation,
the Board of Directors shall decide by resolution all important matters relating
to management of the business of the Company and shall supervise the management
of the Company carried out by the representative director and the officers of
the Company.
<PAGE>
-6-
15.2. The following matters, in particular, shall require approval of the
Board:
(a) Establishment, purchase, leasing and abolishment of business offices and
other places of business;
(b) Approval of forecasts, budgets and statements of accounts;
(c) Decision as to major expansion, retrenchment, suspension, and dissolution
of the Company and any of its businesses;
(d) Designation and appointment of bankers and outside accountants;
(e) Decisions as to the borrowing of funds;
(f) Decisions as to extending credit;
(g) Decisions as to purchase or disposition of assets of more than One Billion
Two Hundred Million Won (1,200,000,000) in value or One Billion Two
Hundred Million Won (1,200,000,000) in excess of such purchases or
dispositions already approved in the budget; or its equivalent in another
currency;
(h) Decisions as to furnishing of security (collateral) other than in the
ordinary course of business;
(i) Subject concerning important litigation or arbitration;
(j) Formulation and adoption of plans for major changes in the fundamental
organization of the Company, including amendment of the Articles of
Incorporation of the Company to be submitted to a general meeting of
members;
(k) Approval of the Company's sales, marketing and research progress and
policies; and
(l) Determination of other important matters relating to the administration of
the affairs of the Company.
Article 16. Meeting of Directors, Notice and Place of Meetings
--------------------------------------------------
16.1. Meetings of the Board of Directors shall be convened from time
to time by the representative director when he deems the same to be necessary or
advisable or promptly upon the request of any director in writing.
16.2. Written notice of each meeting of the Board of Directors,
setting forth the date, time, place and agenda of the meeting shall be given via
registered or certified
<PAGE>
-7-
mail to directors and the statutory auditor who are residents of Korea and via
cable, telefax, or telex, confirmed by registered or certified airmail to all
other Directors not resident in Korea, at least one (1) day prior to the date
set for such meeting.
16.3. At the meeting, directors may act only with respect to matters
set forth in said notice, unless all directors in office otherwise agree.
16.4 Irrespective of the foregoing Paragraph 16.2, meetings of the
Board of Directors may be held without conforming to such procedure set forth
above written consent thereto has been obtained, prior to the meeting, from all
the Directors in office.
16.5. The venue of all meetings of the Board of Directors shall be
the Registered Office of the Company or such other place, in or outside of
Korea, as shall be determined by the Board of Directors.
16.6. The venue of all meetings of the Board of Directors shall be
the Registered Office of the Company or such other place, in or outside of
Korea, as shall be determined by the Board of Directors.
Article 17. Presiding Officer of the Board
------------------------------
The representative director shall preside over all meetings of the
Board of Directors. In the event the representative director is unable or
unwilling to preside over any meeting of the Board of Directors for any reasons,
one of the others nominated by the Board shall preside.
Article 18. Adoption of Resolutions
-----------------------
18.1. All resolutions of the Board of Directors shall be adopted by
affirmative vote of the majority of directors in office. A director who is not
present at a meeting may vote in writing upon the matters for resolutions
submitted at a meeting of the Board.
18.2. In the event that all directors give written consent to any
matter which is the object of a resolution, it shall be deemed that the matter
has been resolved in writing, and such resolutions shall have the same effect as
resolutions adopted at
<PAGE>
-8-
meetings of the Board of Directors.
Article 19. Minutes
-------
Minutes of the meetings of the Board of Directors containing the
substance of course of the proceedings and the results thereof, shall be
prepared. The chairman of the meeting and all other directors present at the
meeting shall affix their seals or signatures thereon.
CHAPTER VI.
ACCOUNTING
Article 20. Fiscal Period
-------------
The fiscal period of the company shall be from the 1st of January
to 31st of December each year.
Article 21. Accounting Principles
---------------------
21.1. The accounting method employed by the company and financial
statements and reports issued by it shall be in accordance with the guidelines
agreed by the members; provided however, that such accounting method, financial
statements and reports shall be consistent with generally accepted accounting
principles and applicable Korean law. The Company shall further provide the
competent Korean authorities with any documentation required by the relevant
mandatory provisions of Korean laws.
21.2. The books and records of the Company shall be audited annually
by an independent and internationally reputable certified public accountant
selected by a resolution of the Board of Directors. Such certified public
accountant shall provide the Company and all members with copies of the
financial report in the English language in accordance with generally accepted
accounting principles of Korea and internationally accepted accounting practices
within thirty (30) days of the end of each year.
<PAGE>
-9-
Article 22. Preparing and Compiling Financial Statements
--------------------------------------------
(1) The representative director shall cause to be prepared the following
documents with their supplementary data and submit them to the statutory auditor
not later than six (6) weeks prior to the date of the ordinary general meeting
of members after obtaining the approval of the Board of Directors:
(A) A Balance Sheet as of the end of the fiscal year;
(B) A Profit and Loss Statement for the previous fiscal year;
(C) Proposals for the appropriation of the retained earnings or deficits;
and
(D) A business report for the previous fiscal year.
The statutory auditor shall submit the Audit Report to the directors within Four
(4) weeks from receipt of the aforesaid documents from the representative
director.
Article 23. Disposition of Profit
---------------------
The Company shall dispose of the profit of each fiscal year (including the
retained earnings carried over from previous year) in the following order of
priority:
(A) Replenishment of any capital deficit carried over from prior years, if
any;
(B) Contributions to reserves required by law and such other reserves as
may be decided by the general meeting of members;
(C) Payment of dividends to members, and
(D) Retained earnings carried forward to next fiscal year.
Article 24. Payment of Dividends
--------------------
Dividends shall be paid to the members of the Company who have been duly
entered in these Articles of Incorporation as of the end of each fiscal year in
proportion to their respective number of units of contribution.
Article 25. Inspection of Books of Accounting
---------------------------------
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-10-
A member of the Company may at any time demand in writing together with a
stated reasons to inspect and make a copy of the books of accounting and/or any
other documents of the Company.
CHAPTER VII.
OTHER MATTERS
Article 26. By Laws
-------
The Company may by resolutions of the Board of Directors, establish and
enforce By-Laws necessary for carrying out its business.
Article 27. Application of Commercial Code, etc.
------------------------------------
Matters not specifically provided for herein shall be determined in
accordance with the resolutions of the general meetings of members and/or the
relevant provisions of the Commercial Code and other applicable laws.
ADDENDA
-------
These Articles of Incorporation shall enter into effect from ____________, 1999.
<PAGE>
Exhibit 4.1
EXECUTION COPY
$150,000,000
CHIPPAC INTERNATIONAL LIMITED
12 3/4% Senior Subordinated Notes Due 2009
PURCHASE AGREEMENT
------------------
July 22, 1999
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
1. Introductory. ChipPAC International Limited, a British Virgin Islands
corporation (the "Issuer"), which is a wholly owned subsidiary of ChipPAC Merger
Corp. ("MergerCo"), a Delaware corporation which was formed and is wholly owned
by affiliates of Bain Capital, Inc. and SXI Group LLC, an affiliate of Citicorp
Venture Capital, proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"Initial Purchasers") the respective principal amounts set forth in Schedule A
hereto of U.S. $150,000,000 aggregate principal amount of its 12 3/4% Senior
Subordinated Notes Due 2009 (the "Offered Securities"). The Offered Securities
are to be issued pursuant to an indenture (the "Indenture") to be dated as of
July 29, 1999 (the "Closing Date"), between the Issuer, MergerCo and Firstar
Bank of Minnesota, N.A., as trustee (the "Trustee"). In connection with the
consummation of the Recapitalization, as defined in the Offering Circular (as
defined herein), (1) MergerCo will merge with and into ChipPAC, Inc., a
California corporation ("ChipPAC"), with ChipPAC, Inc. as the surviving
corporation in such merger, and (2) the Issuer will be merged with and into a
wholly owned subsidiary of ChipPAC, Inc., which surviving corporation will be
renamed ChipPAC International Company Limited (the "Surviving Issuer")(the
mergers described in clauses (1) and (2) are collectively referred to herein as
the "Merger"). MergerCo will guarantee the Offered Securities as of the issue
date on an unconditional senior subordinated basis pursuant to the terms of the
Indenture (the "Parent Guaranty"). As a result of the Merger and in connection
with the Recapitalization, (1) all of the Issuer's obligations under the Offered
Securities, the Indenture, the Registration Rights Agreement and the Escrow
Agreement (as each term is defined herein) will, by operation of law, become
obligations of ChipPAC International Company Limited, (2) all of MergerCo's
obligations under the Parent Guaranty, the Offered Securities, the Indenture,
the Registration Rights Agreement and the Escrow Agreement will, by operation of
law, become obligations of ChipPAC, Inc., (3) ChipPAC, Inc. and ChipPAC
International Company Limited will enter into a supplemental
<PAGE>
indenture relating to the Indenture (the "Supplemental Indenture"), and, in the
case of ChipPAC, Inc., the Parent Guaranty, which Supplemental Indenture will
cause the obligations under the Indenture and the Parent Guaranty to be assumed
by ChipPAC, Inc. and ChipPAC International Company Limited (4) each direct and
indirect subsidiary of ChipPAC, Inc. (other than ChipPAC Assembly and Test
(Shanghai) Company, Ltd. and Hyundai Electronics (Shanghai) Company Ltd. (to be
renamed ChipPAC (Shanghai) Company Ltd. after the Recapitalization)) will enter
into a Subsidiary Guaranty Agreement pursuant to which each will guarantee the
Offered Securities on an unconditional basis (the "Subsidiary Guaranties" and,
together with the Parent Guaranty, the "Guaranties") and (5) the Issuer will
enter into a credit agreement (together with the related guaranties and security
documents, the "Credit Agreement") among itself, the guarantors named therein,
Credit Suisse First Boston, as administrative agent, and the lenders named
therein.
The Offered Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933 (the "Securities
Act"), in reliance upon an exemption therefrom. Pursuant to the terms of the
Offered Securities and the Indenture, the Initial Purchasers and investors that
acquire Offered Securities may only resell or otherwise transfer such Offered
Securities if such Offered Securities are hereafter registered under the
Securities Act or if an exemption from the registration requirements of the
Securities Act is available (including, without limitation, the exemption
afforded by Rule 144A, Rule 144 or Regulation S of the rules and regulations
under the Securities Act).
Holders of the Offered Securities (including the Initial Purchasers and
their direct and indirect transferees) will be entitled to the benefits of a
Registration Rights Agreement dated the Closing Date, among the Issuer, MergerCo
and the Initial Purchasers (the "Registration Rights Agreement"), pursuant to
which the Issuer will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Issuer, which are substantially identical to the
Offered Securities (the "Exchange Securities") (except that the Exchange
Securities will not contain terms with respect to transfer restrictions and
interest rate increase) and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act.
This Agreement, the Indenture, the Offered Securities, the Exchange
Securities, the Registration Rights Agreement and the Escrow Agreement are
sometimes referred to in this Agreement collectively as the "Operative
Documents". All material agreements and instruments relating to the
Recapitalization (including, but not limited to, the Recapitalization Agreement
(as defined in the Offering Document) and the Credit Agreement), are sometimes
referred to in this Agreement collectively as the "Transaction Agreements". The
Operative Documents and the Transactions Agreements are sometimes referred to in
this Agreement collectively as the "Transaction Documents". The transactions
that comprise the Recapitalization (including the Merger, the issuance and sale
of the Offered Securities and the borrowings under the Credit Agreement) are
sometimes collectively referred to in this Agreement as the
2
<PAGE>
"Transactions." References in this Agreement to the subsidiaries of ChipPAC
shall include all direct and indirect subsidiaries of ChipPAC after consummation
of the Merger and related Recapitalization.
On the Closing Date, the Issuer will deposit with Firstar Bank of
Minnesota, N.A. (the "Escrow Agent") the gross proceeds of the offering of the
Offered Securities, together with certain other funds made available to the
Issuer (the "Escrowed Funds"). Upon the satisfaction of certain conditions as
set forth in an Escrow Agreement to be dated the Closing Date between the
Issuer, MergerCo and the Escrow Agent (the "Escrow Agreement"), the Escrowed
Funds will be released to ChipPAC International Company Limited, and such funds
will be used to fund, in part, the Recapitalization.
Capitalized terms used but not defined herein shall have the meanings given
to such terms in the Offering Document (as defined below).
The Issuer and MergerCo hereby agree with the Initial Purchasers as
follows:
2. Representations and Warranties of the Issuer and MergerCo. The Issuer
and MergerCo, jointly and severally, represent and warrant to, and agree with,
the Initial Purchasers that:
(a) A preliminary offering circular dated June 30, 1999, a
supplemental preliminary offering circular dated July 19, 1999 and an
offering circular dated the date of this Agreement relating to the Offered
Securities to be offered by the Initial Purchasers have been prepared by
the Issuer. Such preliminary offering circular, together with such
supplemental preliminary offering circular (collectively, the "Preliminary
Offering Circular") and offering circular (the "Offering Circular") are
hereinafter collectively referred to as the "Offering Document". Any
references herein to the Offering Document shall be deemed to include all
amendments and supplements thereto, unless otherwise noted. The
Preliminary Offering Circular as of its date does not, and the Offering
Circular as of its date and as of the Closing Date does not and will not,
and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The preceding sentence does not apply to statements in or omissions from
the Offering Document based upon written information furnished to the
Issuer by any Initial Purchaser through Credit Suisse First Boston ("CSFB")
specifically for use therein, it being understood and agreed that the only
such information is that described as such in Section 7(b) hereof. No stop
order preventing the use of the Offering Document, or any order asserting
that any of the Transactions are subject to the registration requirements
of the Securities Act, has been issued.
(b) Each of the Issuer, MergerCo and ChipPAC has been duly
incorporated and is an existing corporation in good
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<PAGE>
standing (to the extent such a concept exists in such jurisdiction) under
the laws of the jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Offering Document; and each of the Issuer, MergerCo and
ChipPAC is duly qualified to do business as a foreign corporation in good
standing (to the extent such a concept exists in such jurisdiction) in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified and in good standing would not reasonably be
expected to individually or in the aggregate (x) result in a material
adverse effect on the properties, business, result of operations, financial
condition or prospects of ChipPAC and its subsidiaries taken as a whole,
(y) interfere with or adversely affect the issuance or marketability of the
Offered Securities or (z) in any manner draw into question the validity of
this Agreement, any other Transaction Document or any Transaction (any of
the events set forth in clauses (x), (y) or (z), a "Material Adverse
Effect").
(c) Each subsidiary of ChipPAC has been duly incorporated and is an
existing corporation in good standing (to the extent such a concept exists
in such jurisdiction) under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document;
and each subsidiary is duly qualified to do business as a foreign
corporation in good standing (to the extent such a concept exists in such
jurisdiction) in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified and in good standing could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; all of the issued and outstanding capital stock of
the Issuer, MergerCo, ChipPAC and of each subsidiary has been, and
immediately following the Recapitalization will be, duly authorized and
validly issued and fully paid and nonassessable; and except for pledges in
favor of Credit Suisse First Boston, as collateral agent, under the Credit
Agreement, the capital stock of ChipPAC and each subsidiary owned by
ChipPAC, directly or through subsidiaries, will be owned free from liens,
encumbrances and defects immediately following the Recapitalization.
(d) The Indenture has been duly authorized by the Issuer and
MergerCo, and will be duly authorized by each other Guarantor immediately
following consummation of the Recapitalization, by all necessary corporate
action; the Offered Securities have been duly authorized by the Issuer by
all necessary corporate action; and when the Offered Securities are
delivered and paid for pursuant to this Agreement and the Indenture on the
Closing Date (as defined below), the Indenture will have been duly executed
and delivered by the Issuer and MergerCo, such Offered Securities will have
been duly executed, authenticated, issued and delivered by the Issuer and
will conform in all material respects to the description thereof contained
in the Offering
4
<PAGE>
Document and the Indenture and such Offered Securities will constitute
valid and legally binding obligations of the Issuer and MergerCo and, upon
consummation of the Recapitalization, each other Guarantor, enforceable in
accordance with their terms and entitled to the benefits of the Indenture,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity). The Exchange Securities have been duly and validly authorized for
issuance by the Issuer and, when duly executed, authenticated, issued and
delivered by the Issuer and each Guarantor in accordance with the terms of
the Exchange Offer and the Indenture, will constitute valid and legally
binding obligations of the Issuer and each Guarantor, enforceable in
accordance with their terms and entitled to the benefits of the Indenture,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws for general applicability relating to or
affecting creditors' rights and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity).
(e) Except as disclosed or reflected in the fees and expenses set
forth in the Offering Document, there are no contracts, agreements or
understandings among the Issuer, MergerCo or ChipPAC or its subsidiaries
and any person that would give rise to a valid claim against the Issuer,
MergerCo or ChipPAC or its subsidiaries or any Initial Purchaser for a
brokerage commission, finder's fee or other like payment in connection with
the Transactions.
(f) Subject to the express assumptions set forth in Section 2(s)
below, no consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the Transactions as contemplated by (i) this Agreement and
the Registration Rights Agreement, or (ii) any other Transaction Document,
in each case, in connection with the consummation of the transactions
contemplated therein, except as have already been obtained or as may be
required (i) in connection with the registration of the Exchange Securities
under the Securities Act, (ii) in connection with the qualification of the
Indenture under the Trust Indenture Act (as defined in paragraph (s) below)
pursuant to the Registration Rights Agreement, or (iii) pursuant to state
securities or "Blue Sky" laws.
(g) The execution, delivery and performance by each of the Issuer,
MergerCo and ChipPAC and the subsidiaries of ChipPAC (to the extent a party
thereto) of each of the Transaction Documents and compliance with the terms
and provisions thereof and consummation of the Transactions will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Issuer, MergerCo or ChipPAC or any of its
5
<PAGE>
subsidiaries or any of their properties, or (ii) the Transaction Documents
or any other agreement or instrument to which the Issuer, MergerCo or
ChipPAC or any of its subsidiaries is a party or by which the Issuer,
MergerCo or ChipPAC or any of its subsidiaries is bound or to which any of
the properties of the Issuer, MergerCo or ChipPAC or its subsidiaries is
subject, or (iii) the charter, by-laws or similar governing document of the
Issuer, MergerCo or ChipPAC or any of its subsidiaries, except (A) in each
case, that any rights to indemnity and contribution may be limited by
federal and state securities laws and public policy considerations and (B)
in the case of clauses (i) and (ii) for such breaches, violations or
defaults as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and the Issuer has full
corporate power and authority to authorize, issue and sell the Offered
Securities as contemplated by this Agreement, and each of the Issuer and
MergerCo have full corporate power and authority, and ChipPAC has full
corporate power, to execute, deliver and perform the Transaction Documents
to which it is a party and to consummate the Recapitalization.
(h) This Agreement has been duly authorized, executed and delivered
by the Issuer and MergerCo. Each of the other Operative Documents has been,
or as of the Closing Date will have been, duly authorized, executed and
delivered by each of the Issuer and MergerCo, and immediately upon
consummation of the Recapitalization will be duly authorized, executed and
delivered by each of ChipPAC and its subsidiaries (to the extent a party
thereto). Each of the Transaction Agreements have been or will be as of or
on the Recapitalization Closing Date, duly authorized, executed and
delivered by each of ChipPAC and its subsidiaries (to the extent a party
thereto). Each Transaction Document conforms or will conform in all
material respects to the descriptions thereof contained in the Offering
Document and each Operative Document (other than this Agreement) is or will
constitute valid and legally binding obligations of the Issuer and MergerCo
(to the extent each is a party thereto) and each Transaction Agreement
constitutes or will constitute valid and legally binding obligations of
ChipPAC and each Guarantor, enforceable in accordance with its respective
terms, except that any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations and
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity).
(i) Except as disclosed in the Offering Document, ChipPAC and its
subsidiaries have, or following consummation of the Recapitalization will
have, good and marketable title to all real properties and all other
properties and assets owned by them that are material to ChipPAC and its
subsidiaries taken as a whole, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or proposed to be made thereof by them; and
except as disclosed
6
<PAGE>
in the Offering Document, ChipPAC and its subsidiaries hold any leased real
or personal property that is material to ChipPAC and its subsidiaries taken
as whole under valid and enforceable leases with no exceptions that would
materially interfere with the use made or proposed to be made thereof by
them.
(j) ChipPAC and its subsidiaries possess all certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to ChipPAC or any of its subsidiaries, would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(k) No labor strike, slowdown, stoppage or dispute with the
employees of ChipPAC or any of its subsidiaries exists or, to the knowledge
of the Issuer or MergerCo, is imminent, that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. None
of ChipPAC or any of its subsidiaries has violated (A) any federal, state
or local law or foreign law relating to discrimination in hiring, promotion
or pay of employees, (B) any applicable wage or hour laws of, or (C) any
provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, except those
violations that could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(l) ChipPAC and its subsidiaries own, possess, have the right to
use or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively, "intellectual
property rights") used in the conduct of the business now operated by them,
or presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to
any intellectual property rights that, if determined adversely to ChipPAC
or any of its subsidiaries, would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect. To the knowledge of
ChipPAC, the use of the intellectual property rights in connection with the
business and operations of ChipPAC or any of its subsidiaries does not
infringe on the rights of any person, except such infringements as would
not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(m) Neither ChipPAC nor any of its subsidiaries (i) is in violation
of any statute, any rule, regulation, decision or order of any governmental
agency or body or any court, domestic or foreign, relating to the use,
disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "environmental laws"), (ii) owns or
operates any real property contaminated
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<PAGE>
with any substance that is subject to any environmental laws, (iii) is
liable for any off-site disposal or contamination pursuant to any
environmental laws, or (iv) is subject to any claim relating to any
environmental laws, in each case, which violation, contamination, liability
or claim would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect; and the Issuer and MergerCo are not aware
of any pending investigation which might lead to such a claim.
(n) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the Issuer,
MergerCo or ChipPAC or any of its subsidiaries or any of their respective
properties that, if determined adversely to the Issuer, MergerCo or ChipPAC
or any of its subsidiaries, would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, or would materially
and adversely affect the ability of the Issuer, MergerCo or ChipPAC or any
of its subsidiaries to perform their respective obligations under the
Transaction Documents, or which are otherwise material in the context of
the sale of the Offered Securities and the consummation of the other
Transactions; and no such actions, suits or proceedings are, to Issuer's or
MergerCo's knowledge, threatened or contemplated.
(o) The financial statements included in the Offering Document
present fairly the financial position of ChipPAC and its combined
subsidiaries as of the dates shown and their results of operations and cash
flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles in
the United States applied on a consistent basis and the schedules included
in the Offering Document present fairly the information required to be
stated therein. The assumptions used in preparing the pro forma financial
data included in the Offering Document provide a reasonable basis for
presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma adjustments
give appropriate effect to those assumptions, and the pro forma columns
therein reflect the proper application of those adjustments to the
corresponding historical financial statement amounts. Except as otherwise
disclosed in the Offering Document, such pro forma financial data comply as
to form in all material respects with the requirements that would have been
applicable to pro forma financial statements had this Offering Document
been a prospectus included in a registration statement on Form S-1 filed
with the Commission under the Securities Act.
(p) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included in the Offering Document
there has been (i) no material adverse change, nor any development or event
involving a prospective material adverse change, in the financial
condition, business, properties or results of operations of ChipPAC and its
subsidiaries taken as a whole, (ii) except as disclosed in or contemplated
by the Offering Document, there has been no dividend or distribution of any
8
<PAGE>
kind declared, paid or made by ChipPAC or any of its subsidiaries on any
class of capital stock owned by any of them, (iii) none of ChipPAC or any
of its subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material, individually or in the aggregate, to
ChipPAC and its subsidiaries, taken as a whole, nor entered into any
transaction not in the ordinary course of business, and (iv) none of
ChipPAC or any of its subsidiaries has incurred any liabilities or
obligations, direct or contingent, that are material, individually or in
the aggregate, to ChipPAC and its subsidiaries, taken as a whole, and that
are required to be disclosed on a balance sheet or notes thereto in
accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet or notes thereto included in the
Offering Document.
(q) None of the Issuer or any Guarantor is, and following the
Recapitalization none of them will be, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940 (the "Investment Company Act"); and none of the Issuer or any
Guarantor is and, after giving effect to the offering and sale of the
Offered Securities and the application of the proceeds thereof as described
in the Offering Document and the consummation of the other Transactions,
none of them will be, an "investment company" as defined in the Investment
Company Act.
(r) The Offered Securities are eligible for resale to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act and no
securities of the Issuer, MergerCo or ChipPAC or any of its subsidiaries
are of the same class (within the meaning of Rule 144A(d)(3) under the
Securities Act) as the Offered Securities, or are listed on any national
securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.
(s) Assuming that the representations and warranties of the Initial
Purchasers contained in Section 4(a) below are true in all material
respects, and assuming compliance in all material respects by the Initial
Purchasers with their covenants in Section 4 below, the offer and sale of
the Offered Securities in the manner contemplated by this Agreement will be
exempt from the registration requirements of the Securities Act by reason
of Section 4(2) thereof and Regulation S thereunder and it is not necessary
to qualify an indenture in respect of the Offered Securities under the
United States Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(t) None of the Issuer, MergerCo, ChipPAC, or any of their
respective affiliates, or any person acting on its or their behalf (i) has,
within the six-month period prior to the date hereof, offered or sold in
the United States or to any U.S. person (as such terms are defined in
Regulation S under the Securities Act) the Offered Securities or any
security of the same class or series as the Offered Securities or (ii) has
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<PAGE>
offered or will offer or sell the Offered Securities (A) in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act or (B) with
respect to any such securities sold in reliance on Rule 903 of Regulation S
("Regulation S") under the Securities Act, by means of any directed selling
efforts within the meaning of Rule 902(c) of Regulation S. The Issuer,
MergerCo, ChipPAC, their respective affiliates and each person acting on
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. None of the Issuer, MergerCo or ChipPAC or any
of its subsidiaries has entered or will enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for this Agreement.
(u) Each of ChipPAC and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are executed in accordance with management's general
or specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(v) Each of ChipPAC and its subsidiaries maintains insurance
covering its properties, operations, personnel and businesses, insuring
against such losses and risks as are consistent with industry practice to
protect ChipPAC and its subsidiaries and their respective businesses. None
of ChipPAC or any of its subsidiaries has received notice from any insurer
or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
(w) Except as disclosed in the Offering Document, no relationship,
direct or indirect, exists between or among the Issuer, MergerCo, ChipPAC
or any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Issuer, MergerCo, ChipPAC or
any of its subsidiaries on the other hand, which would be required by the
Securities Act to be described in the Offering Document if the Offering
Document were a prospectus included in a registration statement on Form S-1
filed with the Commission under the Securities Act.
(x) The statements made in the Offering Circular under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Year 2000 Compliance" are true and correct in all material
respects and accurately reflect ChipPAC's Year 2000 compliance readiness.
(z) The statistical and market-related data included in the
Offering Document are based on or derived from sources which the Issuer and
ChipPAC believe to be reliable and accurate in all material respects.
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(aa) The Offering Document, as of its date, and each amendment or
supplement thereto, as of its date, contains the information specified in,
and meets the requirements of, Rule 144A(d)(4) under the Act.
(bb) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries intends to, nor believes that it will, incur debts beyond its
ability to pay such debts as they mature. The present fair saleable value
of the assets of each of the Issuer and ChipPAC and its subsidiaries
exceeds the amount that will be required to be paid on or in respect of its
existing debts and other liabilities (including contingent liabilities) as
they become absolute and matured following the Recapitalization. The assets
of each of the Issuer, MergerCo and ChipPAC and each of its subsidiaries do
not constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Upon the issuance of the Offered
Securities and the consummation of the Recapitalization, the present fair
saleable value of the assets of the Issuer and the Guarantors will exceed
the amount that will be required to be paid on or in respect of their
existing debts and other liabilities (including contingent liabilities) as
they become absolute and matured. Upon the issuance of the Offered
Securities and the consummation of the Recapitalization, the assets of the
Issuer and the Guarantors will not constitute unreasonably small capital to
carry out its business as now conducted, including the capital needs of
each such entity, taking into account the projected capital requirements
and capital availability.
(cc) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries has (A) taken, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in stabilization
or manipulation of the price of any security of the Issuer, MergerCo,
ChipPAC or any of its subsidiaries to facilitate the sale or resale of the
Offered Securities or (B) since the date of the Preliminary Offering
Circular (1) sold, bid for, purchased or paid any person any compensation
for soliciting purchases of the Offered Securities or (2) paid or agreed to
pay to any person any compensation for soliciting another to purchase any
other securities of ChipPAC or any of its subsidiaries.
(dd) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries has used or will use any form of general solicitation in
connection with the offer and sale of any of the Offered Securities,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation.
(ee) Each certificate signed by any officer of the Issuer or
MergerCo and delivered to the Initial Purchasers or counsel for the Initial
Purchasers dated as of the Closing Date and indicating that it is being
delivered pursuant to this Section 2(ee) shall be deemed to be a
representation and warranty by the Issuer or MergerCo, as applicable, to
the Initial Purchasers as to the matters covered thereby.
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(ff) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries or, to the best knowledge of the Issuer, MergerCo and ChipPAC
and its subsidiaries, any director, officer, agent, employee or other
person associated with or acting on behalf of the Issuer, MergerCo or
ChipPAC or its subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Issuer agrees to sell to the Initial
Purchasers, and the Initial Purchasers agree, severally and not jointly, to
purchase from the Issuer, at a purchase price of 97% of the principal amount
thereof plus accrued interest from July 29, 1999 to the Closing Date (as
hereinafter defined), the respective principal amounts of the Offered Securities
set forth opposite the names of the Initial Purchasers in Schedule A hereto.
The Issuer will deliver against payment of the purchase price the Offered
Securities in the form of one or more permanent global securities in definitive
form (the "Global Securities") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent Global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment for the Offered Securities shall be made by the
Initial Purchasers in Federal (same day) funds by wire transfer to an account
previously designated by the Issuer to CSFB at a bank acceptable to CSFB at the
office of Cravath, Swaine & Moore at 9:00 a.m. (New York time), on July 29,
1999, or at such other time not later than seven full business days thereafter
as CSFB and the Issuer determine, such time being referred to as the "Closing
Date", against delivery to the Trustee as custodian for DTC of the Global
Securities representing all of the Offered Securities. The Global Securities
will be made available for checking at the office of Cravath, Swaine & Moore at
least 24 hours prior to the Closing Date.
4. Representations by Initial Purchasers; Resale by Initial Purchasers.
(a) Each Initial Purchaser severally represents and warrants to
the Issuer that it is a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act.
(b) Each Initial Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or pursuant
to
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an exemption from the registration requirements of the Securities Act, or
to non-U.S. persons outside the United States except in accordance with
Regulation S or pursuant to an exemption from the registration requirements
of the Securities Act. Each Initial Purchaser severally represents and
agrees that it has offered and sold the Offered Securities, and will offer
and sell the Offered Securities only in accordance with Rule 903 of
Regulation S or Rule 144A under the Securities Act ("Rule 144A").
Accordingly, neither such Initial Purchaser nor its affiliates, nor any
persons acting on its or their behalf, have engaged or will engage in any
directed selling efforts with respect to the Offered Securities, and such
Initial Purchaser, its affiliates and all persons acting on its or their
behalf have complied in all material respects and will comply in all
material respects with the offering restrictions requirements of Regulation
S and Rule 144A.
(c) Each Initial Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Initial Purchaser or
affiliates of the other Initial Purchaser or with the prior written consent
of the Issuer.
(d) Each Initial Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act, including, but
not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. Each Initial Purchaser severally agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Initial Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the date six months after
the date of issue of the Offered Securities will not offer or sell any
Offered Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Offered Securities in, from or otherwise involving the United Kingdom; and
(iii) it
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has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Offered Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be
issued or passed on.
5. Certain Agreements of the Issuer and MergerCo. The Issuer and MergerCo
agree with the several Initial Purchasers that:
(a) The Issuer will advise CSFB promptly of any proposal to amend
or supplement the Offering Document and will not effect such amendment or
supplementation without CSFB's consent. If, at any time prior to the
completion of the resale of the Offered Securities by the Initial
Purchasers, any event occurs as a result of which the Offering Document as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, the Issuer promptly will notify CSFB of such
event and promptly will prepare, at its own expense, an amendment or
supplement which will correct such statement or omission or effect such
compliance. Upon receipt of such notice in written form, each Initial
Purchaser agrees to suspend use of the Offering Document until the Issuer
has amended or supplemented the Offering Document to correct such
misstatement or omission or to effect compliance with this paragraph (a).
Neither CSFB's consent to, nor the Initial Purchasers' delivery to offerees
or investors of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 6. The Issuer's and the
Initial Purchasers' obligations under this paragraph (a) shall terminate on
the earliest to occur of (i) expiration of the Exchange Offer (as defined
in the Registration Rights Agreement) pursuant to the Registration Rights
Agreement, (ii) the effective date of a shelf registration statement with
respect to the Offered Securities filed pursuant to the Registration Rights
Agreement, (iii) the date upon which no Initial Purchaser nor any of their
respective affiliates continues to hold Offered Securities acquired as part
of their initial distribution, and (iv) the date upon which no Initial
Purchaser nor any of their respective affiliates continues to hold Exchange
Securities, if any.
(b) The Issuer will furnish to the Initial Purchasers copies of any
preliminary offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Initial Purchasers request, and the Issuer will
furnish to CSFB on the date hereof three copies of the Offering Document
signed by a duly authorized officer of the Issuer, one of which will
include the independent accountants' reports therein manually signed by
such independent accountants. At any time when the Issuer is not subject to
Section 13 or 15(d) of the Exchange Act, the Issuer will promptly furnish
or cause to be furnished to each Initial Purchaser and, upon request of
holders and prospective purchasers of the Offered Securities,
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to such holders and purchasers, copies of the information required to be
delivered to holders and prospective purchasers of the Offered Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The
Issuer will pay the expenses of printing and distributing to the Initial
Purchasers all such documents.
(c) The Issuer will advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, of the
issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any of the Offered
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any state securities commission or other
regulatory authority. The Issuer shall use its best efforts to prevent the
issuance of any stop order suspending the qualification or exemption of any
of the Offered Securities under any state securities or Blue Sky laws and,
if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption of
any of the Offered Securities under any state securities or Blue Sky laws,
the Issuer shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time.
(d) The Issuer and MergerCo will cooperate with the Initial
Purchasers and their counsel in connection with the registration and
qualification of the Offered Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions as
CSFB designates and do all things necessary to continue such qualifications
in effect so long as required for the resale of the Offered Securities by
the Initial Purchasers, provided that the Issuer will not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any such jurisdiction.
(e) During the period of five years hereafter, the Issuer and
MergerCo (and, after the Merger, ChipPAC) will furnish to each Initial
Purchaser, as soon as practicable after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and the Issuer and
MergerCo will furnish to each Initial Purchaser as soon as available, a
copy of each report and any definitive proxy statement of the Issuer,
MergerCo and ChipPAC and any of its subsidiaries filed with the Commission
under the Exchange Act or mailed to holders of Offered Securities or any
securities of the Issuer, MergerCo or ChipPAC or and any of its
subsidiaries which have been registered under Section 12 of the Exchange
Act. The obligations of the Issuer under this paragraph (ee) shall cease
if and when the Issuer or MergerCo becomes subject to the reporting
requirements of the Exchange Act.
(f) During the period of two years after the Closing Date, the Issuer
will, upon request, furnish to the Initial
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Purchasers and any holder of Offered Securities a copy of the restrictions
on transfer applicable to the Offered Securities.
(g) During the period of two years after the Closing Date, none of
the Issuer or the Guarantors will permit any of their affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the Offered
Securities that have been reacquired by any of them unless such securities
are not and will not be Restricted Securities as defined in the
Registration Rights Agreement.
(h) During the period of two years after the Closing Date, none of
the Issuer or the Guarantors will be or become, an open-end investment
company, unit investment trust or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment Company
Act.
(i) The Issuer will pay all expenses incidental to the performance of
the Issuer's, MergerCo's and ChipPAC's and its subsidiaries' obligations
under this Agreement, the Indenture, the Registration Rights Agreement and
the other Transaction Documents, including (i) the fees and expenses of
counsel and accountant for the Issuer, the Guarantors and of the Trustee
and its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the
Offered Securities and, as applicable, the Exchange Securities, the
preparation of this Agreement, the Registration Rights Agreement, the
Offered Securities, the Exchange Securities, the Indenture and any
supplemental indenture, and the preparation and printing of the Offering
Document and amendments and supplements thereto, and any other document
relating to the issuance, offer, sale and delivery of the Offered
Securities and as applicable, the Exchange Securities; (iii) the cost of
listing the Offered Securities and qualifying the Offered Securities for
trading in The Portal(SM) Market ("PORTAL") and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Issuer in
connection with the issue of the Offered Securities; (v) for any expenses
(including reasonable fees and disbursements of counsel to the Initial
Purchasers) incurred in connection with qualification of the Offered
Securities or the Exchange Securities for sale under the laws of such
jurisdictions as CSFB designates and the printing of memoranda relating
thereto; (vi) for any fees charged by investment rating agencies for the
rating of the Offered Securities or the Exchange Securities; and (vii) for
expenses incurred in printing and distributing preliminary offering
circulars and the Offering Document (including any amendments and
supplements thereto) to or at the direction of the Initial Purchasers. The
Issuer will also reimburse the Initial Purchasers (to the extent incurred
by them) for all reasonable travel expenses of ChipPAC's officers and
employees and any other expenses of ChipPAC in connection with attending or
hosting meetings with prospective purchasers of the Offered Securities from
the Initial Purchasers; it being understood that the only fees and expenses
of counsel to the Initial Purchasers to be paid by the Issuer shall be
pursuant to the foregoing clause (v).
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(j) In connection with the offering, until CSFB shall have notified
the Issuer and the other Initial Purchaser of the completion of the resale
of the Offered Securities, neither the Issuer nor any Guarantor nor any of
their affiliates has or will, either alone or with one or more other
persons, bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt to
induce any person to purchase any Offered Securities; and neither the
Issuer nor any Guarantor nor any of their affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading
in, or of raising the price of, the Offered Securities.
(k) For a period of 90 days after the date of the initial offering of
the Offered Securities by the Initial Purchasers, none of the Issuer,
MergerCo or ChipPAC or any of its subsidiaries, will offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any United
States dollar denominated debt securities issued or guaranteed by any of
the Issuer, MergerCo or ChipPAC or any of its subsidiaries, and having a
maturity of more than three years from the date of issue. None of the
Issuer, MergerCo or ChipPAC or any of its subsidiaries will at any time
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act, the safe harbor of Regulation S
thereunder or the resale exemption under Rule 144A thereunder to cease to
be applicable to the offer and sale of the Offered Securities.
(l) The Issuer will use the proceeds from the sale of the Offered
Securities in the manner described in the Offering Document under the
caption "Sources and Uses of Funds."
(m) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Offered
Securities in a manner that would require the registration under the
Securities Act of the sale to the Initial Purchasers of the Offered
Securities or to take any other action that would result in the resale of
the Offered Securities not being exempt from registration under the
Securities Act.
(n) None of the Issuer, MergerCo or ChipPAC or any of its
subsidiaries, will take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Issuer to facilitate the
resale of the Offered Securities. Except as permitted by the Securities
Act, the Issuer will not distribute any (i) preliminary offering memorandum
or offering memorandum, including without limitation, the Offering Document
or (ii) other offering material in connection with the offering and sale of
the Offered Securities.
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(o) On the Recapitalization Closing Date, the Initial Purchasers
shall receive one or more counterparts of the Purchase Agreement which
shall have been executed and delivered by duly authorized officers of each
of ChipPAC International Company Limited, ChipPAC and the Guarantors.
(p) On the Recapitalization Closing Date, the Issuer and MergerCo
shall cause the Initial Purchasers to receive an opinion, dated the
Recapitalization Closing Date, from Kirkland & Ellis, counsel for ChipPAC,
Inc. upon consummation of the Recapitalization, substantially in the form
of Exhibit A-2.
(q) On the Recapitalization Closing Date, the Issuer and MergerCo
shall cause the Initial Purchasers to receive an opinion, dated the
Recapitalization Closing Date, from HWR Services Limited, counsel for the
Surviving Issuer upon consummation of the Recapitalization, substantially
in the form of Exhibit B-2.
(r) On the Recapitalization Closing Date, the Issuer and MergerCo
shall cause the Initial Purchaser to receive opinions, each dated the
Recapitalization Closing Date, of counsel for each of the subsidiaries of
ChipPAC, Inc. listed on Annex B of this Agreement, each substantially in
the form of Exhibit C, with the exception that counsel for ChipPAC Assembly
and Test (Shanghai) Company, Ltd. and Hyundai Electronics (Shanghai)
Company Ltd. (to be renamed ChipPAC (Shanghai) Company Ltd. after the
Recapitalization)) need not opine as to paragraph (iv) of Exhibit C.
(s) On the Recapitalization Closing Date, the Issuer and MergerCo
shall cause the Initial Purchasers to receive a copy of the opinions
delivered in connection with the consummation of the Credit Agreement,
which opinions shall expressly state that the Initial Purchasers are
justified in relying upon the opinions therein.
6. Conditions of the Obligations of the Initial Purchasers. The
obligations of the several Initial Purchasers to purchase and pay for the
Offered Securities will be subject to the accuracy of the representations and
warranties on the part of the Issuer and MergerCo (and, after the Merger,
ChipPAC) herein, to the accuracy of the statements of officers of the Issuer,
MergerCo and ChipPAC made pursuant to the provisions hereof, to the performance
by the Issuer and MergerCo of their respective obligations hereunder and to the
following additional conditions precedent:
(a) The Initial Purchasers shall have received a letter, dated the
date of this Agreement, of PricewaterhouseCoopers LLP in agreed form
confirming that they are independent public accountants within the meaning
of the Securities Act and the applicable published rules and regulations
thereunder ("Rules and Regulations") and to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Offering
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Document comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the
related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements and certain specified financial information
included in the Offering Document;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of ChipPAC, and of all subsidiaries of ChipPAC for which such interim
financial statements are provided, inquiries of officials of ChipPAC
and of such subsidiaries who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) with respect to the unaudited financial statements
included in the Offering Document, that any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of this Agreement,
there was any change in the capital stock or any increase in
short-term indebtedness or long-term debt of the Issuer, MergerCo
or ChipPAC and its combined subsidiaries or, at the date of the
latest available balance sheet read by such accountants, there
was any decrease in consolidated net current assets or net
assets, as compared with amounts shown on the latest balance
sheet included in Offering Document; or
(C) for the period from the closing date of the latest
income statement included in the Offering Document to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year and with the period of
corresponding length ended the date of the latest income
statement included in the Offering Document, in revenues,
operating income or net income or in the ratio of earnings to
fixed charges;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Document disclose have
occurred or may occur or which are described in such letter; and
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(iv) they have performed the procedures specified therein on
the pro forma financial statements included in the Offering Document;
(v) on the basis of the review referred to in clause (iv)
above, nothing came to their attention that caused them to believe
that the pro forma financial statements included in the Offering
Document do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the
related published Rules and Regulations or that the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of those statements; and
(vi) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Offering Document (in each case to the
extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of ChipPAC
and its subsidiaries subject to the internal controls of ChipPAC's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any material adverse change in general
economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States
shall be such as, in the Initial Purchasers' reasonable judgment, makes it
inadvisable or impracticable to proceed with the delivery of the Offered
Securities as contemplated hereby, or (ii) (A) in the reasonable judgment
of the Initial Purchasers, any material adverse change in the condition
(financial or other), business, properties, assets, liabilities, prospects,
net worth, results of operations or cash flows of the ChipPAC or its
subsidiaries, taken as a whole, other than set forth in the Offering
Document; (B) (i) any downgrading, suspension or withdrawal of, nor shall
any notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review for a possible change that
does not indicate the direction of possible change in, any rating of the
Issuer including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under
review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act, (ii) any change, nor shall any
notice have been given of any potential or intended change, in the outlook
for any rating of the Issuer by any such rating organization, and (iii) any
notice by any such rating organization that it has assigned (or is
considering
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assigning) a lower rating to the Offered Securities than that on which the
Offered Securities were marketed; (C) any suspension or material limitation
of trading in securities generally on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National
Market, or any establishment of minimum or maximum prices for trading, or
any requirement of maximum ranges for prices for securities, on such
exchange or the Nasdaq National Market, or by such exchange or other
regulatory body or governmental authority having jurisdiction (other than
limitations on price fluctuations or minimums or maximums in effect as of
the date of this Agreement); (D) any banking moratorium declared by federal
or state authorities, or any moratorium declared in foreign exchange
trading by major international banks or persons; or (E) any outbreak or
escalation of armed hostilities involving the United States on or after the
date hereof, or if there has been a declaration by the United States of a
national emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to proceed
with this offering or delivery of the Offered Securities on the terms and
in the manner contemplated in the Offering Document.
(c) Concurrently with the issuance and sale of the Offered Securities
by the Issuer, the Transactions shall be consummated on terms that conform
in all material respects to the description thereof in the Offering
Document and the Transaction Documents; provided, however, that in order to
-------- -------
satisfy certain requirements of Korean law, the Recapitalization may be
consummated after the issuance and sale of the Offered Securities; and the
Initial Purchasers shall have received true and correct copies of all
documents pertaining thereto and evidence reasonably satisfactory to the
Initial Purchasers of the consummation thereof.
(d) There shall exist at and as of the Closing Date and the date of
the consummation of the Recapitalization (after giving effect to the
transactions contemplated by this Agreement and the Transactions) no
condition that would constitute a default (or an event that with notice or
lapse of time, or both, would constitute a default) under any Transaction
Agreement.
(e) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Kirkland & Ellis, counsel for MergerCo, substantially in
the form of Exhibit A-1.
(f) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Harney Westwood Riegels, counsel for the Issuer,
substantially in the form of Exhibit B-1.
(g) The Initial Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to the validity of the Offered Securities,
the Offering Document, the exemption from registration for the offer and
sale of the Offered Securities by the Issuer to the several
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Initial Purchasers and the resales by the several Initial Purchasers as
contemplated hereby and other related matters as CSFB may require, and the
Issuer and ChipPAC shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters
with reference to same in the Offering Circular.
(h) The Initial Purchasers shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a principal
financial or accounting officer of ChipPAC in which such officers shall
state that the representations and warranties of the Issuer and ChipPAC in
this Agreement are true and correct, that the Issuer and ChipPAC have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and that,
subsequent to the respective dates of the most recent financial statements
in the Offering Document, there has been no material adverse change, nor
any development or event involving a prospective material adverse change,
in the financial condition, business, properties or results of operations
of ChipPAC and its subsidiaries taken as a whole except as set forth in or
contemplated by the Offering Document or as described in such certificate.
(i) The Initial Purchasers shall have received a letter, dated the
Closing Date, of PricewaterhouseCoopers LLP which meets the requirements
of subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than three days prior to the
Closing Date for the purposes of this subsection.
(j) The Issuer, MergerCo and the Trustee shall have entered into the
Indenture and you shall have received counterparts, conformed as
executed, thereof.
(k) The Issuer and MergerCo shall have entered into the Registration
Rights Agreement and you shall have received counterparts, conformed as
executed, thereof.
(l) The Issuer shall have entered into the Escrow Agreement and
deposited the amounts required in the Escrow Agreement into an escrow
account, pursuant to the terms of the Escrow Agreement.
(m) The Offered Securities shall have been designated PORTAL
securities in accordance with the rules and regulations adopted by the NASD
relating to trading in the PORTAL market.
(n) On or prior to the Closing Date, the Issuer shall have provided
to each of the Initial Purchasers and counsel to the Initial Purchasers
copies of all Transaction Documents executed and delivered on or prior to
such date (and drafts of Transaction Agreements to be executed on the
Recapitalization Closing Date, if later) to the parties relating to the
Transactions (including but not limited to legal opinions relating
thereto).
22
<PAGE>
(o) The Initial Purchasers shall have been furnished with a copy of
the opinions delivered on behalf of the Issuer and MergerCo, which opinions
shall expressly state that the Initial Purchasers are justified in relying
upon the opinions therein.
The Issuer will furnish the Initial Purchasers with such conformed copies
of such opinions, certificates, letters and documents as the Initial Purchasers
reasonably request. CSFB may in its sole discretion waive on behalf of the
Initial Purchasers compliance with any conditions to the obligations of the
Initial Purchasers hereunder.
7. Indemnification and Contribution. (a) Each of the Issuer and the
Guarantors will jointly and severally indemnify and hold harmless each Initial
Purchaser, its partners, directors and officers and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Initial Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
any related preliminary offering circular or the Exchange Act Reports, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Issuer's or any Guarantor's failure to perform
its obligations under Section 5(a) of this Agreement, and will reimburse each
Initial Purchaser for any legal or other expenses reasonably incurred by such
Initial Purchaser in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
--------
however, (i) that the Issuer and the Guarantors will not be liable in any such
- -------
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Issuer by any Initial
Purchaser through CSFB specifically for use therein, it being understood and
agreed that the only such information consists of the information described as
such in subsection (b) below and (ii) that the Issuer and the Guarantors shall
not be liable to any such Initial Purchaser with respect to any untrue statement
or alleged untrue statement or omission or alleged omission in the Preliminary
Offering Circular to the extent that any such loss, liability, claim, damage or
expense of such Initial Purchaser results from the fact that such Initial
Purchaser sold Offered Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Offering Circular as then amended or supplemented if the Issuer had previously
furnished copies thereof to such Initial Purchaser and the loss, liability,
claim, damage or expense of such Initial Purchaser results from an untrue
statement or omission of a
23
<PAGE>
material fact contained in the Preliminary Offering Circular which was corrected
in the Offering Circular.
(b) Each Initial Purchaser will severally and not jointly indemnify
and hold harmless the Issuer and each Guarantor and their respective directors
and officers and each person, if any, who controls the Issuer and each Guarantor
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities to which the Issuer and each Guarantor may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Offering Document, or any amendment or
supplement thereto, or any related preliminary offering circular, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Issuer by such Initial Purchaser through CSFB specifically for
use therein, and will reimburse the Issuer and each Guarantor for any legal or
other expenses reasonably incurred by the Issuer or such Guarantor in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Initial Purchaser consists of the
following information in the Offering Document furnished on behalf of each
Initial Purchaser: under the caption "Plan of Distribution", the first, third,
fifth, eighth and tenth paragraphs and the second sentence of the seventh
paragraph; provided, however, that the Initial Purchasers shall not be liable
-------- -------
for any losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this
Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
which it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
24
<PAGE>
have been authorized in writing by the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. No indemnifying party shall, without
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action and does not include a statement as to and an admission of
fault, culpability or failure to act by or on behalf of any indemnified party.
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its prior written consent, provided that such consent was not
unreasonably withheld, and that if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees it shall be liable for any
settlement effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer and the Guarantors on the one hand and the Initial Purchasers on the
other from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Issuer and the
Guarantors on the one hand and the Initial Purchasers on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Issuer and the Guarantors on the one hand and
the Initial Purchasers on the other
25
<PAGE>
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Issuer bear to the total
discounts and commissions received by the Initial Purchasers from the Issuer
under this Agreement. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer or a Guarantor or the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Initial Purchaser shall be required to contribute any amount
in excess of the amount by which the total price at which the Offered Securities
purchased by it were resold exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Initial Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.
(e) The obligations of the Issuer and the Guarantors under this
Section shall be in addition to any liability which the Issuer and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Initial Purchaser within
the meaning of the Securities Act or the Exchange Act; and the obligations of
the Initial Purchasers under this Section shall be in addition to any liability
which the respective Initial Purchasers may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Issuer or any Guarantor within the meaning of the Securities Act or the Exchange
Act.
8. Default of Initial Purchasers. If either of the Initial Purchasers
defaults in its obligation to purchase Offered Securities hereunder and the
aggregate principal amount of Offered Securities that such defaulting Initial
Purchaser agreed but failed to purchase does not exceed 10% of the total
principal amount of Offered Securities, CSFB may make arrangements satisfactory
to the Issuer for the purchase of such Offered Securities by other persons,
including the other Initial Purchaser, but if no such arrangements are made by
the Closing Date, the non-defaulting Initial Purchaser shall be obligated to
purchase the Offered Securities that such defaulting Initial Purchaser agreed
but failed to purchase. If one Initial Purchaser so defaults and the aggregate
principal amount of Offered Securities with respect to which such default occurs
exceeds 10% of the total principal amount of Offered Securities and arrangements
satisfactory to CSFB and the Issuer for the purchase of such Offered Securities
by other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of the non-defaulting Initial
Purchaser or the Issuer, except as provided in Section 9. As used in this
Agreement, the term "Initial Purchaser" includes any person substituted for an
26
<PAGE>
Initial Purchaser under this Section. Nothing herein will relieve the defaulting
Initial Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuer, MergerCo and the Guarantors or any of their officers and of the several
Initial Purchasers set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation, or statement as to
the results thereof, made by or on behalf of any Initial Purchaser, the Issuer,
any Guarantor or any of their respective representatives, officers or directors
or any controlling person, and will survive delivery of and payment for the
Offered Securities. If this Agreement is terminated pursuant to Sections 8 or
10, or if for any reason the purchase of the Offered Securities by the Initial
Purchasers is not consummated, the Issuer and the Guarantors shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Issuer and the Guarantors and
the Initial Purchasers pursuant to Section 7 shall remain in effect; if any
Offered Securities have been purchased hereunder, the Issuer and the Guarantors
shall remain responsible for the expenses to be paid or reimbursed by them
pursuant to Section 5 and the respective obligations of the Issuer and the
Guarantors and the Initial Purchasers pursuant to Section 7 shall remain in
effect, and the representations and warranties in Section 2 and all other
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Initial Purchasers is not consummated for any reason
other than solely because of the termination of this Agreement pursuant to
Section 8 or the occurrence of any event specified in Section 6(b)(ii) (whether
pursuant to Section 10 or otherwise), the Issuer and the Guarantors will
reimburse the Initial Purchasers for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Termination. The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the Issuer
from the Initial Purchasers, without liability (other than with respect to
Section 7) on the Initial Purchasers' part to the Issuer if, on or prior to such
date, upon the occurrence of any of the events set forth in Section 6(b).
11. Notices. All communications hereunder will be in writing and, if sent
to the Initial Purchasers will be mailed, delivered or telegraphed and confirmed
to the Initial Purchasers, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, New York 10019 Attention: Transactions Advisory
Group, or, if sent to the Issuer, will be mailed, delivered or telegraphed and
confirmed to it at ChipPAC, Inc., 3151 Coronado Drive, Santa Clara, California
95054 Attention: Chief Financial Officer, with a copy to Kirkland & Ellis, 300
South Grand Avenue, Suite 3000, Los Angeles, California, 90071 Attention: Eva
Herbst Davis, Esq.; provided, however, that any notice to an Initial Purchaser
pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to
such Initial Purchaser.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective
27
<PAGE>
successors and the controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder, except that holders of
Offered Securities shall be entitled to enforce the agreements for their benefit
contained in the second and third sentences of Section 5(b) hereof against the
Issuer as if such holders were parties thereto.
13. Representation of Initial Purchasers. You will act for the several
Initial Purchasers in connection with the transactions contemplated by this
Agreement, and any action under this Agreement taken by you jointly or by CSFB
on behalf of the Initial Purchasers will be binding upon all the Initial
Purchasers.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement. Delivery by
telecopy or facsimile transmission of an executed counterpart of this Agreement
shall be considered due and sufficient delivery.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
THE ISSUER, MERGERCO AND EACH GUARANTOR HEREBY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
28
<PAGE>
If the foregoing is in accordance with the Initial Purchasers'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Issuer, MergerCo and each Guarantor and the Initial Purchasers in accordance
with its terms.
Very truly yours,
CHIPPAC INTERNATIONAL LIMITED
by: /s/ Tony Lin
--------------------------
Name: Tony Lin
Title: Chief Financial Officer
CHIPPAC MERGER CORP.
by: /s/ Paul C. Schorr IV
---------------------------
Name: Paul C. Schorr IV
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
By: Credit Suisse First Boston
Corporation
/s/ David M. Wah
___________________________________
Name: David M. Wah
Title: Director
By: Donaldson, Lufkin & Jenrette
Securities Corporation
/s/ Edward Biggins
___________________________________
Name: Edward Biggins
Title: Vice President
<PAGE>
The foregoing Agreement is executed in counterpart by the following
Guarantors:
CHIPPAC (BARBADOS) LTD.
by: /s/ P.J. Kim
-------------------------
Name: P.J. Kim
Title: Secretary
CHIPPAC LIMITED
by: /s/ P.J. Kim
-------------------------
Name: P.J. Kim
Title: Secretary
CHIPPAC KOREA COMPANY LTD.
by: /s/ P.J. Kim
-------------------------
Name: P.J. Kim
Title: Secretary
CHIPPAC LUXEMBOURG S.A.R.L.
by: /s/ P.J. Kim
-------------------------
Name: P.J. Kim
Title: Secretary
CHIPPAC LIQUIDITY MANAGEMENT HUNGARY LIMITED
LIABILITY COMPANY
by: /s/ P.J. Kim
-------------------------
Name: P.J. Kim
Title: Secretary
30
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SCHEDULE A
Principal Amount
Initial Purchasers of
------------------ Offered
Securities
----------------
Credit Suisse First Boston Corporation................ $120,000,000
Donaldson, Lufkin & Jenrette Securities
Corporation.......................................... $ 30,000,000
------------
Total.................................. $150,000,000
============
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SCHEDULE B
Jurisdiction Counsel
- ------------ -------
Barbados Chancery Chamber
British Virgin Islands HWR Services Limited
China Lovell White Durrant
Korea Kim Shin & Yu
Hungary PricewaterhouseCoopers
Luxembourg PricewaterhouseCoopers
32
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Exhibit A-1
(i) MergerCo is duly incorporated and is existing as a corporation
in good standing under the Delaware General Corporation Laws and has all
requisite corporate power and authority to carry on its business as it is
currently being conducted and as described in the Offering Circular.
(ii) The Purchase Agreement has been duly authorized and executed by
MergerCo.
(iii) Each of the Registration Rights Agreement and the Escrow
Agreement has been duly authorized, executed and delivered by MergerCo,
and, assuming the due authorization, execution and delivery of such
agreements by the Issuer, constitutes a valid and legally binding
obligation of the Issuer and MergerCo, enforceable against the Issuer and
MergerCo in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(iv) The Indenture has been duly authorized, executed and delivered
by MergerCo, and, assuming (i) the due authorization, execution and
delivery of the Indenture by the Issuer under the laws of the British
Virgin Islands and (ii) the due authorization, execution and delivery of
the Indenture by the Trustee, the Indenture constitutes a valid and legally
binding obligation of the Issuer and MergerCo, enforceable against the
Issuer and MergerCo in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(v) The execution and delivery by MergerCo of, and performance by
MergerCo of its obligations under, the Indenture, the Purchase Agreement
and the Escrow Agreement and the issuance and sale of the Offered
Securities will not (i) violate the certificate of incorporation or bylaws
of MergerCo, (ii) conflict with or constitute a breach of, or a default
under, any agreement listed on a certificate of an officer of MergerCo as
being the material agreements of MergerCo and its subsidiaries, (iii) to
our knowledge, breach or otherwise violate any provision in any court or
administrative order, writ, judgment or decree that names MergerCo and is
specifically directed to any of its property or (iv) constitute a violation
by MergerCo of any applicable provision of Federal, California or New York
State law, statute or regulation (except that for purposes of this
paragraph, we express no opinion with respect to federal or state
securities laws or other anti-fraud laws and no opinion as to whether
performance of the indemnification or contribution provisions in the
Purchase Agreement will be enforceable.)
33
<PAGE>
(vi) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court of the United States or
the State of New York is required for the issuance and sale by the Issuer
of the Offered Securities to the Initial Purchasers and the issuance of the
Guarantees by the Guarantors or the consummation by the Issuer and MergerCo
of the other transactions contemplated by the Purchase Agreement and the
Indenture, except such as have been obtained and made under the Securities
Act and the Trust Indenture Act and such as may be required under foreign
securities laws and U.S. "Blue Sky" laws.
(vii) To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending or threatened against, MergerCo or the Issuer
that (i) has caused us to conclude that such action, suit, proceeding or
investigation is required to be described in the Offering Document but is
not so described or (ii) would be reasonably likely to adversely affect the
consummation of any of the transactions contemplated by the Purchase
Agreement or the Indenture.
(viii) The Offering Circular, as of its date, and each amendment or
supplement thereto, as of its date (except for the financial statements and
related notes, the financial statement schedules and other financial and
statistical data included therein or omitted therefrom, as to which no
opinion need be expressed), contains the type of information specified in
and required by Rule 144A(d)(4) under the Securities Act.
(ix) When the Offered Securities are issued and delivered pursuant
to the Purchase Agreement, no Offered Securities will be of the same class
(within the meaning of Rule 144A under the Securities Act) as securities of
the Issuer that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
(x) Neither the Issuer nor MergerCo is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act; and neither the Issuer nor MergerCo, after giving
effect to the sale of the Offered Securities in the Offering Document, will
be, an "investment company" or a company controlled by an "investment
company" within the meaning of the Investment Company Act.
(xi) To our knowledge, no stop order preventing the use of the
Offering Document, or any order asserting that the issuance of the Offered
Securities and the Guarantees are subject to the registration rights
requirements of the Securities Act, has been issued.
(xii) It is not necessary in connection with (i) the offer, sale and
delivery of the Offered Securities to the several Initial Purchasers
pursuant to this Agreement or (ii) the resales of the Offered Securities by
the several Initial Purchasers in the manner contemplated in the Offering
Circular to register the Offered Securities under the Securities Act or
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<PAGE>
to qualify an indenture in respect thereof under the Trust Indenture Act.
(xiii) The Offered Securities, the Registration Rights Agreement, the
Guarantee, the Escrow Agreement and the Indenture conform in all material
respects to the descriptions thereof contained in the Offering Circular;
the description in the Offering Circular under the heading "Description of
Other Financing Arrangements-Senior Credit Facilities" is correct and
complete in all material respects; and the description in the Offering
Circular of United States federal income tax matters under the heading
"Certain Income Tax Considerations" insofar as such statements purport to
describe certain United States federal income tax consequences of the
purchase, ownership and disposition of the Offered Securities under current
law, provide a fair summary of such consequences.
(xiv) Assuming that the Offered Securities have been duly authorized
by the Issuer, when executed and issued by the Issuer and authenticated by
the Trustee in accordance with the terms of the Indenture, and delivered
and paid for by the Initial Purchasers in accordance with the terms of the
Purchase Agreement, the Offered Securities will constitute valid and
legally binding obligations of the Issuer enforceable against the Issuer in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity).
(xv) The Parent Guaranty has been duly authorized by MergerCo, and
assuming due authorization, execution and delivery of the Indenture by the
Trustee, the Parent Guaranty will constitute a valid and legally binding
obligation of MergerCo, enforceable against MergerCo in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors'
rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(xvi) Assuming due authorization of the Exchange Securities by the
Surviving Issuer, when, as and if (i) the Exchange Offer Registration
Statement shall have become effective pursuant to the provisions of the
Securities Act, (ii) the Indenture shall have been qualified pursuant to
the provisions of the Trust Indenture Act, (iii) the Offered Securities
shall have been validly tendered to the Issuer, (iv) the Exchange
Securities shall have been duly executed, authenticated and issued in
accordance with the provisions of the Indenture and duly delivered to the
purchasers thereof in exchange for the Offered Securities, (v) the board of
directors and the appropriate officers of the Surviving Issuer have taken
all necessary action to fix and approve the terms of the Exchange
Securities (vi) the board of directors and appropriate officers of each
Guarantor have taken all necessary action to approve the Guaranties of the
Exchange Securities and (vii) any legally required consents, approvals,
35
<PAGE>
authorizations or other order of the Commission or any other regulatory
authorities have been obtained, the Exchange Securities when issued
pursuant to the Exchange Offer Registration Statement will constitute valid
and binding obligations of the Surviving Issuer and the Guarantors, as
applicable, in each case enforceable against the Surviving Issuer and the
Guarantors, as applicable, in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(xvii) Such counsel shall also state that the purpose of such
counsel's professional engagement was not to establish factual matters, and
preparation of the Offering Circular involved many determinations of a
wholly or partially nonlegal character. Such counsel need make no
representation that it has independently verified the accuracy,
completeness or fairness of the Offering Circular or that the actions taken
in connection with the preparation of the Offering Circular (including the
actions described below) were sufficient to cause the Offering Circular to
be accurate, complete or fair. Such counsel need not pass upon and need not
assume any responsibility for the accuracy, completeness or fairness of the
Offering Circular except to the extent otherwise explicitly indicated in
numbered paragraph (xiv) above. Such counsel shall however confirm that it
has participated in discussions with representatives of the Issuer,
MergerCo and ChipPAC, representatives of the Initial Purchasers, counsel
for the Initial Purchasers and representatives of the independent
accountants for the Issuer and MergerCo during which disclosures in the
Offering Circular and related matters were discussed. Based upon such
counsel's participation in the conferences identified above, such counsel's
understanding of applicable law and the experience such counsel has gained
in such counsel's practice thereunder and relying to a large extent upon
the opinions and statements of officers of the Issuer and MergerCo, such
counsel can, however, advise the Initial Purchasers that nothing has come
to such counsel's attention that has caused such counsel to conclude that
the Offering Circular at the date it bears or on the date of this letter
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
36
<PAGE>
Exhibit A-2
(i) ChipPAC (a) is duly incorporated and is existing as a
corporation in good standing under the laws of the State of California, (b)
has all requisite corporate power and authority to carry on its business as
it is currently being conducted and as described in the Offering Circular
and to own, lease and operate its properties and (c) is duly qualified and
in good standing as a foreign corporation, authorized to do business in
each jurisdiction set forth opposite its name on a schedule to this opinion
(which jurisdictions have been certified by an officer of ChipPAC as being
the material jurisdictions in which ChipPAC conducts business).
(ii) The Purchase Agreement has been duly authorized and executed by
ChipPAC.
(iii) The Supplemental Indenture has been duly authorized, executed
and delivered by ChipPAC and, assuming due authorization, execution and
delivery by the Surviving Issuer and the Trustee, the Supplemental
Indenture constitutes a valid and legally binding obligation of the
Surviving Issuer and ChipPAC, enforceable against the Surviving Issuer and
ChipPAC in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(iv) The execution and delivery by ChipPAC of, and performance by
ChipPAC of its obligations under the Purchase Agreement and the
Supplemental Indenture will not (i) violate the certificate of
incorporation or bylaws of ChipPAC, (ii) conflict with or constitute a
breach of, or a default under, any agreement listed on a certificate of an
officer of ChipPAC as being the material agreements of ChipPAC and its
subsidiaries, (iii) to our knowledge, breach or otherwise violate any
provision in any court or administrative order, writ, judgment or decree
that names ChipPAC and is specifically directed to any of its property or
(iv) constitute a violation by ChipPAC of any applicable provision of
Federal, California or New York State law, statute or regulation (except
that for purposes of this paragraph, we express no opinion with respect to
federal or state securities laws or other anti-fraud laws and no opinion as
to whether performance of the indemnification or contribution provisions in
the Purchase Agreement will be enforceable.)
(vi) Other than those already obtained, no consent, approval,
authorization or order of, or filing with, any governmental agency or body
or court of the United States is required in connection with the
consummation of the transactions contemplated by the Transaction Documents
by ChipPAC, except for such consents, approvals, authorizations, orders or
filings the failure of which to obtain or make would not result in a
Material Adverse Effect.
37
<PAGE>
(vii) To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending or threatened against, ChipPAC or any of its
subsidiaries that (i) has caused us to conclude that such action, suit,
proceeding or investigation is required to be described in the Offering
Document but is not so described or (ii) would be reasonably likely to
adversely affect the consummation of the Recapitalization.
(viii) The Credit Agreement and the Transaction Agreements conform in
all material respects to the descriptions thereof contained in the Offering
Document.
(ix) The Parent Guaranty has been duly authorized by ChipPAC, and
assuming due authorization, execution and delivery of the Supplemental
Indenture by the Trustee, the Parent Guaranty will constitute a valid and
legally binding obligation of ChipPAC, enforceable against ChipPAC in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity).
(x) Assuming due authorization, execution and delivery of the
Subsidiary Guaranty Agreement by each of the Subsidiary Guarantors, ChipPAC
and the Surviving Issuer, the Subsidiary Guaranty Agreement constitutes
valid and legally binding obligations of the Subsidiary Guarantors,
enforceable against the Subsidiary Guarantors in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought via proceeding at law or in equity).
38
<PAGE>
Exhibit B-1
(i) The Issuer is duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry
on its business as it is currently being conducted and as described in the
Offering Document.
(ii) The Issuer has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase Agreement
and each of the other Operating Documents to which it is a party and to
consummate the transactions contemplated thereby, including, without
limitation, to the extent applicable, the corporate power and authority to
issue, sell and deliver the Offered Securities as provided in the Purchase
Agreement.
(iii) The Purchase Agreement has been duly and validly authorized and
executed by the Issuer.
(iv) Each of the Registration Rights Agreement and the Escrow
Agreement has been duly authorized, executed and delivered by the Issuer.
(v) The Indenture and the Offered Securities have been duly
authorized by the Issuer by all necessary corporate action.
(vi) The execution and delivery by the Issuer of, and performance by
the Issuer of its obligations under, the Indenture, the Supplemental
Indenture, the Purchase Agreement, the Registration Rights Agreement and
the Escrow Agreement, and compliance by the Issuer with all of the
respective provisions thereof, and the issuance and sale of the Offered
Securities will not (i) violate the certificate of incorporation or bylaws
of the Issuer, (ii) conflict with or constitute a breach of, or a default
under, any agreement listed on a certificate of an officer of the Issuer as
being the material agreements of the Issuer and its subsidiaries, (iii) to
our knowledge, breach or otherwise violate any provision in any court or
administrative order, writ, judgment or decree that names the Issuer and is
specifically directed to any of its property or (iii) constitute a
violation by the Issuer of any applicable provision of British Virgin
Islands law, statute or regulation.
(vii) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court of the British Virgin
Islands required for the issuance and sale by the Issuer of the Offered
Securities to the Initial Purchasers and the issuance of the Guarantees by
the Guarantors or the consummation by the Issuer of the other transactions
contemplated by the Purchase Agreement and the Indenture, except such as
have been obtained.
(viii) To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending or
39
<PAGE>
threatened against, the Issuer that (i) has caused us to conclude that such
action, suit, proceeding or investigation is required to be described in
the Offering Document but is not so described or (ii) would be reasonably
likely to adversely affect the consummation of any of the transactions
contemplated by the Purchase Agreement or the Indenture.
(ix) The Exchange Securities have been duly and validly authorized
for issuance by the Issuer.
40
<PAGE>
Exhibit B-2
(i) The Surviving Issuer is duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as it is currently being conducted and
as described in the Offering Document and to own, lease and operate its
properties.
(ii) The Surviving Issuer has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Purchase Agreement and each of the Transaction Documents to which it is a
party and to consummate the transactions contemplated thereby, including
without limitation, to the extent applicable, the corporate power and
authority to issue, sell and deliver the Offered Securities as provided in
the Purchase Agreement.
(iii) Each of the Transaction Documents to which it is a party has
been duly authorized, executed and delivered by the Surviving Issuer and,
to the extent governed by British Virgin Island law, constitutes a valid
and legally binding obligation of the Surviving Issuer, enforceable against
the Surviving Issuer in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(iv) The Supplemental Indenture has been duly authorized, executed
and delivered by the Surviving Issuer by all necessary corporate action.
(v) The execution and delivery by the Surviving Issuer of, and
performance by the Surviving Issuer of its obligations under each of the
Transaction Documents to which it is a party, and compliance by the
Surviving Issuer with all of the respective provisions thereof, and the
issuance and sale of the Offered Securities will not (i) violate the
certificate of incorporation or bylaws of the Surviving Issuer, (ii)
conflict with or constitute a breach of, or a default under, any agreement
listed on a certificate of an officer of MergerCo as being the material
agreements of MergerCo and its subsidiaries, (iii) to our knowledge, breach
or otherwise violate any provision in any court or administrative order,
writ, judgment or decree that names the Surviving Issuer and is
specifically directed to any of its property or (iii) constitute a
violation by the Surviving Issuer of any applicable provision of British
Virgin Islands law, statute or regulation.
(vi) Other than those already obtained, no consent, approval,
authorization or order of, or filing with, any governmental agency or body
or court of the British Virgin Islands is required in connection with the
consummation of the Transaction Documents by the Surviving Issuer, except
for such consents, approvals, authorizations, orders or filings the
41
<PAGE>
failure of which to obtain or make would not result in a Material Adverse
Effect.
(vii) To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending or threatened against, the Surviving Issuer
that (i) has caused us to conclude that such action, suit, proceeding or
investigation is required to be described in the Offering Document but is
not so described or (ii) would be reasonably likely to adversely affect the
consummation of the Recapitalization.
(viii) The choice of New York law to govern the Operative Documents
constitutes a valid choice of law insofar as the law of the British Virgin
Islands is concerned. The submission by the British Virgin Islands
Guarantor to the non-exclusive jurisdiction of any federal or state court
in the Borough of Manhattan, The City of New York (a "New York Court") is a
valid submission insofar as the law of the British Virgin Islands is
concerned.
(ix) Neither the British Virgin Islands Guarantor nor any of its
property have any immunity from the jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise) under the laws of
the British Virgin Islands.
(x) In a suit on the merits brought before a the British Virgin
Islands court, a British Virgin Islands court will respect and enforce the
agreement of the parties as to judgment currency.
42
<PAGE>
Exhibit C
(i) [Insert Name] (a) is duly incorporated and is validly existing
as a corporation in good standing under the laws of [Insert Jurisdiction]
and (b) has all requisite corporate power and authority to carry on its
business as it is currently being conducted and as described in the
Offering Document and to own, lease and operate its properties.
(ii) [Insert Name] has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Purchase
Agreement and each of the Transaction Documents to which it is a party and
to consummate the transactions contemplated thereby.
(iii) Each of the Transaction Documents to which it is a party, has
been duly authorized, executed and delivered by [Insert Name] and, to the
extent governed by the laws of [Insert Jurisdiction], constitutes a valid
and legally binding obligation of [Insert Name], enforceable against
[Insert Name] in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(iv) The Subsidiary Guaranty Agreement has been duly authorized,
executed and delivered by [Insert Name] by all necessary corporate action.
(v) The execution and delivery by [Insert Name] of, and performance
by [Insert Name] of its obligations under each of the Transaction Documents
to which it is a party, and compliance by [Insert Name] with all of the
respective provisions thereof, and the issuance and sale of the Offered
Securities will not (i) violate the certificate of incorporation or bylaws
of [Insert Name], (ii) conflict with or constitute a breach of, or a
default under, any agreement listed on a certificate of an officer of
[Insert Name] as being the material agreements of [Insert Name] and its
subsidiaries, (iii) to our knowledge, breach or otherwise violate any
provision in any court or administrative order, writ, judgment or decree
that names [Insert Name] and is specifically directed to any of its
property or (iv) constitute a violation by [Insert Name] of any applicable
provision of [Insert Jurisdiction] law, statute or regulation.
(vi) Other than those already obtained, no consent, approval,
authorization or order of, or filing with, any governmental agency or body
or court of [Insert Jurisdiction] in connection with the consummation of
the Transaction Documents by [Insert Name], except for such consents,
approvals, authorizations, orders or filings the failure of which to obtain
or make would not result in a Material Adverse Effect.
(vii) To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or
43
<PAGE>
governmental agency or body, domestic or foreign, pending or threatened
against, [Insert Name] that (i) has caused us to conclude that such action,
suit, proceeding or investigation is required to be described in the
Offering Document but is not so described or (ii) would be reasonably
likely to adversely affect the consummation of the Recapitalization.
(viii) The choice of New York law to govern the Operative Documents
constitutes a valid choice of law insofar as the law of [Insert
Jurisdiction] is concerned. The submission by [Insert Name] to the non-
exclusive jurisdiction of any federal or state court in the Borough of
Manhattan, The City of New York (a "New York Court") is a valid submission
insofar as the law of the [Insert Jurisdiction] is concerned.
(ix) Neither [Insert Name] nor any of its property have any immunity
from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid
of execution or otherwise) under the laws of [Insert Jurisdiction].
(x) In a suit on the merits brought before [Insert Jurisdiction]
court, a [Insert Jurisdiction] court will respect and enforce the agreement
of the parties as to judgment currency.
44
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
================================================================================
CHIPPAC INTERNATIONAL LIMITED
Issuer
CHIPPAC MERGER CORP.
Guarantor
12 3/4% Senior Subordinated Notes Due 2009
____________________
INDENTURE
Dated as of July 29, 1999
____________________
FIRSTAR BANK OF MINNESOTA, N.A.
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- -------
<S> <C>
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 11.03
(c) .............................. 11.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 11.02
(d) .............................. 7.06
314(a) .............................. 4.02; 11.02
(b) .............................. N.A.
(c)(1) .............................. 11.04
(c)(2) .............................. 11.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.05
315(a) .............................. 7.01
(b) .............................. 7.05; 11.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence) .............................. 11.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 11.01
</TABLE>
N.A. means Not Applicable.
___________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 Page
----
<S> <C>
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions............................................... 1
SECTION 1.02. Other Definitions......................................... 29
SECTION 1.03. Incorporation by Reference of Trust Indenture Act......... 29
SECTION 1.04. Rules of Construction..................................... 30
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating........................................... 31
SECTION 2.02. Execution and Authentication.............................. 31
SECTION 2.03. Registrar and Paying Agent................................ 32
SECTION 2.04. Paying Agent To Hold Money in Trust....................... 32
SECTION 2.05. Securityholder Lists...................................... 33
SECTION 2.06. Transfer and Exchange..................................... 33
SECTION 2.07. Replacement Securities.................................... 34
SECTION 2.08. Outstanding Securities.................................... 34
SECTION 2.09. Temporary Securities...................................... 35
SECTION 2.10. Cancellation.............................................. 35
SECTION 2.11. Defaulted Interest........................................ 35
SECTION 2.12. CUSIP Numbers............................................. 35
SECTION 2.13. Issuance of Additional Securities......................... 36
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee........................................ 36
SECTION 3.02. Selection of Securities To Be Redeemed.................... 37
SECTION 3.03. Notice of Redemption...................................... 37
SECTION 3.04. Effect of Notice of Redemption............................ 38
SECTION 3.05. Deposit of Redemption Price............................... 39
SECTION 3.06. Securities Redeemed in Part............................... 39
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities..................................... 39
SECTION 4.02. SEC Reports............................................... 39
SECTION 4.03. Limitation on Indebtedness................................ 40
SECTION 4.04. Limitation on Restricted Payments......................... 45
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.............................. 51
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock........ 53
SECTION 4.07. Limitation on Affiliate Transactions...................... 57
SECTION 4.08. Change of Control......................................... 60
SECTION 4.09. Limitation on Assets of Non-Subsidiary Guarantors......... 62
SECTION 4.10. Limitation on Sale of the Capital Stock of the Issuer..... 62
SECTION 4.11. Future Guarantors......................................... 62
SECTION 4.12. Withholding Taxes......................................... 63
SECTION 4.13. Compliance Certificate.................................... 65
SECTION 4.14. Further Instruments and Acts.............................. 65
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company, Issuer, and Subsidiary Guarantors May
Merge or Transfer Assets............................. 65
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default......................................... 58
SECTION 6.02. Acceleration.............................................. 71
SECTION 6.03. Other Remedies............................................ 71
SECTION 6.04. Waiver of Past Defaults................................... 71
SECTION 6.05. Control by Majority....................................... 72
SECTION 6.06. Limitation on Suits....................................... 72
SECTION 6.07. Rights of Holders To Receive Payment...................... 73
SECTION 6.08. Collection Suit by Trustee................................ 73
SECTION 6.09. Trustee May File Proofs of Claim.......................... 73
SECTION 6.10. Priorities................................................ 73
SECTION 6.11. Undertaking for Costs..................................... 74
SECTION 6.12. Waiver of Stay or Extension Laws.......................... 74
</TABLE>
<PAGE>
3
<TABLE>
<S> <C>
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee......................................... 75
SECTION 7.02. Rights of Trustee......................................... 76
SECTION 7.03. Individual Rights of Trustee.............................. 77
SECTION 7.04. Trustee's Disclaimer...................................... 77
SECTION 7.05. Notice of Defaults........................................ 77
SECTION 7.06. Reports by Trustee to Holders............................. 77
SECTION 7.07. Compensation and Indemnity................................ 77
SECTION 7.08. Replacement of Trustee.................................... 78
SECTION 7.09. Successor Trustee by Merger............................... 79
SECTION 7.10. Eligibility; Disqualification............................. 80
SECTION 7.11. Preferential Collection of Claims Against Company......... 80
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance.......... 80
SECTION 8.02. Conditions to Defeasance.................................. 81
SECTION 8.03. Application of Trust Money................................ 83
SECTION 8.04. Repayment to Issuer....................................... 83
SECTION 8.05. Indemnity for Government Obligations...................... 84
SECTION 8.06. Reinstatement............................................. 84
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders................................ 84
SECTION 9.02. With Consent of Holders................................... 83
SECTION 9.03. Compliance with Trust Indenture........................... 87
SECTION 9.04. Revocation and Effect of Consents and Waivers............. 87
SECTION 9.05. Notation on or Exchange of Securities..................... 87
SECTION 9.06. Trustee To Sign Amendments................................ 87
SECTION 9.07. Payment for Consent....................................... 88
</TABLE>
<PAGE>
4
<TABLE>
<S> <C>
ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement To Subordinate.................................. 88
SECTION 10.02. Liquidation, Dissolution, Bankruptcy...................... 88
SECTION 10.03. Default on Senior Indebtedness............................ 89
SECTION 10.04. Acceleration of Payment of Securities..................... 90
SECTION 10.05. When Distribution Must Be Paid Over....................... 90
SECTION 10.06. Subrogation............................................... 90
SECTION 10.07. Relative Rights........................................... 91
SECTION 10.08. Subordination May Not Be Impaired......................... 91
SECTION 10.09. Rights of Trustee and Paying Agent........................ 91
SECTION 10.10. Distribution or Notice to Representative.................. 92
SECTION 10.11. Article 10 Not To Prevent Events of Default
or Limit Right To Accelerate......................... 92
SECTION 10.12. Trust Moneys Not Subordinated............................. 92
SECTION 10.13. Trustee Entitled To Rely.................................. 92
SECTION 10.14. Trustee To Effectuate Subordination....................... 93
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness.. 93
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions............................. 93
ARTICLE 11
Company Guaranty
----------------
SECTION 11.01. Guaranty.................................................. 94
SECTION 11.02. Successors and Assigns.................................... 96
SECTION 11.03. No Waiver................................................. 96
SECTION 11.04. Modification.............................................. 96
ARTICLE 12
Subordination of Company Guaranty
---------------------------------
SECTION 12.01. Agreement to Subordinate.................................. 97
SECTION 12.02. Liquidation, Dissolution, Bankruptcy...................... 97
SECTION 12.03. Default on Senior Indebtedness of Guarantor............... 98
SECTION 12.04. Demand for Payment........................................ 98
SECTION 12.05. When Distribution Must Be Paid Over....................... 98
SECTION 12.06. Subrogation............................................... 98
SECTION 12.07. Relative Rights........................................... 99
</TABLE>
<PAGE>
5
<TABLE>
<S> <C>
SECTION 12.08. Subordination May Not Be Impaired by Company.............. 99
SECTION 12.09. Rights of Trustee and Paying Agent........................ 99
SECTION 12.10. Distribution or Notice to Representative.................. 100
SECTION 12.11. Article 12 Not to Prevent Defaults Under a
Guaranty or Limit Right To Demand Payment............ 100
SECTION 12.12. Trustee Entitled To Rely.................................. 100
SECTION 12.13. Trustee To Effectuate Subordination....................... 101
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Guarantor............................ 101
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions............................. 101
ARTICLE 13
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls.............................. 101
SECTION 13.02. Notices................................................... 102
SECTION 13.03. Communication by Holders with Other Holders............... 102
SECTION 13.04. Certificate and Opinion as to Conditions Precedent........ 103
SECTION 13.05. Statements Required in Certificate or Opinion............. 103
SECTION 13.06. When Securities Disregarded............................... 103
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.............. 104
SECTION 13.08. Legal Holidays............................................ 104
SECTION 13.09. Governing Law............................................. 104
SECTION 13.10. No Recourse Against Others................................ 104
SECTION 13.11. Successors................................................ 104
SECTION 13.12. Multiple Originals........................................ 104
SECTION 13.13. Table of Contents; Headings............................... 105
</TABLE>
Exhibit A - Form of Security
Rule 144A/Regulation S Appendix
Exhibit 1 to Rule 144A/Regulation S Appendix
Exhibit B - Form of Subsidiary Guaranty Agreement
<PAGE>
INDENTURE dated as of July 29, 1999, among ChipPAC
International Limited, a British Virgin Islands corporation (the
"Issuer"), ChipPAC Merger Corp., a California corporation (the
"Company") and Firstar Bank of Minnesota, N.A., a national
banking association organized under the laws of the United States
(the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of (1) the Issuer's 12 3/4%
Senior Subordinated Notes Due 2009 (the "Initial Securities") and, (2) if and
when issued pursuant to a registered exchange for Initial Securities, the
Issuer's 12 3/4% Senior Subordinated Notes Due 2009 (the "Exchange Securities")
and, (3) if and when issued pursuant to a private exchange for Initial
Securities, the Issuer's 12 3/4% Senior Subordinated Notes Due 2009 (the
"Private Exchange Securities") and, (4) if and when issued, any Additional
Securities (as defined herein, and together with the Private Exchange
Securities, the Exchange Securities and the Initial Securities, the
"Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
------------
"Additional Assets" means (1) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (2) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary (3) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
-------- -------
described in clauses (2) or (3) above is primarily engaged in a Related
Business.
"Additional Securities" means, subject to the Issuer's compliance with
Section 4.03, 12 3/4% Senior Subordinated Notes Due 2009 issued from time to
time after the Issue Date under the terms of this Indenture (other than pursuant
to Section 2.06, 2.07, 2.09 or 3.06 and other than Exchange Securities or
Private Exchange Securities issued pursuant to an exchange offer for other
Securities outstanding under this Indenture).
<PAGE>
2
"Advisory Agreement" means each of the agreements by and among
ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and each
Principal entered into pursuant to the Recapitalization, as the same may be
amended from time to time in a manner that is not more disadvantageous to the
Company in any material respect than the original agreement as in effect on the
Recapitalization Closing Date.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (1) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (2) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (3) any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (1), (2) and (3) above, (w) a disposition by a Restricted Subsidiary
to the Company or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary, (x) for purposes of Section 4.06 only, a disposition that
constitutes a Restricted Payment permitted by Section 4.04, (y) sales or other
dispositions of obsolete, uneconomical, negligible, worn-out or surplus
<PAGE>
3
assets in the ordinary course of business (including but not limited to
equipment and intellectual property) and (z) disposition of assets with a fair
market value of less than $1,000,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (1) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (2) the sum of all such payments.
"Bain" means Bain Capital, Inc.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day other than a Saturday, Sunday or a day
on which commercial banking institutions are authorized or required by law to
close in New York City.
"Capital Expenditure Facility" means the capital expenditure facility
contained in the Credit Agreement.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the
<PAGE>
4
Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"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, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total voting power
of the Voting Stock of the Company (for the purposes of this clause (1),
such person shall be deemed to beneficially own any Voting Stock of a
Person held by any other Person (the "parent entity"), if such person is
the beneficial owner (as defined in this clause (1)), directly or
indirectly, of more than 50% of the voting power of the Voting Stock of
such parent entity;
(2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors (A) whose election by such Board
of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors on the Issue Date or
whose election or nomination for election was previously so approved or (B)
who were elected to the Board of Directors pursuant to the Shareholders
Agreement, as amended, modified or supplemented from time to time) cease
for any reason to constitute a majority of the Board of Directors then in
office; or
(3) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or
<PAGE>
5
substantially all the assets of the Company to another Person (in each case
other than a Person that is controlled by the Permitted Holders), if the
securities of the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving Person or transferee that represent,
immediately after such transaction, at least a majority of the aggregate
voting power of the Voting Stock of the surviving Person or transferee.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Company Guaranty" means the Guarantee by the Company of the Issuer's
obligations with respect to the Securities contained herein.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which internal financial statements
are available ending on or prior to the date of such determination to (b)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
-------- -------
that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period;
<PAGE>
6
(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period shall be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company
and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);
(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring
a calculation to be made hereunder, which constitutes all or
<PAGE>
7
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first
day of such period; and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (3) or (4)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
the Company (and shall include any applicable Pro Forma Cost Savings). If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries
determined in accordance with GAAP, plus, to the extent not included in such
total interest expense, and to the extent incurred by the Company or its
Restricted Subsidiaries, without duplication:
(1) interest expense attributable to Capital Lease Obligations and
the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, in each case, determined in accordance with
GAAP;
<PAGE>
8
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(6) net costs associated with Hedging Obligations involving any
Interest Rate Agreement (including amortization of fees) determined in
accordance with GAAP;
(7) dividends paid in cash or Disqualified Stock in respect of (A)
all Preferred Stock of Restricted Subsidiaries and (B) all Disqualified
Stock of the Company, in each case held by Persons other than the Company
or a Wholly Owned Subsidiary;
(8) interest actually paid by the Company or a Restricted Subsidiary
under any Guarantee of Indebtedness of any other Person; and
(9) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust;
and less, to the extent included in such total interest expense, (A) the
----
amortization during such period of capitalized financing costs associated with
the Recapitalization and the financing thereof and (B) the amortization during
such period of other capitalized financing costs.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
- -------- -------
Income:
(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (4) below, the Company's equity in the net
<PAGE>
9
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (3) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (4) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by such Restricted Subsidiary consistent
with such restrictions during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(4) any gain (or loss) realized upon the sale or other disposition of
any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or
loss) realized upon the sale or other disposition of any Capital Stock of
any Person;
(5) any extraordinary or unusual gains or losses and the related tax
effect in accordance with GAAP;
<PAGE>
10
(6) any translation gains and losses due solely to fluctuations in
currency values and the related tax effect in accordance with GAAP;
(7) any cash charges resulting from the Recapitalization to the
extent such charges are paid or payable by Hyundai Electronics, Hyundai
Electronics America or any of their Affiliates; and
(8) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(3)(D) thereof.
"Credit Agreement" means the Credit Agreement to be entered into by
and among the Issuer, the Company, certain of its Subsidiaries, the lenders
referred to therein and Credit Suisse First Boston, as Administrative Agent,
together with the related documents thereto (including without limitation the
term loans and revolving loans thereunder, any guarantees and security
documents), as amended, extended, renewed, restated, supplemented or otherwise
modified (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) from time to time, and any agreement
(and related document) governing Indebtedness incurred to refund or refinance,
in whole or in part, the borrowings and commitments then outstanding or
permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or beneficiary.
"CVC" means Citicorp Venture Capital Ltd.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
<PAGE>
11
"Designated Senior Indebtedness" with respect to any Person means (1)
the Bank Indebtedness; provided, however, that Bank Indebtedness outstanding
-------- -------
under any Credit Agreement that Refinanced in part, but not in whole, the
previously outstanding Bank Indebtedness shall only constitute Designated Senior
Indebtedness if it meets the requirements of succeeding clause (2); and (2) any
other Senior Indebtedness of such Person which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $10.0
million and is specifically designated by such Person in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (2) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (3) is redeemable at the option of the holder thereof, in
whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities; provided, however, that any Capital Stock
-------- -------
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the first anniversary of the Stated Maturity of the
Securities shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions of Sections
4.06 and 4.08. Notwithstanding the foregoing, the Intel Preferred Stock as in
effect on the date of issuance will be deemed not to constitute Disqualified
Stock.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income, without duplication: (1) all income
tax expense of the Company and its consolidated Restricted Subsidiaries, (2)
depreciation expense of the Company and its consolidated Restricted
Subsidiaries, (3) amortization expense of the Company and its consolidated
Restricted Subsidiaries (excluding amortization expense (other than the
amortization of capitalized financing costs)
<PAGE>
12
attributable to a prepaid cash item that was paid in a prior period) and (4) all
other non-cash charges of the Company and its consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash expenditures in any future period),
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Equity Offering" means a primary offering of Capital Stock (other
than Disqualified Stock) of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in (1) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (2) statements and
pronouncements of the Financial Accounting Standards Board and (3) such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (1)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or
<PAGE>
13
(2) entered into for the purpose of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
-------- -------
"Guarantee" shall not include endorsements for collection or deposit or standard
contractual indemnities, in each case in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranty" means the Company Guaranty and each Subsidiary Guaranty, as
applicable.
"Guaranty Agreement" means a supplemental indenture, in a form
reasonably satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor
becomes subject to the applicable terms and conditions of the Indenture.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Hyundai Earn-out" means the cash payment to Hyundai Electronics of up
to an additional $55.0 million during the four-year period following January 1,
1999 in the event the Company exceeds certain levels of EBITDA as set forth in
the Recapitalization Agreement; provided, however, in the event the final $20.0
-------- -------
million of such $55.0 million in cash is required to be paid to Hyundai
Electronics, it shall be paid by the mandatory redemption of an equal amount of
Hyundai Preferred Stock.
"Hyundai Electronics" means Hyundai Electronics Industries Company
Ltd., a Republic of Korea corporation.
"Hyundai Preferred Stock" means the 12.5% Redeemable Preferred Stock
issuable to Hyundai Electronics and/or Hyundai Electronics America in connection
with the Recapitalization.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
-------- -------
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall
<PAGE>
14
have a correlative meaning. The accretion of principal of a non-interest bearing
or other discount security, and the issuance as interest or dividend payments of
pay-in-kind securities having identical terms to the underlying security and
which pay-in-kind securities were contemplated on the issue date of such
underlying security, in each case shall not be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts and accrued expenses payable arising in the
ordinary course of business);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (1)
through (3) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all
<PAGE>
15
dividends of other Persons for the payment of which, in either case, such
Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however, that
-------- -------
the amount outstanding at any time of any Indebtedness issued with original
issue discount shall be deemed to be the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
indebtedness at such time as determined in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Intel" means Intel Corporation.
"Intel Preferred Stock" means the 10.0% convertible Preferred Stock
issuable to Intel pursuant to the Stock Purchase Agreement dated on or about the
Recapitalization Closing Date by and between Intel and ChipPAC Merger Corp.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" with respect to any Person means any direct or indirect
advance, loan (other than (A) advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender and (B) commission, travel and similar advances to
<PAGE>
16
officers and employees made in the ordinary course of business) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and Section
4.04:
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value
of the net assets of any Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided,
--------
however, that upon a redesignation of such Subsidiary as a Restricted
-------
Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
<PAGE>
17
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of (1) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(2) all payments made on any Indebtedness which is secured by any assets subject
to such Asset Disposition, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such assets, or which must
by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition and (4) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Obligations" means with respect to any Indebtedness all obligations
for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
<PAGE>
18
"Permitted Holders" means (1) the Principals and any Related Party
thereto and (2) any group of investors if deemed to be a "person" (as such terms
is used in Section 13(d)(3) of the Exchange Act) by virtue of the Shareholders
Agreement, as the same may be amended, modified or supplemented from time to
time, provided that
--------
(1) a Principal is party to such Shareholders Agreement,
(2) the persons party to the Shareholders Agreement, as so amended,
supplemented or modified from time to time that were not parties and
are not Affiliates of persons who were parties, to the Shareholders
Agreement as of the Recapitalization Closing Date, together with their
respective Affiliates (collectively, the "New Investors"), are not
direct or indirect beneficial owners (determined without reference to
the Shareholders Agreement) of more than 50% of the Voting Stock owned
by all parties to the Shareholders Agreement as so amended,
supplemented or modified, and
(3) the New Investors, individually or in the aggregate, do not, directly
or indirectly, have the right, pursuant to the Shareholders Agreement
(as so amended, supplemented or modified from time to time) or
otherwise to designate more than 50% of the members of the Board of
Directors of the Company or any direct or indirect parent entity of
the Company.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in:
(1) a Restricted Subsidiary or a Person that will, upon the making of
such Investment, become a Restricted Subsidiary; provided, however, that
-------- -------
the primary business of such Restricted Subsidiary is a Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
-------- -------
Business;
(3) Temporary Cash Investments;
<PAGE>
19
(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
-------- -------
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees, directors, officers or consultants
made in the ordinary course of business of the Company or such Restricted
Subsidiary;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to Section 4.06;
(9) Currency Agreements and Interest Rate Agreements entered into in
the ordinary course of the Company's business and otherwise in compliance
with the Indenture; and
(10) so long as no Default shall have occurred and be continuing (or
result therefrom), any Person in an aggregate amount which, when added
together with the amount of all the Investments made pursuant to this
clause (10) which at such time have not been repaid through repayments of
loans or advances or other transfers of assets, does not exceed the greater
of (A) $30.0 million and (B) 7.5% of Total Assets (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated
<PAGE>
20
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Secu rity which is due or overdue or is to
become due at the relevant time.
"Principal" means Bain and SXI Holders.
"Pro Forma Cost Savings" means, with respect to any period, the
reduction in costs that were
(1) directly attributable to an asset acquisition and calculated on a
basis that is consistent with Regulation S-X under the Securities
Act in effect and applied as of the Issue Date, or
(2) implemented by the business that was the subject of any such asset
acquisition within six months of the date of the asset acquisition
and that are supportable and quantifiable by the underlying
accounting records of such business,
as if, in the case of each of clause (1) and (2), all such reductions in costs
had been effected as of the beginning of such period.
"Recapitalization" means the plan of recapitalization and merger
pursuant to the Agreement and Plan of Recapitalization and Merger dated as of
March 13, 1999 as amended on or prior to the Issue Date, among Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and
ChipPAC Merger Corp.
"Recapitalization Closing Date" means the date the Company consummates
the Recapitalization.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem,
<PAGE>
21
defease or retire, or to issue other Indebtedness in exchange or replacement
for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (1) such
-------- -------
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (2) such Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
Refinanced and (3) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if Incurred
with original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; provided further, however, that
-------- ------- -------
Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that
Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated July 29, 1999, among the Issuer, the Company, Credit Suisse
First Boston Corporation and Donaldson Lufkin & Jenrette.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, or 80% (or more) owned Subsidiary of
such Principal;
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which
consist of such Principal and/or
<PAGE>
22
such other Persons referred to in the immediately preceding clause
(1); or
(3) any Affiliate of any Person.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company; provided, however, that if
-------- -------
and for so long as any Senior Indebtedness lacks such a representative, then the
Representative for such Senior Indebtedness shall at all times be the holders of
a majority in outstanding principal amount of such senior Indebtedness.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock in their capacity as such (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made
by a Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase, or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in
<PAGE>
23
each case due within one year of the date of acquisition); or
(4) the making of any Investment in any Person (other than a Permitted
Investment).
In determining the amount of any Restricted Payment made in property
other than cash, such amount shall be the fair market value of such property at
the time of such Restricted Payment, as determined in good faith by the Board of
Directors.
"Restricted Subsidiary" means any Subsidiary of the Company (including
the Issuer) that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility
contained in the Credit Agreement and any other facility or financing
arrangement that Refinances or replaces, in whole or in part, any such revolving
credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" of any Person means all (1) Bank Indebtedness of
or guaranteed by such Person, whether outstanding on the Issue Date or
thereafter Incurred, and (2) Indebtedness of such Person, whether outstanding on
the Issue Date or thereafter Incurred, including interest thereon, in respect of
(A) Indebtedness for money borrowed, (B) Indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable and (C) Hedging Obligations, unless, in the case
of (1) and (2), in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to
<PAGE>
24
the obligations under the Notes; provided, however, that Senior Indebtedness
-------- -------
shall not include (i) any obligation of such Person to any subsidiary of such
Person, (ii) any liability for Federal, state, local or other taxes owed or
owing by such Person, (iii) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (iv) any Indebtedness of
such Person (and any accrued and unpaid interest in respect thereof) which is
subordinate or junior by its terms to any other Indebtedness or other obligation
of such Person or (v) that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of the Indenture (but as to any such
Indebtedness under the Credit Agreement, no such violation shall be deemed to
exist if the Representative of the Lenders thereunder shall have received an
officers' certificate of the Company to the effect that the issuance of such
Indebtedness does not violate such covenant and setting forth in reasonable
detail the reasons therefor).
"Senior Subordinated Indebtedness" means (1) with respect to the
Issuer, the Notes and any other Indebtedness of the Issuer that specifically
provides that such Indebted ness is to rank pari passu with the Notes in right
---- -----
of payment and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Issuer which is not Senior Indebtedness
of the Issuer and (2) with respect to the Company or a Subsidiary Guarantor,
their respective Guarantees of the Notes and any other Indebtedness of such
Person that specifically provides that such Indebtedness rank pari passu with
---- -----
such Guaranty in respect of payment and is not subordinated by its terms in
respect of payment to any Indebtedness or other obligation of such Person which
is not Senior Indebtedness of such Person.
"Shareholders Agreement" means the Shareholders Agreement to be
entered into on the Recapitalization Closing Date by and among Hyundai
Electronics, Hyundai Electronics America, SXI Group LLC, certain Bain Related
Parties and ChipPAC, Inc.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such
<PAGE>
25
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer, the
Company or any Subsidiary Guarantor (whether outstanding on the Issue Date or
thereafter Incurred) which is subordinate or junior in right of payment to, in
the case of the Issuer, the Securities or, in the case of the Company or such
Subsidiary Guarantor, its Guaranty, pursuant to a written agreement to that
effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) 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 (1) such Person,
(2) such Person and one or more Subsidiaries of such Person or (3) one or more
Subsidiaries of such Person.
"Subsidiary Guarantor" means ChipPAC (Barbados) Ltd., ChipPAC Limited,
ChipPAC Korea Company Ltd., ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity
Management Hungary Limited Liability Company and any other subsidiary of the
Company that Guarantees the Company's obligations with respect to the Notes.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
"Subsidiary Guaranty Agreement" means the Subsidiary Guaranty
Agreement, to be dated the Recapitalization Closing Date, between the Subsidiary
Guarantors and the Issuer, in the form attached as Exhibit B to this Indenture.
"SXI Group LLC" means SXI Group LLC, a Delaware limited liability
company.
"SXI Holders" means (1) CVC, (2) SXI Group LLC and (3) any officer,
employee or director of CVC or any trust, partnership or the entity established
solely for the benefit of such officers, employees or directors.
<PAGE>
26
"Temporary Cash Investments" means any of the
following:
(1) any evidence of indebtedness, maturing not more than one year
after the date of investment by the Company, the Issuer or any other
Restricted Subsidiary, issued by the United States of America or any
instrumentality agency thereof, or by the Republic of Korea or any
instrumentality or agency thereof, or by the Asian Development Bank, the
World Bank or any other supranational organization (collectively,
"Government Entities") and guaranteed or otherwise backed, directly or
indirectly fully as to principal, premium, if any, and interest, by the
Government Entity issuing such indebtedness;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America, and which bank or trust company
has capital, surplus and undivided profits aggregating in excess of $250.0
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money-market fund sponsored by
a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
(4) 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 or any foreign country recognized by 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 Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group; and
<PAGE>
27
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that Refinances
in whole or in part any such term loan facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the date of this Indenture.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as set forth on the Company's most recent
consolidated balance sheet.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (2) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or owns or holds any Lien on any property
of, the Company or any other Subsidiary of the Company that is not a Subsidiary
of the Subsidiary to be so designated; provided, however, that either (A) the
-------- -------
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.04. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted
<PAGE>
28
Subsidiary; provided, however, that immediately after giving effect to such
-------- -------
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Dollar Equivalent" means with respect to any monetary amount in
a currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
Except as described under Section 4.03 whenever it is necessary to
determine whether the Issuer has complied with any covenant in the Indenture or
a Default has occurred and an amount is expressed in a currency other than U.S.
dollars, such amount will be treated as the U.S. Dollar Equivalent determined as
of the date such amount is initially determined in such currency.
"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 Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is at least 95%
owned by the Company or one or more Wholly Owned Subsidiaries.
<PAGE>
29
SECTION 1.02. Other Definitions.
------------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Additional Amounts"....................... 4.12
"Affiliate Transaction".................... 4.08
"Bankruptcy Law"........................... 6.01
"Blockage Notice".......................... 10.03
"covenant defeasance option"............... 8.01(b)
"Custodian"................................ 6.01
"Event of Default"......................... 6.01
"Excluded Holder".......................... 4.12
"legal defeasance option".................. 8.01(b)
"Legal Holiday"............................ 13.08
"Offer".................................... 4.07(b)
"Offer Amount"............................. 4.07(c)(2)
"Offer Period"............................. 4.07(c)(2)
"pay the Securities"....................... 10.03
"Paying Agent"............................. 2.03
"Payment Blockage Period".................. 10.03
"Purchase Date"............................ 4.07(c)(1)
"Registrar"................................ 2.03
"Successor Company"........................ 5.01
"Taxes".................................... 4.12
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities and each Guaranty;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture and each guaranty;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Issuer, the Company,
each Subsidiary Guarantor and any other obligor on the indenture securities.
<PAGE>
30
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
<PAGE>
31
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. Provisions relating to the Initial
----------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix")
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Issuer is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Issuer).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibit A are part of the terms of this
Indenture.
SECTION 2.02. Execution and Authentication. One Officer shall sign
-----------------------------
the Securities for the Issuer by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of $1,000, upon a written order of the
Issuer signed by two Officers or by an Officer and either an Assistant Treasurer
or an Assistant Secretary of the Issuer. Such order shall specify the amount of
the Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated and, in the case of an issuance of Additional
Securities pursuant to Section 2.13
<PAGE>
32
after the Issue Date, shall certify that such issuance is in compliance with
Section 4.03.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuer to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent
has the same rights as any Registrar, Paying Agent or agent for service of
notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Issuer shall maintain
---------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Issuer may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Issuer shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuer shall notify
the Trustee of the name and address of any such agent. If the Issuer fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Issuer initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
------------------------------------
date of the principal and interest on any Security, the Issuer shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Issuer shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the
<PAGE>
33
Securities and shall notify the Trustee of any default by the Company in making
any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust
fund. The Issuer at any time may require a Paying Agent to pay all money held by
it to the Trustee and to account for any funds disbursed by the Paying Agent.
Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuer shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
----------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Issuer shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-registrar's
request. The Issuer may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section. The Issuer shall not be required to make and
the Registrar need not register transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed or 15 days before an interest
payment date.
Prior to the due presentation for registration of transfer of any
Security, the Issuer, the Trustee, the Paying Agent, the Registrar or any co-
registrar may deem and
<PAGE>
34
treat the person in whose name a Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and interest
on such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Issuer, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
-----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Issuer shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Issuer, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Issuer and the Trustee to protect the Issuer, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Issuer and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Issuer.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Issuer or an Affiliate of the Issuer holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Issuer receive proof satisfactory to them
that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
<PAGE>
35
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are
---------------------
ready for delivery, the Issuer may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Issuer at any time may deliver
-------------
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Issuer unless
the Issuer directs the Trustee to deliver canceled Securities to the Issuer.
The Issuer may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Issuer defaults in a
-------------------
payment of interest on the Securities, the Issuer shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Issuer may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Issuer shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Issuer in issuing the Securities
--------------
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state
- -------- -------
<PAGE>
36
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 2.13. Issuance of Additional Securities. The Issuer shall be
----------------------------------
entitled, subject to its compliance with Section 4.03, to issue Additional
Securities under this Indenture which shall have identical terms as the Initial
Securities issued on the Issue Date, other than with respect to the date of
issuance, issue price and amount of interest payable on the first payment date
applicable thereto. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor shall be treated as a single class for all purposes
under this Indenture.
With respect to any Additional Securities, the Issuer shall set forth
in a resolution of the Board of Directors and an Officers' Certificate, a copy
of each which shall be delivered to the Trustee, the following information:
(1) the aggregate principal amount of such Additional Securities to be
authenticated and delivered pursuant to this Indenture;
(2) the issue price and the issue date of such Additional Securities
and the amount of interest payable on the first payment date applicable
thereto; provided, however, that no Additional Securities may be issued at
-------- -------
a price that would cause such Additional Securities to have "original issue
discount" within the meaning of Section 1273 of the Code; and
(3) whether such Additional Securities shall be transfer restricted
securities and issued in the form of Initial Securities as set forth in the
Appendix to this Indenture or shall be issued in the form of Exchange
Securities as set forth in Exhibit A.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Issuer elects to redeem
-------------------
Securities pursuant to paragraph 5 of the
<PAGE>
37
Securities or is required to redeem Securities pursuant to paragraph 6 of the
Securities, it shall notify the Trustee in writing of the redemption date, the
principal amount of Securities to be redeemed and the paragraph of the
Securities pursuant to which the redemption will occur.
If the Issuer is required to redeem Securities pursuant to paragraph 6
of the Securities, it may reduce the principal amount of Securities required to
be redeemed to the extent it is permitted a credit by the terms of the
Securities and it notifies the Trustee of the amount of the credit and the basis
for it. If the reduction is based on a credit for redeemed or canceled
Securities that the Issuer has not previously delivered to the Trustee for
cancellation, it shall deliver such Securities with the notice.
The Issuer shall give each notice to the Trustee provided for in this
Section at least 35 but not more than 60 days before the redemption date unless
the Trustee consents to a shorter period. Such notice shall be accompanied by
an Officers' Certificate and an Opinion of Counsel from the Issuer to the effect
that such redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them the Trustee selects shall be in amounts
of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Issuer promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Issuer shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address.
<PAGE>
38
The Issuer will prepare and deliver to the Trustee the notice of the
Special Redemption on or prior to the Business Day immediately preceding, and
the Trustee will send by first class mail a copy of such notice to the Holders
of the Securities on the date it delivers notice to the Trustee pursuant to
Section 3.01.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Issuer defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such event, the
Issuer shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued
<PAGE>
39
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest payment
date). Failure to give notice or any defect in the notice to any Holder shall
not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the
----------------------------
redemption date, the Issuer shall deposit with the Paying Agent (or, if the
Issuer or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Issuer to the
Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Issuer shall execute and the Trustee
shall authenticate for the Holder (at the Issuer's expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Issuer shall promptly pay
----------------------
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Issuer may not
------------
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Issuer shall file with the SEC and provide the Trustee and
<PAGE>
40
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and reports to be so filed and provided at the times specified for the
filing of such information, documents and reports under such Sections. The
Issuer also shall comply with the other provisions of TIA (S) 314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
---------------------------
and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness except that the Company and the Issuer may Incur
Indebtedness if, after giving pro forma effect thereto, the Consolidated
Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness of the Company or any Restricted Subsidiary Incurred
pursuant to any Revolving Credit Facility; provided, however, that,
-------- -------
immediately after giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness incurred under this clause (1)
and then outstanding does not exceed the greater of (A) $50.0 million
and (B) the sum of (x) $20.0 million, (y) 50% of the book value of the
inventory of the Company and its Restricted Subsidiaries and (z) 80%
of the book value of the accounts receivables of the Company and its
Restricted Subsidiaries; provided, however, that such Indebtedness may
only be Incurred by a Restricted Subsidiary if such Indebtedness, when
added together with the amount of all other Indebtedness Incurred by
Restricted Subsidiaries pursuant to this clause (1) and then
outstanding, does not exceed an amount equal to 50% of the greater of
(x) the amount in clause (A) above and (y) the amount determined in
clause (B) above;
(2) Indebtedness of the Issuer Incurred pursuant to any Term Loan
Facilities; provided, however, that, after giving effect to any such
-------- -------
Incurrence, the aggregate principal amount of all Indebtedness
Incurred under this clause (2) and then outstanding does not exceed
$190.0 million less the aggregate sum of all principal payments
<PAGE>
41
actually made from time to time after the Issue Date with respect to
such Indebtedness pursuant to paragraph (a)(3)(A) of the covenant
described under Section 4.06;
(3) Indebtedness of the Issuer Incurred prior to the second anniversary of
the Recapitalization Closing Date, pursuant to any Capital Expenditure
Facility (and Refinancing Indebtedness in respect thereof) in an
aggregate principal amount not to exceed $20.0 million;
(4) Indebtedness of the Company or any Restricted Subsidiary owed to and
held by the Company or a Restricted Subsidiary; provided, however,
-------- -------
that any subsequent issuance or transfer of any Capital Stock which
results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than
to the Company or another Restricted Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the
issuer thereof;
(5) Indebtedness consisting of the Initial Securities and the Exchange
Securities (other than Additional Securities);
(6) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2), (3), (4) or (5) of this covenant);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant
to paragraph (a) or pursuant to clause (4), (5), (6), (8) or this
clause (7); provided, however, that to the extent such Refinancing
-------- -------
Indebtedness directly or indirectly Refinances Indebtedness of a
Subsidiary Incurred pursuant to clause (8), such Refinancing
Indebtedness shall be Incurred only by such Subsidiary;
(8) Indebtedness of a Person Incurred and outstanding on or prior to the
date on which such Person was acquired by the Company or a Restricted
Subsidiary (other than Indebtedness Incurred in anticipation of, in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Person was
<PAGE>
42
acquired by the Company or a Restricted Subsidiary); provided,
--------
however, that after giving pro forma effect thereto, (a) the
-------
Consolidated Coverage Ratio increases as a consequence of such
incurrence and related acquisition and (b) the Consolidated Coverage
Ratio is at least 1.5 to 1.0;
(9) Hedging Obligations of the Company or any Restricted Subsidiary under
or with respect to Interest Rate Agreements and Currency Agreements
entered into in the ordinary course of business and not for the
purpose of speculation;
(10) Indebtedness of the Company or any Restricted Subsidiary in respect of
performance bonds, completion guarantees and surety or appeal bonds
entered into by the Company and the Restricted Subsidiaries in the
ordinary course of their business;
(11) Indebtedness consisting of the Guaranties and Guarantees of other
Indebtedness otherwise permitted to be Incurred pursuant to the
Indenture;
(12) Indebtedness of the Company or any Restricted Subsidiary arising from
the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that such Indebtedness is satisfied
within five business days of Incurrence;
(13) Indebtedness (including Capital Lease Obligations) Incurred by the
Company or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of
any Person owning such assets) in an aggregate principal amount which,
when added together with the amount of Indebtedness Incurred pursuant
to this clause (13) and then outstanding, does not exceed the greater
of (A) $15.0 million and (B) 5% of Total Assets (in each case
including any Refinancing Indebtedness with respect thereto);
<PAGE>
43
(14) Indebtedness Incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business including,
without limitation, letters of credit to procure raw materials, or in
respect of workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims;
(15) Indebtedness of the Company issued to directors, employees, officers
or consultants of the Company or a Restricted Subsidiary in connection
with the redemption or purchase of Capital Stock that, by its terms,
is subordinated to the Securities, is not secured by any assets of the
Company or its Restricted Subsidiaries and does not require cash
payments prior to the Stated Maturity of the Securities and
Refinancing Indebtedness in respect thereof, in an aggregate principal
amount which, when added together with the amount of Indebtedness
Incurred pursuant to this clause (15) and then outstanding, does not
exceed $5.0 million;
(16) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition; provided that the maximum
--------
assumable liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company and
its Restricted Subsidiaries in connection with such disposition;
(17) Indebtedness arising from the Recapitalization Agreement providing for
indemnification, adjustment of purchase price, earn out or other
similar business obligations; and
(18) Indebtedness of the Company or a Restricted Subsidiary in an aggregate
principal amount which,
<PAGE>
44
together with all other Indebtedness of the Company and the Restricted
Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (17) above or paragraph
(a) above) does not exceed $20.0 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall
not permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such Indebtedness
shall be subordinated to the Securities or the relevant Guaranty, as applicable,
to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing
covenant, (1) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, the Issuer, in its
sole discretion, will classify such item of Indebtedness at the time of its
Incurrence and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (2) an item of Indebtedness may be
divided and classified in more than one of the types of Indebtedness described
above.
(e) Notwithstanding paragraphs (a) and (b) above, neither the Company
nor the Issuer shall, and the Company shall not permit any Subsidiary Guarantor
to, Incur (1) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness of the Issuer, the Company or
such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness or (2) any Secured Indebtedness (other than
trade payables incurred in the ordinary course of business) that is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Securities or the relevant Guaranty, as applicable, equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
(f) For purposes of determining compliance with any U.S. dollar
denominated restriction on the Incurrence of Indebtedness where the Indebtedness
Incurred is denominated in a different currency, the amount of such Indebtedness
will be the U.S. Dollar Equivalent determined on the date of the Incurrence of
such Indebtedness, provided, however, that
-------- -------
<PAGE>
45
if any such Indebtedness denominated in a different currency is subject to a
Currency Agreement with respect to U.S. dollars, covering all principal,
premium, if any, and interest payable on such Indebtedness, the amount of such
Indebtedness expressed in U.S. dollars will be as provided in such Currency
Agreement. The principal amount of any Refinancing Indebtedness Incurred in the
same currency as the Indebtedness being Refinanced will be the U.S. Dollar
Equivalent of the Indebtedness Refinanced, except to the extent that (i) such
U.S. Dollar Equivalent was determined based on a Currency Agreement, in which
case the Refinancing Indebtedness will be determined in accordance with the
preceding sentence, and (ii) the principal amount of the Refinancing
Indebtedness exceeds the principal amount of the Indebtedness being Refinanced,
in which case the U.S. Dollar Equivalent of such excess will be determined on
the date such Refinancing Indebtedness is Incurred.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
----------------------------------
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum (without
duplication) of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Securities are originally issued to the end of the most recent fiscal
quarter for which internal financial statements are available on or
prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
the issuance or sale of, or capital contribution in respect of, its
Capital Stock (other than Disqualified Stock) subsequent to the Issue
Date (other than an issuance or sale
<PAGE>
46
to a Subsidiary of the Company and other than an issuance or sale to
an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees
to the extent that the purchase by such plan or trust is financed by
Indebtedness of such plan or trust to the Company or any Subsidiary or
Indebtedness Guaranteed by the Company or any Subsidiary); and the
fair market value (as determined in good faith by resolution of the
Board of Directors of the Company) of property (other than cash that
would constitute Temporary Cash Equivalents or a Related Business)
received by the Company or a Restricted Subsidiary subsequent to the
Issue Date as a contribution to its common equity capital (other than
from a Subsidiary or that was financed with loans from the Company or
any Restricted Subsidiary);
(C) the amount by which Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company's consolidated balance
sheet upon the conversion or exchange (other than by a Subsidiary of
the Company) subsequent to the Issue Date of any Indebtedness of the
Company or any Restricted Subsidiary convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less the
amount of any cash, or the fair value of any other property,
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in any Person resulting from dividends, repayments of
loans or advances or other transfers of assets subsequent to the Issue
Date, in each case to the Company or any Restricted Subsidiary from
such Person, and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the
net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however,
-------- -------
that the foregoing sum shall not exceed, in the case of any Person,
the amount of Investments previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such Person.
<PAGE>
47
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(1) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, or capital contribution
in respect of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company
or an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees to
the extent that the purchase by such plan or trust is financed by
Indebtedness of such plan or trust to the Company or any Subsidiary of the
Company or Indebtedness Guaranteed by the Company or any Subsidiary of the
Company); provided, however, that (A) such Restricted Payment shall be
-------- -------
excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness which is permitted to be Incurred pursuant to the covenant
described under Section 4.03; provided, however, that such purchase,
-------- -------
repurchase, redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation of the amount of Restricted
Payments;
(3) any purchase or redemption of Disqualified Stock of the Company or
a Restricted Subsidiary made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock of the Company or a
Restricted Subsidiary which is permitted to be Incurred pursuant to the
covenant described under Section 4.03; provided, however, that such
-------- -------
purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments;
(4) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.06; provided, however,
-------- -------
that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
<PAGE>
48
(5) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the Securities pursuant to
Section 4.08 herein (including the purchase of the Securities tendered),
any purchase or redemption of Subordinated Obligations required pursuant to
the terms thereof as a result of such Change of Control at a purchase or
redemption price not to exceed the outstanding principal amount thereof,
plus any accrued and unpaid interest; provided, however, that (A) at the
-------- -------
time of such purchase or redemption no Default shall have occurred and be
continuing (or would result therefrom), (B) the Company would be able to
Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under Section 4.03 after giving pro forma effect to such
Restricted Payment and (C) such purchase or redemption shall be included in
the calculation of the amount of Restricted Payments;
(6) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that such dividend shall be included
-------- -------
in the calculation of the amount of Restricted Payments;
(7) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, consultants, former consultants,
directors or former directors of the Company or any of its Subsidiaries (or
permitted transferees of such employees, former employees, consultants,
former consultants, directors or former directors), pursuant to the terms
of the agreements (including employment and consulting agreements) or plans
(or amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount
-------- -------
of such repurchases shall not exceed the sum of (x) $5.0 million, (y) the
Net Cash Proceeds from the sale of Capital Stock to members of management
or directors of the Company and its Subsidiaries that occurs after the
Issue Date (to the extent the Net Cash Proceeds from the sale of such
Capital Stock have not otherwise been applied to the payment of Restricted
Payments by virtue of clause (3)(B) of paragraph (a) above and (z) the cash
proceeds of any "Key man" life insurance policies that are used to make
such
<PAGE>
49
repurchases); provided further, however, that (A) such repurchases shall
-------- ------- -------
be excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above;
(8) payments required pursuant to the terms of the Recapitalization
Agreement to consummate the Recapitalization pursuant to the terms of the
Recapitalization Agreement; provided, however, that such payments shall be
-------- -------
excluded in the calculation of the amount of Restricted Payments;
(9) payments in respect of the Hyundai Earn-out pursuant to the terms
of the Recapitalization Agreement as in effect on the Issue Date; provided,
--------
however, that such payments shall be excluded in the calculation of the
-------
amount of Restricted Payments;
(10) payments of in-kind dividends when due on the Hyundai Preferred
Stock pursuant to the terms of such Hyundai Preferred Stock as in effect on
the Recapitalization Closing Date; provided, however, that such payments
-------- -------
shall be excluded in the calculation of the amount of Restricted Payments;
(11) payments of cash dividends when due on and after 5 /1/2/ years
from the Recapitalization Closing Date on the Hyundai Preferred Stock
pursuant to the terms of such Hyundai Preferred Stock as in effect on the
Recapitalization Closing Date; provided, however, that such payments shall
-------- -------
be included in the calculation of the amount of Restricted Payments;
(12) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price thereof; provided, however, that such payments shall be excluded in
-------- -------
the calculation of the amount of Restricted Payments;
(13) payments not to exceed $200,000 in the aggregate solely to enable
the Company to make payments to holders of its Capital Stock in lieu of the
issuance of fractional shares of its Capital Stock; provided, however, that
-------- -------
such payments shall be excluded in the calculation of the amount of
Restricted Payments;
<PAGE>
50
(14) Restricted Payments not to exceed $15.0 million payable on
Capital Stock (including Disqualified Stock) issued to customers, clients,
suppliers or purchasers or sellers of goods or services of the Company or a
Restricted Subsidiary in connection with a strategic investment in the
Company or a Restricted Subsidiary by such customers, clients, suppliers or
purchasers or sellers of goods or services; provided, however, that such
-------- -------
payments shall be included in the calculation of the amount of Restricted
Payments; or
(15) Restricted Payments not exceeding $15.0 million in the aggregate
for any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Obligations, provided, however,
-------- -------
that (A) at the time of such Restricted Payments, no Default shall have
occurred and be continuing (or result therefrom) and (B) such Restricted
Payments shall be included in the calculation of the amount of Restricted
Payments; or
(16) the distribution, as a dividend or otherwise, of shares of
Capital Stock or assets of an Unrestricted Subsidiary provided that the
fair market value (as determined in good faith by the Board of Directors of
the Company) of such shares of Capital Stock or assets shall not exceed the
amount of the Investments that were made (and not subsequently reduced
pursuant to clause (3)(D) of paragraph (a) above) by the Company in such
Unrestricted Subsidiary and were treated as Restricted Payments or were
included in the calculation of the amount of Restricted Payments previously
made; provided, however, that (A) such distributions shall be excluded in
-------- -------
the calculation of the amount of Restricted Payments and (B) any net
reduction in Investments in such Unrestricted Subsidiary resulting from
such distribution shall be excluded from the calculation of amounts under
clause (3)(D) of paragraph (a) above;
(17) Restricted Payments not exceeding $7.5 million in the aggregate;
provided, however, that (A) at the time of such Restricted Payments, no
-------- -------
Default shall have occurred and be continuing (or result therefrom) and (B)
such Restricted Payments shall be included in the calculation of the amount
of Restricted Payments.
<PAGE>
51
SECTION 4.05. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. The Company shall not, and shall not permit any
- ------------------------
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Issuer
or the Company or (c) transfer any of its property or assets to the Issuer or
the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date (including the Indenture, the
Securities and the Guaranties), or, in the case of the Credit
Agreement, as in effect on the Recapitalization Closing Date;
(2) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement (A) evidencing
Indebtedness Incurred without violation of the Indenture or (B)
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this covenant or this
clause (3) or contained in any amendment to an agreement referred to
in clause (1) or (2) of this covenant or this clause (3); provided,
--------
however, that in the case of clauses (A) and (B), the encumbrances and
-------
restrictions with respect to such Restricted Subsidiary contained in
any such refinancing agreement or amendment are, in the good faith
judgment of the Board of Directors, no more restrictive in any
material respect than the encumbrances and restrictions with respect
to such Restricted Subsidiary contained in agreements of
<PAGE>
52
such Restricted Subsidiary in effect at, or entered into on, the Issue
Date or the Recapitalization Closing Date;
(4) any such encumbrance or restriction consisting of customary non-
assignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the
property leased thereunder or in licenses entered into in the ordinary
course of business to the extent such licenses restrict the transfer
of the license or the property licensed thereunder;
(5) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements or mortgages;
(6) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (c) above;
(8) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(9) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition;
(10) any restriction arising under applicable law, regulation or order;
(11) any agreement or instrument governing Capital Stock (other than
Disqualified Stock) of any Person that is in effect on the date such
Person is acquired by the Company or a Restricted Subsidiary;
<PAGE>
53
(12) any restriction on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(13) any restriction in any agreement that is not more restrictive than the
restrictions under the terms of the Credit Agreement as in effect on
the Recapitalization Closing Date.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
---------------------------------------------------
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and
assets subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or cash equivalents;
and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company or such Restricted Subsidiary,
as the case may be, pursuant to one or more of the following:
(A) to the extent the Company elects (or is required by the terms of
any Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Issuer or Indebtedness (other than any
Disqualified Stock) of the Company or another Restricted
Subsidiary of the Company (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within one
year from the later of the closing date of such Asset Disposition
and the receipt of such Net Available Cash;
(B) to the extent the Company elects, to acquire Additional Assets
within one year from (or enter into a binding commitment to
acquire Additional Assets, provided that such commitment shall be
subject only to customary conditions (other than financing) and
such
<PAGE>
54
acquisition shall be consummated within two years from) the later
of the closing date of such Asset Disposition and the receipt of
such Net Available Cash; and
(C) to the extent the Company elects, or to the extent of the balance
of such Net Available Cash after application in accordance with
clauses (A) and (B), to make an offer to the holders of the
Securities (and to holders of other Senior Subordinated
Indebtedness of the Issuer designated by the Issuer) to purchase
Securities (and such other Senior Subordinated Indebtedness)
pursuant to and subject to the conditions contained in the
Indenture;
provided, however, that in connection with any prepayment, repayment or purchase
- -------- -------
of Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness and, in the
case of any revolving facility, shall cause the related loan commitment, if any,
to be permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, the Company and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this paragraph exceeds $10.0 million.
Pending application of Net Available Cash pursuant to this covenant, such Net
Available Cash shall be invested in Permitted Investments or used to temporarily
reduce loans outstanding under any revolving credit facility.
For the purposes of this covenant, the following are deemed to be cash
or cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition, (y) securities, notes or other obligations received by the Company
or any Restricted Subsidiary from the transferee that are promptly converted by
the Company or such Restricted Subsidiary into cash and (z) any Additional
Assets (so long as such Additional Assets were acquired for fair market value in
connection with the transaction giving rise to such Asset Disposition, as
determined in good faith by the Board of Directors of the Company of such
Restricted Subsidiary, as
<PAGE>
55
applicable), which Additional Assets shall be deemed to have been acquired
pursuant to clause (A) of the preceding paragraph in connection with such Asset
Disposition.
(b) In the event of an Asset Disposition that requires the purchase
of the Securities (and other Senior Subordinated Indebtedness) pursuant to
clause (a)(3)(C) above, the Issuer will be required to purchase Securities
tendered pursuant to an offer by the Issuer for the Securities (and other Senior
Subordinated Indebtedness) at a purchase price of 100% of their principal amount
(without premium) plus accrued but unpaid interest (or, in respect of such other
Senior Subordinated Indebtedness, such lesser price, if any, as may be provided
for by the terms of such Senior Subordinated Indebtedness) in accordance with
the procedures (including prorating in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of the Securities (and any
other Senior Subordinated Indebtedness) tendered exceeds the Net Available Cash
allotted to the purchase thereof, the Issuer will select the Securities (and any
other Senior Subordinated Indebtedness) to be purchased on a pro rata basis but
in denominations of $1,000 or multiples thereof. The Issuer shall not be
required to make such an offer to purchase Securities (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor is less than $10.0 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the Issuer
becomes obligated to make an Offer, the Issuer shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the Issuer
either in whole or in part (subject to prorating as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information concerning the business
of the Issuer which the Issuer in good faith believes will enable such Holders
to make an informed decision (which at a minimum will include (i) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Issuer, the most recent subsequently filed
Quarterly Report on Form
<PAGE>
56
10-Q and any Current Report on Form 8-K of the Issuer filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such Reports, and (iii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Issuer shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Issuer shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Issuer is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash Investments, maturing on the last day prior to the
Purchase Date or on the Purchase Date if funds are immediately available by open
of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Issuer shall
deliver to the Trustee for cancellation the Securities or portions thereof which
have been properly tendered to and are to be accepted by the Issuer. The
Trustee shall, on the Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price. In the event that the aggregate
purchase price of the Securities delivered by the Issuer to the Trustee is less
than the Offer Amount applicable to the Securities, the Trustee shall deliver
the excess to the Issuer immediately after the expiration of the Offer Period
for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuer at the address specified in the notice at least three Business Days prior
to the Purchase Date. Holders shall be entitled to withdraw their election if
the Trustee or the Issuer receives not later than one Business Day prior to the
Purchase Date, a telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a
<PAGE>
57
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities (and any other Senior Subordinated Indebtedness included in
the Offer) surrendered by holders thereof exceeds the Offer Amount, the Issuer
shall select the Securities other Senior Subordinated Indebtedness to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuer so that only Securities and the other Senior
Subordinated Indebtedness in denominations of $1,000, or integral multiples
thereof, shall be purchased). Holders whose Securities are purchased only in
part shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
(4) At the time the Issuer delivers Securities to the Trustee which
are to be accepted for purchase, the Issuer shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Issuer
pursuant to and in accordance with the terms of this Section. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuer shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this covenant by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The Company
-------------------------------------
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company involving aggregate consideration in
excess of $2.5 million (an "Affiliate Transaction") unless the terms thereof:
(1) are no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained at the time of such transaction in
arm's-
<PAGE>
58
length dealings with a Person who is not such an Affiliate;
(2) have been approved by a majority of the disinterested members of the
Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of $10.0
million, have been determined by (A) a nationally recognized
investment banking firm to be fair, from a financial standpoint, to
the Company and its Restricted Subsidiaries or (B) an accounting or
appraisal firm nationally recognized in making such determinations to
be on terms that are not less favorable to the Company and its
Restricted Subsidiaries than the terms that could be obtained in an
arms-length transaction from a Person that is not an Affiliate of
the Company.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(1) any Restricted Payment permitted to be paid pursuant to Section 4.04;
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors;
(3) the grant of stock options or similar rights to employees and
directors of the Company or its Restricted Subsidiaries pursuant to
plans approved by the Board of Directors;
(4) loans or advances to employees, directors, officers or consultants (A)
in the ordinary course of business or (B) otherwise in an aggregate
amount not to exceed $5.0 million in the aggregate outstanding at any
one time;
(5) reasonable fees, compensation or employee benefit arrangements to and
indemnity provided for the benefit of employees, directors, officers
or consultants of the Company or any Subsidiary in the ordinary course
of business;
<PAGE>
59
(6) any transaction exclusively between or among the Company and its
Restricted Subsidiaries or between or among Restricted Subsidiaries;
provided, however, that such transactions are not otherwise prohibited
-------- -------
by the Indenture;
(7) the payment of management, consulting and advisory fees and related
expenses made pursuant to the Advisory Agreements as in effect on the
Recapitalization Closing Date and the payment of other customary
management, consulting and advisory fees and related expenses to the
Principals and their Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement or in respect
of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which fees and
expenses are made pursuant to arrangements approved by the Board of
Directors of the Company or such Restricted Subsidiary in good faith;
(8) pursuant to written agreements in effect on the Recapitalization
Closing Date and as amended, renewed or extended from time to time;
provided, however, that any such amendment, renewal or extension shall
-------- -------
not contain terms which are materially less favorable to the Company
and its Restricted Subsidiaries than those in the agreements in effect
on the Recapitalization Closing Date;
(9) any agreement with the Company or any Restricted Subsidiary as in
effect as of the Recapitalization Closing Date or any amendment or
replacement thereto or any transaction contemplated thereby (including
pursuant to any amendment or replacement thereto) so long as any such
amendment or replacement agreement is not more disadvantageous to the
Company or such Restricted Subsidiary in any material respect than the
original agreement as in effect on the Recapitalization Closing Date;
(10) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, the
Shareholders Agreement and any similar agreements which it may enter
into thereafter; provided,
--------
<PAGE>
60
however, that the existence of, or the performance by the Company or
-------
any of its Restricted Subsidiaries of obligations under, any future
amendment to any such existing agreement or under any similar
agreement entered into after the Recapitalization Closing Date shall
only be permitted by this clause (10) to the extent that the terms of
any such amendment or new agreement are not disadvantageous to the
Company or any such Restricted Subsidiary in any material respect;
(11) transactions with customers, clients, suppliers, joint venture
partners or purchasers or sellers of goods or services, in each case
in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with
the terms of the applicable Indenture which are fair to the Company
and its Restricted Subsidiaries, in the reasonable determination of
the Board of Directors of the Company or the senior management
thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party; and
(12) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a
------------------
Change of Control, each Holder shall have the right to require that the Issuer
repurchase such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus any accrued and unpaid interest to the date of
purchase (subject to the right of holders of record on the relevant record date
to receive interest on the relevant interest payment date), in accordance with
the terms contemplated in Section 4.08(b). In the event that at the time of such
Change of Control the terms of the Senior Indebtedness of the Issuer restrict or
prohibit the repurchase of Securities pursuant to this Section, then prior to
the mailing of the notice to Holders provided for in Section 4.08(b) below but
in any event within 30 days following any Change of Control, the Issuer shall
(i) repay in full all such Senior Indebtedness or offer to repay in full all
such Senior Indebtedness and repay such Senior Indebtedness of each lender who
has accepted such offer or (ii) obtain the requisite consent under the
agreements governing such Senior Indebtedness to permit the repurchase of the
Securities as provided for in Section 4.08(b).
<PAGE>
61
(b) Within 30 days following any Change of Control, the Issuer shall
mail a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Issuer to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
any accrued and unpaid interest to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest
on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Issuer
at the address specified in the notice at least three Business Days prior to the
purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Issuer receives not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Issuer
under this Section shall be delivered by the Trustee for cancellation, and the
Issuer shall pay the purchase price plus accrued and unpaid interest, if any, to
the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section, the
Issuer will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in Section
applicable to a Change of Control Offer
<PAGE>
62
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
(f) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Issuer shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.09. Limitation on Assets of Non-Subsidiary Guarantors. The
--------------------------------------------------
Company shall not permit its Restricted Subsidiaries that are not Subsidiary
Guarantors, excluding ChipPAC Assembly and Test (Shanghai) Company, Ltd. and
ChipPAC (Shanghai) Company Ltd. or any successors thereto, to collectively hold
at any one time more than 33 1/3% of the consolidated assets of the Company and
its Restricted Subsidiaries.
SECTION 4.10. Limitation on Sale of the Capital Stock of the Issuer.
------------------------------------------------------
For so long as any of the Securities are outstanding, the Issuer will continue
to be, directly or indirectly, a Wholly Owned Subsidiary of the Company.
SECTION 4.11. Future Guarantors. In the event that, after the Issue
------------------
Date, the Company forms or otherwise acquires, directly or indirectly, any
Restricted Subsidiary, the Company shall cause such Restricted Subsidiary to
Guarantee the Notes pursuant to a Subsidiary Guaranty on the terms and
conditions set forth in the Indenture and the Subsidiary Guaranty Agreement;
provided, however, in the event the Company or a Restricted Subsidiary forms or
- -------- -------
otherwise acquires, directly or indirectly, a Restricted Subsidiary organized
under the laws of a jurisdiction other than the United States and such
jurisdiction prohibits by law, regulation or order such Restricted Subsidiary
from providing a Guarantee, the Company shall use all commercially reasonable
efforts (including pursuing required waivers) over a period up to one year, to
provide such Guarantee; provided further, however, that the Company shall not be
-------- ------- -------
required to use such commercially reasonable efforts with respect to such
subsidiaries for more than a one-year period or such shorter period as the
Company shall determine in good faith that it has used all commercially
reasonable efforts. If the Company or such Restricted Subsidiary is
<PAGE>
63
unable during such period to obtain an enforceable Guarantee in such
jurisdiction, then such Restricted Subsidiary shall not be required to provide a
Guarantee of the Securities pursuant to the Subsidiary Guaranty so long as such
Restricted Subsidiary does not Guarantee any other Indebtedness of the Company
and its Restricted Subsidiaries.
SECTION 4.12. Withholding Taxes. All payments made under or with
------------------
respect to the Securities or under or with respect to the Company Guaranty must
be made free and clear of and without withholding or deduction for or on account
of any present or future tax, duty, levy, impost, assessment or other
governmental charge of whatever nature (including penalties, interest and other
liabilities related thereto) imposed or levied by or on behalf of any
jurisdiction from or through which payment is made or in which the payor is
organized, resident or engaged in business for tax purposes or any province or
territory thereof or by any taxing authority therein (hereinafter "Taxes"),
unless the Issuer or the Company is required to withhold or deduct such Taxes by
law or by the interpretation or administration thereof. If the Issuer or the
Company is so required to withhold or deduct any amount for or on account of
Taxes from any payment made under or with respect to the Securities or under or
with respect to the Company Guaranty, the Issuer or the Company, as the case may
be, will pay such additional amounts ("Additional Amounts") as may be necessary
so that the net amount received by each Holder after such withholding or
deduction (including any withholding or deduction with respect to Additional
Amounts) will not be less than the amount the Holder would have received if such
Taxes had not been withheld or deducted; provided, however, that no Additional
Amounts will be payable with respect to payments made to a Holder (an "Excluded
Holder") to the extent such Holder is subject to such Taxes by reason of its
being connected with the British Virgin Islands or any province or territory
thereof otherwise than by the mere holding of the Securities or the receipt of
payments thereunder or the enforcement of its rights and obligations under the
Securities or the Company Guaranty. The Issuer and the Company will make such
withholding or deduction and remit the full amount deducted or withheld to the
relevant authority as and when required in accordance with applicable law. The
Issuer or the Company will furnish to the Holder, within 30 days after the
payment of any Taxes, certified copies of tax receipts evidencing such payment
by the Issuer or the Company. The Issuer will upon written request of each
Holder (other than an Excluded Holder), reimburse each such Holder for the
amount of (i) any Taxes (including penalties, interest and
<PAGE>
64
expenses arising therefrom or with respect thereto) imposed or levied and paid
by such Holder as a result of payments made under or with respect to the
Securities or under or with respect to the Company Guaranty and (ii) any Taxes
so levied or imposed and paid by such Holder with respect to any reimbursement
under the foregoing clause (i), but excluding any such Taxes on such Holder's
net income, so that the net amount received by such Holder after such
reimbursement will not be less than the net amount the Holder would have
received if Taxes (other than such Taxes on such Holder's net income) on such
reimbursement had not been imposed.
At least 30 days prior to each date on which payment under or with
respect to the Securities or the Company Guaranty is due and payable (unless
such obligation to pay Additional Amounts arises shortly before or after the
30th day prior to such date, in which case promptly thereafter), if the Issuer
or the Company is obligated to pay Additional Amounts with respect to such
payment, the Issuer or the Company will deliver to the Trustee an Officers'
Certificate stating the fact that such Additional Amounts will be payable and
the amounts so payable and setting forth such other information as necessary to
enable the Trustee to pay such Additional Amounts to Holders of the Securities
on the payment date.
The Issuer or the Company will pay any present or future stamp, court
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise in any jurisdiction from the execution, delivery, enforcement
or registration of the Securities or the Company Guaranty, the Indenture or any
other document or instrument in relation thereof, or the receipt of any payments
with respect to the Securities or the Company Guaranty, excluding such taxes,
charges or similar levies imposed by any jurisdiction other than (i) the British
Virgin Islands, (ii) any other jurisdiction in which any of the Issuer or the
Company is organized, resident or engaged in business for tax purposes, (iii)
any jurisdiction in which any successor to the Issuer or the Company is
organized, resident or engaged in business for tax purposes or (iv) any
jurisdiction in which a paying agent is located. In addition, the Issuer and
the Company will agree to indemnify the Holders (on an after-tax basis) for any
such taxes paid by such Holders.
The obligations described under this heading shall survive any
termination, defeasance or discharge of the Indenture.
<PAGE>
65
SECTION 4.13. Compliance Certificate. The Company shall deliver to
-----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA (S) 314(a)(4).
SECTION 4.14. Further Instruments and Acts. Upon request of the
-----------------------------
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company, Issuer, and Subsidiary Guarantors May
---------------------------------------------------
Merge or Transfer Assets. (a) Neither the Issuer nor the Company shall
- -------------------------
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of related transactions, all or substantially all its
assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
British Virgin Islands or the United States of America, any State thereof
or the District of Columbia and the Successor Company (if not the Company
or the Issuer) shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Issuer or Company, as applicable, under the
Indenture and the Company Guaranty or the Securities, as applicable;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
<PAGE>
66
(3) immediately after giving effect to such transaction, (A) the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a) or (B) the Consolidated Coverage
Ratio for the Successor Company and its Restricted Subsidiaries would be
greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such transaction;
(4) the Issuer or Company, as applicable, shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and any supplemental indenture
comply with this Indenture;
(5) In the event that the merging corporation (i.e., the Company or
the Issuer, as applicable) is organized and existing under the laws of the
British Virgin Islands and the Successor Company is organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia or in the event that the merging corporation is
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company is
organized and existing under the laws of the British Virgin Islands (any of
the foregoing events are referred to herein as a "Foreign Jurisdiction
Merger"), the Issuer or the Company, as applicable, shall have delivered to
the Trustee an Opinion of Counsel to the effect that the Holders will not
recognize income, gain or loss for U.S. Federal income tax purposes as a
result of such transaction and will be subject to U.S. Federal income tax
on the same amounts and at the same times as would have been the case if
such transactions had not occurred; and
(6) In the event of a Foreign Jurisdiction Merger, the Issuer or the
Company, as applicable, shall have delivered to the Trustee an Opinion of
Counsel in the British Virgin Islands (or other applicable jurisdiction) to
the effect that (A) any payment of interest or principal under or with
respect to the Notes or the Guaranties will, after the consolidation,
merger, conveyance, transfer or lease of assets, be exempt from the Taxes
described under Section 4.12, and prepared by the Issuer and (B) no other
taxes on income (including capital gains) will be payable under the laws of
the British Virgin Islands or any other jurisdiction where the Successor
Company is or becomes
<PAGE>
67
organized, resident or engaged in business for tax purposes in respect of
the acquisition, ownership or disposition of the Notes, including the
receipt of interest or principal thereon, provided that such Holder does
not use or hold, and is not deemed to use or hold the Notes in carrying on
a business in the British Virgin Islands or other jurisdiction where the
Successor Company is or becomes organized, resident or engaged in business
for tax purposes.
provided, however, that clause (3) above shall not apply (X) if, in the good
- -------- -------
faith determination of the Board of Directors, whose determination shall be
evidenced by a resolution of the Board of Directors, the principal purpose and
effect of such transaction is to change the jurisdiction of incorporation of the
Issuer or the Company or (y) in the case of a merger of the Issuer or the
Company with or into a Wholly Owned Subsidiary of the Company. In addition,
notwithstanding clauses (2)-(6) above, the Issuer may merge into ChipPAC
Operating Limited and the Company may merge into ChipPAC, Inc, in each case on
the Recapitalization Closing Date.
The Successor Company shall be the successor to the Company or the
Issuer, as the case may be, and shall succeed to, and be substituted for, and
may exercise every right and power of, the Issuer or the Company under the
Indenture, and the predecessor Issuer or Company, except in the case of a lease,
shall be automatically released from its obligations under the Company Guaranty,
the Securities and this Indenture.
(b) The Company will not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person unless:
(1) the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of
the United States of America, or any State thereof or the District of
Columbia, and such Person shall expressly assume, by executing a
supplemental indenture or Guaranty Agreement, as applicable, all the
obligations of such Subsidiary under the Indenture or its Subsidiary
Guaranty and under the Securities and this Indenture;
<PAGE>
68
(2) immediately after giving effect to such trans action or
transactions on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time
of such transaction), no Default shall have occurred and be continuing; and
(3) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture or Guaranty Agreement, if any,
complies with this Indenture.
The provisions of clauses (1) and (2) above shall not apply to any one or more
transactions involving a Subsidiary Guarantor which constitute an Asset
Disposition if the Company has complied with the applicable provisions of
Section 4.06.
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
------------------
(1) the Issuer defaults in any payment of interest or any Additional
Amounts on any Security when the same becomes due and payable, whether or
not such payment shall be prohibited by Article 10, and such default
continues for a period of 30 days;
(2) the Issuer (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article 10 or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities,
whether or not such redemption or purchase shall be prohibited by Article
10;
(3) the Company, the Issuer or any Subsidiary Guarantor fails to
comply with Section 5.01;
(4) the Company or any Restricted Subsidiary fails to comply with
Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.11 (other
than a failure to
<PAGE>
69
purchase Securities when required under Section 4.06 or 4.08) and such
failure continues for 30 days after the notice specified below;
(5) the Company or any Restricted Subsidiary fails to comply with any
of its agreements in the Securities or this Indenture (other than those
referred to in clause (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) Indebtedness of the Company, the Issuer or any Significant
Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $10.0
million, or its foreign currency equivalent at the time;
(7) the Company, the Issuer or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company, the Issuer or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, the Issuer or any
Significant Subsidiary or for any substantial part of its property; or
<PAGE>
70
(C) orders the winding up or liquidation of the Company, the
Issuer or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10.0 million or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary, remains outstanding for
a period of 60 days following the entry of such judgment or decree and is
not discharged, waived or the execution thereof stayed within 10 days after
the notice specified below; or
(10) the Company Guaranty or any Subsidiary Guaranty of a Significant
Subsidiary ceases to be in full force and effect (other than in accordance
with the terms of the Company Guaranty or such Subsidiary Guaranty) or any
Significant Subsidiary that is a Subsidiary Guarantor denies or disaffirms
its obligations under its Subsidiary Guaranty.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clauses (4), (5), or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Issuer and the Company of the Default and the
Issuer or the Company does not cure such Default within the time specified after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
The Issuer or the Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice in the form of an Officers'
Certificate of
<PAGE>
71
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in Section 6.01(7) or (8) with respect to the Company
or the Issuer) occurs and is continuing, the Trustee by notice to the Company or
the Issuer, or the Holders of at least 25% in principal amount of the Securities
by notice to the Company or the Issuer and the Trustee, may declare the
principal of and accrued but unpaid interest on all the Securities to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default specified in Section 6.01(7) or (8)
with respect to the Company or the Issuer occurs, the principal of and interest
on all the Securities shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any
Securityholders. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
------------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
<PAGE>
72
principal of or interest on a Security (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to this Indenture or
(iii) a Default in respect of a provision that under Section 9.02 cannot be
amended without the consent of each Securityholder affected. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
--------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
reasonably satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
--------------------
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction
<PAGE>
73
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuer for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Issuer, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
----------
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
<PAGE>
74
SECOND: to holders of Senior Indebtedness of the Issuer to the extent
required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Issuer.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Issuer shall mail to each Securityholder and the Trustee a notice that
states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuer (to the
--------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Issuer (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
<PAGE>
75
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgement made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
<PAGE>
76
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
-----------------
document believed by it to be genuine and to have been signed or presented by
the proper per son. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
-------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it here under
in good faith and in accordance with the advice or opinion of such counsel.
<PAGE>
77
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuer's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuer or the Company in the Indenture or in any document
issued in connection with the sale of the Securities or in the Securities other
than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
-----------------------------
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to May 15 in each year, the Trustee shall
mail to each Securityholder a brief report dated as May 15 that complies with
TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Issuer agrees to notify promptly the Trustee whenever
the Securities become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to
--------------------------
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee
<PAGE>
78
upon request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuer shall indemnify the Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Issuer promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not
relieve the Issuer of its obligations hereunder. The Issuer shall defend the
claim and the Trustee may have separate counsel and the Issuer shall pay the
fees and expenses of such counsel. The Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Issuer's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Issuer's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Issuer, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
----------------------
time by so notifying the Issuer. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
<PAGE>
79
If the Trustee resigns, is removed by the Issuer or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
<PAGE>
80
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuer are
out standing if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Issuer delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Issuer or the Company irrevocably deposits with the Trustee funds sufficient
to pay at maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than Securities
replaced pursuant to Section 2.07), and if in either case the Issuer pays all
other sums payable hereunder by the Issuer, then this Indenture shall, subject
to Sections 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the Issuer
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Issuer.
<PAGE>
81
(b) Subject to Sections 8.01(c) and 8.02, the Issuer or the Company
at any time may terminate (i) all the obligations of the Issuer and the Company
under the Securities and this Indenture ("legal defeasance option") or (ii) the
Company's obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08,
4.09, 4.10 and 4.11 and the operation of Sections 6.01(4), 6.01(6), 6.01(7),
6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect
only to Significant Subsidiaries) and the limitations contained in Sections
5.01(a)(3) ("covenant defeasance option"). The Issuer and the Company may
exercise the legal defeasance option notwithstanding any prior exercise of the
covenant defeasance option.
If the Issuer or the Company exercises the legal defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
with respect thereto. If the Issuer or the Company exercises the covenant
defeasance option, payment of the Securities may not be accelerated because of
an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and
6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to
Significant Subsidiaries) or because of the failure of the Company to comply
with Section 5.01(a)(3). If the Issuer or the Company exercises the legal
defeasance option or the covenant defeasance option, the Company and each
Subsidiary Guarantor shall be released from all their obligations with respect
to the Company Guaranty or its Subsidiary Guaranty, as the case may be.
Upon satisfaction of the conditions set forth herein and upon request
of the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuer's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. Each of the Issuer and the
------------------------
Company may exercise its legal defeasance option or its covenant defeasance
option only if:
(1) the Issuer or the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of principal
of and
<PAGE>
82
interest on the Securities to maturity or redemption, as the case may be;
(2) the Issuer or the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Sections 6.01(7) or (8) with respect to the
Issuer occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Issuer and is not prohibited by Article 10;
(5) the Issuer or the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Issuer or the
Company shall have delivered to the Trustee an Opinion of Counsel stating
that (i) the Issuer or the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the date
of this Indenture there has been a change in the applicable Federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable U.S. Federal income tax law)
and (iii) an Opinion of Counsel in each of the British Virgin Islands and
any other jurisdiction in which the Issuer or the Company is organized,
resident or engaged in
<PAGE>
83
business for tax purposes to the effect that (A) Holders of the Notes will
not recognize income gain or loss for purposes of the tax laws of such
jurisdiction as a result of such legal defeasance or covenant defeasance,
as applicable, and will be subject for purposes of the tax laws of such
jurisdiction to income tax on the same amounts, in the same manner and at
the same times as would have been the case if such legal defeasance or
covenant defeasance had not occurred and (B) payments from the defeasance
trust will be free of exempt from any and all withholding and other taxes
of whatever nature of such jurisdiction or any political subdivision or
taxing authority thereof or therein, except in the case of a payment made
to a Holder which is subject to such tax by reason of its carrying on a
business in the British Virgin Islands or such other jurisdiction;
(7) in the case of the covenant defeasance option, the Issuer or the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(8) the Issuer or the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as contemplated
by this Article 8 have been complied with.
Before or after a deposit, the Issuer may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
--------------------------
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Issuer. The Trustee and the Paying Agent
-------------------
shall promptly turn over to the Issuer
<PAGE>
84
upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuer upon request any money held by them for the
payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Issuer for
payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Issuer
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Securities and the Company's obligations under this Indenture
and the Company Guaranty shall be revived and reinstated as though no deposit
had occurred pursuant to this Article 8 until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Issuer has made
-------- -------
any payment of interest on or principal of any Securities because of the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company, the Issuer
--------------------------
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
<PAGE>
85
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities, including any
Guaranties, or to secure the Securities;
(5) to add to the covenants of the Company and the Restricted
Subsidiaries of the Company for the benefit of the Holders or to surrender
any right or power herein conferred upon the Company and the Restricted
Subsidiaries of the Company;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to secure the Notes; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 or 12 (or Article 3 of the Subsidiary
Guaranty Agreement) of any holder of Senior Indebtedness then outstanding unless
the holders of such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Issuer
shall mail to Securityholders a notice briefly describing such amendment.
Notwithstanding the foregoing sentence, the Issuer shall not be required to mail
to Securityholders a notice with respect to the First Supplemental Indenture,
dated as of the Recapitalization Closing Date, by and among ChipPAC
International Company Limited, ChipPAC, Inc. and the Trustee, pursuant to which
each of ChipPAC International Company Limited and ChipPAC, Inc. assume
obligations under this Indenture. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section.
<PAGE>
86
SECTION 9.02. With Consent of Holders. The Company, the Issuer and
-----------------------
the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange for the
Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may or shall be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 6.04 or 6.07 or the second sentence of
this Section;
(7) make any change in any Guaranty (including the subordination
provisions of such Guaranty) that would adversely affect the
Securityholders; or
(8) make any change in the provisions of paragraph 6 of the
Securities.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
Notwithstanding this Section 9.02, any amendment to Article 10 or 12
(or Article 3 of the Subsidiary Guaranty Agreement) that adversely affects the
rights of any Securityholder under Article 10 or 12 (or Article 3 of the
Subsidiary Guaranty Agreement) will require the consent of Holders of at least
75% in aggregate principal amount of the Securities then outstanding. An
amendment under this Section may not make any change that adversely affects the
<PAGE>
87
rights under Article 10 or 12 (or Article 3 of the Subsidiary Guaranty
Agreement) of any holder of Senior Indebtedness then outstanding unless the
holders of such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Issuer
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
-------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
<PAGE>
88
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company, the Issuer or the Trustee so determines,
the Issuer in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Issuer nor any
-------------------
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement To Subordinate. The Issuer agrees, and each
------------------------
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment of all Obligations with
respect to Senior Indebtedness of the Issuer and that the subordination is for
the benefit of and enforceable by the holders of such Senior Indebtedness. The
Securities shall in all respects rank pari passu with all other Senior
---- -----
Subordinated Indebtedness of the Issuer and only Indebtedness of the Issuer
which is Senior Indebtedness shall rank senior to the Securities in accordance
with the provisions set forth herein. All
<PAGE>
89
provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of the Issuer to creditors upon a total or partial
liquidation or a total or partial dissolution of the Issuer or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Issuer or its property:
(1) the holders of Senior Indebtedness of the Issuer shall be
entitled to receive payment in full in cash of all Obligations with respect
to such Senior Indebtedness (including all interest accruing subsequent to
the filing of a petition in bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) before Securityholders shall be
entitled to receive any payment or distribution with respect to the
Securities; and
(2) until such Senior Indebtedness is paid in full in cash, any
payment or distribution to which Securityholders would be entitled but for
this Article 10 shall be made to holders of such Senior Indebtedness as
their interests may appear, except that Securityholders may receive shares
of stock and any debt securities that are subordinated to such Senior
Indebtedness, and to any debt securities received by holders of Senior
Indebtedness, to at least the same extent as the Securities are
subordinated to Senior Indebtedness of the Issuer.
SECTION 10.03. Default on Senior Indebtedness. The Issuer may not pay
------------------------------
(in cash, property or other assets) the principal of or interest on the
Securities or make any deposit pursuant to Section 8.01 and may not repurchase,
redeem or (except for Securities delivered to the Trustee pursuant to the second
sentence of paragraph 6 of the Securities) otherwise retire any Securities
(collectively, "pay the Securities") if either of the following occurs (each, a
"Payment Default") (i) any Obligations with respect to Senior Indebtedness of
the Issuer are not paid in full when due or (ii) any other default on Senior
Indebtedness of the Issuer occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded in writing or (y) such Senior Indebtedness has been paid in full in
cash; provided, however, that the Issuer may pay the Securities without regard
-------- -------
to the foregoing if the Issuer and
<PAGE>
90
the Trustee receive written notice approving such payment from the
Representative of such Senior Indebtedness. During the continuance of any
default (other than a default described in clause (i) or (ii) of the preceding
sentence) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Issuer may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage Notice")
of such default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because no defaults continue in existence which
would permit the acceleration of the Designated Senior Indebtedness at such
time) or (iii) because such Designated Senior Indebtedness has been repaid in
full in cash. Notwithstanding the provisions described in the immediately
preceding sentence, unless the holders of such Designated Senior Indebtedness or
the Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, or any Payment Default otherwise exists, the
Issuer may resume payments on the Securities after termination of such Payment
Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period; provided, however, that if
-------- -------
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness (other than the Bank Indebtedness),
the Representative of the Bank Indebtedness may give another Blockage Notice
within such period; provided further, however, that in no event may the total
---------------- -------
number of days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 360-consecutive-day period. For
purposes of this Section, no default or event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a subsequent
Payment Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been
<PAGE>
91
cured or waived for a period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
-------------------------------------
the Securities is accelerated because of an Event of Default, the Issuer or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representatives) of the acceleration. If any Designated Senior
Indebtedness is outstanding at the time of such acceleration, neither the
Company nor any Subsidiary Guarantor may pay the Securities until five Business
Days after the Representatives of all the issues of Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Securities only if the Indenture otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Securityholders that because of this Article 10 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of the Issuer and pay it over to them
as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
-----------
Issuer is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Issuer and Securityholders, a payment by the Issuer on such Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the relative
---------------
rights of Securityholders and holders of Senior Indebtedness of the Issuer.
Nothing in this Indenture shall:
(1) impair, as between the Issuer and Securityholders, the
obligation of the Issuer, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of
<PAGE>
92
the Issuer to receive distributions otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired. No right of any
---------------------------------
holder of Senior Indebtedness of the Issuer to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Issuer or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Issuer, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
--------
however, that, if an issue of Senior Indebtedness of the Issuer has a
- -------
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Issuer with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 10 with respect to any Senior Indebtedness of the Issuer which may
at any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Issuer, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
----------------------------------------------------
Right To Accelerate. The failure to make a payment pursuant to the Securities
- -------------------
by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Secu-
<PAGE>
93
rityholders or the Trustee to accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
-----------------------------
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Issuer or any holder of Senior
Indebtedness of the Issuer or any other creditor of the Issuer.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
------------------------
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Issuer to participate in
any payment or distribution pursuant to this Article 10, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 10, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
-----------------------------------
Securityholder by accepting a Security author-
<PAGE>
94
izes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination between
the Securityholders and the holders of Senior Indebtedness of the Issuer as
provided in this Article 10 and appoints the Trustee as attorney-in-fact for any
and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- ------------
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Issuer or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Issuer shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Securityholder by accepting a Security
- ------------------------
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Issuer, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE 11
Company Guaranty
----------------
SECTION 11.01. Guaranty. The Company hereby unconditionally and
--------
irrevocably guarantees to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of and interest on the
Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Issuer under this Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Issuer under this Indenture and
the Securities (all the foregoing being hereinafter collectively called the
"Obligations"). The Company further agrees that the Obligations may be extended
or renewed, in whole or in part, without notice or further assent from the
Company and that
<PAGE>
95
the Company will remain bound under this Article 11 notwithstanding any
extension or renewal of any Obligation.
The Company waives presentation to, demand of, payment from and
protest to the Issuer of any of the Obligations and also waives notice of
protest for nonpayment. The Company waives notice of any default under the
Securities or the Obligations. The obligations of the Company hereunder shall
not be affected by (a) the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any right or remedy against the Issuer or any
other Person under this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any such claim, demand, right or
remedy; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) any change in the ownership of the Company.
The Company further agrees that its Guaranty herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Obligations.
The Company Guaranty is, to the extent and in the manner set forth in
Article 12, subordinated and subject in right of payment to the prior payment in
full of the principal of and premium, if any, and interest on all Senior
Indebtedness of the Company, and the Company Guaranty is made subject to such
provisions of this Indenture.
Except as expressly set forth in Section 8.01(b) the obligations of
the Company hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Company herein shall not be discharged or impaired or otherwise affected by
the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any remedy under this Indenture, the
<PAGE>
96
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of the Company or would otherwise operate as a discharge of the Company as
a matter of law or equity.
The Company further agrees that its Guaranty herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Issuer or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Company by virtue hereof, upon the failure of the Issuer to pay the principal of
or interest on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Company hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
The Company agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full of all Obligations and all obligations to which the Obligations are
subordinated as provided in Article 12 further agrees that, as between it, on
the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Obligations Guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of the Company's Guaranty, herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Company for the purposes of this Section.
<PAGE>
97
The Company also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
SECTION 11.02. Successors and Assigns. This Article 11 shall be
----------------------
binding upon the Company and its successors and assigns and shall enure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.03. No Waiver. Neither a failure nor a delay on the part of
---------
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.
SECTION 11.04. Modification. No modification, amendment or waiver of
------------
any provision of this Article 11, nor the consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in the same, similar or other circumstances.
ARTICLE 12
Subordination of Company Guaranty
---------------------------------
SECTION 12.01. Agreement To Subordinate. The Company agrees, and each
------------------------
Securityholder by accepting a Security agrees, that the Obligations of the
Company are subordinated in right of payment, to the extent and in the manner
provided in this Article 12, to the prior payment of
<PAGE>
98
all Obligations with respect to Senior Indebtedness of the Company and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness. The Obligations of the Company shall in all respects rank
pari passu with all other Senior Subordinated Indebtedness of the Company and
- ---- -----
only Senior Indebtedness of the Company (including the Company's Guaranty of
Senior Indebtedness of the Issuer) shall rank senior to the Obligations of the
Company in accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) the holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash of all Obligations with respect
to such Senior Indebtedness (including all interest accruing subsequent to
the filing of a petition in bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) before Securityholders shall be
entitled to receive any payment or distribution with respect to any
Obligations of the Company; and
(2) until the Senior Indebtedness of the Company is paid in full in
cash, any payment or distribution to which Securityholders would be
entitled but for this Article 12 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Securityholders may
receive shares of stock and any debt securities of the Company that are
subordinated to Senior Indebtedness, and to any debt securities received by
holders of Senior Indebtedness, of the Company to at least the same extent
as the Obligations of the Company are subordinated to Senior Indebtedness
of the Company.
SECTION 12.03. Default on Senior Indebtedness of the Company. The
---------------------------------------------
Company may not make any payment (in cash, property or other assets) pursuant to
any of its Obligations or repurchase, redeem or otherwise retire or defease any
Securities or other Obligations (collectively, "pay its Guaranty") if either of
the following Payment Defaults occurs: (i) any Obligations with respect to
Senior Indebtedness of the Company are not paid in full when due or
<PAGE>
99
(ii) any other default on Senior Indebtedness of the Company occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded in writing or (y) such Senior Indebtedness has
been paid in full in cash; provided, however, that the Company may pay its
-------- -------
Guaranty without regard to the foregoing if the Company and the Trustee receive
written notice approving such payment from the Representatives of such Senior
Indebtedness. The Company may not pay its Guaranty during the continuance of any
Payment Blockage Period after receipt by the Company and the Trustee of a
Payment Notice under Section 10.03. Notwithstanding the provisions described in
the immediately preceding sentence (but subject to the provisions contained in
the first sentence of this Section), unless the holders of Designated Senior
Indebtedness giving such Payment Notice or the Representative of such holders
shall have accelerated the maturity of such Designated Senior Indebtedness, the
Company may resume payments pursuant to its Guaranty after termination of such
Payment Blockage Period.
SECTION 12.04. Demand for Payment. If a demand for payment is made on
------------------
the Company pursuant to Article 11, the Trustee shall promptly notify the
holders of the Designated Senior Indebtedness (or their Representatives) of such
demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Securityholders that because of this Article 12 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of the relevant Senior Indebtedness and pay it over to them or
their Representatives as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of the
-----------
Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 12 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on such Senior
Indebtedness.
<PAGE>
100
SECTION 12.07. Relative Rights. This Article 12 defines the relative
---------------
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay the
Obligations to the extent set forth in Article 11 or the Company Guaranty;
or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by the Company under the Obligations,
subject to the rights of holders of Senior Indebtedness of the Company to
receive distributions otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by Issuer. No right
-------------------------------------------
of any holder of Senior Indebtedness of the Company to enforce the subordination
of the Obligations of the Company shall be impaired by any act or failure to act
by the Company or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 12.03, the Trustee or Paying Agent may continue to make payments on the
Company Guaranty and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less than
two Business Days prior to the date of such payment, a Trust Officer of the
Trustee receives written notice satisfactory to it that payments may not be made
under this Article 12. The Issuer, the Company, the Registrar or co-registrar,
the Paying Agent, a Representative or a holder of Senior Indebtedness of the
Company may give the notice; provided, however, that, if an issue of Senior
-------- -------
Indebtedness of the Company has a Representative, only the Representative may
give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not the Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of the Company which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in
<PAGE>
101
this Article 12 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under a Guaranty or
------------------------------------------------------
Limit Right To Demand Payment. The failure to make a payment pursuant to a
- -----------------------------
Guaranty by reason of any provision in this Article 12 shall not be construed as
preventing the occurrence of a default under such Guaranty. Nothing in this
Article 12 shall have any effect on the right of the Securityholders or the
Trustee to make a demand for payment on the Company pursuant to Article 11 or
the relevant Guaranty.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
------------------------
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 12. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article 12, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness of the Company held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article 12, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.01 and 7.02
shall be applicable to
<PAGE>
102
all actions or omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
-----------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 12 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness of the Company. The Trustee shall not be deemed to owe any
- ---------------------------
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of such Senior Indebtedness shall be entitled by virtue of this
Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Securityholder by accepting a Security
- ------------------------
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE 13
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls. If any provision of
----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail or by telex,
telecopier or overnight air
<PAGE>
103
courier guaranteeing next day delivery, addressed as follows:
if to the Issuer or any Guarantor:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, CA 95054
Attention of Chief Financial Officer
Telecopy: 408-486-5900
if to the Trustee:
Firstar Bank of Minnesota, N.A.
101 East Fifth Street
St. Paul, MN 55101
Attention of Corporation Trust Department
The Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuer, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuer to the Trustee to take or refrain
from taking any action under this Indenture, the Issuer shall furnish to the
Trustee:
<PAGE>
104
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining whether
---------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Issuer, the Company or by
any Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Issuer or the Company shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
<PAGE>
105
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the Securities shall
-------------
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 13.10. No Recourse Against Others. A director, officer,
--------------------------
employee or stockholder, as such, of the Issuer or the Company shall not have
any liability for any obligations of the Issuer or the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Issuer and the
----------
Company in this Indenture and the Securities shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted
<PAGE>
106
for convenience of reference only, are not intended to be
<PAGE>
107
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
SECTION 13.14. Agent for Service; Submission to Jurisdiction; Waiver
-----------------------------------------------------
of Immunities. By the execution and delivery of this Indenture, the Issuer and
- -------------
the Company each (i) acknowledges that it has, by separate written instrument,
irrevocably designated and appointed CT Corporation System (and any successor
entity) ("CT"), 1633 Broadway, New York, New York 10019, as its authorized agent
upon which process may be served in any suit or proceeding arising out of or
relating to this Indenture, the Securities or the Guaranties that may be
instituted in any Federal or state court located in the Borough of Manhattan in
The City of New York or brought by the Trustee (whether in its individual
capacity or in its capacity as Trustee hereunder) or any Holder, and
acknowledges that CT has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding, and (iii) agrees
that service of process upon CT and written notice of said service to the Issuer
or the Company, shall be deemed in every respect effective service of process
upon the Issuer or the Company, as the case may be, in any such suit or
proceeding. The Issuer and the Company each further agree to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
CT in full force and effect so long as this Indenture shall be in full force and
effect.
The Issuer and the Company each hereby irrevocably and unconditionally
waive, to the fullest extent they may legally effectively do so, any objection
which they may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Indenture, the Securities or
the Guaranties in any Federal or state court located in the Borough of Manhattan
in The City of New York. The Issuer and the Company each hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
To the extent that the Issuer and the Company has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity
<PAGE>
108
in this Indenture and the Securities, to the extent permitted by law.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
CHIPPAC INTERNATIONAL LIMITED,
by /s/ Tony Lin
________________________
Name: Tony Lin
Title: Chief Financial Officer
CHIPPAC MERGER CORP.,
by /s/ David Dominik
________________________
Name: David Dominik
Title: Chief Executive Officer
FIRSTAR BANK OF MINNESOTA, N.A.,
by /s/ Frank Leslie
________________________
Name: Frank Leslie
Title: Vice President
<PAGE>
Exhibit 4.3
EXECUTION COPY
================================================================================
CHIPPAC INTERNATIONAL COMPANY LIMITED,
Issuer
CHIPPAC, INC.,
Guarantor
12 3/4% Senior Subordinated Notes Due 2009
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 5, 1999
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
================================================================================
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 5,
1999, between ChipPAC International Company Limited, a British
Virgin Islands corporation (the "Issuer"), ChipPAC, Inc., a
California corporation (the "Company") and Firstar Bank of
Minnesota, N.A., as trustee (the "Trustee"), amends and
supplements the Indenture (as defined below).
RECITALS
1. ChipPAC International Limited (the "Predecessor Issuer"), ChipPAC
Merger Corp. ("MergerCo") and the Trustee entered into the Indenture, dated as
of July 29, 1999 (the "Indenture), relating to the Predecessor Issuer's 12 3/4%
Senior Subordinated Notes Due 2009 (the "Notes"); and
2. The Predecessor Issuer has merged with and into a wholly owned
subsidiary of ChipPAC, Inc. as contemplated by the Indenture (the "First
Merger"), and the surviving corporation has been renamed ChipPAC International
Company Limited; and
3. MergerCo has merged with and into the Company as contemplated by
the Indenture (the "Second Merger").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally binding, the parties hereto hereby
agree as follows:
Section 1. Capitalized terms used herein and not otherwise defined
herein are used as defined in the Indenture.
Section 2. The Issuer hereby acknowledges and agrees that, by virtue
of the First Merger and by operation of law, it has become a party to the
Indenture and has assumed all of the liabilities and obligations of the
Predecessor Issuer under the Indenture and the Notes in accordance with Article
5 of the Indenture.
Section 3. The Company hereby acknowledges and agrees that, by virtue
of the Second Merger and by operation of law, it has become a party to the
Indenture and has assumed all of the liabilities and obligations of MergerCo
under the Indenture, the Company Guaranty contained therein and the Notes in
accordance
<PAGE>
2
with Article 5 of the Indenture.
Section 4. Pursuant to Section 9.05 of the Indenture, the Issuer and
the Company shall issue and the Trustee shall authenticate new Notes that
reflect this First Supplemental Indenture.
Section 5. This First Supplemental Indenture shall be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
Section 6. This First Supplemental Indenture may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, but all of which shall together constitute but one and the same
instrument.
Section 7. This First Supplemental Indenture is an amendment
supplemental to the Indenture and said Indenture and this First Supplemental
Indenture to the Indenture shall henceforth be read together.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be executed as of the day and year first above
written.
CHIPPAC INTERNATIONAL COMPANY
LIMITED,
by /s/ P. J. Kim
________________________
Name: /s/ P. J. Kim
Title: Secretary
CHIPPAC, INC.,
by /s/ Tony Lin
________________________
Name: Tony Lin
Title: Chief Financial Officer
FIRSTAR BANK OF MINNESOTA,
N.A., as Trustee,
by /s/ Frank Leslie
________________________
Name: Frank Leslie
Title: Vice President
<PAGE>
Exhibit 4.4
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHER WISE TRANSFERRED,
ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
<PAGE>
2
No. 001 $150,000,000
CUSIP NO.: 169659AA7
ISIN NO.: US169659AA70
12 3/4% Senior Subordinated Notes Due 2009
ChipPAC International Company Limited , a British Virgin Islands
corporation, promises to pay to CEDE & CO., or registered assigns, the principal
sum of ONE HUNDRED AND FIFTY MILLION UNITED STATES DOLLARS on August 1, 2009.
Interest Payment Dates: August 1 and February 1.
Record Dates: July 15 and January 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: August 5, 1999
CHIPPAC INTERNATIONAL COMPANY
LIMITED,
by /s/ P.J. Kim
------------------------
Name: P.J. Kim
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture.
by /s/ Frank Leslie
----------------------------------
Authorized Signatory
<PAGE>
3
12 3/4% Senior Subordinated Note Due 2009
1. Interest
--------
ChipPAC International Company Limited, a British Virgin Islands
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above; provided, however, that if a Registration Default (as defined in
-----------------
the Registration Rights Agreement) occurs, additional interest will accrue on
this Security at a rate of 0.50% per annum from and including the date on which
any such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Issuer will pay interest
semiannually on August 1 and February 1 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 29, 1999. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay
interest on overdue principal at the rate borne by the Securities plus 1% per
annum, and it shall pay interest on overdue installments of interest at the same
rate to the extent lawful.
2. Method of Payment
-----------------
The Issuer will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the July 15 or January 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuer will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by
a Global Security (including principal, premium and interest) will be made by
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Issuer will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
-------- -------
payments on a certificated
<PAGE>
4
Security will be made by wire transfer to a U.S. dollar account maintained by
the payee with a bank in the United States if such Holder elects payment by wire
transfer by giving written notice to the Trustee or the Paying Agent to such
effect designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, Firstar Bank of Minnesota, N.A., a Delaware banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Issuer
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Issuer or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
---------
The Issuer issued the Securities under an Indenture dated as of July
29, 1999 (the "Indenture"), among the Issuer, the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the
- ------
"Act"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms. The Issuer's obligations under the Securities are
guaranteed by the Company and each of the Subsidiary Guarantors.
The Securities are general unsecured obligations of the Issuer. The
Issuer shall be entitled, subject to its compliance with Section 4.03 of the
Indenture, to issue Additional Securities pursuant to Section 2.13 of the
Indenture. The Initial Securities issued on the Issue Date, any Additional
Securities and all Exchange Securities or Private Exchange Securities issued in
exchange therefor will be treated as a single class for all purposes under the
Indenture. The Indenture limits, among other things (i) the incurrence of
additional debt by the Company and its Restricted Subsidiaries, (ii) the payment
of dividends on capital stock of the Company and the purchase, redemption or
retirement of capital stock or subordinated indebtedness, (iii) certain
transactions with affiliates, (iv) sales of
<PAGE>
5
assets, including capital stock of subsidiaries, and (v) certain consolidations,
mergers and transfers of assets. The Indenture also prohibits certain
restrictions on distributions from subsidiaries. All of these limitations and
prohibitions, however, are subject to a number of important qualifications
contained in the Indenture.
5. Optional Redemption
-------------------
Except as set forth in the next paragraph of this Section 5 and in
Section 6, the Securities may not be redeemed prior to August 1, 2004. On and
after that date, the Issuer may redeem the Securities in whole at any time or in
part from time to time at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date):
if redeemed during the 12-month period beginning August 1,
Period Percentage
------ ----------
2004......................................... 106.375%
2005......................................... 104.250
2006......................................... 102.125
2007 and thereafter.......................... 100.000%
In addition, at any time prior to August 1, 2002, the Issuer may at
its option on one or more occasions redeem up to 35% of the aggregate principal
amount of Securities with the proceeds of one or more Equity Offerings, at any
time or from time to time, at a redemption price (expressed as a percentage of
principal amount) of 112 3/4% of the principal amount thereof, plus accrued
interest to redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date); provided, however, that:
-------- -------
(1) at least 65% of such aggregate principal amount of Securities
(which includes Additional Securities, if any) remains outstanding
immediately after the occurrence of each such redemption (other than the
Securities held, directly or indirectly, by the Issuer or its Affiliates);
and
(2) each such redemption occurs within 60 days after the date of the
related Equity Offering.
<PAGE>
6
The Securities may be redeemed, at the option of the Issuer, at any
time as a whole but not in part, on not less than 30 nor more than 60 days'
notice, at 100% of the principal amount thereof, plus accrued and unpaid
interest (if any) to the date of redemption (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), in the event the Issuer has become or would become
obligated to pay, on the next date on which any amount would be payable with
respect to the Securities, any Additional Amounts as a result of a change in or
an amendment to the laws (including any regulations promulgated thereunder) of
the British Virgin Islands (or any political subdivision or taxing authority
thereof or therein), or any change in or amendment to any official position
regarding the application or interpretation of such laws or regulations, which
change or amendment is announced or becomes effective on or after the Issue
Date; provided, however, that (i) no such notice of redemption may be given
-------- -------
earlier than 60 days prior to the earliest date on which Additional Amounts are
due and payable in respect of the Notes and (ii) at the time any such redemption
notice is given, such obligation to pay Additional Amounts remains in effect.
Prior to giving any notice of redemption pursuant to this provision, the Issuer
will deliver to the applicable Trustee (i) an Officers' Certificate stating that
it is entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to its right to so redeem have occurred
and (ii) an Opinion of Counsel in the British Virgin Islands to the effect that
the Issuer has or will become obligated to pay Additional Amounts as a result of
such amendment or change.
In the case of any partial redemption, selection of the Securities for
redemption will be made by the Trustee, on a pro rata basis, by lot or by such
--- ----
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Security of U.S. $1,000 in original principal amount or
less shall be redeemed in part. If any Security is to be redeemed in part only,
the notice of redemption relating to such Security shall state the portion of
the principal amount thereof to be redeemed. A new Security in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security.
6. Special Mandatory Redemption
----------------------------
In the event the Recapitalization is not consummated on or prior to
August 9, 1999, the Issuer will redeem the Securities (the "Special Redemption")
at a
<PAGE>
7
redemption price of 100% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon (subject to the right of holders of record on the
relevant date to receive interest due on such date) to the date of redemption.
The Issuer will cause the notice of the special mandatory redemption to be
mailed no later than the next business day following August 9, 1999, and will
redeem the Securities three business days following the date of notice of
redemption.
7. Notice of Redemption
--------------------
Except as set forth in paragraph 6 above, notice of optional
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Put Provisions
--------------
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Issuer to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. Subordination
-------------
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Issuer agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
<PAGE>
8
10. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
11. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuer at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuer and not to the Trustee for payment.
13. Discharge and Defeasance
------------------------
Subject to certain conditions, the Issuer at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Issuer deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
14. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a
<PAGE>
9
majority in principal amount outstanding of the Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Issuer and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to add
additional covenants or surrender rights and powers conferred on the Issuer, or
to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not adversely affect
the rights of any Securityholder.
15. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 or 6 of
the Securities, upon acceleration or otherwise, or failure by the Issuer to
redeem or purchase Securities when required; (iii) failure by the Issuer and the
Company to comply with other agreements in the Indenture or the Securities, in
certain cases subject to notice and lapse of time; (iv) certain accelerations
(including failure to pay within any grace period after final maturity) of other
Indebtedness of the Issuer if the amount accelerated (or so unpaid) exceeds
$10.0 million; (v) certain events of bankruptcy or insolvency with respect to
the Company and its Significant Subsidiaries; (vi) certain judgments or decrees
for the payment of money in excess of $10.0 million; and (vii) failure of the
Company Guaranty or any Subsidiary Guaranty to be in full force and effect, or
the failure of the Company or a Significant Subsidiary that is a Subsidiary
Guarantor to honor its obligations under the Company Guaranty or its Subsidiary
Guaranty, as the case may be. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the Securities
may declare all the Securities to be due and payable immediately. Certain events
of bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security.
<PAGE>
10
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Issuer
--------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or
its Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Issuer
or the Trustee shall not have any liability for any obligations of the Issuer
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
18. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
11
20. Holders' Compliance with Registration Rights Agreement.
------------------------------------------------------
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Issuer to the extent provided
therein.
21. Governing Law.
--------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Issuer will furnish to any Securityholder upon written request and
without charge to the Security holder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
CHIPPAC INTERNATIONAL COMPANY
LIMITED
c/o CHIPPAC, INC.
3151 CORONADO DRIVE
SANTA CLARA, CA 95054
<PAGE>
12
________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuer. The agent may substitute another to act
for him.
________________________________________________________________________________
Date: ________________ Your Signature:______________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Issuer or any Affiliate of the Issuer, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
<PAGE>
13
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box
-------- -------
(4) or (5) is checked, the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions, certifications and
other information as the Issuer has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933, such as the exemption provided by Rule 144 under such Act.
________________________
Signature
Signature Guarantee:
____________________________ ________________________
Signature must be guaranteed Signature
<PAGE>
14
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuer as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
15
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Principal amount Signature of
Amount of decrease Amount of increase of this Global authorized officer
in Principal in Principal Security following of Trustee or
Date of Amount of this Amount of this such decrease or Securities
Exchange Global Security Global Security increase) Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
16
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Issuer pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $
Date: _______________ Your Signature: ___________________________
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT 4.6
EXECUTION COPY
$150,000,000
CHIPPAC INTERNATIONAL LIMITED
12 3/4% Senior Subordinated Notes Due 2009
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 29, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
c/o CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
ChipPAC International Limited, a British Virgin Islands corporation (the
"Issuer"), proposes to issue and sell to Credit Suisse First Boston Corporation
and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated July 22,
1999 (the "Purchase Agreement"), $150,000,000 aggregate principal amount of its
12 3/4% Senior Subordinated Notes Due 2009 (the "Initial Securities") to be
unconditionally guaranteed (the "Initial Guaranty") by ChipPAC Merger Corp. (the
"Initial Guarantor" and together with the Issuer, the "Company"). The Initial
Securities will be issued pursuant to an Indenture, dated as of July 29, 1999
(the "Indenture"), among the Company, the Initial Guarantor and Firstar Bank of
Minnesota, N.A., as trustee (the "Trustee").
Concurrently or within seven business days following consummation of the
sale of the Initial Securities, pursuant to an agreement and plan of
recapitalization and merger (the "Recapitalization Agreement") dated as of March
13, 1999, as amended, among Hyundai Electronics Industries Company, Ltd., a
republic of Korea corporation, Hyundai Electronics America, a California
corporation, ChipPAC, Inc., a California corporation ("ChipPAC, Inc.") and the
Initial Guarantor, (1) the Initial Guarantor will be merged with and into
ChipPAC, Inc., with ChipPAC, Inc. as the surviving corporation in such merger,
and (2) the Issuer will be merged with and into a wholly owned subsidiary of
ChipPAC, Inc. with such subsidiary as the surviving corporation, which surviving
corporation will be renamed ChipPAC International Company Limited (the mergers
described in clauses (1) and (2) are collectively referred to herein as the
"Merger"). Upon consummation of the Merger, ChipPAC, Inc. and ChipPAC
International Company Limited will assume, by operation of law, all of,
respectively, the Initial Guarantor's and the Issuer's obligations under this
Agreement and the Purchase Agreement, and by operation of law and by
<PAGE>
execution of a supplemental indenture (the "Supplemental Indenture"), the
Indenture and the Initial Securities. As used herein, the Initial Guarantor
means ChipPAC Merger Corp. and, after the Merger, ChipPAC, Inc., and the Issuer
means ChipPAC International Limited and, after the Recapitalization, ChipPAC
International Company Limited.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Initial Securities (including, without limitation, the
Initial Purchasers), the Exchange Securities (as defined below) and the Private
Exchange Securities (as defined below) (collectively, the "Holders"), as
follows:
1. Registered Exchange Offer. The Company shall, at its own cost, prepare
and, not later than 150 days after (or if the 150th day is not a business day,
the first business day thereafter) the date of original issue of the Initial
Securities (the "Issue Date"), file with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Initial Securities, a like aggregate principal
amount of debt securities (together with the Initial Guaranty and the Subsidiary
Guaranties, the "Exchange Securities") of the Company issued under the Indenture
and substantially identical in all material respects to the Initial Securities
(except for the transfer restrictions relating to the Initial Securities and the
provisions relating to the matters described in Section 6 hereof) that would be
registered under the Securities Act. The Company shall use its reasonable best
efforts to cause such Exchange Offer Registration Statement to be declared
effective under the Securities Act within 210 days (or if the 210th day is not a
business day, the first business day thereafter) after the Issue Date of the
Initial Securities and shall keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable law)
after the date notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to
2
<PAGE>
exchange the Initial Securities for Exchange Securities (assuming that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the Exchange Securities and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information substantially in the form set forth in (a) Annex A
hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer pursuant
to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to
sell Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Company
shall make such prospectus and any amendment or supplement thereto available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 180 days after the consummation of the
Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser
3
<PAGE>
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Initial Securities held by such Initial Purchaser a like
principal amount of debt securities of the Company issued under the Indenture
and identical in all material respects (including the existence of restrictions
on transfer under the Securities Act and the securities laws of the several
states of the United States, but excluding provisions relating to the matters
described in Section 6 hereof) to the Initial Securities (the "Private Exchange
Securities"). The Initial Securities, the Exchange Securities and the Private
Exchange Securities are herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
(y) deliver to the Trustee for cancelation all the Initial Securities so
accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be subject
to the transfer restrictions set forth in the
4
<PAGE>
Indenture and that all the Securities will vote and consent together on all
matters as one class and that none of the Securities will have the right to vote
or consent as a class separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities. Each Exchange Security and Private Exchange Security will bear
interest at the rate set forth thereon; provided, that interest with respect to
the period prior to the issuance thereof shall accrue at the rate or rates borne
by the Initial Securities from time to time during such period.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements with any person to participate in the distribution of the
Securities or the Exchange Securities within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Securities and (v) if such Holder is a broker-dealer, that it will
receive Exchange Securities for its own account in exchange for Initial
Securities that were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the
5
<PAGE>
Commission, the Company is not permitted to effect a Registered Exchange Offer,
as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated within 240 days of the Issue Date, (iii) any Initial Purchaser so
requests with respect to the Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange Securities in the
Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer)
is not eligible to participate in the Registered Exchange Offer or, in the case
of any Holder (other than an Exchanging Dealer) that participates in the
Registered Exchange Offer, such Holder does not receive freely tradeable
Exchange Securities on the date of the exchange, the Company shall take the
following actions:
(a) The Company shall, at its cost, as promptly as practicable (but
in no event more than 60 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use its
reasonable best efforts to cause to be declared effective on or prior to
the 60th day after the date so required or requested pursuant to this
Section 2 a registration statement (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, a "Registration
Statement") on an appropriate form under the Securities Act relating to the
offer and sale of the Transfer Restricted Securities (as defined in Section
6 hereof) by the Holders thereof from time to time in accordance with the
methods of distribution set forth in the Shelf Registration Statement and
Rule 415 under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser) shall
be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the Issue Date or such
shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold pursuant thereto or (ii)
are no longer restricted securities (as defined in Rule 144 under the
Securities Act, or any successor rule thereof) (the "Shelf Registration
Period"). The Company shall be deemed not to have used its reasonable best
efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by applicable
law.
6
<PAGE>
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use its best efforts to reflect
in each such document, when so filed with the Commission, such comments as
such Initial Purchaser reasonably may propose; (ii) include the information
substantially in the form set forth in Annex A hereto on the cover, in
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose
of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement and include the information substantially in
the form set forth in Annex D hereto in the Letter of Transmittal delivered
pursuant to the Registered Exchange Offer; (iii) if requested by an Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; (iv) include
within the prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable
to the Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that is
the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange
Securities received by such broker-dealer in the Registered Exchange Offer
(a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the staff of the Commission or such positions
or policies, in the reasonable judgment of the Initial Purchasers based
upon advice of
7
<PAGE>
counsel (which may be in-house counsel), represent the prevailing views of
the staff of the Commission; and (v) in the case of a Shelf Registration
Statement, include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from whom
the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order that
the Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the prospectus, in light of the circumstances under which they were
made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
8
<PAGE>
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by each
of the selling Holders of the Securities in connection with the offering
and sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Exchange Dealer, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange
Securities covered by the prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States or such provinces of Canada as any Holder
of the Securities reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be
<PAGE>
required to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action which would
subject it to general service of process or to taxation in any jurisdiction
where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company
is required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made,
then the Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from
and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j). Notwithstanding the
foregoing, the Company shall not be required to amend or supplement a
Registration Statement, any related prospectus or any document incorporated
by reference, for a period not to exceed an aggregate of 30 days in any
calendar year, if (i) an event occurs and is continuing as a result of
which the Registration Statement would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading and (ii) the
board of directors of the Company determines in its good faith judgment
that the disclosure of such event at such time
10
<PAGE>
would have a material adverse effect on the business or operations of the
Company.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days
after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that fails to furnish all or any
material portion of such information which the Company reasonably requires,
in the reasonable opinion of its counsel, in order to insure the compliance
of the Shelf Registration Statement with applicable law and Commission
policy within a reasonable time after receiving such written request, and
shall be under no obligation to compensate any such seller for any lost
income, interest or other opportunity foregone, or any liability incurred,
as a result of the Company's decision to exclude such seller.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as
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any, Holder of the Securities shall reasonably request in order to
facilitate the disposition of the Securities pursuant to any Shelf
Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter (collectively, the
"Inspectors") all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) cause the Company's
officers, directors, employees, accountants and auditors to supply all
relevant information reasonably requested by the Holders of the Securities
or any such underwriter, attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case, as shall be reasonably
necessary to enable such persons, to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided, however,
that the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you and on behalf of the
other parties, by one counsel designated by and on behalf of such other
parties as described in Section 4 hereof. Records which the Company
reasonably determines, in good faith, to be confidential and any records
which they notify the Inspectors are confidential shall not be disclosed by
the Inspectors unless (i) the disclosure of such records is necessary to
avoid or correct a material misstatement or omission in such Registration
Statement after a failure by the Company to make such disclosure for a
period of 5 business days after receiving written notice from any Inspector
of the need to make such disclosure, (ii) the release of such records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such records has been made
generally available to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required to
agree that information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company unless and until such
is made generally available to the public. Each selling Holder of such
Registrable Securities and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure of
such records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company at its expense to undertake appropriate
action to prevent disclosure of the records deemed confidential.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in
customary form
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addressed to such Holders and the managing underwriters, if any, thereof
and dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement (it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(o) hereof; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence of material legal
or governmental proceedings involving the Company and its subsidiaries; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in Section
3(o) hereof; the compliance as to form of such Shelf Registration Statement
and any documents incorporated by reference therein and of the Indenture
with the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein
of an untrue statement of a material fact or the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act); (ii) its officers
to execute and deliver all customary documents and certificates and updates
thereof requested by any underwriters of the applicable Securities and
(iii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Shelf Registration Statement to provide to
the selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in customary form and covering matters of the
type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the forms set forth in
Section 6(c)-(h) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public
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accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the
Registration Statement to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter, in customary form, meeting
the requirements as to the substance thereof as set forth in Section 6(a)
of the Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Company will use its best efforts to (i) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement, or (ii) if the Initial Securities were not
previously rated, cause the Securities covered by a Registration Statement
to be rated with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the requirements of such Rules,
including, without limitation, by (i) if such Rules, including Rule 2720,
shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the Registration
Statement relating to such Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of
the Rules.
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(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of
Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Securities covered thereby to act as counsel for the Holders of the Securities
in connection therewith. Except as provided in the preceding sentence, each
Holder shall pay all expenses of its counsel, underwriting discounts and
commissions, and transfer taxes, if any, relating to the sale or disposition of
such Holder's Transfer Restricted Securities pursuant to a Shelf Registration
Statement.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder of
the Securities, any Participating Broker-Dealer and each person, if any,
who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities)
to which each Indemnified Party may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration,
or arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action in respect thereof;
provided, however, that (i) the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of
or is based upon any untrue statement or alleged untrue statement or
omission or alleged
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<PAGE>
omission made in a Registration Statement or prospectus or in any amendment
or supplement thereto or in any preliminary prospectus relating to a Shelf
Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of
such Holder specifically for inclusion therein and (ii) with respect to any
untrue statement or omission or alleged untrue statement or omission made
in any preliminary prospectus relating to a Shelf Registration Statement,
the indemnity agreement contained in this subsection (a) shall not inure to
the benefit of any Holder or Participating Broker-Dealer from whom the
person asserting any such losses, claims, damages or liabilities purchased
the Securities concerned, to the extent that a prospectus relating to such
Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and
any such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to
such person, at or prior to the written confirmation of the sale of such
Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement
will be in addition to any liability which the Company may otherwise have
to such Indemnified Party. The Company shall also indemnify underwriters,
their officers and directors and each person who controls such underwriters
within the meaning of the Securities Act or the Exchange Act to the same
extent as provided above with respect to the indemnification of the Holders
of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages or liabilities or
any actions in respect thereof, to which the Company or any such
controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the
Company by or on behalf of such Holder specifically for inclusion therein;
and, subject to the limitation set forth immediately preceding this clause,
shall reimburse, as incurred, the Company for any legal or other
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<PAGE>
expenses reasonably incurred by the Company or any such controlling person
in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the
Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party (a) other than to the extent such indemnifying party is materially
prejudiced by such omission and (b) other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof. In no event shall an indemnifying
party be liable for fees and expenses of more than one counsel (in addition
to any local counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened action in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
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<PAGE>
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other
from the exchange of the Securities, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or parties on the one
hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party on the one hand or such indemnified party, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the Holders of
the Securities shall not be required to contribute any amount in excess of
the amount by which the net proceeds received by such Holders from the sale
or other disposition of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. For purposes of this paragraph (d), each
person, if any, who controls an indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to
contribution as such indemnified party.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancelation of this
Agreement or any investigation made by or on behalf of any indemnified
party.
6. Additional Interest Under Certain Circumstances.
(a) Additional interest (the "Additional Interest") with respect to
the Initial Securities and the Private Exchange Securities shall be
assessed as follows if any of the following events occur (each such event
in clauses (i) through (iii) below a "Registration Default":
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(i) If by December 26, 1999 (or if such day is not a business
day, the first business day thereafter), neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) If by March 25, 2000 (or if such day is not a business day,
the first business day thereafter), neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement
or the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Securities during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities and the Private
Exchange Securities at a rate of 0.50% per annum over and above the
interest set forth in the title of the Securities from and including the
date on which any such Registration Default shall occur to but excluding
the date on which all such Registration Defaults have been cured, at which
time Additional Interest shall cease to accrue (but any accrued amount
shall be payable) and the interest rate on the Notes will revert to the
original rate.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a
Shelf Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing of a
post-effective amendment to such Shelf Registration Statement to
incorporate annual audited financial information with respect to the
Company where such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus or
(y) other material events, with respect to the Company that would need to
be described in such Shelf Registration Statement or the related
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prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events; provided,
however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be
payable in accordance with the above paragraph from the day such
Registration Default occurs until such Registration Default is cured, at
which time Additional Interest shall cease to accrue (but any accrued
amount shall be payable) and the interest rate on the Notes will revert to
the original rate.
(c) Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Securities. The amount of
Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Initial Securities
or Private Exchange Securities, as the case may be, multiplied by a
fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the basis of
a 360-day year comprised of twelve 30-day months), and the denominator of
which is 360.
(d) "Transfer Restricted Securities" means each Security until (i)
the date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of an Initial Security for an Exchange Security,
the date on which such Exchange Security is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a
copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement, (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act (or other
substantially similar resale exemption promulgated in the future under the
Securities Act, but not Rule 144A under the Securities Act), (v) the date
such Security or Private Exchange Security, as the case may be, shall have
been otherwise transferred by the holder thereof and a new Security not
bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of such Security shall not require
registration or qualification under, and shall not otherwise be restricted
under, the Securities Act or any similar state law then in force or (vi)
such Security or Private Exchange Security, as the case may be, ceases to
be outstanding.
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7. Rules 144 and 144A. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities or Private Exchange
Securities identified to the Company by the Initial Purchasers upon request.
Upon the request of any Holder of Initial Securities or Private Exchange
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Company and the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
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(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to the Initial Purchasers;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No.: (212) 474-3700
Attention: Stephen L. Burns, Esq.
(3) if to the Company, at its address as follows:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Fax No.: (408) 486-5914
Attention: Chief Financial Officer
with a copy to:
Kirkland & Ellis
300 South Grand Avenue, Suite 3000
Los Angeles, California 90071
Fax No.: 213-626-0010
Attention: Eva Herbst Davis, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if
mailed; when receipt is acknowledged by recipient's facsimile machine
operator, if sent by facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company hereby agrees that any
Registration Statement shall, unless otherwise agreed upon by the Initial
Purchasers, include only those Securities required to be included
thereunder pursuant to the terms of this Agreement. The Company has not,
as of the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its
22
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securities that is inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed
to be affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(j) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Company
(i) acknowledges that it has, by separate written instrument, irrevocably
designated and appointed CT Corporation System (and any successor entity),
with offices at 1633 Broadway, New York, NY 10019, as its authorized agent
upon which process may be served in any suit or proceeding arising out of
or relating to this Agreement that may be instituted in any federal or
state court in the State of New York or brought under federal or state
securities laws, and acknowledges that CT Corporation System has accepted
such designation, (ii) submits to the nonexclusive jurisdiction of any such
court in any such suit or proceeding, and (iii) agrees that service of
process upon CT Corporation System and written notice of said service to
the Company shall be deemed in every respect effective service of process
upon it in any such suit or proceeding. The Company further agrees
23
<PAGE>
to take any and all action, including the execution and filing of any and
all such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and
effect so long as any of the Securities shall be outstanding. To the extent
that the Company may acquire any immunity from jurisdiction of any court or
from any legal process (whether through service of notice, attachment prior
to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, it hereby irrevocably waives such
immunity in respect of this Agreement, to the fullest extent permitted by
law.
24
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Issuer and the Guarantors in accordance
with its terms.
Very truly yours,
CHIPPAC INTERNATIONAL LIMITED,
by: /s/ Tony Lin
----------------------------------
Name: Tony Lin
Title: Chief Financial Officer
CHIPPAC MERGER CORP.,
by: /s/ Paul C. Schorr IV
----------------------------------
Name: Paul C. Schorr IV
Title: Vice President
<PAGE>
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ David Wah
_______________________________________________
Name: David Wah
Title: Director
By: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
/s/ Edward Biggins
_______________________________________________
Name: Edward Biggins
Title: Vice President
26
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
27
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Initial Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
28
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus./1/
In addition, the legend required by item 502(b) of Regulation S-K will
appear on the back cover page of the Exchange Offer pro spectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any
_________________________
/1/ In addition, the legend required by item 502(b) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
29
<PAGE>
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
30
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
31
<PAGE>
EXHIBIT 5.1
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
To Call Writer Direct: 312 861-2000 Facsimile:
312 861-2000 312 861-2200
November 19, 1999
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
3151 Coronado Drive
Santa Clara, California 95404
Re: ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal counsel
to ChipPAC International Company Limited, a British Virgin Islands corporation
(the "Issuer"), and ChipPAC, Inc., a California corporation, ChipPAC (Barbados)
Ltd., a corporation formed under the laws of Barbados, ChipPAC Limited, a
British Virgin Islands corporation, ChipPAC Korea Company Ltd., a company formed
under the laws of the Republic of Korea, ChipPAC Luxembourg S.a.R.L., a company
formed under the laws of Luxembourg, and ChipPAC Liquidity Management Hungary
Limited Liability Company, a company formed under the laws of Hungary
(collectively, the "Guarantors" and, together with the Issuer, the
"Registrants") in connection with the proposed
<PAGE>
KIRKLAND & ELLIS
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
November 19, 1999
Page 2
registration by the Issuer of up to $150,000,000 in aggregate principal amount
of the Issuer's 12 3/4% Series B Senior Subordinated Notes Due 2009 (the
"Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with
the Securities and Exchange Commission (the "Commission") on November 19, 1999,
under the Securities Act of 1933, as amended (the "Act") (such Registration
Statement, as amended or supplemented, is hereinafter referred to as the
"Registration Statement"). The obligations of the Issuer under the Exchange
Notes will be guaranteed by the Guarantors (the "Guarantees"). The Exchange
Notes and the Guarantees are to be issued pursuant to the Indenture (the
"Indenture"), dated as of July 29, 1999 (and as amended on August 5, 1999), by
and among the Registrants and Firstar Bank of Minnesota, N.A., as Trustee, in
exchange for and in replacement of the Issuer's outstanding 12 3/4% Senior
Subordinated Notes Due 2009 (the "Old Notes"). We have been informed that
$150,000,000 in aggregate principal amount of Old Notes was outstanding as of
November 19, 1999.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) Amended and Restated Articles of Incorporation of
ChipPAC, Inc., (ii) Amended and Restated Bylaws of ChipPAC, Inc., (iii) minutes,
dated as of July 21, 1999, of the Board of Directors of ChipPAC, Inc. with
respect to the issuance of the Exchange Notes and the Guarantees, (iv) the
Registration Statement and (v) the Notes Registration Rights Agreement, dated as
of July 29, 1999, by and among the Registrants, Credit Suisse First Boston
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than ChipPAC, Inc. and the due authorization, execution
and delivery of all documents, including the
<PAGE>
KIRKLAND & ELLIS
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
November 19, 1999
Page 3
Exchange Notes, the Indenture and Guarantees, by the parties thereto other than
ChipPAC, Inc. As to any facts material to the opinions expressed herein which we
have not independently established or verified, we have relied upon statements
and representations of officers and other representatives of the Registrants and
others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the internal laws of the States of New
York and California, the General Corporation Law of the State of Delaware and
the federal laws of the United States of America.
Based upon and subject to the assumptions, qualifications, exclusions and
other limitations contained in this letter, we are of the opinion that when (i)
the Registration Statement becomes effective, (ii) the Indenture has been duly
qualified under the Trust Indenture Act of 1939, as amended and (iii) the
Exchange Notes and the Guarantees have been duly executed and authenticated in
accordance with the provisions of the Indenture and duly delivered to the
purchasers thereof in exchange for the Old Notes, the Exchange Notes and the
Guarantees will be validly issued and will be legal and binding obligations of
the Registrants.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
<PAGE>
KIRKLAND & ELLIS
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
November 19, 1999
Page 4
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of New York or California or the General Corporation Law of
the State of Delaware or the federal law of the United States be changed by
legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Sincerely,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
EXHIBIT 8.1
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
To Call Writer Direct: 312 861-2000 Facsimile:
312 861-2000 312 861-2200
November 19, 1999
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
Re: Offer by ChipPAC International Company Limited to Exchange any
---------------------------------------------------------------
and all of its outstanding 12 3/4% Senior Subordinated Notes Due
----------------------------------------------------------------
2009 for its 12 3/4% Series B Senior Subordinated Notes Due 2009
----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special legal counsel to (i) ChipPAC International
Company Limited, a British Virgin Islands corporation (the "Issuer"), and (ii)
ChipPAC, Inc., a California corporation, ChipPAC (Barbados) Ltd., a corporation
formed under the laws of Barbados, ChipPAC Limited, a British Virgin Islands
corporation, ChipPAC Korea Company Ltd., a company formed under the laws of the
Republic of Korea, ChipPAC Luxembourg S.a.R.L., a company formed under the laws
of Luxembourg, and ChipPAC Liquidity Management Hungary Limited Liability
Company, a company formed under the laws of Hungary (collectively, the
"Guarantors" and, together with the Issuer, the "Registrants") in connection
with the Issuer's offer (the "Exchange Offer") to exchange any and all of its 12
--------------
3/4% Senior Subordinated Notes Due 2009 (the "Old Securities") for their 12
--------------
3/4%Series B Senior Subordinated Notes Due 2009 (the "New Securities").
--------------
You have requested our opinion as to certain United States federal
income tax consequences of the Exchange Offer. In preparing our opinion, we
have reviewed and relied upon the Registrants' Registration Statement on Form
S-4, originally filed with the Securities and
<PAGE>
KIRKLAND & ELLIS
ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC (Barbados) Ltd.
ChipPAC Limited
ChipPAC Korea Company Ltd.
ChipPAC Luxembourg S.a.R.L.
ChipPAC Liquidity Management Hungary
Limited Liability Company
November 19, 1999
Page 2
Exchange Commission on the date hereof (the "Registration Statement"), and such
----------------------
other documents as we deemed necessary.
On the basis of the foregoing, it is our opinion that the exchange of
the Old Securities for the New Securities pursuant to the Exchange Offer will
not be treated as an "exchange" for United States federal income tax purposes.
The opinion set forth above is based upon the applicable provisions of
the Internal Revenue Code of 1986, as amended, the Treasury Regulations
promulgated or proposed thereunder, current positions of the Internal Revenue
Service (the "IRS") contained in published revenue rulings, revenue procedures,
---
and announcements, existing judicial decisions and other applicable authorities.
No tax ruling has been sought from the IRS with respect to any of the matters
discussed herein. Unlike a ruling from the IRS, an opinion of counsel is not
binding on the IRS. Hence, no assurance can be given that the opinion stated in
this letter will not be successfully challenged by the IRS or by a court. We
express no opinion concerning any tax consequences of the Exchange Offer except
as expressly set forth above.
We hereby consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Certain Federal Income Tax Consequences." In giving this consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
Exhibit 10.1
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 5, 1999
AMONG
CHIPPAC INTERNATIONAL COMPANY LIMITED,
CHIPPAC, INC.,
THE LENDERS LISTED HEREIN,
as Lenders,
AND
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Sole Lead Arranger and Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1.
DEFINITIONS...................................................................................... 1
1.1 Certain Defined Terms.............................................................. 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement....................................................... 38
1.3 Other Definitional Provisions...................................................... 38
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS....................................................... 39
2.1 Commitments; Loans................................................................. 39
2.2 Interest on the Loans.............................................................. 46
2.3 Fees............................................................................... 50
2.4 Repayments, Prepayments and Reductions in
Commitments; General Provisions Regarding Payments................................. 50
2.5 Use of Proceeds.................................................................... 60
2.6 Special Provisions Governing Eurodollar Rate Loans................................. 60
2.7 Increased Costs; Taxes; Capital Adequacy........................................... 63
2.8 Obligation of Lenders and Issuing Bank to Mitigate................................. 66
SECTION 3.
LETTERS OF CREDIT................................................................................ 67
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein............................................................. 67
3.2 Letter of Credit Fees.............................................................. 69
3.3 Drawings and Payments and Reimbursement of Amounts
Drawn or Paid Under Letters of Credit.............................................. 70
3.4 Obligations Absolute............................................................... 72
3.5 Indemnification; Nature of Issuing Bank's Duties................................... 72
3.6 Increased Costs and Taxes Relating to Letters of Credit............................ 74
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT........................................................ 75
4.1 Conditions to Loans................................................................ 75
4.2 Conditions to All Loans............................................................ 80
4.3 Conditions to Letters of Credit.................................................... 80
SECTION 5.
REPRESENTATIONS AND WARRANTIES................................................................... 81
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries.......................................................... 81
5.2 Authorization of Borrowing, etc.................................................... 82
5.3 Financial Condition; Projections................................................... 83
5.4 No Material Adverse Change......................................................... 84
5.5 Title to Properties; Liens; Real Property; Intellectual
Property........................................................................... 84
5.6 Litigation; Adverse Facts.......................................................... 85
5.7 Payment of Taxes................................................................... 85
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
5.8 Performance of Agreements.......................................................... 85
5.9 Governmental Regulation............................................................ 85
5.10 Securities Activities.............................................................. 86
5.11 Employee Benefit Plans............................................................. 86
5.12 Certain Fees....................................................................... 86
5.14 Employee Matters................................................................... 87
5.15 Solvency........................................................................... 87
5.16 Disclosure......................................................................... 87
5.17 Year 2000 Matters.................................................................. 88
SECTION 6.
AFFIRMATIVE COVENANTS............................................................................ 88
6.1 Financial Statements and Other Reports............................................. 88
6.2 Corporate Existence................................................................ 92
6.3 Payment of Taxes and Claims; Tax Consolidation..................................... 93
6.4 Maintenance of Properties; Insurance............................................... 93
6.5 Inspection; Lender Meeting......................................................... 93
6.6 Compliance with Laws, etc.......................................................... 94
6.7 Environmental Disclosure and Inspection............................................ 94
6.8 ChipPAC's Remedial Action Regarding Hazardous
Materials.......................................................................... 95
6.9 Execution of Guaranty and Collateral Documents by Future
Subsidiaries....................................................................... 95
6.10 Interest Rate Protection........................................................... 96
6.11 Further Assurances................................................................. 96
6.12 Year 2000 Matters.................................................................. 97
SECTION 7.
NEGATIVE COVENANTS............................................................................... 97
7.1 Indebtedness....................................................................... 97
7.2 Liens and Related Matters.......................................................... 99
7.3 Investments; Joint Ventures........................................................ 101
7.4 Contingent Obligations............................................................. 102
7.5 Restricted Payments................................................................ 103
7.6 Financial Covenants................................................................ 105
7.7 Restriction on Fundamental Changes; Asset Sales.................................... 108
7.8 Sales and Lease-Backs.............................................................. 109
7.9 Transactions with Shareholders and Affiliates...................................... 109
7.10 Ownership of Subsidiary Stock...................................................... 110
7.11 Amendments or Waivers of Certain Agreements........................................ 110
7.12 Fiscal Year........................................................................ 111
7.13 Conduct of Business................................................................ 111
SECTION 8.
EVENTS OF DEFAULT................................................................................ 111
8.1 Failure to Make Payments When Due.................................................. 111
8.2 Default in Other Agreements........................................................ 112
8.3 Breach of Certain Covenants........................................................ 112
8.4 Breach of Warranty................................................................. 112
8.5 Other Defaults Under Loan Documents................................................ 112
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc............................... 113
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc................................. 113
8.8 Judgments and Attachments.......................................................... 113
8.9 Dissolution........................................................................ 114
8.10 Employee Benefit Plans............................................................. 114
8.11 Change in Control.................................................................. 114
8.12 Invalidity of Guaranties........................................................... 114
8.13 Failure of Security................................................................ 114
SECTION 9.
AGENTS........................................................................................... 115
9.1 Appointment........................................................................ 115
9.2 Powers; General Immunity........................................................... 117
9.3 Representations and Warranties; No Responsibility for Appraisal of
Creditworthiness................................................................... 118
9.4 Right to Indemnity................................................................. 118
9.5 Successor Administrative Agent and Swing Line Lender............................... 119
9.6 Collateral Documents; Successor Collateral Agent................................... 119
SECTION 10.
MISCELLANEOUS.................................................................................... 120
10.1 Assignments and Participations in Loans and Letters of
Credit............................................................................. 120
10.2 Expenses........................................................................... 123
10.3 Indemnity.......................................................................... 123
10.4 Set-Off; Security Interest in Deposit Accounts..................................... 124
10.5 Ratable Sharing.................................................................... 124
10.6 Amendments and Waivers............................................................. 125
10.7 Independence of Covenants.......................................................... 126
10.8 Notices............................................................................ 127
10.9 Survival of Representations, Warranties and Agreements............................. 127
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.............................. 127
10.11 Marshalling; Payments Set Aside.................................................... 127
10.12 Severability....................................................................... 128
10.13 Obligations Several; Independent Nature of the Lenders' Rights..................... 128
10.14 Maximum Amount..................................................................... 128
10.15 Headings........................................................................... 129
10.16 Applicable Law..................................................................... 129
10.17 Successors and Assigns............................................................. 129
10.18 Consent to Jurisdiction and Service of Process..................................... 129
10.19 Waiver of Jury Trial............................................................... 130
10.20 Judgment Currency.................................................................. 130
10.21 Confidentiality.................................................................... 131
10.22 Counterparts; Effectiveness........................................................ 132
</TABLE>
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF GUARANTY
V FORM OF PRINCIPAL PLEDGE AGREEMENT
VI FORM OF PRINCIPAL SECURITY AGREEMENT
VII FORM OF COMPLIANCE CERTIFICATE
VIII FORMS OF OPINIONS OF COUNSEL TO LOAN PARTIES
IX FORM OF ASSIGNMENT AGREEMENT
X FORM OF COLLATERAL ACCOUNT AGREEMENT
XI FORM OF PERMITTED SELLER PAPER SUBORDINATION
PROVISIONS
XII-A CHINESE PLEDGE AGREEMENT (SHANGHAI I)
XII-B CHINESE PLEDGE AGREEMENT (SHANGHAI II)
XIII-A CHINESE SECURITY AGREEMENT (RECEIVABLES)
XIII-B CHINESE SECURITY AGREEMENT (LAND USE AND BUILDING)
XIV HEI PREFERRED STOCK
XV HUNGARIAN PLEDGE AGREEMENT
XVI KOREAN PLEDGE AGREEMENT
XVII KOREAN SECURITY AGREEMENT
XVIII INTEL PREFERRED STOCK
XIX OTHER RECAPITALIZATION SECURITY AGREEMENTS
<PAGE>
SCHEDULES
1.1(i) CERTAIN ADJUSTMENTS TO EBITDA/CONSOLIDATED
INTEREST EXPENSE
1.1(ii) INTERCOMPANY NOTES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1G PERFECTION OF SECURITY INTERESTS
4.1P CORPORATE STRUCTURE; CAPITAL STRUCTURE; OWNERSHIP
5.1 SUBSIDIARIES OF CHIPPAC
5.5B CERTAIN REAL PROPERTY MATTERS
5.5C CERTAIN INTELLECTUAL PROPERTY MATTERS
5.12 CERTAIN FEES
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2A CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.8 CERTAIN SALES AND LEASE-BACKS
<PAGE>
CONFORMED COPY
CHIPPAC INTERNATIONAL COMPANY LIMITED
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of August 5, 1999 and entered into
by and among CHIPPAC INTERNATIONAL COMPANY LIMITED, a British Virgin Islands
company ("Company"), CHIPPAC, INC., a California corporation ("ChipPAC"), THE
------- -------
BANKS, FINANCIAL INSTITUTIONS AND OTHER ENTITIES LISTED ON THE SIGNATURE PAGES
HEREOF (each individually referred to herein as a "Lender" and collectively as
------
"Lenders"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as administrative agent for the
- -------- ----
Lenders (in such capacity, the "Administrative Agent"), as sole lead arranger
--------------------
(in such capacity, the "Sole Lead Arranger"), and as collateral agent for the
------------------
Administrative Agent and the Lenders (in such capacity, the "Collateral Agent").
----------------
R E C I T A L S
---------------
WHEREAS, Bain (capitalized terms used herein having the meanings
assigned to those terms in subsection 1.1), the SXI Holders and the Existing
Investors propose to engage in a series of Recapitalization Transactions,
whereby ChipPAC will be recapitalized on the Closing Date;
WHEREAS, ChipPAC and Company have requested Lenders to extend, and
Lenders have agreed to extend, certain credit facilities in an aggregate
principal amount of up to $220,000,000 to Company, the proceeds of which will be
used, together with proceeds from the Equity Contribution and not less than
$150,000,000 in gross cash proceeds from the issuance and sale of Subordinated
Debt, to permit the consummation of the Recapitalization Transactions, to pay
related fees and expenses, and to provide financing for working capital and
other general corporate purposes of the Operating Subsidiaries; and
WHEREAS, the Lenders are willing to make such credit facilities
available upon and subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
<PAGE>
"Acquired Business" has the meaning assigned to such term in the
-----------------
definition of the term "Acquired Capital Expenditures".
"Acquired Capital Expenditures" means, on the date of any Permitted
-----------------------------
Acquisition and with respect to the Person or business (the "Acquired
--------
Business") acquired in such Permitted Acquisition, an amount equal to the
--------
greater of (i) 8% of the net sales of such Acquired Business for the
twelve-month period most recently ended and (ii) the average historical
capital expenditures made with respect to such Acquired Business for the
last two fiscal years applicable to such Acquired Business ending prior to
the consummation of such Permitted Acquisition.
"Acquired Capital Expenditures Percentage" means, with respect to any
----------------------------------------
Acquired Business on the date of the related Permitted Acquisition, the
quotient (expressed as a percentage) obtained by dividing the Acquired
Capital Expenditures of such Acquired Business by the Maximum Consolidated
Capital Expenditures Amount (without giving effect to any previous increase
to such amount as a result of previous Permitted Acquisitions or by
application of the Carryforward) for the Fiscal Year in which such
Permitted Acquisition occurs.
"Additional Subordinated Debt" means subordinated, unsecured
----------------------------
Indebtedness of Company the proceeds of which are used solely to finance
one or more Permitted Acquisitions and to pay related expenses; provided
--------
that (i) such Indebtedness does not require any scheduled payment of
principal prior to the maturity date of the Subordinated Debt issued on or
prior to the Closing Date and (ii) the subordination provisions and other
non-pricing terms and conditions thereof are no less favorable to ChipPAC
and its Subsidiaries and the Lenders than the analogous provisions of the
Subordinated Debt Documents executed on or prior to the Closing Date.
"Administrative Agent" has the meaning assigned to that term in the
--------------------
Preamble to this Agreement and shall include any successor Administrative
Agent appointed pursuant to subsection 9.5.
"Affected Class" has the meaning assigned to that term in subsection
--------------
10.6A.
"Affected Lender" has the meaning assigned to that term in subsection
---------------
2.6C.
"Affected Loans" has the meaning assigned to that term in subsection
--------------
2.6C.
"Affiliate" means, as applied to any Person, any other Person directly
---------
or indirectly controlling, controlled by, or under common control with that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that Person, whether through the ownership
of voting securities or by contract or otherwise.
2
<PAGE>
"Agents" means, collectively, the Administrative Agent, the Collateral
------
Agent and the Sole Lead Arranger.
"Agreement" means this Credit Agreement dated as of August 5, 1999, as
---------
it may be amended, restated, supplemented or otherwise modified from time
to time.
"Anniversary" means a date that is an anniversary of the Closing Date.
-----------
"Applicable Base Rate Margin" means (i) with respect to Term B Loans,
---------------------------
3.00% per annum, and (ii) with respect to Term A Loans, Term Delayed Draw
Loans and Revolving Loans, a percentage per annum determined by reference
to the Applicable Leverage Ratio as set forth below:
======================================================
Applicable Base Rate
Margin for Term A
Applicable Loans, Term Delayed
Leverage Draw Loans and
Ratio Revolving Loans
------------------------------------------------------
Greater than 3.5:1.0 2.25%
------------------------------------------------------
Less than or equal to 3.5:1.0 2.00%
------------------------------------------------------
Less than or equal to 3.0:1.0 1.75%
------------------------------------------------------
Less than 2.5:1.0 1.50%
======================================================
; provided, however, that the Applicable Base Rate Margin shall be 2.25% in
-------- -------
the case of Term A Loans, Term Delayed Draw Loans and Revolving Loans, in
each case for so long (but only for so long) as an Event of Default has
occurred and is continuing or Company has not submitted to the
Administrative Agent the information as and when required under subsection
6.1(ii) or (iii), as applicable.
"Applicable Eurodollar Rate Margin" means (i) with respect to Term B
---------------------------------
Loans, 4.00% per annum, and (ii) with respect to Term A Loans, Term Delayed
Draw Loans and Revolving Loans, a percentage per annum determined by
reference to the Applicable Leverage Ratio as set forth below:
========================================================
Applicable
Eurodollar
Rate Margin for Term A
Applicable Loans, Term Delayed
Leverage Draw Loans and
Ratio Revolving Loans
--------------------------------------------------------
Greater than 3.5:1.0 3.25%
--------------------------------------------------------
Less than or equal to 3.5:1.0 3.00%
--------------------------------------------------------
Less than or equal to 3.0:1.0 2.75%
--------------------------------------------------------
Less than 2.5:1.0 2.50%
========================================================
3
<PAGE>
; provided, however, that the Applicable Eurodollar Rate Margin shall be
-------- -------
3.25% in the case of Term A Loans, Term Delayed Draw Loans and Revolving
Loans, in each case for so long (but only for so long) as an Event of
Default has occurred and is continuing or Company has not submitted to the
Administrative Agent the information as and when required under subsection
6.1(ii) or (iii), as applicable.
"Applicable Laws" means, collectively, all statutes, laws, rules,
---------------
regulations, ordinances, decisions, writs, judgments, decrees, and
injunctions of any Governmental Authority affecting ChipPAC or any of its
Subsidiaries or any Collateral or any of their other assets, whether now or
hereafter enacted and in force, and all Governmental Authorizations
relating thereto.
"Applicable Leverage Ratio" means, with respect to any date of
-------------------------
determination, the Leverage Ratio set forth in the Pricing Certificate (as
defined below) in effect for the Pricing Period (as defined below) in which
such date of determination occurs. For purposes of this definition, (i)
"Pricing Certificate" means an Officer's Certificate of ChipPAC certifying
--------------------
as to the Leverage Ratio as of the last day of any Fiscal Quarter and
setting forth the calculation of such Leverage Ratio in reasonable detail,
which Officer's Certificate may be delivered to Administrative Agent at any
time on or after the date of delivery by ChipPAC of the Compliance
Certificate (the "Related Compliance Certificate") with respect to the
------------------------------
period ending on the last day of such Fiscal Quarter pursuant to subsection
6.1(iv), and (ii) "Pricing Period" means each period commencing on the
--------------
first Business Day after the delivery to Administrative Agent of a Pricing
Certificate and ending on the first Business Day after the next Pricing
Certificate is delivered to Administrative Agent; provided that, anything
contained in this definition to the contrary notwithstanding, (a) the
Applicable Leverage Ratio for the period from the Closing Date to but
excluding the First Adjustment Date shall be deemed to be greater than
3.50:1.00 for purposes of making the relevant calculation referred to
above, and (b) in the event that, after the First Adjustment Date, (X)
ChipPAC fails to deliver a Pricing Certificate to Administrative Agent
setting forth the Leverage Ratio as of the last day of any Fiscal Quarter
on or before the last day on which ChipPAC is required to deliver the
Related Compliance Certificate (such last day being the "Cutoff Date") and
-----------
(Y) Administrative Agent determines (each such determination being an
"Agent Determination") on or after the Cutoff Date (on the basis of the
--------------------
Related Compliance Certificate or a Pricing Certificate delivered after the
Cutoff Date) that the Applicable Leverage Ratio that would have been in
effect if ChipPAC had delivered a Pricing Certificate on the Cutoff Date is
greater than the Leverage Ratio set forth in the most recent Pricing
Certificate actually delivered by ChipPAC, then (1) the Applicable Leverage
Ratio in effect for purposes of making the relevant calculation referred to
above for the period from the Cutoff Date to the date of delivery by
ChipPAC of the next Pricing Certificate (or, if earlier, the next date on
which an Agent Determination is made) shall be the Leverage Ratio
determined pursuant to the Agent Determination and (2) on the first
Business Day after Administrative Agent delivers written notice to ChipPAC
and Company of any Agent Determination, Company shall pay to Administrative
Agent, for distribution (as appropriate) to Lenders, an aggregate amount
equal to the additional interest and letter of credit fees Company would
have been required to pay in respect of all applicable Loans and Letters of
Credit in respect of which any interest or fees have been paid by Company
during the period from the Cutoff
4
<PAGE>
Date to the date such notice is given by Administrative Agent to ChipPAC
and Company if the amount of such interest and fees had been calculated
using the Applicable Leverage Ratio based on such Agent Determination.
"Approved Fund" with respect to any Lender that is a fund that invests
-------------
in bank loans, any other fund or trust or entity that invests in bank loans
and is advised or managed by the same investment advisor as such Lender or
by an Affiliate of such investment advisor property.
"Asian Letters of Credit" means Commercial Letters of Credit, in an
-----------------------
aggregate face amount outstanding at any time not to exceed $50,000,000,
issued by one or more local banks for the account of the Operating
Subsidiaries.
"Asset Sale" means the sale, lease, sale and leaseback, assignment,
----------
conveyance, transfer or other disposition by ChipPAC or any of its
Subsidiaries to any Person (other than ChipPAC or any of its wholly owned
Subsidiaries) of any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock (including,
without limitation, of any of ChipPAC's Subsidiaries), but excluding (a)
sales of assets in a single transaction or a series of related transactions
equal to $2,000,000 or less, (b) sales or other disposals of obsolete,
uneconomical, negligible, worn out or surplus equipment or other assets,
and (c) sales and other disposals of assets in the ordinary course of
business, including sales or discounts of accounts receivable in connection
with the collection or compromise thereof, the sale or exchange of
equipment or other personal property, including intellectual property, for
the functional equivalent thereof, and leasing or licensing of real or
personal property (including intellectual property).
"Assignment Agreement" means an assignment agreement in substantially
--------------------
the form of Exhibit IX annexed hereto or in such other form as may be
----------
approved by the Administrative Agent.
"Bain" means Bain Capital, Inc. and/or one or more of its Affiliates.
----
"Bankruptcy Law" means Title 11 of the United States Code entitled
--------------
"Bankruptcy", as now and hereafter in effect, or any successor statute, or
any similar state or foreign law for the relief of debtors.
"Base Rate" means, at any time, the higher of (x) the Prime Rate and
---------
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
---------------
reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City are authorized or required by
law to close; provided that, with respect to matters relating to Eurodollar
--------
Rate Loans, the term "Business Day" shall mean a day other than a Saturday,
------------
Sunday or other day on which commercial banks in New York City or London,
England, are authorized or required by law to close.
5
<PAGE>
"Calculation Date" has the meaning assigned to that term in subsection
----------------
7.6B.
"Calculation Period" has the meaning assigned to that term in
------------------
subsection 7.6A.
"Capital Lease" means, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Capital Stock" means any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation), including, without limitation, partnership interests and
membership interests, and any and all warrants, rights or options to
purchase or other arrangements or rights to acquire any of the foregoing.
"Carryforward" has the meaning assigned to that term in subsection
------------
7.6C.
"Cash" means money, currency or a credit balance in a Deposit Account.
----
"Cash Equivalents" means (i) marketable securities issued or directly
----------------
and unconditionally guaranteed by the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either S&P or Moody's; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
and, at the time of acquisition, having a rating of at least A-1 from S&P
or at least P-1 from Moody's, issued by any Lender or any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia, any member of the European Economic
Community, Korea, the People's Republic of China and Hong Kong or any U.S.
branch of a foreign bank having combined capital and surplus of not less
than $250,000,000 (each Lender and each such commercial bank being herein
called a "Cash Equivalent Bank"); (v) Eurodollar time deposits having a
--------------------
maturity of less than one year purchased directly from any Cash Equivalent
Bank (provided such deposit is with such Cash Equivalent Bank or any other
Cash Equivalent Bank); (vi) repurchase obligations for underlying
securities of the types described in clauses (i) through (v); (vii)
investments in money market funds which invest their assets in the types of
Cash Equivalents described in clauses (i) through (v) above; and (viii)
other short-term investments utilized by foreign Subsidiaries in accordance
with normal investment practices for cash management in investments of a
type and with financial institutions analogous to the foregoing.
6
<PAGE>
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
-------------
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise (other than the portion of
such deferred payment constituting interest), but only as and when so
received) received from such Asset Sale.
"Chinese Agreements" means, the agreements related to the ChipPAC
------------------
Shanghai I Loan, the Chinese Security Agreements and the Chinese Pledge
Agreements.
"Chinese Pledge Agreements" means, collectively, the ChipPAC Shanghai
-------------------------
I pledge agreement and the ChipPAC Shanghai II pledge agreement,
substantially in the form of Exhibits XII-A and XII-B annexed hereto, as
------------------------
such Chinese Pledge Agreements may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Chinese Security Agreements" means, collectively, the receivables
---------------------------
security agreement and the land use right and building mortgage agreement,
substantially in the form of Exhibits XIII-A and XIII-B annexed hereto, as
--------------------------
such Chinese Security Agreements may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Chinese Security Effective Date" has the meaning assigned to that
-------------------------------
term in subsection 6.11.
"ChipPAC" has the meaning assigned to that term in the Preamble to
-------
this Agreement.
"ChipPAC Barbados" means ChipPAC (Barbados) Ltd., a corporation
----------------
organized under the laws of Barbados.
"ChipPAC Hungary" means ChipPAC Liquidity Management Hungary Limited
---------------
Liability Company, a limited liability company organized under the laws of
Hungary.
"ChipPAC Hungary Capital Contribution" means the $29,000,000 capital
------------------------------------
contribution to be made by Company to ChipPAC Hungary on or prior to the
Closing Date.
"ChipPAC Hungary Loan" means the $116,000,000 loan to be made by
--------------------
ChipPAC Luxembourg to ChipPAC Hungary on the Closing Date.
"ChipPAC Korea" means ChipPAC Korea Company Ltd., a corporation
-------------
organized under the laws of the Republic of Korea.
"ChipPAC Korea Loan" means the $145,000,000 loan to be made by ChipPAC
------------------
Hungary to ChipPAC Korea on the Closing Date.
"ChipPAC Limited" means ChipPAC Limited, a corporation organized
---------------
under the laws of the British Virgin Islands.
7
<PAGE>
"ChipPAC Limited Loan" means the $121,000,000 loan to be made by
--------------------
Company to ChipPAC Limited on the Closing Date.
"ChipPAC Luxembourg" means ChipPAC Luxembourg S.a.r.l., a corporation
------------------
organized under the laws of Luxembourg.
"ChipPAC Luxembourg Loan" means the $116,000,000 loan to be made by
-----------------------
Company to ChipPAC Luxembourg on the Closing Date.
"ChipPAC Shanghai I" means ChipPAC (Shanghai) Company Limited, a
------------------
limited liability company established and organized under the laws of the
People's Republic of China.
"ChipPAC Shanghai I Loan" means the $34,000,000 loan to be made by
-----------------------
Company to ChipPAC Shanghai I on the Closing Date.
"ChipPAC Shanghai II" means ChipPAC Assembly & Test (Shanghai) Co.,
-------------------
Ltd., a limited liability company established and organized under the laws
of the People's Republic of China.
"Class" means each of the following classes of the Lenders: (i) the
-----
Lenders having Term A Loan Exposure, (ii) the Lenders having Term B Loan
Exposure, (iii) the Lenders having Term Delayed Draw Loan Exposure and (iv)
the Lenders having Revolving Loan Exposure.
"Cleanup" means all actions required to: (1) clean up, remove, treat
-------
or remediate Hazardous Materials in the indoor or outdoor environment; (2)
prevent the Release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (3) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Closing Date" means the date on which the Term Loans (other than the
------------
Term Delayed Draw Loans) are made, but in any event not later than August
15, 1999.
"Collateral" means all of the properties and assets (including Capital
----------
Stock) in which Liens are purported to be granted by the Collateral
Documents as security for the Obligations.
"Collateral Account" has the meaning assigned to that term in the
------------------
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
----------------------------
executed and delivered by Company, ChipPAC and the Collateral Agent as of
the Closing Date, substantially in the form of Exhibit X annexed hereto, as
---------
such Collateral Account Agreement may be amended, restated, supplemented or
otherwise modified from time to time.
8
<PAGE>
"Collateral Agent" means CSFB, in its capacity as collateral agent
----------------
hereunder and under the Collateral Documents, and any successor in such
capacity.
"Collateral Documents" means (i) the Intercompany Security Documents
--------------------
and (ii) the Pledge Agreements, the Security Agreements, the Collateral
Account Agreement, and any other documents, instruments or agreements
delivered by any Loan Party pursuant to this Agreement or any of the other
Loan Documents in order to grant to Collateral Agent, on behalf of the
Lenders, Liens and to perfect such Liens on any assets of such Loan Party
as security for all or any of the Obligations.
"Commercial Letter of Credit" means any letter of credit or similar
---------------------------
instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or
services by ChipPAC or any Operating Subsidiary in the ordinary course of
its business.
"Commitments" means the commitments of the Lenders to make Loans as
-----------
set forth in subsection 2.1A of this Agreement.
"Company" has the meaning assigned to that term in the Preamble to
-------
this Agreement.
"Compliance Certificate" means a certificate substantially in the form
----------------------
of Exhibit VII annexed hereto delivered to the Administrative Agent by
-----------
ChipPAC pursuant to subsection 6.1(iv).
"Condemnation Proceeds" has the meaning assigned to that term in
---------------------
subsection 2.4B(iii)(d).
"Consolidated Adjusted EBITDA" means, for any period, without
----------------------------
duplication, the sum of the amounts for such period (as determined for
ChipPAC and its Subsidiaries on a consolidated basis) of (i) Consolidated
Net Income, (ii) Consolidated Interest Expense (excluding the cash portion
of any payments made pursuant to subsection 2.3 to the Agent or Lenders on
or before the Closing Date, but including the non-cash amortization of such
amounts after the Closing Date), (iii) provisions for taxes based on income
(including, without duplication, foreign withholding taxes and any state
single business, unitary or similar taxes), (iv) total depreciation
expense, (v) total amortization expense, (vi) to the extent deducted in
determining Consolidated Net Income, those items described in subdivision A
of Schedule 1.1(i) annexed hereto, and (vii) other non-cash items reducing
---------------
Consolidated Net Income (excluding accruals of expenses and establishment
of reserves in the ordinary course of business) to the extent reflected as
a charge or otherwise deducted from the determination of Consolidated Net
Income, less non-cash items increasing Consolidated Net Income (other than
----
accruals of revenue or reversals of reserves), all of the foregoing (except
as otherwise provided in the definition of any term used herein) as
determined on a consolidated basis in conformity with GAAP; provided that,
for purposes of determining Consolidated Adjusted EBITDA for any period (or
portion thereof) that includes the Fiscal Quarters ended December 31, 1999,
March 31, 2000 and/or June 30, 2000,
9
<PAGE>
Consolidated Adjusted EBITDA shall be determined pursuant to the
methodology set forth in subdivision B of Schedule 1.1(i).
"Consolidated Capital Expenditures" means, for any period, the
---------------------------------
aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability (including that portion of Capital Leases which
is capitalized on a consolidated balance sheet in accordance with GAAP), by
ChipPAC and its Subsidiaries during that period that, in conformity with
GAAP, are or should be included in "purchases of property, plant or
equipment" or comparable items reflected in the consolidated statement of
cash flows of ChipPAC and its Subsidiaries; provided, however, that the
-------- -------
following shall in any event be excluded from the definition of
Consolidated Capital Expenditures: (a) any such expenditures made with, or
subsequently reimbursed out of, the proceeds of insurance, condemnation
awards (or payments in lieu thereof), indemnity payments or payments in
respect of judgments or settlements received from third parties for
purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received, so long as such expenditures
are commenced (or are contractually committed to commence) within 365 days
of the later of the occurrence of the damage to or loss of the assets being
replaced or repaired and the receipt of such proceeds, awards or payments
in respect thereof, (b) any such expenditures constituting the reinvestment
of proceeds from the sales of assets in equipment or other productive
assets of ChipPAC and its Subsidiaries, so long as such expenditures are
commenced (or are contractually committed to commence) within 365 days of
the receipt of such proceeds, (c) if made on or prior to December 31, 2001,
Micro BGA Capital Expenditures and (d) any such expenditures made with the
proceeds of the HEI Unspent Amount and/or the Intel Preferred Stock and
identified as such on an Officer's Certificate pursuant to Section 6.1(iv);
and provided further, however, that Consolidated Capital Expenditures shall
-------- ------- -------
not include any expenditures made by ChipPAC or any of its Subsidiaries to
acquire in a Permitted Acquisition the business, property or assets of any
Person, or the stock or other evidence of beneficial ownership of any
Person that, as a result of such acquisition, becomes a Subsidiary of
ChipPAC.
"Consolidated Current Assets" means, as at any date of determination,
---------------------------
the total assets of ChipPAC and its Subsidiaries on a consolidated basis
which may properly be classified as current assets in conformity with GAAP,
excluding Cash, Cash Equivalents and deferred income taxes to the extent
otherwise included in current assets.
"Consolidated Current Liabilities" means, as at any date of
--------------------------------
determination, the total liabilities of ChipPAC and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities
in conformity with GAAP, other than (i) any liabilities that are the
current portion of Indebtedness (including Capital Lease obligations)
classified as long term liabilities in conformity with GAAP (including
accrued but unpaid interest) and (ii) deferred income taxes to the extent
otherwise included in current liabilities.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
-----------------------------
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a) Consolidated Adjusted EBITDA, and (b) the Consolidated
Working Capital Adjustment (which may be a negative number) minus (ii) the
-----
sum, without
10
<PAGE>
duplication, of the amounts for such period of (a) voluntary and scheduled
cash principal repayments made in respect of Consolidated Total Debt
(excluding repayments of Revolving Loans or loans under similar revolving
lines of credit except to the extent the Revolving Loan Commitments or
similar commitments to lend, respectively, are permanently reduced in
connection with such repayments), (b) Consolidated Capital Expenditures
plus, to the extent not included therein, the Micro BGA Capital
----
Expenditures (net of any proceeds of any related financings with respect to
such Capital Expenditures and net of any portion of the HEI Unspent Amount
used to finance such Capital Expenditures) plus (or minus, if negative) the
---- ------
Carryforward for such period to be carried forward to the next period less
----
the Carryforward (if any) for the preceding period carried forward to the
current period, (c) Consolidated Interest Expense paid in cash during such
period, (d) the provision for taxes (including, without duplication,
foreign withholding taxes and any single business, unitary or similar
taxes) based on income of ChipPAC and its Subsidiaries and paid in cash
with respect to such period (including taxes payable in cash within 90 days
following such period), (e) any cash payments made during such period with
respect to items set forth in subdivision A of Schedule 1.1(i) annexed
---------------
hereto, (f) non-cash charges added in calculating Consolidated Adjusted
EBITDA in a prior period to the extent such non-cash charges are or will be
paid in cash in the current period, (g) to the extent not otherwise
deducted in determining Consolidated Net Income, fees and expenses
associated with any exchange of Subordinated Debt contemplated under the
terms of the Subordinated Debt Documents, (h) to the extent not otherwise
deducted in determining Consolidated Excess Cash Flow, cash payments made
during such period with respect to non-current liabilities and cash
payments made during such period with respect to restructuring reserves and
expenditures with respect to Permitted Acquisitions, and (i) to the extent
not otherwise deducted in determining Consolidated Net Income, Restricted
Payments and Investments made pursuant to subsection 7.3 or 7.5 made during
such period (including any payments made related to the Earnout and the
Intel Preferred Stock).
"Consolidated Interest Expense" means, for any period (as determined
-----------------------------
for ChipPAC and its Subsidiaries on a consolidated basis), total cash or
non-cash interest expense (including that portion attributable to capital
leases in accordance with GAAP), including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under
Interest Rate Agreements and other Hedge Agreements, commitment fees
accrued under subsection 2.3A and any Administrative Agent's fees payable
to Administrative Agent, provided that Consolidated Interest Expense for
any period (or portion thereof) that includes the Fiscal Quarters ended
December 31, 1999, March 31, 2000 and June 30, 2000 shall be determined in
accordance with subdivision B of Schedule 1.1(i).
---------------
"Consolidated Net Income" means, for any period, the net income (or
-----------------------
loss) of ChipPAC and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded therefrom (i) the income (or
--------
loss) of any Person other than a Subsidiary of ChipPAC in which any other
person (other than ChipPAC or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to ChipPAC or any Subsidiary of ChipPAC by such
Person during such period, (ii) the income (or
11
<PAGE>
loss) of any Person accrued prior to the date it becomes a Subsidiary of
ChipPAC or is merged into or consolidated with ChipPAC or any Subsidiary of
ChipPAC or that Person's assets are acquired by ChipPAC or any Subsidiary
of ChipPAC, (iii) the amount of income of any Subsidiary of ChipPAC only to
the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of such amount of income is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or
losses attributable to Asset Sales, (v) Transaction Costs, and (vi) to the
extent not included in clauses (i) through (v) above, any net extraordinary
unusual or nonrecurring gains or net unusual or nonrecurring extraordinary
losses and any write-offs of deferred financing costs associated with
Indebtedness of ChipPAC or any Subsidiary of ChipPAC repaid on the Closing
Date.
"Consolidated Total Debt" means, as at any date of determination, the
-----------------------
aggregate amount, without duplication, of all outstanding Indebtedness of,
and Contingent Obligations consisting of the guarantee of Indebtedness by
ChipPAC and its Subsidiaries on a consolidated basis; provided that the
--------
term "Consolidated Total Debt" shall exclude any Indebtedness with respect
to outstanding Permitted Seller Paper so long as the terms and conditions
of such Permitted Seller Paper do not require any cash payments to be made
to the holder of such Permitted Seller Paper prior to the payment in full
of all Obligations.
"Consolidated Working Capital" means, as at any date of determination,
----------------------------
the excess of Consolidated Current Assets over Consolidated Current
Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
---------------------------------------
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or
is less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (iii) under Interest
Rate Agreements or other Hedge Agreements. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to
make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such
12
<PAGE>
obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise) or (Y) to maintain the solvency or any
balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclause (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal
to (A) the amount of the obligation so guaranteed or otherwise supported
or, if less, the amount to which such Contingent Obligation is specifically
limited (including netting of Interest Rate Agreements of Hedge Agreements)
or (B) if neither amount in clause (A) is stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform) as determined by such Person in good faith.
Contingent Obligations shall not include standard contractual indemnities
entered into in the ordinary course of business, endorsements of
instruments for deposit or collection in the ordinary course of business or
any product warranties in the ordinary course of business.
"Continuing Director" shall mean, as of any date of determination, any
-------------------
member of the Board of Directors of ChipPAC who (i) was a member of such
Board of Directors on the Closing Date or (ii) was nominated for election
or elected to such Board of Directors with the affirmative vote (directly
or indirectly) of Bain and the SXI Holders.
"Contractual Obligation" means, as applied to any Person, any
----------------------
provision of any material indenture, mortgage, deed of trust, contract,
undertaking or other material agreement or instrument to which such Person
is a party or to which such Person or any of its assets is subject.
"CSFB" means Credit Suisse First Boston.
----
"Default" means a condition or event that, after notice or after any
-------
applicable grace period has lapsed, or both, would constitute an Event of
Default.
"Defaulting Lender" means any Lender with respect to which a Lender
-----------------
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like
---------------
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States
------- -
of America.
"Earnout" means amounts payable to HEI, either through a redemption of
-------
a portion of the HEI Preferred Stock, direct cash payments or a combination
thereof, during the four-and-one-half year period following the closing of
the Recapitalization Transactions if ChipPAC and its Subsidiaries attain
certain financial performance objectives as set forth in the
Recapitalization Agreement.
"Eligible Assignee" means (A) (i) a commercial bank organized under
-----------------
the laws of the United States or any state thereof; (ii) a commercial bank
13
<PAGE>
organized under the laws of any other country or a political subdivision
thereof; provided that (x) such bank is acting through a branch or agency
--------
located in the United States or (y) such bank is organized under the laws
of a country that is a member of the Organization for Economic Cooperation
and Development or a political subdivision of such country; and (iii) any
other financial institution or entity which is an "accredited investor" (as
defined in Regulation D under the Securities Act) which extends credit or
buys loans as one of its businesses including, but not limited to,
insurance companies, mutual funds, investment funds and lease financing
companies; (B) any Lender and any Affiliate of any Lender; provided that
--------
neither Company nor any Affiliate of Company shall be an Eligible Assignee
(other than by assignment within 30 days of the Closing Date to an
investment fund controlled by or under common control with Bain) and (C) an
Approved Fund.
"Employee Benefit Plan" means "employee benefit plan" as defined in
---------------------
Section 3(3) of ERISA which is subject to ERISA and which is maintained or
contributed to by Company or any of its ERISA Affiliates.
"Environmental Claim" means any written claim, action, or notice by
-------------------
any Person alleging potential liability (including, without limitation,
potential liability for investigatory costs, Cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (a) the
presence or Release of any Hazardous Materials at any location, whether or
not owned, leased or operated by Company or any of its Subsidiaries, or (b)
any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all present and future treaties,
------------------
international conventions and federal, state, local, and foreign laws,
regulations, Governmental Authorizations, codes, ordinances, orders,
decrees, judgments and binding agreements issued, promulgated or entered
into by or with any Governmental Authority relating to pollution or
protection of the environment, including, without limitation, laws relating
to Releases or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, disposal, transport or handling of Hazardous Materials,
laws and regulations with regard to recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Materials and laws relating
to the management or use of natural resources.
"Environmental Liabilities" means all liabilities, obligations to
-------------------------
conduct Cleanup, and all Environmental Claims against any Loan Party or its
Subsidiaries or against any Person whose liability for any Environmental
Claim any Loan Party or its Subsidiaries may have retained or assumed
contractually or by operation of law arising from (a) the presence, Release
or threatened Release of Hazardous Materials at any location, owned,
leased, occupied or operated by Company or its Subsidiaries, or (b) any
violation, or alleged violation, of any Environmental Law.
"Equity Contribution" means, collectively, (i) the contribution by the
-------------------
Sponsors to ChipPAC Merger Corp. of approximately $87,000,000 in cash in
exchange for all of the outstanding common stock of ChipPAC Merger Corp.
and
14
<PAGE>
(ii) approximately $10,000,000 of rollover equity contribution by the
Existing Investors, all as contemplated by the Recapitalization
Transactions.
"Equity Proceeds" means the cash proceeds (net of underwriting
---------------
discounts and commissions and other costs and expenses (including legal
costs) associated therewith) from the issuance of any Capital Stock or
other equity Securities of, or the making of any capital contribution to,
ChipPAC or any of its Subsidiaries after the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
---------------
which is a member of a controlled group of corporations within the meaning
of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person
is a member; and (iii) solely for purposes of obligations under Section 412
of the Internal Revenue Code or under the applicable sections set forth in
Section 414(t)(2) of the Internal Revenue Code, any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which that Person, any corporation described in clause (i)
above or any trade or business described in clause (ii) above is a member.
"ERISA Event" means (i) a "reportable event" within the meaning of
-----------
Section 4043(c) of ERISA and the regulations issued thereunder with respect
to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation or with respect to which
no penalty will be assessed by the PBGC for failure to satisfy such notice
requirements); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal
Revenue Code) or the failure to make by its due date a required installment
under Section 412(m) of the Internal Revenue Code with respect to any
Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to
terminate such plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the withdrawal by Company or any of its ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting, in either case, in
liability pursuant to Section 4063 or 4064 of ERISA, respectively; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan
pursuant to Section 4042 of ERISA; (vi) the imposition of liability on
Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069
of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii)
the withdrawal by Company or any of its ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)
from any Multiemployer Plan resulting in withdrawal liability pursuant to
Section 4201 of ERISA, or the receipt by Company or any of its ERISA
Affiliates of written notice from any Multiemployer Plan that it is in
15
<PAGE>
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or
that it intends to terminate or has terminated under Section 4042 of ERISA
or under Section 4041A of ERISA if such termination would result in
liability to Company or any of its ERISA Affiliates; (viii) the imposition
on Company or any of its ERISA Affiliates of fines, penalties or taxes
under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the disqualification by the Internal Revenue Service of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) under Section 401(a) of
the Internal Revenue Code, or the determination by the Internal Revenue
Service that any trust forming part of any Pension Plan fails to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue
Code; or (x) the imposition of a Lien pursuant to Section 401(a)(29) or
412(n) of the Internal Revenue Code or pursuant to ERISA with respect to
any Pension Plan.
"Eurocurrency Reserve Requirements" means, for each Interest Period
---------------------------------
for each Eurodollar Rate Loan, the highest reserve percentage applicable to
any Lender during such Interest Period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System or any
successor for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement), with respect to liabilities or assets consisting of or
including Eurocurrency liabilities having a term equal to such Interest
Period.
"Eurodollar Base Rate" means the rate per annum determined by the
--------------------
Administrative Agent at approximately 11:00 A.M. (London time) on the date
which is two Business Days prior to the beginning of the relevant Interest
Period (as specified in the applicable Notice of Borrowing) by reference to
the British Bankers' Association Interest Settlement Rates for deposits in
Dollars (as set forth by any service selected by the Administrative Agent
which has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying such rates) for
a period equal to such Interest Period; provided that, to the extent that
--------
an interest rate is not ascertainable pursuant to the foregoing provisions
of this definition, the "Eurodollar Base Rate" shall be the interest rate
per annum determined by the Administrative Agent to be the average of the
rates per annum at which deposits in Dollars are offered for such relevant
Interest Period to major banks in the London interbank market in London,
England by the Reference Lenders at approximately 11:00 A.M. (London time)
on the date which is two Business Days prior to the beginning of such
Interest Period. If any of the Reference Lenders shall be unable or shall
otherwise fail to supply such rates to the Administrative Agent upon its
request, the rate of interest shall be determined on the basis of the
quotations of the remaining Reference Lender.
"Eurodollar Rate Loans" means Loans bearing interest at rates
---------------------
determined by reference to the Reserve Adjusted Eurodollar Rate as provided
in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
----------------
"Excess Proceeds Amount" means, initially, $0, which amount shall be
----------------------
(i) increased (a) on the date of delivery in any Fiscal Year of an
---------
Officer's
16
<PAGE>
Certificate setting forth the calculation of Consolidated Excess Cash Flow
for the preceding Fiscal Year pursuant to subsection 2.4B(iii)(e) (each
such date being an "Excess Cash Payment Date"), so long as any prepayment
------------------------
required pursuant to subsection 2.4B(iii)(e) has been made, by an amount
equal to the amount of such Consolidated Excess Cash Flow which is not so
prepaid, and (b) on the date of the receipt by ChipPAC or any Subsidiary of
ChipPAC of any Equity Proceeds, so long as any prepayment required pursuant
to subsection 2.4B(iii)(c) has been made, by an amount equal to such Equity
Proceeds and such other proceeds which are not so prepaid, and (ii) reduced
-------
(a) on each Excess Cash Payment Date where Consolidated Excess Cash Flow
for the immediately preceding Fiscal Year is a negative number, by such
amount, (b) at the time any Consolidated Capital Expenditures are made
pursuant to subsection 7.6D(iii), by the amount of such Consolidated
Capital Expenditures, (c) at the time any time a Permitted Acquisition is
funded pursuant to subsection 7.7(v)(z) with an amount attributable to the
Excess Proceeds Amount, by the portion of the purchase price paid with the
Excess Proceeds Amount and (d) at the time Investments are made pursuant to
subsection 7.3(xii), by the amount of such Investments in excess of
$20,000,000 it being understood that the Excess Proceeds Amount may be
reduced to an amount below $0 after giving effect to the reductions
enumerated in clause (ii)(a) above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Existing Investors" means HEA and HEI.
------------------
"Facilities" means any and all real property (including, without
----------
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or (for purposes of Sections 5.13 and 10.3 only) heretofore
owned, leased, operated or used by ChipPAC or any of its Subsidiaries (but
only as to portions thereof actually owned, leased, operated or used) or
any of their respective predecessors or any of their respective Affiliates
that are directly or indirectly controlled by ChipPAC.
"Federal Funds Effective Rate" means, for any period, a fluctuating
----------------------------
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by
the Administrative Agent.
"First Adjustment Date" means the later of (a) six months from the
---------------------
Closing Date and (b) the date of the delivery of the first set of quarterly
financial statements pursuant to subsection 6.1(ii) following the Closing
Date.
"First Priority" means, with respect to any Lien purported to be
--------------
created in any Collateral pursuant to any Collateral Document, that such
Lien is the most senior Lien (other than Permitted Encumbrances and other
Liens permitted
17
<PAGE>
pursuant to subsection 7.2A to the extent not perfected by filing of any
UCC financing statements) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means the fiscal year of ChipPAC and its Subsidiaries
-----------
ending on December 31 of each calendar year. For purposes of this
Agreement, any particular Fiscal Year shall be designated by reference to
the calendar year in which such Fiscal Year ends.
"Fixed Charge Coverage Ratio" has the meaning assigned to that term in
---------------------------
subsection 7.6E.
"Foreign Benefit Event" means with respect to any Foreign Pension
---------------------
Plan, (a) the existence of unfunded liabilities in excess of the amount
permitted under any applicable law, or in excess of the amount that would
be permitted absent a waiver from a Governmental Authority, (b) the failure
to make the required contributions or payments, under any applicable law,
on or before the due date for such contributions or payments, (c) the
receipt of a notice by a Governmental Authority relating to the intention
to terminate any such Foreign Pension Plan or to appoint a trustee or
similar official to administer any such Foreign Pension Plan, or alleging
the insolvency of any such Foreign Pension Plan and (d) the incurrence of
any liability in excess of $5,000,000 which is unfunded or for which a
reserve has not been established in the financial statements of ChipPAC and
its subsidiaries (or the Dollar equivalent thereof in another currency) by
Company or any of its Subsidiaries under applicable law on account of the
complete or partial termination of such Foreign Pension Plan or the
complete or partial withdrawal of any participating employer therein, or
(e) the occurrence of any transaction that is prohibited under any
applicable law and could reasonably be expected to result in the incurrence
of any liability by Company or any of its Subsidiaries, or the imposition
on Company or any of its Subsidiaries of any fine, excise tax or penalty
resulting from any noncompliance with any applicable law, in each case in
excess of $5,000,000 (or the Dollar equivalent thereof in another
currency).
"Foreign Pension Plan" shall mean any plan, fund (including any
--------------------
superannuation fund) or other similar program established or maintained
outside the United States by ChipPAC or any one or more of its Subsidiaries
primarily for the benefit of employees of ChipPAC or such Subsidiaries
residing outside the United States, which plan, fund or other similar
program provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Funding and Payment Office" means the office of the Administrative
--------------------------
Agent located at 11 Madison Avenue, New York, NY 10010 (or such office of
the Administrative Agent or any successor Administrative Agent specified by
the Administrative Agent or such successor Administrative Agent in a
written notice to the Loan Parties and the Lenders).
18
<PAGE>
"Funding Date" means the date of the funding of a Loan, which, in the
------------
case of the Term A Loans and Term B Loans, shall be the Closing Date.
"GAAP" means, subject to the limitations on the application thereof
----
set forth in subsection 1.2, generally accepted accounting principles set
forth in 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, in each case as the same are applicable to
the circumstances as of the date of determination and specifically, terms
used herein applicable to Company and its Subsidiaries defined by reference
to GAAP shall give effect to the subtraction of minority interests.
"Governmental Acts" has the meaning assigned to that term in
-----------------
subsection 3.5A.
"Governmental Authority" means any nation or government, any state or
----------------------
any political subdivision of any of the foregoing and any entity exercising
executive, legislative, judicial or regulatory functions of or pertaining
to government.
"Governmental Authorization" means any permit, license, authorization,
--------------------------
plan, directive, consent order or consent decree of or from any
Governmental Authority.
"Granting Bank" has the meaning assigned to that term in subsection
-------------
10.1F.
"Guaranty" means, individually, the Guaranty, substantially in the
--------
form of Exhibit IV annexed hereto, executed and delivered by ChipPAC and
----------
the Subsidiary Guarantors as of the Closing Date or by any additional
Subsidiary Guarantor from time to time thereafter pursuant to subsection
6.9, as such Guaranty may heretofore have been or hereafter may be amended,
restated, supplemented or otherwise modified from time to time, or any
other guaranty of the Obligations, and "Guaranties" means, collectively,
----------
the Guaranty and each other guaranty of the Obligations.
"Guarantor" means, individually, ChipPAC, the Subsidiary Guarantors or
---------
any other guarantor of the Obligations, and "Guarantors" means,
----------
collectively, ChipPAC, the Subsidiary Guarantors and each other guarantor
of the Obligations.
"Hazardous Materials" means all substances defined as Hazardous
-------------------
Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"HEA" means Hyundai Electronics America, a California corporation.
---
19
<PAGE>
"Hedge Agreements" means all swaps, caps or collar agreements or
----------------
similar arrangements entered into by ChipPAC or any of its Subsidiaries
providing for protection against fluctuations in currency exchange rates or
the exchange of nominal interest obligations, either generally or under
specific contingencies.
"HEI" means Hyundai Electronics Industries Co., Ltd., a corporation
---
incorporated under the laws of the Republic of Korea.
"HEI Preferred Stock" means a series of senior pay-in-kind preferred
-------------------
stock of ChipPAC issued to HEI in connection with the Recapitalization
Transactions having an initial liquidation preference of $70,000,000 and
the other terms and conditions set forth in Exhibit XIV annexed hereto.
-----------
"HEI Unspent Amount" means $12,295,000, which is the amount by which
------------------
the cash consideration payable to HEI pursuant to the Recapitalization
Agreement is reduced as a result of ChipPAC's actual capital expenditures
for the period from January 1, 1999, through the Closing Date being less
than budgeted capital expenditures for such period.
"Hungarian Pledge Agreement" means the Quota Lien Agreement by and
--------------------------
between the Company and the Collateral Agent, substantially in the form of
Exhibit XV annexed hereto, as such Hungarian Pledge Agreement may hereafter
----------
be amended, restated, supplemented or otherwise modified from time to time.
"Immaterial Subsidiaries" means one or more Subsidiaries of ChipPAC,
-----------------------
designated in writing to the Administrative Agent from time to time;
provided that (x) the assets of all such designated Subsidiaries
--------
constitute, in the aggregate, less than or equal to 5% of the total assets
of ChipPAC and its Subsidiaries on a consolidated basis and (y) all such
designated Subsidiaries contribute, individually or in the aggregate, less
than or equal to 5% of Consolidated Adjusted EBITDA.
"Indebtedness" means, as applied to any Person, (i) all indebtedness
------------
for borrowed money, (ii) that portion of obligations with respect to
Capital Leases that is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations
for borrowed money (other than current accounts payable incurred in the
ordinary course of business and accrued expenses incurred in the ordinary
course of business), (iv) any obligation owed for all or any part of the
deferred purchase price of property or services (excluding the Earnout, any
such obligations incurred under ERISA or any Foreign Pension Plan, any
obligation under employment or consulting agreements of ChipPAC or its
Subsidiaries and current trade payables incurred in the ordinary course of
business) which obligation in accordance with GAAP would be shown as a
liability on the balance sheet of such Person, (v) all indebtedness created
or arising under any conditional sale or other title retention agreement
with respect to any property or assets acquired by such Person (unless the
rights and remedies of the seller or the lender under such agreement in the
event of default are limited to repossession or sale of such property or
assets), (vi) all obligations, contingent or otherwise, as an account party
under any Letter of Credit or under acceptance, letter of credit or similar
facilities to the extent not reflected as trade liabilities on
20
<PAGE>
the balance sheet of such Person in accordance with GAAP, and (vii) all
indebtedness secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that
Person. The amount of Indebtedness which is non-recourse to the obligor
thereunder or to any other obligor and for which recourse is limited to an
identified asset or assets shall be equal to the lesser of (1) the stated
amount of such obligation and (2) the fair market value of such asset or
assets. Obligations under Interest Rate Agreements and Hedge Agreements
constitute (X) in the case of Hedge Agreements, Contingent Obligations, and
(Y) in all other cases, Investments, and in neither case constitute
Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
----------
"Information Memorandum" means the Confidential Information Memorandum
----------------------
dated July 1999, that was used in connection with the syndication of the
credit facilities set forth herein.
"Initial Period" means the period commencing on and including the
--------------
Closing Date and ending on the earlier of (i) the date on which the Sole
Lead Arranger notifies Company that it has concluded its primary
syndication of the Loans and the Commitments, and (ii) thirty (30) days
after the Closing Date.
"Insurance Proceeds" has the meaning assigned to that term in
------------------
subsection 2.4B(iii)(d).
"Intel" means Intel Corporation, a Delaware corporation.
-----
"Intel Preferred Stock" means the 10% convertible preferred stock of
---------------------
ChipPAC issued to Intel in connection with the Recapitalization
Transactions having an initial liquidation preference of $10,000,000 and on
the other terms and conditions set forth in Exhibit XVIII annexed hereto.
-------------
"Intellectual Property" has the meaning assigned to that term in
---------------------
subsection 5.5C.
"Intercompany Note" means any note evidencing Indebtedness of ChipPAC
-----------------
or any Subsidiary of ChipPAC to ChipPAC or any other Subsidiary of ChipPAC
(including the Recapitalization Notes) set forth on Schedule 1.1(ii)
----------------
annexed hereto, and "Intercompany Notes" means, collectively, all such
------------------
notes.
"Intercompany Security Documents" means the Recapitalization Security
------------------------------
Agreements and the Recapitalization Notes.
"Interest Coverage Ratio" has the meaning assigned to that term in
-----------------------
subsection 7.6A.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
---------------------
the last Business Day in each of March, June, September and December of
each year, commencing September 1999, and (ii) with respect to any
Eurodollar Rate
21
<PAGE>
Loan, the last day of each Interest Period applicable to such Loan;
provided that in the case of each Interest Period of longer than three
--------
months, "Interest Payment Date" shall also include the date that is three
months or integral multiple thereof after the commencement of such Interest
Period.
"Interest Period" has the meaning assigned to that term in subsection
---------------
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
-----------------------
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to hedge ChipPAC or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
--------------------------------
Reserve Adjusted Eurodollar Rate, for purposes of determining the interest
rate in respect of an Interest Period. The Interest Rate Determination
Date for purposes of calculating the Reserve Adjusted Eurodollar Rate shall
be the second Business Day prior to the first day of the related Interest
Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter and any
successor statute and the regulations promulgated by the Internal Revenue
Service thereunder.
"Investment" means (i) any direct or indirect purchase or other
----------
acquisition by ChipPAC or any of its Subsidiaries of, or of a beneficial
interest in, stock or other Securities of any other Person, (ii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
ChipPAC or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable acquired from that other Person that
are not current assets or did not arise from sales to that other Person in
the ordinary course of business or (iii) Interest Rate Agreements;
provided, however, that the term "Investment" shall not include (a) current
-------- -------
trade and customer accounts receivable for goods furnished or services
rendered in the ordinary course of business and payable in accordance with
customary trade terms, (b) advances and prepayments to suppliers for goods
and services in the ordinary course of business, (c) stock or other
securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due or owing to ChipPAC or any of its Subsidiaries
(whether in bankruptcy of customers or suppliers or otherwise) or as
security for any such Indebtedness or claims, (d) Cash, and (e) deposits to
secure the performance of leases. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment
"Investors" means Bain, the SXI Holders and the Existing Investors.
---------
"Issuing Bank" means, with respect to any Letter of Credit, CSFB, in
------------
its capacity as issuer of Letters of Credit, and, any other Lender,
reasonably
22
<PAGE>
acceptable to Company and the Administrative Agent, having a Letter of
Credit Subfacility Commitment.
"Judgment Currency" has the meaning assigned to that term in
-----------------
subsection 10.20.
"Judgment Currency Conversion Date" has the meaning assigned to that
---------------------------------
term in subsection 10.20.
"Korean Pledge Agreement" means that certain Pledge (Jil-Kwon)
-----------------------
Agreement entered into by and between ChipPAC Korea and ChipPAC Hungary on
or prior to the Closing Date, substantially in the form of Exhibit XVI
-----------
annexed hereto, as such Korean Pledge Agreement may hereafter be amended,
restated, supplemented or otherwise modified from time to time with the
consent of the Requisite Lenders.
"Korean Security Agreement" means that certain Yangdo Dambo Agreement
-------------------------
entered into by and between ChipPAC Korea and the Collateral Agent on or
prior to the Closing Date, substantially in the form of Exhibit XVII
------------
annexed hereto, as such Korean Security Agreement may hereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Lender" and "Lenders" means the Persons identified as "Lenders" and
------ -------
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1, and the term
"Lenders" shall include the Swing Line Lender unless the context otherwise
requires; provided that the term "Lenders", when used in the context of a
--------
particular Commitment, shall mean the Lenders having that Commitment.
"Lender Default" means (i) the refusal (which has not been retracted)
--------------
of a Lender to make available its portion of any Loans (including any
Revolving Loans made to pay Refunded Swing Line Loans or to reimburse
drawings under Letters of Credit) in accordance with subsection 2.1A or its
portion of any unreimbursed drawing or payment under a Letter of Credit in
accordance with subsection 3.3C or (ii) a Lender having notified Company
and/or the Administrative Agent in writing that it does not intend to
comply with its obligations under subsection 2.1 or subsection 3.1C, 3.3B
or 3.3C.
"Lending Office" means, as to any Lender, the office or offices of
--------------
such Lender specified as the "Lending Office" in Schedule 2.1, or such
------------
other office or offices as such Lender may from time to time notify Company
and the Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
---------------- -----------------
Credit and Standby Letters of Credit issued or to be issued by the Issuing
Bank pursuant to subsection 3.1.
"Letter of Credit Issuing Office" means, as to any Issuing Bank, the
-------------------------------
address from time to time specified by such Issuing Bank to Company and the
Administrative Agent as its letter of credit issuing office. The initial
"Letter of
23
<PAGE>
Credit Issuing Office" for CSFB shall be 5 World Trade Center, 8/th/ Floor,
New York, New York, 10048.
"Letter of Credit Subfacility Commitment" means, with respect to any
---------------------------------------
Issuing Bank at any time, the commitment of such Issuing Bank to issue
Letters of Credit pursuant to subsection 3.1A; provided that the aggregate
--------
amount of the Letter Credit Subfacility Commitments shall in no event
exceed $10,000,000; provided, further, that any reduction in the Revolving
-------- -------
Loan Commitments to a level that is below the then aggregate amount of the
Letter of Credit Subfacility Commitments shall result in the pro rata
reduction of the aggregate Letter of Credit Subfacility Commitments pro
rata to each Issuing Bank.
"Letter of Credit Usage" means, as at any date of determination, the
----------------------
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding plus (ii) the aggregate amount of all drawings under Letters of
----
Credit honored by the Issuing Bank and not theretofore reimbursed by
Company (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B).
"Leverage Ratio" has the meaning assigned to that term in subsection
--------------
7.6.
"Lien" means any lien, mortgage, pledge, assignment, security
----
interest, fixed or floating charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest) and any
option, trust or deposit or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means, as the context requires, one or more of the
---- -----
Term Loans, Revolving Loans, Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, any notes issued pursuant to
--------------
subsection 2.1E(ii), the Letters of Credit (and any applications for, or
reimbursement agreements or other documents or certificates executed by
ChipPAC or Company in favor of the Issuing Bank relating to, the Letters of
Credit), the Guaranties and the Collateral Documents.
"Loan Parties" means Company, ChipPAC Shanghai I, ChipPAC Shanghai II
------------
and each Guarantor.
"Local Lines of Credit" means (a) the lines of credit in an aggregate
---------------------
principal amount outstanding at any time not to exceed $25,000,000 (or the
equivalent), to provide working capital financing for the Operating
Subsidiaries and (b) additional lines of credit in an aggregate principal
amount outstanding at any time not to exceed $5,000,000 (or the
equivalent), to provide working capital financing for the Operating
Subsidiaries in connection with a Permitted Acquisition.
24
<PAGE>
"Margin Stock" has the meaning assigned to that term in Regulation U
------------
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business, results of operations, financial condition or prospects of
ChipPAC and its Subsidiaries, taken as a whole, or (ii) the validity or
enforceability of any of the Transaction Documents (to the extent adverse
to ChipPAC or its Subsidiaries) or the Loan Documents against the Loan
Parties (other than Immaterial Subsidiaries, except to the extent any such
invalidity or unenforceability would adversely affect the Collateral
Agent's ability to realize upon any Collateral) or the rights, remedies and
benefits available to the parties thereunder.
"Material Contracts" means any indenture, mortgage, deed of trust,
------------------
contract, undertaking, agreement or other instrument to which ChipPAC or
any of its Subsidiaries is a party for which breach, nonperformance,
cancellation or failure to renew would constitute an Event of Default or
could reasonably be expected to have a Material Adverse Effect.
"Maximum Consolidated Capital Expenditures Amount" has the meaning
------------------------------------------------
assigned to that term in subsection 7.6C(i).
"Merger Corp" means ChipPAC Merger Corp., a Delaware corporation.
-----------
"Micro BGA Capital Expenditures" means expenditures that would
------------------------------
constitute Consolidated Capital Expenditures (but for clause (c) in the
proviso to the definition of such term) made with respect to the provision
of Micro BGA packaging services pursuant to the Services Agreement dated as
of the Closing Date by and between HEI and ChipPAC Limited.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a "multiemployer plan", as defined in
------------------
Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA, to which
Company or any of its ERISA Affiliates is contributing or to which Company
or any of its ERISA Affiliates has an obligation to contribute.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash
-----------------
Proceeds of such Asset Sale net of costs of sale including, without
limitation, (i) income taxes estimated to be payable as a result of such
Asset Sale within two years of the date of receipt of such Cash Proceeds,
(ii) transfer, sales, use and other taxes payable in connection with such
Asset Sale, (iii) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than the Loans)
that is secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset
Sale, and (iv) financial advisor's commissions and fees and expenses of
counsel and other advisors in connection with such Asset Sale.
"Non-Defaulting Lender" means and includes each Lender other than a
---------------------
Defaulting Lender.
25
<PAGE>
"Notice of Borrowing" means a notice in the form of Exhibit I annexed
------------------- ---------
hereto delivered by Company to the Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
---------------------------------
the form of Exhibit II annexed hereto delivered by Company to the
----------
Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the
interest rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice in the form of
--------------------------------------
Exhibit III annexed hereto delivered by Company to the Administrative Agent
-----------
pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party
-----------
from time to time owed to the Agents, the Lenders or any of them or their
respective Affiliates under the Loan Documents, whether for principal,
interest, reimbursement of amounts drawn under Letters of Credit or
payments for early termination of Interest Rate Agreements, fees, expenses,
indemnification or otherwise.
"Obligation Currency" has the meaning assigned to that term in
-------------------
subsection 10.20.
"Officer's Certificate" means, with respect to any Person, a
---------------------
certificate executed on behalf of such Person (x) if such Person is a
partnership or limited liability company, by its chairman of the Board (if
an officer) or chief executive officer or by the chief financial officer,
vice president, treasurer or a principal financial officer of its general
partner or managing member or other Person authorized to do so by its
Organizational Documents, (y) if such Person is a corporation, on behalf of
such corporation by its chairman of the board (if an officer) or chief
executive officer or its chief financial officer, vice president, treasurer
or a principal financial officer and (z) if such person is ChipPAC or a
Subsidiary of ChipPAC, a Responsible Officer; provided that every Officer's
--------
Certificate with respect to the compliance with a condition precedent to
the making of any Loans hereunder shall include (i) a statement that the
officer or officers making or giving such Officer's Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signer or signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied
with, and (iii) a statement as to whether, in the opinion of the signer or
signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
---------------
(including, without limitation, leases that may be terminated by the lessee
at any time) of any property (whether real, personal or mixed) that is not
a Capital Lease other than any such lease under which that Person is the
lessor.
26
<PAGE>
"Operating Subsidiaries" means ChipPAC Limited, ChipPAC Korea, ChipPAC
----------------------
Shanghai I, ChipPAC Shanghai II and each other Subsidiary of ChipPAC (other
than Company, ChipPAC Barbados, ChipPAC Luxembourg and ChipPAC Hungary)
that conducts packaging and testing services, sales or distribution
functions.
"Organizational Authorizations" means, with respect to any Person,
-----------------------------
resolutions of its Board of Directors, general partners or members of such
Person, and such other Persons, groups or committees (including, without
limitation, managers and managing committees), if any, required by the
Organizational Certificate or Organization Documents of such Person to
authorize or approve the taking of any action or the entering into of any
transaction.
"Organizational Certificate" means, with respect to any Person, the
--------------------------
certificate or articles of incorporation, partnership or limited liability
company or any other similar or equivalent organizational, charter or
constitutional certificate or document filed with the applicable
Governmental Authority in the jurisdiction of its incorporation,
organization or formation.
"Organizational Documents" means, with respect to any Person, the by-
------------------------
laws, partnership agreement, limited liability company agreement, operating
agreement, management agreement or other similar or equivalent
organizational, charter or constitutional agreement or arrangement.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA (or any successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a
------------
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"Permitted Acquisitions" means an acquisition made pursuant to
----------------------
subsection 7.7(v).
"Permitted Encumbrances" means the following types of Liens:
----------------------
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 6.3;
(ii) statutory or contractual Liens of landlords, statutory
Liens of banks and rights of setoff, statutory Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
(other than any such Lien imposed pursuant to Section 401(a)(29) or
412(n) of the Internal Revenue Code or by ERISA) incurred in the
ordinary course of business for sums not yet delinquent or being
contested in good faith pursuant to appropriate proceedings, if such
reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
27
<PAGE>
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive, in each case, of obligations for the payment of borrowed
money or other Indebtedness);
(iv) any attachment or judgment Lien not constituting an Event
of Default under subsection 8.8;
(v) leases or subleases granted to others (in the ordinary
course of business consistent with past practices) not interfering in
any material respect with the ordinary conduct of the business or
operations of ChipPAC or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries and
encumbrances set forth on the title reports delivered to the
Administrative Agent;
(vii) any (a) interest or title of a lessor or sublessor under
any Capital Lease permitted by subsection 7.1(v) or any operating
lease not prohibited by this Agreement, (b) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject
to, or (c) subordination of the interest of the lessee or sublessee
under such lease to any restriction or encumbrance referred to in the
preceding clause (b);
(viii) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(ix) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(x) deposits in the ordinary course of business to secure
liabilities to insurance carriers, lessors, utilities and other
service providers;
(xi) bankers' liens and rights of setoff with respect to
customary depository arrangements entered into in the ordinary course
of business;
(xii) any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the use of
any real property; and
(xiii) licenses of patents, trademarks and other intellectual
property rights granted by ChipPAC or any of its Subsidiaries in the
ordinary course of business and not interfering in any material
respect with the ordinary conduct of the business of ChipPAC or such
Subsidiary.
28
<PAGE>
"Permitted Seller Paper" means any unsecured Indebtedness of ChipPAC
----------------------
or its Subsidiaries that is not guaranteed by any Subsidiary of ChipPAC and
that is incurred in connection with any acquisition consummated in
accordance with the provisions of subsection 7.7(v) and payable to the
seller in connection therewith and containing the subordination provisions
set forth on Exhibit XI hereto.
-----------------
"Person" means and includes natural persons, corporations, limited
------
partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof and any other entities of whatever nature.
"Pledge Agreements" means, collectively, the Principal Pledge
-----------------
Agreement, the Korean Pledge Agreement, the Hungarian Pledge Agreement and
the Chinese Pledge Agreements.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by CSFB as its prime commercial lending rate in effect at
its principal office in New York City. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged
to any customer. CSFB or any other Lender may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate.
"Principal Pledge Agreement" means that certain Pledge Agreement
--------------------------
entered into by and among ChipPAC, certain of the Guarantors and the
Collateral Agent as of the Closing Date, or pursuant to subsection 6.9,
substantially in the form of Exhibit V annexed hereto, as such Principal
---------
Pledge Agreement may hereafter be amended, restated, supplemented or
otherwise modified from time to time.
"Principal Security Agreement" means the Security Agreement entered
----------------------------
into by and among ChipPAC, certain of the Guarantors and the Collateral
Agent on and as of the Closing Date, or pursuant to subsection 6.9,
substantially in the form of Exhibit VI annexed hereto, as such Security
----------
Agreement may hereafter be amended, restated, supplemented or otherwise
modified from time to time.
"Pro Forma Basis" means, with respect to compliance with any test or
---------------
covenant hereunder, compliance with such covenant or test after giving
effect to any proposed acquisition or other action (including cost
reduction actions taken as a result thereof) which requires compliance on a
pro forma basis (including pro forma adjustments arising out of events
which are directly attributable to a specific transaction, are factually
supportable and are expected to have a continuing impact, in each case
determined on a basis consistent with Article 11 of Regulation S-X of the
Securities Act and as interpreted by the Staff of the Securities and
Exchange Commission which (to the extent consistent therewith) may include
cost savings resulting from head count reductions, closure of facilities
and similar restructuring charges or integration activities or other
adjustments certified by a financial officer of ChipPAC, together with such
other pro forma adjustments certified by a financial officer of ChipPAC as
being
29
<PAGE>
reasonable and having been made in good faith as may be reasonably
acceptable to the Administrative Agent) using, for purposes of determining
such compliance, the historical financial statements of all entities or
assets so acquired or to be acquired and the consolidated financial
statements of ChipPAC and its Subsidiaries which shall be reformulated as
if such acquisition or other action, and any other acquisitions which have
been consummated during the period, and any Indebtedness or other
liabilities incurred in connection with any such acquisition had been
consummated at the beginning of such period and assuming that such
Indebtedness bears interest during any portion of the applicable
measurement period prior to the relevant acquisition at the weighted
average of the interest rates applicable to outstanding Loans during such
period.
"Pro Forma Compliance" means, at any date of determination, ChipPAC
--------------------
shall be in pro forma compliance with the covenants set forth in
--- -----
subsections 7.6A, B, C and D as of the last day of the most recent Fiscal
Quarter end (computed on the basis of (i) balance sheet amounts as of the
most recently completed Fiscal Quarter, and (ii) income statement amounts
for the most recently completed period of four consecutive Fiscal Quarters,
in each case, for which financial statements shall have been delivered to
the Administrative Agent and calculated on a Pro Forma Basis in respect of
the event giving rise to such determination).
"Pro Rata Share" means (i) with respect to all payments, computations
--------------
and other matters relating to the Term A Loan Commitment or the Term A
Loans of any Lender, the percentage obtained by dividing (x) the Term A
--------
Loan Exposure of that Lender by (y) the aggregate Term A Loan Exposure of
--
all the Lenders; (ii) with respect to all payments, computations and other
matters relating to the Term B Loan Commitment or the Term B Loans of any
Lender, the percentage obtained by dividing (x) the Term B Loan Exposure of
--------
that Lender by (y) the aggregate Term B Loan Exposure of all the Lenders;
--
(iii) with respect to all payments, computations and other matters relating
to the Term Delayed Draw Loan Commitment or the Term Delayed Draw Loans of
any Lender, the percentage obtained by dividing (x) the Term Delayed Draw
--------
Loan Exposure of that Lender by (y) the aggregate Term Delayed Draw Loan
--
Exposure of all the Lenders; (iv) with respect to all payments,
computations and other matters relating to the Revolving Loan Commitment or
the Revolving Loans of any Lender or any Letters of Credit issued by any
Lender or any participations purchased by any Lender therein or in any
Swing Line Loans, the percentage obtained by dividing (x) the Revolving
--------
Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure
--
of all the Lenders; and (v) for all other purposes with respect to each
Lender, the percentage obtained by dividing (x) the sum of the Term Loan
--------
Exposure of that Lender and the Revolving Loan Exposure of that Lender by
--
(y) the sum of the aggregate Term Loan Exposure of all the Lenders and the
aggregate Revolving Loan Exposure of all the Lenders; in any such case as
the applicable percentage may be adjusted by assignments permitted pursuant
to subsection 10.1. The initial Pro Rata Share of each Lender for purposes
of each of clauses (i), (ii), (iii) and (iv) of the preceding sentence is
set forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
------------
"Projections" has the meaning assigned to that term in subsection
-----------
5.3B.
30
<PAGE>
"Qualified Public Equity Offering" means an underwritten public
--------------------------------
offering of common stock of, and by, ChipPAC pursuant to a registration
statement filed with the Securities and Exchange Commission in accordance
with the Securities Act.
"Recapitalization Agreement" means the Agreement and Plan of
--------------------------
Recapitalization and Merger dated as of March 13, 1999, as amended to date,
entered into by HEI, HEA, ChipPAC and Merger Corp, as the same may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.11A.
"Recapitalization Loans" means, collectively, the ChipPAC Luxembourg
----------------------
Loan, the ChipPAC Limited Loan, the ChipPAC Hungary Loan, the ChipPAC Korea
Loan and the ChipPAC Shanghai I Loan.
"Recapitalization Note" means a note evidencing a Recapitalization
---------------------
Loan, and "Recapitalization Notes" means, collectively, all such notes.
----------------------
"Recapitalization Security Agreement" means the Chinese Security
-----------------------------------
Agreements, the Korean Pledge Agreement and each other pledge or security
agreement entered into by a Subsidiary to secure a Recapitalization Loan,
and "Recapitalization Security Agreements" means, collectively, all such
------------------------------------
agreements. The Recapitalization Security Agreements, other than the
Chinese Pledge and Security and the Korean Pledge and Security Agreements,
are substantially in the form of Exhibit XIX annexed hereto.
-----------
"Recapitalization Transactions" means the transactions contemplated by
-----------------------------
the Recapitalization Agreement (including the Recapitalization Loans) and
the payment of Transaction Costs, in each case occurring on or about the
Closing Date.
"Recovery Event" has the meaning assigned to that term in subsection
--------------
2.4B(iii)(d).
"Reference Lenders" means (i) CSFB and (ii) another Lender determined
-----------------
by the Administrative Agent with the consent of Company.
"Refunded Swing Line Loans" has the meaning assigned to that term in
-------------------------
subsection 2.1A(v).
"Register" has the meaning assigned to that term in subsection 2.1D.
--------
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
------------------
subsection 3.3B.
"Reinvestment Assets" means, in the case of any Reinvestment Event,
-------------------
any assets which are either (i) in replacement of the assets subject to the
31
<PAGE>
Reinvestment Event, or (ii) long term assets (including Capital Stock)
useful in the business of ChipPAC or its Subsidiary whose assets were
subject to the Reinvestment Event.
"Reinvestment Deferred Amount" means, with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds, Insurance Proceeds or Condemnation
Proceeds, as the case may be, received by ChipPAC or any of its
Subsidiaries in connection therewith which are not applied to prepay the
Loans (and/or reduce the Revolving Loan Commitments) in accordance with
subsection 2.4B(iii)(a) or (d) as a result of the delivery of a
Reinvestment Notice.
"Reinvestment Event" means any Asset Sale or Recovery Event in respect
------------------
of which ChipPAC has delivered a Reinvestment Notice.
"Reinvestment Notice" means a written notice executed by a Responsible
-------------------
Officer stating that no Default or Event of Default has occurred and is
continuing and that ChipPAC (directly or indirectly through a Subsidiary)
intends and expects to use all or a specified portion of the Net Cash
Proceeds, Insurance Proceeds or Condemnation Proceeds, as the case may be,
of an Asset Sale or Recovery Event to acquire Reinvestment Assets within
365 days of the receipt of such Net Cash Proceeds, Insurance Proceeds or
Condemnation Proceeds, as the case may be.
"Reinvestment Prepayment Amount" means, with respect to any
------------------------------
Reinvestment Event, the Reinvestment Deferred Amount, if any, relating
thereto less any amount expended prior to the relevant Reinvestment
Prepayment Date to acquire Reinvestment Assets.
"Reinvestment Prepayment Date" means, with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring 365 days after such
Reinvestment Event and (b) the date on which ChipPAC shall have determined
not to, or shall have otherwise ceased to, acquire Reinvestment Assets with
all or any portion of the relevant Reinvestment Deferred Amount.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the environment.
"Requisite Class Lenders" means, at any time of determination (i) for
-----------------------
the Class of the Lenders having Term A Loan Exposure, Non-Defaulting
Lenders having or holding more than 50% of the aggregate Term A Loan
Exposure of all Non-Defaulting Lenders, (ii) for the Class of Lenders
having Term B Loan Exposure, Non-Defaulting Lenders having or holding more
than 50% of the aggregate Term B Loan Exposure of all Non-Defaulting
Lenders, (iii) for the Class of Lenders having Term Delayed Draw Loan
Exposure, Non-Defaulting Lenders having or holding more than 50% of the
aggregate Term Delayed Draw Loan Exposure of all Non-Defaulting Lenders,
and (iv) for the Class of Lenders having Revolving Loan Exposure, Non-
Defaulting Lenders having or holding more than 50% of the aggregate
Revolving Loan Exposure of all Non-Defaulting Lenders.
32
<PAGE>
"Requisite Lenders" means Non-Defaulting Lenders having or holding
-----------------
more than 50% of the sum of the aggregate Term Loan Exposure of all Non-
Defaulting Lenders and the aggregate Revolving Loan Exposure of all Non-
Defaulting Lenders.
"Reserve Adjusted Eurodollar Rate" means, with respect to each day
--------------------------------
during each Interest Period pertaining to a Eurodollar Rate Loan, a rate
per annum determined for such day in accordance with the following formula:
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Responsible Officer" means the chairman of the board of directors (if
-------------------
an officer), chief executive officer, president, executive vice president,
general counsel, chief financial officer, assistant treasurer, assistant
secretary, principal financial or accounting officer or the secretary of
ChipPAC, or as applicable, a Subsidiary of ChipPAC or another officer
designated by the board of ChipPAC or any of its Subsidiaries but, in any
event, with respect to financial reporting matters, the chief executive
officer, chief financial officer or treasurer of ChipPAC.
"Restricted Payment" means (i) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of stock (or of
any other Capital Stock) of ChipPAC or any of its Subsidiaries now or
hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock (or of
any other Capital Stock) of ChipPAC or any of its Subsidiaries now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock (or of any other Capital Stock) of ChipPAC or
any of its Subsidiaries now or hereafter outstanding, and (iv) any payment
or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in substance or
legal defeasance), sinking fund or similar payment with respect to,
Subordinated Debt.
"Revolving Loan Commitment" means the commitment of a Lender to make
-------------------------
Revolving Loans to Company pursuant to subsection 2.1A(iv), and "Revolving
---------
Loan Commitments" means such commitments of all Lenders in the aggregate.
----------------
"Revolving Loan Commitment Termination Date" means July 31, 2005.
------------------------------------------
"Revolving Loan Exposure" means, with respect to any Lender as of any
-----------------------
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b)
----
in the event that Lender is an Issuing Bank, the aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender (net of any
participations
33
<PAGE>
purchased by other Lenders in such Letters of Credit) plus (c) the
----
aggregate amount of all participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any
Letters of Credit plus (d) the aggregate amount of all participations
----
purchased by that Lender in any outstanding Swing Line Loans plus (e) in
----
the case of the Swing Line Lender, the sum of the aggregate outstanding
principal amount of all Swing Line Loans (in each case net of any
participations therein purchased by other Lenders).
"Revolving Loans" means the Loans made by the Lenders to Company
---------------
pursuant to subsection 2.1A(iv).
"S&P" means Standard & Poor's Ratings Services.
---
"Securities" means any stock, shares, partnership interests, voting
----------
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, and any successor statute.
"Security Agreements" means, collectively, the Principal Security
-------------------
Agreement, the Korean Security Agreement, the Chinese Security Agreements
and the Recapitalization Security Agreements.
"Shareholders Agreement" means that certain Shareholders Agreement to
----------------------
be entered into on or prior to the Closing Date by and among ChipPAC and
certain shareholders of ChipPAC which Shareholders Agreement shall be in
the form delivered to the Administrative Agent on or prior to the Closing
Date and as such Shareholders Agreement may hereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.11A.
"Sole Lead Arranger" has the meaning assigned to that term in the
------------------
Preamble to this Agreement.
"Solvent" means, with respect to any Person, that as of the date of
-------
determination both (i) (a) the then fair saleable value of the property
sold as a going concern of such Person is (y) greater than the total amount
of liabilities (including contingent liabilities but excluding amounts
payable under intercompany promissory notes) of such Person and (z) not
less than the amount that will be required to pay the probable liabilities
on such Person's then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales reasonably
available to such Person; (b) such Person's capital is not unreasonably
small in relation to its business or any contemplated or undertaken
transaction; and (c) such Person does not intend to incur, or believe that
it will incur, debts beyond its ability to pay such debts as they become
due;
34
<PAGE>
and (ii) such Person is "solvent" within the meaning given that term and
similar terms under applicable laws relating to fraudulent transfers and
conveyances. For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all
of the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
"SPC" has the meaning assigned to that term in subsection 10.1F.
---
"Sponsor Advisory Services Agreements" means each of the Advisory
------------------------------------
Services Agreements by and between ChipPAC and each of the Sponsors, dated
on or about the Closing Date, in form delivered to the Administrative Agent
on or prior to the Closing Date, as the same may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.11A.
"Sponsor Management Fees" means the fees (including one-time fees
-----------------------
payable in connection with acquisitions, divestitures and financings) and
expenses payable to the Sponsors pursuant to the Sponsor Advisory Services
Agreements.
"Sponsors" means Bain and the SXI Holders.
--------
"Standby Letter of Credit" means any standby letter of credit or
------------------------
similar instrument, issued for the purpose of supporting obligations of
ChipPAC and its Subsidiaries incurred or arising in the ordinary course of
business; provided that Standby Letters of Credit may not be issued for the
--------
purpose of supporting trade payables.
"Subordinated Debt" means (i) subordinated, unsecured Indebtedness of
-----------------
Company evidenced by the Subordinated Debt Documents and issued on or prior
to the Closing Date (and any Indebtedness issued in exchange for such
Indebtedness as contemplated by the Subordinated Debt Documents) in any
aggregate principal amount of not less than $150,000,000 and (ii) any
Additional Subordinated Debt.
"Subordinated Debt Documents" means the documents pursuant to which
---------------------------
the Subordinated Debt is issued (or exchanged) in the form delivered to
Administrative Agent on or prior to the Closing Date, as such documents may
be amended, restated, supplemented or otherwise modified from time to time
to the extent permitted under Subsection 7.11A.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association, joint venture or other business entity of which
more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the
management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
35
<PAGE>
"Subsidiary Guarantor" means any Subsidiary of ChipPAC that is a party
--------------------
to the Guaranty on the Closing Date (which shall be each such Subsidiary
(other than Company, ChipPAC Shanghai I and ChipPAC Shanghai II) existing
as of the Closing Date) or at any time after the Closing Date pursuant to
subsection 6.9.
"Swing Line Lender" means CSFB, or any Person serving as a successor
-----------------
Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of the Swing Line
--------------------------
Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(v).
"Swing Line Loans" means the Loans made by the Swing Line Lender
----------------
pursuant to subsection 2.1A(v).
"SXI Holders" means (a) Citicorp Venture Capital, Ltd., (b) any
-----------
officers, employees or directors of the foregoing or any trust partnership
or entity established solely for the benefit or such officers, employees or
directors and (c) any Affiliates (including SXI Group LLC) of the
foregoing.
"Systems" has the meaning assigned to that term in the definition of
-------
Year 2000 Problems.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
--- -----
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "Tax on the overall net income" of a Person
-------- -----------------------------
shall be construed as a reference to a tax on all or part of the net
income, profits or gains of that Person (whether worldwide, or only insofar
as such income, profits or gains are considered to arise in or to relate to
a particular jurisdiction, or otherwise) including a franchise tax imposed
in lieu of a net income tax.
"Term A Loan Commitment" means the commitment of a Lender to make a
----------------------
Term A Loan to Company pursuant to subsection 2.1A(i), and "Term A Loan
-----------
Commitments" means such commitments of all Lenders in the aggregate.
-----------
"Term A Loan Exposure" means, with respect to any Lender, as of any
--------------------
date of determination (i) prior to the funding of the Term A Loans, that
Lender's Term A Loan Commitment and (ii) after the funding of the Term A
Loans, the outstanding principal amount of the Term A Loans of that Lender.
"Term A Loans" means the Loans made by the Lenders pursuant to
------------
subsection 2.1A(i).
"Term B Loan Commitment" means the commitment of a Lender to make a
----------------------
Term B Loan to Company pursuant to subsection 2.1A(ii), and "Term B Loan
-----------
Commitments" means such commitments of all Lenders in the aggregate.
-----------
36
<PAGE>
"Term B Loan Exposure" means, with respect to any Lender, as of any
--------------------
date of determination (i) prior to the funding of the Term B Loans, that
Lender's Term B Loan Commitment and (ii) after the funding of the Term B
Loans, the outstanding principal amount of the Term B Loans of that Lender.
"Term B Loans" means the Loans made by the Lenders pursuant to
------------
subsection 2.1A(ii).
"Term Delayed Draw Loan Commitment" means the commitment of a Lender
---------------------------------
to make a Term Delayed Draw Loan to Company pursuant to subsection
2.1A(iii), and "Term Delayed Draw Loan Commitments" means such commitments
----------------------------------
of all Lenders in the aggregate.
"Term Delayed Draw Loan Commitment Termination Date" means July 31,
--------------------------------------------------
2001.
"Term Delayed Draw Loan Exposure" means, with respect to any Lender,
-------------------------------
as of any date of determination, (i) prior to the Term Delayed Draw Loan
Commitment Termination Date, that Lender's Term Delayed Draw Loan
Commitment and (ii) after the Term Delayed Draw Loan Commitment Termination
Date, the outstanding principal amount of the Term Delayed Draw Loans of
that Lender.
"Term Delayed Draw Loans" means the Loans made by the Lenders pursuant
-----------------------
to subsection 2.1A(iii).
"Term Loan Commitment" means the Term A Loan Commitment, the Term B
--------------------
Loan Commitment or the Term Delayed Draw Loan Commitment of a Lender, and
"Term Loan Commitments" means such commitments of all Lenders in the
---------------------
aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any date
------------------
of determination, the aggregate Term A Loan Exposure, Term B Loan Exposure
and Term Delayed Draw Loan Exposure of that Lender.
"Term Loans" means, collectively, the Term A Loans, the Term B Loans
----------
and the Term Delayed Draw Loans.
"Total Utilization of Revolving Loan Commitments" means, as at any
-----------------------------------------------
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the
purpose of repaying any Refunded Swing Line Loans or reimbursing the
applicable Issuing Bank for any amount drawn under any Letter of Credit but
not yet so applied) plus (ii) the aggregate principal amount of all
----
outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.
----
"Transaction Costs" means the fees, costs and expenses payable by
-----------------
ChipPAC and its Subsidiaries in connection with the transactions
contemplated by the Transaction Documents including, without limitation,
amounts payable to the Agents and the Lenders.
37
<PAGE>
"Transaction Documents" means, collectively, (i) any documentation
---------------------
related to the Equity Contribution, (ii) the Recapitalization Agreement,
(iii) the Shareholders Agreement, (iv) the Sponsor Advisory Services
Agreements, (v) the Subordinated Debt Documents, (vi) the Subordinated
Debt, and (vii) any and all other documents, agreements, instruments and
arrangements related to or in connection with the Recapitalization
Transactions.
"Year 2000 Problems" means limitations in the capacity or readiness to
------------------
handle date information (including, without limitation, calculations based
on date information) for the Year 1999 or years beginning January 1, 2000
of any of the hardware, firmware or software systems ("Systems") associated
-------
with information processing and delivery, operations or services (e.g.,
security and alarms, elevators, communications, and HVAC), including,
without limitation, equipment containing embedded microchips, in each case
necessary to the business or operations of ChipPAC and its Subsidiaries
taken as a whole.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
------------------------------------------------------------------------
Agreement.
----------
Except as otherwise expressly provided in this Agreement, (a) all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP; and (b) financial statements and other
information required to be delivered by ChipPAC to the Lenders pursuant to
clauses (i), (ii), (iii) and (xiii) of subsection 6.1 shall be prepared in
accordance with GAAP without giving effect to Accounting Principles Board
Opinions 16 and 17 with respect to any Permitted Acquisition. In the event that
a change in GAAP or other accounting principles and policies after the date
hereof affects in any material respect the calculations of the compliance by
ChipPAC and its Subsidiaries with the covenants contained herein, the Lenders
and ChipPAC agree to negotiate in good faith to amend the affected covenants
(and related definitions) to compensate for the effect of such changes so that
the restrictions, limitations and performance standards effectively imposed by
such covenants, as so amended, are substantially identical to the restrictions,
limitations and performance standards imposed by such covenants as in effect on
the date hereof; provided that if the Requisite Lenders and ChipPAC fail to
--------
reach agreement with respect to such amendment within a reasonably period of
time following the date of effectiveness of any such change, calculation of
compliance by ChipPAC and its Subsidiaries with the covenants contained herein
shall be determined in accordance with GAAP as in effect immediately prior to
such change.
1.3 Other Definitional Provisions.
-----------------------------
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes," "including" and similar forms used in any Loan
Document shall be construed as if followed by the words "without limitation."
38
<PAGE>
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Loans.
------------------
A. Commitments. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Loan Parties set
forth herein and in the other Loan Documents, each Lender hereby severally
agrees to make the Loans described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii)
and 2.1A(iv) and the Swing Line Lender hereby agrees to make the Swing Line
Loans as described in subsection 2.1A(v).
(i) Term A Loans. Each Lender severally agrees to make Loans to
------------
Company on the Closing Date in an aggregate amount not exceeding its Pro
Rata Share of the aggregate amount of the Term A Loan Commitments, to be
used for the purposes identified in subsection 2.5A. The amount of each
Lender's Term A Loan Commitment is set forth opposite its name in Schedule
--------
2.1 annexed hereto; provided that the Term A Loan Commitments of the
--- --------
Lenders shall be adjusted to give effect to any assignments of the Term A
Loan Commitments pursuant to subsection 10.1B. The aggregate original
principal amount of the Term A Loan Commitments is $70,000,000. Each
Lender's Term A Loan Commitment shall expire immediately and without
further action on August 15, 1999 if the Term A Loans are not made on or
before that date. Company may make only one borrowing under the Term A
Loan Commitments. Amounts borrowed under this subsection 2.1A(i) and
subsequently repaid or prepaid may not be reborrowed.
(ii) Term B Loans. Each Lender severally agrees to make Loans to
------------
Company on the Closing Date in an aggregate amount not exceeding its Pro
Rata Share of the aggregate amount of the Term B Loan Commitments, to be
used for the purposes identified in subsection 2.5A. The amount of each
Lender's Term B Loan Commitment is set forth opposite its name in Schedule
--------
2.1 annexed hereto; provided that the Term B Loan Commitments of the
--- --------
Lenders shall be adjusted to give effect to any assignments of the Term
Loan Commitments pursuant to subsection 10.1B. The aggregate original
principal amount of the Term B Loan Commitments is $80,000,000. Each
Lender's Term B Loan Commitment shall expire immediately and without
further action on August 15, 1999 if the Term B Loans are not made on or
before that date. Company may make only one borrowing under the Term B
Loan Commitments. Amounts borrowed under this subsection 2.1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
(iii) Term Delayed Draw Loans. Each Lender severally agrees, subject
-----------------------
to the limitations set forth below with respect to the maximum amount of
Term Delayed Draw Loans, to lend to Company from time to time during the
period from the Closing Date to but excluding the Term Delayed Draw Loan
Commitment Termination Date an aggregate amount not exceeding its Pro Rata
Share of the aggregate amount of the Term Delayed Draw Loan Commitments, to
be used for the purposes identified in subsection 2.5B. The original
amount of each Lender's Term Delayed Draw Loan Commitment is set forth
opposite its name in Schedule 2.1 annexed hereto and the aggregate original
------------
amount of the Term Delayed Draw Loan Commitments is $20,000,000; provided
--------
that the Term Delayed Draw Loan Commitments of the Lenders shall be
adjusted to give effect to any assignments of the Term Delayed Draw Loan
Commitments pursuant to
39
<PAGE>
subsection 10.1B; provided further that the amount of the Term Delayed Draw
-------- -------
Loan Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsection 2.4B. Each Lender's Term
Delayed Draw Loan Commitment shall expire on the Term Delayed Draw Loan
Commitment Termination Date to the extent that Term Delayed Draw Loans have
not been made on or before that date. Amounts borrowed under this
subsection 2.1A(iii) may be repaid and reborrowed, subject to the
limitations and conditions set forth herein, to but excluding the Term
Delayed Draw Loan Commitment Termination Date.
(iv) Revolving Loans. Each Lender severally agrees, subject to the
---------------
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time, to lend to Company
from time to time during the period from the Closing Date to but excluding
the Revolving Loan Commitment Termination Date Revolving Loans, to be used
for the purposes identified in subsection 2.5C, provided that after giving
effect to such Loans its Revolving Loan Exposure shall not exceed its Pro
Rata Share of the aggregate amount of the Revolving Loan Commitments. The
original amount of each Lender's Revolving Loan Commitment is set forth
opposite its name in Schedule 2.1 annexed hereto and the aggregate original
------------
amount of the Revolving Loan Commitments is $50,000,000 less the aggregate
amount of the Local Lines of Credit; provided that the Revolving Loan
--------
Commitments of the Lenders shall be adjusted to give effect to any
assignments of the Revolving Loan Commitments pursuant to subsection 10.1B;
provided further that the amount of the Revolving Loan Commitments shall be
-------- -------
reduced from time to time by the amount of any reductions thereto made
pursuant to subsection 2.4C. Each Lender's Revolving Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all Revolving
Loans and all other amounts owed hereunder with respect to the Revolving
Loans and the Revolving Loan Commitments shall be paid in full no later
than that date. Amounts borrowed under this subsection 2.1A(iv) may be
repaid and reborrowed, subject to the limitations and conditions set forth
herein, to but excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, (i) in no
event shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitments then in effect and (ii) prior to the
Chinese Security Effective Date, in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed $15,000,000.
(v) Swing Line Loans. The Swing Line Lender hereby agrees, subject to
----------------
the limitations set forth below with respect to the maximum aggregate
amount of all Swing Line Loans outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to Company from time to
time during the period from the Closing Date to but excluding the Revolving
Loan Commitment Termination Date by making Base Rate Loans as Swing Line
Loans to Company in an aggregate amount not to exceed the amount of the
Swing Line Loan Commitment, to be used for the purposes identified in
subsection 2.5C, notwithstanding the fact that such Swing Line Loans, when
aggregated with the sum of the Swing Line Lender's outstanding Revolving
Loans and the Swing Line Lender's Pro Rata Share of the Letter of Credit
Usage then in effect, may exceed the Swing Line Lender's Revolving Loan
Commitment. The original amount of
40
<PAGE>
the Swing Line Loan Commitment is $10,000,000; provided that the amounts of
--------
the Swing Line Loan Commitment are subject to reduction as provided in
clause (b) of the next paragraph. The Swing Line Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all Swing Line
Loans and all other amounts owed hereunder with respect to the Swing Line
Loans shall be paid in full no later than that date. Amounts borrowed under
this subsection 2.1A(v) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing
Line Loans and the Swing Line Loan Commitment shall be subject to the
following limitations:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect;
(b) prior to the Chinese Security Effective Date, in no event
shall the Total Utilization of Revolving Loan Commitments exceed
$15,000,000; and
(c) any reduction of the Revolving Loan Commitments made pursuant
to subsection 2.4B which reduces the aggregate Revolving Loan
Commitments to an amount less than the then current amount of the
Swing Line Loan Commitment shall result in an automatic corresponding
reduction of the Swing Line Loan Commitment such that the amount
thereof equals the amount of the Revolving Loan Commitments, as so
reduced, without any further action on the part of Company, the
Administrative Agent or the Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), the Swing Line Lender
may, at any time in its sole and absolute discretion, deliver to the
Administrative Agent (with a copy to Company), no later than 11:00 a.m.
(New York time) at least one (1) Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Company) requesting the Lenders to make Revolving Loans that are
Base Rate Loans to Company on such Funding Date in an amount equal to the
amount of such Swing Line Loans (the "Refunded Swing Line Loans")
-------------------------
outstanding on the date such notice is given which the Swing Line Lender
requests the Lenders to prepay. Anything contained in this Agreement to
the contrary notwithstanding, (i) the proceeds of such Revolving Loans made
by the Lenders other than the Swing Line Lender shall be immediately
delivered by the Administrative Agent to the Swing Line Lender (and not to
Company) and applied to repay a corresponding portion of the Refunded Swing
Line Loans and (ii) on the day such Revolving Loans are made, the Swing
Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be
deemed to be paid with the proceeds of a Revolving Loan made by the Swing
Line Lender to Company, and such portion of the Swing Line Loans deemed to
be so paid shall no longer be outstanding as Swing Line Loans but shall
instead constitute part of the Swing Line Lender's outstanding Revolving
Loans to Company. Company hereby authorizes the Administrative Agent and
the Swing Line Lender to charge
41
<PAGE>
Company's accounts with the Administrative Agent and the Swing Line Lender
(up to the amount available in each such account) in order to immediately
pay the Swing Line Lender the amount of the Refunded Swing Line Loans to
the extent the proceeds of such Revolving Loans made by the Lenders,
including the Revolving Loan deemed to be made by the Swing Line Lender,
are not sufficient to repay in full the Refunded Swing Line Loans. If any
portion of any such amount paid (or deemed to be paid) to the Swing Line
Lender should be recovered by or on behalf of Company from the Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this
subsection 2.1A(v) in an amount sufficient to repay any amounts owed to the
Swing Line Lender in respect of any outstanding Swing Line Loans on or
before the third Business Day after demand for payment thereof by the Swing
Line Lender, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans, and in an
amount equal to its Pro Rata Share of the applicable unpaid amount together
with accrued interest thereon. Upon one (1) Business Day's notice from the
Swing Line Lender, each Lender shall deliver to the Swing Line Lender an
amount equal to its respective participation in the applicable unpaid
amount in same day funds at the office of the Swing Line Lender located at
the Funding and Payment Office. In order to evidence such participation
each Lender agrees to enter into a participation agreement at the request
of the Swing Line Lender in form and substance satisfactory to the Swing
Line Lender. In the event any Lender fails to make available to the Swing
Line Lender the amount of such Lender's participation as provided in this
paragraph, the Swing Line Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the rate
customarily used by the Swing Line Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate, as
applicable.
Notwithstanding anything contained herein to the contrary, (i) each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (a) any setoff, counterclaim, recoupment,
defense or other right which such Lender may have against the Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of a Default or Event of Default; (c) any
adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan Document
by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that
--------
such obligations of each Lender are subject to the condition that the Swing
Line Lender believed in good faith that all conditions under Section 4 to
the making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, were satisfied at the time such Refunded Swing Line Loans
or unpaid Swing Line Loans were made, or the satisfaction of any such
condition not satisfied had been waived by
42
<PAGE>
Requisite Lenders prior to or at the time such Refunded Swing Line Loans or
other unpaid Swing Line Loans were made; and (ii) the Swing Line Lender
shall not be obligated to make any Swing Line Loans if it has elected not
to do so after the occurrence and during the continuation of a Default or
Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including any
such Loans made as Eurodollar Rate Loans with a particular Interest Period) made
on any Funding Date (other than Revolving Loans made pursuant to a request by
the Swing Line Lender pursuant to subsection 2.1A(v) for the purpose of repaying
any Refunded Swing Line Loans and Revolving Loans made pursuant to subsection
3.3B for the purpose of reimbursing the Issuing Bank for the amount of a drawing
or payment under a Letter of Credit issued by it) shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of that
amount; provided that any Eurodollar Rate Loan shall be in a minimum amount of
--------
$1,000,000 and integral multiples of $100,000 in excess of that amount. Swing
Line Loans made on any Funding Date shall be in an aggregate minimum amount of
$100,000 and integral multiples of $50,000 in excess of that amount. Whenever
Company desires that the Lenders make Term Loans or Revolving Loans it shall
deliver to the Administrative Agent a Notice of Borrowing no later than 1:00
p.m. (New York time), at least three (3) Business Days in advance of the
proposed Funding Date in the case of a Eurodollar Rate Loan, or at least one (1)
Business Day in advance of the proposed Funding Date in the case of a Base Rate
Loan. Whenever Company desires that the Swing Line Lender make a Swing Line
Loan, it shall deliver to Administrative Agent a Notice of Borrowing no later
than 1:00 p.m. (New York time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing
Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case of any
Loans other than Swing Line Loans, whether such Loans shall be Base Rate Loans
or Eurodollar Rate Loans, and (v) in the case of any Loans requested to be made
as Eurodollar Rate Loans, the initial Interest Period requested therefor. Term
Loans and Revolving Loans may be continued as or converted into Base Rate Loans
and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of
delivering the above-described Notice of Borrowing, Company may give the
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
--------
promptly confirmed in writing by delivery of a Notice of Borrowing to the
Administrative Agent on or before the applicable Funding Date.
Neither the Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that the
Administrative Agent believes in good faith to have been given by a duly
authorized officer authorized to borrow on behalf of Company or for otherwise
acting in good faith under this subsection 2.1B, and upon funding of Loans by
the Lenders in accordance with this Agreement pursuant to any such telephonic
notice, Company shall have effected Loans hereunder.
Company shall notify the Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct
(with such materiality qualifications as is set forth in a particular matter to
which Company is required to certify) as of the applicable Funding Date, and the
acceptance by Company of the proceeds of any Loans shall constitute a re-
certification by Company, as of the applicable
43
<PAGE>
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans under
this Agreement shall be made by the Lenders simultaneously and proportionately
to their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by the
Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), the Administrative Agent shall notify each
Lender or the Swing Line Lender, as the case may be, of the proposed borrowing
and of the amount of such Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to the
Administrative Agent not later than 1:00 P.M. (New York time) on the applicable
Funding Date and the Swing Line Lender shall make the amount of its Swing Line
Loan available to the Administrative Agent not later than 2:00 P.M. (New York
time) on the applicable Funding Date, in each case in same day funds, at the
Funding and Payment Office. Except as provided in subsection 2.1A(v) or
subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing
Line Loans or to reimburse the Issuing Bank for the amount of an honored drawing
or payment under a Letter of Credit issued by it, upon satisfaction or waiver of
the conditions precedent specified in subsections 4.1 (in the case of Loans made
on the Closing Date) and 4.2 (in the case of all Loans), the Administrative
Agent shall make the proceeds of such Loans available to Company on the
applicable Funding Date by causing an amount of same day funds equal to the
proceeds of all such Loans received by the Administrative Agent from the Lenders
or the Swing Line Lender, as the case may be, to be credited to the account of
Company at the Funding and Payment Office.
Unless the Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to the Administrative Agent the amount of such Lender's Loan requested
on such Funding Date, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such Funding Date and
the Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Company a corresponding amount on such Funding Date. If
such corresponding amount is not in fact made available to the Administrative
Agent by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to the
Administrative Agent, at the customary rate set by the Administrative Agent for
the correction of errors among banks for three Business Days and thereafter at
the Base Rate. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify Company and Company shall immediately pay such corresponding
44
<PAGE>
amount to the Administrative Agent, together with interest thereon for each day
from such Funding Date until the date such amount is paid to the Administrative
Agent at the rate applicable to such Loan. Nothing in this subsection 2.1C
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) The Administrative Agent shall maintain, at its address referred
to in subsection 10.8, a register for the recordation of the names and
addresses of the Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for
--------
inspection by Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(ii) The Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the
outstanding Loans of each Lender. Any such recordation shall be conclusive
and binding on Company and each Lender, absent manifest error; provided
--------
that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans.
(iii) Each Lender shall record on its internal records the amount of
each Loan made by it and each payment in respect thereof. Any such
recordation shall be conclusive and binding on Company, absent manifest
error; provided that failure to make any such recordation, or any error in
--------
such recordation, shall not affect Company's Obligations in respect of the
applicable Loans; and provided, further, that in the event of any
-------- -------
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern absent manifest error with
respect to the Register.
(iv) Company, the Administrative Agent and the Lenders shall deem and
treat the Persons listed as the Lenders in the Register as the holders and
owners of the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any Commitment or Loan
shall be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
the Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates CSFB and any financial institution
serving as a successor Administrative Agent to serve as Company's agent
solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent CSFB serves
in such capacity, CSFB
45
<PAGE>
and its officers, directors, employees, agents and affiliates shall
constitute Indemnitees for all purposes under subsection 10.3.
E. Evidence of Debt; Repayment of Loans.
(i) Company hereby unconditionally promises to pay to the
Administrative Agent (a) for the account of the Swingline Lender, the then
unpaid principal amount of each Swingline Loan, on the date of each
borrowing of a Revolving Loan or, if earlier, on the Revolving Loan
Commitment Termination Date, (b) for the account of each Lender holding
Term Loans, the principal amount of each Term Loan of such Lender as
provided in subsection 2.4A and (c) for the account of each Lender holding
Revolving Loans, the then unpaid principal amount of each Revolving Loan of
such Lender on the Revolving Loan Commitment Termination Date.
(ii) Any Lender may request that the Loans made by it hereunder be
evidenced by a promissory note. In such event, Company shall execute and
deliver to such Lender a promissory note payable to such Lender and its
registered assigns and in a form and substance reasonably acceptable to the
Administrative Agent and Company. Notwithstanding any other provision of
this Agreement, in the event any Lender shall request and receive such a
promissory note, the interests represented by such note shall at all times
(including after any assignment of all or part of such interests pursuant
to subsection 10.1) be represented by one or more promissory notes payable
to the payee named therein or its registered assigns.
2.2 Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made to maturity (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or the Reserve
Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of
subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal
amount thereof from the date made to maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a telephonic notice or Notice of
Borrowing is given with respect to such Loan pursuant to subsection 2.1B (so
long as Company delivers to Administrative Agent a Notice of Borrowing within
one Business Day prior thereto). The basis for determining the interest rate
with respect to any Term Loan or any Revolving Loan may be changed from time to
time pursuant to subsection 2.2D. If on any day any Term Loan or Revolving Loan
is outstanding with respect to which notice has not been delivered to the
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate. Subject
to the provisions of subsections 2.2E and 2.7, the Term Loans and the Revolving
Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
----
the Applicable Base Rate Margin; or
46
<PAGE>
(ii) if a Eurodollar Rate Loan, then at the sum of the Reserve
Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
----
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans
shall bear interest to maturity at the sum of the Base Rate plus the Applicable
----
Base Rate Margin for Revolving Loans less 0.50% per annum.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, on behalf of Company select an
interest period (each an "Interest Period") to be applicable to such Loan, which
---------------
Interest Period shall be, at Company's option, either a one, two, three or six
month period (or, provided that any such interest period is available from all
the Lenders in a particular tranche for which an Interest Period is being
selected, a two- week, nine- month, twelve- month or other period as requested
by Company); provided that:
--------
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Term A
Loans or Term Delayed Draw Loans shall extend beyond the sixth Anniversary
of the Closing Date, no Interest Period with respect to any portion of the
Term B Loans shall extend beyond the seventh Anniversary of the Closing
Date and no Interest Period with respect to any portion of the Revolving
Loans shall extend beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal of the Term A Loans, the Term B Loans or the Term
Delayed Draw Loans, as the case may be, unless the aggregate principal
amount of Term A Loans, Term B Loans or Term Delayed Draw Loans, as the
case may be,
47
<PAGE>
that are Base Rate Loans plus the aggregate principal amount of Term A
----
Loans, Term B Loans or Term Delayed Draw Loans, as the case may be, that
are Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the Term
A Loans or Term B Loans or Term Delayed Draw Loans, as the case may be, on
such date;
(vii) Company may not select an Interest Period of longer than one
month prior to the end of the Initial Period;
(viii) there shall be no more than one Interest Period outstanding at
any time during the Initial Period, and thereafter no more than twenty
Interest Periods shall be outstanding at any time; and
(ix) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity, by acceleration or otherwise); provided that in the event that any
--------
Swing Line Loans, Revolving Loans or any Term Loans that are Base Rate Loans are
prepaid pursuant to subsection 2.4B(i), interest accrued on such Loans through
the date of such prepayment shall be payable on the next succeeding Interest
Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Term Loans or Revolving Loans equal to $500,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis (provided that any Loan being
converted to a Eurodollar Rate Loan shall be in a minimum amount of $1,000,000
and integral multiples of $100,000 in excess of such amount) or (ii) upon the
expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue all or any portion of such Loan equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount as a Eurodollar Rate Loan;
provided, however, that a Eurodollar Rate Loan may only be converted into a Base
- -------- -------
Rate Loan on the expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to the
Administrative Agent no later than 12:00 Noon at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan), and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/ Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Default or Event
48
<PAGE>
of Default has occurred and is continuing. In lieu of delivering the
above-described Notice of Conversion/Continuation, Company may give the
Administrative Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
--------
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to the Administrative Agent within one Business Day
prior to the proposed conversion/continuation date.
Neither the Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that the
Administrative Agent believes in good faith to have been given by a duly
authorized officer authorized to act on behalf of Company or for otherwise
acting in good faith under this subsection 2.2D, and upon conversion or
continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. The outstanding principal amount of Loans not
paid when due and, to the extent permitted by applicable law, any interest
payments thereon not paid when due, and any fees and other amounts then due and
payable hereunder and not paid, shall thereafter bear interest (including post-
petition interest in any proceeding under any Bankruptcy Law) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Revolving
Loans that are Base Rate Loans); provided that, in the case of Eurodollar Rate
--------
Loans, upon the expiration of the Interest Period in effect at the time any such
increase in interest rate is effective such Eurodollar Rate Loans shall
thereupon become Base Rate Loans and shall thereafter bear interest payable upon
demand at a rate equal to 2% per annum in excess of the interest rates otherwise
payable under this Agreement for Base Rate Loans that are Term A Loans, Term B
Loans, Term Delayed Draw Loans or Revolving Loans, as applicable. Payment or
acceptance of the increased rates of interest provided for in this subsection
2.2E is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of the Administrative Agent or any Lender.
F. Computation of Interest. Interest on Loans shall be computed on the
basis of a 360-day year (or a 365- or 366-day year, as applicable, in the case
of Base Rate Loans based on the Prime Rate) and for the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Loan, the date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan
to such Base Rate Loan, as the case may be, shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar
49
<PAGE>
Rate Loan, as the case may be, shall be excluded; provided that if a Loan is
--------
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan.
2.3 Fees.
----
A. Commitment Fees.
(i) Revolving Loan Commitments. Company agrees to pay to the
--------------------------
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share of the Revolving Loan Commitments, commitment fees
for the period from and including the date hereof to and excluding the
Revolving Loan Commitment Termination Date equal to the sum of (x) the
average of the daily excess of the Revolving Loan Commitments over the sum
of the aggregate principal amount of Revolving Loans outstanding (but not
any Swing Line Loans outstanding) plus (y) the Letter of Credit Usage
----
multiplied by 0.50% per annum.
-------------
(ii) Term Delayed Draw Loan Commitments. Company agrees to pay to the
----------------------------------
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share of the Term Delayed Draw Loan Commitments,
commitment fees for the period from and including the date hereof to and
excluding the Term Delayed Draw Loan Commitment Termination Date equal to
the daily Term Delayed Draw Loan Commitments multiplied by 1.00% per annum.
-------------
(iii) Calculation and Payment. All of the foregoing commitment fees
-----------------------
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed and shall be payable quarterly in arrears on the last Business
Day in each of March, June, September and December of each year, commencing
in September 1999, and on the Revolving Loan Commitment Termination Date
and the Term Delayed Draw Loan Commitment Termination Date.
B. Other Fees. Company agrees to pay to Sole Lead Arranger and
Administrative Agent such fees in the amounts and at the times separately agreed
upon between Company, Sole Lead Arranger and Administrative Agent.
2.4 Repayments, Prepayments and Reductions in Commitments; General Provisions
-------------------------------------------------------------------------
Regarding Payments.
------------------
A. Scheduled Payments of Term Loans.
(i) Scheduled Payments of Term A Loans. Company shall make principal
----------------------------------
payments on the Term A Loans in installments on the dates set forth below,
each such installment to be in an amount equal to the corresponding amount
set forth below:
50
<PAGE>
===============================================
SCHEDULED REPAYMENT
DATE OF
TERM A LOANS
===============================================
June 30, 2000 $1,000,000
September 30, 2000 $1,000,000
December 31, 2000 $2,000,000
March 31, 2001 $2,500,000
-----------------------------------------------
June 30, 2001 $2,500,000
September 30, 2001 $3,000,000
December 31, 2001 $3,000,000
March 31, 2002 $3,000,000
-----------------------------------------------
June 30, 2002 $3,000,000
September 30, 2002 $3,000,000
December 31, 2002 $3,000,000
March 31, 2003 $3,000,000
-----------------------------------------------
June 30, 2003 $3,000,000
September 30, 2003 $3,750,000
December 31, 2003 $3,750,000
March 31, 2004 $3,750,000
-----------------------------------------------
June 30, 2004 $3,750,000
September 30, 2004 $5,500,000
December 31, 2004 $5,500,000
March 31, 2005 $5,500,000
-----------------------------------------------
July 31, 2005 $5,500,000
===============================================
; provided that the scheduled installments of principal of the Term A Loans
--------
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term A Loans in accordance with subsection
2.4C; and provided, further, that the final installment specified above for
-------- -------
the repayment by Company of the Term A Loans shall be in an amount, if such
amount is different from that specified above, sufficient to repay all
amounts owing by Company under this Agreement with respect to the Term A
Loans.
(ii) Scheduled Payments of Term B Loans. Company shall make principal
----------------------------------
payments on the Term B Loans in 25 consecutive installments on the last
Business Day of March, June, September and December of each year,
commencing on the last Business Day of March 2000; provided, however, that
-------- -------
Company shall make the final installment payment on July 31, 2006. Each
such installment shall be in an amount equal to $200,000, with the balance
due and payable on the July 31, 2006; provided that the scheduled
--------
installments of principal of the Term B Loans set forth above shall be
reduced in connection with any voluntary or mandatory prepayments of the
Term B Loans in accordance with subsection 2.4C.
(iii) Scheduled Payments of Term Delayed Draw Loans. Company shall
---------------------------------------------
make principal payments on the Term Delayed Draw Loans in installments on
the
51
<PAGE>
dates set forth below, each such installment to be in an amount equal to
the corresponding percentages set forth below of the principal amount of
the Term Delayed Draw Loans outstanding on the Term Delayed Draw Loan
Commitment Termination Date:
===============================================
SCHEDULED REPAYMENT
DATE OF
TERM A LOANS
===============================================
September 30, 2001 3.75%
December 31, 2001 3.75%
March 31, 2002 3.75%
June 30, 2002 3.75%
-----------------------------------------------
September 30, 2002 5.63%
December 31, 2002 5.63%
March 31, 2003 5.63%
June 30, 2003 5.63%
-----------------------------------------------
September 30, 2003 6.25%
December 31, 2003 6.25%
March 31, 2004 6.25%
June 30, 2004 6.25%
-----------------------------------------------
September 30, 2004 9.38%
December 31, 2004 9.38%
March 31, 2005 9.38%
July 31, 2005 9.38%
===============================================
; provided that the scheduled installments of principal of the Term Delayed
--------
Draw Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Delayed Draw Loans in
accordance with subsection 2.4C; and provided, further, that the final
-------- -------
installment specified above for the repayment by Company of the Term
Delayed Draw Loans shall be in an amount, if such amount is different from
that specified above, sufficient to repay all amounts owing by Company
under this Agreement with respect to the Term Delayed Draw Loans.
B. Prepayments and Reductions in Commitments.
(i) Voluntary Prepayments. Company may, upon written or telephonic
---------------------
notice to the Administrative Agent on or prior to 1:00 P.M. (New York time)
on the date of prepayment, which notice, if telephonic, shall be promptly
confirmed in writing, at any time and from time to time prepay, without
premium or penalty, any Swing Line Loan on any Business Day in whole or in
part in an aggregate minimum amount of $100,000 and integral multiples of
$50,000 in excess of that amount. In addition, Company may, upon not less
than one (1) Business Day's, in the case of Base Rate Loans, and upon not
less than three (3) Business Days', in the case of Eurodollar Rate Loans,
prior written or telephonic notice, promptly confirmed in writing to the
Administrative Agent (which notice
52
<PAGE>
the Administrative Agent will promptly transmit by facsimile or telephone
to each Lender), at any time and from time to time prepay, without premium
or penalty, the Loans (other than Swing Line Loans) on any Business Day in
whole or in part in an aggregate minimum amount of $500,000 and integral
multiples of $100,000 in excess of that amount; provided, however, that in
-------- -------
the event Company shall prepay a Eurodollar Rate Loan other than on the
expiration of the Interest Period applicable thereto, Company shall, at the
time of such prepayment, also pay any amounts payable under subsection 2.6D
hereof. Notice of prepayment having been given as aforesaid, the Loans
shall become due and payable on the prepayment date specified in such
notice and in the aggregate principal amount specified therein. Any
voluntary prepayments pursuant to this subsection 2.4B(i) shall be applied
as specified in subsection 2.4C.
(ii) Voluntary Reductions of Commitments. Company may, upon not less
-----------------------------------
than three (3) Business Days' prior written or telephonic notice, promptly
confirmed in writing to the Administrative Agent (which notice the
Administrative Agent will promptly transmit by facsimile or telephone to
each Lender), at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, (x) the Revolving
Loan Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the Total Utilization of Revolving Loan Commitments at
the time of such proposed termination or reduction or (y) the Term Delayed
Draw Loan Commitments; provided that any such partial reduction of the
--------
Revolving Loan Commitments or the Term Delayed Draw Loan Commitments shall
be in an aggregate minimum amount of $1,000,000 and integral multiples of
$100,000 in excess of that amount. Company's notice to the Administrative
Agent shall designate the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial reduction, and such
termination or reduction of the Revolving Loan Commitments or the Term
Delayed Draw Loan Commitments shall be effective on the date specified in
such notice and shall reduce the Revolving Loan Commitment or the Term
Delayed Draw Loan Commitment, respectively, of each Lender proportionately
to its respective Pro Rata Share. Any such voluntary reduction of the
Revolving Loan Commitment or the Term Delayed Draw Loan Commitments shall
be applied as specified in subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of Commitments.
-------------------------------------------------------------
The Loans shall be prepaid and/or the Revolving Loan Commitments and Term
Delayed Draw Loan Commitments shall be reduced in the manner provided in
subsection 2.4C upon the occurrence of the following circumstances:
(a) Asset Sales. No later than the fifth (5/th/) Business Day
-----------
following the date of receipt by ChipPAC or any of its Subsidiaries of
Cash Proceeds of any Asset Sale, Company shall prepay the Loans
(and/or the Revolving Loan Commitments or Term Delayed Draw Loan
Commitments shall be reduced) in an amount equal to the Net Cash
Proceeds received with respect thereto; provided that, if ChipPAC
--------
shall have delivered a Reinvestment Notice to the Administrative Agent
no later than the fifth (5/th/) Business Day following the
consummation of such Asset Sale, Company shall not be required to make
any prepayment with
53
<PAGE>
the proceeds of such Asset Sale to the extent that any of such
proceeds are reinvested (or as to which a contract has been entered
into to reinvest) in Reinvestment Assets within 365 days from the date
of receipt of such proceeds; provided further that the aggregate
-------- -------
amount of Net Cash Proceeds that may be reinvested pursuant to the
immediately preceding proviso shall not exceed $15,000,000 in any
Fiscal Year (or $30,000,000 in any Fiscal Year at any time the
Leverage Ratio, determined on a Pro Forma Basis after giving effect to
such Asset Sale, is less than 3.50:1.00); and provided still further
-------- ----- -------
that, on each Reinvestment Prepayment Date, an amount equal to the
Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied to prepay the Loans (and/or the
Revolving Loan Commitments or Term Delayed Draw Loan Commitments shall
be reduced). Concurrently with any prepayment of Loans (and/or any
reduction in the Revolving Loan Commitments or Term Delayed Draw Loan
Commitments) pursuant to this subsection 2.4B(iii)(a), ChipPAC shall
deliver to the Administrative Agent an Officer's Certificate
demonstrating in detail reasonably satisfactory to the Administrative
Agent the derivation of the Net Cash Proceeds of the correlative Asset
Sale from the gross sales price thereof. In addition, in the event
that ChipPAC shall, at any time after receipt of proceeds of any
Reinvestment Event requiring a prepayment (and/or a reduction in the
Revolving Loan Commitments) pursuant to this subsection 2.4B(iii)(a),
determine that the prepayments (and/or a reduction in the Revolving
Loan Commitments) previously made in respect of such Reinvestment
Event were in an aggregate amount less than that required by the terms
of this subsection 2.4B(iii)(a), Company shall promptly cause to be
made an additional prepayment of the Loans (and/or reduction in the
Revolving Loan Commitments) in an amount equal to the amount of any
such deficit, and ChipPAC shall concurrently therewith deliver to the
Administrative Agent an Officer's Certificate demonstrating the
derivation of the additional proceeds resulting in such deficit. If
Company is otherwise required to apply any portion of Net Cash
Proceeds to prepay Indebtedness evidenced by the Subordinated Debt
then, notwithstanding anything contained in this Agreement to the
contrary, ChipPAC shall cause such Net Cash Proceeds to be applied to
the prepayment of the Loans so as to eliminate or minimize any
obligation to be applied to prepay the Subordinated Debt.
(b) Issuances of Debt. On or prior to the first (1/st/) Business
-----------------
Day after receipt by ChipPAC or any of its Subsidiaries of any
proceeds (net of any payment of underwriting discounts, commission and
other costs and expenses associated therewith (including legal costs
and expenses)) of any Indebtedness (other than the Loans, the
Subordinated Debt and any other Indebtedness permitted by this
Agreement), Company shall prepay the Loans (and/or the Revolving Loan
Commitments or Term Delayed Draw Loan Commitments shall be reduced) in
an amount equal to the amount of such proceeds; provided that payment
--------
or acceptance of the amounts provided for in this subsection
2.4B(iii)(b) shall not constitute a waiver of any Event of Default
resulting from the incurrence of such Indebtedness or otherwise
prejudice any rights or remedies of the Administrative Agent or any
Lender. If Company is otherwise required to
54
<PAGE>
apply any portion of such proceeds to prepay Indebtedness evidenced by
the Subordinated Debt then, notwithstanding anything contained in this
Agreement to the contrary, ChipPAC shall cause such proceeds to be
applied to the prepayment of the Loans so as to eliminate or minimize
any obligation to prepay the Subordinated Debt.
(c) Issuances of Equity Securities. On or prior to the first
------------------------------
(1/st/) Business Day after receipt by ChipPAC or any of its
Subsidiaries of any Equity Proceeds (net of any payment of
underwriting discounts, commission and other costs and expenses
associated therewith (including legal costs and expenses)) other than
(w) capital contributions made by ChipPAC or any of its Subsidiaries,
(x) Equity Proceeds received by ChipPAC as payment for any shares of
Capital Stock purchased by, or of the exercise price under any option
for any shares of Capital Stock of ChipPAC held by, any officer,
director, employee or consultant of ChipPAC or any of its
Subsidiaries, (y) Equity Proceeds received from the Investors or their
respective Affiliates or customers or suppliers of ChipPAC or its
Subsidiaries, and (z) Equity Proceeds received by ChipPAC or any of
its Subsidiaries solely to the extent that such Equity Proceeds are
used to finance a Permitted Acquisition), Company shall prepay the
Loans (and/or the Revolving Loan Commitments or Term Delayed Draw Loan
Commitments shall be reduced) in an amount equal to (i) 75% of all
such Equity Proceeds, if at such time the Leverage Ratio, on a Pro
Forma basis, is greater than or equal to 3.50:1.00 or (ii) 50% of all
such Equity Proceeds, if at such time the Leverage Ratio, on a Pro
Forma Basis, is less than 3.50:1.00; provided, however, that
notwithstanding the foregoing, ChipPAC may use the first $50,000,000
of Equity Proceeds of a Qualified Public Equity Offering, at its
option, (i) to redeem HEI Preferred Stock, (ii) to redeem Intel
Preferred Stock and/or (iii) to repurchase Subordinated Debt. If
Company is otherwise required to apply any portion of such Equity
Proceeds to prepay Indebtedness evidenced by the Subordinated Debt
then, notwithstanding anything contained in this Agreement to the
contrary, ChipPAC shall cause such Equity Proceeds to be applied to
the prepayment of the Loans so as to eliminate or minimize any
obligation to repurchase the Subordinated Debt.
(d) Insurance and Condemnation Proceeds. No later than the fifth
-----------------------------------
(5/th/) Business Day following the date of receipt by ChipPAC or any
of its Subsidiaries of any cash payments under any insurance policy as
a result of any damage to or loss of all or any portion of the
Collateral or any other tangible asset (net of actual costs incurred
and any taxes paid or payable by ChipPAC or any of its Subsidiaries in
connection with adjustment and settlement thereof, "Insurance
---------
Proceeds") or any proceeds resulting from the taking of assets by the
power of eminent domain, condemnation or otherwise (net of actual
costs incurred and any taxes paid or payable by ChipPAC or any of its
Subsidiaries in connection with adjustment and settlement thereof,
"Condemnation Proceeds") (any such event resulting in the recovery of
---------------------
Insurance Proceeds or Condemnation Proceeds, a "Recovery Event"),
--------------
Company shall prepay the Loans (and/or the Revolving Loan Commitments
or Term Delayed Draw Loan Commitments shall be reduced) in an amount
equal to the
55
<PAGE>
Insurance Proceeds or Condemnation Proceeds, as the case may be,
received; provided that, if ChipPAC shall have delivered a
--------
Reinvestment Notice to the Administrative Agent no later than five (5)
Business Days prior to the consummation of such Recovery Event and no
Event of Default exists at the time of such consummation and the time
of delivery of such notice, Company shall not be required to make any
prepayment (and/or reduction in the Revolving Loan Commitments or Term
Delayed Draw Loan Commitments) with the proceeds of such Recovery
Event to the extent that (x) all or any portion of such proceeds are
reinvested (or a contract has been entered into to reinvest) in
Reinvestment Assets within 365 days from the date of receipt of such
proceeds, and (y) after giving effect thereto, the aggregate amount of
proceeds not used to make mandatory prepayments of Loans (and/or
reduce the Revolving Loan Commitments or Term Delayed Draw Loan
Commitments) pursuant to this proviso does not exceed $10,000,000
during any Fiscal Year; provided, further, that, on each Reinvestment
-------- -------
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount
with respect to the relevant Reinvestment Event shall be applied to
prepay the Loans (and/or the Revolving Loan Commitments or Term
Delayed Draw Loan Commitments shall be reduced). In addition, in the
event that ChipPAC shall, at any time after receipt of proceeds of any
Reinvestment Event requiring a prepayment (and/or reduction in the
Revolving Loan Commitments or Term Delayed Draw Loan Commitments)
pursuant to this subsection 2.4B(iii)(d), determine that the
prepayments (and/or reduction in the Revolving Loan Commitments or
Term Delayed Draw Loan Commitments) previously made in respect of such
Reinvestment Event were in an aggregate amount less than that required
by the terms of this subsection 2.4B(iii)(d), Company shall promptly
cause to be made an additional prepayment of the Loans (and/or reduce
the Revolving Loan Commitments or Term Delayed Draw Loan Commitments)
in an amount equal to the amount of any such deficit, and ChipPAC
shall concurrently therewith deliver to the Administrative Agent an
Officer's Certificate demonstrating the derivation of the additional
proceeds resulting in such deficit. If Company is otherwise required
to apply any portion of such proceeds to prepay Indebtedness evidenced
by the Subordinated Debt then, notwithstanding anything contained in
this Agreement to the contrary, ChipPAC shall cause such Insurance
Proceeds and Condemnation Proceeds to be applied to the prepayment of
the Loans so as to eliminate or minimize any obligation to prepay the
Subordinated Debt.
(e) Consolidated Excess Cash Flow. In the event that there shall
-----------------------------
be Consolidated Excess Cash Flow for any Fiscal Year (commencing with
the Fiscal Year ending December 31, 2000), Company shall, no later
than ninety-five (95) days after the end of such Fiscal Year, prepay
the Loans (and/or the Revolving Loan Commitments or Term Delayed Draw
Loan Commitments shall be reduced) in an aggregate amount equal to (i)
75% of such Consolidated Excess Cash Flow if the Leverage Ratio at the
end of such Fiscal Year was greater than or equal to 3.50:1.00 or (ii)
50% of such Consolidated Excess Cash Flow if the Leverage Ratio at the
end of such Fiscal Year was less than 3.50:1.00; provided, however,
-------- -------
that no such
56
<PAGE>
payment shall be required if the Leverage Ratio at the end of such
Fiscal Year was less than or equal to 2.75:1.00.
(f) Reductions or Restrictions of Revolving Loan Commitments.
--------------------------------------------------------
Company shall prepay the Swing Line Loans and/or Revolving Loans from
time to time to the extent necessary so that (1) the Total Utilization
of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect, and (2) the aggregate
principal amount of all outstanding Swing Line Loans shall not at any
time exceed the Swing Line Loan Commitment then in effect. All Swing
Line Loans shall be prepaid in full prior to the prepayment of any
Revolving Loans pursuant to this subsection 2.4B(iii)(f). If at any
time that there are no Revolving Loans and Swing Line Loans
outstanding (whether after giving effect to any prepayment thereof
pursuant to this subclause (f) or otherwise) the Total Utilization of
Revolving Loan Commitments exceeds the Revolving Loan Commitment,
Company shall deposit into the Collateral Account such amounts as are
necessary so that, after giving effect thereto, the amount on deposit
in the Collateral Account pursuant to this subclause (f) is at least
equal to such excess.
C. Application of Prepayments and Unscheduled Reductions of Commitments.
(i) Application of Prepayments by Type of Loans. Any voluntary
-------------------------------------------
prepayments pursuant to subsection 2.4B(i) shall be applied as specified by
Company in the applicable notice of prepayment; provided that in the event
--------
Company fails to specify the Loans to which any such prepayment shall be
applied, such prepayment shall be applied first to repay outstanding Swing
-----
Line Loans to the full extent thereof, second to repay outstanding
------
Revolving Loans to the full extent thereof, and third to repay outstanding
-----
Term Loans to the full extent thereof. Any amount required to be applied as
a prepayment of Loans or Revolving Loan Commitment or Term Delayed Draw
Loan Commitment reduction pursuant to any of subsections 2.4B(iii)(a)
through (e) or this subsection 2.4C(i) shall be applied first to repay Term
-----
Loans as selected by Company in an amount not in excess of an amount equal
to the scheduled amortization payments on such Term Loans selected for the
immediately succeeding twelve-month period, second to further prepay the
------
Term Loans ratably to the full extent thereof, third to prepay Swing Line
-----
Loans to the full extent thereof and to permanently reduce the Revolving
Loan Commitments by the amount of such prepayment, fourth to prepay
------
Revolving Loans to the full extent thereof and to further permanently
reduce the Revolving Loan Commitments by the amount of such prepayment,
fifth to prepay outstanding reimbursement obligations with respect to
-----
Letters of Credit, sixth to cash collateralize Letters of Credit as
-----
provided in the Collateral Account Agreement, seventh to reduce the Term
-------
Delayed Draw Loan Commitment and eighth, to the extent of any remaining
------
amount, to further reduce the Revolving Loan Commitments. Anything
contained herein to the contrary notwithstanding, so long as any Term A
Loans or Term Delayed Draw Loans are outstanding, in the case of any
voluntary or mandatory prepayments of Term Loans pursuant to subsection
2.4A or 2.4B or this subsection 2.4C, (a) Company shall use reasonable
efforts to notify the Lenders of such prepayment in advance of payment to
the Administrative Agent of such
57
<PAGE>
amount, (b) upon receipt of such payment, the Administrative Agent shall
notify the Lenders of such payment, (c) in the event any Lender with Term B
Loans elects to waive such Lender's right to receive such prepayment in
respect of any such Loans, such Lender shall so advise the Administrative
Agent in writing no later than the close of business on the date it
receives such notice from the Administrative Agent and (d) upon receipt of
such written advice from such Lender, the Administrative Agent shall apply
the amount waived by such Lender to prepay Term A Loans and Term Delayed
Draw Loans.
(ii) Application of Prepayments of Term Loans to Installments. The
--------------------------------------------------------
amount of any prepayments of Term A Loans, Term B Loans or Term Delayed
Draw Loans, as applicable, shall be applied first to reduce each scheduled
-----
installment thereof set forth in subsection 2.4A(i), 2.4A(ii) or 2.4A(iii),
as applicable, that is unpaid and due within the next twelve months of the
date of such prepayment in the order that such installments are scheduled
to occur, and second to ratably reduce each scheduled installment of
------
principal thereof set forth in subsection 2.4A(i), 2.4A(ii) or 2.4A(iii),
as applicable.
(iii) Application of Prepayments of Loans to Base Rate Loans and
----------------------------------------------------------
Eurodollar Rate Loans. Considering Loans constituting Term A Loans, Term B
---------------------
Loans, Term Delayed Draw Loans and Revolving Loans being prepaid
separately, any prepayment thereof shall be applied first to Base Rate
Loans to the full extent thereof before application to Eurodollar Rate
Loans, in each case in a manner which minimizes the amount of any payments
required to be made by Company pursuant to subsection 2.6D.
D. Application of Proceeds of Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. All proceeds received by
-------------------------------------
the Administrative Agent or the Collateral Agent, as the case may be, in
respect of any sale of, collection from, or other realization upon all or
any part of the Collateral under any Collateral Document may, in the
discretion of the Collateral Agent, be held by the Collateral Agent as
Collateral for, and applied in full by the Administrative Agent against,
the applicable Secured Obligations (as defined in such Collateral Document)
in the following order of priority:
(a) to the payment of all costs and expenses of such sale,
collection or other realization, including all other reasonable
expenses, liabilities and advances made or incurred by such Agents in
connection therewith, and all amounts for which such Agents are
entitled to indemnification under such Collateral Document and all
advances made by the Collateral Agent thereunder for the account of
the applicable Loan Party, and to the payment of all reasonable costs
and expenses paid or incurred by the Collateral Agent in connection
with the exercise of any right or remedy under such Collateral
Document, all in accordance with the terms of this Agreement and such
Collateral Document;
(b) thereafter, to the extent of any excess proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; and
58
<PAGE>
(c) thereafter, to the extent of any excess proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
----------------------------------------
by the Administrative Agent under any Guaranty shall be applied promptly
from time to time by the Administrative Agent in the following order of
priority:
(a) to the payment of the reasonable costs and expenses of any
collection or other realization under such Guaranty, including all
reasonable expenses, liabilities and advances made or incurred by the
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Obligations (as defined in such Guaranty) for
the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to
the payment to the applicable Guarantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
--------------------------
principal, interest, fees and other Obligations hereunder shall be made in
same day funds and without defense, setoff or counterclaim, free of any
restriction or condition, and delivered to the Administrative Agent not
later than 12:00 Noon (New York time) on the date due at the Funding and
Payment Office for the account of the Lenders; funds received by the
Administrative Agent after that time on such due date shall be deemed to
have been paid by Company on the next succeeding Business Day. Company
hereby authorizes the Administrative Agent to charge its accounts with the
Administrative Agent in order to cause timely payment to be made to the
Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for
that purpose).
(ii) Application of Payments to Principal and Interest. Except as
-------------------------------------------------
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest, on the
principal amount being repaid or prepaid, and all such payments (and in any
event any payments made in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to the Lenders' respective
Pro Rata Shares. The Administrative Agent shall promptly distribute to each
Lender, at its
59
<PAGE>
applicable Lending Office specified in Schedule 2.1 or at such other
------------
address as such Lender may request, its Pro Rata Share of all such payments
received by the Administrative Agent and the commitment fees of such Lender
when received by the Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4E(iii) if,
pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, the Administrative Agent shall give effect thereto
in apportioning payments received thereafter.
(iv) Payments on Business Days. Except if expressly provided
-------------------------
otherwise, whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be included
in the computation of the payment of interest hereunder or of the
commitment fees hereunder, as the case may be.
2.5 Use of Proceeds.
---------------
A. Term Loans Made on the Closing Date. The proceeds of the Term Loans
to be made to Company on the Closing Date shall be applied, together with the
net cash proceeds of the issuance and sale of the Subordinated Debt to fund the
ChipPAC Hungary Capital Contribution and the Recapitalization Loans.
B. Term Delayed Draw Loans. The proceeds of any Term Delayed Draw Loans
shall be applied by Company only for the purpose of acquiring equipment or
making other capital expenditures required in connection with the performance by
the Operating Subsidiaries with respect to Micro BGA Capital Expenditures.
C. Revolving Loans; Swing Line Loans. The proceeds of any Revolving Loans
and any Swing Line Loans shall be applied for working capital and general
corporate purposes of the Operating Subsidiaries.
D. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 11:00 A.M. (New York time) on each Interest Rate Determination Date, the
Administrative Agent shall determine (which determination shall, absent manifest
error,
60
<PAGE>
be final, conclusive and binding upon all parties) the interest rate that shall
apply to the Eurodollar Rate Loans for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to Company and each
Lender.
B. Inability to Determine Applicable Interest Rate. In the event that the
Administrative Agent shall have reasonably determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances arising after the date of this Agreement affecting the
London interbank market, adequate and fair means do not exist for ascertaining
the interest rate applicable to such Loans on the basis provided for in the
definition of Reserve Adjusted Eurodollar Rate the Administrative Agent shall on
such date give notice (by telecopy or by telephone confirmed in writing) to
Company and each Lender of such determination, whereupon (i) no Loans may be
made or continued as, or converted to, Eurodollar Rate Loans, until such time as
the Administrative Agent notifies Company and the Lenders that the circumstances
giving rise to such notice no longer exist (such notification not to be
unreasonably withheld or delayed) and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect of
which such determination was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and the Administrative
Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by such Lender in good faith
with any law, treaty, governmental rule, regulation, guideline or order (or
would conflict with any such treaty, governmental rule, regulation, guideline or
order not having the force of law even though the failure to comply therewith
would not be unlawful) or (ii) has become impracticable, or would cause such
Lender material hardship, as a result of contingencies occurring after the date
of this Agreement which materially and adversely affect the London interbank
market, then, and in any such event, such Lender shall be an "Affected Lender"
---------------
and it shall on that day give notice (by telecopy or by telephone confirmed in
writing) to Company and the Administrative Agent of such determination (which
notice the Administrative Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, Eurodollar Rate Loans, shall be suspended until such notice
shall be withdrawn by the Affected Lender, (b) to the extent such determination
by the Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of Borrowing or a Notice of Conversion/
Continuation, the Affected Lender shall make such Loan as (or convert such Loan
to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation
to maintain its outstanding Eurodollar Rate Loans, as the case may be (the
"Affected Loans"), shall be terminated at the earlier to occur of the expiration
--------------
of the Interest Period then in effect with respect to the Affected Loans or when
required by law, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the foregoing,
to the extent a determination by an Affected Lender as described above relates
to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, Company shall have the
option, subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by
61
<PAGE>
giving notice (by telecopy or by telephone confirmed in writing) to the
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
the Administrative Agent shall promptly transmit to each other Lender). Except
as provided in the immediately preceding sentence, nothing in this subsection
2.6C shall affect the obligation of any Lender other than an Affected Lender to
make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. Compensation for Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to the lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or re-employment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment
(including any prepayment pursuant to subsection 2.4B) or conversion of any of
its Eurodollar Rate Loans occurs on a date that is not the last day of an
Interest Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company in the repayment of its Eurodollar Rate Loans when required by the terms
of this Agreement.
E. Booking of Eurodollar Rate Loans. Subject to its obligations under
subsection 2.8, any Lender may make, carry or transfer Eurodollar Rate Loans at,
to, or for the account of any of its branch offices or the office of an
Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Reserve Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and, through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender in the United States
of America; provided, however, that each Lender may fund each of its Eurodollar
-------- -------
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of an Event of Default, unless the Requisite Lenders
otherwise consent, (i) Company may not elect to have a Loan be made or
maintained as, or converted to, a Eurodollar Rate Loan after the expiration of
any Interest Period then in effect for that Loan and (ii) subject to the
provisions of subsection 2.6D, any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to a
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requested borrowing or conversion/continuation that has not yet occurred shall
be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the Closing
Date, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) results in a change in the basis of taxation of such Lender (or
its applicable lending office) (other than a change with respect to any Tax
on the overall net income of such Lender or franchise tax in lieu thereof)
with respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Reserve Adjusted Eurodollar
Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, the Lender shall
promptly notify Company and the Administrative Agent thereof and Company shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender shall reasonably determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder, provided that notwithstanding anything to the contrary contained in
--------
this subsection 2.7A, unless a Lender gives notice to Company that it is
obligated to pay an amount under this subsection within six months after the
later of (x) the date such Lender incurs such increased cost or suffers such
reduction in amounts received or receivable and (y) the date such Lender has
actual knowledge of such costs or reduction
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in amounts received or receivable, then such Lender shall only be entitled to be
compensated for such amount to the extent of the increased cost or reduction in
amounts received or receivable that is incurred or suffered on or after the date
which occurs six months prior to such Lender giving notice to Company that it is
obligated to repay the respective amounts pursuant to this subsection 2.7A. Such
Lender shall deliver to Company (with a copy to the Administrative Agent) a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
-----------------------------
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of the Administrative Agent or any Lender imposed, levied, collected
or assessed by any jurisdiction from or through which a payment is made by
or on behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person is required
--------------------
by law to make any deduction or withholding on account of any Tax (other
than a Tax on the overall net income of the Administrative Agent or any
Lender) from any sum paid or payable by Company to the Administrative Agent
or any Lender under any of the Loan Documents:
(a) Company shall notify the Administrative Agent of any such
requirement or any change in any such requirement as soon as
practicable;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on the Administrative Agent or such Lender, as the case may
be) on behalf of and in the name of the Administrative Agent or such
Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment (including deduction, withholding or
payment with respect to additional sums payable under this subsection
2.7B(ii)), the Administrative Agent or such Lender, as the case may
be, receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment of such tax
been required or made; provided that no such additional amount shall
be required to be paid to any Lender under this clause (c) except to
the extent that any change after the Closing Date or after the date of
the Assignment Agreement pursuant to which such Lender became a Lender
(in the case of each other Lender) in any such requirement for a
deduction, withholding or payment shall result in the imposition, or
an increase in the rate, of such deduction, withholding or payment in
respect of payments to such Lender. Notwithstanding the preceding
clause, additional sums shall be required to be paid to any
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Lender to the extent that such Lender (or its assignor) was entitled,
at the time of designation of a new lending office (or assignment), to
receive additional amounts from Company in respect of payments to such
Lender (or its assignor);
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, Company shall deliver to the Administrative
Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the
relevant taxing or other authority; and
(e) Company shall indemnify the Administrative Agent or any
Lender for the full amount of any such Tax paid by the Administrative
Agent or any Lender on or with respect to any payment on account of
any obligation of Company under this subsection 2.7B(ii) and any
penalties, interest and reasonable expenses with respect thereto,
whether or not such Tax was legally imposed or asserted by the
relevant governmental authority, within 15 Business Days after written
request for such indemnification. A certificate as to the amount of
such payment or liability delivered to Company by the Administrative
Agent or any Lender shall be conclusive absent manifest error.
(iii) Other Taxes. Company shall also pay any and all present or
-----------
future recording, stamp, documentary, excise, transfer, sales, property or
similar Taxes arising from any payment made hereunder or from the
execution, delivery or enforcement or registration of, or otherwise with
respect to, this Agreement and the other Loan Documents. In the case of any
such payments made by the Administrative Agent or any Lender, Company shall
reimburse the Administrative Agent or such Lender for the full amount of
such Taxes paid by the Administrative Agent or any Lender within 15
Business Days following receipt by Company of a written statement or
invoice setting forth in reasonable detail the basis for such reimbursement
request.
C. Tax Refunds. If any Lender receives a refund or otherwise would have
received a refund but for the offset of the amount of such refund against
such Lender's Taxes (a "Tax Refund"), which in the good faith judgment of
----------
such Lender is allocable to Company, it shall promptly pay such refund net
of all out-of-pocket expenses of the Lender and without interest (other
than any interest paid by the relevant jurisdiction with respect to such
refund) to Company; provided, however, that Company agrees to promptly
-------- -------
return such Tax Refund (plus any penalties, interest or other charges
imposed by the relevant jurisdiction) to the applicable Lender if it
receives notice from such Lender that such Lender is required to repay such
Tax Refund. Nothing contained in this subsection 2.7C shall require any
Lender to make available its Tax returns (or any other information relating
to its Taxes which it deems confidential) to Company or any other Person.
D. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the Closing
Date of any
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law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
any Lender (or its applicable lending office) with any guideline, request
or directive regarding capital adequacy (whether or not having the force of
law) of any such governmental authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on the capital
of such Lender or any corporation controlling such Lender as a consequence
of, or with reference to, such Lender's Loans or Commitments or Letters of
Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which
such Lender reasonably determines such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness,
phase-in, applicability, change or compliance (taking into consideration
the policies of such Lender or such controlling corporation with regard to
capital adequacy), then, within fifteen Business Days after receipt by
Company from such Lender of the statement referred to in the next sentence,
Company shall pay to such Lender such additional amount or amounts as will
compensate such Lender or such controlling corporation on an after-tax
basis for such reduction. Such Lender shall deliver to Company (with a copy
to the Administrative Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional amounts,
which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
E. Substitute Lenders. In the event (i) Company is required under the
provisions of this subsection 2.7 or subsection 3.6 to make payments to any
Lender or in the event any Lender fails to lend to Company in accordance
with this Agreement, or (ii) any Lender fails to consent to a proposed
change, waiver, discharge or termination under the Loan Documents otherwise
approved by Requisite Lenders, then, in either case, Company may elect to
terminate such Lender as a party to this Agreement; provided that,
--------
concurrently with such termination, (i) Company shall pay that Lender all
principal, interest and fees and other amounts (including without
limitation amounts, if any, owed under this subsection 2.7) due to be paid
to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
the Administrative Agent (or, in the event the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) shall
agree, as of such date, to become a Lender for all purposes under this
Agreement (whether by assignment or amendment) and to assume all
obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the reasonable judgment of
the Administrative Agent (or, in the event the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) to
evidence the substitution of such Lender shall have been received and
approved by the Administrative Agent as of such date.
2.8 Obligation of Lenders and Issuing Bank to Mitigate.
--------------------------------------------------
Each of the Lender and the Issuing Bank agrees that, as promptly as
practicable after the officer of such Lender or the Issuing Bank responsible for
administering the Loans or Letters of Credit of such Lender or the Issuing Bank,
as the case may be, becomes aware of the occurrence of an event or the existence
of a condition that would
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cause such Lender to become an Affected Lender or that would entitle such Lender
or the Issuing Bank to receive payments under subsection 2.7 or subsection 3.6,
it will, to the extent not inconsistent with the internal policies of such
Lender or the Issuing Bank and any applicable legal or regulatory restrictions,
use reasonable efforts to (i) make, issue, fund or maintain the Commitments of
such Lender or the affected Loans or Letters of Credit of such Lender or the
Issuing Bank through another lending or letter of credit office of such Lender
or the Issuing Bank, or (ii) take such other measures as such Lender or the
Issuing Bank may deem reasonable, if as a result thereof the circumstances which
would cause such Lender to be an Affected Lender would cease to exist or the
additional amounts which would otherwise be required to be paid to such Lender
or the Issuing Bank pursuant to subsection 2.7 or subsection 3.6 would be
reduced and if, as determined by such Lender or the Issuing Bank in its
reasonable discretion, the making, issuing, funding or maintaining of such
Commitments or Loans or Letters of Credit through such other lending or letter
of credit office or in accordance with such other measures, as the case may be,
would not otherwise materially adversely affect such Commitments or Loans or
Letters of Credit or the interests of such Lender or the Issuing Bank; provided
--------
that such Lender or the Issuing Bank will not be obligated to utilize such other
lending or letter of credit office pursuant to this subsection 2.8 unless
Company agrees to pay all incremental expenses incurred by such Lender or the
Issuing Bank as a result of utilizing such other lending or letter of credit
office. A certificate as to the amount of any such expenses payable by Company
pursuant to this subsection 2.8 (setting forth in reasonable detail the basis
for requesting such amount) submitted by such Lender or the Issuing Bank to
Company (with a copy to the Administrative Agent) shall be conclusive absent
manifest error.
SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
---------------------------------------------------------------------
Therein.
-------
A. Letters of Credit. In addition to Company requesting that Lenders make
Revolving Loans pursuant to subsection 2.1A(iv) and that the Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(v), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the date which is five (5)
Business Days before the Revolving Loan Commitment Termination Date, that the
Issuing Bank issue Letters of Credit for the account of ChipPAC or any of its
Subsidiaries to the extent and for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to and upon
the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Loan Parties herein set forth, the Issuing
Bank agrees to issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Company shall not request that the Issuing
--------
Bank issue (and the Issuing Bank shall not issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
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(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed the Letter of Credit Subfacility
Commitment;
(iii) any Letter of Credit prior to the Chinese Security Effective
Date, if, after giving effect to such issuance, the Total Utilization of
Revolving Loan Commitments would exceed $15,000,000;
(iv) any Standby Letter of Credit having an expiration date later
than the earlier of (a) five (5) Business Days prior to the Revolving Loan
Commitment Termination Date and (b) the date which is one year from the
date of issuance of such Standby Letter of Credit; provided that the
--------
immediately preceding clause (b) shall not prevent the Issuing Bank from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods absent a Default or Event of Default,
subject to the immediately preceding clause (a), not to exceed one year
each unless the Issuing Bank elects not to extend for any such additional
period; provided, further, that, unless the Requisite Lenders otherwise
-------- -------
consent, the Issuing Bank shall give notice that it will not extend such
Standby Letter of Credit if it has knowledge that a Default or Event of
Default has occurred and is continuing (and has not been waived in
accordance with subsection 10.6) on the last day on which such Issuing Bank
may give notice to the beneficiary that it will not extend such Standby
Letter of Credit; or
(v) any Commercial Letter of Credit (a) having an expiration date
later than the earlier of (x) thirty (30) days prior to the Revolving Loan
Commitment Termination Date and (y) the date which is one hundred eighty
(180) days from the date of issuance of such Commercial Letter of Credit or
(b) that is otherwise unacceptable to the Issuing Bank in its reasonable
discretion.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance of a
------------------
Letter of Credit, it shall deliver to the Issuing Bank, at the Letter of
Credit Issuing Office, and the Administrative Agent, at the Funding and
Payment Office, a Notice of Issuance of Letter of Credit no later than
12:00 Noon (New York time) at least three (3) Business Days (in the case of
Standby Letters of Credit) and five (5) Business Days (in the case of
Commercial Letters of Credit), or such shorter period as may be agreed to
by the Issuing Bank in any particular instance, in advance of the proposed
date of issuance. The Notice of Issuance of Letter of Credit shall specify
(a) the proposed date of issuance (which shall be a Business Day), (b) the
face amount of or maximum aggregate liability under, as applicable, the
Letter of Credit, (c) the expiration date of the Letter of Credit, (d) the
name and address of the account party and beneficiary, and (e) either the
verbatim text of the proposed Letter of Credit or the proposed terms and
conditions thereof, including a precise description of any documents and
the verbatim text of any certificates to be presented by the beneficiary
which, if presented by the beneficiary prior to the expiration date of the
Letter of Credit, would require the Issuing Bank to make payment
thereunder; and provided that the Issuing Bank, in its reasonable
--------
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents or certificates; provided further that no
-------- -------
Letter of Credit shall require payment against a conforming draft or other
request for
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payment to be made thereunder on the same business day (under the laws of
the jurisdiction in which the office of the Issuing Bank to which such
draft or other request for payment is required to be presented is located)
that such draft or other request for payment is presented if such
presentation is made after 10:00 A.M. (in the time zone of such office of
the Issuing Bank) on such Business Day.
Company shall notify the Issuing Bank (and the Administrative Agent,
if not such Issuing Bank) prior to the issuance of any Letter of Credit in
the event that any of the matters to which Company is required to certify
in the applicable Notice of Issuance of Letter of Credit is no longer true
and correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit, Company shall be deemed to
have re-certified, as of the date of such issuance, as to the matters to
which Company is required to certify in the applicable Notice of Issuance
of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Bank shall issue the requested Letter of Credit in
accordance with the Issuing Bank's standard procedures, and upon its
issuance of such Letter of Credit the Issuing Bank shall promptly notify
the Administrative Agent and each Lender of such issuance, which notice
shall be accompanied by a copy of such Letter of Credit.
(iii) Reports to Lenders. Within thirty (30) days after the end of
------------------
each calendar quarter ending after the Closing Date, so long as any Letter
of Credit shall have been outstanding during such calendar quarter, the
Issuing Bank shall deliver to the Administrative Agent and the
Administrative Agent shall deliver to each Lender a report setting forth
for such calendar quarter the daily maximum amount available to be drawn
under the Letters of Credit that were outstanding during such calendar
quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Bank a
participation in such Letter of Credit and any drawings honored or payments made
thereunder in an amount equal to such Lender's Pro Rata Share (with respect to
the Revolving Loan Commitments) of the maximum amount which is or at any time
may become available to be drawn or required to be paid thereunder.
3.2 Letter of Credit Fees.
---------------------
Company agrees to pay the following amounts to the Issuing Bank with
respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee equal
to 0.250% per annum of the daily maximum amount available to be drawn under
such Letter of Credit and (b) a Letter of Credit fee equal to the product
of (x) the then Applicable Eurodollar Rate Margin with respect to Revolving
Loans and (y) the daily maximum amount available to be drawn under such
Letter of Credit, in each case payable in arrears on and to the last
Business Day in each of March, June, September and December of each year,
commencing September 1999, and
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on the Revolving Loan Commitment Termination Date and computed on the basis
of a 360-day year for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit (without duplication of the fees payable under clause (i)
above), documentary and processing charges in accordance with such Issuing
Bank's standard schedule for such charges in effect at the time of such
issuance, amendment or transfer, as the case may be.
Promptly upon receipt by such Issuing Bank of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Bank shall distribute to each other
Lender having Revolving Loan Exposure its Pro Rata Share of such amount.
3.3 Drawings and Payments and Reimbursement of Amounts Drawn or Paid Under
----------------------------------------------------------------------
Letters of Credit.
-----------------
A. Responsibility of Issuing Bank With Respect to Requests for Drawings
and Payments. In determining whether to honor any drawing or request for payment
under any Letter of Credit by the beneficiary thereof, the Issuing Bank shall be
responsible only to determine that the documents and certificates required to be
delivered under such Letter of Credit have been delivered and to use reasonable
care so that they comply on their face with the requirements of such Letter of
Credit.
B. Reimbursement by Company of Amounts Drawn or Paid Under Letters of
Credit. In the event an Issuing Bank has determined to honor a drawing or
request for payment under a Letter of Credit issued by it, the Issuing Bank
shall immediately notify Company and the Administrative Agent, and Company shall
reimburse such Issuing Bank on or before the Business Day immediately following
the date on which such drawing is honored or such payment is made (the
applicable "Reimbursement Date") in an amount in same day funds equal to the
------------------
amount of such honored drawing; provided that, anything contained in this
--------
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified the Administrative Agent and the Issuing Bank prior to 12:00 Noon (New
York time) on the date immediately following the date of such honored drawing or
request for payment that Company intends to reimburse such Issuing Bank for the
amount of such honored drawing or payment with funds other than the proceeds of
Revolving Loans, Company shall be deemed to have given a timely Notice of
Borrowing to the Administrative Agent requesting the Lenders to make Revolving
Loans which are Base Rate Loans on the applicable Reimbursement Date in an
amount equal to the amount of such honored drawing or payment and (ii) subject
to satisfaction or waiver of the conditions specified in subsection 4.2B, the
Lenders shall, on the applicable Reimbursement Date, make Revolving Loans in the
amount of such honored drawing or payment, the proceeds of which shall be
applied directly by the Administrative Agent to reimburse the Issuing Bank for
the amount of such honored drawing or payment; provided further that if for any
-------- -------
reason proceeds of Revolving Loans are not received by the Issuing Bank on the
applicable Reimbursement Date in an amount equal to the amount of such honored
drawing or payment, Company shall reimburse the Issuing Bank, on demand, in an
amount in same day funds equal to the excess of the amount of such honored
drawing or payment over the aggregate amount of such Revolving Loans, if any,
which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Revolving Loans on the terms and
conditions set forth in this Agreement, and Company shall retain any and all
rights it
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may have against any Lender resulting from the failure of such Lender to make
such Revolving Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Drawings or Payments Under Letters
of Credit.
(i) Payment by Lenders. In the event that Company shall fail for any
------------------
reason to reimburse any Issuing Bank as provided in subsection 3.3B in an
amount equal to the amount of any honored drawing or payment made by such
Issuing Bank under a Letter of Credit issued by it, such Issuing Bank shall
promptly notify each other Lender of the unreimbursed amount of such
honored drawing or payment and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share of the
Revolving Loan Commitments. Each Lender shall make available to such
Issuing Bank an amount equal to its respective participation, in same day
funds, at the office of such Issuing Bank specified in such notice, not
later than 2:00 P.M. (New York time) on the first business day (under the
laws of the jurisdiction in which such office of such Issuing Bank is
located) after the date notified by such Issuing Bank. In the event that
any Lender fails to make available to such Issuing Bank on such business
day the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Bank shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Bank for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice
the right of any Lender to recover from any Issuing Bank any amounts made
available by such Lender to such Issuing Bank pursuant to this subsection
3.3C in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit
by such Issuing Bank in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Bank.
(ii) Distribution to Lenders of Reimbursements Received From Company.
---------------------------------------------------------------
In the event any Issuing Bank shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any honored
drawing or payment made by such Issuing Bank under a Letter of Credit
issued by it, such Issuing Bank shall distribute to each other Lender which
has paid all amounts payable by it under subsection 3.3C(i) with respect to
such honored drawing or payment such other Lender's Pro Rata Share of all
payments subsequently received by such Issuing Bank from Company in
reimbursement of such honored drawing or payment when such payments are
received. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request.
D. Interest on Amounts Drawn or Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to each
------------------------------
Issuing Bank, with respect to drawings or payments made under any Letters
of Credit issued by it, interest on the amount paid by such Issuing Bank in
respect of each such drawing or payment from the date such drawing is
honored or payment
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is made to but excluding the date such amount is reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B) at a rate equal to (a) for the period from the
date such drawing is honored or payment is made to but excluding the
applicable Reimbursement Date, the Base Rate plus the Applicable Base Rate
----
Margin with respect to Revolving Loans, and (b) thereafter, a rate which is
2% per annum in excess of the rate of interest described in the foregoing
clause (a). Interest payable pursuant to this subsection 3.3D(i) shall be
computed on the basis of a 360-day year for the actual number of days
elapsed in the period during which it accrues and shall be payable on
demand or, if no demand is made, on the date on which the related drawing
or payment under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Bank. Promptly upon
-------------------------------------------------
receipt by any Issuing Bank of any payment of interest pursuant to
subsection 3.3D(i), (a) such Issuing Bank shall distribute to each other
Lender, out of the interest received by such Issuing Bank in respect of the
period from the date of the applicable honored drawing or payment under a
Letter of Credit issued by such Issuing Bank to but excluding the date on
which such Issuing Bank is reimbursed for the amount of such drawing or
payment (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such other Lender would
have been entitled to receive in respect of the Letter of Credit fee that
would have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored or payment had
been made under such Letter of Credit, and (b) in the event such Issuing
Bank shall have been reimbursed by other Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing or payment, such Issuing
Bank shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing or
payment such other Lender's Pro Rata Share of any interest received by such
Issuing Bank in respect of that portion of such drawing or payment so
reimbursed by other Lenders for the period from the date on which such
Issuing Bank was so reimbursed by other Lenders to and including the date
on which such portion of such drawing or payment is reimbursed by Company.
Any such distribution shall be made to a Lender at its Lending Office set
forth in Schedule 2.1 or at such other address as such Lender may request.
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3.4 Obligations Absolute.
--------------------
The obligation of Company to reimburse each Issuing Bank for drawings
honored or payments made under the Letters of Credit issued by it and to repay
any Revolving Loans made by the Lenders pursuant to subsection 3.3B and the
obligations of the Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right which
Company or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Bank or other Lender or any other
Person or, in the
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case of a Lender, against Company whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between ChipPAC or one of
its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which appears to substantially comply with the terms of such
Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of ChipPAC or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that Default or Event of Default shall have occurred
and be continuing;
provided, in each case, that payment by the applicable Issuing Bank under the
- --------
applicable Letter of Credit shall not have constituted bad faith, gross
negligence or willful misconduct of such Issuing Bank under the circumstances in
question.
3.5 Indemnification; Nature of Issuing Bank's Duties.
------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Bank from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Bank may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Bank, other than as a result of (a) the bad faith, gross negligence or willful
misconduct of such Issuing Bank or (b) subject to the following clause (ii), the
wrongful dishonor by such Issuing Bank of a proper demand for payment made under
any Letter of Credit issued by it or (ii) the failure of such Issuing Bank to
honor a drawing or other request for payment under any such Letter of Credit as
a result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all such acts
or omissions herein called "Governmental Acts").
-----------------
B. Nature of Issuing Bank's Duties. As between Company and any Issuing
Bank, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Bank by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Bank shall not
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be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with the
application for and issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) failure
of the beneficiary of any such Letter of Credit to comply fully with any
conditions required in order to draw upon such Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing or payment under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of such Issuing Bank,
including without limitation any Governmental Acts, and none of the above shall
affect or impair, or prevent the vesting of, any of such Issuing Bank's rights
or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Bank under or in connection with the Letters of
Credit issued by it or any documents and certificates delivered thereunder, if
taken or omitted in good faith, shall not put such Issuing Bank under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Bank for
any liability arising out of the bad faith, gross negligence or willful
misconduct of such Issuing Bank.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to matters covered thereby), in the event that any Issuing Bank or
any Lender shall determine (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto) that any law, treaty
or governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the Closing Date, or compliance by any Issuing Bank or
Lender with any guideline, request or directive issued or made after the Closing
Date by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subject to any additional Tax such Issuing Bank or any Lender
(or its applicable lending or letter of credit office) (other than a change
with respect to any Tax on the overall net income of such Issuing Bank or
Lender) with respect to the issuing or maintaining of any Letters of Credit
or the purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Bank;
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(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing Bank
or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Bank or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Bank or Lender of agreeing to issue, issuing or maintaining any Letter of Credit
or agreeing to purchase, purchasing or maintaining any participation therein or
to reduce any amount received or receivable by such Issuing Bank or Lender (or
its applicable lending or letter of credit office) with respect thereto; then,
in any case, Company shall promptly pay to such Issuing Bank or Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts (reasonably determined by such Issuing Bank or Lender) as may
be necessary to compensate such Issuing Bank or Lender for any such increased
cost or reduction in amounts received or receivable hereunder. Such Issuing Bank
or Lender shall deliver to Company a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Issuing Bank or Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction (or waiver) of
the following conditions.
4.1 Conditions to Loans.
-------------------
The obligations of the Lenders to make the Loans to be made on the Closing
Date are, in addition to the conditions precedent specified in subsection 4.2,
subject to prior or concurrent satisfaction (or waiver) of the following
conditions:
A. Company Documents. On or before the Closing Date, each of ChipPAC and
Company shall deliver to the Administrative Agent the following, each, unless
otherwise noted, dated the Closing Date:
(i) Certified copies of its Organizational Certificate, together
with a good standing certificate from the Secretary of State of the State
of Delaware or the appropriate Governmental Authority of the British Virgin
Islands, as applicable, and each other jurisdiction in which it is
qualified as a foreign corporation to do business (except any such
jurisdiction in which failure to be qualified could not reasonably be
expected to have a Material Adverse Effect), each dated a recent date prior
to the Closing Date;
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(ii) Copies of its Organizational Documents, certified as of the
Closing Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement and the other
Loan Documents and the Transaction Documents to which it is a party,
certified as of the Closing Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment;
(iv) Incumbency certificates of its officers executing this
Agreement and the other Loan Documents to which it is a party as of the
Closing Date;
(v) Executed originals of this Agreement and the other Loan
Documents to which it is a party;
(vi) Certified copies of each of the Transaction Documents to which
it is a party; and
(vii) Such other documents as the Administrative Agent may reasonably
request.
B. Subsidiary Documents. On or before the Closing Date, ChipPAC shall
deliver or cause to be delivered to the Administrative Agent for the Lenders the
following for each of its Subsidiaries other than Company (which may be waived
by the Agents for any Subsidiaries of ChipPAC with respect to the items
described in clause (i) below) after giving effect to the Recapitalization
Transactions, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of the Organizational Certificate, together
with a good standing certificate (to the extent such a certificate is
applicable and available in the relevant jurisdiction) from the applicable
Governmental Authority of its jurisdiction of incorporation, organization
or formation and each other jurisdiction in which it is qualified as a
foreign corporation or other entity to do business (except any such state
in which failure to be qualified could not reasonably be expected to have a
Material Adverse Effect), each dated a recent date prior to the Closing
Date;
(ii) Copies of the Organizational Documents of such Subsidiary,
certified as of the Closing Date by its corporate secretary or an assistant
secretary;
(iii) Copies of the Organizational Authorizations of such Subsidiary
approving and authorizing the execution, delivery and performance of the
Guaranty, as applicable, and the other Loan Documents and the Transaction
Documents to which such Subsidiary is party, certified as of the Closing
Date by its corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment;
(iv) Incumbency certificates of its officers executing the Guaranty,
as applicable, and the other Loan Documents to which such Subsidiary is
party;
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(v) Executed originals of the Guaranty and the other Loan Documents
to which such Subsidiary is party; and
(vi) Such other documents as the Administrative Agent may reasonably
request.
C. Consummation of the Recapitalization Transactions.
(i) (a) Each of the material terms and conditions of the
Transaction Documents shall be in form and substance reasonably
satisfactory to the Administrative Agent and each such Transaction Document
shall be in full force and effect and (b) all conditions to the
Recapitalization Transactions set forth in the Transaction Documents shall
have been satisfied or the fulfillment of any such conditions shall have
been waived with the reasonable consent of the Requisite Lenders (such
consent not to be unreasonably withheld);
(ii) on or before the Closing Date, the Investors shall have made
the Equity Contribution;
(iii) on or before the Closing Date, the Recapitalization
Transactions shall have been consummated in accordance with the
Recapitalization Agreement and the Administrative Agent shall have received
evidence reasonably satisfactory to it of the foregoing; and
(iv) on or before the Closing Date, Company shall have issued and
sold for Cash not less than $150,000,000 in gross aggregate principal
amount of Subordinated Debt in accordance with the terms and conditions of
the Subordinated Debt Documents.
D. Loan Documents. Each of the Loan Documents shall have been duly
executed by the parties thereto, shall have been delivered to the Administrative
Agent and shall be in full force and effect.
E. Necessary Consents. ChipPAC shall have obtained all consents of
Governmental Authorities and other Persons necessary in connection with the
Recapitalization Transactions, and each of the foregoing shall be in full force
and effect and in form and substance reasonably satisfactory to the
Administrative Agent (other than any such consents, the failure to obtain which,
either individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect). All applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the
Recapitalization Transactions or the financing thereof and no action, request
for stay, petition for review or rehearing, reconsideration or appeal shall be
pending and any time for agency action to set aside its consent on its own
motion has expired.
F. Indebtedness. After giving effect to the Recapitalization Transactions
and the other transactions contemplated hereby, on the Closing Date, neither
ChipPAC nor any of its Subsidiaries shall have outstanding any Indebtedness or
preferred stock other than (i) the Loans and extensions of credit hereunder,
(ii) the Subordinated Debt, (iii) the Preferred Stock, (iv) the Intercompany
Notes, (v) the Local Lines of Credit, (vi) the Asian Letters of Credit and (vii)
Indebtedness listed in Schedule 7.1.
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G. Perfection of Security Interests. Except with respect to such actions
set forth on Schedule 4.1G, which shall be taken as promptly as practicable
-------------
following the Closing Date, ChipPAC shall have taken or caused to be taken such
actions in such a manner so that the Collateral Agent upon filing and recording
has a valid and perfected First Priority security interest in the entire
personal property (both tangible and intangible) constituting Collateral. Such
actions shall include, without limitation: (i) the delivery pursuant to the
applicable Collateral Documents of (a) such certificates or other instruments
(each of which shall be registered in the name of the Collateral Agent or
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock or equivalent powers duly endorsed in blank, all in form and substance
reasonably satisfactory to the Collateral Agent) representing all of the shares
or other interests of Capital Stock required to be pledged pursuant to the
Collateral Documents and (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner reasonably satisfactory to the
Collateral Agent) evidencing any Collateral; (ii) the delivery to the Collateral
Agent of (a) the results of a recent search, by a Person reasonably satisfactory
to the Collateral Agent, of all effective UCC financing statements and fixture
filings and all judgment and tax lien filings which may have been made with
respect to any personal or mixed property of any Loan Party, together with
copies of all such filings disclosed by such search; (iii) the delivery to the
Collateral Agent of Uniform Commercial Code financing statements executed by the
applicable Loan Parties as to all such Collateral granted by such Loan Parties
for all jurisdictions as may be reasonably necessary to perfect the
Administrative Agent's security interest in such Collateral; (iv) the delivery
to the Collateral Agent of evidence reasonably satisfactory to the Collateral
Agent that all other filings (including, without limitation, Uniform Commercial
Code termination statements and releases), recordings and other actions the
Collateral Agent deems reasonably necessary to establish, preserve and perfect
the First Priority Liens granted to the Collateral Agent in personal (both
tangible and intangible) and mixed property shall have been made; and (v) such
other filings, registrations, recordings and other actions the Collateral Agent
deems reasonably necessary to establish, preserve and perfect the First Priority
Liens granted to the Collateral Agent in any Collateral, which by the nature,
location or pledgor thereof, should be made or taken in or with respect to any
foreign jurisdiction.
H. Solvency Opinion. The Lenders shall have received a written opinion of
Valuation Research Corporation, in form and substance reasonably satisfactory to
the Administrative Agent, that ChipPAC and its Subsidiaries after giving effect
to the Recapitalization Transactions and the financing transactions contemplated
hereby are Solvent.
I. Transaction Costs. The Transaction Costs shall not exceed
approximately $30,000,000.
J. Opinions of Loan Parties' Counsel. The Agent and its counsel shall
have received originally executed copies for each Agent and Lenders of one or
more favorable written opinions of Kirkland & Ellis, special New York counsel
for the Loan Parties, (ii) Kim, Shin & Yu, special Korean counsel to the Loan
Parties, (iii) King & Wood, special Chinese counsel to the Loan Parties, (iv)
PricewaterhouseCoopers Kft., special Hungarian counsel to the Loan Parties, (v)
Harney Westwood & Riegels, special British Virgin Islands counsel to the Loan
Parties, (vi) Chancery Chambers, special Barbados counsel to the Loan Parties
and (vii) PricewaterhouseCoopers Societe a responsabilite limitee, special
Luxembourg counsel to the Loan Parties, setting forth
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substantially the opinions designated in Exhibit VIII annexed hereto and
------------
otherwise in form and substance reasonably satisfactory to the Administrative
Agent.
K. Opinions of Counsel in the Recapitalization Transactions. The
Administrative Agent and its counsel shall have received copies of each legal
opinion, if any, delivered by any counsel for any Loan Party pursuant to the
Transaction Documents, together with a letter from counsel rendering each such
opinion authorizing the Agents and the Lenders to rely upon the applicable
opinion to the same extent as though it were addressed to the Agents and the
Lenders.
L. Fees and Expenses. Company shall have paid to the Administrative
Agent, for distribution (as appropriate) to the Agents and the Lenders, the fees
payable on the Closing Date referred to in subsection 2.3 and all reasonable
expenses owing to any such Person by Company as of the Closing Date for which
invoices have been presented prior to the Closing Date.
M. Financial Statements. On or before the Closing Date, the
Administrative Agent and the Lenders shall have received from ChipPAC, the
financial information and projections described in subsection 5.3 hereof (which,
in the case of the financial statements provided pursuant to subsection 5.3B,
shall not be materially inconsistent with the estimated financial statements
previously provided by ChipPAC to the Administrative Agent), all in form and
substance reasonably satisfactory to the Administrative Agent.
N. Evidence of Insurance. The Administrative Agent shall have received
satisfactory certificates of insurance with respect to each of the insurance
policies required pursuant to subsection 6.4, and the Administrative Agent shall
be reasonably satisfied with the nature and scope of these insurance policies.
O. No Material Adverse Effect. (i) Since December 31, 1998, no Material
Adverse Effect shall have occurred.
P. Corporate and Capital Structure, Ownership, Management, Etc.
(i) Corporate Structure. The corporate organizational structure of
-------------------
ChipPAC and its Subsidiaries, both before and after giving effect to the
Recapitalization Transactions, shall be as set forth in Schedule 4.1P
-------------
annexed hereto.
(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of ChipPAC after giving effect to the Recapitalization
Transactions, shall be as set forth in Schedule 4.1P annexed hereto.
-------------
Q. Representations and Warranties. Each of ChipPAC and Company shall have
delivered to the Administrative Agent (with a sufficient number of originally
executed counterparts for the Lenders) an Officer's Certificate, in form and
substance reasonably satisfactory to the Administrative Agent, to the effect
that the representations and warranties in Section 5 hereof are true and correct
in all material respects on and as of the Closing Date, and both before and
after giving effect to the Recapitalization Transactions, to the same extent as
though made on and as of that date.
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R. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to the Administrative Agent and its counsel, and the Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents, instruments and legal opinions as the
Administrative Agent may reasonably request.
4.2 Conditions to All Loans.
-----------------------
The obligations of the Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. The Administrative Agent shall have received before that Funding Date,
in accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by a Responsible Officer on behalf of
Company and delivered to the Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on
and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute a Default or Event of Default;
(iii) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it, on that Funding Date; and
(iv) The making of the Loans requested on such Funding Date shall
not violate any law including, without limitation, Regulation T, Regulation
U or Regulation X of the Board of Governors of the Federal Reserve System.
4.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Bank is obligated to issue such Letter of Credit) is subject
to the following additional conditions precedent:
A. On or before the date of issuance of such Letter of Credit, the
Issuing Bank and the Administrative Agent shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, signed by a Responsible Officer of Company on
behalf of Company and delivered to the Administrative Agent, together with all
other information specified in subsection 3.1B(i) and such other documents or
information as the applicable Issuing Bank may reasonably require in connection
with the issuance of such Letter of Credit.
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B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to make the
Loans, to induce the Issuing Bank to issue Letters of Credit and to induce the
other Lenders to purchase participations therein, each of ChipPAC and Company
represents and warrants to each Lender and the Issuing Bank, on the date of this
Agreement, on the Closing Date, on each Funding Date, and on the date of
issuance of each Letter of Credit, that the following statements are true and
correct.
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
- ------------
A. Organization and Powers. Each Loan Party which is a corporation is
organized, existing and in good standing (to the extent such concept is relevant
in the jurisdiction of organization of such Loan Party) under the laws of its
respective jurisdiction of organization. Each Subsidiary Guarantor which is a
partnership or limited liability company is a duly organized and validly
existing limited partnership or limited liability company under the laws of its
jurisdiction of formation and is in good standing in such jurisdiction. ChipPAC,
Company and each Subsidiary has all requisite corporate, partnership or limited
liability company (as applicable) power and authority to own and operate their
respective properties, to carry on their respective business as now conducted
and as proposed to be conducted, to enter into the Loan Documents, to carry out
the transactions contemplated thereby and, in the case of Company, to borrow
hereunder.
B. Qualification and Good Standing. ChipPAC, Company and each Loan Party
is qualified or authorized to do business and in good standing (to the extent
such concept is relevant in such jurisdiction) in every jurisdiction where their
respective assets are located and wherever necessary to carry out their
respective businesses and operations, except in jurisdictions where the failure
to be so qualified or in good standing has not had and would not reasonably be
expected to have a Material Adverse Effect.
C. Conduct of Business. ChipPAC and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.13.
D. ChipPAC and Subsidiaries. All of the Subsidiaries of ChipPAC as of the
Closing Date (after giving effect to the Recapitalization Transactions) are
identified in Schedule 5.1 annexed hereto, as it may be supplemented from time
------------
to time in accordance with the provisions of subsection 6.9. The Capital Stock
or other equity interests of ChipPAC and each of the Subsidiaries identified in
Schedule 5.1 annexed hereto is duly authorized, validly issued, fully paid and
- ------------
nonassessable (except in the case of any limited liability company or
partnership interests) and none of such Capital Stock or other equity interests
constitutes Margin Stock. Schedule 5.1 annexed hereto correctly sets forth the
------------
direct or indirect ownership interest of ChipPAC in each of its Subsidiaries
identified therein.
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5.2 Authorization of Borrowing, etc.
--------------------------------
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents have been duly authorized by all necessary corporate and/or
partnership (as applicable) action on the part of each of the Loan Parties party
thereto.
B. No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Closing Date, the execution,
delivery and performance by each of the applicable Loan Parties of the Loan
Documents, and the consummation of the transactions contemplated by the Loan
Documents, do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to any Loan Party, the Organizational
Certificate or any other Organizational Documents of any Loan Party or any
order, judgment or decree of any court or other agency of government binding on
any Loan Party, which violation would reasonably be expected to have a Material
Adverse Effect, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any Contractual Obligation
of any Loan Party, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of any Loan Party (other than any
Liens created under any of the Loan Documents), or (iv) require any approval of
shareholders, partners or members or any approval or consent of any Person under
any Contractual Obligation of any Loan Party, except for such approvals or
consents which will be obtained on or before the Closing Date, approvals or
consents with respect to the Chinese Agreements (or, with respect to certain
other notifications to be made pursuant to foreign security arrangements, on or
within 20 days after the Closing Date) or where failure to obtain or make the
foregoing would not reasonably be expected to have a Material Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by the
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents and the Transaction Documents do not require
any registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except to the extent obtained on or before the Closing Date (or, with
respect to certain filings to be made in various foreign jurisdictions to create
and perfect Liens, other than with respect to the Chinese Agreements, on or
within 20 days after the Closing Date) or where the failure to obtain or make
the foregoing would not reasonably be expected to have a Material Adverse
Effect.
D. Binding Obligation. Each of the Loan Documents has been duly executed
and delivered by each of the Loan Parties party thereto and is the legally valid
and binding obligation of each such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
E. Valid Issuance of the Subordinated Debt. Company has the power and
authority to issue the Subordinated Debt. The Subordinated Debt, when issued and
paid for, will be the legally valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability. The Subordinated Debt, when issued and sold in the
manner contemplated by the Transaction Documents
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on the Closing Date, will either (a) have been registered or qualified under
applicable federal and state securities laws or (b) be exempt therefrom.
5.3 Financial Condition; Projections.
--------------------------------
A. Financial Statements. ChipPAC has heretofore delivered to the
Administrative Agent, the following financial statements and information:
(i) pro forma consolidated balance sheet of ChipPAC and its
Subsidiaries as at (a) March 31, 1999, together with the related pro forma
consolidated statements of income for the twelve month period then ended,
and (b) the three month period ended March 31, 1999, and the year ended
December 31, 1998, in each case reflecting pro forma adjustments that give
effect to the consummation of the Recapitalization Transactions; and
(ii) (a) unaudited consolidated balance sheet of ChipPAC and its
Subsidiaries as at March 31, 1999, together with the related consolidated
statements of income for the three month period then ended, and (b) audited
consolidated balance sheets for ChipPAC and its Subsidiaries as at December
31, 1996, December 31, 1997 and December 31, 1998, together with the
related audited consolidated statements of operations and cash flows for
each Fiscal Year then ended.
All such statements in clause (ii) hereof were prepared in conformity with GAAP
and fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments and the absence of
footnote disclosure required in accordance with GAAP. On the Closing Date and
after giving effect to the transactions contemplated by the Loan Documents and
the Transaction Documents to occur on such date, neither ChipPAC nor any of its
Subsidiaries has any Contingent Obligation, contingent liability or liability
for taxes, long-term lease or unusual forward or long-term commitment that is
not reflected in the financial statements referred to in the preceding clauses
of this subsection (except for the one-time charges related to HEI's union
change in control in Korea), or the notes thereto and which in any such case is
material in relation to the business, results of operations or financial
condition of ChipPAC and its Subsidiaries taken as a whole.
B. Projections. On and as of the Closing Date, the projections of ChipPAC
and its Subsidiaries for the period from the Closing Date through the seventh
anniversary of the Closing Date previously delivered to the Lenders (the
"Projections") are based on good faith estimates and assumptions made by the
-----------
management of ChipPAC, and on the Closing Date are reasonable, it being
recognized, however, that projections as to future events are not to be viewed
as facts and that the actual results during the period or periods covered by the
Projections may differ from the projected results and that the differences may
be material.
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5.4 No Material Adverse Change.
--------------------------
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Since December 31, 1998, there shall not have occurred or become known to
the Collateral Agent any event or events, adverse condition or change in or
affecting ChipPAC that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.5 Title to Properties; Liens; Real Property; Intellectual Property.
----------------------------------------------------------------
A. Title to Properties; Liens. After giving effect to the transactions
contemplated by the Loan Documents and the Transaction Documents to occur on the
Closing Date, ChipPAC and its Subsidiaries have good title to or a valid
leasehold interest in or license in all of their respective material properties
and assets reflected in the financial statements referred to in subsection 5.3
or in the most recent financial statements delivered pursuant to subsection 6.1,
in each case subject to Permitted Encumbrances and Liens permitted under
subsection 7.2, except for assets disposed of since the date of such financial
statements or as otherwise permitted under subsection 7.7 and except for such
defects that neither individually nor in the aggregate could reasonably be
expected to have a Material Adverse Effect. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 5.5B annexed hereto
-------------
contains a true, accurate and complete list of all fee interests and leasehold
properties of any Loan Party. Except as specified in Schedule 5.5B annexed
-------------
hereto, each lease or sublease, as applicable, for each such Leasehold Property
is in full force and effect and neither ChipPAC nor Company has knowledge of any
material default by any party thereto that has occurred and is continuing
thereunder (except where the consequences of any such default would not
reasonably be expected to have a Material Adverse Effect), and each such
agreement constitutes the legally valid and binding obligation of each
applicable Loan Party, enforceable against such Loan Party in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles.
C. Intellectual Property. ChipPAC and its Subsidiaries own or have the
valid right to use all trademarks and service marks, tradenames, patents,
copyrights, trade secrets and technology used in or necessary to conduct
ChipPAC's and its Subsidiaries' business (collectively, the
"Intellectual Property"), free and clear of any and all Liens other than
---------------------
Permitted Encumbrances except where the failure to so own or have the right to
use could not reasonably be expected to have a Material Adverse Effect. All
currently existing registrations of Intellectual Property owned by ChipPAC or
any of its Subsidiaries are in full force and effect and, to the best of
ChipPAC's and its Subsidiaries' knowledge, are valid and enforceable. The
conduct of ChipPAC's and its Subsidiaries' business as currently conducted,
including, but not limited to, all processes or services, provided, offered or
sold by ChipPAC and its Subsidiaries, does not infringe upon, violate,
misappropriate or dilute any intellectual property of any third party which
infringement, violation, misappropriation or dilution could reasonably be
expected to have a Material Adverse Effect. To the best of ChipPAC's and its
Subsidiaries' knowledge, no third party is infringing upon the Intellectual
Property in any material respect. Except as set forth in Schedule 5.5C on the
-------------
Closing Date, there is no pending or, to the best of ChipPAC's and its
Subsidiaries' knowledge, threatened claim or litigation contesting ChipPAC's or
any Subsidiary of ChipPAC's right to own or use any material Intellectual
Property or the validity or enforceability thereof.
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5.6 Litigation; Adverse Facts.
-------------------------
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of ChipPAC or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of ChipPAC or
any of its Subsidiaries (after due inquiry), threatened against or affecting
ChipPAC or any of ChipPAC's Subsidiaries or any property of ChipPAC or any of
ChipPAC's Subsidiaries that, individually or in the aggregate, could reasonably
be expected to result in, a Material Adverse Effect. Neither ChipPAC nor any of
ChipPAC's Subsidiaries is (i) in violation of any applicable law that has had,
or could reasonably be expected to result in, a Material Adverse Effect or (ii)
subject to or in default with respect to any final judgment, writ, injunction,
decree, rule or regulation of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that has had, or could reasonably be
expected to result in, a Material Adverse Effect.
5.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of ChipPAC and its Subsidiaries required to be filed by any of them
have been timely filed and all material taxes, assessments, fees and other
governmental charges upon ChipPAC and its Subsidiaries and upon their respective
properties, assets, income, businesses and franchises which are due and payable
have been paid when due and payable. Neither ChipPAC nor any of its Subsidiaries
knows of any proposed material tax assessment against ChipPAC or any of its
Subsidiaries other than those which are being actively contested by ChipPAC or
such Subsidiary in good faith and by appropriate proceedings and for which
reserves or other appropriate provisions, if any, as may be required in
conformity with GAAP shall have been made or provided therefor.
5.8 Performance of Agreements.
-------------------------
Neither ChipPAC nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a material default, except, in each case, individually or
in the aggregate, where the consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.
5.9 Governmental Regulation.
-----------------------
Neither ChipPAC nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal, state or local statute or regulation which may limit its ability to
incur the Indebtedness to be incurred by it in connection with the
Recapitalization Transactions or which may otherwise render all or any portion
of the Obligations unenforceable.
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5.10 Securities Activities.
---------------------
Neither Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
----------------------
A. Company and each of its ERISA Affiliates are in material compliance
with all applicable provisions and requirements of ERISA with respect to each
Employee Benefit Plan, and have performed in all material respects all their
obligations under each Employee Benefit Plan, except to the extent that any non-
compliance with ERISA or any such failure to perform would not have a Material
Adverse Effect on Company or any of its ERISA Affiliates. ChipPAC and each of
its Subsidiaries are in material compliance with all requirements of law with
respect to each Foreign Pension Plan, and have performed in all material
respects all their obligations under each Foreign Pension Plan, except to the
extent that any noncompliance with any requirements of law applicable to such
Foreign Pension Plans would not have a Material Adverse Effect on ChipPAC or any
of its Subsidiaries.
B. No ERISA Event or Foreign Benefit Event has occurred which has
resulted or to the knowledge of ChipPAC or its Subsidiaries is reasonably
expected to occur which has or would reasonably be expected to have a Material
Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code and/or Section 601 of ERISA, neither ChipPAC nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of ChipPAC or any of its Subsidiaries that would be reasonably
expected to have a Material Adverse Effect.
5.12 Certain Fees.
------------
Except as set forth in Schedule 5.12, no broker's or finder's fee or
-------------
commission will be payable with respect to this Agreement or any of the
transactions contemplated hereby, and ChipPAC and Company hereby jointly and
severally indemnify the Lenders against, and agree that they will hold the
Lenders harmless from, any claim, demand or liability for any such broker's or
finder's fees alleged to have been incurred in connection herewith or therewith
and any expenses (including reasonable fees, expenses and disbursements of
counsel) arising in connection with any such claim, demand or liability.
5.13 Environmental Matters.
---------------------
(i) ChipPAC, each of its Subsidiaries (including without
limitation, all operations and conditions at or in the Facilities presently
owned and operated by ChipPAC or its Subsidiaries), and, to the knowledge
of ChipPAC and its Subsidiaries, each of the tenants under any leases or
occupancy agreements governing any portion of any Facilities presently
owned or operated by ChipPAC or its Subsidiaries, are in compliance with
all applicable Environmental Laws (which compliance includes, but is not
limited to, the possession by ChipPAC, each of its Subsidiaries and each of
such tenants of all permits and other
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Governmental Authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof), except where failure
to be in compliance would not reasonably be expected to have a Material
Adverse Effect.
(ii) There is no Environmental Claim pending or, to ChipPAC's and
its Subsidiaries' knowledge, threatened against ChipPAC or any of its
Subsidiaries or, to the best knowledge of ChipPAC and its Subsidiaries,
against any Person whose liability for any Environmental Claim ChipPAC or
any of its Subsidiaries has retained or assumed contractually or by
operation of law in each such case which, individually or in the aggregate,
would have a Material Adverse Effect.
(iii) There are no past or present (or to the best knowledge of
ChipPAC and its Subsidiaries, future) actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the Release
or presence of any Hazardous Material at, from, under or onto any Facility
or any other location, which could reasonably be expected to form the basis
of any Environmental Claim against ChipPAC or any of its Subsidiaries, or
to the best knowledge of ChipPAC and its Subsidiaries, against any Person
whose liability for any Environmental Claim ChipPAC or any of its
Subsidiaries has retained or assumed contractually or by operation of law
in each such case which would have a Material Adverse Effect.
(iv) Except as would not reasonably be expected to have a Material
Adverse Effect, none of the Facilities contain any: underground storage
tanks; asbestos; polychlorinated biphenyls ("PCBs"); underground injection
----
wells; radioactive materials; or septic tanks or waste disposal pits in
which process wastewater or any Hazardous Materials have been discharged or
disposed.
5.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened involving
ChipPAC or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.15 Solvency.
--------
ChipPAC and its Subsidiaries, taken as a whole, are, and, upon the
incurrence of any Obligations by any Loan Party (including, without limitation,
the making of the Loans, the delivery of the Guaranties and the Liens created by
the Collateral Documents) on any date on which this representation is made, and
after giving effect to the Recapitalization Transactions and the incurrence of
Indebtedness in connection therewith, will be, Solvent.
5.16 Disclosure.
----------
The representations and warranties of ChipPAC and its Subsidiaries
contained in the Loan Documents and the information contained in the other
documents, certificates and written statements furnished to any of the Agents or
the Lenders (including, without limitation, the Information Memorandum) by or on
behalf of ChipPAC or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement or any other Loan Document, when
taken together, do not contain any untrue statement of
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a material fact or omit to state a material fact (known to ChipPAC or the
applicable Subsidiary, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by ChipPAC to be
reasonable at the time made, it being recognized by the Agents and the Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results and that the differences may be material.
There is no fact known to ChipPAC or any of its Subsidiaries (other than matters
of a general economic nature) that has had, or could reasonably be expected to
result in, a Material Adverse Effect and that has not been disclosed herein or
in such other documents, certificates and statements furnished to the Lenders
for use in connection with the transactions contemplated hereby.
5.17 Year 2000 Matters.
-----------------
ChipPAC reasonably believes that, as relating to ChipPAC and its
Subsidiaries, taken as a whole, (x) the assessment and correction of any Year
2000 Problems, in each case, which, individually or in the aggregate, if not
corrected could reasonably be expected to have a Material Adverse Effect, will
be substantially completed on or prior to September 30, 1999, (y) a Material
Adverse Effect will not occur as a result of any Year 2000 Problem, and (z) the
aggregate costs and expenses incurred and reasonably expected to be incurred in
connection with the assessment and correction of Year 2000 Problems, including,
without limitation, a plan of correction ("Plan of Correction"), with respect to
------------------
any Year 2000 Problems, and the testing and monitoring of all Systems and the
correction of Year 2000 Problems, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.
AFFIRMATIVE COVENANTS
Each of ChipPAC and Company covenants and agrees that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations (other than indemnification obligations
not due and payable), and the cancellation or expiration of all Letters of
Credit, unless the Requisite Lenders shall otherwise give prior written consent,
ChipPAC and Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
ChipPAC will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. ChipPAC will deliver to the Administrative Agent (and the
Administrative Agent shall deliver to each Lender):
(i) Monthly Financials: as soon as available and in any event within
------------------
thirty (30) days after the end of each month, commencing September 30, 1999
(but not, in any case, for any month in which a Fiscal Quarter ends), the
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consolidated balance sheet of ChipPAC and its Subsidiaries as at the end of
such month and the related consolidated statements of income, stockholders'
equity and cash flows of ChipPAC for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, all in
reasonable detail and certified by a principal financial officer of ChipPAC
that they fairly present, in all material respects, the financial condition
of ChipPAC and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments and the
absence of footnotes;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within forty-five (45) days after the end of each Fiscal Quarter commencing
with the Fiscal Quarter ending September 30, 1999, (a) the consolidated
balance sheets of ChipPAC and its Subsidiaries as at the end of such Fiscal
Quarter and the related consolidated statements of income and consolidated
statement of cash flows of ChipPAC and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, setting forth, in the case of
statements of income only, in comparative form the corresponding figures
for the corresponding periods of the previous Fiscal Year (except to the
extent such comparative information is not available for the one-year
period prior to the Closing Date) and the corresponding figures from the
consolidated plan and financial forecast for the current Fiscal Year
delivered pursuant to subsection 6.1(xiii), all prepared in accordance with
the GAAP and in reasonable detail and certified by the chief executive
officer or chief financial officer of ChipPAC that they fairly present, in
all material respects, the financial condition of ChipPAC and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments and the absence of
footnotes; and (b) a narrative report;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within ninety (90) days after the end of each Fiscal Year, (a) the
consolidated balance sheets of ChipPAC and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated statements of income and
consolidated statement of cash flows of ChipPAC and its Subsidiaries for
such Fiscal Year, setting forth, in the case of statements of income only,
in comparative form the corresponding figures for the previous Fiscal Year
(except to the extent such comparative information is not available for the
one-year period prior to the Closing Date) and the corresponding figures
from the consolidated plan and financial forecast delivered pursuant to
subsection 6.1(xiii) for the Fiscal Year covered by such financial
statements, all prepared in accordance with the GAAP and in reasonable
detail and certified by the chief executive officer or chief financial
officer of ChipPAC that they fairly present, in all material respects, the
financial condition of ChipPAC and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated; (b) a narrative report describing the operations of
ChipPAC and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Year; provided, however, that ChipPAC may
-------- -------
deliver to Administrative Agent in lieu of such narrative report, copies of
the report filed by ChipPAC with the Securities and Exchange Commission on
Form 10-K in respect of such Fiscal Year; and (c) in the case of such
consolidated financial statements, a report thereon of independent
certified
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public accountants of recognized national standing selected by ChipPAC and
reasonably satisfactory to the Administrative Agent, which report shall be
unqualified as to going concern and scope of audit, and shall state that
such consolidated financial statements fairly present, in all material
respects, the consolidated financial position of ChipPAC and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the audit by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each
-------------------------------------
delivery of financial statements of ChipPAC and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) an Officer's Certificate of
ChipPAC stating that the signer has reviewed the terms of this Agreement
and has made, or caused to be made under his or her supervision, a review
in reasonable detail of the transactions and condition of ChipPAC and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signer did not have
knowledge of the existence as at the date of such Officer's Certificate of
any condition or event that constitutes a Default or Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action ChipPAC has taken, is taking
and proposes to take with respect thereto; (b) a Compliance Certificate
(which may be delivered after the applicable Fiscal Quarter or Fiscal Year
end but prior to the date of delivery of such financial statements for
purposes of determining the Applicable Leverage Ratio) demonstrating in
reasonable detail compliance during and at the end of the applicable
accounting periods with the restrictions contained in Section 7 (but only
to the extent compliance with such restrictions is required to be tested at
the end of the applicable accounting period); provided, that ChipPAC shall
--------
deliver to Administrative Agent a Compliance Certificate and an Officer's
Certificate upon and together with the delivery of a Pricing Certificate;
and (c) if any portion of the proceeds of the Intel Preferred Stock or the
HEI Unspent Amount was used during the preceding Fiscal Quarter, an
Officer's Certificate of ChipPAC to such effect, showing the amount so used
and the amount that may be used in subsequent periods;
(v) [Intentionally Omitted];
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of ChipPAC and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit has included a reading of the terms of this Agreement and the
other Loan Documents as they relate to the covenants set forth in
subsection 7.6 and accounting matters, and (b) stating whether, in
connection with their audit examination, any condition or event, insofar as
such condition or event relates to the covenants set forth in subsection
7.6 or accounting matters, that constitutes a Default or Event of Default
has come to their attention and, if such a condition or event has come to
their attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any failure
--------
to obtain knowledge
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of any such Default or Event of Default that would not be disclosed in the
course of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to ChipPAC by national independent certified public accountants
in connection with each annual, interim or special audit of the financial
statements of ChipPAC and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by ChipPAC to its
security holders (but only in their capacity as security holders), (b) all
regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by ChipPAC or
any of its Subsidiaries with any securities exchange or with the Securities
and Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made available
generally by ChipPAC or any of its Subsidiaries to the public concerning
material developments in the business of ChipPAC or any of its
Subsidiaries;
(ix) Events of Default, etc.: promptly upon any Responsible Officer
-----------------------
of ChipPAC or Company obtaining knowledge (a) of any condition or event
that constitutes a Default or an Event of Default, or becoming aware that
any Lender has given any notice (other than to the Administrative Agent) or
taken any other action with respect to a claimed Default or Event of
Default, (b) that any Person has given any notice to ChipPAC or any of its
Subsidiaries or taken any other action with respect to a claimed default or
event or condition of the type referred to in subsection 8.2, or (c) of the
occurrence of any event or change that has caused or evidences or could be
reasonably expected to cause, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Default, Event of Default, default, event or condition, and what
action ChipPAC (or applicable Subsidiary) has taken, is taking and proposes
to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any Responsible
-------------------------------
Officer of ChipPAC or Company obtaining knowledge of (x) the institution
of, or nonfrivolous threat of, any material action, suit, proceeding
(whether administrative, judicial or otherwise), Environmental Claim,
governmental investigation or arbitration against or affecting ChipPAC or
any of its Subsidiaries or any property of ChipPAC or any of its
Subsidiaries (collectively, "Proceedings") not previously disclosed in
-----------
writing by Company to the Administrative Agent or (y) any material
development in any Proceeding that, in any case:
(a) could reasonably be expected to have a Material Adverse
Effect; or
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(b) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to ChipPAC to enable the Lenders and their counsel to
evaluate such matters;
(xi) ERISA Events and Foreign Benefit Events: promptly upon
---------------------------------------
ChipPAC or Company becoming aware of the occurrence of any ERISA Event or
Foreign Benefit Event that would reasonably be expected to result in a
material liability of ChipPAC or any of its Subsidiaries, a written notice
specifying the nature thereof, what action ChipPAC or any of its
Subsidiaries has taken, is taking or proposes to take with respect thereto
and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor, the PBGC or any comparable Governmental
Authority with respect thereto;
(xii) ERISA and Foreign Benefit Notices: with reasonable
---------------------------------
promptness, copies of (a) all written notices received by ChipPAC or any of
its Subsidiaries from a Multiemployer Plan or Foreign Benefit Plan sponsor
concerning an ERISA Event or a Foreign Benefit Event which would reasonably
be expected to result in a material liability; and (b) such other documents
or governmental reports or filings relating to any Multiemployer Plan or
Foreign Benefit Plan as the Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 45 days after the beginning of each Fiscal Year, a consolidated
plan and financial forecast for the next succeeding Fiscal Year, including
without limitation (a) a forecasted consolidated balance sheet and
forecasted consolidated statements of income and consolidated statement of
cash flows of ChipPAC and its Subsidiaries for such Fiscal Year, together
with a pro forma Compliance Certificate for such Fiscal Year and an
--- -----
explanation of the assumptions on which such forecasts are based, and (b)
such other information and projections as the Administrative Agent may
reasonably request:
(xiv) Insurance: as soon as practicable and in any event by the
---------
last day of each Fiscal Year, a report in form and substance reasonably
satisfactory to the Administrative Agent outlining all material changes
made to insurance coverage maintained as of the date of such report by
ChipPAC and its Subsidiaries; and
(xv) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to ChipPAC or any of ChipPAC's
Subsidiaries as from time to time may be reasonably requested by the
Administrative Agent or the Requisite Lenders.
6.2 Corporate Existence
-------------------
Except as otherwise permitted under subsection 7.7, ChipPAC will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to the
business of ChipPAC and its Subsidiaries (on a consolidated basis) or the Loan
Parties, taken as a whole; provided,
--------
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however that neither ChipPAC nor any of its Subsidiaries shall be required to
- -------
preserve any such right or franchise if the Board of Directors of ChipPAC or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of business of such entity.
6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its income, businesses
or franchises before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable which, if unpaid, might
become a Lien (other than a Permitted Encumbrance) upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided that no such tax, charge or claim need be paid if
--------
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor.
B. ChipPAC will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than ChipPAC and Subsidiaries of ChipPAC).
6.4 Maintenance of Properties; Insurance.
------------------------------------
ChipPAC will, and will cause each of its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear and
tear and damage by casualty or condemnation excepted, all material properties
used or useful in the business of ChipPAC and its Subsidiaries and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. ChipPAC will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and businesses of its Subsidiaries
against loss or damage of the kinds and with respect to liability customarily
carried or maintained under similar circumstances by corporations of established
reputation engaged in similar businesses. Each such policy of casualty insurance
covering damage to or loss of property shall name the Collateral Agent for the
benefit of the Lenders as additional insured and as the loss payee thereunder
for all losses, subject to application of proceeds as required by subsection
2.4B(iii)(d), each such policy of liability insurance coverage shall name the
Collateral Agent for the benefit of the Lenders as additional insured, and all
such policies of insurance shall provide for at least thirty (30) days' prior
written notice to the Collateral Agent of any modification or cancellation of
such policy.
6.5 Inspection; Lender Meeting.
--------------------------
ChipPAC shall, and shall cause each of its Subsidiaries to, permit the
Administrative Agent and any authorized representatives designated by any Lender
to visit and inspect any of the properties of ChipPAC or any of ChipPAC's
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants, provided ChipPAC may be present at
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these discussions upon reasonable advance notice and at such reasonable times
during normal business hours and as often as may be reasonably requested;
provided, further, that each Lender shall coordinate with the Administrative
- -------- -------
Agent the frequency and timing of any such visits, inspections and discussions
so as to reasonably minimize the burden imposed on ChipPAC and its Subsidiaries;
provided still further that, unless an Event of Default has occurred, no single
- -------- ----- -------
Lender shall be entitled to more than one inspection during any twelve month
period. Without in any way limiting the foregoing, ChipPAC will, upon the
reasonable request of the Administrative Agent, participate in a meeting of the
Administrative Agent and the Lenders once during each Fiscal Year to be held at
ChipPAC's corporate offices (or such other location as may be agreed to by
ChipPAC and the Administrative Agent) at such time as may be agreed to by
ChipPAC and the Administrative Agent.
6.6 Compliance with Laws, etc.
--------------------------
ChipPAC shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which, individually or in the
aggregate with other non-compliances, could reasonably be expected to cause a
Material Adverse Effect.
6.7 Environmental Disclosure and Inspection.
---------------------------------------
A. ChipPAC agrees that the Administrative Agent may retain, at ChipPAC's
expense, an independent professional consultant reasonably acceptable to ChipPAC
to review any report relating to Hazardous Materials prepared by or for ChipPAC
and to conduct its own investigation (reasonable in scope under the
circumstances) of any Facility currently owned, leased, operated or used by
ChipPAC or any of its Subsidiaries, if (x) a Default or an Event of Default
related to environmental matters shall have occurred and be continuing, or (y)
the Administrative Agent reasonably believes that a violation of an
Environmental Law on or around such Facility has occurred or is likely to occur,
which could, in either such case, reasonably be expected to result in a Material
Adverse Effect. In the event that the conditions specified in (x) or (y) above
exist, ChipPAC shall use its commercially reasonable efforts to obtain for the
Administrative Agent and its agents, employees, consultants and contractors the
right, upon reasonable notice to ChipPAC, to enter into or on to the Facilities
currently owned, leased, operated or used by ChipPAC or any of its Subsidiaries
to perform such tests on such property as are reasonably necessary to conduct a
review and/or investigation of the matters giving rise to the request. Any such
investigation of any Facility shall be conducted, unless otherwise agreed to by
ChipPAC and the Administrative Agent, during normal business hours, and shall be
conducted so as not to interfere with the ongoing operations at any such
Facility or to cause any damage or loss to any property at such Facility.
ChipPAC and the Administrative Agent hereby acknowledge and agree that any
report of any investigation conducted at the request of the Administrative Agent
pursuant to this subsection 6.7A will be obtained and shall be used by the
Administrative Agent and the Lenders for the purposes of the Lenders' internal
credit decisions, to monitor and police the Loans and to protect the Lenders'
security interests, if any, created by the Loan Documents. The Administrative
Agent agrees, upon request by ChipPAC, to deliver a copy of any such report to
Company with the understanding that ChipPAC acknowledges and agrees that (i)
consistent with the terms of subsection 10.3 hereof, it will indemnify and hold
harmless the Administrative Agent and each Lender from any costs, losses or
liabilities relating to ChipPAC's use of or reliance on such report, (ii)
neither Agent nor
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any Lender makes any representation or warranty with respect to such report, and
(iii) by delivering such report to ChipPAC, neither the Administrative Agent nor
any Lender is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. ChipPAC shall promptly notify the Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by ChipPAC or any of its
Subsidiaries that could reasonably be expected to expose ChipPAC or any of its
Subsidiaries to, or result in, Environmental Liability that could have a
Material Adverse Effect and (ii) any proposed action to be taken by ChipPAC or
any of its Subsidiaries to modify current operations in a manner that could
reasonably be expected to subject ChipPAC or any of its Subsidiaries to material
additional obligations under Environmental Laws where such obligations would
reasonably be expected to have a Material Adverse Effect.
C. ChipPAC shall, at its own expense, provide copies of such documents or
information as the Administrative Agent may reasonably request in relation to
any matters disclosed pursuant to this subsection 6.7.
6.8 ChipPAC's Remedial Action Regarding Hazardous Materials.
-------------------------------------------------------
ChipPAC shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, handling, storage, use, disposal, transportation or Release or
threatened Release of any Hazardous Materials on, under or affecting any
Facility in order to comply with all applicable Environmental Laws and
Governmental Authorizations unless the failure to so comply could not reasonably
be expected to have a Material Adverse Effect. In the event ChipPAC or any of
its Subsidiaries undertakes any Cleanup action with respect to the presence,
Release or threatened Release of any Hazardous Materials on or affecting any
Facility, Company or such Subsidiary shall conduct and complete such Cleanup
action in compliance with all applicable Environmental Laws where failure to do
so would reasonably be expected to have a Material Adverse Effect.
6.9 Execution of Guaranty and Collateral Documents by Future Subsidiaries.
---------------------------------------------------------------------
In the event that any Person becomes a Subsidiary of ChipPAC (including any
Subsidiary created in accordance with subsection 7.7(vi)), ChipPAC will promptly
notify the Administrative Agent of that fact and cause such Subsidiary to
execute and deliver to the Administrative Agent and the Collateral Agent a
counterpart of the Guaranty and such of the Pledge Agreements and the Security
Agreements (except to the extent that any such guarantee, pledge or security
arrangements are not permissible under the applicable law of such Subsidiary's
jurisdiction of organization or incorporation) as the Collateral Agent may
request, and to take all such further action and execute all such further
documents and instruments as may be required to grant and perfect in favor of
the Collateral Agent, for the benefit of the Lenders, a First Priority Lien in
all (subject to exceptions for assets in which a security interest cannot be
granted) of the real, mixed and personal property assets of such Subsidiary. In
addition, ChipPAC shall pledge (if it is the direct owner of Capital Stock of
such Subsidiary) or shall cause each of its applicable Subsidiaries to pledge
(if any of such other Subsidiaries is the direct owner of Capital Stock of such
Subsidiary, each such owner, whether Company or any of its other Subsidiaries,
the "Pledging Parent") all of the Capital Stock of such Subsidiary to the
---------------
Collateral Agent pursuant to the applicable Collateral Documents and to take all
such further action and
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execute all such further documents and instruments as may be reasonably required
to grant and perfect in favor of the Collateral Agent, for the benefit of the
Lenders, a First Priority security interest in such Capital Stock. ChipPAC shall
deliver to the Administrative Agent, together with such Loan Documents, in the
case of each such Subsidiary that is required to be a party to any Loan
Document: (i) (a) certified copies of such Subsidiary's Organizational
Certificate together, if applicable, with a good standing certificate from the
jurisdiction of its incorporation, formation or organization, as applicable,
each to be dated a recent date prior to their delivery to the Administrative
Agent to the extent such concept is relevant in such jurisdiction, (b) a copy of
such Subsidiary's Organizational Documents, certified by its secretary or an
assistant corporate secretary (or Person holding an equivalent title or having
equivalent duties and responsibilities) as of a recent date prior to their
delivery to the Administrative Agent, (c) a certificate executed by the
secretary or an assistant secretary of such Subsidiary as to (x) the incumbency
and signatures of the officers of such Subsidiary executing such Guaranty, the
Collateral Documents and the other Loan Documents to which such Subsidiary is a
party and (y) the fact that the attached Organizational Authorizations of such
Subsidiary authorizing the execution, delivery and performance of such Guaranty,
such Collateral Documents and such other Loan Documents are in full force and
effect and have not been modified or rescinded, and (ii) to the extent
reasonably requested by the Administrative Agent, an opinion of counsel to such
Subsidiary, that is reasonably satisfactory to the Administrative Agent and its
counsel, as to (a) the due organization and good standing of such Subsidiary to
the extent such concept in relevant is such jurisdiction, (b) the due
authorization, execution and delivery by such Subsidiary of such Guaranty, the
Collateral Documents and any other Loan Documents to which it is a party and (c)
the enforceability of such Guaranty and such Collateral Documents against such
Subsidiary, (d) the validity and perfection of the security interests granted by
such Subsidiary (and by the Pledging Parent of such Subsidiary in respect of the
Capital Stock of such Subsidiary) in favor of the Collateral Agent pursuant to
the Collateral Documents, and (e) such other matters as any Agent may reasonably
request, all of the foregoing to be reasonably satisfactory in form and
substance to the Administrative Agent and its counsel.
6.10 Interest Rate Protection.
------------------------
Within 90 days following the Closing Date, ChipPAC (or its Subsidiaries, as
applicable) shall maintain in effect one or more Interest Rate Agreements in
form and substance reasonably satisfactory to the Administrative Agent and the
Borrower to the extent necessary so that, for a period of at least two years
following the Closing Date, interest on the portion of the aggregate outstanding
principal amount of funded Indebtedness of ChipPAC and its Subsidiaries equal to
at least 50% of the aggregate outstanding principal amount of such Indebtedness
is covered by such Interest Rate Agreements.
6.11 Further Assurances.
------------------
At any time or from time to time upon the reasonable request of the
Administrative Agent or the Collateral Agent, ChipPAC will, at its expense,
promptly execute, acknowledge and deliver such further documents and do such
other acts and things as the Administrative Agent or the Collateral Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and to provide for payment of the Obligations in accordance with the terms of
this Agreement and the other Loan
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Documents. In furtherance and not in limitation of the foregoing, ChipPAC shall
take, and cause each of its Subsidiaries to take, such actions as the
Administrative Agent or the Collateral Agent may reasonably request from time to
time (including the execution and delivery (where permitted by applicable law)
of guaranties, security agreements and pledge agreements, mortgages and deeds of
trust with respect to real property with a fair market value of at least
$5,000,000, landlord's consents and estoppels for leased properties with an
annual rent of at least $500,000, or stock powers, financing statements and
other documents, the filing or recording of any of the foregoing, title
insurance with respect to any of the foregoing that relates to an interest in
real property, and the delivery of stock certificates and other collateral with
respect to which perfection is obtained by possession) to ensure that the
Obligations are guarantied by the Guarantors and are secured, directly or
indirectly, by substantially all of the assets of ChipPAC and its Subsidiaries
and all of the outstanding Capital Stock of the Subsidiaries of ChipPAC. In
addition to the foregoing, ChipPAC will use commercially reasonable efforts to
obtain, as promptly as practicable after the Closing Date, all necessary
approvals for the Chinese Agreements and shall cause the Liens to be created
thereunder to be granted and to become effective. Promptly upon obtaining such
approvals and causing all such Liens and security interests to be effective,
ChipPAC shall provide written notice thereof to the Administrative Agent,
together with certified copies of such approvals (if such approvals are issued
in writing) and the Chinese Agreements (the date of such notice being referred
to herein as the "Chinese Security Effective Date").
-------------------------------
6.12 Year 2000 Matters.
-----------------
ChipPAC shall (i) promptly advise the Administrative Agent of any material
(A) disruption or delay in the implementation of the Plan of Correction, as the
same may be updated from time to time; and (ii) periodically report to the
Administrative Agent, in such form as the Administrative Agent may reasonably
request but in no event no more frequently than once per calendar quarter, on
(a) the progress of ChipPAC and its Subsidiaries in implementing the Plan of
Correction, (b) the budget for, and actual financial performance with respect
to, implementation of the Plan of Correction and (c) the assessment of ChipPAC,
any senior manager of ChipPAC or any Subsidiary of ChipPAC, or any consultant of
the adequacy of the Plan of Correction or the related implementation budget.
SECTION 7.
NEGATIVE COVENANTS
Each of ChipPAC and Company covenants and agrees that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations (other than indemnification obligations
not due and payable) and the cancellation or expiration of all Letters of
Credit, unless the Requisite Lenders shall otherwise give prior written consent,
each of ChipPAC and Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness
except:
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(i) Each of the Loan Parties may become and remain liable with
respect to its respective Obligations;
(ii) Company may become and remain liable with respect to
Indebtedness evidenced by, and with respect to guaranties of, the
Subordinated Debt;
(iii) ChipPAC and the Operating Subsidiaries may remain liable with
respect to Indebtedness described in Schedule 7.1 annexed hereto, and any
------------
refinancing, modification replacement or renewal thereof that does not
increase the principal amount thereof;
(iv) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection 7.4
and, upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(v) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to (i) Indebtedness under Capital Leases, (ii)
Indebtedness to customers and suppliers that enables the Operating
Subsidiaries to acquire assets from, or to be used to provide services to,
such customers and suppliers, and (iii) other Indebtedness secured by Liens
permitted under subsection 7.2A(iii); provided, that the aggregate amount
--------
of all Indebtedness outstanding under this clause (v) at any time shall not
exceed $20,000,000;
(vi) ChipPAC may become and remain liable with respect to
Indebtedness owed to (on an intercompany basis) any of its Subsidiaries,
and any Subsidiary may become and remain liable with respect to
Indebtedness to (on an intercompany basis) ChipPAC or any other Subsidiary;
provided that, in each case, (a) all intercompany Indebtedness shall be
--------
evidenced by promissory notes or loan agreements which shall have been
pledged to the Collateral Agent pursuant to the Collateral Documents, (b)
all intercompany Indebtedness owed by ChipPAC or Company to any of its
respective Subsidiaries shall be unsecured (except for the Recapitalization
Loans) and subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or an
intercompany subordination agreement that in any such case are reasonably
satisfactory to the Administrative Agent, and (c) any payment by any
Subsidiary of ChipPAC under any Guaranty shall result in a pro tanto
--- -----
reduction of the amount of any intercompany Indebtedness owed by such
Subsidiary to ChipPAC or to any of its Subsidiaries for whose benefit such
payment is made;
(vii) ChipPAC and its Subsidiaries may become and remain liable with
respect to Permitted Seller Paper with respect to any Permitted
Acquisition; provided that any cash payments individually or in the
--------
aggregate of principal, interest or other amounts with respect thereto
required to be made prior to the payment in full of the Obligations shall
not exceed $20,000,000;
(viii) The Operating Subsidiaries may become and remain liable with
respect to Indebtedness under the Local Lines of Credit;
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(ix) Any Subsidiary of to a ChipPAC acquired pursuant to a Permitted
Acquisition may become and remain liable with respect to Indebtedness
existing at the time of consummation of the Permitted Acquisition; provided
--------
that (a) such Indebtedness was not incurred in connection with or in
anticipation of such Permitted Acquisition, (b) such Indebtedness does not
constitute debt for borrowed money (other than debt for borrowed money
incurred in connection with industrial revenue or industrial development
bond or similar financings), it being understood and agreed that Capital
Lease obligations shall not constitute debt for borrowed money for purposes
of this clause (ix), and (c) at the time of such Permitted Acquisition such
Indebtedness does not exceed 50% of the total purchase price paid
(including, for purposes of determining the total purchase price paid,
Indebtedness assumed in connection with such Permitted Acquisition) with
respect to the assets acquired in the related Permitted Acquisition;
(x) ChipPAC and its Subsidiaries may become and remain liable with
respect to Indebtedness consisting of the financing in the ordinary course
of business of insurance premiums with respect to coverage required to be
maintained under subsection 6.4;
(xi) Subsidiaries of ChipPAC may become and remain liable with
respect to Indebtedness consisting of a converted equity Investment by
ChipPAC or another Subsidiary of ChipPAC in such Subsidiaries; provided
--------
that the underlying equity Investment was permitted hereunder at the time
of such conversion;
(xii) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to other Indebtedness in an aggregate principal amount
not to exceed at any time outstanding $20,000,000; and
(xiii) ChipPAC and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of performance bonds, completion
guarantees and surety and appeal bonds entered into by ChipPAC and its
Subsidiaries in the ordinary course of business.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. ChipPAC shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of ChipPAC or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, domestic or foreign, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2A annexed hereto;
-------------
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(iii) Purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention, deferred
purchase devices or consignments) in real or tangible personal property of
ChipPAC or any Operating Subsidiary acquired after the Closing Date and
existing or created at the time of acquisition thereof or within one
hundred eighty (180) days thereafter, and the renewal, extension and
refunding of any such security interest in an amount not exceeding the
amount thereof remaining unpaid immediately prior to such renewal,
extension or refunding; provided, that the Indebtedness secured by such
--------
Lien is permitted by subsection 7.1(v); provided, further, that such Liens
-------- -------
do not at any time (including, without limitation, in connection with any
renewal, extension and refunding) cover or encumber any assets or property
other than the assets or property financed by such Indebtedness;
(iv) Liens on the working capital assets and equipment of ChipPAC
Korea, ChipPAC Shanghai I or ChipPAC Shanghai II that secure only the
Indebtedness permitted pursuant to Section 7.1(viii);
(v) Liens on assets of the Operating Subsidiaries not otherwise
permitted under this subsection 7.2A, to the extent attaching to properties
and assets with an aggregate fair market value not in excess of, and
securing liabilities not in excess of, an aggregate amount not to exceed
$7,500,000 at any time outstanding;
(vi) Liens securing any Indebtedness permitted pursuant to Section
7.1(ix); provided that such Liens only encumber the assets acquired in the
--------
related Permitted Acquisition; and provided further that such Liens were
-------- -------
not granted in contemplation of the related Permitted Acquisition; and
(vii) Liens in favor of the Collateral Agent granted pursuant to the
Collateral Documents or granted in favor of any Agent or Lender pursuant to
subsection 10.4 hereof.
B. No Further Negative Pledges. Except with respect to specific property
encumbered by a Lien permitted under this Agreement or to secure payment of
particular Indebtedness or to be sold pursuant to an executed agreement with
respect to an Asset Sale or the sale of all or substantially all of the stock
(or assets) of a Subsidiary permitted under this Agreement, neither ChipPAC nor
any of its Subsidiaries shall enter into any agreement (other than any documents
of a type described in subdivisions (c) through (f) of subsection 7.2C, the Loan
Documents and the Subordinated Debt Documents) prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
C. No Restrictions on Subsidiary Distributions to ChipPAC or Other
Subsidiaries. Except as otherwise provided herein, ChipPAC will not, and will
not permit any of its Subsidiaries to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance, limitation or restriction
of any kind on the ability of any such Subsidiary to (i) pay dividends or make
any other distributions on any of such Subsidiary's Capital Stock owned by
ChipPAC or any other Subsidiary of ChipPAC, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to ChipPAC or any other Subsidiary of
ChipPAC, (iii) make loans or advances to ChipPAC or any other Subsidiary of
ChipPAC, or (iv) transfer any of its property or assets to ChipPAC or any other
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Subsidiary of ChipPAC, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) this Agreement and the other Loan
Documents, (c) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of ChipPAC or any of its Subsidiaries, (d)
customary provisions restricting assignment of any licensing agreement entered
into by ChipPAC or any of its Subsidiaries in the ordinary course of business,
(e) customary provisions restricting the transfer of assets subject to Liens
permitted under subsection 7.2A(iii) or (iv), (f) joint ventures entered into
pursuant to subsection 7.3, and (g) the Subordinated Debt Documents.
7.3 Investments; Joint Ventures.
---------------------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment except:
(i) ChipPAC and its Subsidiaries may (x) continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
ChipPAC, and (y) make and own additional Investments in any Loan Party;
(ii) ChipPAC and its Subsidiaries may make and own intercompany
loans to the extent permitted by subsection 7.1(vi);
(iii) ChipPAC and its Subsidiaries may make and own Investments in
Cash Equivalents;
(iv) ChipPAC and its Subsidiaries may make and own Consolidated
Capital Expenditures and Micro BGA Capital Expenditures permitted by
subsection 7.6D;
(v) ChipPAC and its Subsidiaries may make and own Investments
consisting of notes received in connection with any Asset Sale permitted
under subsection 7.7(iv);
(vi) ChipPAC and its Subsidiaries may make loans to officers,
employees, directors, executives or consultants of ChipPAC and its
Subsidiaries (a) in the ordinary course of business for travel, moving,
entertainment or similar expenses, or (b) otherwise in an aggregate amount
not to exceed $2,000,000 outstanding at any time;
(vii) ChipPAC and its Subsidiaries may make and own Permitted
Acquisitions;
(viii) ChipPAC and its Subsidiaries may continue to own the
Investments described in Schedule 7.3 annexed hereto;
------------
(ix) ChipPAC and its Subsidiaries may make loans and advances to
employees, officers, executives or consultants to Company and its
Subsidiaries in the ordinary course of business of ChipPAC and its
Subsidiaries as presently conducted for the purpose of purchasing capital
stock of ChipPAC so long as the proceeds of such loans or advances are used
in their entirety to purchase such capital stock;
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(x) ChipPAC and its Subsidiaries may make and own Investments in
Subsidiaries pursuant to subsection 7.7(vi) or Permitted Acquisitions under
subsection 7.7(v) and other Investments owned by entities acquired pursuant
to such Permitted Acquisitions to the extent owned as at the time of
consummation of such Permitted Acquisitions;
(xi) ChipPAC and its Subsidiaries may make and own Investments in
wholly owned Subsidiaries of ChipPAC consisting of intercompany
Indebtedness (other than the Recapitalization Notes) of such Subsidiaries
converted to equity Investments; provided that (a) the underlying
--------
intercompany Indebtedness was permitted hereunder at the time of such
conversion and (b) up to $7,000,000 aggregate principal amount of the
ChipPAC Shanghai I Loan may be converted to equity at the time and to the
extent required by applicable law so long as (x) Company gives prior notice
thereof to the Administrative Agent, (y) at the time of such conversion no
Default or Event of Default shall have occurred and be continuing and (z)
Company complies with the applicable provisions of Section 6.11 with
respect to the resulting equity interest;
(xii) ChipPAC and its Subsidiaries may make and own Investments not
otherwise permitted under this subsection 7.3 in an aggregate amount not in
excess of $20,000,000, plus the Excess Proceeds Amount;
----
(xiii) ChipPAC and its Subsidiaries may consummate the
Recapitalization Transactions; and
(xiv) ChipPAC and its Subsidiaries may enter into Interest Rate
Agreements entered into pursuant to this Agreement or otherwise in the
ordinary course of its business, and not for speculative purposes.
7.4 Contingent Obligations.
----------------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) ChipPAC and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of Letters of Credit; the
Subsidiary Guarantors may become and remain liable with respect to
Contingent Obligations arising under the Guaranties; and ChipPAC Korea,
ChipPAC Shanghai I and ChipPAC Shanghai II may become and remain liable
with respect to Asian Letters of Credit;
(ii) ChipPAC and the Subsidiary Guarantors may become and remain
liable with respect to Contingent Obligations arising under their
guaranties of the Subordinated Debt as are required under the Subordinated
Debt Documents;
(iii) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations of any such
Person incurred in connection with Asset Sales or other sales of assets;
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(iv) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Contingent Obligations under guarantees in the
ordinary course of business of the obligations of suppliers, landlords,
customers, franchisees, workers' compensation providers and licensees of
ChipPAC and its Subsidiaries;
(v) ChipPAC and the Operating Subsidiaries, as applicable, may
remain liable with respect to Contingent Obligations described in
Schedule 7.4 annexed hereto and any modifications, extensions or renewal of
------------
such Contingent Obligations;
(vi) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided, that the
--------
maximum aggregate liability, contingent or otherwise, of ChipPAC and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $7,500,000;
(vii) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Hedge Agreements entered into pursuant to this
Agreement or otherwise in the ordinary course of business, and not for
speculative purposes;
(viii) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to guaranties of Indebtedness assumed in connection
with a Permitted Acquisition pursuant to subsection 7.1(ix); provided,
--------
that, such guaranties were existing at the time of consummation of the
Permitted Acquisition and not incurred in connection with, or in an
anticipation of, such Permitted Acquisition;
(ix) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Contingent Obligations arising out of the indemnity
obligations under the Recapitalization Agreement; and
(x) ChipPAC and the Operating Subsidiaries may become and remain
liable with respect to Contingent Obligations arising out of any guaranties
of Indebtedness of any Subsidiary permitted under this Agreement; provided
--------
that if such indebtedness is subordinated to the Obligations, any such
guaranties shall be subordinated to the same extent.
7.5 Restricted Payments.
-------------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Payment; provided that ChipPAC and its Subsidiaries may make the
--------
following the Restricted Payments:
(i) any Subsidiary of ChipPAC or its Subsidiaries may pay dividends
to ChipPAC or a Subsidiary of ChipPAC;
(ii) Company may make regularly scheduled payments (but, except as
contemplated by subsection 2.4B(iii)(c) with respect to the proceeds of a
Qualified Public Equity Offering, not prepayments) of principal and
interest in
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respect of the Subordinated Debt in accordance with the terms of, and
subject to the subordination provision contained in, the Subordinated Debt
Documents;
(iii) ChipPAC or any Subsidiary may make regularly scheduled
principal and interest payments in respect of Permitted Seller Paper to the
extent permitted under subsection 7.1(vii) in accordance with the terms of,
and subject to the subordination provisions contained in, such Permitted
Seller Paper;
(iv) so long as no Default or Event of Default shall have occurred
and be continuing or would result therefrom, then ChipPAC and its
Subsidiaries, collectively, may make cash Restricted Payments in an
aggregate amount not to exceed $2,500,000 in any Fiscal Year, plus an
----
amount equal to any cash Restricted Payments permitted to be made during
one or more preceding Fiscal Years under this clause (iv) but not made
during such preceding Fiscal Year(s) in an aggregate amount not in excess
of $10,000,000;
(v) ChipPAC and its Subsidiaries, collectively, may make cash
Restricted Payments in any Fiscal Year to the extent necessary to make
repurchases of Securities (and options or warrants to purchase such
Securities) of ChipPAC from employees, officers or directors upon
termination (including by reason of death, disability or retirement) of
such employees, officers or directors in an aggregate amount not to exceed
$5,000,000 plus cash proceeds of any "key man" life insurance policies used
to make such repurchases and the proceeds from any resales of such stock;
(vi) ChipPAC may make Restricted Payments in connection with
repurchases of equity Securities, including Capital Stock, deemed to occur
upon the exercise of stock options if such Securities represent a portion
of the exercise price thereof;
(vii) ChipPAC may make Restricted Payments (other than payments in
cash in respect of the HEI Preferred Stock and the Intel Preferred Stock,
in each case except to the extent expressly permitted hereby) contemplated
by the Recapitalization Transactions;
(viii) So long as no Default or Event of Default has occurred and is
continuing, ChipPAC may make Restricted Payments in respect of the Earnout;
(ix) So long as no Default or Event of Default has occurred and is
continuing, ChipPAC may make Restricted Payments in connection with
payments of cash dividends when due on and after five and one-half years
from the closing of the Recapitalization Transactions on the HEI Preferred
Stock pursuant to the terms thereof;
(x) So long as (a) no Default or Event of Default has occurred and
is continuing and (b) the Leverage Ratio is less than or equal to
2.00:1.00, ChipPAC may make Restricted Payments in connection with (i) any
mandatory or voluntary redemption of the Intel Preferred Stock and (ii) any
required payment of accrued and unpaid dividends on the Intel Preferred
Stock at any time such stock is converted into Capital Stock of ChipPAC,
both pursuant to the terms of the Intel Preferred Stock; and
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(xi) ChipPAC may redeem the HEI Preferred Stock and or the Intel
Preferred Stock to the extent contemplated by subsection 2.4B(iii)(c) with
the proceeds of a Qualified Public Equity Offering.
7.6 Financial Covenants.
-------------------
A. Minimum Interest Coverage Ratio. The ratio (the
"Interest Coverage Ratio") of (i) Consolidated Adjusted EBITDA to (ii)
-----------------------
Consolidated Interest Expense payable in cash (excluding, to the extent
Consolidated Interest Expense, (i) fees paid to the Administrative Agent on and
after the Closing Date; (ii) cash payments made under consulting agreements; and
(iii) cash payments made under Hedge Agreements or Interest Rate Agreements) for
(w) the five month period ending December 31, 1999, (x) the eight month period
ending March 31, 2000, (y) the eleven month period ending June 30, 2000 or (z)
any four-Fiscal Quarter period thereafter ending during or at the end of any of
the periods set forth below (each applicable period being a
"Calculation Period") shall not be less than the correlative ratio indicated
------------------
below:
=====================================================================
Period During Which Minimum Interest
Calculation Period Ends Coverage Ratio
=====================================================================
December 31, 1999 through September 30, 2000 2.00:1.00
---------------------------------------------------------------------
December 31, 2000 through September 30, 2001 2.25:1.00
---------------------------------------------------------------------
Thereafter 2.50:1.00
=====================================================================
B. Maximum Leverage Ratio. The ratio (the "Leverage Ratio") of (i)
--------------
Consolidated Total Debt as of the last day (any such day being a
"Calculation Date") of any Fiscal Quarter ending during any of the periods set
----------------
forth below, to (ii) Consolidated Adjusted EBITDA for (w) the five month period
ending December 31, 1999, (x) the eight month period ending March 31, 2000, (y)
the eleven month period ending June 30, 2000 or (z) any four-Fiscal Quarter
period thereafter ending on such Calculation Date shall not exceed the
correlative ratio indicated below:
=====================================================================
Period During Which Maximum
Calculation Date Occurs Leverage Ratio
---------------------------------------------------------------------
December 31, 1999 through June 30, 2000 4.75:1.0
---------------------------------------------------------------------
September 30, 2000 4.50:1.0
---------------------------------------------------------------------
December 31, 2000 4.25:1.0
---------------------------------------------------------------------
March 31, 2001 through September 30, 2001 4.00:1.0
---------------------------------------------------------------------
December 31, 2001 through September 30, 2002 3.50:1.0
---------------------------------------------------------------------
December 31, 2002 through September 30, 2003 3.00:1.0
---------------------------------------------------------------------
Thereafter 2.50:1.0
=====================================================================
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C. Consolidated Capital Expenditures.
(i) Except as provided below, Company shall not, and shall not permit
its Subsidiaries to, make or incur Consolidated Capital Expenditures in any
Fiscal Year (or specified portion thereof) in an aggregate amount in excess
of the corresponding amount (the
"Maximum Consolidated Capital Expenditures Amount") set forth below
------------------------------------------------
opposite such Fiscal Year (or such portion thereof) as indicated below;
provided, that the Maximum Consolidated Capital Expenditures Amount for any
--------
Fiscal Year shall be increased by an amount equal to the excess, if any, of
(x) the Maximum Consolidated Capital Expenditures Amount (excluding, and
without giving effect to, any increases thereto from any prior carryover of
amounts pursuant to this clause for the previous Fiscal Year (or specified
portion thereof) but including any increases thereto as a result of the
application of the further proviso to this clause (i)) over (y) the actual
amount of Consolidated Capital Expenditures for such previous Fiscal Year
(or specified portion thereof) (the amount of such increase described in
this proviso being the "Carryforward" from such preceding Fiscal Year):
------------
==============================================================
Fiscal Year Maximum Consolidated
(or Portion Thereof) Capital Expenditures Amount
==============================================================
Fiscal Year 1999 $20,000,000
- --------------------------------------------------------------
Fiscal Year 2000 $30,000,000
- --------------------------------------------------------------
Fiscal Year 2001 $50,000,000
- --------------------------------------------------------------
Fiscal Year 2002 $55,000,000
- --------------------------------------------------------------
Fiscal Year 2003 $60,000,000
- --------------------------------------------------------------
Fiscal Year 2004 and thereafter $60,000,000
==============================================================
; provided further that, the Maximum Consolidated Capital Expenditure
-------- -------
Amount for each period during or after a Permitted Acquisition occurs shall
be increased by an amount equal to the Acquired Capital Expenditures
Percentage of such Maximum Capital Expenditure Amount for such period.
(ii) Except as provided below, Company shall not, and shall not
permit its Subsidiaries to, make or incur Micro BGA Capital Expenditures in
any Fiscal Year (or specified portion thereof) in an aggregate amount (the
"Maximum Micro BGA Capital Expenditures Amount") in excess of the
---------------------------------------------
corresponding amount set forth below opposite such Fiscal Year (or such
portion thereof) as indicated below; provided that the Maximum Micro BGA
--------
Capital Expenditures Amount for any Fiscal Year ending on or prior to
December 31, 2001, shall be increased by an amount equal to the excess, if
any, of (x) the Maximum Micro BGA Capital Expenditures Amount (excluding,
and without giving effect to, any increases thereto from any prior carry
over of amounts pursuant to this clause for the previous Fiscal Year (or
specified portion thereof) over (y) the actual amount of Micro BGA Capital
Expenditures for such previous Fiscal Year (or specified portion thereof):
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<PAGE>
==============================================================
Fiscal Year Maximum Micro BGA
(or Portion Thereof) Capital Expenditures Amount
==============================================================
Fiscal Year 1999 $ 5,000,000
- --------------------------------------------------------------
Fiscal Year 2000 $30,000,000
- --------------------------------------------------------------
Fiscal Year 2001 The amount, if any earned forward
from Fiscal Year 2000
==============================================================
(iii) In addition to the Consolidated Capital Expenditures made
pursuant to the foregoing clause (i) of the subsection 7.6C, ChipPAC and
its Subsidiaries may make additional Consolidated Capital Expenditures not
in excess of the Excess Proceeds Amount.
D. Minimum Fixed Charge Coverage Ratio. The ratio (the
"Fixed Charge Coverage Ratio") of (i) Consolidated Adjusted EBITDA to (ii)
---------------------------
the sum, without duplication, of (a) Consolidated Interest Expense payable
in cash (excluding, to the extent otherwise included in Consolidated
Interest Expense, (i) fees paid to the Administrative Agent after the
Closing Date; (ii) cash payments made under consulting agreements; and
(iii) cash payments made under Hedge Agreements or Interest Rate
Agreements), plus (b) Consolidated Capital Expenditures, plus (c) the
---- ----
provision for taxes (including, without duplication, foreign withholding
taxes and any single business, unitary or similar taxes) based on income of
ChipPAC and its Subsidiaries and paid or payable in cash, plus (d) the
----
principal amount of all Indebtedness scheduled to be paid during such
period (calculated as of the first day of such period), plus (e) Cash
----
dividends and distributions paid by ChipPAC, in each case for (1) the five
month period ending December 31, 1999, (2) the eight month period ending
March 31, 2000, (3) the eleven month period ending June 30, 2000 or (4) any
four-Fiscal Quarter period thereafter ending during or at the end of any of
the periods set forth below (each applicable four-Fiscal Quarter period
being a "Calculation Period") (all amounts in the preceeding lettered
------------------
lettered clauses (a) through (e) referred to collectively as the "Fixed
Charges") shall not be less than the correlative ratio indicated below:
======================================================================
Period During Which Minimum Fixed
Calculation Period Ends Charge Coverage
Ratio
======================================================================
December 31, 1999 through September 30, 2000 1.00:1.00
----------------------------------------------------------------------
December 31, 2000 through December 31, 2002 1.05:1.00
----------------------------------------------------------------------
Thereafter 1.10:1.00
======================================================================
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<PAGE>
E. Certain Calculations.
With respect to any period during which any Permitted Acquisition
occurs or any business of any other Person is acquired by ChipPAC or any of
its Subsidiaries as permitted pursuant to the terms hereof, for purposes of
determining compliance or Pro Forma Compliance with the financial covenants
set forth in this subsection 7.6, Consolidated Adjusted EBITDA,
Consolidated Interest Expense and Fixed Charges shall be calculated with
respect to such periods and such Permitted Acquisition or business on a Pro
Forma Basis.
7.7 Restriction on Fundamental Changes; Asset Sales.
-----------------------------------------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of ChipPAC or any of its Subsidiaries
or enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of all or any portion of its
business or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or a substantial part of the business or assets of, or
Capital Stock or other evidence of beneficial ownership of, any Person or any
unit or division thereof, except:
(i) Any Subsidiary of ChipPAC (other than Company) may be merged
with or into ChipPAC or any wholly owned Subsidiary, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to ChipPAC or any wholly
owned Subsidiary; provided that, in the case of such a merger involving
--------
ChipPAC, ChipPAC shall be the continuing or surviving corporation and in
the case of any other merger involving a Loan Party, a Loan Party shall be
the continuing or surviving corporation;
(ii) ChipPAC and its Subsidiaries may acquire inventory, equipment
and other assets in the ordinary course of business;
(iii) ChipPAC and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the
board of directors of ChipPAC or its Subsidiaries, as the case may be);
(iv) ChipPAC and its Subsidiaries may make Asset Sales of assets
having a fair market value (determined in good faith by the board of
directors of ChipPAC or its Subsidiaries, as the case may be) not in excess
of $15,000,000 (or $30,000,000 if, after giving effect to such Asset Sale,
the Leverage Ratio determined on a Pro Forma Basis is less than 3.50:1.00)
for any Fiscal Year; provided that, in each such case, (x) the
--------
consideration received for such assets shall be in an amount at least equal
to the fair market value thereof (determined in good faith by the board of
directors of ChipPAC); and (y) the proceeds of such Asset Sales shall be
applied as required by subsection 2.4B(iii)(a);
(v) ChipPAC and its Subsidiaries may acquire the stock or other
equity Securities of any Person that, as a result of such acquisition,
becomes a wholly
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<PAGE>
owned Subsidiary of ChipPAC or any of its Subsidiaries or is merged into
ChipPAC or its Subsidiaries, or may acquire the business, property or
assets of any Person; provided, that (x) on a Pro Forma Basis, ChipPAC
--------
shall be in compliance with each of the covenants set forth in subsection
7.6, (y) no Default or Event of Default shall have occurred and be
continuing or result therefrom and (z) after giving effect to such
Acquisition, if the Leverage Ratio determined on a Pro Forma Basis shall
exceed 2.75:1.00, then the aggregate consideration paid or assumed in
respect of all Permitted Acquisitions under this Agreement shall not exceed
the sum of $50,000,000 and the Excess Proceeds Amount;
(vi) ChipPAC or its Subsidiaries may create or, if permitted by
clause (v) above, acquire new Subsidiaries; provided that, (a) promptly
--------
after the formation or acquisition of each such Subsidiary, ChipPAC or such
Subsidiary, as applicable, shall deliver or cause to be delivered each of
the items and execute each of the documents, if any, required pursuant to
subsection 6.9; and
(vii) ChipPAC may consummate the Recapitalization Transactions.
7.8 Sales and Lease-Backs.
---------------------
Except for the transactions described in Schedule 7.8, ChipPAC shall not,
------------
and shall not permit any of its Subsidiaries to, directly or indirectly, become
or remain liable as lessee or as a guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any property (whether
real, personal or mixed), whether now owned or hereafter acquired, (i) which
ChipPAC or any of its Subsidiaries has sold or transferred or is to sell or
transfer to any other Person (other than ChipPAC or any of its Subsidiaries) or
(ii) which ChipPAC or any of its Subsidiaries intends to use for substantially
the same purpose as any other property which has been or is to be sold or
transferred by ChipPAC or any of its Subsidiaries to any Person (other than
ChipPAC or any of its Subsidiaries) in connection with such lease.
7.9 Transactions with Shareholders and Affiliates.
---------------------------------------------
ChipPAC shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of ChipPAC or such Subsidiary or with any Affiliate
of ChipPAC or of any such Subsidiary or holder involving consideration in excess
of $1,500,000, on terms that are less favorable to ChipPAC or that Subsidiary,
as the case may be, than those that might be obtained at the time from Persons
who are not such a holder or Affiliate; provided that the foregoing restriction
--------
shall not apply to (i) transactions between ChipPAC and any Subsidiary or
between Subsidiaries; (ii) reasonable and customary fees paid to members of the
boards of directors of ChipPAC and its Subsidiaries; (iii) management and one-
time transaction (acquisitions, divestitures and financings) fees paid by
ChipPAC pursuant to the Sponsor Advisory Services Agreements, plus reasonable
----
out-of-pocket expenses related thereto; provided, in no event shall any
--------
management fees be paid (but may accrue) under the Sponsor Advisory Services
Agreements at any time an Event of Default under any of subsection 8.1, 8.6, or
8.7 has occurred and is continuing; (iv) loans and advances permitted to be made
under subsections 7.3(vi) or (ix); (v) Restricted Payments permitted to be made
under subsection 7.5; (vi) issuance of capital stock and/or grants of stock
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<PAGE>
options to any Affiliates, including employees and consultants of ChipPAC
pursuant to employment or consulting arrangements; (vii) employment and
consulting arrangements entered into in the ordinary course of business; (viii)
the Recapitalization Transactions (including performance under the terms of the
Transaction Documents); (ix) any agreement with ChipPAC or any Subsidiary as in
effect on the Closing Date or any amendment or replacement thereto or any
transaction contemplated thereby (including pursuant to any amendment or
replacement thereto) so long as any amendment or replacement agreement is not
more disadvantageous to ChipPAC or such Subsidiary in any material respect than
the original agreement as in effect on the Closing Date; and (x) transactions
with customers, clients, suppliers, joint venture partners or purchasers or
sellers of goods or services, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in compliance with the terms of this Agreement which are fair to
ChipPAC and its Subsidiaries, in the reasonable determination of the applicable
board of directors or the senior management thereof, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party.
7.10 Ownership of Subsidiary Stock.
-----------------------------
ChipPAC shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity
Securities of any of its Subsidiaries, except as permitted under this
Agreement and the Collateral Documents or to qualify directors or for
nominee holders if required by applicable law; or
(ii) except as a result of a sale permitted hereby of all of the
outstanding Capital Stock of a Loan Party to a third party, permit any
Capital Stock of any Loan Party to be directly or indirectly owned by any
person other than ChipPAC, Company or a Subsidiary Guarantor;
(iii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of Capital
Stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except as permitted under this Agreement and the Collateral
Documents, to ChipPAC or another Subsidiary of ChipPAC or to qualify
directors or for nominee holders, if required by applicable law.
7.11 Amendments or Waivers of Certain Agreements.
-------------------------------------------
A. Amendments or Waivers of Transaction Documents. None of ChipPAC nor
any of its Subsidiaries shall terminate or agree to any amendment, restatement,
supplement or other modification to, or waive any of its rights under, any
Transaction Document (other than any document relating to the Subordinated Debt)
if such termination, amendment, restatement, supplement, modification or waiver
would reasonably be expected to be materially adverse to the Lenders without
obtaining the prior written consent of the Requisite Lenders to such amendment
or waiver.
B. Amendments of Documents Relating to Subordinated Debt. ChipPAC shall
not, and shall not permit any of its Subsidiaries to, amend or otherwise change
the
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<PAGE>
terms of any Subordinated Debt, or make any payment consistent with an amendment
thereof or change thereto, if the effect of such amendment or change is (i) to
increase the interest rate on such Subordinated Debt, (ii) change (to earlier
dates) any dates upon which payments of principal or interest are due thereon,
(iii) change any event of default or condition to an event of default with
respect thereto (other than to eliminate any such event of default or increase
any grace period related thereto), (iv) change the redemption, prepayment or
defeasance provisions thereof, (v) change the subordination provisions of such
Subordinated Debt or any guaranty of any Subordinated Debt, or (vi) if the
effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Debt (or a trustee or other representative on their behalf) which
would reasonably be expected to be materially adverse to the Lenders without
obtaining the prior written consent of the Requisite Lenders to such amendment
or waiver.
C. Amendments or Waivers of Certain Intercompany Documents. ChipPAC shall
not, and shall not permit any of its Subsidiaries to, terminate or agree to any
amendment, restatement, supplement or other modification to, or waiver of any of
its rights under, the Korean Pledge Agreement, any Intercompany Note or any
other intercompany document pursuant to which any property, assets or rights of
a Subsidiary are pledged to ChipPAC or another Subsidiary and further pledged by
such latter Person to the Collateral Agent to secure the Obligations if such
termination, amendment, restatement, supplement, modification or waiver would
reasonably be expected to be adverse to the Lenders without obtaining the prior
written consent of the Requisite Lenders to such amendment or waiver.
7.12 Fiscal Year.
-----------
Neither ChipPAC nor any of its Subsidiaries shall change its Fiscal Year-
end from December 31 of each calendar year.
7.13 Conduct of Business.
-------------------
ChipPAC shall not, nor shall it permit any of its Subsidiaries to, engage
in any business or activities other than of the type engaged in as of the
Closing Date or similar, related or supportive businesses or those consented to
by the Requisite Lenders, including the performance of its obligations
hereunder, under the other Loan Documents and under the Transaction Documents.
SECTION 8.
EVENTS OF DEFAULT
IF any of the following conditions or events ("Events of Default") shall
-----------------
occur:
8.1 Failure to Make Payments When Due.
---------------------------------
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Bank in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company
112
<PAGE>
to pay any interest on any Loan or any fee or any other amount due under this
Agreement or any other Loan Document within five (5) Business Days after the
date due; or
8.2 Default in Other Agreements.
---------------------------
(i) Failure of ChipPAC or any of its Subsidiaries to pay when due (a) any
principal of or interest on any Indebtedness (other than Indebtedness referred
to in subsection 8.1) in an individual principal amount of $2,500,000 or more or
any items of Indebtedness with an aggregate principal amount of $7,500,000 or
more, in each case beyond the end of any grace period provided therefor; or (b)
any Contingent Obligation in an individual principal amount of $2,500,000 or
more or any Contingent Obligations with an aggregate principal amount of
$7,500,000 or more, in each case beyond the end of any grace period provided
therefor; or (ii) breach or default by ChipPAC or any of its Subsidiaries with
respect to any other material term of (a) any evidence of any Indebtedness in an
individual principal amount of $2,500,000 or more or any items of Indebtedness
with an aggregate principal amount of $7,500,000 or more or any Contingent
Obligation in an individual principal amount of $2,500,000 or more or any
Contingent Obligations with an aggregate principal amount of $7,500,000 or more,
in each case beyond the end of any grace period provided thereof; or (b) any
loan agreement, mortgage, indenture or other agreement relating to such
Indebtedness or Contingent Obligation(s), or the occurrence of any other event,
condition or circumstance in respect of any such Indebtedness or Contingent
Obligations if in any case under this clause (ii) the effect of such breach or
default or event, condition or circumstance is to cause, or to permit the holder
or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on
behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable (or redeemable) prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 Breach of Certain Covenants.
---------------------------
Failure of any Loan Party to perform or comply with any term or condition
contained in subsection 2.5, 6.2, or Section 7 of this Agreement; provided,
--------
however, that such failure with respect to the covenants contained in
- -------
subsections 7.1 through 7.5 shall not constitute an Event of Default for ten
(10) days after such failure so long as such Loan Party is diligently pursuing
the cure of such failure; or
8.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
ChipPAC or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by ChipPAC or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within thirty (30) days after the
earlier of (i) a Responsible
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<PAGE>
Officer of ChipPAC or Company becoming aware of the occurrence of such default
or (ii) receipt by ChipPAC or Company of notice from the Administrative Agent of
such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of ChipPAC or any of its Subsidiaries (other than
Immaterial Subsidiaries) in an involuntary case under any Bankruptcy Law, which
decree or order is not stayed; or any other similar relief shall be granted
under any applicable Bankruptcy Law; or (ii) an involuntary case shall be
commenced against ChipPAC or any of its Subsidiaries (other than Immaterial
Subsidiaries) under any Bankruptcy Law; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
ChipPAC or any of its Subsidiaries (other than Immaterial Subsidiaries), or over
all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of ChipPAC or any of its Subsidiaries (other than Immaterial
Subsidiaries) for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of ChipPAC or any of its Subsidiaries (other
than Immaterial Subsidiaries), and any such event described in this clause (ii)
shall continue for sixty (60) days unless dismissed, bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
---------------------------------------------------
(i) ChipPAC or any of its Subsidiaries (other than Immaterial
Subsidiaries) shall have an order for relief entered with respect to it or
commence a voluntary case under any Bankruptcy Law now or hereafter in effect,
or shall consent to the entry of an order for relief in an involuntary case, or
to the conversion of an involuntary case to a voluntary case, under any such
law, or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
ChipPAC or any of its Subsidiaries (other than Immaterial Subsidiaries) shall
make any assignment for the benefit of creditors; or (ii) ChipPAC or any of its
Subsidiaries (other than Immaterial Subsidiaries) shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of ChipPAC or any of its
Subsidiaries (other than Immaterial Subsidiaries) (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $2,500,000 or (ii)
in the aggregate at any time an amount in excess of $7,500,000 (in either case
not adequately covered by insurance) shall be entered or filed against ChipPAC
or any of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days
(or in any event later than five days prior to the date of any proposed sale
thereunder); or
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8.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against ChipPAC or any of
its Subsidiaries decreeing the dissolution or split-up of ChipPAC or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of thirty (30) days; or
8.10 Employee Benefit Plans.
----------------------
(i) Company or one of its ERISA Affiliates shall have engaged in a
transaction which is prohibited under Section 4975 of the Internal Revenue Code
or Section 406 of ERISA which results in the imposition of a liability which has
a material adverse effect on Company or any of its Subsidiaries; or (ii) there
shall occur any Foreign Benefit Events which, individually or in the aggregate,
results in the imposition of a liability which has a Material Adverse Effect on
ChipPAC or any of its Subsidiaries; or
8.11 Change in Control.
-----------------
(i) The Sponsors shall beneficially own less than, in the aggregate, any
other Person or "group" (within meaning of 13d-3 or 13d-5 of the Exchange Act)
of all issued and outstanding equity securities of ChipPAC representing economic
and voting interests in ChipPAC; (ii) the Sponsors shall cease to beneficially
own less than, in the aggregate, 51% of the outstanding equity securities of
ChipPAC (excluding equity securities issued to management pursuant to management
stock option plans or similar arrangements) representing economic interests in
ChipPAC; (iii) a majority of the members of the Board of Directors of ChipPAC
shall not be Continuing Directors; (iv) Company or any Operating Subsidiary
shall cease to be a wholly owned Subsidiary of ChipPAC or (v) any "Change of
Control" shall occur under the Subordinated Debt Documents; or
8.12 Invalidity of Guaranties.
------------------------
At any time after the execution and delivery thereof, any Guaranty of the
Obligations of Company for any reason, other than the satisfaction in full of
all Obligations (other than indemnification obligations not due and payable),
ceases to be in full force and effect (other than in accordance with its terms)
or is declared to be null and void, or any Loan Party denies in writing that it
has any further liability, including without limitation with respect to future
advances by the Lenders, under any Loan Document to which it is a party; or
8.13 Failure of Security.
-------------------
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations
(other than indemnification obligations not due and payable) or any other
termination of such Collateral Document in accordance with the terms hereof or
thereof) or shall be declared null and void, or the validity or enforceability
thereof shall be contested in writing by any Loan Party, or the Collateral Agent
shall not have or shall cease to have a valid security interest in any
Collateral purported to be covered thereby having a fair market value exceeding
$1,000,000, perfected and with the priority required by the relevant Collateral
Document, for any reason other than the failure of the Collateral Agent, the
Administrative Agent or
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any Lender to take any action within its control, subject only to Liens
permitted under the applicable Collateral Documents;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations, shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by ChipPAC and Company, and the obligation of each Lender to make any
Loan and the obligation of the Issuing Bank to issue any Letter of Credit shall
thereupon terminate, and (ii) upon the occurrence and during the continuation of
any other Event of Default, the Administrative Agent shall, upon the written
request of the Requisite Lenders, by written notice to Company, declare all or
any portion of the amounts described in clauses (a) through (c) above to be, and
the same shall forthwith become, immediately due and payable, and the obligation
of each Lender to make any Loan and the obligation of the Issuing Bank to issue
any Letter of Credit shall thereupon terminate; provided that the foregoing
--------
shall not affect in any way the obligations of the Lenders under subsection
3.3C(i).
Notwithstanding anything contained in the preceding paragraph, if at any
time within sixty (60) days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Defaults and
Events of Default (other than non-payment of the principal of and accrued
interest on the Loans, in each case which is due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to subsection 10.6, then the
Requisite Lenders, by written notice to Company, may at their option rescind and
annul such acceleration and its consequences; but such action shall not affect
any subsequent Default or Event of Default or impair any right consequent
thereon. The provisions of this paragraph are intended merely to bind the
Lenders to a decision which may be made at the election of the Requisite Lenders
and are not intended to benefit Company and do not grant Company the right to
require the Lenders to rescind or annul any acceleration hereunder or preclude
the Agents or the Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 Appointment.
-----------
A. CSFB is hereby appointed the Administrative Agent and Sole Lead
Arranger hereunder and under the other Loan Documents. CSFB is also hereby
appointed the Collateral Agent hereunder and under the Collateral Documents.
Each Lender hereby authorizes each Agent to act as its agent in accordance with
the terms of this Agreement and the other Loan Documents. Each Agent agrees to
act upon the express conditions
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contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 9 are solely for the benefit of the Agents and the
Lenders and neither ChipPAC nor Company shall have any rights as a third party
beneficiary of any of the provisions thereof. In performing its functions and
duties under this Agreement, each Agent shall act solely as an agent of the
Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for ChipPAC or any
of its Subsidiaries. Upon the conclusion of the Initial Period, all obligations
of the Sole Lead Arranger hereunder shall terminate and thereafter the Sole Lead
Arranger shall have no obligations or liabilities under any of the Loan
Documents.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case the Administrative Agent or the
Collateral Agent deems that by reason of any present or future law of any
jurisdiction the Administrative Agent or the Collateral Agent may not exercise
any of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that the Administrative Agent or the
Collateral Agent appoint an additional individual or institution as a separate
trustee, co-trustee, collateral agent or collateral co-agent (any such
additional individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
----------------------------- -----------------------
Agents").
- ------
In the event that the Administrative Agent or the Collateral Agent appoints
a Supplemental Collateral Agent with respect to any Collateral, (i) each and
every right, power, privilege or duty expressed or intended by this Agreement or
any of the other Loan Documents to be exercised by or vested in or conveyed to
the Administrative Agent or the Collateral Agent with respect to such Collateral
shall be exercisable by and vest in such Supplemental Collateral Agent to the
extent, and only to the extent, necessary to enable such Supplemental Collateral
Agent to exercise such rights, powers and privileges with respect to such
Collateral and to perform such duties with respect to such Collateral, and every
covenant and obligation contained in the Loan Documents and necessary to the
exercise or performance thereof by such Supplemental Collateral Agent shall run
to and be enforceable by either the Administrative Agent or the Collateral Agent
or such Supplemental Collateral Agent, and (ii) the provisions of this Section 9
and of subsections 10.2 and 10.3 that refer to the Administrative Agent or the
Collateral Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to the Administrative Agent or the Collateral
Agent shall be deemed to be references to the Administrative Agent or the
Collateral Agent and/or such Supplemental Collateral Agent, as the context may
require.
Should any instrument in writing from ChipPAC, Company or any other Loan
Party be required by any Supplemental Collateral Agent so appointed by the
Administrative Agent or the Collateral Agent for more fully and certainly
vesting in and confirming to him or it such rights, powers, privileges and
duties, ChipPAC shall, or shall cause such Loan Party to, execute, acknowledge
and deliver any and all such instruments promptly upon request by the
Administrative Agent or the Collateral Agent. In case any Supplemental
Collateral Agent, or a successor thereto, shall die, become incapable of
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acting, resign or be removed, all the rights, powers, privileges and duties of
such Supplemental Collateral Agent, to the extent permitted by law, shall vest
in and be exercised by the Administrative Agent or the Collateral Agent until
the appointment of a new Supplemental Collateral Agent.
9.2 Powers; General Immunity.
------------------------
A. Duties Specified. Each Lender irrevocably authorizes each Agent to
take such action on such Lender's behalf and to exercise such powers hereunder
and under the other Loan Documents as are specifically delegated to such Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents and
it may perform such duties by or through its agents or employees. No Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender, and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished by any Agent to the Lenders or by or on behalf of ChipPAC
and/or its Subsidiaries to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of ChipPAC, Company or any other Person liable for
the payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Default or Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, the
Administrative Agent shall not have any liability arising from confirmations of
the amount of outstanding Loans or the Total Utilization of Revolving Loan
Commitments or the component amounts thereof.
C. Exculpatory Provisions. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to the
Lenders for any action taken or omitted by such Agent under or in connection
with any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. If any Agent shall request instructions from
the Lenders with respect to any act or action (including the failure to take an
action) in connection with this Agreement or any of the other Loan Documents,
such Agent shall be entitled to refrain from such act or taking such action
unless and until such Agent shall have received instructions from the Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Without prejudice to the generality of the foregoing,
(i) such Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and
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shall be protected in relying on opinions and judgments of attorneys (who may be
attorneys for ChipPAC and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against such Agent as a result of such Agent acting or (where
so instructed) refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of the Requisite Lenders (or
such other Lenders as may be required to give such instructions under subsection
10.6). Such Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under this Agreement or any of the other
Loan Documents unless and until it has obtained the instructions of the
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agents Entitled to Act as the Lender. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Each Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with ChipPAC or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from ChipPAC and/or its Subsidiaries for services in
connection with this Agreement and otherwise without having to account for the
same to the Lenders.
9.3 Representations and Warranties; No Responsibility for Appraisal of
------------------------------------------------------------------
Creditworthiness.
----------------
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of ChipPAC and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of ChipPAC and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of the
Lenders or, except as expressly provided elsewhere in this Agreement, to provide
any Lender with any credit or other information with respect thereto (except as
provided in Section 4 or subsection 6.1), whether coming into its possession
before the making of the Loans or at any time or times thereafter, and no Agent
shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to the Lenders.
9.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, reasonable counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against such Agent in performing its duties hereunder or under
the other Loan Documents or otherwise in its capacity as such Agent in any way
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relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
- --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
9.5 Successor Administrative Agent and Swing Line Lender.
----------------------------------------------------
A. Successor Administrative Agent. The Administrative Agent may resign at
any time by giving thirty (30) days' prior written notice thereof to the
Lenders, ChipPAC and Company. Upon any such notice of resignation, the Requisite
Lenders shall have the right, upon five (5) Business Days' notice to ChipPAC and
Company, to appoint a successor Administrative Agent with the consent of ChipPAC
and Company. Upon the acceptance of any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, that successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation hereunder
as the Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation of the Administrative
Agent pursuant to subsection 9.5A shall also constitute the resignation of CSFB
or its successor as the Swing Line Lender, and any successor Administrative
Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such
appointment, become the successor Swing Line Lender for all purposes hereunder.
In such event any outstanding Swing Line Loans made by the retiring
Administrative Agent in its capacity as Swing Line Lender shall be transferred
to the successor Swing Line Lender.
9.6 Collateral Documents; Successor Collateral Agent.
-------------------------------------------------
Each Lender hereby further authorizes the Collateral Agent to enter into
each Collateral Document as secured party on behalf of and for the benefit of
the Lenders and the other beneficiaries named therein and agrees to be bound by
the terms of each Collateral Document; provided that the Collateral Agent shall
--------
not enter into or consent to any material amendment, modification, termination
or waiver of any provision contained in any Collateral Document without the
prior consent of the Requisite Lenders (or, if required pursuant to subsection
10.6, all the Lenders); provided further, however, that, without further written
-------- ------- -------
consent or authorization from any Lender, the Collateral Agent may execute any
documents or instruments necessary to effect the release of any asset
constituting Collateral from the Lien of the applicable Collateral Document in
the event that such asset is sold in a transaction to which the Requisite
Lenders have consented or otherwise disposed of in a transaction permitted by
this Agreement, or to the extent otherwise permitted or required by any
Collateral Document. Anything contained in any of the Loan Documents to the
contrary notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
(including without limitation through the exercise of a right of set-off against
call deposits of such Lender in which any funds on deposit in the Collateral
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Account may from time to time be invested), it being understood and agreed that
all rights and remedies under the Collateral Documents may be exercised solely
by the Collateral Agent for the benefit of the Lenders and the other
beneficiaries named therein in accordance with the terms thereof. The Collateral
Agent may resign at any time, and a successor Collateral Agent may be appointed,
in accordance with subsection 9.5 as if such subsection 9.5 applied to the
Collateral Agent in lieu of the Administrative Agent.
SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit.
-------------------------------------------------------------
A. General. Subject to subsection 10.1B or 10.1C, as applicable, each
Lender shall have the right at any time to (i) sell, assign, transfer or
negotiate to any Eligible Assignee, or (ii) sell participations to any Person
in, all or any part of its Commitments (together with its Letters of Credit or
participations therein made or arising pursuant to its Revolving Loan
Commitment) or any Loan or Loans made by it or any other interest herein or in
any other Obligations owed to it; provided that no such sale, assignment,
--------
transfer or participation shall, without the consent of ChipPAC or Company,
require Company to file a registration statement with the Securities and
Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided further that no
-------- -------
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by the Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii); provided, further
-------- -------
that no such sale, assignment, transfer or participation of any Letter of Credit
or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan
Commitment and the Revolving Loans of the Lender effecting such sale,
assignment, transfer or participation. Except as otherwise provided in this
subsection 10.1, no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or any granting of participations in,
all or any part of its Commitments or the Loans, the Letters of Credit or
participations therein or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit, or participation therein or other Obligation may (a) be assigned
in any amount to another Lender who is a Non-Defaulting Lender, or to an
Approved Fund or an Affiliate of the assigning Lender or another Lender
who, in either such case, is a Non-Defaulting Lender, with the giving of
notice to Company and the Administrative Agent or (b) be assigned in an
aggregate amount of not less than $5,000,000 (or such lesser amount (1) as
shall constitute the aggregate amount of the Commitments, Loans, Letters of
Credit, and participations therein and other Obligations of the assigning
Lender, or (2) as may be agreed to by Company and the Administrative Agent)
to any other Eligible Assignee with the consent of the Administrative Agent
(such consent not to be unreasonably withheld) and so long as no Event of
Default shall have occurred and be continuing with the consent of Company
(such consent not to be unreasonably withheld). To the extent of any
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such assignment in accordance with either clause (a) or (b) above, the
assigning Lender shall be relieved of its obligations with respect to its
Commitments, Loans, Letters of Credit, or participations therein or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement, together
with a processing fee of $3,500 payable by the assigning Lender, and, if
requested by the Administrative Agent, a completed administrative
questionnaire in the Administrative Agent's customary form with respect to
the assignee under such Assignment Agreement. Upon such execution,
delivery, acceptance and recordation, from and after the effective date
specified in such Assignment Agreement, (y) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and (z) the assigning
Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment Agreement,
relinquish its rights and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto); provided
--------
that, anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Bank such Lender shall
continue to have all rights and obligations of the Issuing Bank with
respect to outstanding Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder. The Commitments hereunder shall be modified to reflect
the Commitments of such assignee and any remaining Commitments of such
assigning Lender.
(ii) Acceptance by the Administrative Agent; Recordation in Register.
---------------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing fee referred to in subsection 10.1B(i), the Administrative
Agent shall, if such Assignment Agreement has been completed and is in
substantially the form of Exhibit IX hereto and if the Administrative Agent
----------
has consented to the assignment evidenced thereby (to the extent such
consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein
(which acceptance shall evidence any required consent of the Administrative
Agent to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company. The
Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
(i) effecting the extension of the final maturity of the Loan allocated to such
participation or (ii) effecting a reduction of the principal amount of or
affecting the rate of interest payable on any Loan or any fee allocated to such
participation. ChipPAC, Company and each Lender hereby acknowledge and agree
that, solely for purposes of subsections 2.6D, 2.7, 3.6, 10.2, 10.3, 10.4 and
10.5, (a) any participation will give rise to a direct obligation of ChipPAC and
Company to the participant and (b) the participant shall be considered to be a
"Lender".
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D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans and the
other Obligations owed to such Lender to any Federal Reserve Bank as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any operating circular issued by such Federal Reserve Bank;
and any Lender which is an investment fund may pledge all or any portion of its
Loans to its trustee in support of its obligations to such trustee; provided
--------
that (i) no Lender shall, as between Company and such Lender, be relieved of any
of its obligations hereunder as a result of any such assignment and pledge and
(ii) in no event shall such Federal Reserve Bank be considered to be a "Lender"
or be entitled to require the assigning Lender to take or omit to take any
action hereunder.
E. Information. Each Lender may furnish any information concerning
ChipPAC and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.21.
F. Special Purpose Funding Vehicle. Notwithstanding anything to the
contrary contained herein, any Lender (a "Granting Bank") may grant to a special
-------------
purpose funding vehicle (a "SPC"), identified as such in writing from time to
---
time by the Granting Bank to the Administrative Agent, ChipPAC and Company, the
option to provide to Company all or any part of any Loan that such Granting Bank
would otherwise be obligated to make to Company pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any SPC to
- --------
make any Loan, and (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Bank shall
be obligated to make such Loan pursuant to the terms hereof. The making of a
Loan by an SPC hereunder shall utilize the Commitment of the Granting Bank to
the same extent, and as if, such Loan were made by such Granting Bank. Each
party hereto hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability for which shall
remain with the Granting Bank). In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. In addition, notwithstanding anything to the contrary contained
in this subsection 10.1F, any SPC may (i) with notice to, but without the prior
written consent of, Company, ChipPAC and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to the Granting Bank or to any financial institutions (consented to by
Company, ChipPAC and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC. This
section may not be amended without the written consent of the SPC.
G. Limitation. No assignee, participant or other transferee of any
Lender's rights shall be entitled to receive any greater payment under
subsection 2.7 than such Lender would have been entitled to receive with respect
to the rights transferred, unless
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such transfer is made with Company's prior written consent or at a time when the
circumstances giving rise to such greater payment did not exist.
10.2 Expenses.
--------
ChipPAC and Company agree, jointly and severally, to pay promptly (i) all
the actual and reasonable costs and out-of-pocket expenses of the Agents in
connection with the preparation of the Loan Documents; (ii) all costs of
furnishing all opinions by counsel for ChipPAC and its Subsidiaries (including
without limitation any opinions requested by the Lenders or Agents as to any
legal matters arising hereunder) and of each of ChipPAC's and Company's
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including, without limitation, with respect to confirming compliance with
environmental and insurance requirements; (iii) the reasonable fees, expenses
and disbursements of counsel to the Agents (including allocated costs of
internal counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loans and any consents, amendments,
waivers or other modifications hereto or thereto, in each case, requested by or
for the benefit of ChipPAC or Company and any other documents or matters
requested by Company; (iv) all other reasonable costs and expenses incurred by
the Agents in connection with the negotiation, preparation and execution of the
Loan Documents and the transactions contemplated hereby and thereby and the
syndication of the Loans and Commitments; and (v) after the occurrence of a
Default or Event of Default, all the respective reasonable costs and expenses,
including reasonable attorneys' fees (including allocated costs of internal
counsel) and costs of settlement, incurred by the Agents and the Lenders in
enforcing any Obligations of or in collecting any payments due from ChipPAC or
Company hereunder or under the other Loan Documents by reason of such Default or
Event of Default or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, ChipPAC and
Company agree, jointly and severally, to defend (subject to Indemnitees'
selection of counsel), indemnify, pay and hold harmless on an after-tax basis
the Agents and the Lenders, and the officers, directors, employees, agents,
attorneys and affiliates of the Agents and the Lenders (collectively called the
"Indemnitees") from and against any and all other liabilities, obligations,
-----------
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnitees, and all
such fees and disbursements, as well as other costs and expenses, incurred by
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including without limitation
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents or the
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transactions contemplated hereby or thereby (including without limitation the
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans or the issuance of Letters of Credit hereunder or
the use or intended use of any of the Letters of Credit) or any Environmental
Liabilities that arise from or relate to the management, use, control,
ownership, occupancy or operation of any Facility or assets of any Loan Party or
its Subsidiaries (including without limitation, all on-site and off-site
activities involving Hazardous Materials), or the Release or threatened Release
of any Hazardous Materials (or allegations of the same) on or from any of the
Facilities or on or from any other property where Hazardous Materials are or
were (or are or were alleged to be) Released or threatened to be Released in
connection with any of the Facilities or the business of any of the Loan
Parties, their Subsidiaries, or any predecessor in interest to the Loan Parties
or their Subsidiaries (collectively called the "Indemnified Liabilities");
-----------------------
provided that neither ChipPAC nor Company shall have any obligation to any
- --------
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
that such Indemnified Liabilities arose from the bad faith, gross negligence or
willful misconduct of that Indemnitee. To the extent that the undertaking to
defend, indemnify, pay and hold harmless set forth in the preceding sentence may
be unenforceable because it is violative of any law or public policy, each of
ChipPAC and Company shall contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
10.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized by each of
ChipPAC and Company at any time or from time to time, without notice to ChipPAC
or Company or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other Indebtedness at any time held or owing by that Lender
(at any office of that Lender wherever located) to or for the credit or the
account of ChipPAC or Company against and on account of the obligations and
liabilities of ChipPAC or Company to that Lender under this Agreement, the
Letters of Credit and participations therein, including, but not limited to, all
claims of any nature or description arising out of or connected with this
Agreement, the Letters of Credit and participations therein or any other Loan
Document, irrespective of whether or not (i) that Lender shall have made any
demand hereunder or (ii) the principal of or the interest on the Loans or any
amounts in respect of the Letters of Credit or any other amounts due hereunder
shall have become due and payable pursuant to Section 8 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
Each of ChipPAC and Company hereby further grants to the Administrative Agent
and each Lender a security interest in all deposits and accounts maintained with
the Administrative Agent or such Lender as security for the Obligations.
10.5 Ratable Sharing.
---------------
The Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the
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exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Loan Documents or otherwise,
or as adequate protection of a deposit treated as cash collateral under any
Bankruptcy Law, receive payment or reduction of a proportion of the aggregate
amount of principal, interest, amounts payable in respect of Letters of Credit,
fees and other amounts then due and owing to that Lender hereunder or under the
other Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender)
---------------------
which is greater than the proportion received by any other Lender in respect of
the Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify the Administrative Agent and
each other Lender of the receipt of such payment and (ii) apply a portion of
such payment to purchase participations (which it shall be deemed to have
purchased from each seller of a participation simultaneously upon the receipt by
such seller of its portion of such payment) in the Aggregate Amounts Due to the
other Lenders so that all such recoveries of Aggregate Amounts Due shall be
shared by all the Lenders in proportion to the Aggregate Amounts Due to them;
provided that if all or part of such proportionately greater payment received by
- --------
such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy, reorganization or insolvency proceeding of ChipPAC or Company or
otherwise, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Each of ChipPAC and Company
expressly consents to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of banker's lien,
set-off or counterclaim with respect to any and all monies owing by ChipPAC or
Company to that holder with respect thereto as fully as if that holder were owed
the amount of the participation held by that holder.
10.6 Amendments and Waivers.
----------------------
A. No amendment, modification, termination or waiver of any provision of
this Agreement, or consent to any departure by ChipPAC, Company or any other
Loan Party therefrom, shall in any event be effective without the written
consent of the Requisite Lenders; provided that any such amendment,
--------
modification, termination, waiver or consent which: (a) reduces the principal
amount of any of the Loans; (b) changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or consent of all
the Lenders; (c) postpones the scheduled final maturity date of any of the
Loans; (d) reduces the percentage specified in the definition of the "Requisite
Lenders" (it being understood that, with the consent of the Requisite Lenders,
additional extensions of credit pursuant to this Agreement may be included in
the definition of the "Requisite Lenders" on substantially the same basis as the
Term A Loans, Term A Loan Commitments, Term B Loans, Term B Loan Commitments,
Term Delayed Draw Loans, Term Delayed Draw Loan Commitments, Revolving Loans and
Revolving Loan Commitments are included on the Closing Date); (e) postpones the
date or reduces the amount of any scheduled payment (but not prepayment) of
principal of any of the Loans or of any scheduled reduction of the Revolving
Credit Commitments or Term Delayed Draw Loan Commitments; (f) postpones the date
on which any interest or any fees are payable; (g) decreases the interest rate
borne by any of the Loans (other than any waiver of any increase in the interest
rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount
of any fees payable hereunder; (h) releases all or substantially all of the
Collateral; (i) except as permitted by this Agreement (subsection 7.7) or any
Guaranty, releases any of the Guarantors from their obligations under the
Guaranties; (j) reduces the amount or postpones the due date of any amount
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payable in respect of, or extends the required expiration date of, any Letter of
Credit; or (k) changes in any manner the provisions contained in this subsection
10.6, shall be effective only if evidenced by a writing signed by or on behalf
of all the Lenders to whom Obligations are owed or who have Commitments
outstanding being directly affected by such amendment, modification,
termination, waiver or consent. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 4 shall be
effective only if evidenced by a writing signed by or on behalf of the
Administrative Agent, (ii) no increase in the Commitments of any Lender over the
amount thereof then in effect shall be effective without the written concurrence
of that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Defaults, Events of Default or
of a mandatory prepayment or a reduction of any or all of the Commitments be
deemed to constitute an increase of the Commitment of any Lender and that an
increase in the available portion of any Commitment of any Lender shall not be
deemed to constitute an increase in the Commitment of such Lender, (iii) no
amendment, modification, termination or waiver of any provision of subsection
2.1A(v) or any other provision of this Agreement relating to the Swing Line Loan
Commitment or the Swing Line Loans shall be effective without the written
concurrence of the Swing Line Lender, (iv) no amendment, modification,
termination or waiver of any provision of Section 3 relating to the rights or
obligations of the Issuing Bank shall be effective without the written
concurrence of the Issuing Bank with respect to any Letter of Credit then
outstanding, and (v) no amendment, modification, termination or waiver of any
provision of Section 9 or of any other provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of any Agent shall be
effective without the written concurrence of such Agent. The Administrative
Agent may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that Lender
and no amendment, modification, termination or waiver of any provision of
subsection 2.4 which has the effect of changing any voluntary or mandatory
prepayments or Commitment reductions applicable to any Class (the
"Affected Class") in a manner that disproportionately disadvantages such Class
--------------
relative to any other Class shall be effective without the written concurrence
of the Requisite Class Lenders of the Affected Class (it being understood and
agreed that any amendment, modification, termination or waiver of any such
provision which only postpones or reduces any voluntary or mandatory prepayment
or Commitment reduction from those set forth in subsection 2.4 with respect to
one Class but not the other Classes shall be deemed to disproportionately
disadvantage such one Class but not to disproportionately disadvantage such
other Classes for purposes of this clause). Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on ChipPAC or Company in any case shall
entitle ChipPAC or Company to any other or further notice or demand in similar
or other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this subsection 10.6 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by
ChipPAC or Company, on ChipPAC or Company.
10.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another
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such covenant shall not avoid the occurrence of an Default or Event of Default
if such action is taken or condition exists.
10.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telecopy or telex, or four Business Days
after depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed. For the purposes hereof, the address of
each party hereto shall be as set forth on the signature pages hereof attached
hereto, or such other address as shall be designated by such party in a written
notice delivered to the Administrative Agent, ChipPAC and Company.
10.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the respective agreements of ChipPAC and Company set forth in
subsections 2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4, as applicable and the
agreements of the Lenders set forth in subsections 9.2C, 9.4, 10.4, 10.5 and
10.21 shall survive the payment of the Loans, the cancellation or expiration of
the Letters of Credit and the reimbursement of any amounts drawn or paid
thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of any Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
10.11 Marshalling; Payments Set Aside.
-------------------------------
Neither any Agent nor any Lender shall be under any obligation to marshal
any assets in favor of ChipPAC, Company or any other party or against or in
payment of any or all of the Obligations. To the extent that ChipPAC or Company
makes a payment or payments to the Administrative Agent or the Lenders (or to
the Administrative Agent or Collateral Agent for the benefit of the Lenders), or
any Agent or the Lenders enforce any security interests or exercise their rights
of setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor
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or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
10.12 Severability.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 Obligations Several; Independent Nature of the Lenders' Rights.
--------------------------------------------------------------
The obligations of the Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
the Lenders pursuant hereto or thereto, shall be deemed to constitute the
Lenders as a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
10.14 Maximum Amount.
--------------
A. It is the intention of ChipPAC, Company and the Lenders to conform
strictly to the usury and similar laws relating to interest from time to time in
force, and all agreements between the Loan Parties and their respective
Subsidiaries and the Lenders, whether now existing or hereafter arising and
whether oral or written, are hereby expressly limited so that in no contingency
or event whatsoever, whether by acceleration of maturity hereof or otherwise,
shall the amount paid or agreed to be paid in the aggregate to the Lenders as
interest (whether or not designated as interest, and including any amount
otherwise designated but deemed to constitute interest by a court of competent
jurisdiction) hereunder or under the other Loan Documents or in any other
agreement given to secure the Indebtedness or obligations of ChipPAC or Company
to the Lenders, or in any other document evidencing, securing or pertaining to
the Indebtedness evidenced hereby, exceed the maximum amount permissible under
applicable usury or such other laws (the "Maximum Amount"). If under any
--------------
circumstances whatsoever fulfillment of any provision hereof, or any of the
other Loan Documents, at the time performance of such provision shall be due,
shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to
be fulfilled shall be reduced to the Maximum Amount. For the purposes of
calculating the actual amount of interest paid and/or payable hereunder in
respect of laws pertaining to usury or such other laws, all sums paid or agreed
to be paid to the holder hereof for the use, forbearance or detention of the
Indebtedness of ChipPAC or Company evidenced hereby, outstanding from time to
time shall, to the extent permitted by Applicable Law, be amortized, pro-rated,
allocated and spread from the date of disbursement of the proceeds of the Loans
until payment in full of all of such Indebtedness, so that the actual rate of
interest on account of such Indebtedness is uniform through the term hereof. The
terms and provisions of this subsection shall control and supersede every other
provision of all agreements between ChipPAC, Company and the Lenders.
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B. If under any circumstances any Lender shall ever receive an amount
which would exceed the Maximum Amount, such amount shall be deemed a payment in
reduction of the principal amount of the Loans and shall be treated as a
voluntary prepayment under subsection 2.4B(i) and shall be so applied in
accordance with subsection 2.4 hereof or, if such excessive interest exceeds the
unpaid balance of the Loans and any other Indebtedness of ChipPAC or Company in
favor of such Lender, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to ChipPAC or Company, as applicable.
10.15 Headings.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.16 Applicable Law.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.17 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders (it being understood that
the Lenders' rights of assignment are subject to subsection 10.1). Neither
ChipPAC's or Company's respective rights or obligations hereunder nor any
interest therein may be assigned or delegated by ChipPAC or Company without the
prior written consent of all Lenders.
10.18 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST CHIPPAC OR COMPANY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.8;
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(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.18 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
10.19 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP OR OTHER RELATIONSHIP THAT IS BEING ESTABLISHED.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.19 AND EXECUTED BY EACH OF THE PARTIES HERETO),
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
10.20 Judgment Currency.
------------------
A. The obligations of Company and the other Loan Parties hereunder
and under the other Loan Documents to make payments in dollars (the "Obligation
----------
Currency") shall not be discharged or satisfied by any tender or recovery
- --------
pursuant to any judgment expressed in or converted into any currency other than
the Obligation Currency,
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except to the extent that such tender or recovery results in the effective
receipt by the Administrative Agent or a Lender or the Issuing Bank of the full
amount of the Obligation Currency expressed to be payable to the Administrative
Agent or such Lender or the Issuing Bank under this Agreement or the other Loan
Documents. If, for the purpose of obtaining or enforcing judgment against
Company or any other Loan Party or in any court or in any jurisdiction, it
becomes necessary to convert into or from any currency other than the Obligation
Currency (such other currency being hereinafter referred to as the
"Judgment Currency") an amount due in the Obligation Currency, the conversion
-----------------
shall be made at the rate of exchange (as quoted by the Administrative Agent or
if the Administrative Agent does not quote a rate of exchange on such currency,
by a known dealer in such currency designated by the Administrative Agent)
determined, in each case, as of the date immediately preceding the day on which
the judgment is given (such Business Day being hereinafter referred to as the
"Judgment Currency Conversion Date").
---------------------------------
B. If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, Company covenants and agrees to pay, or cause to be paid, as a separate
obligation and notwithstanding any judgment, such additional amounts, if any
(but in any event not a lesser amount), as may be necessary to ensure that the
amount paid in the Judgment Currency, when converted at the rate of exchange
prevailing on the date of payment, will produce the amount of the Obligation
Currency which could have been purchased with the amount of Judgment Currency
stipulated in the judgment or judicial award at the rate of exchange prevailing
on the Judgment Currency Conversion Date.
C. For purposes of determining the rate of exchange for this Section,
such amounts shall include any premium and costs payable in connection with the
purchase of the Obligation Currency.
10.21 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking and investing practices, it being
understood and agreed by ChipPAC and Company that in any event a Lender may make
disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participation therein or as required or requested by
any governmental agency or representative thereof or pursuant to legal process;
provided that nothing herein shall prevent any Agent or any Lender from
- --------
disclosing any such information (i) to the Administrative Agent or any other
Lender, (ii) any of its employees, directors, officers, agents or affiliates who
need to know such information in accordance with customary safe and sound
banking or commercial lending practices who receive such information having been
made aware of the confidential nature thereof, (iii) upon the request or demand
of any Governmental Authority having jurisdiction over it, (iv) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Applicable Laws, (v) if required to do so in connection
with any litigation or similar proceeding, (vi) which has been publicly
disclosed other than in breach of this subsection 10.21 or (vii) to the National
Association of Insurance Commissioners or any securities exchange or any similar
organization, or any nationally recognized rating agency that requires access to
132
<PAGE>
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender. In the event that any Lender discloses any
information pursuant to clauses (iv) or (v) of the preceding sentence, such
Lender will, before such disclosure, give notice thereof to ChipPAC and Company
if such Lender is lawfully permitted to do so; and provided, further that in no
-------- -------
event shall any Lender be obligated or required to return any materials
furnished by ChipPAC or any of its Subsidiaries unless requested by ChipPAC or
any of its Subsidiaries to do so.
10.22 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
133
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
CHIPPAC INTERNATIONAL COMPANY LIMITED
By: /s/ P.J. Kim
----------------------------------------
Name: P.J. Kim
Title: Senior Manager
Notice Address:
c/o HWR Services Limited
Craigmuir Chambers, P.O. Box 71
Road Town, Tortola
British Virgin Islands
and
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, CA 95054
Attn: Chief Financial Officer
Telephone: (408) 486-5900
Facsimile: (408) 486-5911
with a copy to:
Bain Capital, Inc. II
One Embarcadero
Suite 2260
San Francisco, CA 94111
Attn: David Dominik
Prescott Ashe
Telephone: (415) 627-1330
Facsimile: (415) 627-1333
and
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attn: Marshall Haines
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
and
<PAGE>
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Linda Myers
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
and
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Attn: Paul C. Schorr IV
Telephone: (212) 559-2056
Facsimile: (212) 888-2940
and
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attn: G. Daniel O'Donnell
Telephone: (215) 994-4000
Facsimile: (215) 994-2222
CHIPPAC, INC.
By: /s/ Gary Breton
--------------------------------------
Name: Gary Breton
Title: Managing Director and Vice
President
Notice Address:
3151 Coronado Drive
Santa Clara, CA 95054
Attn: Chief Financial Officer
Telephone: (408) 486-5900
Facsimile: (408) 486-5911
<PAGE>
with a copy to:
Bain Capital, Inc. II
One Embarcadero
Suite 2260
San Francisco, CA 94111
Attn: David Dominik
Prescott Ashe
Telephone: (415) 627-1330
Facsimile: (415) 627-1333
and
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attn: Marshall Haines
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Linda Myers
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
and
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Attn: Paul C. Schorr IV
Telephone: (212) 559-2056
Facsimile: (212) 888-2940
and
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attn: G. Daniel O'Donnell
Telephone: (215) 994-4000
Facsimile: (215) 994-2222
<PAGE>
AGENTS AND LENDERS: CREDIT SUISSE FIRST BOSTON,
individually and as the Administrative
Agent, Sole Lead Arranger and the
Collateral Agent
By: /s/ Chris Horgan
---------------------------------------
Name: Chris Horgan
Title: Vice President
By: /s/ Wm. Matthew Carter
---------------------------------------
Name: Wm. Matthew Carter
Title: Assistant Vice President
BANKBOSTON N.A.,
By: /s/ Anthony B. Kwee
---------------------------------------
Name: Anthony B. Kwee
Title: Vice President
STATE STREET BANK AND TRUST
COMPANY,
By: /s/ William S. Rowe
---------------------------------------
Name: William S. Rowe
Title: Assistant Vice President
BALANCED HIGH-YIELD FUND II
LIMITED,
By: BHF (USA) Capital Corporation, as
attorney-in-fact
By: /s/ Hans J. Scholz
---------------------------------------
Name: Hans J. Scholz
Title: Vice President
By: /s/ Anthony Heyman
---------------------------------------
Name: Anthony Heyman
Title: Assistant Vice President
<PAGE>
CIBC Inc.,
By: /s/ Dean J. Decker
---------------------------------------
Name: Dean J. Decker
Title: Executive Director
CIBC World Markets Corp.,
AS AGENT
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
Its Agent/Manager
By: /s/ David C. Wagner
---------------------------------------
Name: David C. Wagner
Title: Vice President
HELLER FINANCIAL, INC.,
By: /s/ Robert M. Reeg
---------------------------------------
Name: Robert M. Reeg
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF
CHICAGO,
By: /s/ Stephanie Mack
---------------------------------------
Name: Stephanie Mack
Title: Associate Underwriter
IBM CREDIT CORPORATION,
By: /s/ Ronald J. Bachner
---------------------------------------
Name: Ronald J. Bachner
Title: Manager, Commercial Financing
Solutions Americas
North Castle Drive
Armonk, NY 10504
<PAGE>
SCHEDULE 1.1(i)
Certain Adjustments to EBITDA/Consolidated Interest Expense
-----------------------------------------------------------
A. Without duplication and to the extent otherwise deducted in determining
Consolidated Net Income:
(i) items classified as unusual or nonrecurring gains and losses
(including restructuring costs, severance and relocation costs, any
one-time expenses related to (or resulting from) any merger,
recapitalization or Permitted Acquisition);
(ii) one-time compensation charges, including any arising from any
recapitalization of Company's bonus program or existing stock
options, performance share or restricted stock plans resulting from
any merger or recapitalization transaction or expended in any
period prior to the consummation of the transactions contemplated
by the Transaction Documents;
(iii) non-recurring cash charges and transaction expenses incurred in
connection with the transactions contemplated by the Transaction
Documents to the extent deducted in determining Consolidated Net
Income;
(iv) non-recurring cash charges and transaction expenses incurred in
connection with Permitted Acquisitions to the extent deducted in
determining Consolidated Net Income;
(v) any translation gains and losses due solely to fluctuations in
currency values and the related tax effect in accordance with GAAP;
(vi) one-time charges related to HEI's union change in control in Korea,
to the extent paid by HEI;
(vii) non-cash charges associated with Intel's warrant to purchase
$5,000,000 of ChipPAC's common stock at a 20.0% discount to the
initial public offering price; and
(viii) the payment of management, consulting and advisory fees and related
expenses made pursuant to the Sponsor Advisory Services Agreements.
B. For purposes of calculating the Interest Coverage Ratio, the Leverage Ratio
and the Fixed Charge Coverage Ratio at or for the periods ended December
31, 1999, March 31, 2000, and June 30, 2000, Consolidated Adjusted EBITDA
and Consolidated Interest Expense shall be deemed to be (i) Consolidated
Adjusted EBITDA and Consolidated Interest Expense, respectively, for the
period from
<PAGE>
July 31, 1999, to December 31, 1999, multiplied by 12/5, (ii) Consolidated
Adjusted EBITDA and Consolidated Interest Expense, respectively, for the
period from July 31, 1999, to March 31, 2000, multiplied by 3/2, and (iii)
Consolidated Adjusted EBITDA and Consolidated Interest Expense,
respectively, for the period from July 31, 1999, to June 30, 2000,
multiplied by 12/11.
<PAGE>
1
EXHIBIT 10.2
GUARANTY
This GUARANTY is entered into as of August 5, 1999, by CHIPPAC, INC., a
California corporation ("ChipPAC"), and THE UNDERSIGNED DIRECT AND INDIRECT
-------
SUBSIDIARIES of CHIPPAC (each such undersigned Subsidiary, a "Subsidiary
----------
Guarantor", and all such Subsidiaries, collectively, the "Subsidiary
- --------- ----------
Guarantors"; the Subsidiary Guarantors and ChipPAC being referred to herein
- ----------
collectively as the "Guarantors"; provided that, Guarantors shall be deemed to
--------
include any Additional Guarantors (as hereinafter defined)), in favor of CREDIT
SUISSE FIRST BOSTON ("CSFB"), as administrative agent (in such capacity, the
----
"Administrative Agent") for the banks, financial institutions and other entities
--------------------
(collectively, the "Lenders") from time to time party to the Credit Agreement
-------
referred to below, any Interest Rate Exchangers (as hereinafter defined), any
Indemnitees (as defined in the Credit Agreement) and any other Beneficiaries (as
defined below).
RECITALS
A. ChipPAC International Company Limited, a British Virgin Islands
company (the "Company") has entered into that certain Credit Agreement dated as
-------
of August 5, 1999 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement") with the Lenders and CSFB, as the
----------------
Administrative Agent, the Sole Lead Arranger and the Collateral Agent
(collectively, the "Agents"), pursuant to which the Lenders have severally
------
agreed to make Loans to the Company and to issue (or participate in) Letters of
Credit for the account of ChipPAC and its Subsidiaries upon, and subject to, the
terms and conditions set forth therein.
B. ChipPAC and its Subsidiaries may from time to time enter, or may from
time to time have entered, into one or more Interest Rate Agreements the "Lender
------
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
- ------------------------
capacity, collectively, the "Interest Rate Exchangers") in accordance with the
------------------------
terms of the Credit Agreement, and it is desired that the obligations of ChipPAC
and its Subsidiaries under the Lender Interest Rate Agreements, including
without limitation the obligation of ChipPAC and its Subsidiaries to make
payments thereunder in the event of early termination thereof, be guarantied
hereunder.
C. A portion of the proceeds of the Loans may be advanced to the
Subsidiary Guarantors such that the Guarantied Obligations (as hereinafter
defined) are otherwise being incurred for and will inure to the benefit of the
Guarantors, and each Guarantor will derive substantial direct and indirect
benefit from the making of the Loans to, and the issuance of the Letters of
Credit for the account of, the Company.
D. It is a condition precedent to the obligations of each Lender to make
its respective Loans and to issue (or participate in) the Letters of Credit
under the Credit Agreement that each of the Guarantors guaranty the Guarantied
Obligations and execute and deliver this Guaranty to the Administrative Agent
for the ratable benefit of the Beneficiaries.
E. Each of the Guarantors is willing irrevocably and unconditionally to
guaranty such obligations pursuant to the terms hereof.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
<PAGE>
2
in order to induce the Lenders to enter into the Credit Agreement and to make
the Loans and other extensions of credit thereunder (including without
limitation the issuance of (and participation in) the Letters of Credit) and to
induce the Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, each of the Guarantors hereby agrees as follows:
SECTION 1.
DEFINITIONS
1.1 Defined Terms.
-------------
Capitalized terms used herein (including in the Recitals hereto) and
not defined herein shall have the meanings assigned to such terms in the Credit
Agreement. As used in this Guaranty, the following terms shall have the
following meanings unless the context otherwise requires:
"Additional Guarantors" has the meaning assigned to that term in subsection
---------------------
3.12.
"Beneficiaries" means the Lenders, the Agents, any Interest Rate Exchangers
-------------
and any Indemnitees and their respective successors, transferees, assigns and
endorsees.
"Company" has the meaning assigned to that term in the first recital.
-------
"CSFB" has the meaning assigned to that term in the preamble.
----
"Guarantied Obligations" means, collectively, at any time:
----------------------
(a) (i) all unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans, (ii) all reimbursement
obligations and unpaid drawings in respect of Letters of Credit and (iii)
all other obligations and liabilities of every nature owing by the Company
or any other Loan Party to any Beneficiary arising under, out of or in
connection with the Credit Agreement, any other Loan Document, the Loans or
the Letters of Credit;
(b) all obligations and liabilities of every nature owing by
ChipPAC or any of its Subsidiaries to any Interest Rate Exchangers arising
under, out of or in connection with the Lender Interest Rate Agreements;
all of the foregoing, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter arising, created or incurred, as may
be changed, modified or altered from time to time, howsoever arising; and all of
the foregoing obligations shall include obligations which, but for any automatic
stay under any applicable Bankruptcy Law, including Section 362(a) of Title 11
of the United States Code, would be, or would have become, due.
"Guarantors" has the meaning assigned to that term in the preamble.
----------
<PAGE>
3
"Guaranty" means this Guaranty as it may be amended, restated, supplemented
--------
or otherwise modified from time to time in accordance with the provisions hereof
and the Credit Agreement.
"Interest Rate Exchangers" has the meaning assigned to that term in the
------------------------
second recital.
"Lender Interest Rate Agreements" has the meaning assigned to that term in
-------------------------------
the second recital.
"Obligee Guarantor" has the meaning assigned to that term in
-----------------
subsection 2.7.
"payment in full," "paid in full" or any similar term means payment in
--------------- ------------
full, in cash, of the Guarantied Obligations (other than indemnification
obligations not due and payable), including, without limitation, all principal,
interest, costs, fees and expenses (including, without limitation, reasonable
legal fees and expenses) of the Beneficiaries as required under the Loan
Documents and the Lender Interest Rate Agreements.
"Requisite Obligees" means (i) prior to the Guarantied Obligation described
------------------
in clause (a) of the definition thereof having been satisfied or paid in full
(other than indemnification obligations not due and payable) and the Commitments
having been terminated and all Letters of Credit having expired or been
canceled, the Requisite Lenders, and (ii) thereafter, the holders of a majority
of the aggregate notional amount under all Lender Interest Rate Agreements (or,
with respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement).
1.2 Interpretation.
--------------
(a) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise specifically
provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of the
Credit Agreement shall prevail.
SECTION 2.
THE GUARANTY
2.1 Guaranty of the Guarantied Obligations.
--------------------------------------
Subject to the provisions of subsection 2.2(a), each of the Guarantors
hereby jointly and severally, irrevocably and unconditionally, guaranties to the
Administrative Agent for the ratable benefit of the Beneficiaries, the prompt,
complete and punctual performance, compliance and payment in full of all
Guarantied Obligations when the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise.
<PAGE>
4
2.2 Limitation on Amount Guarantied; Contribution by Guarantors.
-----------------------------------------------------------
(a) Anything contained in this Guaranty to the contrary
notwithstanding, (i) this Agreement shall not constitute a guarantee by any
Subsidiary Guarantor which is not organized under the laws of the United States
or any political subdivision thereof of the Obligations of any Loan Party which
is organized under the laws of the United States or any political subdivision
thereof and (ii) the maximum liability of each Subsidiary Guarantor hereunder
shall in no event exceed the amount which can be guarantied by such Subsidiary
Guarantor pursuant hereto under applicable federal, state and foreign laws
relating to the insolvency of debtors and fraudulent conveyances or transfers.
Each Guarantor agrees that the Guarantied Obligations may at any time, and from
time to time, exceed the amount of the liability of such Guarantor hereunder
without impairing the guaranty of such Guarantor contained in subsection 2.1 or
affecting the rights and remedies of the Administrative Agent or any Beneficiary
hereunder.
(b) Each Guarantor hereby agrees that to the extent that a Guarantor
shall have paid more than its proportionate share of any payment made hereunder,
such Guarantor shall be entitled to seek and receive contribution from and
against any other Guarantor hereunder which has not paid its proportionate share
of such payment and each other Guarantor agrees that it will contribute its
proportionate share of such payment to the applicable Guarantor. Each
Guarantor's right of contribution shall be subject to the terms and conditions
of subsections 2.6 and 2.7. The provisions of this subsection 2.2(b) shall in no
respect limit the obligations and liabilities of any Guarantor to any
Beneficiary, and each Guarantor shall remain liable to any Beneficiary for the
full amount guarantied by such Guarantor hereunder, subject only to subsection
2.2(a).
2.3 Payment by Guarantors; Application of Payments.
----------------------------------------------
Subject to the provisions of subsection 2.2(a), each of the Guarantors
hereby jointly and severally agrees, in furtherance of the foregoing and not in
limitation of any other right which any Beneficiary may have at law or in equity
against any Guarantor by virtue hereof, that upon the failure of the Company to
pay or perform any of the Guarantied Obligations when and as the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, each Guarantor will promptly, following
written demand, pay, or cause to be paid, to the Administrative Agent for the
ratable benefit of the Beneficiaries, all Guarantied Obligations then due. All
payments made hereunder shall be made on the same basis as, and in accordance
with, subsection 2.4E of the Credit Agreement and shall be applied promptly from
time to time as provided in subsection 2.4D of the Credit Agreement.
2.4 Liability of Guarantors Absolute.
--------------------------------
Each Guarantor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any event,
condition or circumstance whatsoever including, without limitation, any which
constitutes, a legal or equitable discharge of the Company for the underlying
Guarantied Obligations or of any Guarantor of its guaranty hereunder or
otherwise of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, each Guarantor agrees as follows:
<PAGE>
5
(a) This Guaranty is a guaranty of payment when due and not of
collectibility. This Guaranty is a primary obligation of each Guarantor and
not merely a contract of surety.
(b) The obligations of each Guarantor hereunder are exclusive
and independent of (i) the obligations of the Company under the Loan
Documents or the Lender Interest Rate Agreements, (ii) the obligations of
any other guarantor (including any other Guarantor) of the obligations of
the Company under the Loan Documents or the Lender Interest Rate
Agreements, and (iii) any security or collateral for such obligations of
the Company or any guaranties thereof, whether granted by the Company, any
Guarantor or any other Person; and a separate action or actions may be
brought and prosecuted against such Guarantor whether or not any action is
brought against the Company or any of such other guarantors, security or
collateral and whether or not the Company is joined in any such action or
actions.
(c) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which
has not been paid or performed. Without limiting the generality of the
foregoing, if the Administrative Agent or any Beneficiary is awarded a
judgment in any suit brought to enforce the obligations of any Guarantor in
respect of the Guarantied Obligations then, to the maximum extent permitted
by applicable law, such judgment shall not be deemed to release such
Guarantor from its obligation to pay the portion of the Guarantied
Obligations that is not the subject of such suit, and such judgment shall
not, except to the extent satisfied by such Guarantor, limit, affect,
modify or abridge any other Guarantor's liability hereunder in respect of
the Guarantied Obligations.
(d) Any Beneficiary, upon such terms as it deems appropriate,
without notice, demand, consent or incurring responsibility to any
Guarantor and without affecting the validity or enforceability of this
Guaranty or giving rise to any reduction, limitation, impairment, discharge
or termination of any Guarantor's obligations or liability hereunder, from
time to time may (i) renew, alter, extend, accelerate, increase the rate of
interest on or otherwise change or modify the time, place, manner or terms
of payment of the Guarantied Obligations; (ii) settle, compromise, release
or discharge, or accept or refuse any offer of performance with respect to,
or substitutions for, the Guarantied Obligations or any agreement relating
thereto and/or subordinate the payment of the same to the payment of any
other obligations; (iii) request and accept other guaranties of the
Guarantied Obligations and take and hold security for the payment of this
Guaranty or the Guarantied Obligations; (iv) release, surrender, exchange,
substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment of the
Guarantied Obligations, any other guaranties of the Guarantied Obligations,
or any other obligation of any Person (including any other Guarantor) with
respect to the Guarantied Obligations; (v) sell, exchange, release,
surrender, realize or foreclose, enforce and apply or otherwise deal with
in any manner and in any order any security now or hereafter held by or on
behalf of, or for the benefit of, such Beneficiary in respect of this
Guaranty or the Guarantied Obligations; (vi) apply any sums by whomsoever
paid or howsoever realized to any of the Guarantied Obligations; (vii)
consent to or waive any breach of, or any act, omission or default under,
any of the Loan Documents, the Lender Interest Rate Agreements or any of
the instruments or agreements in connection therewith, or otherwise amend,
modify
<PAGE>
6
or supplement any of the Loan Documents, the Lender Interest Rate
Agreements or any of the instruments or agreements in connection therewith;
and (viii) exercise or refrain from exercising any other rights available
to it under the Loan Documents or the Lender Interest Rate Agreements.
(e) This Guaranty and the obligations of the Guarantors
hereunder shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any reason
(other than payment in full of the Guarantied Obligations), including,
without limitation, the occurrence of any of the following, whether or not
any Guarantor shall have had notice or knowledge of any of them: (i) any
failure or omission to assert or enforce, or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under the Loan
Documents, the Lender Interest Rate Agreements, at law, in equity or
otherwise) with respect to the Guarantied Obligations or any agreement or
instrument relating thereto, or with respect to any other guaranty of, or
security for the payment of, the Guarantied Obligations; (ii) any
rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions (including, without
limitation, provisions relating to events of default) of the Credit
Agreement, any of the other Loan Documents, any of the Lender Interest Rate
Agreements or any agreement or instrument relating thereto, or of any other
guaranty or security for the Guarantied Obligations, in each case whether
or not in accordance with the terms of the Credit Agreement or such Loan
Document, such Lender Interest Rate Agreement or any agreement relating to
such other guaranty or security; (iii) the application of payments received
from any source (other than payments received pursuant to other Loan
Documents or any Lender Interest Rate Agreements or from the proceeds of
any security for the Guarantied Obligations) to the payment of indebtedness
other than the Guarantied Obligations, even though any Beneficiary might
have elected to apply such payment to any part or all of the Guarantied
Obligations; (iv) except as permitted pursuant to subsection 7.7 of the
Credit Agreement, any Beneficiary's consent to the change, reorganization
or termination of the corporate structure or existence of the Company or
any of its Subsidiaries and to any corresponding restructuring of the
Guarantied Obligations; (v) any failure to perfect or continue perfection
of a security interest in any collateral which secures any of the
Guarantied Obligations; (vi) any defenses, set-offs or counterclaims which
the Company, any Guarantor or any other Person may allege or assert against
any Beneficiary in respect of the Guarantied Obligations, including, but
not limited to, failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and
usury; and (vii) any other act or thing or omission, or delay to do any
other act or thing, which may or might in any manner or to any extent vary
the risk of any Guarantor as an obligor in respect of the Guarantied
Obligations.
2.5 Waivers by Guarantors.
---------------------
Each Guarantor hereby waives, for the benefit of the Beneficiaries:
(a) any right to require any Beneficiary, as a condition of
payment by such Guarantor, to (i) proceed against the Company, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
the Company, any such other
<PAGE>
7
guarantor or any other Person, (iii) proceed against or have resort to any
balance of any deposit account or credit on the books of any Beneficiary in
favor of the Company or any other Person, or (iv) pursue any other remedy
in the power of any Beneficiary whatsoever;
(b) any defense based on or arising out of the Company or any
other guarantor (including any other Guarantor) or any other Person,
including, without limitation, any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of the
Company, any other guarantor (including any other Guarantor) or any other
Person, any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of the Company from any cause other than payment in full of the Guarantied
Obligations;
(c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal;
(d) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty, (ii) the benefit of any statute of limitations affecting such
Guarantor's liability hereunder or the enforcement hereof, (iii) any rights
to set-offs, recoupments and counterclaims, and (iv) any requirement that
any Beneficiary protect, secure, perfect or insure any security interest or
lien or any property subject thereto; and
(e) promptness, diligence, notices, demands, presentments,
protests, notices of protest, notices of dishonor and notices of any action
or inaction, including acceptance of this Guaranty, notices of default
under the Credit Agreement, any other Loan Document, the Lender Interest
Rate Agreements or any agreement or instrument related thereto, notices of
any renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Company,
notices of the existence, creation or incurrence of any additional
Indebtedness and notices of any of the matters referred to in subsection
2.4 and any right to consent to any thereof.
2.6 Guarantors' Rights of Subrogation, Contribution, etc.
----------------------------------------------------
Until the Guarantied Obligations (other than indemnification
obligations not due and payable) have been satisfied or paid in full and the
Commitments terminated and all Letters of Credit shall have expired or been
canceled, each Guarantor hereby waives and agrees that it shall not assert or
seek or be entitled to any claim, right or remedy, direct or indirect, that such
Guarantor now has or may hereafter have against the Company or any of its assets
in connection with this Guaranty or the performance by such Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including, without limitation, (a) any right of subrogation, reimbursement,
contribution or indemnification that such Guarantor now has or may hereafter
have against the Company with respect to the Guarantied Obligations, (b) any
right to enforce, or to participate in, any claim, right or remedy that any
Beneficiary now has or may hereafter have against the Company and (c) any
benefit of, and any right to participate in, any collateral or security now or
hereafter held by, on behalf of or for any Beneficiary. In addition, until the
Guarantied Obligations (other than
<PAGE>
8
indemnification obligations not due and payable) shall have been satisfied or
paid in full and the Commitments shall have terminated and all Letters of Credit
shall have expired or been canceled, each Guarantor shall withhold exercise of
any right of contribution such Guarantor may have against any other guarantor
(including any other Guarantor) of the Guarantied Obligations (including,
without limitation, any such right of contribution under subsection 2.2(b)).
Each Guarantor further agrees that, to the extent the waiver or agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution with respect to the Guarantied Obligations as
set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement, contribution
or indemnification such Guarantor may have against the Company, any such other
guarantor or against any collateral or security, shall be junior and subordinate
to any rights any Beneficiary may have against the Company, to all right, title
and interest any Beneficiary may have in any such collateral or security, and to
any right any Beneficiary may have against such other guarantor. If any amount
shall be paid to any Guarantor on account of any such subrogation,
reimbursement, indemnification or contribution rights with respect to the
Guarantied Obligations at any time when all of the Guarantied Obligations (other
than indemnification obligations not due and payable) shall not have been
satisfied or paid in full and the Commitments shall not have terminated and all
Letters of Credit shall have not expired or been canceled, such amount shall be
held in trust for and on behalf of Beneficiaries and shall forthwith be paid
over to the Administrative Agent for the benefit of Beneficiaries to be credited
and applied against the Guarantied Obligations, whether matured or unmatured, in
accordance with the terms hereof.
2.7 Subordination of Other Obligations.
----------------------------------
Any indebtedness of the Company now or hereafter held by any Guarantor
(the "Obligee Guarantor") is hereby subordinated in right of payment to the
-----------------
Guarantied Obligations, and any such indebtedness collected or received by the
Obligee Guarantor after an Event of Default has occurred and is continuing shall
be held in trust for the Administrative Agent on behalf of Beneficiaries and
shall forthwith be paid over to the Administrative Agent for the benefit of
Beneficiaries to be credited and applied against the Guarantied Obligations but
without affecting, impairing or limiting in any manner the liability of the
Obligee Guarantor under any other provision of this Guaranty.
2.8 Expenses.
--------
Guarantors jointly and severally agree to pay, or cause to be paid,
promptly upon written demand, and to save the Beneficiaries harmless against
liability for, any and all reasonable costs and reasonable expenses (including
reasonable fees and disbursements of counsel and allocated costs of internal
counsel) incurred or expended by the Administrative Agent or any Beneficiary in
connection with this Guaranty, including, without limitation, any enforcement,
or, if requested by or for the benefit of the Company or any Guarantor any
amendment, consent or waiver.
2.9 Continuing Guaranty.
-------------------
This Guaranty is a continuing guaranty and shall remain in effect
until all of the Guarantied Obligations (other than indemnification obligations
not due and payable) shall have been satisfied or paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been canceled. Each Guarantor hereby irrevocably
<PAGE>
9
waives any right to revoke this Guaranty as to future transactions giving rise
to any Guarantied Obligations.
2.10 Authority of Guarantors or Company.
----------------------------------
It is not necessary for any Beneficiary to inquire into the capacity
or powers of any Guarantor or the Company or the officers, directors or any
agents acting or purporting to act on behalf of any of them.
2.11 Financial Condition of Company.
------------------------------
Any Loans may be granted to the Company or continued from time to
time, and any Lender Interest Rate Agreement may be entered into from time to
time, in each case without notice to or authorization from any Guarantor
regardless of the financial or other condition of the Company at the time of any
such grant or continuation or at the time such Lender Interest Rate Agreement is
entered into, as the case may be. No Beneficiary shall have any obligation to
disclose or discuss with any Guarantor its assessment, or any Guarantor's
assessment, of the financial condition of the Company. Each Guarantor has
adequate means to obtain information from the Company on a continuing basis
concerning the financial condition of the Company and its ability to perform its
obligations under the Loan Documents and the Lender Interest Rate Agreements,
and each Guarantor assumes the responsibility for being and keeping informed of
the financial condition of the Company and of all circumstances bearing upon the
risk of nonpayment of the Guarantied Obligations. Each Guarantor hereby waives
and relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of the Company
now known or hereafter known by any Beneficiary.
2.12 Rights Cumulative.
-----------------
The rights, powers, privileges and remedies given to the
Administrative Agent for the ratable benefit of the Beneficiaries by this
Guaranty are cumulative and shall be in addition to and independent of, and may
be exercised singly or concurrently, and are exclusive of, all rights, powers
and remedies given to the Agents and the Beneficiaries by virtue of any statute
or rule of law or in any of the other Loan Documents, any of the Lender Interest
Rate Agreements or any agreement between any Guarantor and any Beneficiary or
Beneficiaries or between the Company and any Beneficiary or Beneficiaries. Any
forbearance, indulgence or failure to exercise, and any delay by the
Administrative Agent or any Beneficiary in exercising, any right, power,
privilege or remedy hereunder shall not impair any such right, power, privilege
or remedy or be construed to be a waiver thereof nor shall it preclude the
future or further exercise of any such or other right, power, privilege or
remedy. No single or partial exercise of any right, power, privilege or remedy
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power, privilege or remedy. A waiver by the Administrative
Agent or any Beneficiary of any right, power, privilege or remedy hereunder on
any one occasion shall not be construed to be a bar to any right, power,
privilege or remedy which the Administrative Agent or any Beneficiary would
otherwise have on any future occasion. No notice to or demand on any Guarantor
in any case shall entitle such Guarantor or any other Guarantor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Beneficiary to any other or further action in any
circumstances without notice or demand.
<PAGE>
10
2.13 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty.
-------------------------------------------------------------
(a) So long as any Guarantied Obligations (other than indemnification
obligations not due and payable) remain outstanding, no Guarantor shall, without
the prior written consent of the Administrative Agent acting pursuant to the
instructions of Requisite Obligees, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of, or
against, the Company. The obligations of the Guarantors under this Guaranty
shall not be reduced, limited, impaired, discharged, deferred, suspended or
terminated by any proceeding, voluntary or involuntary, involving the
bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement
of the Company, or by any defense which the Company may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) To the extent permitted by applicable law, each Guarantor
acknowledges and agrees that any interest on any portion of the Guarantied
Obligations which accrues after the commencement of any proceeding referred to
in clause (a) above (or, if interest on any portion of the Guarantied
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceedings had not been commenced) shall be
included in the Guarantied Obligations, because it is the intention of the
Guarantors and the Beneficiaries that the Guarantied Obligations which are
guarantied by the Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve the Company of any
portion of such Guarantied Obligations. The Guarantors will permit any trustee
in bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay the Administrative Agent, or allow the claim
of the Administrative Agent in respect of, any such interest accruing after the
date on which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by any Person or Persons, the obligations of Guarantors
hereunder shall be reinstated but only in the event that all or any part of such
payment(s) are rescinded or recovered directly or indirectly from any
Beneficiary, or otherwise are repaid, returned or restored by, any Agent or any
Beneficiary for the following (or similar) reasons (i) the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or any
Guarantor, (ii) the appointment of a receiver, intervenor, conservator, trustee
or similar officer of, for or on behalf of the Company or any Guarantor or any
of its property, (iii) any judgment, decree or order of any court or
administrative body having jurisdiction over any Beneficiary or any of its
property, or (iv) any settlement or compromise of any such claim effected by
such Beneficiary with any such claimant (including the Company or any
Guarantor)), and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty and each
Guarantor shall be and remain liable hereunder for the amount so repaid,
returned, restored, rescinded or recovered to the same extent as if such amount
had never originally been received by any such Beneficiary.
2.14 Set Off.
-------
In addition to any other rights any Beneficiary may have under law or
in equity, if any amount shall at any time be due and owing by any Guarantor to
any Beneficiary under this Guaranty, such Beneficiary is authorized at any time
or from time to time upon the occurrence and during the continuation of any
Event of Default or any payment default under
<PAGE>
11
any Lender Interest Rate Agreement, without notice to any Guarantor or any other
Person (any such notice being hereby expressly waived), to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness of such Beneficiary owing to
such Guarantor and any other property of such Guarantor held by any Beneficiary
to, or for the credit or the account of, such Guarantor against and on account
of the Guarantied Obligations and liabilities of such Guarantor to any
Beneficiary under this Guaranty.
2.15 Discharge of Guaranty Upon Sale of Guarantor.
--------------------------------------------
If all of the stock or assets of any Subsidiary Guarantor or any of
its successors in interest under this Guaranty shall be sold or otherwise
disposed of (including by merger or consolidation) in an Asset Sale permitted
by, and in compliance with the provisions of subsections 7.7 and 2.4B(iii)(a) of
the Credit Agreement or otherwise consented to by Requisite Lenders, the
guaranty of such Subsidiary Guarantor or such successor in interest, as the case
may be, hereunder shall automatically be discharged and released without any
further action by any Beneficiary or any other Person effective as of the time
of such Asset Sale.
SECTION 3.
MISCELLANEOUS
3.1 Survival of Warranties.
----------------------
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Guaranty and the other Loan Documents
and the Lender Interest Rate Agreements and any increase in the Commitments
under the Credit Agreement.
3.2 Notices.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, telexed or
sent by United States mail or courier service and shall be deemed to have been
given when delivered in person or by courier service, upon receipt of telecopy
or telex, or four (4) Business Days after depositing it in the United States
mail, registered or certified, with postage prepaid and properly addressed. For
the purposes hereof, the address of each party hereto shall be as provided in
subsection 10.8 of the Credit Agreement or as set forth under such party's name
on the signature pages hereof or, as to any party, such other address as shall
be designated by such party in a written notice delivered to the other parties
hereto.
3.3 Severability.
------------
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
<PAGE>
12
3.4 Amendments and Waivers.
----------------------
No amendment, modification, termination or waiver of any provision of
this Guaranty, and no consent to any departure by any Guarantor therefrom, shall
in any event be effective without the written concurrence of the Administrative
Agent (with the consent or at the direction of the Requisite Obligees) and, in
the case of any such amendment or modification, each Guarantor against whom
enforcement of such amendment or modification is sought. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
3.5 Headings.
--------
Section and subsection headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
3.6 Applicable Law; Rules of Construction.
-------------------------------------
THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The rules of construction
set forth in subsection 1.3 of the Credit Agreement shall be applicable to this
Guaranty mutatis mutandis.
3.7 Successors and Assigns.
----------------------
This Guaranty is a continuing guaranty and shall be binding upon each
Guarantor and its respective successors and assigns. This Guaranty shall inure
to the benefit of the Beneficiaries and their respective successors and assigns.
No Guarantor shall assign this Guaranty or any of the rights or obligations of
such Guarantor hereunder without the prior written consent of all Lenders.
Subject to subsection 10.1 of the Credit Agreement, any Beneficiary may, without
notice or consent, assign its interest in this Guaranty in whole or in part. The
terms and provisions of this Guaranty shall inure to the benefit of any
transferee or assignee of any Loan, and in the event of such transfer or
assignment the rights and privileges herein conferred upon such Beneficiary
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.
3.8 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF
OR RELATING TO THIS GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND
CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS GUARANTY, EACH GUARANTOR
IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
/s/ P.J. Kim
for ChipPAC(Luxembourg) S.a.r.l.
<PAGE>
13
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT; (V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
3.9 Waiver of Trial by Jury.
-----------------------
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, EACH
BENEFICIARY HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. EACH
GUARANTOR WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED
BY THE ADMINISTRATIVE AGENT AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
GUARANTY. In the event of litigation, this Guaranty may be filed as a written
consent to a trial by the court.
3.10 No Other Writing.
----------------
This writing is intended by the Guarantors and the Beneficiaries as
the final expression of this Guaranty and is also intended as a complete and
exclusive statement of the terms of their agreement with respect to the matters
covered hereby. No course of dealing, course of performance or trade usage, and
no parol evidence of any nature, shall be used to supplement or modify any terms
of this Guaranty. There are no conditions to the full effectiveness of this
Guaranty.
3.11 Further Assurances.
------------------
At any time or from time to time, upon the reasonable request of the
Administrative Agent, Guarantors shall execute and deliver such further
documents and do such other acts and things as the Administrative Agent may
reasonably request in order to effect fully the purposes of this Guaranty.
3.12 Additional Guarantors.
---------------------
The initial Guarantors hereunder shall be ChipPAC and all of the
Subsidiaries of ChipPAC as on the date hereof (other than the Company, ChipPAC
Shanghai I and ChipPAC Shanghai II). From time to time subsequent to the date
hereof, additional
<PAGE>
14
Subsidiaries of ChipPAC may (or shall if required pursuant to subsection 6.9 of
the Credit Agreement) become parties hereto as additional Guarantors (each an
"Additional Guarantor"), by executing a counterpart of this Guaranty. Upon
--------------------
delivery of any such counterpart to the Administrative Agent, notice of which is
hereby waived by each of the Guarantors, each such Additional Guarantor shall be
a Guarantor and shall be as fully a party hereto as if such Additional Guarantor
were an original signatory hereof. Each Guarantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Guarantor hereunder, nor by any election of the
Administrative Agent not to cause any Subsidiary of ChipPAC to become an
Additional Guarantor hereunder. This Guaranty shall be fully effective as to any
Guarantor that is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Guarantor hereunder.
3.13 Counterparts; Effectiveness.
---------------------------
This Guaranty may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same instrument.
This Guaranty shall become effective as to each Guarantor upon the execution of
a counterpart hereof by such Guarantor (whether or not a counterpart hereof
shall have been executed by any other Guarantor) and receipt by the
Administrative Agent (or its counsel or other representatives) of written or
telephonic notification of such execution and authorization or an original or
copy of an executed counterpart hereof.
3.14 Authority of Administrative Agent.
---------------------------------
Each Guarantor acknowledges that the rights and responsibilities of
the Administrative Agent under this Guaranty with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Guaranty shall, as
between the Administrative Agent and the Beneficiaries, be governed by the
Credit Agreement and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Administrative Agent and the
Guarantor, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Beneficiaries with full and valid authority so to act or
refrain from acting, and no Guarantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
3.15 Documents.
---------
Each Guarantor acknowledges that an executed (or conformed) copy of
each of the Loan Documents and the Lender Interest Rate Agreements has been made
available to its principal executive officers and such officers are familiar
with the contents thereof.
[Remainder of page intentionally left blank]
<PAGE>
15
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
CHIPPAC, INC.
By: /s/ Gary Breton
---------------------
Name: Gary Breton
Title: Vice President
Notice Address:
311 Coronado Drive
Santa Clara, CA 95054
Attention: Chief Financial Officer
Telephone: (408) 486-5900
Facsimile: (408) 486-5911
<PAGE>
16
Each of the entities listed on Schedule
--------
A annexed hereto
-
By: /s/ P.J. Kim
-----------------------
on behalf of each of the entities
listed on Schedule A annexed hereto
----------
Name: P.J. Kim
Title: Secretary and Power of
Attorney
Notice Address:
See Schedule A
----------
<PAGE>
17
SCHEDULE A
Name Notice Address for Each Guarantor
- ---- ---------------------------------
ChipPAC, Inc. 3151 Coronado Drive Santa Clara, CA 95054
ChipPAC (Barbados) Ltd. Chancery House, High Street Bridgetown,
Barbados, West Indies
ChipPAC Limited c/o HWR Services Limited
Craigmuir Chambers P.O. Box 71 Road Town,
Tortola, British Virgin Islands
ChipPAC International c/o HWR Services Limited
Company Limited Craigmuir Chambers P.O. Box 71 Road Town,
Tortola, British Virgin Islands
ChipPAC Luxembourg 16 rue Eugene Ruppert B.P. 1443 L-1014
S.a.R.L. Luxembourg
ChipPAC Liquidity Wesselenyi u. 16 H-1077 Budapest, Hungary
Management Hungary
Limited Liability Company
ChipPAC Korea Company Ltd. San 136-1, Ami-ri, Bubal-EUB, Ischon-Si
Kyoungki-Do 467-701 Korea
<PAGE>
Exhibit 10.3
SUBSIDIARY GUARANTY AGREEMENT, dated as of August 5, 1999,
made by ChipPAC Korea Company Ltd., ChipPAC Limited, ChipPAC
(Barbados) Ltd., ChipPAC Luxembourg S.a.R.L. and ChipPAC
Liquidity Management Hungary Limited Liability Company
(collectively, the "Subsidiary Guarantors"), the undersigned
subsidiaries of ChipPAC, Inc., ("ChipPAC") and ChipPAC
International Company Limited (the "Issuer"), in favor of
the Holders and the Trustee (as defined below).
Reference is made to the Indenture (as the same may be amended,
restated, supplemented or modified from time to time, the "Indenture") entered
into among ChipPAC International Limited, ChipPAC Merger Corp. ("MergerCo"), and
Firstar Bank of Minnesota, N.A., as trustee (the "Trustee"), dated as of July
29, 1999 relating to the Securities.
WHEREAS, MergerCo agreed pursuant to the Indenture to Guarantee the
Securities pursuant to the terms of the Indenture.
WHEREAS, ChipPAC and the Issuer shall become parties to the Indenture
through execution of a Supplemental Indenture (the "Supplemental Indenture") to
be dated as of the date of this Subsidiary Guaranty Agreement;
WHEREAS, either ChipPAC or the Issuer owns directly or indirectly all
or a majority of interest in each Subsidiary Guarantor; and
WHEREAS, ChipPAC and the Issuer will agree to cause the Subsidiary
Guarantors to Guarantee the Securities pursuant to the terms of the Indenture,
the Supplemental Indenture and this Subsidiary Guaranty Agreement,
NOW, THEREFORE, in consideration of the promises thereby, the
Subsidiary Guarantors hereby agree with and for the benefit of the Holders as
follows:
<PAGE>
2
ARTICLE 1
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Subsidiary Guaranty
--------------
Agreement, terms that shall be defined in the Indenture (to the extent not
otherwise defined herein) or in the preamble or recitals hereto are used herein
as shall therein be defined.
ARTICLE 2
Guaranties
----------
SECTION 2.01. Guaranties. Each Subsidiary Guarantor hereby
-----------
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
obligations of the Issuer under the Indenture and the Securities to pay amounts
to the Trustee or the Holders in respect of the Securities and (b) the full and
punctual performance within applicable grace periods of all other obligations of
the Issuer under the Indenture and the Securities (all the foregoing being
hereinafter collectively called the "Indenture Obligations"). Each Subsidiary
Guarantor further agrees that the Indenture Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
the Indenture notwithstanding any extension or renewal of any Indenture
Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Issuer of any of the Indenture Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives
notice of any default under the Securities or the Indenture Obligations. The
obligations of each Subsidiary Guarantor hereunder shall not be affected by (a)
the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Issuer or any other Person under the
Indenture, the Securities or any other agreement or otherwise; (b) any extension
or renewal of any such claim, demand, right or remedy; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of the
Indenture, the Securities or any other agreement; (d) the release of any
security held by any
<PAGE>
3
Holder or the Trustee for the Indenture Obligations or any of them; (e) the
failure of any Holder or the Trustee to exercise any right or remedy against any
other guarantor of the Indenture Obligations; or (f) subject to Section 2.06 of
this Subsidiary Guaranty Agreement, any change in the ownership of such
Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Indenture Obligations.
Each Subsidiary Guaranty is, to the extent and in the manner set forth
in Article 3, subordinated and subject in right of payment to the prior payment
in full in cash of all obligations with respect to all Senior Indebtedness of
the Subsidiary Guarantor giving such Subsidiary Guaranty and each Subsidiary
Guaranty is made subject to such provisions of the Indenture.
Except as shall be expressly set forth in Section 8.01(b) of the
Indenture and as expressly set forth in Sections 2.02 and 2.06 of this
Subsidiary Guaranty Agreement, the obligations of each Subsidiary Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Indenture Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Subsidiary Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under the Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
such Subsidiary Guarantor or would otherwise operate as a discharge of such
Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment,
<PAGE>
4
or any part thereof, of principal of or interest on any Indenture Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuer or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Issuer to pay the
principal of or interest on any Indenture Obligation when and as the same shall
become due, whether at maturity, by acceleration, by redemption or otherwise, or
to perform or comply with any other Indenture Obligation, each Subsidiary
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid amount of such Indenture
Obligations and (ii) accrued and unpaid interest on such Indenture Obligations
(but only to the extent not prohibited by law).
Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Indenture Obligations guaranteed hereby
until payment in full of all Indenture Obligations and all obligations to which
the Indenture Obligations are subordinated as provided in Article 3. Each
Subsidiary Guarantor further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Indenture Obligations Guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of such Subsidiary Guarantor's
Subsidiary Guaranty herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Indenture Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 of the Indenture, such Indenture
Obligations (whether or not due and payable) shall forthwith become due and
payable by such Subsidiary Guarantor for the purposes of this Section.
SECTION 2.02. Limitation on Liability. Any term or provision of the
------------------------
Indenture to the contrary notwithstanding, the maximum, aggregate amount of the
Indenture Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering the
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or
<PAGE>
5
fraudulent transfer or similar laws affecting the rights of creditors generally.
Each Subsidiary Guarantor that makes a payment under its Subsidiary
Guaranty will be entitled to a contribution from each other Subsidiary Guarantor
in an amount equal to such other Subsidiary Guarantor's pro rata portion of such
--- ----
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.
SECTION 2.03. Successors and Assigns. This Article 2 shall be
-----------------------
binding upon each Subsidiary Guarantor and its successors and assigns and shall
enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in the
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of the
Indenture.
SECTION 2.04. No Waiver. Neither a failure nor a delay on the part
----------
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 2 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 2 at law,
in equity, by statute or otherwise.
SECTION 2.05. Modification. No modification, amendment or waiver of
-------------
any provision of this Article 2, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 2.06. Release of Subsidiary Guarantor. Upon the sale
--------------------------------
(including any sale pursuant to any exercise of remedies by a holder of Senior
Indebtedness) or other disposition (including by way of consolidation or merger)
of
<PAGE>
6
all or substantially all of the capital stock of a Subsidiary Guarantor or the
sale, assignment, transfer or disposition of all or substantially all the assets
of such Subsidiary Guarantor in each case in one or more related transactions
(in each case (i) other than to the Issuer or an Affiliate of the Issuer and
(ii) in accordance with Section 5.01 to be included in the Indenture), such
Subsidiary Guarantor shall be deemed automatically released from all obligations
under this Subsidiary Guaranty Agreement (including this Article 2) without any
further action required on the part of the Trustee or any Holder. At the request
of the Issuer or any Subsidiary Guarantor, the Trustee shall execute and deliver
an appropriate instrument evidencing such release.
SECTION 2.07. Withholding Taxes. (a) All payments made by a
-----------------
Subsidiary Guarantor under or with respect to its Subsidiary Guaranty shall be
made free and clear of and without withholding or deduction for or on account of
any present or future tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and other liabilities related thereto)
imposed or levied by or on behalf of any jurisdiction from or through which
payment is made or where the payor is located or any province or territory
thereof or by any authority or agency therein or thereof having power to tax
(hereinafter "Taxes"), unless such Subsidiary Guarantor is required to withhold
or deduct Taxes by law or by the interpretation or administration thereof by the
relevant government authority or agency. If such Subsidiary Guarantor is so
required to withhold or deduct any amount for or on account of Taxes from any
payment made under or with respect to a Subsidiary Guaranty, such Subsidiary
Guarantor will be required to pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder after such
withholding or deduction (including with respect to such Additional Amounts)
will not be less than the amount the Holder would have received if such Taxes
had not been withheld or deducted; provided, however, that no Additional Amounts
-------- -------
will be payable with respect to payments made to a Holder (an "Excluded Holder")
in respect of a beneficial owner to the extent such beneficial owner is subject
to such Taxes by reason of its being connected with the British Virgin Islands
or any province or territory thereof otherwise than by the mere holding of
Securities or the receipt of payments thereunder or the enforcement of a
Subsidiary Guaranty. The Subsidiary Guarantors will also make such withholding
or deduction and remit the full amount deducted or withheld to the relevant
authority as and when required in accordance
<PAGE>
7
with applicable law. The Subsidiary Guarantors will furnish to the Holder of the
Securities, within 30 days after the date the payment of any Taxes is due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the Subsidiary Guarantors. The Subsidiary Guarantors will upon
written request of each Holder (other than an Excluded Holder), reimburse each
such Holder for the amount of any Taxes so levied or imposed and paid by such
Holder with respect to any reimbursement referred to above, but excluding any
such Taxes on such Holder's net income, so that the net amount received by such
Holder after such reimbursement will not be less than the net amount the Holder
would have received if Taxes (other than such Taxes on such Holder's net income)
on such reimbursement had not been imposed.
(b) Whenever in this Subsidiary Guaranty Agreement or the Indenture
there is mentioned, in any context, (a) the payment of principal, (b) purchase
prices in connection with a purchase of Securities, (c) interest or (d) any
other amount payable on or with respect to any of the Securities or a Subsidiary
Guaranty, such reference shall be deemed to include payment of Additional
Amounts provided for in Section 2.07(a) to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.
(c) At least 10 days prior to the first interest payment date for the
Securities and at least 10 days prior to each date of payment of principal of or
interest on the Securities if there has been a change with respect to the
matters set forth in the below-mentioned Officers' Certificate or Certificates,
the Subsidiary Guarantors will furnish the Trustee and the principal Paying
Agent, if other than the Trustee, with an Officers' Certificate of each of the
Subsidiary Guarantors instructing the Trustee and such Paying Agent whether any
payment with respect to a Subsidiary Guaranty shall be made to Holders of the
Securities subject to withholding or deduction for, or on account of, any Taxes.
If any such withholding or deduction shall be required, then such Officers'
Certificate or Certificates shall specify by country, the amount, if any,
required to be withheld or deducted on such payments to the Holders, and the
Subsidiary Guarantors will pay to the Trustee or such Paying Agent the
Additional Amounts required by this Section. The Subsidiary Guarantors, jointly
and severally, agree to indemnify the Trustee and any Paying Agent for, and to
hold them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
<PAGE>
8
with actions taken or omitted by any of them in reliance on any Officers'
Certificate furnished pursuant to this Section.
ARTICLE 3
Subordination of Subsidiary Guaranties
--------------------------------------
SECTION 3.01. Agreement To Subordinate. Each Subsidiary Guarantor
-------------------------
agrees, and each Securityholder by accepting a Security agrees, that the
Indenture Obligations of such Subsidiary Guarantor are subordinated in right of
payment, to the extent and in the manner provided in this Article 3, to the
prior payment in full in cash of all Senior Indebtedness of such Subsidiary
Guarantor and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. The Indenture Obligations of a
Subsidiary Guarantor shall in all respects rank pari passu with all other Senior
---- -----
Subordinated Indebtedness of such Subsidiary Guarantor and only Senior
Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's
Guarantee of Senior Indebtedness of the Issuer) shall rank senior to the
Indenture Obligations of such Subsidiary Guarantor in accordance with the ]
provisions set forth herein.
SECTION 3.02. Liquidation, Dissolution, Bankruptcy. Upon any
-------------------------------------
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property:
(1) the holders of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to receive payment in full in cash of all obligations
with respect to such Senior Indebtedness (including all interest accruing
subsequent to the filing of a petition in bankruptcy at the rate provided
for in the documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law) before Securityholders shall be
entitled to receive any payment or distribution with respect to any
Indenture Obligations of such Subsidiary Guarantor; and
(2) until all obligations with respect to the Senior Indebtedness of
any Subsidiary Guarantor is paid in full in cash, any payment or
distribution to which
<PAGE>
9
Securityholders would be entitled but for this Article 3 shall be made to
holders of such Senior Indebtedness as their interests may appear, except
that Securityholders may receive shares of stock and any debt securities of
such Subsidiary Guarantor that are subordinated to Senior Indebtedness, and
to any debt securities received by holders of Senior Indebtedness, of such
Subsidiary Guarantor to at least the same extent as the Indenture
Obligations of such Subsidiary Guarantor are subordinated to Senior
Indebtedness of such Subsidiary Guarantor.
SECTION 3.03. Default on Senior Indebtedness of Subsidiary Guarantor.
-------------------------------------------------------
No Subsidiary Guarantor may make any payment (in cash, property or other assets)
pursuant to any of its Indenture Obligations or repurchase, redeem or otherwise
retire or defease any Securities or other Indenture Obligations (collectively,
"pay its Subsidiary Guaranty") if either of the following Payment Default
occurs: (1) any obligations with respect to Senior Indebtedness of such
Subsidiary Guarantor is not paid in full when due or (2) any other default on
Senior Indebtedness of such Subsidiary Guarantor occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (x) the default has been cured or waived and any such acceleration
has been rescinded in writing or (y) such Senior Indebtedness has been paid in
full in cash; provided, however, that any Subsidiary Guarantor may pay its
-------- -------
Subsidiary Guaranty without regard to the foregoing if such Subsidiary Guarantor
and the Trustee receive written notice approving such payment from the
Representatives of such Senior Indebtedness. No Subsidiary Guarantor may pay
its Subsidiary Guaranty during the continuance of any Payment Blockage Period
after receipt by the Issuer and the Trustee (with a copy to the Issuer) of a
Blockage Notice under Section 10.03 of the Indenture. Notwithstanding the
provisions described in the immediately preceding sentence (but subject to the
provisions contained in the first sentence of this Section), unless the holders
of Designated Senior Indebtedness giving such Blockage Notice or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, any Subsidiary Guarantor may resume payments
pursuant to its Subsidiary Guaranty after termination of such Payment Blockage
Period.
SECTION 3.04. Demand for Payment. If a demand for payment is made on
-------------------
a Subsidiary Guarantor pursuant to Article 2, the Trustee shall promptly notify
the holders of
<PAGE>
10
the Designated Senior Indebtedness (or their Representatives) of such demand. If
any Designated Senior Indebtedness is outstanding at the time of such
acceleration, neither the Issuer nor any Subsidiary Guarantor may pay the
Securities until five Business Days after the Representatives of all the issues
of Designated Senior Indebtedness receive notice of such acceleration and,
thereafter, may pay the Securities only if the Indenture otherwise permits
payment at that time.
SECTION 3.05. When Distribution Must Be Paid Over. If a distribution
------------------------------------
is made to Securityholders that because of this Article 3 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of the relevant Senior Indebtedness and pay it over to them or
their Representatives as their interests may appear.
SECTION 3.06. Subrogation. After all Senior Indebtedness of a
------------
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 3 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary
Guarantor on such Senior Indebtedness.
SECTION 3.07. Relative Rights. This Article 3 defines the relative
----------------
rights of Securityholders and holders of Senior Indebtedness of a Subsidiary
Guarantor. Nothing in this Agreement or the Indenture shall:
(1) impair, as between a Subsidiary Guarantor and Securityholders, the
obligation of such Subsidiary Guarantor, which is absolute and
unconditional, to pay the Indenture Obligations to the extent set forth in
Article 2; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by such Subsidiary Guarantor under the
Indenture Obligations, subject to the rights of holders of Senior
Indebtedness of such Subsidiary Guarantor to receive distributions
otherwise payable to Securityholders.
SECTION 3.08. Subordination May Not Be Impaired by the Issuer. No
------------------------------------------------
right of any holder of Senior Indebtedness of any Subsidiary Guarantor to
enforce the
<PAGE>
11
subordination of the Indenture Obligations of such Subsidiary Guarantor shall be
impaired by any act or failure to act by such Subsidiary Guarantor or by its
failure to comply with the Indenture.
SECTION 3.09. Rights of Trustee and Paying Agent. Notwithstanding
-----------------------------------
Section 3.03, the Trustee or Paying Agent may continue to make payments on any
Subsidiary Guaranty and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less than
two Business Days prior to the date of such payment, a Trust Officer of the
Trustee receives written notice satisfactory to it that payments may not be made
under this Article 3. The Issuer, the relevant Subsidiary Guarantor, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of any Subsidiary Guarantor may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not the Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 3 with respect to any Senior Indebtedness of any Subsidiary Guarantor
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness; and nothing in Article 7 of the Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 3 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07 of the Indenture.
SECTION 3.10. Distribution or Notice to Representative. Whenever a
-----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of any Subsidiary Guarantor, the distribution may be made and the notice given
to their Representative (if any).
SECTION 3.11. Article 3 Not To Prevent Defaults Under a Subsidiary
----------------------------------------------------
Guaranty or Limit Right To Demand Payment. The failure to make a payment
- ------------------------------------------
pursuant to a Subsidiary Guaranty by reason of any provision in this Article 3
shall not be construed as preventing the occurrence of a default under such
Subsidiary Guaranty. Nothing in this Article 3 shall have any effect on the
right of the Securityholders or the Trustee to make a demand for payment on any
Subsidiary Guarantor pursuant to Article 2.
<PAGE>
12
SECTION 3.12. Trustee Entitled To Rely. Upon any payment or
-------------------------
distribution pursuant to this Article 3, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 3.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 3. In the event
that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of any
Subsidiary Guarantor to participate in any payment or distribution pursuant to
this Article 3, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
of such Subsidiary Guarantor held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 3, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 of the Indenture shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 3.
SECTION 3.13. Trustee To Effectuate Subordination. Each
------------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 3
and appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 3.14. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe
- -------------------------------------
any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary
Guarantor and shall not be liable to any such holders if it shall mistakenly pay
over or distribute to Securityholders or the Issuer or any
<PAGE>
13
other Person, money or assets to which any holders of such Senior Indebtedness
shall be entitled by virtue of this Article 3 or otherwise.
SECTION 3.15. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Securityholder by accepting a Security
- -------------------------
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 4
Miscellaneous
-------------
SECTION 4.02. Notices. All notices and other communications
--------
pertaining to this Subsidiary Guaranty Agreement shall be deemed to have been
duly given (a) at the time delivered by hand, if personally delivered, (b) five
Business Days after being deposited in the mail, postage prepaid, if mailed, (c)
when answered back, if telexed, (d) when receipt is acknowledged, if telecopied,
and (e) the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(x) if to the Subsidiary Guarantor, at the Issuer's address set forth in the
Indenture, and (y) if to the Holders or the Trustee, as provided in the
Indenture. The Issuer, any Subsidiary Guarantor and the Trustee may, by notice
to the others, designate additional or different addresses for subsequent
notices or communications.
SECTION 4.02. Parties. Nothing expressed or mentioned in this
--------
Subsidiary Guaranty Agreement is intended or shall be construed to give any
Person, firm or corporation, other than the Holders and the Trustee, any legal
or equitable right, remedy or claim under or in respect of this Subsidiary
Guaranty Agreement or any provision herein contained.
<PAGE>
14
SECTION 4.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THESE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.04. Severability Clause. In case any provision of this
--------------------
Subsidiary Guaranty Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be ineffective only to the extent of such invalidity, illegality or
unenforceability.
SECTION 4.05. Waivers, Amendments and Remedies. The failure to insist
---------------------------------
in any one or more instances upon strict performance of any of the provisions of
this Subsidiary Guaranty Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights, but the same shall continue and remain in
full force and effect. Except as otherwise expressly limited in this Subsidiary
Guaranty Agreement, all remedies under this Subsidiary Guaranty Agreement shall
be cumulative and in addition to every other remedy provided for herein or by
law.
SECTION 4.06. Headings. The headings of the Articles and the
---------
sections in this Subsidiary Guaranty Agreement are for convenience of reference
only and shall not be deemed to alter or affect the meaning or interpretation of
any provisions thereof.
SECTION 4.07. Effectiveness. Notwithstanding anything herein to the
--------------
contrary, this Agreement shall not take effect until the Closing Date, the
representations and warranties set forth in this Agreement shall be deemed to be
made solely as of the Closing Date, and the covenants, agreements and other
obligations created by this Agreement shall only apply prospectively from the
Closing Date and shall have no retroactive effect.
SECTION 4.08. Agent for Service; Submission to Jurisdiction; Waiver
-----------------------------------------------------
of Immunities. By the execution and delivery of this Indenture, each Subsidiary
- --------------
Guarantor (i) acknowledges that it has, by separate written instrument,
irrevocably designated and appointed CT Corporation System (and any successor
entity) ("CT"), 1633 Broadway, New York, New York 10019, as its authorized agent
upon which process may be served in any suit or proceeding arising out of or
<PAGE>
15
relating to the Indenture, the Securities or the Guaranties that may be
instituted in any Federal or state court located in the Borough of Manhattan in
The City of New York or brought by the Trustee (whether in its individual
capacity or in its capacity as Trustee hereunder) or any Holder, and
acknowledges that CT has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding, and (iii) agrees
that service of process upon CT and written notice of said service to a
Subsidiary Guarantor, shall be deemed in every respect effective service of
process upon such Subsidiary Guarantor in any such suit or proceeding. The
Subsidiary Guarantors further agree to take any and all action, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of CT in full force and
effect so long as this Indenture shall be in full force and effect.
Each Subsidiary Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to the Indenture or this Agreement, the
Securities or the Guaranties in any Federal or state court located in the
Borough of Manhattan in The City of New York. Each Subsidiary Guarantor hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
To the extent that any Subsidiary Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in this Agreement to the
extent permitted by law.
<PAGE>
16
IN WITNESS WHEREOF, the Subsidiary Guarantors have duly executed this
Subsidiary Guaranty Agreement as of the date first above written.
CHIPPAC KOREA COMPANY LTD.,
by /s/ P. J. Kim
--------------------
Name: P. J. Kim
Title: Secretary
CHIPPAC LIMITED,
by /s/ P. J. Kim
--------------------
Name: P. J. Kim
Title: Secretary
CHIPPAC (BARBADOS) LTD.,
by /s/ P. J. Kim
--------------------
Name: P. J. Kim
Title: Secretary
CHIPPAC LUXEMBOURG S.A.R.L.,
by /s/ P. J. Kim
--------------------
Name: P. J. Kim
Title: Secretary
CHIPPAC LIQUIDITY MANAGEMENT
HUNGARY LIMITED LIABILITY COMPANY,
by /s/ P. J. Kim
--------------------
Name: P. J. Kim
Title: Secretary
<PAGE>
17
Acknowledged:
CHIPPAC, INC.,
by /s/ Tony Lin
_______________________
Name: Tony Lin
Title: Chief Financial Officer
CHIPPAC INTERNATIONAL COMPANY LIMITED,
by /s/ P. J. Kim
_______________________
Name: P. J. Kim
Title: Secretray
<PAGE>
EXHIBIT 10.4
------------
AMENDED & RESTATED
SHAREHOLDERS AGREEMENT
----------------------
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made as of August 5,
1999, by and among ChipPAC, Inc., a California corporation (the "Company"), the
Persons listed on Schedule I attached hereto (the "Hyundai Group"), the Persons
listed on Schedule II attached hereto (the "Bain Group"), the SXI Group (as
defined in Section 8 hereof), Intel Corporation, a Delaware corporation
("Intel"), ChipPAC Equity Investors LLC ("CSFB"), an affiliate of Credit Suisse
First Boston Corporation and Sankaty High Yield Asset Partners, L.P.
("Sankaty"). The Hyundai Group, the Bain Group, the SXI Group, Intel, CSFB and
Sankaty are collectively referred to herein as the "Shareholders"; each of the
Hyundai Group, the Bain Group and the SXI Group is sometimes referred to as a
"Group"; and each member of each such Group, Intel, CSFB and Sankaty as a
"Shareholder." Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 8 hereof.
WHEREAS, the parties hereto desire to establish the composition of the
Company's Board of Directors (the "Board"), to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Capital Stock and to provide
for certain rights and obligations in respect thereto as hereinafter provided.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Voting Agreement.
(a) From and after the date of this Agreement and until the provisions
of this Section 1 cease to be effective, each holder of Shareholder Shares shall
vote all of its Shareholder Shares which are voting shares and any other voting
securities of the Company over which such holder has voting control and shall
take all other necessary or desirable actions within its control (whether in its
capacity as a shareholder, or through any of its representatives serving as a
director, member of a board committee or officer of the Company or any of its
Subsidiaries or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Company and its Subsidiaries
shall take all necessary and desirable actions within its control (including,
without limitation, calling special board and shareholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established and maintained at no less than eight and no more than ten
directors;
(ii) the following individuals shall be nominated and elected to the
Board:
(A) one (1) representative (the "Hyundai Director") designated by
the holders of a majority of the Hyundai Shares;
(B) three (3) representatives (the "Bain Directors") designated
by the holders of a majority of the Bain Shares;
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(C) three (3) representatives (the "SXI Directors") designated by
the holders of a majority of the SXI Shares;
(D) one (1) representative (the "Management Director") of
management, who shall be the Company's chief executive officer, but
only so long as such person serves as the Company's chief executive
officer;
(E) in the event of and during the continuation of an Event of
Default (as defined in the Articles of Incorporation) with respect to
any shares of Senior Preferred Stock in accordance with the terms
thereof, one (1) additional representative (the "Additional Hyundai
Director") which the holders of the Senior Preferred Stock are
entitled to appoint in accordance with the terms of the Articles of
Incorporation;
(F) upon the mutual agreement of the holders of a majority of the
Bain Shares and the holders of a majority of the SXI Shares to fill
any remaining vacancies on the Board, all remaining members of the
Board shall be an equal number of representatives designated by the
holders of a majority of the Bain Shares and the holders of a majority
of the SXI Shares, unless an Event of Default shall have occurred and
be continuing, in which case the provisions of clause (a)(ii)(E) of
this Section 1 shall govern and no other directors shall be elected
pursuant to this clause (F) and any directors then in office pursuant
to this clause (F) shall forthwith resign or be removed until such
time as there is no longer any Event of Default in existence, at which
time the special right of the holders of Senior Preferred Stock to
appoint the Additional Hyundai Director shall terminate subject to
revesting upon the occurrence and continuation of any Event of
Default;
(ii) the size of the board of directors of each of the Company's
Subsidiaries (a "Sub Board") shall be no greater than that of the Board and
shall have at least one (1) representative designated pursuant to Section
1(a)(ii)(A), if so desired by the holders of the Hyundai Shares, at least
one Bain Director and at least one SXI Director, and if more than one Bain
Director or one SXI Director, then an equal number of both;
(iv) except with respect to the Additional Hyundai Director, who
shall automatically be removed at such time as there is no longer any Event
of Default in existence, at which time the special right of the holders of
Senior Preferred Stock to appoint the Additional Hyundai Director shall
terminate subject to revesting upon the occurrence and continuation of any
Event of Default, any Bain Director, SXI Director, Hyundai Director or
Additional Hyundai Director shall be removed forthwith from the Board or
any Sub Board (with or without cause) prior to the expiration of such
director's term at the written request of the holders of a majority of the
shares of the Group which designated such director
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pursuant to Section 1(a)(ii) (and under no other circumstances, except as
provided above with respect to the Additional Hyundai Director), and no
Bain Director, SXI Director, Hyundai Director or Additional Hyundai
Director shall be removed from the Board or any Sub Board prior to the
expiration of such director's term except at the prior written request of
the holders of a majority of the shares of the Group which designated such
director pursuant to Section 1(a)(ii) and except as provided above with
respect to the Additional Hyundai Director; and
(v) in the event that any director designated pursuant to Section
1(a)(ii) by the holders of a majority of the Hyundai Shares, the holders of
a majority of the Bain Shares or the holders of a majority of the SXI
Shares for any reason ceases to serve as a member of the Board or a Sub
Board during his or her term of office, the resulting vacancy on the Board
or Sub Board shall be filled by a person designated by the same Group (in
the manner provided hereunder) that designated the director that will no
longer serve on the Board or Sub Board.
(vi) the Bylaws of the Company will require that the vote or action of
a majority of the directors present at any meeting at which a quorum is
present shall be the vote or action of the Board; provided, however, that
no action shall be taken without the affirmative vote of a majority of the
Bain Directors and a majority of the SXI Directors with respect to:
(A) any merger of the Company into any other corporation or
merger of any other corporation into the Company, or any consolidation
of the Company with any other corporation (other than the merger of a
wholly-owned Subsidiary into the Company), the liquidation or
dissolution of the Company, or the sale, assignment, lease, transfer
or other disposition of all or substantially all of the assets of the
Company as, or substantially as, an entirety to any other corporation
or other entity or person;
(B) the amendment or repeal of any provision of, or the addition
of any provision to the Articles of Incorporation of the Company or
its Bylaws;
(C) the expenditure by the Company of an amount of funds in
excess of $5,000,000 for a purpose which is not within the then
current strategic and operating plan referred to in clause (H) hereof;
(D) any declaration or payment of any dividend on, or other
distribution in respect of, the Company's capital stock, or any
payment in cash of interest on indebtedness that by its terms may be
paid in kind or accrued;
(E) any issuance, redemption, repurchase or other transaction
involving the capital stock of the Company (other than in connection
with the exercise of stock options granted pursuant to any plan or
arrangement approved under clause (N)
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hereof, or the issuance of no more than $3,000,000 in shares of Common
Stock (determined for this purpose by the price allocated to shares of
Common Stock acquired pursuant to the Recapitalization Agreement)
issued to members of the Company's management within 120 days after
the date hereof);
(F) any borrowings (or guarantees thereof) in excess of
$5,000,000 from any bank or other person or entity, other than
drawings on borrowings or lines of credit existing as of the date
hereof (or any extensions, renewals or refinancings thereof) or as
previously approved as provided herein;
(G) any loans to any persons or entities by the Company, other
than advances to employees of the Company or its Subsidiaries for
ordinary and necessary business expenses consistent with past practice
or to purchase Common Stock described in the parenthetical in clause
(E) above;
(H) the annual strategic and operating plan of the Company, which
shall be prepared by the officers of the Company and shall include a
summary of expected capital expenditures and expenditures in respect
of acquisitions, and any material departures from such plan;
(I) any sale or encumbrance of assets in excess of $5,000,000;
(J) any business acquisition by the Company, by purchase of
assets, capital stock, merger or otherwise, for purchase consideration
exceeding $5,000,000;
(K) the selection of commercial or investment bankers for the
Company;
(L) the selection of the public accountants for the Company;
(M) the selection of the Chief Executive Officer of the Company;
(N) the approval of compensation payable to the corporate
officers of the Company, including executive bonus and incentive plans
and arrangements of such officers; or
(O) the approval of any action by a Subsidiary of the Company in
respect of any matter of the nature set forth in this Section 1(a)(vi)
with respect to such Subsidiary.
(b) The Company (and it Subsidiaries, as the case may be) shall pay or
promptly reimburse the actual reasonable out-of-pocket expenses incurred by each
director in connection with attending meetings of the Board, any Sub Board or
any committee of the Board or any Sub Board.
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(c) The provisions of this Section 1 shall terminate automatically and
be of no further force and effect upon the consummation of a Initial Public
Offering in which the net proceeds to the Company exceed $25 million (a
"Qualifying IPO").
(d) If any Group fails to designate a representative to fill a
directorship pursuant to the terms of this Section 1 or any Group ceases to have
such right hereunder, the election of an individual to such directorship shall
be accomplished in accordance with the Articles of Incorporation and Bylaws or
comparable governing documents of the Company (in the case of the Board) and the
applicable Subsidiary of the Company (in the case of a Sub Board) and applicable
law.
(e) The rights of any Group under this Agreement to designate one or
more directors hereunder shall terminate at such time as such Group ceases to
own, either directly or indirectly through one or more Affiliates, fifty percent
(50%) of the Shareholder Shares owned by such Group immediately following the
Effective Time as defined in the Recapitalization Agreement; provided that the
provisions of this Section 1(e) shall not apply to the Hyundai Group if any
member of the Hyundai Group is required by any provision of applicable law in
the Republic of Korea (as evidenced by the written opinion of a reputable Korean
law firm addressed to the Company's Board) to maintain Board representation as a
condition to its direct or indirect ownership of Capital Stock.
(f) Each director shall be given advance notice of any meeting of the
Board of Directors in accordance with the Bylaws (or, in the case of any Sub
Board, the comparable governing document).
2. Restrictions on Transfer of Shareholder Shares.
(a) Transfer of Shareholder Shares. No holder of Shareholder Shares
(other than the Bain Group or the SXI Group) shall sell, transfer, assign,
pledge or otherwise dispose of (whether directly or indirectly, whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in any Shareholder Shares (a "Transfer"), except Transfers
pursuant to and in accordance with the provisions of Section 2(b), 2(c), 2(d),
2(e) or 3 of this Agreement; it being agreed and understood that nothing in this
Section 2(a) shall relieve any member of the Bain Group or the SXI Group from
any of their obligations in Section 2(b) below.
(b) Participation Rights.
(i) Except as otherwise specifically set forth in this Agreement, at
least thirty (30) days prior to any Transfer of shares of any class of Capital
Stock by any member of the Bain Group or the SXI Group (the "Transferring
Shareholder") (other than a Transfer among the members of the Bain Group or
their Affiliates, among the members of the SXI Group or their Affiliates or to
an employee or director of the Company or its Subsidiaries), the Transferring
Shareholder will deliver a written notice (the "Sale Notice") to the Company and
the other Shareholders (the "Other
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<PAGE>
Shareholders"), specifying in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the Transfer. Notwithstanding the
restrictions contained in this Section 2, any or all of the Other Shareholders
may elect to participate in the contemplated Transfer by delivering written
notice to the Transferring Shareholder within ten (10) days after delivery of
the Sale Notice. If any Other Shareholder has elected to participate in such
Transfer (each such Other Shareholder, a "Participating Shareholder"), each of
the Transferring Shareholder and the Participating Shareholders will be entitled
to sell in the contemplated Transfer, at the same price and on the same terms, a
number of shares of such class of Capital Stock equal to the product of (A) the
quotient determined by dividing the number of shares of such class of Capital
Stock owned by such Participating Shareholder by the aggregate number of shares
of such class of Capital Stock owned by the Transferring Shareholder and all
Participating Shareholders and (B) the number of shares of such class of Capital
Stock to be sold in the contemplated Transfer. Notwithstanding the foregoing, in
the event that the Transferring Shareholder intends to Transfer shares of more
than one class of Capital Stock, the Participating Shareholders shall be
required to sell in the contemplated Transfer a pro rata portion of shares of
all such classes of Capital Stock (to the extent the Participating Shareholders
own any shares of such other classes of Capital Stock), which portion shall be
determined in the manner set forth in the immediately preceding sentence.
For example (by way of illustration only), if the Sale Notice
contemplated a sale of 100 shares of Class A Common by the
Transferring Shareholder, and if the Transferring Shareholder at such
time owns 30% of the Class A Common and if one Participating
Shareholder elects to participate and owns 20% of the Class A Common
(and all other Shareholders choose not to participate), then the
Transferring Shareholder would be entitled to sell 60 shares (30% /
50% x 100 shares) and the Participating Shareholder would be entitled
to sell 40 shares (20% / 50% x 100 shares).
(ii) The Transferring Shareholder will use reasonable best efforts to
obtain the agreement of the prospective transferee(s) to the participation of
the Participating Shareholders in any contemplated Transfer, and the
Transferring Shareholder will not effect any Transfer of any of its shares of
Capital Stock to the prospective transferee(s) unless (A) simultaneously with
such Transfer, the prospective transferee or transferees purchase from each
Participating Shareholder the shares of Capital Stock which such Participating
Shareholder is entitled to sell to such prospective transferee(s) pursuant to
Section 2(b)(i) above or (B) simultaneously with such Transfer, the Transferring
Shareholder purchases (on the same terms and conditions on which such shares
were sold to the transferee(s)) the number of shares of such class of Capital
Stock from each Participating Shareholder which such Participating Shareholder
would have been entitled to sell pursuant to Section 2(b)(i) above.
(c) Right of First Refusal.
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(i) From and after the fifth anniversary of the date of this
Agreement, in the event that the Hyundai Shares represent five percent (5%) or
less of the Company's outstanding shares of Common Stock, any member of the
Hyundai Group shall have the right to Transfer all or any portion of the Hyundai
Shares held by any such Person to any third Person other than a Competitor (as
defined below) in accordance with this Section 2(c). For purposes of this
Section 2(c), the term "Competitor" means any Person that, directly or
indirectly, either for itself or for any other Person, participates in providing
products or services in the semiconductor business or any other business in
which the Company or any of its Subsidiaries are engaged in at the time of such
proposed Transfer anywhere in the world. For purposes of this Section 2(c), the
term "participates" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, owner or otherwise; provided
that the passive ownership of 5% or less of the outstanding stock of any
publicly traded corporation shall not constitute "participation" in any such
business.
(ii) At least fifteen (15) days prior to any Transfer of any Hyundai
Shares pursuant to this Section 2(c), the member of the Hyundai Group proposing
to make such Transfer (the "Transferring Hyundai Shareholder") shall deliver a
written notice (the "Hyundai Sale Notice") to the Bain Group and the SXI Group
(the "Recipient Shareholders") and to the Company, specifying in reasonable
detail the identity of the prospective transferee(s), the number of Hyundai
Shares to be transferred and the terms and conditions of the proposed Transfer.
First, each Recipient Shareholder may elect to purchase all or any portion of
such holder's Pro Rata Share (as defined below) of the Hyundai Shares specified
in the Hyundai Sale Notice at the price and on the other terms specified therein
by delivering written notice of such election to the Transferring Hyundai
Shareholder and the Company within fifteen (15) days after receipt of the
Hyundai Sale Notice by the Company. For purposes of Section 2(c) and 2(d), each
Recipient Shareholder's "Pro Rata Share" shall be based upon such Shareholder's
proportionate ownership of all Shareholder Shares owned by all Recipient
Shareholders. Any Hyundai Shares not elected to be purchased by the end of such
15-day period shall be reoffered during the five-day period immediately
following the expiration of the aforementioned 15-day period by the Transferring
Hyundai Shareholder on a pro rata basis to the Recipient Shareholders who have
elected to purchase their Pro Rata Share. If the Recipient Shareholders have
not elected to purchase all of the Hyundai Shares specified in the Hyundai Sale
Notice within such twenty (20) day period (i.e., the sum of the previously
aforementioned fifteen and five day periods), the Company may elect to purchase
all or any portion of the remaining Hyundai Shares specified in the Hyundai Sale
Notice at the price and on the other terms specified therein by delivering
written notice of such election to the Transferring Hyundai Shareholder within
30 days after receipt of the Hyundai Sale Notice by the Company. If the
Company or any Recipient Shareholders have elected to purchase Hyundai Shares
from the Transferring Hyundai Shareholder, the transfer of such shares shall be
consummated as soon as practical after the delivery of the election notice(s) to
the Transferring Hyundai Shareholder, but in any event within 30 days after
receipt of the Hyundai Sale Notice by the Company. If prior to the expiration
of such 30 day period the Company and the Recipient Shareholders have not
elected to purchase all of the Hyundai Shares being offered, the Transferring
Hyundai Shareholder may, within 90 days after the Company's
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<PAGE>
receipt of the Hyundai Sale Notice, transfer such remaining Hyundai Shares to
one or more third Persons (other than a Competitor) at a price no less than the
price per share specified in the Hyundai Sale Notice and on other terms no more
favorable to the transferees thereof than offered to the Company and the
Recipient Shareholders in the Hyundai Sale Notice. Any Hyundai Shares not
transferred within such 90-day period shall be reoffered to the Recipient
Shareholders and the Company in accordance with this Section 2(c) prior to any
subsequent Transfer.
(d) Regulatory First Offer Right.
(i) In the event that it becomes necessary or desirable for Intel to
make a Transfer of Intel Shares in order to comply with any applicable law or
any rule or regulation of any governmental or regulatory authority or in the
event the Company fails to make any redemption of any Class A Preferred Stock,
par value $.01 per share, held by Intel required pursuant to Section 4 of
Attachment I to the Company's Articles of Incorporation (irrespective of any
legal or contractual restrictions prohibiting any such redemption), Intel shall
have the right to Transfer all or any portion of the Intel Shares to any third
Person other than a Packaging Competitor (as defined below) in accordance with
this Section 2(d). For purposes of this Section 2(d), the term "Packaging
Competitor" means any Person that, directly or indirectly, either for itself or
for any other Person, participates to a significant extent in the semiconductor
merchant assembly or test business anywhere in the world (i.e., 40% or more of
its annual revenues are derived from such business). For purposes of this
Section 2(d), the term "participates" includes any direct or indirect interest
in any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, consultant, owner or
otherwise; provided that neither (i) the passive ownership of 10% or less of the
outstanding stock of any publicly traded corporation nor (ii) being a customer
or supplier of any person or entity shall constitute "participation" in any such
business.
(ii) At least 20 business days prior to making any such Transfer of
Intel Shares pursuant to this Section 2(d), Intel shall deliver a written notice
(the "Intel Offer Notice") to the Recipient Shareholders (as defined in Section
2(c) above) and the Company. The Intel Offer Notice shall disclose in
reasonable detail the proposed number of Intel Shares to be transferred and the
proposed sale price, terms and conditions of the Transfer. First, each
Recipient Shareholder may elect to purchase all or any portion of such holder's
Pro Rata Share of the Intel Shares specified in the Intel Offer Notice at the
price and on the other terms specified therein by delivering written notice of
such election to Intel and the Company within ten (10) business days after
receipt of the Intel Offer Notice by the Company. Any Intel Shares not elected
to be purchased by the end of such ten (10) business day period shall be
reoffered during the five business day period immediately following the
expiration of the aforementioned ten (10) business day period by Intel on a pro
rata basis to the Recipient Shareholders who have elected to purchase their Pro
Rata Share. If the Recipient Shareholders have not elected to purchase all of
the Intel Shares specified in the Intel Offer Notice within such fifteen (15)
business day period (i.e., the sum of the previously aforementioned ten (10) and
five (5) business day periods), the Company may elect to purchase all or any
portion of the remaining Intel Shares specified in the Intel Offer Notice at the
price and on the other terms
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specified therein by delivering written notice of such election to Intel within
20 business days after receipt of the Intel Offer Notice by the Company, it
being understood that Intel shall not be obligated to sell such Intel Shares to
the Company and the Recipient Shareholders unless the Company and the Recipient
Shareholders, in the aggregate, have elected to purchase all of the Intel Shares
specified in such Intel Offer Notice. If the Company or any Recipient
Shareholders have elected to purchase Intel Shares from Intel, the transfer of
such shares shall be consummated as soon as practical after the delivery of the
election notice(s) to Intel, but in any event within 30 business days after
receipt of the Intel Offer Notice by the Company (or such longer period of time
as may be required pursuant to applicable law). If the Company and the Recipient
Shareholders do not elect within the aforementioned 20 business day period to
purchase all of the Intel Shares being offered, Intel may, within 60 days after
the Company's receipt of the Intel Offer Notice, transfer such Intel Shares to
one or more third Persons (other than a Packaging Competitor) at a price no less
than 95% of the price per share specified in the Intel Offer Notice and on other
terms no more favorable to the transferees thereof than offered to the Company
and the Recipient Shareholders in the Intel Offer Notice. Any Intel Shares not
transferred within such 60-day period shall be reoffered to the Recipient
Shareholders and the Company in accordance with this Section 2(d) prior to any
subsequent Transfer.
(e) Certain Permitted Transfers. The restrictions contained in
Section 2(a) will not apply to any Transfer of Shareholder Shares by any
Shareholder (i) among its Affiliates, (ii) pursuant to an Approved Sale, (iii)
pursuant to the applicable laws of descent and distribution or among such
Shareholder's Family Group or (iv) pursuant to Section 2(b), 2(c) or 2(d)
hereof; provided that the restrictions contained in this Agreement will continue
to apply to the Shareholder Shares after any Transfer pursuant to clause (i),
(iii) or (iv) above and each transferee of such Shareholder Shares shall agree
in writing, prior to and as a condition to the effectiveness of such Transfer,
to be bound by the provisions of this Agreement, without modification or
condition, subject only to the consummation of the Transfer. Upon the Transfer
of Shareholder Shares pursuant to this Section 2(e), the transferor will deliver
a written notice to the Company and the other parties to this Agreement, which
notice will disclose in reasonable detail the identity of such transferee(s) and
shall include an original counterpart of the agreement of such transferee(s) to
be bound by this Agreement.
(f) Termination of Restrictions. The restrictions set forth in this
Section 2 shall continue with respect to each Shareholder Share until the
earlier of (i) the consummation of an Approved Sale and (ii) the consummation of
a Qualifying IPO.
3. Sale of the Company.
(a) If the holders of at least a majority of the Bain Shares and the
holders of at least a majority of the SXI Shares (the "Requisite Holders")
approve (and, in the case of any sale or other fundamental change or
extraordinary transaction which requires the approval of the board of directors
of a California corporation pursuant to the California Corporations Code, the
Board shall
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have approved such sale) a sale of all or substantially all (as defined in the
Revised Model Business Corporation Act) of the Company's assets determined on a
consolidated basis or a sale of all or substantially all of the Company's
outstanding capital stock (whether by merger, recapitalization, consolidation,
reorganization, combination or otherwise) to any Independent Third Party or
group of Independent Third Parties, and the Board shall have received a written
opinion of an internationally recognized investment banking firm (which firm
shall have been selected by the Board), acting as an independent financial
advisor to the Board, to the effect that the consideration to be received by the
Company or its shareholders (as the case may be) in such transaction is fair to
the Company or its shareholders (as the case may be), from a financial point of
view (collectively an "Approved Sale"), each holder of Shareholder Shares will
consent to and raise no objections against such Approved Sale. If the Approved
Sale is structured as (i) a merger or consolidation, each holder of Shareholder
Shares will waive any dissenter's rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) a sale of stock, each
holder of Shareholder Shares will agree to sell all of its Shareholder Shares
and rights to acquire Shareholder Shares on the terms and conditions approved by
the Board and the Requisite Holders; it being understood and agreed that in the
event one of the terms of such sale provides for joint and several liability for
post-closing indemnification obligations, the Bain Group and the SXI Group shall
enter into a contribution agreement with Intel and the members of the Hyundai
Group which provides that each party to such contribution agreement shall bear
any such indemnification obligations pro rata according to each such party's
percentage interest in the proceeds of such Approved Sale. Each holder of
Shareholder Shares will take all necessary or desirable actions in connection
with the consummation of the Approved Sale as requested by the Requisite Holders
and the Company.
(b) The obligations of the holders of Capital Stock with respect to an
Approved Sale are subject to the satisfaction of the following conditions: (i)
upon the consummation of the Approved Sale, each holder of Capital Stock will
receive the same form of consideration and the same portion of the aggregate
consideration that such holders of Capital Stock would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Articles of Incorporation as in effect immediately prior to such Approved Sale,
(ii) if any holder of a class of Capital Stock is given an option as to the form
and amount of consideration to be received, each holder of such class of Capital
Stock will be given the same option; (iii) each holder of then currently
exercisable rights to acquire shares of a class of Capital Stock will be given
an opportunity to exercise such rights prior to the consummation of the Approved
Sale and participate in such sale as holders of such class of Capital Stock;
(iv) neither Intel nor (except to the knowledge of the Hyundai Director or the
Additional Hyundai Director, if any) any member of the Hyundai Group shall be
obligated to make any general representations and warranties concerning the
business and affairs of the Company (but each shall bear a portion of the
indemnification obligations with respect thereto, subject to the other terms and
conditions of this Section 3), it being understood that Intel and the Hyundai
Group would be expected to make customary representations and warranties with
respect to its ownership of their respective Shareholder Shares (e.g., title to
stock, authorization, etc.); (v) Intel's and the Hyundai Group's indemnification
obligations in connection with an Approved Sale shall not exceed their
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respective distributable proceeds in connection with such transaction; and (vi)
neither Intel nor any member of the Hyundai Group shall be obligated to amend or
take any other actions with respect to its then existing contractual
relationships with the Company or the purchaser of the Company.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities and Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Shareholder Shares will,
at the request of the Company, appoint a purchaser representative (as such term
is defined in Rule 501 promulgated by the Securities and Exchange Commission)
reasonably acceptable to the Company. If any holder of Shareholder Shares
appoints a purchaser representative designated by the Company, the Company will
pay the fees of such purchaser representative, but if any holder of Shareholder
Shares declines to appoint the purchaser representative designated by the
Company, such holder will appoint another purchaser representative, and such
holder will be responsible for the fees of the purchaser representative so
appointed.
(d) Each holder of Shareholder Shares will bear a pro-rata share
(based upon the number of shares of Common Stock sold by such holder in relation
to the number of shares of Common Stock sold by all holders in such Approved
Sale) of the costs paid to any third party in connection with any sale of
Shareholder Shares pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all holders of Capital Stock and are not otherwise
paid by the Company or the acquiring party. Costs incurred by holders of
Shareholder Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this Section 3 shall terminate upon the
consummation of a Qualifying IPO.
4. Preemptive Rights.
(a) If the Company proposes to issue and sell any of its shares of
Capital Stock or any securities containing options or rights to acquire any
shares of Capital Stock or any securities convertible into shares of Capital
Stock to any member of the Bain Group or the SXI Group or their respective
Affiliates, the Company will first offer to each of the other Shareholders a
portion of the number or amount of such securities proposed to be sold in any
such transaction or series of related transactions equal to the product of the
percentage each such other Shareholder holds of all shares of Common Stock
(including for purposes hereof, any shares of Common Stock then issuable with
respect to the Company's Class A Preferred Stock, par value $.01 per share) then
held by all of the Company's Shareholders by the number of shares proposed to be
issued and sold by the Company in any such transaction or series of related
transactions, all for the same price and upon the same terms and conditions as
the securities that are being offered to any member of the Bain Group or the SXI
Group and their respective Affiliates in such transaction or series of
transactions; provided that if all Shareholders entitled to purchase or receive
such stock or securities are required to also
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purchase other securities of the Company, the Shareholders exercising their
rights pursuant to this Section 4 shall also be required to purchase the same
strip of securities (on the same terms and conditions) that such other
Shareholders are required to purchase. For purposes of this Section 4 only, the
term Capital Stock shall include any capital stock of any Subsidiary of the
Company and any other securities convertible into or exercisable for shares of
the Company's or its Subsidiaries' capital stock.
(b) Notwithstanding the foregoing, the provisions of this Section 4
shall not be applicable to the issuance of shares of Capital Stock (i) upon the
conversion of shares of one class of Capital Stock into shares of another class,
(ii) as a dividend on the outstanding shares of Capital Stock, (iii) in any
transaction in respect of a security that is available to all holders of such
security on a pro rata basis, (iv) in connection with the grant or exercise of
stock or options to employees or directors of the Company or (v) in a public
offering pursuant to a registration statement filed with, and declared effective
by, the Securities and Exchange Commission pursuant to the Securities Act; and
further, the provisions of this Section 4 shall terminate upon the occurrence of
a Qualifying IPO.
(c) The Company will cause to be given to the Shareholders a written
notice setting forth the terms and conditions upon which the Shareholders may
purchase such shares or other securities (the "Preemptive Notice"). After
receiving a Preemptive Notice, a Shareholder wishing to exercise the preemptive
rights granted by this Section 4 must give notice to the Company in writing,
within fifteen (15) days after the date that such Preemptive Notice is deemed
given pursuant to Section 19, that such Shareholder irrevocably agrees to
purchase the shares or other securities offered pursuant to this Section 4 on
the date of sale to any member of the Bain Group or the SXI Group or any of such
member's respective Affiliates (the "Preemptive Reply"). If any Shareholder
fails to make a Preemptive Reply in accordance with this Section 4, shares or
other securities offered to such Shareholder in accordance with this Section 4
may thereafter, for a period not exceeding six months following the expiration
of such 15-day period, be issued, sold or subjected to rights or options to any
member of the Bain Group or the SXI Group or any of such member's respective
Affiliates at a price not less than ninety percent (90%) of the price at which
they were offered to the Shareholders. Any such shares or other securities not
so issued, sold or subjected to rights or options to any member of the Bain
Group or the SXI Group or any of such member's respective Affiliates during such
six-month period will thereafter again be subject to the preemptive rights
provided for in this Section 4.
5. Affiliate Transactions. Until the earlier of (i) the
consummation of a Qualifying IPO and (ii) the first date on which neither the
Bain Group nor the SXI Group holds twenty-five percent (25%) or more of the
Company's outstanding common stock and no member of the Bain Group or the SXI
Group has the right to designate directors pursuant to Section 1(a)(ii), the
Company shall not, and shall cause its Subsidiaries not to, enter into any
transaction with any member of the Bain Group or the SXI Group or any of their
respective Affiliates, except for any transaction with any such Person which is
not substantially less favorable to the Company or such Subsidiary as would be
obtainable by the Company or such Subsidiary at the time in a comparable
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arm's-length transaction with an unaffiliated Person; provided that any
transaction contemplated by (i) those certain advisory agreements dated the date
hereof between the Company and/or its Subsidiaries and each of Bain Capital,
Inc. and SXI Group LLC or their respective designees (it being agreed and
understood that the advisory fees paid or payable pursuant to paragraph 3
thereof which are not subject to the other terms and conditions of this Section
5 shall be capped in an amount equal to those described in the proviso to the
first sentence of paragraph 3 of each such advisory agreement) and (ii) that
certain Registration Agreement dated the date hereof between the Company and
certain of its stockholders, in any such case, shall not be subject to this
Section 5.
6. Legend; Securities Law Matters.
(a) Each certificate evidencing Shareholder Shares and each
certificate issued in exchange for or upon the Transfer of any Shareholder
Shares (if such shares remain Shareholder Shares as defined herein after such
Transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form (which legend shall be removed and new unlegended
certificates issued in the event that the shares represented thereby have been
registered pursuant to an effective registration statement filed under the
Securities Act):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON AUGUST __, 1999 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN TRANSFER AND VOTING RESTRICTIONS PURSUANT TO A
SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST __, 1999, AMONG THE ISSUER OF
SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S SHAREHOLDERS.
A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Shareholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Shareholder Shares in accordance with Section 8 hereof.
(b) In connection with the Transfer of any Shareholder Shares, the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the Transfer or proposed Transfer, together with, if so
requested by the Company, an opinion of counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such Transfer of Shareholder Shares may be effected without
registration of such Shareholder Shares under the Securities Act. In addition,
if the holder of the Shareholder Shares delivers to the
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Company an opinion of such counsel that no subsequent Transfer of such
Shareholder Shares shall require registration under the Securities Act, the
Company shall promptly upon such contemplated Transfer deliver new certificates
for such securities which do not bear the Securities Act legend set forth in
subparagraph (a). If the Company is not required to deliver new certificates for
such Shareholder Shares not bearing such legend, the holder thereof shall not
effect any Transfer of the same until the prospective transferee has confirmed
to the Company in writing its agreement to be bound by the conditions contained
in this subparagraph and subparagraph (a).
(c) Upon the request of any Shareholder, the Company shall promptly
supply to such Shareholder or its prospective transferees all information
regarding the Company required to be delivered in connection with a Transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
(d) If any Shareholder Shares become eligible for sale pursuant to
Rule 144(k) of the Securities and Exchange Commission or no longer constitute
"restricted securities" (as defined under Rule 144(a) of the Securities and
Exchange Commission), the Company shall, upon the request of the holder of such
Shareholder Shares, remove the legend set forth in subparagraph (a) from the
certificates for such securities.
7. Transfer. Prior to Transferring any Shareholder Shares (other
than in a Public Sale permitted pursuant to the terms and conditions of this
Agreement or in an Approved Sale) to any Person, the transferring Shareholder
shall cause the prospective transferee to execute and deliver to the Company and
the other Shareholders a counterpart of this Agreement and thereafter all
references to the transferring Shareholder shall be deemed to refer to the
transferee and all references to the transferring Shareholder's Group shall be
deemed to include the transferee, except that (i) the rights of the Hyundai
Group set forth in Section 1 and Section 2(c) shall only inure to the benefit of
Hyundai Electronics America and its Affiliates and shall not be transferable or
otherwise assignable and (ii) the rights of Intel set forth in Section 2(d)
shall only inure to the benefit of Intel and its Affiliates and shall not be
transferable or otherwise assignable.
8. Definitions.
"Affiliate" of a Shareholder means any other Person, entity or
investment fund controlling, controlled by or under common control with the
Shareholder and, in the case of a Shareholder which is a partnership or a
limited liability company, any partner or member, respectively, of the
Shareholder.
"Articles of Incorporation" means the Company's Articles of
Incorporation in effect at the time as of which any determination is being made.
"Bain Shares" means (i) any Capital Stock issued to the Bain Group
pursuant to the Recapitalization Agreement (whether directly or indirectly
through Merger Corp. or otherwise), (ii)
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any shares of Capital Stock otherwise acquired by the Bain Group and (iii) any
equity securities issued or issuable directly or indirectly with respect to the
Capital Stock referred to in clauses (i) or (ii) by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, or, in each case, any comparable
transaction.
"Capital Stock" means each class of the Company's capital stock.
"Common Stock" means the Company's Class L Common Stock, par value
$.01 per share, Class A Common Stock, par value $.01 per share, Class B Common
Stock, par value $.01 per share and/or any other class or series of common stock
hereafter created by the Company, as the context may require.
"Family Group" means a Shareholder's spouse and descendants (whether
or not adopted) and any trust solely for the benefit of the Shareholder and/or
the Shareholder's spouse and/or the Shareholder's descendants (by birth or
adoption), parents or dependents, any charitable trust the grantor of which is a
Shareholder and/or member of a Shareholder's Family Group, or any corporation or
partnership in which the direct and beneficial owner of all of the equity
interest is such Shareholder and/or a member of such Shareholder's Family Group.
"Financing Shares" means (i) any Capital Stock issued to CSFB or
Sankaty pursuant to that certain Stock Purchase Agreement, dated as of August 5,
1999, by and among the Company, CSFB and Sankaty, (ii) any shares of Capital
Stock otherwise acquired by CSFB or Sankaty and (iii) any equity securities
issued or issuable directly or indirectly with respect to the Capital Stock
referred to in clauses (i) or (ii) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, or, in each case, any comparable transaction.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"Hyundai Shares" means (i) any Capital Stock issued to the Hyundai
Group pursuant to the Recapitalization Agreement, (ii) any shares of Capital
Stock otherwise acquired by the Hyundai Group and (iii) any equity securities
issued or issuable directly or indirectly with respect to the Capital Stock
referred to in clauses (i) or (ii) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, or, in each case, any comparable transaction.
"Independent Third Party" means any Person who (together with its
Affiliates), immediately prior to the contemplated transaction, does not own in
excess of ten percent (10%) of the Common Stock on a fully-diluted basis (a "10%
Owner"), who is not controlling, controlled by or under common control with any
such 10% Owner and who is not the spouse, descendant (by birth
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<PAGE>
or adoption), parent or dependent of any such 10% Owner or a trust for the
benefit of such 10% Owner and/or such other Persons.
"Initial Public Offering" means a public offering and sale of the
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, if immediately thereafter the Company has publicly held
Common Stock listed on a national securities exchange or the NASD automated
quotation system.
"Intel Shares" means (i) any Capital Stock issued to Intel pursuant to
that certain Stock Purchase Agreement, dated as of August 5, 1999, by and among
the Company and Intel (the "Purchase Agreement"), (ii) any shares of Capital
Stock otherwise acquired by Intel and (iii) any equity securities issued or
issuable directly or indirectly with respect to the Capital Stock referred to in
clauses (i) or (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, or, in each case, any comparable transaction.
"Merger Corp." means ChipPAC Merger Corp., a Delaware corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or other entity, or a government or any
branch, department, agency, political subdivision or official thereof.
"Public Sale" means any sale of Shareholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
(other than Rule 144(k)), adopted under the Securities Act.
"Qualifying IPO" has the meaning assigned in Section 1(c).
"Recapitalization Agreement" means that certain Agreement and Plan of
Recapitalization and Merger, dated as of March 13, 1999, as amended, by and
among the Company, Hyundai Electronics Industries Co., Ltd., Hyundai Electronics
America and Merger Corp.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Preferred Stock" means the Company's Series B Preferred Stock,
par value $.01 per share.
"Shareholder Shares" means the Bain Shares, the SXI Shares, the Intel
Shares, the Hyundai Shares and the Financing Shares. For purposes of this
Agreement, each Shareholder who holds options or warrants to acquire shares of
Capital Stock shall be deemed to be the holder of all Shareholder Shares
issuable (at the time of such determination) upon the exercise of such options
or warrants. As to any particular shares constituting Shareholder Shares, such
shares will cease to
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<PAGE>
be Shareholder Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, or (y) sold to the public through a broker, dealer or market
maker pursuant to Rule 144 (or by any similar provision then in force) under the
Securities Act, in each case in conformity with the terms and conditions of this
Agreement.
"Subsidiary" means with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association, limited
liability company or other business entity, a majority of the partnership,
membership or other similar ownership interests thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business entity gains
or losses or shall be or control the managing director or general partner of
such partnership, association or business entity.
"Sub Board" has the meaning assigned in Section 1(a)(iii).
"SXI" means SXI Group LLC, a Delaware limited liability company.
"SXI Group" means SXI; Billig Family Limited Partnership; Frederick K.
Minturn; Citicorp Venture Capital, Ltd.; their respective Affiliates; their co-
investment partnerships; in connection with a co-investment, their respective
employees, directors, and internal, full-time consultants, any member of any of
their respective Family Groups, and any trust or partnership of which their
respective employees, directors, and internal, full-time consultants are the
sole beneficiaries in connection with a co-investment (any such trust or
partnership, a "Co-Investment Vehicle"), and the partners and beneficiaries of
such Co-Investment Vehicle as a distribution in-kind; any transferee of any of
the foregoing in order to resolve a Regulatory Problem if, (x) after taking
commercially reasonable actions with the cooperation of the Company, such person
is unable to restructure its ownership of Shareholder Shares in a manner that
avoids a Regulatory Problem and in a manner which is not adverse to such person,
and (y) giving notice to the Company, such person has determined that such
Regulatory Problem may not be avoided; and any other transferee of any of the
foregoing so long as the aggregate SXI Shares held by all such transferees
pursuant to this clause do not exceed 10% of the SXI Shares. "Regulatory
Problem" means, with respect to any person, any set of facts or circumstances
wherein it has been asserted by any governmental authority (or such person or
any of its Affiliates believes in good faith that there is a substantial risk of
such assertion) that such person is not entitled to hold, or exercise any
significant right, with respect to, the Shareholder Shares held by such person
because of such person's regulatory status.
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<PAGE>
"SXI Shares" means (i) any Capital Stock issued to the SXI Group
pursuant to the Recapitalization Agreement (whether directly or indirectly
through Merger Corp. or otherwise), (ii) any shares of Capital Stock otherwise
acquired by the SXI Group and (iii) any equity securities issued or issuable
directly or indirectly with respect to the Capital Stock referred to in clauses
(i) or (ii) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, or, in each case, any comparable transaction.
9. Financial Statements and Other Information.
(a) The Company will deliver to each holder of Shareholder Shares
(provided that for purposes of this Section 9, delivery to Hyundai Electronics
America (in the case of the Hyundai Group), Bain Capital, Inc. (in the case of
the Bain Group), Citicorp Venture Capital, Ltd. (in the case of the SXI Group),
Credit Suisse First Boston Corporation (in the case of CSFB) and Sankaty High
Yield Asset Partners, L.P. (in the case of Sankaty) shall be deemed effective
delivery to each member of such Group):
(i) no later than forty-five (45) days after the end of each
quarterly accounting period of the Company in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the
beginning of the fiscal year to the end of such quarter, and unaudited
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such quarterly period, setting forth in each case comparisons to the
Company's annual budget, and to the corresponding period in the preceding
fiscal year (all of which statements shall be prepared in accordance with
GAAP); and
(ii) no later than one hundred twenty (120) days after the end of
each fiscal year of the Company, consolidated statements of income and cash
flows of the Company for such fiscal year, and consolidated balance sheets
of the Company as of the end of such fiscal year, setting forth in each
case comparisons to the Company's annual budget, and to the preceding
fiscal year, all prepared in accordance with GAAP, and accompanied by an
unqualified opinion of PriceWaterhouseCoopers or such other independent
accounting firm of recognized national standing approved by the Board.
(b) As long as any member of the SXI Group owns any Capital Stock, the
Company shall notify the SXI Group (i) at least fifteen (15) days prior to
taking any action after which the number of record holders of the Company's
voting stock would be increased from fewer than fifty (50) to fifty (50) or
more, and (ii) of any other action or occurrence after which the number of
record holders of the Company's voting stock was increased (or would increase)
from fewer than fifty (50) to fifty (50) or more, as soon as practicable after
the Company becomes aware that such other action or occurrence has occurred or
is proposed to occur.
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<PAGE>
(c) Promptly after the end of each fiscal year (but in any event prior
to August 31 of each year) the Company shall deliver to the SXI Group a written
assessment of the economic impact of the SXI Group's investment in the Company,
specifying the full-time equivalent jobs created or retained in connection with
the investment, the impact of the investment on the businesses of the Company in
terms of expanded revenue and taxes, and other economic benefits resulting from
the investment, including but not limited to, technology development or
commercialization, minority business development, urban or rural business
development, expansion or exports.
(d) Prior to or after the Closing, the Company shall, if requested by
the SXI Group, execute Forms 480 ("Size Status Declaration") and 652-D
("Assurance of Compliance") of the Small Business Administration and any other
documents that may be required by the Small Business Administration or any other
governmental agency having jurisdiction over the activities of a member of the
SXI Group, or which a member of the SXI Group may reasonably require in
connection therewith.
10. Inspection Rights. The Company shall permit any representatives
designated by any holder of Shareholder Shares, upon reasonable notice and
during normal business hours, to examine all Board minutes of the Company and
its Subsidiaries (including all minutes of all Board committees of the Board of
Directors of the Company and its Subsidiaries), shareholder meeting minutes and
stock ledgers of the Company and its Subsidiaries.
11. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Shareholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Shareholder Shares as the owner
of such shares for any purpose.
12. Funding Obligations. No provision of this Agreement shall
require any Shareholder or Group or any of their respective Affiliates to
provide any future funding or any other financial support to the Company or any
of its Subsidiaries.
13. Amendment and Waiver. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and (i) the holders of a majority of the Bain
Shares, (ii) the holders of a majority of the SXI Shares, (iii) the holders of a
majority of the Hyundai Shares and (iv) the holders of a majority of Intel
Shares; provided that in the event that such amendment or waiver would adversely
treat a Shareholder or Group in a manner different from any other holders of
Shareholder Shares, then such amendment or waiver will require the consent of
such adversely treated holder or the holders of a majority of the Shareholders
Shares of such adversely treated Group. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
19
<PAGE>
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
16. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its successors and assigns and the Shareholders and any
subsequent holders of Shareholder Shares and the respective successors and
assigns of each of them, so long as they hold Shareholder Shares. If a party
hereto ceases to own any Shareholder Shares, such party will no longer be deemed
to be a Shareholder for purposes of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
18. Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and any Shareholder shall have the right to
injunctive relief, in addition to all of its rights and remedies at law or in
equity, to enforce the provisions of this Agreement. Nothing contained in this
Agreement shall be construed to confer upon any Person who is not a signatory
hereto or any successor or assign of a signatory hereto any rights or benefits,
as a third party beneficiary or otherwise.
19. Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
sent by telecopy (with receipt confirmed) on a business day during regular
business hours of the recipient (or, if not, on the next succeeding business
day) or three business days after sent by reputable overnight express courier
(charges prepaid), at the address listed below or at any address listed in the
Company's records in case of any Shareholder not so listed herein.
20
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If to the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: CEO
Facsimile: (408) 486-5914
If to HEA:
c/o Hyundai Electronics America
3101 North First Street
San Jose, California 95134
U.S.A.
Attention: Dr. C.S. Park
Facsimile: (408) 232-8101
With a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
U.S.A.
Attention: Rod J. Howard
Facsimile: (650) 496-2777
21
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If to Intel:
-----------
c/o Intel Corporation
2200 Mission College Boulevard
RN6-46
Santa Clara, California 95052
U.S.A.
Attention: M&A Portfolio Manager
Facsimile: (408) 765-0569
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
1530 Page Mill Road
Palo Alto, California 94304-1125
Attention: Lawrence Calof
Facsimile: (650) 849-5333
If to any member of the Bain Group:
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
U.S.A.
Attention: David Dominik
Edward Conard
Prescott Ashe
Facsimile: (617) 572-3274
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
U.S.A.
Attention: Jeffrey C. Hammes, P.C.
Gary M. Holihan
Facsimile: (312) 861-2200
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If to any member of the SXI Group:
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
U.S.A.
Attention: Michael A. Delaney
Paul C. Schorr
Facsimile: (212) 888-2940
With a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
U.S.A.
Attention: G. Daniel O'Donnell
Geraldine A. Sinatra
Facsimile: (215) 994-2222
20. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. THE CORPORATE
LAW OF THE STATE OF CALIFORNIA WILL GOVERN ALL ISSUES CONCERNING THE RELATIVE
RIGHTS OF THE COMPANY AND ITS SHAREHOLDERS. ALL OTHER ISSUES CONCERNING THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE STATE OF CALIFORNIA. EACH PARTY HERETO HEREBY SUBMITS TO THE CO-
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND OF ANY CALIFORNIA STATE COURT SITTING IN SAN
FRANCISCO, CALIFORNIA OVER ANY LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY
OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN. EACH PARTY HERETO HEREBY WAIVES THE NECESSITY FOR PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED),
WITH A COPY ALSO BEING SENT BY FACSIMILE (WITH RECEIPT CONFIRMED), IN EACH CASE
DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH IN, AND WITH COPIES SENT AS
REQUIRED BY, SECTION 19 ABOVE, AND SERVICE SO
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MADE SHALL BE DEEMED TO BE COMPLETED ON THE DATE OF ACTUAL RECEIPT. EACH PARTY
HERETO HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID. NOTHING IN THIS
SECTION 20 WILL PROHIBIT PERSONAL SERVICE IN LIEU OF THE SERVICE BY MAIL
CONTEMPLATED HEREIN.
21. Delivery by Facsimile. This Agreement and any signed agreement
or instrument entered into in connection herewith or contemplated hereby, and
any amendments hereto or thereto, to the extent signed and delivered by means of
a facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation of a contract and each such party forever waives any such defense.
22. Arbitration Procedure.
(a) The parties agree that they will attempt to settle any claim or
controversy arising out of this Agreement through good faith negotiations in the
spirit of mutual cooperation between senior business executives with authority
to resolve the controversy.
(b) Any dispute that cannot be resolved by the parties through good
faith negotiations within 30 days of the commencement of the controversy will
then, upon the written request of any party, be resolved by binding arbitration
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by a sole arbitrator who is a retired federal judge
resident in the State of California. To the extent not governed by such rules,
such arbitrator shall be directed by the parties to set a schedule for
determination of such dispute that is reasonable under the circumstances. Such
arbitrator shall be directed by the parties to determine the dispute in
accordance with this Agreement and the substantive rules of law (but not the
rules of procedure or evidence) that would be applied by a federal court. The
arbitration will be conducted in the English language in San Francisco,
California. Judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction.
(c) Nothing contained in this Section 22 shall prevent any party from
resorting to judicial process if injunctive or other equitable relief from a
court is available to prevent irreparable injury to one party or to others or to
the extent no adequate remedy is available at law. The use of arbitration
procedures will not be construed under the doctrine of laches, waiver or
estoppel to affect adversely any party's right to assert any claim or defense.
24
<PAGE>
23. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
24. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
25. Additional Hyundai Information and Inspection Rights. In
addition to any other rights set forth in this Agreement, during the Earn-Out
Period (as defined in Section 2.5 of the Recapitalization Agreement) (subject to
early termination of the rights set forth in this Section 25 upon payment of the
Earn-Out Maximum (as defined in the Recapitalization Agreement)):
(i) the Company will deliver to Hyundai Electronics America, copies
of the Company's annual operating and annual capital budgets and all material
modifications thereto, after review and approval of such budgets by the Board;
and
(ii) the Company shall permit representatives designated by Hyundai
Electronics America, upon reasonable notice and during normal business hours,
and in a manner which will not materially disrupt the conduct of the Company's
business, to examine the Company's books of account and records, to discuss the
affairs, finances and accounts of the Company with its officers, and to inspect
and receive such other information as Hyundai Electronics America may reasonably
request.
All documents and information furnished by or on behalf of the Company
to Hyundai Electronics America shall be subject to the terms of the
confidentiality agreement set forth in Section 12.5 of the Recapitalization
Agreement as if fully set forth in this Agreement.
[the rest of this page is intentionally left blank]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement on the day and year first above written.
CHIPPAC, INC.
By: /s/ Gary Breton
_______________________________
Its: _______________________________
THE HYUNDAI GROUP:
HYUNDAI ELECTRONICS AMERICA
By: /s/ Baxon S. Kim
_______________________________
Its: _______________________________
INTEL:
INTEL CORPORATION
By: /s/ Arvind Sodhani
_______________________________
Its: Vice President and Treasurer
_______________________________
<PAGE>
FINANCING SOURCES:
CSFB:
CHIPPAC EQUITY INVESTORS LLC
By: Merchant Capital, Inc.
Its: Managing Member
By:
_______________________________
Its: Vice President
_______________________________
SANKATY:
SANKATY HIGH YIELD ASSET PARTNERS, L.P.
By:
_______________________________
Its: Managing Director
_______________________________
THE BAIN GROUP:
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/ David Dominik
_______________________________
A Managing Director
BCIP ASSOCIATES II
By: /s/ David Dominik
_______________________________
A General Partner
<PAGE>
BCIP ASSOCIATES II-B
By: /s/ David Dominik
________________________________
A General Partner
BCIP ASSOCIATES II-C
By: /s/ David Dominik
________________________________
A General Partner
BCIP TRUST ASSOCIATES II
By: Bain Capital, Inc.
Its: General Partner
By: /s/ David Dominik
________________________________
A Managing Director
BCIP TRUST ASSOCIATES II-B
By: Bain Capital, Inc.
Its: General Partner
By: /s/ David Dominik
________________________________
A Managing Director
PEP INVESTMENTS PTY. LTD
By: /s/ David Dominik
_______________________________
Its: _______________________________
<PAGE>
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Hammes
____________________________________
A General Partner
RANDOLPH STREET PARTNERS 1998 DIF, LLC
By: /s/ Jeffrey Hammes
_______________________________________
Its: _______________________________________
THE SXI GROUP:
SXI GROUP LLC
By: /s/ Paul C. Schorr IV
_______________________________________
Its: Vice President and Assistant Secretary
_______________________________________
BILLIG FAMILY LIMITED PARTNERSHIP
By: /s/ William Billig
_______________________________________
Its: _______________________________________
/s/ Frederick K. Minturn
_______________________________________
Frederick K. Minturn
<PAGE>
SCHEDULE I
The Hyundai Group
-----------------
Hyundai Electronics America;
Hyundai Electronics Industries Co., Ltd. (to the extent that it becomes the
holder of any shares of Capital Stock pursuant to Section 2.3 or 2.5 of the
Recapitalization Agreement); and their respective permitted transferees pursuant
to Section 2(e)(i) of this Agreement.
<PAGE>
SCHEDULE II
The Bain Group
--------------
Bain Capital Fund VI, L.P.
BCIP Associates II
BCIP Associates II-B
BCIP Trust Associates II-C
BCIP Trust Associates II
BCIP Trust Associates II-B
PEP Investments Pty., Ltd.
Randolph Street Partners II
Randolph Street Partners 1999 DIF, LLC
<PAGE>
EXHIBIT 10.5
------------
AMENDED & RESTATED
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT (this "Agreement") is made and entered
into as of August 5, 1999, by and among ChipPAC, Inc., a California corporation
(the "Company"), each of the Persons listed on Schedule I attached hereto (the
"Hyundai Shareholders"), each of the Persons listed on Schedule II attached
hereto (the "Bain Shareholders"), the SXI Shareholders (as defined in Section 9
hereof), Intel Corporation, a Delaware corporation ("Intel"), ChipPAC Equity
Investors LLC ("CSFB"), an affiliate of Credit Suisse First Boston and Sankaty
High Yield Asset Partners, L.P. ("Sankaty"). The Hyundai Shareholders, the Bain
Shareholders, the SXI Shareholders, Intel, CSFB and Sankaty are collectively
referred to herein as the "Shareholders," and each as a "Shareholder". Unless
otherwise provided in this Agreement, capitalized terms used herein shall have
the meanings set forth in paragraph 9 hereof.
The Hyundai Shareholders, the Company and ChipPAC Merger Corp., a
Delaware corporation ("MergerCorp."), are parties to that certain Agreement and
Plan of Recapitalization and Merger, dated as of March 13, 1999, as amended (the
"Recapitalization Agreement"). Intel and the Company are parties to that
certain Stock Purchase Agreement, dated as of August 5, 1999 (the "Purchase
Agreement"). CSFB, Sankaty and the Company are parties to that certain Stock
Purchase Agreement dated as of August 5, 1999 (the "CSFB Purchase Agreement").
In connection with the transactions contemplated by each of the Recapitalization
Agreement, the Purchase Agreement and the CSFB Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the closing of the
transactions contemplated by each of the Recapitalization Agreement, the
Purchase Agreement and the CSFB Purchase Agreement.
The parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time, the holders of a majority
of the Bain Registrable Securities and the holders of a majority of the SXI
Registrable Securities may request registration under the Securities Act of all
or part of their Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations") or, if available, on Form S-2 or S-3 or
any similar short-form registration ("Short-Form Registrations"). The holders
of a majority of the Hyundai Registrable Securities may request registration
under the Securities Act of all or part of the Hyundai Registrable Securities
pursuant to a Long-Form Registration or a Short-Form Registration under the
circumstances and as set forth in paragraph 1(d) below. The holders of a
majority of the Intel Registrable Securities may request registration under the
Securities Act of all or part of the Intel Registrable Securities pursuant to a
Long-Form Registration or a Short-Form Registration under the circumstances and
as set forth in paragraph 1(e) below. Each request for a Demand Registration
shall specify the approximate number of Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
ten days after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of
<PAGE>
Registrable Securities and, subject to paragraph 1(f) below, will include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
receipt of the Company's notice. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations."
(b) Long-Form Registrations. The holders of a majority of the Bain
Registrable Securities and the holders of a majority of the SXI Registrable
Securities will be entitled to request unlimited Long-Form Registrations in
which the Company will pay all Registration Expenses. The Company will pay all
Registration Expenses in connection with any registration initiated as a Long-
Form Registration whether or not it has become effective. All Long-Form
Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
the Bain Registrable Securities and the holders of a majority of the SXI
Registrable Securities will be entitled to request unlimited Short-Form
Registrations in which the Company will pay all Registration Expenses. Demand
Registrations will be Short-Form Registrations whenever the Company is permitted
to use any applicable short form. After the Company has become subject to the
reporting requirements of the Securities Exchange Act, the Company will use its
best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) Hyundai Demand Registration Rights. At any time after the
Company's Common Stock is publicly traded on any national securities exchange or
quoted as a NASDAQ "National Market Security" and prior to the seventh
anniversary of the closing of the transactions contemplated by the
Recapitalization Agreement, the holders of a majority of the Hyundai Registrable
Securities will be entitled to request one Long-Form Registration in which the
Company will pay all Registration Expenses (the "Hyundai Demand Registration");
provided that the Company will not be obligated to effect such Hyundai Demand
Registration unless the holders of the Hyundai Registrable Securities request to
include at least 50% of the Hyundai Registrable Securities. The Hyundai Demand
Registration will be a Short-Form Registration if the Company is permitted to
use any applicable short form. A registration shall not count as the one
permitted Hyundai Demand Registration until it has become effective (unless such
registration has not become effective due solely to the fault of the holders
requesting such registration) and unless the holders of Hyundai Registrable
Securities are able to register and sell at least 75% of the Hyundai Registrable
Securities requested to be included in such registration; provided, however,
that the holders of Hyundai Registrable Securities shall not be entitled to
request more than one such registration in any six month period even if the
previous registration did not count as the one permitted Hyundai Demand
Registration. Nevertheless, the Company shall pay all Registration Expenses in
connection with any registration that was initiated as an Hyundai Demand
Registration whether or not it has become effective and whether or not such
registration has counted as the one permitted Hyundai Demand Registration.
(e) Intel Demand Registration Rights. At any time after the Company's
Common Stock is publicly traded on any national securities exchange or quoted as
a NASDAQ "National Market Security" and prior to the seventh anniversary of the
closing of the transactions contemplated by the Purchase Agreement, the holders
of a majority of the Intel Registrable Securities will be
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<PAGE>
entitled to request one Long-Form Registration in which the Company will pay all
Registration Expenses (the "Intel Demand Registration"); provided that the
Company will not be obligated to effect such Intel Demand Registration unless
the holders of the Intel Registrable Securities request to include at least 50%
of the Intel Registrable Securities. The Intel Demand Registration will be a
Short-Form Registration if the Company is permitted to use any applicable short
form. A registration shall not count as Intel's one permitted Intel Demand
Registration until it has become effective (unless such registration has not
become effective due solely to the fault of the holders requesting such
registration) and unless the holders of Intel Registrable Securities are able to
register and sell at least 75% of the Intel Registrable Securities requested to
be included in such registration; provided, however, that the holders of Intel
Registrable Securities shall not be entitled to request more than one such
registration in any six month period even if the previous registration did not
count as Intel's one permitted Intel Demand Registration. Nevertheless, the
Company shall pay all Registration Expenses in connection with any registration
that was initiated as an Intel Demand Registration whether or not it has become
effective and whether or not such registration has counted as Intel's one
permitted Intel Demand Registration.
(f) Priority on Demand Registrations. The Company will not include in
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of (i) the holders of a majority of the
Registrable Securities included in such registration, in the case of any Demand
Registration other than a Hyundai Demand Registration or an Intel Demand
Registration, (ii) the holders of a majority of the Hyundai Registrable
Securities in the case of a Hyundai Demand Registration and (iii) the holders of
a majority of the Intel Registrable Securities in the case of an Intel Demand
Registration. If a Demand Registration is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold therein without
adversely affecting the marketability of the offering, (i) in the case of any
Demand Registration other than a Hyundai Demand Registration or an Intel Demand
Registration, the Company will include in such registration prior to the
inclusion of any securities which are not Registrable Securities the number of
Registrable Securities requested to be included which in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering, pro rata among the respective holders thereof on the basis of the
number of shares of Registrable Securities owned by each such holder, (ii) in
the case of a Hyundai Demand Registration, the Company will include in such
registration (A) first, the securities the holders of the Hyundai Registrable
Securities propose to sell, pro rata among the respective holders thereof on the
basis of the number of shares of Registrable Securities owned by each such
holder, (B) second, the Registrable Securities requested to be included in such
registration by the other holders of Registrable Securities, pro rata among such
other holders on the basis of the number of shares of Registrable Securities
owned by each such holder and (C) third, other securities requested to be
included in such registration and (iii) in the case of an Intel Demand
Registration, the Company will include in such registration (A) first, the
securities the holders of the Intel Registrable Securities propose to sell, pro
rata among the respective holders thereof on the basis of the number of shares
of Registrable Securities owned by each such holder, (B) second, the Registrable
Securities requested to be included in such registration by the other holders of
Registrable Securities, pro rata among such other holders on the basis of the
number of shares of Registrable Securities owned by each such holder and (C)
third, other securities requested to be included in such registration.
-3-
<PAGE>
(g) Restrictions on Demand Registrations. The Company may postpone
for up to ninety days the filing or the effectiveness of a registration
statement for a Demand Registration if the Company and the holders of at least a
majority of the Registrable Securities agree that such Demand Registration would
reasonably be expected to have a material adverse effect on any proposal or plan
by the Company or any of its Subsidiaries to engage in any acquisition of assets
(other than in the ordinary course of business) or any merger, consolidation,
tender offer, reorganization or similar transaction; provided that in such
event, the holders of a majority of Registrable Securities requesting such
Demand Registration will be entitled to withdraw such request and, if such
request is withdrawn, the Company will pay all Registration Expenses in
connection with such registration; and provided further, that in the case of any
Intel Demand Registration, the Company shall only be permitted to effect two (2)
such non-consecutive postponements during any twelve-month period.
(h) Selection of Underwriters. The holders of a majority of the Bain
Registrable Securities and the holders of a majority of the SXI Registrable
Securities included in any Demand Registration (other than a Hyundai Demand
Registration or an Intel Demand Registration) will have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval, which will not be unreasonably withheld. The Company will
have the right to select the investment banker(s) and manager(s) to administer
any Hyundai Demand Registration, subject to the approval of a majority of the
Hyundai Registrable Securities included in any Hyundai Demand Registration,
which will not be unreasonably withheld. The Company will have the right to
select the investment banker(s) and manager(s) to administer any Intel Demand
Registration, subject to the approval of a majority of the Intel Registrable
Securities included in any Intel Demand Registration, which will not be
unreasonably withheld.
(i) Other Registration Rights. Except as provided in this Agreement,
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Registrable Securities.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities (including any proposed registration of the Company's
securities by any third party) under the Securities Act (other than pursuant to
a Demand Registration or a registration on Form S-4 or S-8 or any successor or
similar forms) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), whether or
not for sale for its own account, the Company will give prompt written notice to
all holders of Registrable Securities of its intention to effect such a
registration and, subject to paragraph 2(c) and (d) below, will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
-4-
<PAGE>
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder and (iii) third, other securities requested to
be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration and the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of shares owned by each such holder
and (ii) second, other securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering shall be made by the Company and must be approved by the holders of
a majority of the Bain Registrable Securities and the holders of a majority of
the SXI Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such securities,
until a period of at least ninety days has elapsed from the effective date of
such previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities, options or rights convertible into
or exchangeable or exercisable for such securities, during the seven days prior
to and the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree; it being agreed that, with respect
to Intel, in the case of any underwritten Demand Registration or underwritten
Piggyback Registration other than the Company's Initial Public Offering, Intel
shall only be obligated to a lock-up during the seven days prior to and the 90-
day
-5-
<PAGE>
period beginning on the effective date of any such underwritten offering if
Intel then holds 5% or more of the Company's outstanding common stock (and, if
Intel then holds less than 5% of the Company's common stock, no such lock-up
shall be required in connection with any such underwritten offering, unless
Intel otherwise agrees).
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) to cause each holder of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Class A
Common and Class L Common held by a holder of Registrable Securities requesting
registration as to which the Company has received reasonable assurances that
only Registrable Securities will be distributed to the public), and pursuant
thereto the Company will as expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Securities and Exchange Commission a registration statement with respect to such
Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents will be subject to review
and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of either
(i) not less than six months (subject to extension pursuant to paragraph 7(b))
or, if such registration statement relates to an underwritten offering, such
longer period as in the opinion of counsel for the underwriters a prospectus is
required by law to be delivered in connection with sales of Registrable
Securities by an underwriter or dealer or (ii) such shorter period as will
terminate when all of the securities covered by such registration statement have
been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement (but in any
event not before the expiration of any longer period required under the
-6-
<PAGE>
Securities Act), and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney,
-7-
<PAGE>
accountant or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) obtain one or more comfort letters, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request (so long as such Registrable Securities constitute at least
10% of the securities covered by such registration statement); and
(m) provide a legal opinion of the Company's outside counsel, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration
-8-
<PAGE>
Expenses"), will be borne as provided in this Agreement, except that the Company
will, in any event, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the NASD automated
quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration (or two counsels, if such registration includes
holders of both Bain Registrable Securities and SXI Registrable Securities).
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered
for each seller.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person that controls such holder (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities, joint or
several, to which such holder or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue or alleged untrue statement of material fact contained (A) in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or (B) in any application or other document or
communication (in this paragraph 6 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify any securities covered by such registration statement under the "blue
sky" or securities laws thereof, or (ii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such holder and each such
director, officer and controlling person for any legal or any other expenses
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission, made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written information
prepared and furnished to the Company by such holder expressly for use therein
or by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will
-9-
<PAGE>
indemnify such underwriters, their officers and directors and each Person that
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify and hold harmless
the Company, its directors and officers and each other Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities, joint or several, to which such holder or any such
director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or in
any application or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
made in such registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information prepared and furnished
to the Company by such holder expressly for use therein, and such holder will
reimburse the Company and each such director, officer and controlling Person for
any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the obligation to indemnify will be individual to each
holder and will be limited to the net amount of proceeds received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
-10-
<PAGE>
7. Participation in Underwritten Registrations.
-------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such paragraph 4(e). If
the Company gives any such notice, the applicable time period mentioned in
paragraph 4(b) during which a Registration Statement is to remain effective will
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to this paragraph to and including the
date when each seller of a Registrable Security covered by such registration
statement has received the copies of the supplemented or amended prospectus
contemplated by paragraph 4(e).
8. Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to sell Registrable
Securities pursuant to Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Registrable Securities a written statement confirming the Company's compliance
with such requirements.
9. Definitions.
-----------
"Affiliate" shall have the meaning assigned to such term in the
Shareholders Agreement.
"Bain Registrable Securities" means (i) any shares of Common Stock
issued to the Bain Shareholders pursuant to the Recapitalization Agreement
(whether directly or indirectly through Merger Corp. or otherwise), (ii) any
equity securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other
-11-
<PAGE>
reorganization, including a recapitalization or exchange
and (iii) any other shares of Common Stock held by Persons holding securities
described in clause (i) or (ii) above; provided that in the event that pursuant
to such recapitalization or exchange, equity securities are issued which do not
participate in the residual equity of the Company ("Non-Participating
Securities"), such Non-Participating Securities will not be Registrable
Securities. As to any particular shares constituting Bain Registrable
Securities, such shares will cease to be Bain Registrable Securities when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
"Class A Common" means the Class A Common Stock, par value $.01 per
share, of the Company.
"Class L Common" means the Class L Common Stock, par value $.01 per
share, of the Company.
"Common Stock" means both Class A Common and Class L Common.
"Family Group" shall have the meaning assigned to such term in the
Shareholders Agreement.
"Financing Source Registrable Securities" means (i) any shares of
Common Stock issued to CSFB or Sankaty pursuant to the CSFB Purchase Agreement,
(ii) any equity securities issued or issuable directly or indirectly with
respect to the securities referred to in clause (i) by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, including a recapitalization or
exchange and (iii) any other shares of Common Stock held by Persons holding
securities described in clause (i) or (ii) above; provided that in the event
that pursuant to such recapitalization or exchange, Non-Participating Securities
are issued, such Non-Participating Securities will not be Registrable
Securities. Notwithstanding anything in this Agreement to the contrary, shares
of Common Stock or other equity securities of the Company that would otherwise
constitute Financing Source Registrable Securities shall not be considered
Financing Source Registrable Securities (and thus, not Registrable Securities)
if the holder thereof can sell, in any three (3) month period, all of such
holder's shares or securities, as applicable, without registration pursuant to
Rule 144 under the Securities Act. As to any particular shares constituting
Financing Source Registrable Securities, such shares will cease to be Financing
Source Registrable Securities when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or by similar provision then in force) under
the Securities Act.
"Hyundai Registrable Securities" means (i) any shares of Common Stock
received by the Hyundai Shareholders pursuant to the Recapitalization Agreement,
(ii) any equity securities issued or issuable directly or indirectly with
respect to the securities referred to in clause (i) by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, including a recapitalization or
exchange and (iii) any other shares of Common Stock held by Persons holding
securities described in clause (i) or (ii)
-12-
<PAGE>
above; provided that in the event that pursuant to such recapitalization or
exchange, Non-Participating Securities are issued, such Non-Participating
Securities will not be Registrable Securities. As to any particular shares
constituting Hyundai Registrable Securities, such shares will cease to be
Hyundai Registrable Securities when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or by similar provision then in force) under
the Securities Act.
"Initial Public Offering" means a public offering and sale of the
Common Stock pursuant to an effective registration statement under the
Securities Act, if immediately thereafter the Company has publicly held Common
Stock listed on a national securities exchange of the NASD automated quotation
system.
"Intel Registrable Securities" means (i) any shares of Common Stock
issued upon conversion of the Class A Preferred Stock, par value $.01 per share
issued pursuant to the Purchase Agreement, (ii) any shares of Common Stock
issued upon exercise of all or any portion of the Warrant issued pursuant to the
Purchase Agreement, (iii) any equity securities issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) or (ii) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
including a recapitalization or exchange and (iv) any other shares of Common
Stock held by Persons holding securities described in clause (i), (ii) or (iii)
above; provided that in the event that pursuant to such recapitalization or
exchange, Non-Participating Securities are issued, such Non-Participating
Securities will not be Registrable Securities. Notwithstanding anything in this
Agreement to the contrary, shares of Common Stock or other equity securities of
the Company that would otherwise constitute Intel Registrable Securities shall
not be considered Intel Registrable Securities (and thus, not Registrable
Securities) if the holder thereof can sell, in any three (3) month period, all
of such holder's shares or securities, as applicable, without registration
pursuant to Rule 144 under the Securities Act. As to any particular shares
constituting Intel Registrable Securities, such shares will cease to be Intel
Registrable Securities when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, or (y) sold to the public through a broker, dealer or market
maker pursuant to Rule 144 (or by similar provision then in force) under the
Securities Act.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Registrable Securities" means collectively the Hyundai Registrable
Securities, the Intel Registrable Securities, the Bain Registrable Securities,
the SXI Registrable Securities and the Financing Source Registrable Securities.
For purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to acquire such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
-13-
<PAGE>
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Shareholder Shares" shall have the meaning assigned to such term in
the Shareholders Agreement.
"Shareholders Agreement" means the Shareholders Agreement, dated of
even date herewith, by and among the Company and the Shareholders.
"SXI Registrable Securities" means (i) any shares of Common Stock
issued to the SXI Shareholders pursuant to the Recapitalization Agreement
(whether directly or indirectly through Merger Corp. or otherwise), (ii) any
equity securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange
and (iii) any other shares of Common Stock held by Persons holding securities
described in clause (i) or (ii) above; provided that in the event that pursuant
to such recapitalization or exchange, Non-Participating Securities are issued,
such Non-Participating Securities will not be Registrable Securities. As to any
particular shares constituting SXI Registrable Securities, such shares will
cease to be SXI Registrable Securities when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"SXI Shareholders" means SXI Group LLC, a Delaware limited liability
company; Billig Family Limited Partnership; Frederick K. Minturn; Citicorp
Venture Capital, Ltd.; their respective Affiliates; their co-investment
partnerships; in connection with a co-investment, their respective employees,
directors, and internal, full-time consultants, any member of any of their
respective Family Groups, and any trust or partnership of which their respective
employees, directors, and internal, full-time consultants are the sole
beneficiaries in connection with a co-investment (any such trust or partnership,
a "Co-Investment Vehicle"), and the partners and beneficiaries of such Co-
Investment Vehicle as a distribution in-kind; any transferee of any of the
foregoing in order to resolve a Regulatory Problem if, (x) after taking
commercially reasonable actions with the cooperation of the Company, such person
is unable to restructure its ownership of Shareholder Shares in a manner that
avoids a Regulatory Problem and in a manner which is not adverse to such person,
and (y) giving notice to the Company, such person has determined that such
Regulatory Problem may not be avoided; and any other transferee of any of the
foregoing so long as the aggregate SXI Registrable Securities held by all such
transferees pursuant to this clause do not exceed 10% of the SXI Registrable
Securities. "Regulatory Problem" means, with respect to any person, any set of
facts or circumstances wherein it has been asserted by any governmental
authority (or such person or any of its Affiliates believes in good faith that
there is a substantial risk of such assertion) that such person is not entitled
to hold, or exercise any significant right, with respect to, the Shareholder
Shares held by such person because of such person's regulatory status.
-14-
<PAGE>
10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; but if such amendment or waiver would treat a holder or group of
holders of Registrable Securities in a manner different from any other holders
of Registrable Securities, then such amendment or waiver will require the
consent of such holder or the holders of a majority of the Registrable
Securities of such group adversely treated.
(e) Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement that are for the
benefit of the holders of Registrable Securities (or any portion thereof) as
such will be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities (or of such portion thereof), subject to the provisions
respecting the minimum numbers or percentages of shares of Registrable
Securities (or of such portion thereof) required in order to be entitled to
certain rights, or take certain actions, contained herein.
(f) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
-15-
<PAGE>
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. All issues concerning the enforceability, validity
and binding effect of this Agreement will be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
California or any other jurisdiction) that would cause the application of the
law of any jurisdiction other than the State of California.
(j) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service. Such notices, demands and other communications shall
be sent to the addresses indicated below or, if no address is so indicated for
any particular Shareholder, at the address listed in the Company's records:
If to the Company:
-----------------
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: CEO
Facsimile: (408) 486-5914
If to any of the Hyundai Shareholders:
-------------------------------------
c/o Hyundai Electronics America
3101 North First Street
San Jose, California 95134
U.S.A.
Attention: Dr. C.S. Park
Facsimile: (408) 232-8101
With a copy to:
--------------
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
U.S.A.
Attention: Rod J. Howard
Facsimile: (650) 496-2777
-16-
<PAGE>
If to Intel:
-----------
c/o Intel Corporation
2200 Mission College Boulevard
RN6-46
Santa Clara, California 95052
U.S.A.
Attention: M&A Portfolio Manager
Facsimile: (408) 765-0569
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
1530 Page Mill Road
Palo Alto, California 94304-1125
Attention: Lawrence Calof
Facsimile: (650) 849-5333
If to any of the Bain Shareholders:
----------------------------------
c/o Bain Capital II, Inc.
One Embarcadero, Suite 2260
San Francisco, California 94111
Attention David Dominik
Prescott Ashe
Facsimile: (415) 627-1333
and to:
------
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
U.S.A.
Attention: Edward Conard
Facsimile: (617) 572-3274
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, P.C.
Gary M. Holihan
Facsimile: (312) 861-2200
-17-
<PAGE>
If to any of the SXI Shareholders:
---------------------------------
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
U.S.A.
Attention: Michael A. Delaney
Paul C. Schorr IV
Facsimile: (212) 888-2940
With a copy to:
--------------
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
U.S.A.
Attention: G. Daniel O'Donnell
Geraldine A. Sinatra
Facsimile: (215) 994-2222
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Agreement on
the day and year first above written.
CHIPPAC, INC.
By: /s/ Gary Breton
__________________________________
Its:__________________________________
THE HYUNDAI SHAREHOLDERS:
HYUNDAI ELECTRONICS AMERICA
By: /s Baxon S. Kim
__________________________________
Its:__________________________________
INTEL:
INTEL CORPORATION
By: /s/ Arvind Sodhani
__________________________________
Its: Vice President and Treasurer
__________________________________
<PAGE>
FINANCING SOURCES:
CSFB:
CHIPPAC EQUITY INVESTORS LLC
By: Merchant Capital, Inc.
Its: Managing Member
By:
__________________________________
Its: Vice President
__________________________________
SANKATY:
SANKATY HIGH YIELD ASSET
PARTNERS, L.P.
By:
__________________________________
Its: Managing Director
__________________________________
THE BAIN SHAREHOLDERS:
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/ David Dominik
__________________________________
A Managing Director
BCIP ASSOCIATES II
By: /s/ David Dominik
__________________________________
A General Partner
<PAGE>
BCIP ASSOCIATES II-B
By: /s/ David Dominik
__________________________________
A General Partner
BCIP ASSOCIATES II-C
By: /s/ David Dominik
__________________________________
A General Partner
BCIP TRUST ASSOCIATES II
By: Bain Capital, Inc.
Its: General Partner
By: /s/ David Dominik
__________________________________
A Managing Director
BCIP TRUST ASSOCIATES II-B
By: Bain Capital, Inc.
Its: General Partner
By: /s/ David Dominik
__________________________________
A Managing Director
PEP INVESTMENTS PTY., LTD.
By: /s/ David Dominik
__________________________________
Its:_________________________________
<PAGE>
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Hammes
__________________________________
A General Partner
RANDOLPH STREET PARTNERS
1998 DIF, LLC
By: /s/ Jeffrey Hammes
__________________________________
Its:_________________________________
<PAGE>
THE SXI SHAREHOLDERS:
SXI GROUP LLC
By: /s/ Paul C. Schorr IV
________________________________________
Its: Vice President and Assistant Secretary
_______________________________________
BILLIG FAMILY LIMITED PARTNERSHIP
By: /s/ William Billig
________________________________________
Its:
_______________________________________
/s/ Frederick Minturn
_____________________________________
Frederick K. Minturn
<PAGE>
SCHEDULE I
The Hyundai Shareholders
------------------------
Hyundai Electronics America and its permitted transferees
pursuant to Section 2(e)(i) of the Shareholders Agreement
Hyundai Electronics Industries Co., Ltd. to the extent that it becomes
the holder of any shares of Hyundai Registrable Securities pursuant to
Section 2.3 of the Recapitalization Agreement and its permitted transferees
pursuant to Section 2(e)(i) of the Shareholders Agreement
<PAGE>
SCHEDULE II
The Bain Shareholders
---------------------
Bain Capital Fund VI, L.P.
BCIP Associates II
BCIP Associates II-B
BCIP Trust Associates II-C
BCIP Trust Associates II
BCIP Trust Associates II-B
PEP Investments Pty., Ltd.
Randolph Street Partners II
Randolph Street Partners 1999 DIF, LLC
<PAGE>
Exhibit 10.6
------------
TRANSITION SERVICES AGREEMENT
-----------------------------
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into as of
August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., a
corporation incorporated under the laws of the Republic of Korea ("HEI"),
Hyundai Electronics America, a California corporation ("HEA," and collectively
with HEI, "Hyundai"), ChipPAC, Inc., a California corporation ("CPI"), ChipPAC
Korea Company Ltd., a corporation incorporated under the laws of the Republic of
Korea ("CPK"), Hyundai Electronics Company (Shanghai) Ltd., a company limited
under the laws of the People's Republic of China ("ChipPAC Shanghai I"), ChipPAC
Assembly and Test (Shanghai) Company, Ltd., a company limited under the laws of
the People's Republic of China ("ChipPAC Shanghai II," and collectively with
ChipPAC Shanghai I, "CPC"), ChipPAC Barbados Limited, a corporation incorporated
under the laws of Barbados ("Barbados"), ChipPAC Limited, a corporation
incorporated under the laws of the Territory of the British Virgin Islands
("BVI"). CPI, CPK, CPC, Barbados and BVI are collectively referred to herein as
the "Companies" and individually as a "Company." Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meaning given such
terms in the Recapitalization Agreement (as defined in the Recitals below).
RECITALS:
--------
WHEREAS, HEI was the owner of all of the issued and outstanding shares of
capital stock of CPK and all of the outstanding equity interests of ChipPAC
Shanghai I; CPI was the owner of all of the outstanding equity interests of
ChipPAC Shanghai II; and HEA was the owner of all of the issued and outstanding
capital stock of CPI;
WHEREAS, pursuant to the transactions contemplated by that certain
Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999,
by and among HEI, HEA, CPI and ChipPAC Merger Corp., a Delaware corporation (as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, the "Recapitalization Agreement"), the capital structure of each of
CPK, CPC and CPI was reconstituted such that (i) each of CPK, CPC, Barbados and
BVI is now a direct or indirect wholly owned subsidiary of CPI and (ii) HEA now
holds a minority interest in CPI;
WHEREAS, prior to the consummation of the Recapitalization Transactions,
Hyundai and certain of its Affiliates provided certain administrative and other
services to the Companies in connection with the Companies' worldwide
semiconductor packaging and testing businesses (the "Business"); and
WHEREAS, Hyundai and the Companies recognize that it is advisable for
Hyundai and/or certain of its Affiliates to continue to provide certain
administrative and other services to the Companies for a transition period.
NOW, THEREFORE, the Companies and Hyundai hereby agree as follows:
<PAGE>
ARTICLE 1
SERVICES PROVIDED
-----------------
1.1 Transition Services. Upon the terms and subject to the conditions set
forth in this Agreement, Hyundai will, or will cause its Affiliates to, provide
to the Companies for the Business each of the services listed in Exhibit A,
which is attached hereto and made part of this Agreement (hereinafter referred
to individually as a "Transition Service," and collectively as the "Transition
Services"), during the time period for each Transition Service set forth on
Exhibit A (hereinafter referred to as the "Time Periods" for all of the
Transition Services, and the "Time Period" for each Transition Service).
1.2 Personnel. In providing the Transition Services, Hyundai and its
Affiliates, as they deem necessary or appropriate in their sole discretion, may
(a) use such personnel of Hyundai or its Affiliates and (b) employ the services
of third parties to the extent such third party services are routinely used to
provide similar services to Hyundai's or its Affiliates' business operations or
are reasonably necessary for the efficient performance of any of such Transition
Services.
1.3 Level of Transition Services.
----------------------------
(a) Hyundai and its Affiliates shall perform the Transition Services
exercising the same degree of care as they exercise in performing the same or
similar services for their own account, with priority equal to that provided to
their own business operations. Nothing in this Agreement shall require Hyundai
or any of its Affiliates to favor the Business over its own business operations.
(b) Unless otherwise specifically set forth in the Exhibits attached
hereto, it is the intention of the parties that a Company's level of use of any
Transition Service that such Company elects to use shall not be higher than the
level of use required by the Business prior to the date hereof. In no event
shall any Company be entitled to any new service or to increase its use of any
of the Transition Services above that level of use without the prior written
consent of Hyundai, which consent may be withheld by Hyundai in its sole
discretion.
1.4 No Obligation to Continue to Use Services.
-----------------------------------------
(a) Except as otherwise expressly set forth in the Exhibits attached
hereto, none of the Companies shall have any obligation to continue to use any
of the Transition Services, and any Company may delete any Transition Service
from the Transition Services that Hyundai is providing to such Company by giving
Hyundai not less than ten (10) business days' prior written notice of its desire
to delete any or all Transition Services provided to such Company.
(b) If any Transition Service is terminated by a Company, such Company may
not elect to reinstate such Transition Service.
-2-
<PAGE>
ARTICLE 2
COMPENSATION
------------
2.1 Consideration. As consideration for the Transition Services, the
Company to whom the Transition Service is provided (the "Receiving Company")
shall pay to Hyundai the amount specified for each Transition Service as set
forth in Exhibit A. Upon the deletion of any Transition Service in accordance
with paragraph 1.4 above, the compensation to be paid under this paragraph 2.1
shall be reduced by the amount specified for such deleted Transition Service.
2.2 Invoices. Each month during the term of this Agreement, Hyundai
shall submit one invoice (containing itemized entries) to the Receiving Company
for all Transition Services provided to such Company during that month. Such
monthly invoices shall be issued as promptly as practicable following the month
in which such services were rendered. Each invoice shall include itemization in
reasonable detail of the invoiced amounts. Upon request by the appropriate
Receiving Company, Hyundai will provide such further detail regarding any
amounts invoiced pursuant to this paragraph 2.1 as such Company may from time to
time reasonably request, including, without limitation, detail with respect to
any third party billing information relating to the Transition Services provided
under this Agreement. All invoices shall be sent to the appropriate Receiving
Company with a copy to CPI at the following address:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: Chief Financial Officer
Facsimile: (408) 486-5914
2.3 Payment of Invoices. The appropriate Receiving Company will pay all
amounts due pursuant to this Agreement within thirty (30) days after receipt
of each such invoice hereunder.
ARTICLE 3
CONFIDENTIALITY
---------------
3.1 Obligations. The obligations of confidentiality set forth in
Section 12.5 of the Recapitalization Agreement are hereby incorporated herein by
reference.
3.2 Effectiveness. The foregoing obligations of confidentiality
shall be in effect during the term of this Agreement and any extensions thereof
and for a period of three (3) years after the termination or expiration of this
Agreement.
ARTICLE 4
TERM AND TERMINATION
--------------------
-3-
<PAGE>
4.1 Term. This Agreement shall become effective on the date hereof
and shall remain in force until the expiration of the longest Time Period unless
all of the Transition Services are deleted by the Companies in accordance with
paragraph 1.4 above, or this Agreement is terminated under paragraph 4.2 below
prior to the end of such period.
4.2 Termination.
-----------
(a) If any of Hyundai or its Affiliates, on the one hand, or any of the
Companies, on the other hand (hereafter called the "Defaulting Party"), shall
fail to perform or default in the performance of any of its obligations under
this Agreement, the other party (hereinafter called the "Non-Defaulting Party")
may give written notice to the Defaulting Party specifying the nature of such
failure or default and stating that the Non-Defaulting Party intends to
terminate this Agreement if such failure or default is not cured within thirty
(30) days of such written notice. If any failure or default so specified is not
cured within such thirty (30) day period, the Non-Defaulting Party may elect to
immediately terminate this Agreement or any portion of the Transition Services
described on Exhibit A; provided that if the failure or default relates to a
dispute made in good faith by the Defaulting Party, the Non-Defaulting Party may
not terminate this Agreement pending the resolution of such dispute.
(b) Either Hyundai or the Companies may immediately terminate this
Agreement by a written notice to the other without any prior notice upon the
occurrence of any of the following events: (i) the other party enters into
proceedings in bankruptcy or insolvency; (ii) the other party shall make an
assignment for the benefit of creditors; (iii) a petition shall be filed against
the other party under a bankruptcy law, a corporate reorganization law, or any
other law for relief of debtors (or similar law in purpose or effect), which
petition has not been dismissed or discharged within sixty (60) days after the
filing thereof; (iv) the other party enters into liquidation or dissolution
proceedings; or (v) sale or transfer to an unaffiliated third party of a
majority of the assets or capital stock or voting power of CPI, whether by
merger, stock or asset purchase or otherwise. In addition, the Companies may
terminate the Export and Consulting Services on the terms and subject to the
conditions set forth in Exhibit A.
4.3 Survival of Certain Obligations. Without prejudice to the survival of
the other agreements of the parties, the following obligations shall survive the
termination of this Agreement: (a) for the period set forth therein, the
obligations of each party under Articles 3 and 4 and (b) Hyundai's right to
receive the compensation for the Transition Services delivered to the Companies
(as described in paragraph 2.1 above) incurred prior to the date of termination.
ARTICLE 5
MISCELLANEOUS
-------------
5.1 Amendments. This Agreement shall not be amended or modified
except in writing signed by the parties hereto.
-4-
<PAGE>
5.2 Successors and Assignment. This Agreement shall be binding and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party may assign any of its rights or duties pursuant to this
Agreement without the prior written consent of the other party hereto; provided
that any Company may assign its rights under this Agreement as collateral
security to any Company's or its Affiliates' financing sources.
5.3 Entire Agreement. This Agreement and the schedules and exhibits
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein.
5.4 Notices. Except as otherwise provided in paragraph 2.1 hereof
(with respect to delivery of invoices), any notice, demand or request required
or permitted to be given under the provisions of this Agreement shall be in
writing, including by facsimile, and shall be deemed to have been duly delivered
and received on the date of personal delivery, on the day after delivery to a
nationally recognized overnight courier service if sent by an overnight delivery
service for next morning delivery or when dispatched by facsimile transmission
(with the facsimile transmission confirmation being deemed conclusive evidence
of such dispatch) and shall be addressed to the following address, or to such
other address as any party may request, in the case of Hyundai, by notifying the
Companies, and in the case of the Companies, by notifying Hyundai:
To the Companies: ChipPAC Limited
Craigmuir Chambers
P.O. Box 71
Road Town, Tortola
British Virgin Islands
Attention: Richard Parsons
Facsimile: (284) 494-7906
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: Chief Financial Officer
Facsimile: (408) 486-5914
and
---
Copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes, P.C.
Gary M. Holihan
Fax: (312) 861-2200
-5-
<PAGE>
To Hyundai: Hyundai Electronics America
3101 North First Street
San Jose, California 95134
U.S.A.
Attention: Dr. C.S. Park
Facsimile: (408) 232-8101
and
---
Hyundai Electronic Industries, Co., Ltd.
San 136-1
Amri-ri, Bubal-eub
Ichon-si
Kyoungki-do, 467-71 Korea
Attention: Y.H. Kim, Chief Executive Officer
Copy to: Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
U.S.A.
Attention: Rod J. Howard
Facsimile: (650) 496-2777
5.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to a contract
executed and performed entirely in such state, without giving effect to the
conflicts of laws principles thereof and each of the parties hereto submits to
jurisdiction in any state or federal court located in the State of California
and waives any claim of improper jurisdiction or lack of venue in connection
with any claim or controversy which may be brought in connection with this
Agreement.
5.6 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
5.7 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
5.8 Counterparts. This Agreement may be executed in two or more
counterparts (any one of which may be by facsimile), each of which will be
deemed an original and all of which together will constitute one and the same
instrument.
-6-
<PAGE>
5.9 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity other than the parties hereto and their permitted successors or
permitted assigns, any rights or remedies under or by reason of this Agreement.
5.10 Reservation of Rights. Either party's waiver of any of its
remedies afforded hereunder or at law is without prejudice and shall not operate
to waive any other remedies which that party shall have available to it, nor
shall such waiver operate to waive the party's rights to any remedies due to a
future breach, whether of a similar or different nature.
5.11 Dealings with Third Parties. Neither party is, nor shall hold
itself out to others to be, vested with any power, authority, or right to bind
contractually or to act on behalf of the other party as its broker, agent, or
otherwise for the purpose of committing, selling, conveying, or transferring any
of the other party's assets or property, contracting for or in the name of the
other party, or making any representation binding upon such other party.
5.12 Conflict. In case of conflict between the terms and conditions
of this Agreement and any schedule or exhibit hereto, the terms and conditions
of such exhibit or schedule shall control and govern as it relates to the
Transition Service to which those terms and conditions apply.
5.13 Remedies. Each of the parties to this Agreement acknowledges and
agrees that the Companies would be damaged irreparably in the event any of the
covenants or agreements of Hyundai under this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties hereto agrees that the Companies shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement by Hyundai and to enforce specifically this Agreement and the terms
and provisions hereof in any competent court having jurisdiction over the
parties.
5.14 Arbitration. The terms and conditions of the arbitration
provisions of paragraph 10.8 of the Recapitalization Agreement are incorporated
herein by reference.
* * * * *
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Transition
Services Agreement as of the date first above written.
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
/s/ Dr. C.S. Park
By: ____________________________________
Name: Dr. C.S. Park
Title: Executive Vice President
HYUNDAI ELECTRONICS AMERICA
/s/ Dr. C.S. Park
By: ____________________________________
Name: Dr. C.S. Park
Title: President
CHIPPAC LIMITED
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
CHIPPAC, INC.
/s/ Gary Breton
By: ____________________________________
Gary Breton
Name: __________________________________
Title: _________________________________
CHIPPAC KOREA COMPANY LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
HYUNDAI ELECTRONICS COMPANY (SHANGHAI)
LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
<PAGE>
CHIPPAC ASSEMBLY AND TEST (SHANGHAI)
COMPANY, LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
CHIPPAC BARBADOS LIMITED
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
-9-
<PAGE>
EXHIBIT A
---------
SEE ATTACHED
<PAGE>
SERVICE TO BE PROVIDED: Transit Insurance.
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Fire & Marine to provide to the Companies transit insurance on inventory
and capital equipment shipped by CPK or CPC.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Transit Insurance to be provided, the
Receiving Company shall pay Hyundai Fire & Marine on a transaction basis at
Hyundai Fire & Marine's prevailing market insurance rates.
<PAGE>
SERVICE TO BE PROVIDED: Water Freight Services.
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Merchant Marine to provide to the Companies water freight service for
transport of raw materials and fixed assets between CPK and CPC.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Water Freight Services to be provided,
the Receiving Company shall pay Hyundai Merchant Marine on a transaction basis
at Hyundai Merchant Marine's prevailing market freight rates.
-12-
<PAGE>
SERVICE TO BE PROVIDED: Uniforms and Travel Services
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Department Store to provide uniforms and travel services for CPK's
employees.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Uniform and Travel Services to be
provided, CPK shall pay Hyundai Department Store the purchase order value (which
shall not be greater than market value) of the uniforms and the prevailing
market value of the travel services.
-13-
<PAGE>
SERVICE TO BE PROVIDED: Office Space in Japan
DESCRIPTION OF SERVICES: Hyundai shall cause Hyundai Electronics Japan to share
its current office space (or any replacement therefor) to house the Companies'
operation of the Business in Japan.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: The Office Space in Japan shall be made available based on the
Prorated Facility Cost. "Prorated Facility Cost" means Hyundai Electronics
Japan's actual out-of-pocket costs for (i) rent of the premises, (ii) electric,
gas and water utility charges for the premises and (iii) janitorial charges for
the premises, each prorated based upon a fraction, the numerator of which shall
be the number of employees performing services (on a full time basis) in
connection with the Business at the end of the preceding month and the
denominator of which shall be the number of total employees working at the
Office Space.
-14-
<PAGE>
SERVICE TO BE PROVIDED: Services of Employees in Japan
DESCRIPTION OF SERVICES: So long as the employees of Hyundai Electronics Japan
currently performing services for the Business remain employees of Hyundai
Electronics Japan, Hyundai shall cause Hyundai Electronics Japan to make such
persons available on a full time basis to perform services for the Business. At
the Companies' request, Hyundai shall further cause Hyundai Electronics Japan to
hire and retain up to three more employees to perform, on a full time basis,
other services for the Business as the Companies may designate; provided that
the obligation of Hyundai Electronics Japan in such capacity shall be limited
solely to serve as the employer of such employees and will not include the
obligation to recruit any such employee. Any work required in connection with
the recruitment of employees to perform services for the Business shall be the
responsibility of the Companies.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the services to be provided by the
employees mentioned above, the Receiving Company or its designee shall reimburse
Hyundai Electronics Japan an amount equal to the Employment Costs for each such
employee. "Employment Costs" means the actual out-of-pocket employment costs
incurred by Hyundai Electronics Japan with respect such employee with respect to
(i) salary and wages, (ii) employee reimbursement expenses and (iii) the
employer's portion of (A) all payroll taxes, (B) all retirement plan
contributions and (C) medical insurance premiums.
-15-
<PAGE>
SERVICE TO BE PROVIDED: Export and Consulting Services
DESCRIPTION OF SERVICES: During the term set forth below, the Companies shall
engage HEI (and/or an HEI Affiliate designated by HEI) to act as the exporter of
record for all of the Companies' exports out of Korea and, in connection
therewith, the Companies shall (and HEI and/or its Affiliates shall permit the
Companies to) use the Hyundai name for purposes of obtaining export permits and
customs certificates and reporting exports to government agencies and to third
parties (the "Export Reporting Services"), it being understood and agreed that
nothing in this sentence shall require HEI or any of its Affiliates to provide
greater Export Reporting Services than heretofore provided to ChipPAC, Inc.,
ChipPAC Korea and ChipPAC Shanghai by Hyundai Corporation. In addition, at the
Companies' request, HEI shall provide to the Companies (i) additional Export
Reporting Services (greater than those heretofore provided) and (ii) other
export-related consulting services through its headquarters and worldwide
overseas branches with respect to promotion, financing, advertising, collection
of payments, products repair service arrangements, local practices and other
functions related to the Business as the Companies may reasonably request (the
services in clauses (i) and (ii) collectively, the "Other Export-Related
Services"). The Export Reporting Services and the Other Export-Related Services
may be provided by HEI either directly or, in HEI's discretion, through one or
more of its Affiliates, at the direction of HEI, but HEI shall have
responsibility for seeing that such services are performed.
TIME PERIOD:
Export Reporting Services: HEI shall provide, and the Companies hereby engage
HEI to provide, the Export Reporting Services for the thirty-six (36) month
period commencing on the date of this Agreement, such period to be automatically
extended from year to year thereafter unless written notice of termination is
given not less than six (6) months prior to the end of such year; provided that
if the Companies reasonably determine that the continuation of such services
will deprive the Companies of an economic benefit with a value to the Companies
of more than one hundred thousand dollars ($100,000) per year (the "Threshold
Amount") that cannot otherwise be obtained as long as such services are provided
through HEI or its Affiliates, then prior to the expiration of such thirty-six
(36) month period or any extension thereof, (i) the Companies may give written
notice of such loss (which notice shall include the amount of such loss) to HEI;
(ii) HEI shall have the right (but not the obligation) to agree to compensate
the Companies for the full amount of such loss (without regard to the Threshold
Amount) and any ongoing losses that may be incurred by the Companies as a result
of continuing to receive such services from HEI or its Affiliates and shall
notify the Companies of its election within sixty (60) days after receipt of
notice from the Companies described in clause (i); and (iii) if HEI declines to
compensate the Companies for any such loss, then the Companies shall have the
right to terminate the Export Reporting Services upon three (3) months' written
notice to HEI.
Other Export-Related Services: HEI shall make available to the Companies, upon
request, the Other Export Related Services during the twelve (12) month period
following the date of this Agreement.
-16-
<PAGE>
COST OF SERVICE: In consideration of the Export and Consulting Services
(including both the Export Reporting Services and the Other Export-Related
Services) and upon presentation of a detailed invoice itemizing each service
provided and the time charges and out-of-pocket expenses incurred in providing
such service, the Receiving Company shall pay HEI an amount equal to the lesser
of (i) the actual cost of the Other Export-Related Services (consisting of the
prorated salary cost of employees devoted to providing such Other Export-Related
Services, plus actual out-of-pocket expenses incurred in providing such Other
Export-Related Services) and (ii) 0.25% of the declared value of the exported
goods with respect to which the Other Export-Related Services were provided.
-17-
<PAGE>
SERVICE TO BE PROVIDED: Other Services
DESCRIPTION OF SERVICES: Hyundai will, and will cause its Affiliates to,
provide to the Companies, upon the request of the Companies, any other services
not specifically set forth in this Agreement, to the extent such services were
provided by Hyundai or any of its Affiliates to the Business at any time during
the twelve month period ended on the Closing Date.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Other Services to be provided, the
Receiving Company shall reimburse Hyundai an amount equal to the out-of-pocket
costs paid by Hyundai to any third party in providing such services.
-18-
<PAGE>
Exhibit 10.7
------------
[Translation]
Lease Agreement
This Real Estate Agreement, entered on June 30, 1998 by and between the Lessor,
Hyundai Electronics Industries Co., Ltd. (the "Lessor"), and the Lessee, ChipPAC
Korea ("Lessee"), as follows:
Article 1. Description of Leased Premises
The real estate which is to be leased by the Lessor to the Lessee under this
Agreement ("Leased Premises") shall be as follows. The details and location are
indicated in particulars of the area of use and each drawing described in the
Attachment 1 through Attachment 3:
1. 32,250m/2/ of area which is described in the Attachment 1 within the
building of the semiconductor assembly factory locating in Ami-ri San
136-1. Pubal-eup, Icheon, Kyunggi-do. (area for exclusive use:
26,870m/2/, common area: 5,380m/2/)
2. 4,212m/2/ of area which is described in the Attachment 2 within the
Test House locating in Ami-ri San 136-1, Pubal-eup, Icheon, Kyunggi-
do. (area for exclusive use: 3,445m/2/, common area: 767m/2/)
3. Total 7,545m/2/ of the area which is described in the Attachment 3
within the Main Building locating in Bongmyung 2 dong 37-21, Heungduk-
ku, Chungju, Choongchungbuk-do and the area of the ancillary building.
4. 20,467m/2/ of area of the entire buildings 3, 4 and 5 of Chungwoon
Dormitory locating in Ami-ri San 136-1. Pubal-eup, Icheon, Kyunggi-do.
5. 2,855m/2/ of area of the dormitory building locating Bongmyung 2 dong
37-21, Heungduk-ku, Chungju, Choongchungbuk-do.
Article 2. Effect
(1) This Agreement shall become effective as of the Transfer Date under the
Business Transfer Agreement dated ____________, 1998 which has been
executed between the Lessor and the Lessee ("Effective Date").
<PAGE>
(2) Notwithstanding the foregoing provision, if all the licenses and approvals
necessary for the Lessee's use of the Leased Premises under this Agreement
(including all the licenses and approvals for registration of factory under
the Industrial Placement and Factory Construction Act) has not been
obtained by the Transfer Date under the Business Transfer Agreement, this
Agreement shall became effective from the date of completion of obtaining
of such licenses and approvals, and such date of completion of obtaining of
such licenses and approvals shall be deemed to be the Effective Date under
this Agreement.
Article 3. Term of Lease
(1) The term of lease under this Agreement shall be five (5) years from the
Effective Date of this Agreement.
(2) If the Lessor wishes to terminate this Agreement in the middle of the term
of this Agreement, it shall give a written notice to the Lessee twelve (12)
months prior to the date of the termination of this Agreement. If the
Lessee wishes to terminate this Agreement in the middle of the term of this
Agreement or the extended term, it shall give a written notice to the
Lessor six (6) months prior to the date of the termination of this
Agreement. However, despite this provision, the Lessor shall not terminate
this Agreement within three (3 )) years from the Effective Date of this
Agreement.
(3) The term of this lease as described in the previous Paragraph shall be
automatically renewed for one (1) year unless there is notice of rejecting
the renewal from a party three (3) months prior to the expiration of the
term. The conditions of the renewed lease during the renewed lease term
shall be the same as those of this Agreement unless there is any separate
agreement between the parties.
Article 4. Security Deposit and Monthly Rent
(1) The Parties shall agree not to give nor to receive any security deposit.
(2) The Lessee shall agree to pay Lessor a monthly rent calculated as provided
in the "Standards for Calculation of Monthly Rent" which is attached hereto
as the Attachment 4 by a separate agreement between both parties. However,
monthly rent is exclusive of the value added tax, and the value added tax
shall be borne by the Lessee.
(3) The monthly rent as provided in the previous Paragraph shall be deposited
to the account designated by the Lessor by the fifteenth (15th) day of each
month in cash. However, if the date of payment is a holiday, the monthly
rent shall be paid on the following day. In case that the term of the first
payment date after execution of this Agreement and the last
<PAGE>
monthly term of this Lease is less than one (1) month, the monthly rent for
the above term shall be calculated and paid on the number of days.
(4) If the Lessee fails to pay by the date of payment provided in the foregoing
Paragraph (3), the Lessee shall pay the default interest at the average
default interest rate of general loan of general commercial banks
additionally.
(5) Adjustment of Rent
1. Regular adjustment: The parties shall adjust monthly rent to be paid
in the following year by applying the "Standards for Calculation of
Monthly Rent" described in the Attachment 4 one (1) month prior to
the completion of each one (1) year period during the term of this
Lease.
2. Irregular adjustment: In case of any of the following events, both
parties may from time to time adjust monthly rent through agreement
by both parties.
A. If any and all taxes and public imposts to be borne by the
Lessor in connection with the Leased Premises is changed by 20%
or more in comparison with any and all taxes and public imposts
at the time of the calculation of final rent.
B. If interest rate of fixed deposit with maturity of one (1) year
of commercial banks is changed by 20% or more in comparison
with the interest rate at the time of the calculation of final
rent.
C. If the consumer price index published by the Bank of Korea is
changed by 20% or more in comparison with the consumer price
index at the time of the calculation of final rent.
D. If the value of the Leased Premises is changed by 20% or more
through change of publicly notified land price and revaluation
of assets by the Lessor.
3. If both parties fail to reach an agreement on the adjusted amount of
the rent in accordance with the foregoing Paragraphs (1) and (2), the
adjusted amount shall be based on appraisal by the Korea Appraisal
Board or professional appraisal institution agreed by the parties.
Article 5. Transfer, Sub-lease, Disposition and Registration of Lease Right
(1) The Lessee shall not assign its rights and obligations under this Agreement
to any third party and shall not sublease the whole or any part of the
Leased Premises to any third
<PAGE>
party without prior consent from the Lessor.
(2) The Lessor shall not sell or transfer the Leased Premises to any third
party during the term of this Lease. The Lessor shall not additionally
establish kun-mortgage, "yangdo dambo" and any other security (hereinafter
"Mortgage") on the Leased Premised without the Lessee's prior consent,
except for security, such as kun-mortgage which has already been
established on the Leased Premises.
(3) Notwithstanding the Lessor's covenant as described in the Paragraph (2), if
title of the Leased Premises is transferred, the Lessor shall take all
steps which is necessary for it to cause new owner to assume all
obligations as the Lessor under this Agreement. In addition, the Lessor
shall bear all expenses and costs arising in performing such obligations.
(4) If requested by the Lessee, the Lessor shall agree to complete the
registration for establishment of lease right upon the Leased Premises in
the name of the Lessee.
Article 6. Alteration in the Leased Premises
(1) The Lessee may, at its expense, alter the Leased Premises during the term
of this lease with prior consent of Lessor. In the event of any minor
alteration in which the original structure undergoes no change, the Lessee
may notify the Lessor thereof later.
A. Lay-out, installation or alteration which is necessary for the
business operation, such as installing partitions or lighting
facilities;
B. Installation of utilities such as telecommunications including
telephone, electricity, water supply or drainage;
C. Installation or attachment of signs and advertising materials within
the scope permitted by the relevant laws and regulations;
D. Other work which are necessary for the business activities within the
scope resulting in no significant change to the original structure of
the Leased Premises.
(2) The Lessee shall preserve, use and realize profit from, the Leased Premises
with due care during the term of this lease. In addition, upon altering the
Leased Premises, the Lessee shall comply with the relevant laws and
regulations.
Article 7. Maintenance of the Leased Premises
(1) The Lessor shall be liable for maintenance of any basic properties of the
Leased Premises
<PAGE>
(structure, fire preventive area, rooftop water proofing and exterior
decoration). In the event that such properties are to be repaired due to
their wear and tear, discoloration or functional difficulty, the Lessor
shall, at its expense, repair them. The expenses for repair and maintenance
of the building interior materials shall be borne by the Lessee.
(2) The Lessor shall be liable to maintain, preserve and repair the
electricity, water, air conditioning, sewage and waste water facilities,
steam related facilities and piping facilities all of which are installed
outside the Leased Premises since those facilities are essential for use of
the Leased Premises. The Lessee shall be liable to maintain, preserve and
repair the facilities which are installed inside the Leased Premises.
(3) The Lessee shall be liable to maintain, preserve and repair any facilities
which it has installed into or altered on the Leased Premises upon its
necessity.
(4) The Lessee may use the land owned by the Lessor for the purpose of use as
parking lot and other facilities attached to the Leased Premises within a
reasonable scope. However, the Lessee shall separately consult with the
Lessor on the terms and conditions of the use.
(5) In regard to the same building shared between Lessee and Lessor, the Lessee
shall permit the Lessor to use (have access to, store or load) the portion
of the Leased Premises leased by the Lessee to the extent that the Lessor
has a need to use the area.
Article 8. Insurance and Taxes and Public Imposts
(1) The Lessor shall, at its expense, take out an insurance in order to protect
the building used as factory, warehouse, dormitory and laboratory, and its
interior fixtures and facilities from fire, flood and other risks as the
Lessor deems necessary. However, at the Lessee's request, the Lessor shall
cause the Lessee to be the co-insured of the insurance, and the Lessee
shall bear the additional insurance premium incurred therefrom. The Lessee
shall, at its expense, take out the insurance in order to protect any
materials, products, machinery, equipment, furniture and other fixtures
which Lessee has installed or stored in the Leased Premises from fire,
flood or other risks which the Lessee deems necessary.
(2) The Lessor shall pay all taxes and public imposts imposed on the Leased
Premises. Any tax imposed on the business place shall be borne by the
Lessee. Upon a separate consultation, the Lessee shall pay for the
utilities and facilities related to use of the Leased Premises, including
that of telephone, electricity, heating, water and other similar
facilities.
Article 9. Indemnity
The Lessee shall not be liable for all losses and damage to the Lessor due to
Acts of God or any
<PAGE>
force majeure cause, including destruction, damage or loss of the Leased
Premises. The Lessor shall not be liable for all losses and damage to the Lessee
due to the same cause indicated above including destruction, damage or loss of
the Lessee's belongings installed or stored by the Lessee in the Leased
Premises.
Article 10. Termination
(1) In any of the following cases, the Lessor may terminate this Agreement by
giving two (2) week prior written notice to the Lessee:
A. When the Lessee delays payment of the monthly rent hereunder twice or
more, or when the Lessee commits a breach of any of its obligations
under this Agreement that is not remedied within 30 days from the
giving of written notice requiring said breach to be remedied;
B. When attachment, preliminary attachment, preliminary injunction or
coercive collection is executed against the Lessee or its properties;
C. When the Lessee transfers any significant portion of its assets or
businesses to a third party or such portion is merged into or
undertaken by a third party;
D. When the procedures of reorganization, composition, bankruptcy or
liquidation are executed against the Lessee, or when the Lessee or its
creditors apply for execution of such procedure;
E. When the relevant financial institutions have rejected to pay or
suspended the payment of, promissory notes or checks issued, endorsed,
undertaken or guaranteed the payment by the Lessee.
(2) Upon occurrence of any of the following causes, the Lessee may terminate
this Agreement by giving two (2) week prior written notice to the Lessor:
A. When the Lessor commits a breach of any of its obligations under this
Agreement that is not remedied within 30 days from giving a written
notice requiring said breach to be remedied;
B . When the procedures of reorganization, composition, bankruptcy or
liquidation are executed against the Lessor, or when the Lessor or its
creditors apply for execution of such procedure;
C. When the relevant financial institutions have rejected to pay or
suspended the payment by, promissory notes or checks issued, endorsed,
undertaken or guaranteed for payment by the Lessor.
<PAGE>
(3) Upon termination or expiration of this Agreement, the Lessee shall, at the
Lessor's request, immediately restore the Leased Premises to their original
condition and shape at its expense and then surrender them to the Lessor.
In addition, the Lessee shall deregister the registration of leasehold
right which has been established on the Leased Premises. If the Lessee
delays to surrender the Leased Premises, the Lessee agrees to pay the
amount equal to three times the monthly rent as set forth in Article 4 for
the delayed time as penalty.
(4) Upon termination or expiration of this Agreement, the Lessor shall not be
liable to purchase any and all portions of the Leased Premises newly
installed, altered or changed by the Lessee, nor to reimburse the expenses
to the Lessee.
Article 11. Compensation for Damage
(1) When either party breaches its obligation hereunder and causes damage to
the other party, the breaching party shall compensate the damage directly
incurred by the other party.
(2) When the Lessee, its employee, supplier or customer causes damage to the
Leased Premises or other property of the Lessor, the Lessee shall forthwith
notify the Lessor of it and compensate such damage incurred therefrom.
(3) When a third party requires to surrender the Leased Premises or when there
exist any encumbrances on the Leased Premises, the Lessor shall protect it
against such request or encumbrances at its own expense and under its
responsibility in order for the Lessee to continuously use the Leased
Premises.
Article 12. Governing Law
The laws of the Republic of Korea shall apply to the execution, enforcement and
interpretation of this Agreement. Any and all disputes arising from or in
connection with this Agreement shall be settled by submitting them to the
competent court of the Seoul District Court.
Article 13. General Provisions
Any matters which are not specified in this Agreement shall be determined under
mutual agreement of the parties in accordance with the relevant laws and
regulations and general commercial practices.
<PAGE>
IN WITNESS WHEREOF, this Agreement shall be executed in duplicates and the
Lessor and the Lessee shall sign and affix their seals on this Agreement and
keep one copy each.
June 30, 1998
Lessor: Hyundai Electronics Industries Co., Ltd.
San 136-1, Ami-ri, Bubal-eup, Echon-si, Kyunggi-do
Representative Director Young Hwan Kim (seal)
Lessee: ChipPAC Korea
San 136-1, Ami-ri, Bubal-eup, Echon-si, Kyunggi-do
Representative Director (seal)
Officer's Certification
- -----------------------
I, Tony Lin, hereby represent that this English translation is a fair and
accurate translation.
By: /s/ Tony Lin
------------------
Title: Chief Financial Officer
ChipPAC, Inc.
<PAGE>
Attachment 1
Area of Use and Location of Semiconductor Assembly Factory
Unit: Square Meter
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Area for Area for Total
Exclusive Use Common Use
--------------------------------------------------------------------
Leased Total area Rate Leased Total area
area of use area*
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IF 8,628 15,002 58% 5,307 9.228 13,935
- ----------------------------------------------------------------------------------------
2F 3,385 5,98l 57% 40 70 3,425
- ----------------------------------------------------------------------------------------
3F 14,857 22,414 66% 33 50 14,890
- ----------------------------------------------------------------------------------------
Total 26,870 43,397 62% 5,380 9,348 32,250
- ----------------------------------------------------------------------------------------
</TABLE>
* Area for common use is calculated by multiplying total area for common use by
the rate of area for exclusive use.
<PAGE>
Attachment 2
Area of Use and Location of Test House
<PAGE>
Attachment 3
Area of Use and Location of Chungju Factory
and Ancillary Facilities
<PAGE>
Attachment 4
Standard for Calculation of Monthly Rent
The parties agree with the following standard of calculation of monthly rent in
accordance with Article 4, Paragraph (2) of the Lease Agreement:
1. The monthly rent shall be the total amount of the land rental fee for the
area of land deemed to be used plus the rent of the leased building:
2. The rental fee for the area of land deemed to be used shall be calculated
as follows:
Land use fee = (Interest to be paid per square meter + general land tax per
square meter) x the area of land deemed to be used (in the
unit of square meter)
- Interest to be paid = The price of the land deemed to be used x average
interest rate of a time deposit with maturity of
one year of the commercial banks
However, with respect to the initial term of lease of one (1)
year, the average interest rate of a time deposit with maturity
of one Year of the commercial banks shall be 18%.
- The price of the land deemed to be used shall be the higher one
between the book value and publicly notified land price of the land
deemed to be used.
- General land tax = Publicly notified land price x tax exemption rate
(31%) x tax rate (0.36%)
The tax exemption rate shall refer to the rate applied under the
municipal ordinance of Icheon-si.
- Area of land deemed to be used:
When the Lessee leases the entire building, the area of land deemed to
be used shall refer to the area of the ground of the Leased Premises.
When the Lessee leases a part of the building, it shall refer to the
area calculated by multiplying the rate of use (calculated by
multiplying the area of Leased Premises total area of the relevant
building) by the area of ground of the building. The area of land
<PAGE>
deemed to be used for each Leased Premises shall be as follows:
i) Semiconductor assembly factory:
34,185m/2/ (28,482m/2/ for exclusive use, 5,703m/2/ for common
use)
ii) Test House:
4,464m/2/ (3,651m/2/ for exclusive use, 813m/2/ for common use)
iii) Chungju factory and ancillary facilities:
7,997m/2/
iv) Buildings No. 3, No. 4 and No. 5 of Chungwoon Dormitory:
21,695m/2/
v) Chungju Dormitory:
3,026m/2/
3. The rent of the Leased Premises shall be calculated as follows:
Rent of the Leased Premises
= (Total area of the Leased Premises including area for common use x
interest to be paid for each square meter of the building) +
(depreciation cost + taxes and dues + maintenance cost) x rate of use
- Interest to be paid = The Book value of the building x average interest
rate of a time deposit with maturity of one year
of the commercial banks
However, with respect to the initial term of lease of one (1)
year, the average interest rate of a time deposit with maturity
of one year of the commercial banks shall be 18%.
- Depreciation cost = Acquisition price of the building to which the
Leased Premises belong number of years of
depreciation
- Taxes and dues:
<PAGE>
Exhibit 10.7.1
--------------
Amendment Agreement
Hyundai Electronics Industries Co., Ltd. (the "Hyundai") and ChipPAC Korea, Ltd.
(the "ChipPAC") agrees to amend the lease agreement (the "Agreement") executed
between the parties as of June 30, 1999 as follows.
A. Paragraph 2 of Article 3 of the Agreement (Term of Lease) shall be amended
as follows.
(2) If one of the parties to the Agreement wishes to terminate the
Agreement in the middle of the term or the extended term of the
Agreement, such party shall give a written notice to the other party
twelve (12) months prior to the date of termination of the Agreement.
However, no party shall terminate the Agreement within two (2) years
from the Effective Date of this Agreement.
B. Paragraph 2 and 5 of Article 4 of the Agreement (Security Deposit and
Monthly Rent) shall be amended as follows.
(2) The Lessee shall pay the Lessor three hundred ninety seven million
four hundred thirteen thousand Won (397,413,000 Won) on a monthly
basis for the one (1) year term as a monthly rent in consideration of
the use of the land as set forth in Paragraph 4 of Article 7 of the
Agreement and the lease of Leased Premises as set forth in Article 1
of the Agreement. However, the monthly rent is exclusive of the value
added tax, and the value added tax shall be borne by the Lessee.
(5) A monthly rent to be paid to the Lessor by the Lessee shall be
adjusted upward on a yearly basis, whereby a monthly rent shall be
the amount of the monthly rent of the previous year plus five (5)
percent of such a monthly rent according to the Agreement.
C. The entire Appendix 4 of the Agreement (Standard for Calculation of Monthly
Rent) shall be removed.
D. The terms of the Agreement which are not explicitly amended or altered
herein shall be deemed to have the same effects as in the Agreement.
<PAGE>
Property tax = The book value of the building to which the
Leased Premises belong x tax rate (0.36%)
Facilities tax = The book value of the building to which the
Leased Premises belong x tax rate (0.32%)
- Maintenance cost = The book value of the building to which the
Leased Premises x 1%
- Rate of use = Total area of the Leased Premises including area
for common use / total area of the building to
which the Leased Premises belong including area
for common use
4. Inintial monthly rent: Total amount of monthly rents for one (l) year from
Effective Date shall be 397,413,000 Won and the details are as follows;
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Ichoen Test House Chungju Chungju Cunng- Total
Factory Factory Dorm. woon
Dorm.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Monthly 166,832 47,099 77,683 27,700 78,144 397,413
Rent
(1,000won)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IN WITNESS WHEREOF, two (2) copies of the agreement are executed, and sealed by
Hyundai and ChipPAC who shall keep one (1) copy in their custody.
September 30, 1998
"Hyundai" Hyundai Electronics Co., Ltd.
Ami-ri San 136-1 Pubal-eup, Icheon-si, Kyongki-do
Representative Director Young Whan Kim, (Seal)
"ChipPAC" ChipPAC Korea, Ltd.
Ami-ri San 136-1 Pubal-eup, Icheon-si, Kyongki-do
Representative Director Su Nam Lee, (Seal)
Officer's Certification:
- -----------------------
I, Tony Lin, hereby represent that this English translation is a fair and
accurate translation.
By: /s/ Tony Lin
------------------
Title: Chief Financial Officer
ChipPAC, Inc.
<PAGE>
Exhibit 10.7.2
--------------
Amendment Agreement 2
Hyundai Electronics Industries Co., Ltd. (the "HEI") and ChipPAC Korea, Ltd.
(the "CPK") agrees to amend the lease agreement ("the Agreement") executed
between the parties as of June 30, 1998 and the Amendment Agreement (the
"Amendment 1") as of September 30, 1998 as follows
A. Paragraph 1 and 2 of Article 3 of the Agreement and Paragraph 2 of the
Amendment shall be amended as follows
1. The term of lease under this Agreement shall be five years from the
Effective Date of this Amendment 2. However, CPK shall have an option to
extend the Agreement for an additional five year term ("the extended term"),
exercisable by CPK at any time prior to the expiration of the initial term.
2. Lessor may not terminate in the middle of the term of this agreement or
extended term. However, it is understood and agreed that nothing herein shall
limit HEI's termination rights under Article 10 of this Agreement and
applicable laws. If lessee wishes to terminate the agreement fully or
partially (the "partial termination") in the middle of the term or the
extended term of the agreement, the lessee shall give a written notice to
lessor six months prior to the date of termination. However, lessee may not
terminate the agreement within three years from the Effective Date of this
Amendment 2.
B. Paragraph 6 and 7 shall be added to Article 4 of the Agreement as follows
6. The monthly rent during the extended term shall be adjusted as set forth in
Article 4 Section 5 of the Agreement.
7. In the case of any partial termination, the monthly rent shall be
proportionately reduced based on the reduction in the amount of rentable
square meters.
C. The term of the Agreement and Amendment 1 which are not explicitly amended or
altered herein shall be deemed to have the same effects as set forth
<PAGE>
in the Agreement and Amendment 1
IN WITNESS whereof, two copies of the agreement are executed and sealed by HEI
and CPK who shall keep one copy in their custody.
July 31, 1999
HEI
/seal/
__________________
CPK
/seal/
__________________
Officer's Certification:
- -----------------------
I, Tony Lin, hereby represent that this English translation is a fair and
accurate translation.
By: /s/ Tony Lin
------------------
Title: Chief Financial Officer
ChipPAC, Inc.
<PAGE>
Exhibit 10.8
------------
Agreement Concerning
Supply of Utilities,
Use of Welfare Facilities and
Management Services for Real Estate
Hyundai Electronics Industries Co., Ltd. ("HEI") and ChipPAC Korea, ("CPK")
hereby execute the Agreement concerning the supply of Utilities, use of welfare
facilities, and management services for real estate (hereinafter referred to as
"the Agreement") with the following conditions, pursuant to Article 9 of the
Business Transfer Agreement (hereinafter referred to as "the Business Transfer
Agreement") executed as of June 30, 1998 between the parties.
Article 1. Purpose
1. The purpose of the Agreement is to support CPK's success in the
semiconductor assembly business transferred from HEI under the Business
Transfer Agreement, by prescribing the rights and obligations between HEI
and CPK with respect to the supply of utilities, such as electric power,
water, heating and air conditioning, etc. ("Utilities") necessary for the
use of the real estate which CPK leased from HEI under the Lease Agreement
("Lease Agreement") executed on , 1998, the use of the welfare
facilities, such as cafeteria, etc. ("Welfare Facilities") and the
provision of management services accompanied with the use of the leased
real estate, such as the treatment of wastes, prevention of disasters, and
perimeter security, etc. ("the Management Services").
2. The details of the Utilities, Welfare Facilities, Management Services which
HEI supplies or provides CPK under the terms and conditions of the
Agreement shall be as set forth in Attachment 1 through Attachment 3.
Article 2. Standard for Calculating the Usage Fee
1. The usage fee ("the Usage Fee") which CPK shall pay HEI in consideration of
the provision of Utilities, Welfare Facilities and Management Services from
HEI under Article 1 above shall be decided in accordance with the
calculation standard, such as the unit price, etc. (hereinafter referred to
as "the Standard for Calculating the Usage Fee") as set forth in Attachment
1 through Attachment 3.
2. The Standard for Calculating the Usage Fee in Paragraph 1 above shall be
effective for one (1) year on a yearly basis and both parties shall consult
and adjust the Standard for Calculating the Usage Fee to be applied for the
following one (1) year, two (2) months prior to the expiration of the
effective period. In the event of a failure to adjust the Standard for
Calculating the Usage Fee between the parties, it shall be settled in
accordance with the methods as set forth in proviso of Article 13,
Paragraph 1. However, by the time the award of arbitration is made, the
Usage Fee shall be paid in
<PAGE>
accordance with the Standard for Calculating the Usage Fee which applied
for the immediate preceding one (1) year. Upon the award of the
arbitration, it shall be settled according to the results thereof.
Article 3. Determination and Payment of the Monthly Usage Fee
1. Unless otherwise agreed by both parties, CPK shall submit the details of
the Utilities, Welfare Facilities and Management Services used for the
immediate preceding month by the 5th day (if it falls on a holiday, the
following day) of each month. HEI shall calculate CPK's Usage Fee for the
immediate preceding month in accordance with the Standard for Calculating
the Usage Fee based on the details above and then invoice CPK in writing by
the 8th day of the current month (if it is a holiday, the following day).
If CPK fails to submit the details of the use above by the 7th day of each
month, HEI may invoice after calculating the Usage Fee of CPK for the
immediate preceding month based on HEI's own data. However, if HEI raises
any objection over the contents of the details submitted by CPK or if CPK
raises any objection in the future with respect to the invoice for the
Usage fee calculated by HEI without the submission of the above details
from CPK, it shall be resolved through mutual consultation between the
parties. In the event of any change of the usage fee thereafter, it shall
be settled upon the payment of the Usage Fee for the month in which such
objection was raised.
2. CPK shall make fall payment of the Usage Fee to HEI in cash, within 15
days from the date of invoice from HEI under the foregoing Paragraph.
3. If CPK delays the whole or a part of the payment of the Usage Fee, CPK
shall pay HEI the default interest at the average default interest rate of
a general loan of general commercial banks for the delayed Usage Fee plus
the principal of the Usage Fee.
Article 4. Maintenance and Repair
HEI shall maintain and repair the relevant facilities and procure the necessary
personnel and expenses under its own responsibilities and at its own cost, for
the purpose of CPK's smooth use of the Utilities, Welfare Facilities and
Management Services, unless otherwise specified in the Lease Agreement or the
Standard for Calculating the Usage Fee.
Article 5. CPK's Obligations
With respect to the use of the Utilities, Welfare Facilities and Management
Services, CPK shall perform its obligations as a prudent custodian and comply
with the relevant laws and regulations, rules established by HEI in connection
with such Utilities, Welfare Facilities or Management Services and other
instructions of HEI.
<PAGE>
Article 6. Transfer or Increase of Communication Related Facilities
1. In cases where HEI transfers or increases communication related
facilities upon the request of CPK, the expense needed therefor shall be
borne by CPK in accordance with (Attachment 3).
2. The transferred or increased communication related facilities in accordance
with the foregoing Paragraph shall be deemed to be changed by CPK under
Article 6 of the Lease Agreement.
Article 7. Suspension of the Performance of Obligations
1. In the case that CPK delays payment of the monthly Usage Fee under Article
3 two or more times, and a written notice from HEI granting a period of 15
days or more to make payment has been sent, if CPK fails to make full
payment within such period, HEI may suspend the whole or a part of the
supply of all services under the Agreement.
2. After HEI suspends the whole or a part of the supply of the services under
the Agreement, CPK shall not use the suspended Utilities, Welfare
Facilities and Management Services till the full payment of any and all
delayed Usage Fees.
The suspension of the supply of the services made by HEI in accordance with
Paragraph 1 above shall not constitute the non-performance of HEI's
obligations under the Lease Agreement and HEI shall not take responsibility
for any damages incurred on CPK due to the suspension of the supply of the
relevant services.
Article 8. Government Approval, etc.
In connection with the performance of the Agreement, if any approval, permit or
report to the government and other relevant authority is necessary, the relevant
party shall take the necessary measures under its own responsibility and at its
own expense.
Article 9. Duration and Termination of the Agreement, etc.
1. The Agreement shall be effective from the effective date of the Lease
Agreement to the expiration date of the Lease Agreement.
2. In cases where the other party commits a breach of any of its obligations
under this Agreement, in connection with the provision or use of Welfare
Facilities or Management Services, that is not remedied within sixty (60)
days from the giving of a written notice requiring said breach to be
remedied, the Agreement, to the extent of the relevant part,
<PAGE>
shall be terminable forthwith by either party hereto. In cases where CPK
breaches its obligation to pay the Usage Fee as set forth in Article 7,
Paragraph 1, HEI may exercise both the rights of suspension of the supply
of services under Article 7, Paragraph 1 and the termination of the
Agreement under this Paragraph.
3. Notwithstanding Paragraph 2 above, unless otherwise agreed by both parties,
the termination of the Utilities parts in the Agreement shall not be
permitted, prior to the expiration of the Lease Agreement.
4. In cases where the period for the payment of the Usage Fee is less than one
(1) month to be settled at the time of the termination of the Agreement and
the Standard for Calculating Usage Fee is determined on a monthly basis,
the Usage Fee shall be calculated and paid on the number of days used.
5. With respect to the procedures for settlement prescribed in Paragraph 4
above, Article 3 shall apply mutatis mutandis.
Article 10. Compensation for Damage
In cases where a party causes damage to the other party by breaching its
obligations under the Agreement, by its intention or negligence, the breaching
party shall compensate the direct damages incurred on the other party.
However, with respect to the damages incurred on CPK in connection with the
power supply of HEI to CPK, HEI shall be exempted from any and all liabilities
unless it was caused by HEI's intention or gross negligence.
Article 11. Confidentiality
Each party shall not divulge to a third party any and all technical information,
trade secret and other business confidential matters of the other party obtained
in connection with the Agreement and the performance thereof for the duration of
the Agreement and three (3) years thereafter, without the prior written consent
of the other party.
Article 12. Force Majeure
In cases where a party is unable to perform its obligations under the Agreement
due to the amendment or abolishment of the relevant laws and regulations, acts
of God, fire, war, actions of the government, strike or other force majeure
events after the execution of the Agreement, it shall immediately report thereof
to the other party. While such force majeure event exists, a party shall not
take any responsibility for any non-performance of the Agreement against the
other party.
<PAGE>
Article 13. Miscellaneous
1. The execution, performance and interpretation of the Agreement shall be
governed by the laws of the Republic of Korea. Any dispute arising from or
in relation to the Agreement shall be settled in the competent court of
Seoul District Court. However, in the case of a failure to adjust the
Standard for Calculating Usage Fee under Article 2, Paragraph 2 or in cases
where the parties fail to reach an agreement to determine the Usage Fee
under Article 3, Paragraph 1, it shall be resolved by the commercial
arbitration of the Korean Chamber of Commerce.
2. Any matters not specified in the Agreement shall be decided through mutual
agreement in accordance with the relevant laws and regulations and general
business practices.
3. Each party shall not transfer the whole or a part of its rights and
obligations under this Agreement nor cause a third party to act for its
rights and obligations, without the prior written consent of the other
party.
4. The terms and conditions of the Agreement may be revised by the written
agreement with affixed seals and names (or signatures) of both parties.
In Witness Whereof, the parties shall prepare the Agreement in duplicate, set
their names and seals thereof and keep each copy hereof respectively.
June 30, 1998
HEI: Hyundai Electronics Industries Co., Ltd.
Address: San 136-1, Ami-ri, Bubal-eub, Ichon-ku, Kyongki-do, 467-860,
Korea
Representative Director: Young Hwan Kim (seal)
CPK: ChipPAC Korea
San 136-1, Ami-ri, Bubal-eub, Ichon-ku, Kyongki-do, 467-860, Korea
Representative Director: ________________ (seal)
Officer's Certification
- -----------------------
I, Tony Lin, hereby represent that this English translation is a fair and
accurate translation.
By: /s/ Tony Lin
------------------
Title: Chief Financial Officer
ChipPAC, Inc.
<PAGE>
Utility Supply, Use of Welfare Facilities and Management Services for Real
Estate 1) Utility Supply
- ------------------------------------------------------------------------------
(1) Scope: Electricity, Water Supply, Sewage & Waste Water, Steam etc
(2) Usage Fee
<TABLE>
<CAPTION>
(Unit: Won)
- ---------------------------------------------------------------------------------------------------------------------------------
Item Unit Contract Price Calculation of Usage Fee
------------------
Unit Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electricity KWH monthly usage x 54 .U/price = KEPCO supply cost in of the month x 1.13
unit price (overhead, interest on facility value, etc)
/54 = /47.68 (KEPCO supply cost in Apr 98) x 1.13
- ---------------------------------------------------------------------------------------------------------------------------------
Water Water m* monthly usage x 183 1. Based on average actual cost
-house use m* unit price 2. Unit Price = water cost + purification cost
-industrial . purification cost = labor + depreciation + expenses
use + direct cost
------------------------ ------------------------------------------------------------------------
Sewage m* 773 1. Based on average actual cost
------------------------ ------------------
Waste Water m* 741 2. Unit Price = labor + depreciation + expenses
+ direct cost
- --------------------------------------------------------------------------------------------------------------------------------
Steam TON monthly usage x 24445 . Unit Price = gas price per liter x 80 + 7,551Won
unit price
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Maintenance:
1) HEI to be responsible for maintenance/repair of utilities outside
A&T building
2) CPK to be responsible for maintenance/repair of utilities inside A&T
building
3) HEI shall not be responsible for damages or losses caused to CPK
unless intentional or by negligence.
- --------------------------------------------------------------------------------
<PAGE>
2) Use of Welfare Facilities
- -------------------------------------------------------------------------------
(1) Scope: Canteen, Guest house, Company Newspaper, educational facility,
others
(2) Usage Fee
<TABLE>
<CAPTION>
(Unit: Won)
- -----------------------------------------------------------------------------------------------------------------------------------
Item Contract Price Details of Contract Price
------------------------
Unit Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) Welfare Canteen number of meal 2,000/cupon same price as for visitors
facilities coupon x u/price
----------------------------------------------------------------------------------------------------------------
Vision21, Ami Art Hall, Fixed Cost 5,000,000/mon 1. Allocation of HEI's total cost as
Gym., swimming pool, per number of total CPK employees
shuttle bus 2. HEI total cost: labor,
depreciation, expenses
----------------------------------------------------------------------------------------------------------------
Legal service Fixed Cost 100,000/mon Allocation of HEI's total cost as per
number of total CPK employees
----------------------------------------------------------------------------------------------------------------
Civil affair service actual cost per service CPK employees personally pay for the
service.
----------------------------------------------------------------------------------------------------------------
Wedding Hall 100,000/wedding same rate as for Hyundai subsidiaries
(personally pay 40,000KRW, CPK
supports 60,000KRW)
----------------------------------------------------------------------------------------------------------------
Guest house as charged per use same rate as for Hyundai Elevator
- -----------------------------------------------------------------------------------------------------------------------------------
2) Parking Car Parking Fixed Cost 4,500,000/mon Allocation of HEI's total cost as per
number of CPK office workers
- -----------------------------------------------------------------------------------------------------------------------------------
3) commuter Bus for Ichon and Fixed Cost 18,400,000/mon Allocation of HEI's total cost as per
bus other cities number of CPK office workers
- -----------------------------------------------------------------------------------------------------------------------------------
4) Company HEI Newspapers Fixed Cost 1,000,000/mon @ 180/copy x 5,400 copies
publications
- -----------------------------------------------------------------------------------------------------------------------------------
5) Education Educational cost as charged per class direct cost per class x 1.4 ('96, '97
actual overhead, indirect, expenses,
etc)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Others
1) HEI employees Rental APT
: CPK employees can reside for the remaining term of contract
which was personally executed with HEI.
2) HEI employees Clinic
: CPK employees can use HEI clinic. Price is as per the guideline
set by Gov't.
3) Commuter Bus (not included in this Agreement)
: CPK and HEI agrees how to allocate the cost. CPK will
directly pay its portion to bus companies.
- -------------------------------------------------------------------------------
<PAGE>
3) Management Services for Real Estate
- --------------------------------------------------------------------------------
(1) Scope: waste disposal, dangerous article warehouse, fire brigade,
guard, telecommunication facilities, road
(2) Usage Fee
1) Number of CPK employee in Ichon premise as of month end x 11,500
Won -- Number of A&T employees in May 98 x 11,500 Won = 24,679
thousand Won
2) Reference: Calculation Details per Item (per month)
<TABLE>
<CAPTION>
(Unit : Won)
- -----------------------------------------------------------------------------------------------------------------------------------
Item Allocated by Estimates Remark
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Waste disposal Total 4,204,000
------------------------------------------------------------------------------------------------------
general waste quantity of 2,163,000 Fixed cost based on wastes happened
designated waste wastes in the past
extinguishable waste
------------------------------------------------------------------------------------------------------
street dust nbr of employees 900,000 Allocation of HEI's total cost as per
number of total CPK employees
------------------------------------------------------------------------------------------------------
use of road quantity of water, 388,000 Allocation of HEI's total cost as per
waste water usage of water, waste water
------------------------------------------------------------------------------------------------------
legal management quantity of wastes 753,000 labor + expenses
- -----------------------------------------------------------------------------------------------------------------------------------
2. Dangerous article chemicals, etc. quantity 141,000 depreciation cost of warehouse X CPK
warehouse area rate
- -----------------------------------------------------------------------------------------------------------------------------------
3. Fire Brigade rent area 684,000 (labor + expenses) x ratio of CPK
employees
- -----------------------------------------------------------------------------------------------------------------------------------
4. Guard and Reception nbr of employees 14,563,000 (direct cost + depreciation of
security system) x ratio of number
of CPK employees
- -----------------------------------------------------------------------------------------------------------------------------------
5. Telecommunication Total 4,883,000
facilities -----------------------------------------------------------------------------------------------------
tie line nbr of lines
Ichon - Seoul 149,000 HEI's total cost X ratio of nbr of
Ichon - overseas (excluding Sanghai) 1,998,000 CPK line
-----------------------------------------------------------------------------------------------------
Maintenance nbr of lines 2,500,000 HEI's total cost X ratio of nbr of
CPK line
-----------------------------------------------------------------------------------------------------
switch board/operator nbr of lines 236,000 HEI's total cost X ratio of nbr of
CPK line
- -----------------------------------------------------------------------------------------------------------------------------------
Grand Total 24,475,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The following won't be included in the agreement.
- telephone (other than mobile/tie line): CPK to have a direct contract
with KT. HEI to allow CPK to use HEI's switching facilities.
- Mobile: CPK to change the name of subscriber from HEI to CPK, directly
pay to telephone company.
- Ichon-HECS, Ichon-Chung Joo tie line: HEI to change the name of
subscriber from HEI to CPK, directly pay to KT.
* Additional Cost: CPK to pay 8000KRW/line to HEI for expansion of tel
facilities, line move, increase of nbr of line, etc.
- --------------------------------------------------------------------------------
<PAGE>
II. Amendment Agreement
1. Additional items which are not included in the Original Agreement
. Contact parties: CPK (ChipPAC Korea)
HEI (Hyundai Electronics Industries)
. Scope of supply: HEI's supply of Cool water, CDA, Nitrogen to CPK
. Calculation method of the Usage Fee
<TABLE>
<CAPTION>
Item Unit Contract Price Unit Price
-----------------------------------------------------------------
<S> <C> <C> <C>
Cool water m/3/ Monthly usage x unit price 34 Won
-----------------------------------------------------------------
CDA m/3/ Monthly usage x unit price 4 Won
-----------------------------------------------------------------
Nitrogen m/3/ Monthly usage x unit price 42 Won
-----------------------------------------------------------------
</TABLE>
* The same unit price was applied as in the Utility Supply Agreement.
2. Modification on the "Use of Welfare" part in the Original Agreement:
HEI's Intramural hospital
. Contract parties: CPK (ChipPAC Korea)
HEI (Hyundai Electronics Industries)
. Related Article in the Original Agreement
- HEI shall request a lump-sum payment to CPK for the medical
treatment fee on CPK's employees
- The medical treatment fee will be decided in accordance with the
Standard Fee set by the Government.
. The above article shall be modified and replaced as below.
- CPK's employees shall receive free medical treatment service from
HEI's intramural hospital for the items on which HEI's employees
receive free medical treatment service. As a compensation for this,
CPK will pay 3.5 million Korean won to HEI every month. However, for
the regular health check-up service, CPK shall pay monthly lump-sum
charges separately at HEI's request.
<PAGE>
Exhibit 10.10
-------------
SUBLEASE
TO
3151 Coronado Drive, Santa Clara, CA 95054
1. PARTIES. This Sublease, dated, for reference purposes only, May 1, 1998, is
made by and between Hyundai Electronics America, a California Corporation
(herein called "Sublessor") and ChipPAC, Inc., a California Corporation
(herein called "Sublessee").
2. PREMISES. Sublessor hereby subleases and Sublessee hereby subleases from
Sublessor for the term, at the rental, and upon all of the conditions set
forth herein, a forty-one thousand, eight hundred fifty (41,850) square
foot portion of that certain real property situated in the County of Santa
Clara, State of California commonly known described as 3151 Coronado Drive,
Santa Clara, California 95054. Said real property, including the land and
all improvements thereon, is hereinafter called the "Premises".
3. TERM.
3.1 Length. The term of this Sublease shall be for three (3) years and one (1)
month commencing on May 1, 1998 and ending on May 31, 2001 unless sooner
terminated pursuant to any provision hereof.
3.2 Delay In Commencement. Notwithstanding said commencement date, if for any
reason Sublessor cannot deliver possession of the Premises to Sublessee on
said date, Sublessor shall not be subject to any liability therefore, nor
shall such failure affect the validity of this Sublease or the obligations
of the Sublessee hereunder or extend the term hereof, but in such case
Sublessee shall not be obligated to pay rent until possession of the
Premises is tendered to Sublessee; provided, however, that if Sublessor
shall not have delivered possession of the Premises within sixty (60) days
from said commencement date, Sublessee may, at Sublessee's option, by
notice in writing to Sublessor within ten (10) days thereafter, cancel this
Sublease, in which event the parties shall be discharged from all
obligations thereunder. If Sublessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions
hereof, such occupancy shall not advance the termination date and Sublessee
shall pay rent for such period at the initial monthly rates set forth
below.
4. RENT. Sublessee shall pay to Sublessor as rent for the Premises for May
through December, 1998 the sum of three hundred seventy-four thousand,
seventy-six dollars and sixteen cents ($374,076.16), of which ninety-two
thousand, five hundred forty-three dollars and four cents ($92,543.04) is
designated as operating expenses. Any shortfalls of pro rata operating
expenses allocable to Sublessee will be paid by the Sublessee to the
Sublessor. The Sublessor's allocations of operating expenses between
Sublessees shall be made in accordance with the provisions of Section 7.2
"Basic Operating Cost" of the Master Lease. Beginning January 1, 1999,
through the end of the Sublease, Sublessee shall pay the Sublessor in
advance on the first day of each month of the term hereof thirty-five
thousand, five hundred seventy-two dollars and fifty cents ($35,572.50)
plus its prorated share of any other rents which Sublessor may owe to
Master Lessor pursuant to the Master Lease which at this time are
calculated to be twelve thousand, seven hundred eighty-eight dollars and
ninety-nine cents ($12,788.99) per month for operating costs and eight
hundred, eighty dollars and nineteen cents ($880.19) per month for Tenant
improvement amortization. Rent for any period during the term hereof which
is for less than one month shall be a prorated portion of the monthly
installment; provided, however, that if Sublessee uses a disproportionate
amount of any utility, Sublessee shall pay for that additional share. Rent
shall be payable in lawful money of the United States to Sublessor at the
address stated herein or to such other persons or at such other places as
Sublessor may designate in writing. Any rent paid by Sublessee to Sublessor
shall be used exclusively to pay rent to Master Lessor.
Rent for any period during the term hereof which is for less than one month
shall be a prorated portion of the monthly installment; provided, however,
that if Sublessee uses a
1
<PAGE>
disproportionate amount of any utility, Sublessee shall pay for that
additional share. Rent shall be payable in lawful money of the United
States to Sublessor at the address stated herein or to such other persons
or at such other places as Sublessor may designate in writing. Any rent
paid by Sublessee to Sublessor shall be used exclusively to pay rent to
Master Lessor.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon execution
hereof the sum of twenty-eight thousand, two hundred seventy six dollars
($28,276.00) as security for Sublessee's faithful performance of
Sublessee's obligations hereunder. If Sublessee fails to pay rent or other
charges due hereunder, or otherwise defaults with respect to any provision
of this Sublease, Sublessor may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in default or for
the payment of any other sum to which Sublessor may become obligated by
reason of Sublessee's default, or to compensate Sublessor for any loss or
damage which Sublessor may suffer thereby. If Sublessor so uses or applies
all or any portion of said deposit, Sublessee shall within ten (10) days
after written demand therefore, deposit cash with Sublessor in an amount
sufficient to restore said deposit to the full amount herein above stated
and Sublessee's failure to do so shall be a material breach of this
Sublease. Sublessor shall not be required to keep said deposit separate
from its general accounts. If Sublessee performs all of Sublessee's
obligations hereunder. said deposit, or so much thereof as has not
theretofore been applied by Sublessor, shall be returned, without payment
of interest or other increment for its use to Sublessee (or at Sublessor's
option, to the last assignee, if any, of Sublessee's interest hereunder) at
the expiration of the term hereof, and after Sublessee has vacated the
Premises. No trust relationship is created herein between Sublessor and
Sublessee with respect to said Security Deposit.
6. USE.
6.1 Use. The Premises shall be used and occupied only for general office
business and assembly and test and for no other purpose.
6.2 Compliance with Law.
(a) Sublessor warrants to Sublessee that the Premises, in its existing
state, but without regard to the use for which Sublessee will use the
Premises, does not violate any applicable building code, regulation or
ordinance at the time that this Sublease is executed. In the event
that it is determined that this warranty his been violated, then it
shall be the obligation of the Sublessor, after written notice from
Sublessee, to promptly, at Sublessor's sole cost and expense, rectify
any such violation. In the event that Sublessee does not give to
Sublessor written notice of the violation of this warranty within one
year from the commencement of the term of this Sublease, it shall be
conclusively deemed that such violation did not exist and the
correction of the same shall be the obligation of the Sublessee.
(b) Except as provided in paragraph 6.2(a), Sublessee shall, at
Sublessee's expense, comply promptly with all applicable statutes,
ordinances, rules, regulations, orders, restrictions of record and
requirements in effect during the term or any part of the term hereof
regulating the use by Sublessee of the Premises. Sublessee shall not
use or permit
2
<PAGE>
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant of the building
containing the Premises, which shall tend to disturb such other tenants.
6.3 Condition of Premises. Except as provided in paragraph 6.2(a) Sublessee
hereby accepts the premises in their condition existing as of the date of
the execution hereof, subject to all applicable zoning, municipal, county
and state laws, ordinances and regulations governing and regulating the use
of the Premises, and accepts this Sublease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto. Sublessee
acknowledges that neither Sublessor nor Sublessor's agents have made any
representation or warranty as to the suitability of the Premises for the
conduct of Sublessee's business.
7. MASTER LEASE.
7.1 Sublessor is the lessee of the Premises by virtue of a lease, hereinafter
referred to as the "Master Lease", a copy of which is attached hereto
marked Exhibit A, dated February 16, 1998 wherein Spieker -- French #86,
Limited Partnership is the lessor hereinafter referred to as the "Master
Lessor".
7.2 This Sublease is and shall be at all times subject and subordinate to the
Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and Sublessee
to each other under this Sublease shall be the terms and conditions of the
Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this
Sublease document shall control over the Master Lease. Therefore, for the
purposes of this Sublease, wherever in the Master Lease the word "Lessor"
is used it shall be deemed to mean the Sublessor herein and wherever in the
Master Lease the word "Lessee" is used it shall be deemed to mean the
Sublessee herein.
7.4 During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease,
Sublessee does hereby expressly assume and agree to perform and comply
with, for the benefit of Sublessor and Master Lessor, each and every
obligation of Sublessor under the Master Lease except for the following
paragraphs which are excluded therefrom: none.
7.5 The obligations that Sublessee has assumed under Paragraph 7.4 hereof are
hereinafter referred to as the "Sublessee's Assumed Obligations". The
obligations that Sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remaining Obligations".
7.6 Sublessee shall hold Sublessor free and harmless of and from all liability,
judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or
perform Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire term of
this Sublease, subject, however, to any earlier termination of the Master
Lease without the fault of the Sublessor, and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessor free and harmless
of and from all liability, judgments, costs, damages, claims or
3
<PAGE>
demands arising out of Sublessor's failure to comply with or perform
Sublessor's Remaining Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in full force
and effect and that no default exists on the part of any party to the
Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor's
interest in this Sublease and all rentals and income arising therefrom,
subject, however, to the terms of paragraph 8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that until a default
shall occur in the performance or Sublessor's Obligations under the Master
Lease, that Sublessor may receive, collect and enjoy the rents accruing
under this Sublease. However, if Sublessor shall default in the performance
of its obligations to Master Lessor, then Master Lessor may, at its option,
receive and collect, directly from Sublessee, all rent owing and to be owed
under this Sublease.
Master Lessor shall not, by reason of this assignment of the Sublease or by
reason of the collection of the rents from the Sublessee, be deemed liable
to Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs Sublessee, upon receipt
of any written notice from the Master Lessor stating that a default exists
in the performance of Sublessor's obligations under the Master Lease, to
pay to Master Lessor the rents due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request from Master Lessor, and that Sublessee shall pay such
rents to Master Lessor without any obligation or right to inquire as to
whether such default exists and notwithstanding any notice from or claim
from Sublessor to the contrary and Sublessor shall have no right or claim
against Sublessee for any such rents so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1 In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within ten (10) days of the date hereof,
Master Lessor signs this Sublease thereby giving its consent to this
Subletting.
9.2 In the event that the obligations of the Sublessor under the Master Lease
have been guaranteed by third parties then this Sublease, nor the Master
Lessor's consent, shall not be effective unless, within ten (10) days of
the date hereof, said guarantors sign this Sublease thereby giving
guarantors consent to this Sublease and the terms thereof.
9.3 In the event that Master Lessor does give such consent then:
4
<PAGE>
(a) Such consent will not release Sublessor of its obligations or
alter the primary liability of Sublessor to pay the rent and perform
and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
(b) The acceptance of rent by Master Lessor from Sublessee or any one
else liable under the Master Lease shall not be deemed a waiver by
Master Lessor of any provision of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent to any
subsequent subletting or assignment.
(d) In the event of any default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors
or any one else liable under the Master Lease or this Sublease without
first exhausting Master Lessor's remedies against any other person or
entity liable thereon to Master Lessor.
(e) Master Lessor may consent to subsequent subletting and assignments
of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor nor any one else
liable under the Master Lease and without obtaining their consent and
such action shall not relieve such persons from liability.
(f) In the event that Sublessor shall default in its obligations under
the Master Lease, then Sublessee, at its option and without being
obligated to do so, may require attorn to Master Lessor in which event
Master Lessor shall undertake the obligations of Sublessor under this
Sublease from the time of the exercise of said option to termination
of this Sublease but Master Lessor shall not be liable for any prepaid
rents nor any security deposit paid by Sublessee, nor shall Master
Lessor be liable for any other defaults of the Sublessor under the
Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at the
end of this document shall constitute their consent to the terms of this
Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's knowledge,
no default presently exists under the Master Lease of obligations to be
performed by Sublessor and that the Master Lease is in full force and
effect.
9.6 In the event that Sublessor defaults under its obligations to be performed
under the Master Lease by Sublessor, Master Lessor agrees to deliver to
Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any default of Sublessor described in any notice of default
within ten (10) days after service of such notice of default on Sublessee.
If such default is cured by Sublessee than Sublessee shall have the right
of reimbursement and offset from and against Sublessor.
10. ATTORNEY'S FEES. If any party or the Broker named herein brings an action
to enforce the terms hereof or to declare rights hereunder, the prevailing
party in such action, shall be entitled to its reasonable attorney's fees
and costs to be paid by the losing party as fixed by the Court. The
provision of this paragraph shall inure to the benefit of the Broker named
herein who seeks to enforce a right hereunder
5
<PAGE>
SUBLESSOR
Executed at San Jose _______________________________
on 3/12/99 By ___________________________
Address 3101 North 1st St. By /s/ T.J. Thomas
Hyundai Electronics America
San Jose, CA
SUBLESSEE
Executed at Santa Clara, CA 95054 _______________________________
on March 19, 1999 By /s/ Dennis McKenna
Address 3151 Coronado Drive By /s/ Tony Lin
ChipPAC, Inc.
Santa Clara, CA 95054
6
<PAGE>
Exhibit 10.17
ADVISORY AGREEMENT
------------------
This Advisory Agreement (this "Agreement") is made and entered into as
of August 5, 1999, by and between ChipPAC, Inc., a California corporation,
ChipPAC Limited, a corporation incorporated under the laws of the Territory of
the British Virgin Islands, ChipPAC Operating Limited (name to be changed to
ChipPAC International Company Limited), a corporation incorporated under the
laws of the Territory of the British Virgin Islands (collectively, the
"Companies," and individually, the "Company"), and Bain Capital, Inc., a
Delaware corporation ("Bain"). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Agreement and Plan of
Merger and Recapitalization, dated as of March 13, 1999, as amended, by and
among the ChipPAC, Inc., Hyundai Electronics Industries Co., Ltd., Hyundai
Electronics America and ChipPAC Merger Corp.
WHEREAS, the Companies desire to retain Bain and Bain desires to
perform for the Companies and/or their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
ten (10) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless the Companies
provide or Bain provides written notice of its or their desire to terminate this
Agreement to the other party 90 days prior to the expiration of the Term or any
extension thereof.
2. Services. Bain shall perform or cause to be performed such
services for any of the Companies and/or their subsidiaries as directed by such
Company's board of directors, which may include, without limitation, the
following:
(a) executive and management services;
(b) identification, support and analysis of acquisitions and
dispositions by such Company or its subsidiaries;
(c) support and analysis of financing alternatives, including, without
limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
(e) human resource functions, including searching and hiring of
executives; and
<PAGE>
(f) other services for such Company or its subsidiaries upon which
such Company's board of directors and Bain agree.
Notwithstanding any provision in this Agreement to the contrary, each of
the parties hereto acknowledges and agrees that there are no minimum levels of
services required to be provided to the Companies pursuant to this Agreement.
3. Advisory Fee. Payment for services rendered by Bain and/or its
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall be billed on an hourly basis for actual services rendered
(it being agreed that no minimum services levels shall be required), plus
reasonable out-of-pocket expenses incurred by Bain and/or its affiliates;
provided that, commencing with the calendar quarter ended March 31, 2000, when
and if ChipPAC, Inc. and its subsidiaries achieve LTM Period EBITDA, as defined
below, as calculated at the end of such calendar quarter or any succeeding
calendar quarter, in excess of $81.2 million, in lieu of the aforementioned fees
and expenses, Bain and/or its affiliates will be entitled to an annual advisory
fee, the amount of which shall be the greater of (i) $1,000,000 per annum and
(ii) 0.3% per annum of the annual consolidated revenue of ChipPAC, Inc. and its
subsidiaries (determined on a trailing twelve month basis), plus reasonable out-
of-pocket expenses of Bain and/or its affiliates. All fees and expenses
described in this paragraph 3 shall be payable to Bain or its designees on a
quarterly basis in advance (based on the parties' estimate of the amount of fees
and expenses which shall become due and payable for such quarter) commencing as
of the date hereof. "LTM Period EBITDA" means, for ChipPAC, Inc. and its
consolidated subsidiaries, for any trailing twelve month period ending on the
date of any measurement, operating income, plus depreciation, amortization, any
non-cash charges related to write-downs of impaired assets and, to the extent
deducted in determining operating income, any fees and expenses incurred
pursuant to this Agreement and pursuant to that certain Advisory Agreement dated
as of the date hereof between the Companies and SXI Group LLC, as the same may
be amended, replaced or modified from time to time.
4. Transaction Fees.
(a) The Companies hereby agree to pay to Bain or its designees on the
Closing Date a fee for services rendered in connection with the structuring
of the financing for the Recapitalization Transactions and certain other
management services. Such fees shall be payable to Bain or its designees
by wire transfer in an amount not to exceed 1% of the aggregate value of
the financing for the Recapitalization Transactions plus reasonable out-of-
pocket expenses.
(b) In addition, during the term of this Agreement, the Companies
shall pay to Bain or its designees a transaction fee in connection with the
consummation of each acquisition, divestiture or financing by any of the
Companies or their subsidiaries in an amount equal to 1% of the aggregate
value of such transaction.
5. Personnel. Bain shall provide and devote to the performance of
this Agreement such partners, employees and agents of Bain as Bain shall deem
appropriate to the furnishing of the services required.
-2-
<PAGE>
6. Liability. Neither Bain nor any other Indemnitee (as defined in
Section 7 below) shall be liable to any of the Companies or any of their
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of an Indemnitee acting within the scope of such person's employment or
authority. Bain makes no representations or warranties, express or implied, in
respect of the services to be provided by Bain or any of the other Indemnitees.
Except as Bain may otherwise agree in writing after the date hereof: (i) Bain
shall have the right to, and shall have no duty (contractual or otherwise) not
to, directly or indirectly: (A) engage in the same or similar business
activities or lines of business as any of the Companies or any of their
subsidiaries, including those competing with any of the Companies or any of
their subsidiaries and (B) do business with any client or customer of any of the
Companies or any of their subsidiaries; (ii) neither Bain nor any officer,
director, employee, partner, affiliate or associated entity thereof shall be
liable to any of the Companies or any of their subsidiaries or affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities
of or of such person's participation therein; and (iii) in the event that Bain
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for both any of the Companies or any of their subsidiaries, on the
one hand, and Bain, on the other hand, or any other person, Bain shall have no
duty (contractual or otherwise) to communicate or present such corporate
opportunity to any of the Companies or any of their subsidiaries and,
notwithstanding any provision of this Agreement to the contrary, shall not be
liable to any of the Companies or any of their affiliates for breach of any duty
(contractual or otherwise) by reasons of the fact that Bain directly or
indirectly pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such opportunity to any of
the Companies. In no event will any of the parties hereto be liable to any
other party hereto for any indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or in respect of any liabilities relating to any third party claims
(whether based in contract, tort or otherwise) other than the Claims (as defined
in Section 7 below) relating to the service to be provided by Bain hereunder.
7. Indemnity. Each of the Companies and their subsidiaries shall
defend, indemnify and hold harmless each of Bain, its affiliates, partners,
employees and agents (collectively, the "Indemnitees") from and against any and
all loss, liability, damage or expenses arising from any claim by any person
with respect to, or in any way related to, the performance of services
contemplated by this Agreement (including attorneys' fees) (collectively,
"Claims") resulting from any act or omission of any of the Indemnitees, other
than for Claims which shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by an Indemnitee. Each of the
Companies and their subsidiaries shall defend at its own cost and expense any
and all suits or actions (just or unjust) which may be brought against such
Company, any of its subsidiaries or any of the Indemnitees or in which any of
the Indemnitees may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by any of the Indemnitees, except that if such damage
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by an Indemnitee, then Bain shall reimburse the Companies and
their subsidiaries for the costs of defense and other costs incurred by the
Companies and their subsidiaries.
-3-
<PAGE>
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Companies, as appropriate:
--------------------------------
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attention: Chief Executive Officer
Facsimile: (408) 486-5914
ChipPAC Limited
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
ChipPAC Operating Limited (name to be changed to
ChipPAC International Company Limited)
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
To Bain:
-------
Bain Capital II, Inc.
One Embarcadero, Suite 2260
San Francisco, CA 94111
Facsimile: (415) 627-1333
Attn: David Dominik
Prescott Ashe
and
---
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Facsimile: (617) 572-3274
Attn: Edward Conard
9. Assignment. None of the Companies may assign any obligations
hereunder to any other party without the prior written consent of Bain (which
consent shall not be unreasonably withheld), and Bain may not assign any
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld); provided that
Bain may, without consent of the Companies, assign its rights and obligations
under this Agreement to any of its affiliates (but only if such affiliate is a
person or entity (excluding any Bain portfolio companies) controlled by Bain, or
in the case of an affiliate which is a partnership, only if Bain is
-4-
<PAGE>
the ultimate general partner of such partnership). The assignor shall remain
liable for the performance of any assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement
as of the date first written above.
CHIPPAC, INC.
By: /s/ Gary Breton
Its:____________________________________
CHIPPAC LIMITED
By: /s/ P. J. Kim
Its:____________________________________
CHIPPAC OPERATING LIMITED (NAME TO BE
CHANGED TO CHIPPAC INTERNATIONAL COMPANY
LIMITED)
By: /s/ P. J. Kim
Its:____________________________________
BAIN CAPITAL, INC.
By: /s/ David Dominik
Its:____________________________________
<PAGE>
Exhibit 10.18
ADVISORY AGREEMENT
------------------
This Advisory Agreement (this "Agreement") is made and entered into as
of August 5, 1999, by and between ChipPAC, Inc., a California corporation,
ChipPAC Limited, a corporation incorporated under the laws of the Territory of
the British Virgin Islands, ChipPAC Operating Limited (name to be changed to
ChipPAC International Company Limited), a corporation incorporated under the
laws of the Territory of the British Virgin Islands (collectively, the
"Companies," and individually, the "Company"), and SXI Group LLC ("SXI").
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Agreement and Plan of Merger and Recapitalization, dated as
of March 13, 1999, as amended, by and among the ChipPAC, Inc., Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics America and ChipPAC Merger
Corp.
WHEREAS, the Companies desire to retain SXI and SXI desires to perform
for the Companies and/or their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
ten (10) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless the Companies
provide or SXI provides written notice of its or their desire to terminate this
Agreement to the other party 90 days prior to the expiration of the Term or any
extension thereof.
2. Services. SXI shall perform or cause to be performed such
services for any of the Companies and/or their subsidiaries as directed by such
Company's board of directors, which may include, without limitation, the
following:
(a) executive and management services;
(b) identification, support and analysis of acquisitions and
dispositions by such Company or its subsidiaries;
(c) support and analysis of financing alternatives, including, without
limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
(e) human resource functions, including searching and hiring of
executives; and
<PAGE>
(f) other services for such Company or its subsidiaries upon which
such Company's board of directors and SXI agree.
Notwithstanding any provision in this Agreement to the contrary, each
of the parties hereto acknowledges and agrees that there are no minimum levels
of services required to be provided to the Companies pursuant to this Agreement.
3. Advisory Fee. Payment for services rendered by SXI and/or its
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall be billed on an hourly basis for actual services rendered
(it being agreed that no minimum services levels shall be required), plus
reasonable out-of-pocket expenses incurred by SXI and/or its affiliates;
provided that, commencing with the calendar quarter ended March 31, 2000, when
and if ChipPAC, Inc. and its subsidiaries achieve LTM Period EBITDA, as defined
below, as calculated at the end of such calendar quarter or any succeeding
calendar quarter, in excess of $81.2 million, in lieu of the aforementioned fees
and expenses, SXI and/or its affiliates will be entitled to an annual advisory
fee, the amount of which shall be the greater of (i) $1,000,000 per annum and
(ii) 0.3% per annum of the annual consolidated revenue of ChipPAC, Inc. and its
subsidiaries (determined on a trailing twelve month basis), plus reasonable out-
of-pocket expenses of SXI and/or its affiliates. All fees and expenses
described in this paragraph 3 shall be payable to SXI or its designees on a
quarterly basis in advance (based on the parties' estimate of the amount of fees
and expenses which shall become due and payable for such quarter) commencing as
of the date hereof. "LTM Period EBITDA" means, for ChipPAC, Inc. and its
consolidated subsidiaries, for any trailing twelve month period ending on the
date of any measurement, operating income, plus depreciation, amortization, any
non-cash charges related to write-downs of impaired assets and, to the extent
deducted in determining operating income, any fees and expenses incurred
pursuant to this Agreement and pursuant to that certain Advisory Agreement dated
as of the date hereof between the Companies and Bain Capital, Inc. as the same
may be amended, replaced or modified from time to time.
4. Transaction Fees.
(a) The Companies hereby agree to pay to SXI or its designees on the
Closing Date a fee for services rendered in connection with the structuring
of the financing for the Recapitalization Transactions and certain other
management services. Such fees shall be payable to SXI or its designees by
wire transfer in an amount not to exceed 1% of the aggregate value of the
financing for the Recapitalization Transactions plus reasonable out-of-
pocket expenses.
(b) In addition, during the term of this Agreement, the Companies
shall pay to SXI or its designees a transaction fee in connection with the
consummation of each acquisition, divestiture or financing by any of the
Companies or their subsidiaries in an amount equal to 1% of the aggregate
value of such transaction.
5. Personnel. SXI shall provide and devote to the performance of
this Agreement such partners, employees and agents of SXI as SXI shall deem
appropriate to the furnishing of the services required.
-2-
<PAGE>
6. Liability. Neither SXI nor any other Indemnitee (as defined in
Section 7 below) shall be liable to any of the Companies or any of their
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of an Indemnitee acting within the scope of such person's employment or
authority. SXI makes no representations or warranties, express or implied, in
respect of the services to be provided by SXI or any of the other Indemnitees.
Except as SXI may otherwise agree in writing after the date hereof: (i) SXI
shall have the right to, and shall have no duty (contractual or otherwise) not
to, directly or indirectly: (A) engage in the same or similar business
activities or lines of business as any of the Companies or any of their
subsidiaries, including those competing with any of the Companies or any of
their subsidiaries and (B) do business with any client or customer of any of the
Companies or any of their subsidiaries; (ii) neither SXI nor any officer,
director, employee, partner, affiliate or associated entity thereof shall be
liable to any of the Companies or any of their subsidiaries or affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities
of or of such person's participation therein; and (iii) in the event that SXI
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for both any of the Companies or any of their subsidiaries, on the
one hand, and SXI, on the other hand, or any other person, SXI shall have no
duty (contractual or otherwise) to communicate or present such corporate
opportunity to any of the Companies or any of their subsidiaries and,
notwithstanding any provision of this Agreement to the contrary, shall not be
liable to any of the Companies or any of their affiliates for breach of any duty
(contractual or otherwise) by reasons of the fact that SXI directly or
indirectly pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such opportunity to any of
the Companies. In no event will any of the parties hereto be liable to any
other party hereto for any indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or in respect of any liabilities relating to any third party claims
(whether based in contract, tort or otherwise) other than the Claims (as defined
in Section 7 below) relating to the service to be provided by SXI hereunder.
7. Indemnity. Each of the Companies and their subsidiaries shall
defend, indemnify and hold harmless each of SXI, its affiliates, members,
partners, employees and agents (collectively, the "Indemnitees") from and
against any and all loss, liability, damage or expenses arising from any claim
by any person with respect to, or in any way related to, the performance of
services contemplated by this Agreement (including attorneys' fees)
(collectively, "Claims") resulting from any act or omission of any of the
Indemnitees, other than for Claims which shall be proven to be the direct result
of gross negligence, bad faith or willful misconduct by an Indemnitee. Each of
the Companies and their subsidiaries shall defend at its own cost and expense
any and all suits or actions (just or unjust) which may be brought against such
Company, any of its subsidiaries or any of the Indemnitees or in which any of
the Indemnitees may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by any of the Indemnitees, except that if such damage
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by an Indemnitee, then SXI shall reimburse the Companies and
their subsidiaries for the costs of defense and other costs incurred by the
Companies and their subsidiaries.
-3-
<PAGE>
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Companies, as appropriate:
--------------------------------
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attention: Chief Executive Officer
Facsimile: (408) 486-5914
ChipPAC Limited
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
ChipPAC Operating Limited
(Name to be changed to
ChipPAC International Company Limited)
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
To SXI:
------
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
U.S.A.
Attention: Michael A. Delaney
Paul C. Schorr IV
Facsimile: (212) 888-2940
9. Assignment. None of the Companies may assign any obligations
hereunder to any other party without the prior written consent of SXI (which
consent shall not be unreasonably withheld), and SXI may not assign any
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld); provided that
SXI may, without consent of the Companies, assign its rights and obligations
under this Agreement to any of its affiliates (but only if such affiliate is a
person or entity (excluding any SXI portfolio companies) controlled by SXI, or
in the case of an affiliate which is a partnership, only if SXI is the ultimate
general partner of such partnership) or to Citicorp Venture Capital Ltd. The
assignor shall remain liable for the performance of any assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
-4-
<PAGE>
11. Counterparts. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
CHIPPAC, INC.
By: /s/ Gary Breton
-----------------------------
Its:
----------------------------
CHIPPAC LIMITED
By: /s/ P.J. Kim
-----------------------------
Its:
----------------------------
CHIPPAC OPERATING LIMITED (NAME TO
BE CHANGED TO CHIPPAC
INTERNATIONAL COMPANY LIMITED)
By: /s/ P.J. Kim
-----------------------------
Its:
----------------------------
SXI GROUP LLC
By: /s/ Paul C. Schorr IV
-----------------------------
Its:
----------------------------
<PAGE>
Exhibit 10.20
-------------
CHIPPAC, INC.
-------------
1999 STOCK PURCHASE AND OPTION PLAN
-----------------------------------
1. Purpose of Plan. This 1999 Stock Purchase and Option Plan (the
---------------
"Plan") of ChipPAC, Inc., a California corporation (the "Company") is designed
---- -------
to provide incentives to such present and future employees, directors,
consultants or advisers of the Company or its subsidiaries ("Participants"), as
------------
may be selected in the sole discretion of the Committee (as defined below),
through the grant of Options by the Company to Participants or through the sale
of Common Stock to Participants. Only those Participants who are employees of
the Company and its Subsidiaries shall be eligible to receive incentive stock
options. This Plan is a compensatory benefit plan within the meaning of Rule
701 of the Securities Act of 1933, as amended, and, unless and until the
Company's common stock is publicly traded, the issuance of stock purchase
options for shares of Common Stock (as defined below) pursuant to the Plan, the
issuance of shares of Common Stock pursuant to such stock purchase options and
the issuance of any other shares of Common Stock pursuant to this Plan are, to
the extent permitted by applicable federal securities laws, intended to qualify
for the exemption from registration under Rule 701 of the Securities Act of
1933, as amended and Section 25102(o) of the California Securities Law of 1968.
2. Definitions. Certain terms used in this Plan have the meanings
-----------
set forth below:
"Board" means the Company's board of directors.
-----
"Code" means the Internal Revenue Code of 1986, as it may be amended
----
from time to time.
"Class A Common" means the Company's Class A Common Stock, par value
--------------
$.01 per share.
"Class L Common" means the Company's Class L Common Stock, par value
--------------
$.01 per share.
"Committee" shall mean the committee of the Board which may be
---------
designated by the Board to administer the Plan. The Committee shall be composed
of two or more directors as appointed from time to time to serve by the Board.
In the absence of the appointment of any such Committee, any action permitted or
required to be taken hereunder shall be deemed to refer to the Board.
"Common Stock" means the Class A Common and the Class L Common.
------------
<PAGE>
"Fair Market Value" of a share of Common Stock means the market value
-----------------
as determined in good faith by the Committee or, in the absence of the
Committee, by the Board.
"Option" means any option enabling the holder thereof to purchase any
------
class of Common Stock from the Company granted by the Committee pursuant to the
provisions of this Plan. Options to be granted under this Plan may be incentive
stock options within the meaning of Section 422 of the Code ("Incentive Stock
---------------
Options") or in such other form, consistent with this Plan, as the Committee may
- -------
determine.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
3. Grant of Options. The Committee shall have the right and power
----------------
to grant to any Participant such Options at any time prior to the termination of
this Plan in such quantity, at such price, on such terms and subject to such
conditions that are consistent with this Plan and established by the Committee;
provided that (i) the exercise price for any Options shall be not less than 85%
of the Fair Market Value of the underlying Common Stock at the time the Options
are granted, except that the exercise price shall be 110% of the Fair Market
Value of the underlying Common Stock in the case of any person who owns capital
stock possessing more than 10% of the total combined voting power of all classes
of capital stock of the Company or its Subsidiaries, (ii) the exercise period of
such Options may not be more than 120 months from the date such Options are
granted, (iii) such Options shall not be transferable other than by will or
under the laws of descent and distribution, (iv) Participants shall have the
right to exercise Options at the rate of at least 20% per year over five (5)
years from the date the Options are granted, subject to reasonable conditions
such as continued employment, except that in the case of Options granted to
officers, directors or consultants of the Company or any of its Subsidiaries,
the Options may become fully exercisable, subject to reasonable conditions such
as continued employment, at any time or during any period established by the
Company and (v) unless a Participant's employment is terminated for cause, as
defined by applicable law or the terms of any agreement evidencing any grant of
Options or a contract of employment, a Participant shall have the right to
exercise in the event of termination of employment, to the extent that the
Participant is otherwise entitled to exercise on the date employment terminates,
for a period of (A) not less than six (6) months from the date of termination if
termination was caused by death or disability and (B) not less than 30 days from
the date of termination if termination was caused by other than death or
disability. Options granted under this Plan shall be subject to such terms and
conditions and evidenced by agreements as shall be determined from time to time
by the Committee.
4. Sale of Common Stock. The Committee shall have the power and
--------------------
authority to sell to any Participant any class or classes of Common Stock at any
time prior to the termination of this Plan in such quantity, at such price, on
such terms and subject to such conditions that are consistent with this Plan and
established by the Committee; provided that (i) the purchase price for any
shares of Common Stock to be sold pursuant to this Plan shall be at least 85% of
the Fair Market
-2-
<PAGE>
Value thereof at the time the Participant is granted the right to purchase
shares of Common Stock under this Plan or at the time the purchase is
consummated, except that the purchase price shall be 100% of the Fair Market
Value thereof at the time the Participant is granted the right to purchase
shares of Common Stock under this Plan or at the time the purchase is
consummated, in the case of any person who owns capital stock possessing more
than 10% of the total combined voting power of all classes of capital stock of
the Company or its Subsidiaries and (ii) such Participant's rights to purchase
shares of Common Stock under this Plan shall not be transferable other than by
will or under the laws of descent and distribution. Common Stock sold under this
Plan shall be subject to such terms and evidenced by agreements as shall be
determined from time to time by the Committee.
5. Administration of the Plan. The Committee shall have the power
--------------------------
and authority to prescribe, amend and rescind rules and procedures governing the
administration of this Plan, including, but not limited to the full power and
authority (i) to interpret the terms of this Plan, the terms of any Options
granted under this Plan, and the rules and procedures established by the
Committee governing any such Options and (ii) to determine the rights of any
person under this Plan, or the meaning of requirements imposed by the terms of
this Plan or any rule or procedure established by the Committee. Each action of
the Committee which shall be binding on all persons. In administering the Plan,
the Committee shall provide the Participants with such financial statements as
may be required pursuant to applicable law.
6. Limitation on the Aggregate Number of Shares. The number of
--------------------------------------------
shares of Common Stock issued under this Plan (including the number of shares of
Common Stock with respect to which Options may be granted under this Plan (and
which may be issued upon the exercise or payment thereof)) shall not exceed, in
the aggregate, 500,000 shares of Class L Common and 15,500,000 shares of Class A
Common (as such numbers are equitably adjusted pursuant to paragraph 9 hereof).
If any Options expire unexercised or unpaid or are canceled, terminated or
forfeited in any manner without the issuance of Common Stock or payment
thereunder, the shares with respect to which such Options were granted shall
again be available under this Plan. Similarly, if any shares of Common Stock
issued hereunder upon exercise of Options are repurchased hereunder, such shares
shall again be available under this Plan for reissuance as Options. Shares of
Common Stock to be issued upon exercise of the Options or shares of Common Stock
to be sold directly hereunder may be either authorized and unissued shares,
treasury shares, or a combination thereof, as the Committee shall determine.
7. Incentive Stock Options. All Incentive Stock Options shall
-----------------------
comport with all requirements set forth in Section 422 of the Code and the
regulations promulgated thereunder. To the extent that the aggregate fair
market value of stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year
exceeds $100,000 (measured as of the date such options are granted), such
options shall be treated as options which are not Incentive Stock Options.
8. Listing, Registration and Compliance with laws and Regulations.
--------------------------------------------------------------
Each Option shall be subject to the requirement that if at any time the
Committee shall determine, in its
-3-
<PAGE>
discretion, that the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any state or federal
securities or other law or regulation, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition to or in
connection with the granting of such Option or the issue or purchase of shares
thereunder, no such Option may be exercised or paid in Common Stock in whole or
in part unless such listing, registration, qualification, consent or approval (a
"Required Listing") shall have been effected or obtained, and the holder of the
----------------
Option will supply the Company with such certificates, representations and
information as the Company shall request which are reasonably necessary or
desirable in order for the Company to obtain such Required Listing, and shall
otherwise cooperate with the Company in obtaining such Required Listing. In the
case of officers and other persons subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Committee may at any time impose any
limitations upon the exercise of an Option which, in the Committee's discretion,
are necessary or desirable in order to comply with Section 16(b) and the rules
and regulations thereunder. If the Company, as part of an offering of securities
or otherwise, finds it desirable because of federal or state regulatory
requirements to reduce the period during which any Options may be exercised, the
Committee may, in its discretion and without the consent of the holders of any
such Options, so reduce such period on not less than 15 days' written notice to
the holders thereof.
9. Adjustment for Change in Common Stock. In the event of a
-------------------------------------
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation or other change in the Common Stock, the Committee
shall make appropriate changes in the number and type of shares authorized by
this Plan, the number and type of shares covered by outstanding Options and the
prices specified therein.
10. Taxes. The Company shall be entitled, if necessary or desirable,
-----
to withhold (or secure payment from the Plan participant in lieu of withholding)
the amount of any withholding or other tax due from the Company with respect to
any amount payable and/or shares issuable under this Plan, and the Company may
defer such payment or issuance unless indemnified to its satisfaction.
11. Termination and Amendment. The Committee at any time may suspend
-------------------------
or terminate this Plan and make such additions or amendments as it deems
advisable under this Plan, except that they may not, without further approval by
the Company's stockholders, (a) increase the maximum number of shares as to
which Options may be granted under this Plan, except pursuant to paragraph 9
above or (b) extend the term of this Plan; provided that, subject to paragraph 8
hereof, the Committee may not change any of the terms of a written agreement
with respect to an Option between the Company and the holder of such Option
without the approval of the holder of such Option. No Options shall be granted
or shares of Common Stock issued hereunder after November 1, 2009; provided
that, if the term of this Plan is otherwise extended, no Incentive Stock Options
shall be granted hereunder after November 1, 2009.
* * * * *
-4-
<PAGE>
Exhibit 10.21
KEY EMPLOYEE PURCHASED STOCK AGREEMENT
--------------------------------------
KEY EMPLOYEE PURCHASED STOCK AGREEMENT (this "Agreement") dated as of
---------
_________ __, 1999, by and between ChipPAC, Inc., a California corporation (the
"Company") and _______ ("Employee").
------- --------
Pursuant to the Company's 1999 Stock Purchase and Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A, the Company and
---- ---------
Employee desire to enter into an agreement pursuant to which Employee will
purchase and the Company will sell certain shares of the Company's Class L
Common Stock, par value $.01 per share (the "Class L Common") and certain shares
--------------
of the Company's Class A Common Stock, par value $.01 per share (the "Class A
-------
Common" and together with the Class L Common, the "Common Stock"). All of such
- ------ ------------
shares of Common Stock and all shares of the Company's capital stock hereafter
acquired by Employee are referred to herein as "Employee Stock."
--------------
The parties hereto agree as follows:
STOCK PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Employee will purchase, and the
Company will sell, ________ shares of Class L Common at a price of $9.00 per
share and ______ shares of Class A Common at a price of $0.1111 per share, for
an aggregate purchase price of ______. All of the shares of Employee Stock
issued to Employee pursuant to this Section 1(a) shall constitute "Time Vesting
------------
Shares."
- ------
(b) The Company will deliver to Employee copies of certificates
representing the shares of Employee Stock purchased pursuant to this Agreement,
and, upon receipt of such copies, Employee will deliver to the Company (i) a
certified bank check, wire transfer of funds or a personal check in the amount
of the aggregate purchase price under Section 1(a) above and (ii) an executed
consent from Employee's spouse (if any) in the form of Exhibit B attached
---------
hereto. If, at any time subsequent to the date hereof and prior to the
occurrence of a Termination Event (as defined in Section 3(g) hereof), Employee
becomes legally married (whether in the first instance or to a different
spouse), Employee shall cause Employee's spouse to execute and deliver a consent
in the form of Exhibit B attached hereto. Employee's failure to deliver the
---------
Company an executed consent in the form of Exhibit B at any time when Employee
---------
would otherwise be required to deliver such consent shall constitute Employee's
continuing representation and warranty that Employee is not legally married as
of such date.
(c) Representations and Warranties. In connection with the purchase
------------------------------
and sale of the Employee Stock hereunder, Employee represents and warrants to
the Company that:
<PAGE>
(i) The Employee Stock to be acquired by Employee pursuant to
this Agreement will be acquired for Employee's own account and not with a
view to, or intention of, distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), or any applicable
--------
state securities laws, and the Employee Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) Employee is an executive officer or management employee of
the Company or its Subsidiaries, is sophisticated in financial matters and
is able to evaluate the risks and benefits of the investment in the
Employee Stock.
(iii) Employee is able to bear the economic risk of his or her
investment in the Employee Stock for an indefinite period of time because
the Employee Stock has not been registered under the 1933 Act and,
therefore, cannot be sold unless subsequently registered under the 1933 Act
or an exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Employee Stock and has had full access to such other information concerning
the Company and its Subsidiaries as he or she has requested. The Company
has provided to Employee, and Employee has reviewed, or has had an
opportunity to review, a copy of that certain Offering Circular of ChipPAC
International Limited dated July 22, 1999, and Employee is familiar with
each of the transactions contemplated thereby. Employee has also reviewed a
copy of the Plan (a copy of which is attached hereto as Exhibit A).
---------
(v) This Agreement constitutes the legal, valid and binding
obligation of Employee, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Employee is a party or any judgment, order
or decree to which Employee is subject.
(vi) Employee has consulted, or has had an opportunity to
consult with, independent legal counsel regarding his or her rights and
obligations under this Agreement and he or she fully understands the terms
and conditions contained herein.
(d) Acknowledgment. As an inducement to the Company to sell the
--------------
Employee Stock to Employee, and as a condition thereto, Employee acknowledges
and agrees that:
(i) the Company will have no duty or obligation to disclose to
Employee, and Employee will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior to,
upon or in connection with the repurchase of Employee Stock upon the
termination of Employee's employment with the Company or its Subsidiaries
or as otherwise provided hereunder; and
-2-
<PAGE>
(ii) neither the issuance of the Employee Stock to Employee nor
any provision contained herein shall entitle Employee to remain in the
employment of the Company or its Subsidiaries or affect the right of the
Company to terminate Employee's employment at any time for any reason.
(e) Plan Acknowledgment. The Company and Employee acknowledge and
-------------------
agree that this Agreement has been executed and delivered, and the Employee
Stock has been issued hereunder, in connection with and as part of the
compensation and incentive arrangements between the Company and Employee. The
issuance of Employee Stock hereunder is pursuant to, and subject to all the
terms and conditions of the Plan, attached hereto as Exhibit A.
---------
(f) 83(b) Election. Within 30 days after the date hereof, each
--------------
Employee that is subject to United States federal income tax will make an
effective election (in the form of Exhibit C attached hereto) with the Internal
---------
Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code") relative to the
----
Employee Stock purchased pursuant to this Agreement.
2. Vesting of Time Vesting Shares.
------------------------------
(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
common stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's common stock and
who is not the spouse or descendant (by birth or adoption) of any such 10% owner
of the Company's common stock.
"Investors" means Bain Capital Fund VI, L.P., BCIP Associates II, BCIP
---------
Associates II-B, BCIP Associates II-C, BCIP Trust Associates II, BCIP Trust
Associates II-B, PEP Investments Pty., Ltd., Randolph Street Partners 1998 DIF,
LLC, Randolph Street Partners II and SXI Group LLC and any of their transferees.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
-3-
<PAGE>
(b) Vesting. On each date set forth below the Time Vesting Shares
-------
shall become vested with respect to the cumulative percentage of Time Vesting
Shares set forth opposite such date if Employee is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
Cumulative Percentage
of Time Vesting
Date Shares Vested
---- -------------
August 5, 2000 20%
August 5, 2001 40%
August 5, 2002 70%
August 5, 2003 100%
; provided that, if Employee's Termination Date (as defined in paragraph 3(b)
hereof) occurs at any time after August 5, 2000 and prior to August 5, 2003, the
cumulative percentage of Time Vesting Shares to become vested shall be
determined on a pro rata basis according to the number of fiscal quarters (i.e.,
fiscal quarters ending November 1, February 1, May 1 and August 1) elapsed since
the prior annual vesting date and provided further, that upon any Change in
Control (as defined below), so long as Employee was employed by the Company or
any of its Subsidiaries on the day immediately prior to such Change in Control,
all of the Time Vesting Shares shall become vested. For purposes hereof, a
"Change in Control" shall be deemed to occur upon the first date that the
-----------------
Investors and their affiliates collectively cease to own at least 35% of the
aggregate number of shares of common stock of the Company that they own on the
date hereof (as adjusted for stock splits, stock dividends and recapitalization
and for exchanges in connection with a merger, consolidation, reorganization or
sale). Time Vesting Shares which have become vested are referred to herein as
"Vested Shares" and all other Time Vesting Shares are referred to herein as
-------------
"Unvested Shares."
---------------
3. Repurchase Option.
-----------------
(a) Definitions. The following terms are defined as follows:
-----------
"Cause" shall have the meaning assigned to such term in Employee's
-----
written employment arrangements with the Company or any of its Subsidiaries or,
in the absence of any such written employment arrangements, "Cause" shall mean
(i) the commission of a felony or any other act or omission involving
dishonesty, disloyalty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform duties as
reasonably directed by the Company's board of directors or management, (iv)
gross negligence or willful misconduct with respect to the Company or any of its
Subsidiaries or (v) any other material breach of this Agreement.
-4-
<PAGE>
"Fair Market Value" of each share of Employee Stock means the market
-----------------
value as determined in good faith by the Company's board of directors.
"Original Cost" of each share of Employee Stock will be equal to the
-------------
price paid by the Employee for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other recapitalizations
affecting the Common Stock subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Employee is no longer
-----------------
employed by the Company or any of its Subsidiaries for any reason (the date of
such termination being referred to herein as the "Termination Date"), the
----------------
Employee Stock, whether held by Employee or one or more transferees, will be
subject to repurchase by the Company and the Investors (each of the
aforementioned, solely at their option) pursuant to the terms and conditions set
forth in this paragraph 3 (the "Repurchase Option").
-----------------
(c) Repurchase Price. If Employee is no longer employed by the
----------------
Company or any of its Subsidiaries for any reason, then on or after the
Termination Date, the Company and the Investors may elect to purchase (i) in the
case of Employee's termination for Cause or in the case of Employee's
participation in any Competitive Activity during the Noncompete Period (as each
such term is defined in Section 12 hereof), all or any portion of the Employee
Stock at a price per share equal to the lower of Original Cost or Fair Market
Value (as of the Termination Date) and (ii) in any other case, all or any
portion of the Unvested Shares at a price per share equal to Fair Market Value
(as of the Termination Date).
(d) Repurchase Procedures. The Company may elect to exercise the
---------------------
right to purchase all or any portion of the shares of Employee Stock pursuant to
the Repurchase Option by delivering written notice (the "Repurchase Notice") to
-----------------
the holder or holders of the Employee Stock within 45 days of the Termination
Date (or in the case of Employee's participation in any Competitive Activity
during the Noncompete Period, within 45 days of the date the Company becomes
aware of any such participation, but in no event later than the 45/th/ day after
the expiration of the Noncompete Period). The Repurchase Notice will set forth
the number of shares of Employee Stock to be acquired from such holder(s), the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction. If any Employee Stock is held by any
transferees of Employee, the Company shall purchase the shares elected to be
purchased from such holder(s) of Employee Stock, pro rata according to the
number of shares of Employee Stock held by such holder(s) at the time of
delivery of such Repurchase Notice (determined as nearly as practicable to the
nearest share). If Employee Stock of different classes is to be purchased by
the Company and Employee Stock is held by any transferees of Employee, the
number of shares of each class of Employee Stock to be purchased will be
allocated among such holders, pro rata according to the total number of shares
of Employee Stock to be purchased from such persons.
-5-
<PAGE>
(e) Investor Rights.
---------------
(i) If for any reason the Company does not elect to purchase all of
the Employee Stock pursuant to the Repurchase Option prior to the 45/th/ day
following the Termination Date (or in the case of Employee's participation in
any Competitive Activity during the Noncompete Period, within 45 days of the
date the Company becomes aware of any such participation, but in no event later
than the 45/th/ day after the expiration of the Noncompete Period), the
Investors will be entitled to exercise the Repurchase Option, in the manner set
forth in this paragraph 3, for the Employee Stock the Company has not elected to
purchase (the "Available Shares"). As soon as practicable, but in any event
----------------
within thirty (30) days after the Company determines that there will be any
Available Shares (and in no event later than the 45/th/ day following the
Termination Date (or the 45/th/ day following the date the Company becomes aware
of Employee's participation in any Competitive Activity, but in no event later
than the 45/th/ day after the expiration of the Noncompete Period)), the Company
will deliver written notice (the "Option Notice") to the Investors setting forth
-------------
the number of Available Shares and the price for each Available Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share (based upon the number of shares of Common Stock then held by
such Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period, the Company will, if necessary,
notify the Investors electing to purchase Available Shares of any Available
Shares which Investors have elected not to purchase and each of the electing
Investors will be entitled to purchase the remaining Available Shares on the
same terms as described above (the "Second Option Notice"); provided that if in
--------------------
the aggregate such Investors elect to purchase more than the remaining Available
Shares, such remaining Available Shares purchased by each such Investor will be
reduced on a pro rata basis based upon the number of shares of Common Stock then
held by such Investors. Each Investor may elect to purchase any of the
remaining Available Shares available to such Investor by delivering written
notice to the Company within 5 days after the delivery of the Second Option
Notice (with such 5-day period referred to herein as the "Second Election
---------------
Period").
- ------
(iv) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period or the Second Election Period (if
any) the Company will, if necessary, notify the holder(s) of Employee Stock as
to the number of shares of Employee Stock being purchased from the holder(s) by
the Investors (the "Supplemental Repurchase Notice"). At the time the Company
------------------------------
delivers a Supplemental Repurchase Notice to the holder(s) of Employee Stock,
the Company will also deliver to each electing Investor written notice setting
forth the number of shares of Employee Stock the Company and each Investor will
acquire, the aggregate purchase price to be paid and the time and place of the
closing of the transaction.
-6-
<PAGE>
(f) Closing. The closing of the transactions contemplated by this
-------
paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Employee
Stock to be purchased pursuant to the Repurchase Option by delivery of, in the
case of each Investor, a check payable to the holder of such Employee Stock, and
in the case of the Company (i) first, by cancellation of any amounts due and
owing under any promissory note issued by Employee to the Company, (ii) second,
by a check payable to the holder of such Employee Stock up to the amount of the
Original Cost therefor paid in cash by Employee and (iii) a note or notes
payable in one installment on the first anniversary of the closing of such
purchase and bearing interest at a rate per annum equal to 8% (it being agreed
that the Company may, in its sole discretion, elect to make any payment under
this clause (iii) in cash), in any case in the aggregate amount of the purchase
price for such shares. Any notes issued by the Company pursuant to this
paragraph 3(f) shall be subject to any restrictive covenants to which the
Company is subject at the time of such purchase. Notwithstanding anything to the
contrary contained in this Agreement, all repurchases of Employee Stock by the
Company will be subject to applicable restrictions contained in the California
General Corporation Law and in the Company's and its Subsidiaries' debt and
equity financing agreements. If any such restrictions prohibit the repurchase of
Employee Stock hereunder which the Company is otherwise entitled to make, the
Company may make such repurchases as soon as it is permitted to do so under such
restrictions. The Company and/or the Investors, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the Employee Stock, including, but not limited to, the representation
that such seller has good and marketable title to the Employee Stock to be
transferred free and clear of all liens, claims and other encumbrances.
(g) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the first date subsequent to the date that the Company sells any shares
of its common stock pursuant to a registration statement filed under the 1933
Act (collectively, a "Termination Event").
-----------------
4. Restrictions on Transfer.
------------------------
(a) Transfer of Employee Stock. Employee will not sell, pledge or
--------------------------
otherwise transfer any interest in any shares of Employee Stock, except pursuant
to the provisions of para graphs 3, 4(b), 4(c), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Employee Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among Employee's
Family Group (as defined below), provided that the restrictions contained in
this paragraph 4 will continue to be applicable to the Employee Stock after any
such transfer and the transferees of such Employee Stock shall agree in writing
to be bound by the provisions of this Agreement. "Family Group" means
------------
Employee's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Employee and/or Employee's
-7-
<PAGE>
spouse and/or descendants. Any transferee of Employee Stock pursuant to a
transfer in accordance with the provisions of this subparagraph 4(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Employee Stock
--------------------
pursuant to this paragraph 4(b), Employee will deliver a written notice (the
"Transfer Notice") to the Company. The Transfer Notice will disclose in
---------------
reasonable detail the identity of the Permitted Transferee(s).
(c) Participation Rights.
--------------------
(i) At least 30 days prior to any transfer of shares of any class of
Common Stock by an Investor (other than a transfer among the Investors or
their affiliates or to an employee or director of the Company or its
Subsidiaries), the transferring Investor will deliver written notice (the
"Sale Notice") to the Company, Employee and all other holders of such class
-----------
of Common Stock that have been granted participation rights similar to the
participation rights granted herein (Employee and such other holders of
Common Stock with participation rights collectively referred to as the
"Other Stockholders"), specifying in reasonable detail the identity of the
------------------
prospective transferee(s) and the terms and conditions of the transfer.
Notwithstanding the restrictions contained in this paragraph 4, the Other
Stockholders may elect to participate in the contemplated transfer by
delivering written notice to the transferring Investor within 10 days after
delivery of the Sale Notice. If any Other Stockholders have elected to
participate in such transfer, each of the transferring Investor and such
Other Stockholders will be entitled to sell in the contemplated transfer,
at the same price and on the same terms, a number of shares of such class
of Common Stock equal to the product of (A) the quotient determined by
dividing the number of shares of such class of Common Stock owned by such
person by the aggregate number of shares of such class of Common Stock
owned by the transferring Investor and the Other Stockholders participating
in such sale and (B) the number of shares of such class of Common Stock to
be sold in the contemplated transfer. Notwithstanding the foregoing, in
the event that the transferring Investor(s) intend to transfer shares of
more than one class of Common Stock, the Other Stockholders participating
in such transfer shall be required to sell in the contemplated transfer a
pro rata portion of shares of all such classes of Common Stock, which
portion shall be determined in the manner set forth immediately above.
For example (by way of illustration only), if the Sale Notice contemplated
-----------------------------------------
a sale of 100 shares of Class L Common by the transferring Investor, and if
the transferring Investor at such time owns 30% of the Class L Common and
if one Other Stockholder elects to participate and owns 20% of the Class L
Common, the transferring Investor would be entitled to sell 60 shares
(30% / 50% x 100 shares) and the Other Stockholder would be entitled to
sell 40 shares (20% / 50% x 100 shares).
(ii) The transferring Investor will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
Other Stockholders in any contemplated transfer, and the transferring
Investor will not transfer any of its shares of Common Stock
-8-
<PAGE>
to the prospective transferee(s) unless (A) simultaneously with such
transfer, the prospective transferee or transferees purchase from the Other
Stockholders the shares of Common Stock which the Other Stockholders are
entitled to sell to such prospective transferee(s) pursuant to paragraph
4(c)(i) above or (B) simultaneously with such transfer, the transferring
Investor purchases the number of shares of such class of Common Stock from
the Other Stockholders which the Other Stockholders would have been
entitled to sell pursuant to paragraph 4(c)(i) above.
(d) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of a Termination Event.
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Employee Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
EMPLOYEE STOCK AGREEMENT BETWEEN THE ISSUER (THE "COMPANY")
AND AN EMPLOYEE OF THE COMPANY DATED AS OF _________ __,
1999, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) No holder of Employee Stock may sell, transfer or dispose of any
Employee Stock (except pursuant to an effective registration statement under the
Securities Act of 1933) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel shall be reasonably acceptable to the Company) that registration under
the 1933 Act is not required in connection with such transfer.
6. Definition of Employee Stock. For all purposes of this Agreement,
----------------------------
Employee Stock will continue to be Employee Stock in the hands of any holder
other than Employee (except for the Company, the Investors or purchasers
pursuant to an offering registered under the 1933 Act or purchasers pursuant to
a Rule 144 transaction (other than a Rule 144(k) transaction occurring prior to
the time of a closing of a Public Offering (as defined in Section 8 below)), and
each such other
-9-
<PAGE>
holder of Employee Stock will succeed to all rights and obligations attributable
to Employee as a holder of Employee Stock hereunder. Employee Stock will also
include shares of the Company's capital stock issued with respect to shares of
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of the Company's
common stock held by the Investors approve (and, in the case of any sale or
other fundamental change which requires the approval of the board of directors
of a California corporation pursuant to the California General Corporation Law,
the Company's board of directors shall have approved such sale) a sale of all or
substantially all of the Company's assets determined on a consolidated basis or
a sale of all or substantially all of the Company's outstanding capital stock
(whether by merger, recapitalization, consolidation, reorganization, combination
or otherwise) to an Independent Third Party or group of Independent Third
Parties (an "Approved Sale"), each holder of Employee Stock will vote for,
-------------
consent to and raise no objections against such Approved Sale. If the Approved
Sale is structured as (i) a merger or consolidation, each holder of Employee
Stock will waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) sale of stock, each holder
of Employee Stock will agree to sell all of his or her shares of Employee Stock
and rights to acquire shares of Employee Stock on the terms and conditions
approved by the Company's board of directors and the holders of a majority of
the Company's common stock then outstanding. Each holder of Employee Stock will
take all necessary or desirable actions in connection with the consummation of
the Approved Sale as requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Articles of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Employee Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Employee Stock appoints a purchaser
-10-
<PAGE>
representative designated by the Company, the Company will pay the fees of such
purchaser representative, but if any holder of Employee Stock declines to
appoint the purchaser representative designated by the Company, such holder will
appoint another purchaser representative, and such holder will be responsible
for the fees of the purchaser representative so appointed.
(d) Employee and the other holders of Employee Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Employee Stock pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by Employee
and the other holders of Employee Stock on their own behalf will not be
considered costs of the transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the
closing of a Public Offering (as defined below).
8. Public Offering. In the event that the Company's board of
---------------
directors and the holders of a majority of the Company's shares of common stock
then outstanding approve an initial public offering and sale of the Company's
common stock (a "Public Offering") pursuant to an effective registration
---------------
statement under the 1933 Act, the holders of Employee Stock will take all
necessary or desirable actions in connection with the consummation of the Public
Offering. In the event that such Public Offering is an underwritten offering
and the managing underwriters advise the Company in writing that in their
opinion the Common Stock structure will adversely affect the marketability of
the offering, each holder of Employee Stock will consent to and vote for a
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Company's board of directors and
holders of a majority of the shares of Common Stock then outstanding find
acceptable and will take all necessary or desirable actions in connection with
the consummation of the recapitalization, reorganization and/or exchange.
9. Voting Agreement. Each holder of Employee Stock hereby agrees to
----------------
vote all of his or her shares of Employee Stock (and, in the event such holder
is entitled to vote any of the Company's other securities for the election of
directors, such holder shall vote all such securities) and take all other
necessary actions (whether in such holder's capacity as a stockholder, director
or officer of the Company), and the Company shall take all necessary or
desirable actions as are requested by the Investors, in order to cause any
representatives designated by the Investors to be elected as members of the
Company's board of directors. In addition, no holder shall vote his or her
shares of Employee Stock (or such other securities) in connection with the
removal of any of the Investors' designees as a director unless and until the
Investors direct such holder how to vote on such removal. Except as otherwise
provided herein, each holder of Employee Stock shall at all times retain the
right to vote his or her Employee Stock (and such other securities) in his or
her sole discretion on all other matters presented to the Company's stockholders
for a vote. All Investor determinations under this paragraph 9 shall be made by
the Investors holding a majority of the Common Stock held by all Investors (in
each case determined on a fully-diluted basis). The provisions of this
paragraph 9 shall terminate upon the occurrence of a Termination Event.
-11-
<PAGE>
10. Confidential Information. Employee acknowledges that the
------------------------
information, observations and data obtained by him or her while employed by the
Company and its Subsidiaries concerning the business or affairs of the Company
or any of its Subsidiaries ("Confidential Information") are the property of the
------------------------
Company or such Subsidiary. Therefore, Employee agrees that he or she shall not
disclose to any unauthorized person or use for his or her own purposes any
Confidential Information without the prior written consent of the Company's
board of directors, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Employee's acts or omissions. Employee shall deliver to the Company
as of the Termination Date, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of the
Company or any Subsidiary which he or she may then possess or have under his or
her control.
11. Inventions and Patents. Employee acknowledges that all
----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Subsidiaries' actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Employee while employed
by the Company or its Subsidiaries ("Work Product") belong to the Company or
------------
such Subsidiary. Employee shall promptly disclose such Work Product to the
Company's board of directors and perform all actions reasonably requested by the
Company's board of directors (whether during or after the period of Employee's
employment with the Company or its Subsidiaries) to establish and confirm such
ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
12. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the sale and purchase of the
Company's stock hereunder and the other stock sales and stock options made
available to Employee pursuant to separate agreements, Employee acknowledges
that in the course of his or her employment with the Company or its Subsidiaries
he or she shall become familiar with the Company's and its Subsidiaries' trade
secrets and with other Confidential Information concerning the Company and its
Subsidiaries and that his or her services shall be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, Employee
agrees that, during the period of his or her employment with the Company or its
Subsidiaries and, at the Company's option, so long as the Company elects to pay
Employee's monthly base salary during any such month (it being agreed that the
Company's payment of any severance or other termination payments pursuant to any
separate employment or other agreement between the Company and Employee which
provides Employee with severance or other termination payments (whether on a
periodic basis or in a lump sum) not less than Employee's monthly base salary
shall be deemed to satisfy the aforementioned requirement), on a month to month
basis thereafter for a period not to exceed twelve months (the "Noncompete
----------
Period"), he or she shall not directly or indirectly own any interest in,
- ------
manage, control, participate in, consult with,
-12-
<PAGE>
render services for, or in any manner engage in any business competing with the
businesses of the Company or its Subsidiaries, as such businesses exist or are
in process on the date of the termination of Employee's employment, anywhere in
the world (any of the foregoing, a "Competitive Activity"). Nothing herein shall
--------------------
prohibit Employee from being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as Employee has no active participation in the business of such
corporation.
(b) During the Noncompete Period, Employee shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any Subsidiary at any time during Employee's period
of employment with the Company or its Subsidiaries or (iii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor, franchisee or business
relation and the Company or any Subsidiary (including, without limitation,
making any negative statements or communications about the Company or its
Subsidiaries).
13. Enforcement. If, at the time of enforcement of paragraph 10, 11
-----------
or 12 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reason able under such
circumstances shall be substituted for the stated period, scope or area.
Because Employee's services are unique and because Employee has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would not be an adequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security). In addition, in the event of an alleged breach or violation by
Employee of paragraph 12, the Noncompete Period shall be tolled until such
breach or violation has been duly cured. Employee agrees that the restrictions
contained in paragraph 12 are reasonable.
14. Other Businesses. As long as Employee is employed by the Company
----------------
or any of its Subsidiaries, Employee agrees that he or she will not, except with
the express written consent of the Company's board of directors, become engaged
in, or render services for, any business other than the business of the Company
or any of its Subsidiaries.
15. Holdback Agreement. No holder of Employee Stock will effect any
------------------
public sale or distribution (including sales pursuant to Rule 144 of the 1933
Act) of any Employee Stock or of any other capital stock or equity securities of
the Company, or any securities, options or rights convertible into or
exchangeable or exercisable for such stock or securities, during the seven days
prior to and the 180-day period beginning on the effective date of any
underwritten public offering
-13-
<PAGE>
of the Company's common stock, except as part of such underwritten public
offering. The restrictions on the transfer set forth in this Section 15 shall
continue with respect to each share of Employee Stock until the date on which
such share has been transferred pursuant to an offering registered under the
1933 Act or to the public through a broker, dealer or market maker pursuant to
the provisions of Rule 144 (other than Rule 144(k)), adopted under the 1933 Act.
16. Employee's Representations. Employee hereby represents and
--------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Employee do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or by which he or she is bound, (ii)
Employee is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and (iii)
upon the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Employee, enforceable in accordance
with its terms.
17. Survival. Paragraphs 10, 11 and 12 shall survive and continue in
--------
full force in accordance with their terms notwithstanding any termination of
Employee's employment.
18. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered or sent by guaranteed overnight
delivery service, to the Investors and Employee at the addresses indicated in
the Company's records and to the Company at the address indicated below:
To the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attn: CEO
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or deposited with such delivery service.
-14-
<PAGE>
19. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. In the
event that any ruling of any court or governmental authority calls into question
the validity of any portion of this Agreement, the parties hereto shall consult
with each other concerning such matters and shall negotiate in good faith a
modification to this Agreement which would obviate any such questions as to
validity while preserving, to the extent possible, the intent of the parties and
the economic and other benefits of this Agreement and the portion thereof whose
validity is called into question.
20. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
21. Counterparts. This Agreement may be executed in separate
------------
counterparts (any one of which may be delivered by facsimile), each of which
will be deemed to be an original and all of which taken together will constitute
one and the same agreement.
22. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Employee, the Company, the
Investors and their respective successors and assigns, provided that Employee
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement.
23. GOVERNING LAW. ALL ISSUES CONCERNING THE ENFORCEABILITY,
-------------
VALIDITY AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION IN ANY STATE OR FEDERAL COURT LOCATED IN THE
STATE OF CALIFORNIA AND WAIVES ANY CLAIM OF IMPROPER JURISDICTION OR LACK OF
VENUE IN CONNECTION WITH ANY CLAIM OR CONTROVERSY WHICH MAY BE BROUGHT IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO MAINTAINS SUBSTANTIAL
CONTACTS WITH THE STATE OF CALIFORNIA, AND A SIGNIFICANT PORTION OF THE PARTIES'
RELATIONSHIP SHALL BE CARRIED OUT IN THE STATE OF CALIFORNIA, BY REASON OF THE
COMPANY'S SANTA CLARA, CALIFORNIA FACILITY. EACH PARTY AGREES THAT THE
COVENANTS
-15-
<PAGE>
PROVIDED IN THIS SECTION 23 ARE A MATERIAL INDUCEMENT TO EACH PARTY TO ENTER
INTO THIS AGREEMENT, AND EACH PARTY RELIED ON SUCH COVENANTS IN ENTERING INTO
THIS AGREEMENT.
24. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
25. Effect of Transfers in Violation of Agreement. The Company will
----------------------------------------------
not be required (a) to transfer on its books any shares of Employee Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
have been transferred in violation of this Agreement.
26. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the board of directors
of the Company, the Investors who hold 70% of the Common Stock held by the
Investors, and Employee; provided that in the event that such amendment or
waiver would adversely affect an Investor or a group of Investors in a manner
different than any other Investor, then such amendment or waiver will require
the consent of such Investor or a majority of the Common Shares held by such
group of Investors adversely affected.
27. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
* * * * *
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CHIPPAC, INC.
By: _______________________________
Its: _______________________________
____________________________________
Employee Name
-17-
<PAGE>
Exhibit B
---------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
. 1999 ChipPAC, Inc. Stock Purchase and Option Plan
. Key Employee Purchased Stock Agreement
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of capital stock of ChipPAC,
Inc. (the "Company") under certain circumstances and impose other restrictions
-------
on such capital stock. I agree that my spouse's interest in the capital stock
is subject to the agreements referred to above and the other agreements referred
to therein and any interest I may have in such capital stock shall be
irrevocably bound by these agreements and the other agreements referred to
therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints Employee N
ame, who is the spouse of the undersigned spouse (the "Shareholder") as the
-----------
undersigned's true and lawful attorney and proxy in the undersigned's name,
place and stead to sign, make, execute, acknowledge, deliver, file and record
all documents which may be required, and to manage, vote, act and make all
decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of capital stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
capital stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
__________________________ __________________________________
Signature Signature
__________________________ __________________________________
Printed Name Printed Name
__________________________ __________________________________
Dated Dated
<PAGE>
Exhibit C
---------
ELECTION TO INCLUDE STOCK IN GROSS INCOME
PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned acquired shares of Class L Common Stock, par value
$.01 per share and shares of Class A Common Stock, par value $.01 per share
(collectively, the "Shares"), of ChipPAC, Inc., a California corporation (the
------
"Company"), on _________ __, 1999. The Company and certain of its shareholders
-------
have the right to repurchase certain of the Shares at cost from the undersigned
(or from the holder of the Shares, if different from the undersigned) should the
undersigned cease to be employed by the Company or its subsidiaries. Hence, the
Shares are subject to a substantial risk of forfeiture. The Shares are also
non-transferable. The undersigned desires to make an election to have the
Shares taxed under (S)83(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), at the time he or she acquired the Shares.
----
Therefore, pursuant to Code (S)83(b) and Treasury Regulation (S)1.83-2
promulgated thereunder, the undersigned hereby makes an election with respect to
the Shares, to report as taxable income in 1999 the excess of the Shares' fair
market value on _________ __, 1999 over the acquisition price thereof.
The following information is supplied in accordance with Treasury
Regulation (S)1.83-2(e):
1. The name, address and social security number of the undersigned:
__________________
__________________
__________________
Social Security No.: ____________
2. A description of the property, with respect to which the election
is being made: _______ shares of the Company's Class L Common Stock, par value
$.01 per share and _________ shares of the Company's Class A Common Stock, par
value $.01 per share.
3. The date on which the property was transferred: _________ __,
1999. The taxable year for which such election is made: Calendar 1999.
4. The restrictions to which the property is subject: If, at any
time prior to the first to occur of (i) a sale of the Company and (ii) the first
date subsequent to the date that the Company sells any shares of its common
stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, the undersigned ceases to be employed by the Company or any
<PAGE>
of its subsidiaries, the unvested portion of the Shares shall be subject to
repurchase by the Company at fair market value, except in the case of the
undersigned's termination for cause or in the event that the undersigned
participates in any competitive activity during the period not to exceed 12
months from the date of the undersigned's termination of employment with the
Company or any of its subsidiaries, in which event all of the Shares shall be
subject to repurchase by the Company at the lower of original cost or fair
market value. Twenty percent of the Shares shall become vested as of August 5,
2000, an additional 20% of the Shares shall become vested as of August 5, 2001,
an additional 30% of the Shares shall become vested as of August 5, 2002 and the
final 30% of the Shares shall become vested on August 5, 2003; provided that if
the undersigned's termination of employment with the Company or its subsidiaries
occurs at any time after August 5, 2000 and prior to August 5, 2003, the
percentages of Shares to become vested shall be determined on a pro-rata fiscal
quarter basis; provided further, that upon any change in control, all of the
Shares shall become vested.
5. The fair market value on _________ __, 1999 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: _______.
6. The amount paid for such property: _________.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations (S)1.83-2(e)(7).
Dated: _________ __, 1999
___________________________________
Employee Name
-2-
<PAGE>
Exhibit 10.22
-------------
KEY EMPLOYEE PURCHASED STOCK AGREEMENT (WITH LOAN)
--------------------------------------------------
KEY EMPLOYEE PURCHASED STOCK AGREEMENT (WITH LOAN) (this "Agreement")
---------
dated as of _________ __, 1999, by and between ChipPAC, Inc., a California
corporation (the "Company") and ________ ("Employee").
------- --------
Pursuant to the Company's 1999 Stock Purchase and Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A, the Company and
---- ---------
Employee desire to enter into an agreement pursuant to which Employee will
purchase and the Company will sell certain shares of the Company's Class L
Common Stock, par value $.01 per share (the "Class L Common") and certain shares
--------------
of the Company's Class A Common Stock, par value $.01 per share (the "Class A
-------
Common" and together with the Class L Common, the "Common Stock"). All of such
- ------ ------------
shares of Common Stock and all shares of the Company's capital stock hereafter
acquired by Employee are referred to herein as "Employee Stock."
--------------
The parties hereto agree as follows:
STOCK PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Employee will purchase, and the
Company will sell, _______ shares of Class L Common at a price of $9.00 per
share and ________ shares of Class A Common at a price of $0.1111 per share, for
an aggregate purchase price of ________. All of the shares of Employee Stock
issued to Employee pursuant to this Section 1(a) shall constitute "Time Vesting
------------
Shares."
- ------
(b) The Company will deliver to Employee copies of certificates
representing the shares of Employee Stock purchased pursuant to this Agreement,
and, upon receipt of such copies, Employee will deliver to the Company (i) a
certified bank check, wire transfer of funds or a personal check in the amount
of the aggregate purchase price under Section 1(a) above, (ii) an executed
consent from Employee's spouse (if any) in the form of Exhibit B attached hereto
---------
and (iii) a promissory note in the form of Annex 1 attached hereto in the
-------
principal amount of ______ (the "Note"). If, at any time subsequent to the date
----
hereof and prior to the occurrence of a Termination Event (as defined in Section
3(g) hereof), Employee becomes legally married (whether in the first instance or
to a different spouse), Employee shall cause Employee's spouse to execute and
deliver a consent in the form of Exhibit B attached hereto. Employee's failure
---------
to deliver the Company an executed consent in the form of Exhibit B at any time
---------
when Employee would otherwise be required to deliver such consent shall
constitute Employee's continuing representation and warranty that Employee is
not legally married as of such date. Employee's obligations under the Note
shall be secured by a pledge in favor of the Company of all of the shares of
Employee Stock, and in connection therewith, Employee shall enter into a pledge
agreement in the form of Annex 2 attached hereto.
-------
<PAGE>
(c) Representations and Warranties. In connection with the purchase
------------------------------
and sale of the Employee Stock hereunder, Employee represents and warrants to
the Company that:
(i) The Employee Stock to be acquired by Employee pursuant to
this Agreement will be acquired for Employee's own account and not with a
view to, or intention of, distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), or any applicable
--------
state securities laws, and the Employee Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) Employee is an executive officer or management employee of
the Company or its Subsidiaries, is sophisticated in financial matters and
is able to evaluate the risks and benefits of the investment in the
Employee Stock.
(iii) Employee is able to bear the economic risk of his or her
investment in the Employee Stock for an indefinite period of time because
the Employee Stock has not been registered under the 1933 Act and,
therefore, cannot be sold unless subsequently registered under the 1933 Act
or an exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Employee Stock and has had full access to such other information concerning
the Company and its Subsidiaries as he or she has requested. The Company
has provided to Employee, and Employee has reviewed, or has had an
opportunity to review, a copy of that certain Offering Circular of ChipPAC
International Limited dated July 22, 1999, and Employee is familiar with
each of the transactions contemplated thereby. Employee has also reviewed a
copy of the Plan (a copy of which is attached hereto as Exhibit A).
---------
(v) This Agreement constitutes the legal, valid and binding
obligation of Employee, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Employee is a party or any judgment, order
or decree to which Employee is subject.
(vi) Employee has consulted, or has had an opportunity to
consult with, independent legal counsel regarding his or her rights and
obligations under this Agreement and he or she fully understands the terms
and conditions contained herein.
(d) Acknowledgment. As an inducement to the Company to sell the
--------------
Employee Stock to Employee, and as a condition thereto, Employee acknowledges
and agrees that:
(i) the Company will have no duty or obligation to disclose to
Employee, and Employee will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Employee Stock upon the
termination of Employee's employment with the Company or its Subsidiaries
or as otherwise provided hereunder; and
-2-
<PAGE>
(ii) neither the issuance of the Employee Stock to Employee nor
any provision contained herein shall entitle Employee to remain in the
employment of the Company or its Subsidiaries or affect the right of the
Company to terminate Employee's employment at any time for any reason.
(e) Plan Acknowledgment. The Company and Employee acknowledge and
-------------------
agree that this Agreement has been executed and delivered, and the Employee
Stock has been issued hereunder, in connection with and as part of the
compensation and incentive arrangements between the Company and Employee. The
issuance of Employee Stock hereunder is pursuant to, and subject to all the
terms and conditions of the Plan, attached hereto as Exhibit A.
---------
(f) 83(b) Election. Within 30 days after the date hereof, each
--------------
Employee that is subject to United States federal income tax will make an
effective election (in the form of Exhibit C attached hereto) with the Internal
---------
Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code") relative to the
----
Employee Stock purchased pursuant to this Agreement.
2. Vesting of Time Vesting Shares.
------------------------------
(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
common stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's common stock and
who is not the spouse or descendant (by birth or adoption) of any such 10% owner
of the Company's common stock.
"Investors" means Bain Capital Fund VI, L.P., BCIP Associates II, BCIP
---------
Associates II-B, BCIP Associates II-C, BCIP Trust Associates II, BCIP Trust
Associates II-B, PEP Investments Pty., Ltd., Randolph Street Partners 1998 DIF,
LLC, Randolph Street Partners II and SXI Group LLC and any of their transferees.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
(b) Vesting. On each date set forth below the Time Vesting Shares
-------
shall become vested with respect to the cumulative percentage of Time Vesting
Shares set forth opposite such date
-3-
<PAGE>
if Employee is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date:
Cumulative Percentage
of Time Vesting
Date Shares Vested
---- -------------
August 5, 2000 20%
August 5, 2001 40%
August 5, 2002 70%
August 5, 2003 100%
; provided that, if Employee's Termination Date (as defined in paragraph 3(b)
hereof) occurs at any time after August 5, 2000 and prior to August 5, 2003, the
cumulative percentage of Time Vesting Shares to become vested shall be
determined on a pro rata basis according to the number of fiscal quarters (i.e.,
fiscal quarters ending November 1, February 1, May 1 and August 1) elapsed since
the prior annual vesting date and provided further, that upon any Change in
Control (as defined below), so long as Employee was employed by the Company or
any of its Subsidiaries on the day immediately prior to such Change in Control,
all of the Time Vesting Shares shall become vested. For purposes hereof, a
"Change in Control" shall be deemed to occur upon the first date that the
-----------------
Investors and their affiliates collectively cease to own at least 35% of the
aggregate number of shares of common stock of the Company that they own on the
date hereof (as adjusted for stock splits, stock dividends and recapitalization
and for exchanges in connection with a merger, consolidation, reorganization or
sale). Time Vesting Shares which have become vested are referred to herein as
"Vested Shares" and all other Time Vesting Shares are referred to herein as
-------------
"Unvested Shares."
---------------
3. Repurchase Option.
-----------------
(a) Definitions. The following terms are defined as follows:
-----------
"Cause" shall have the meaning assigned to such term in Employee's
-----
written employment arrangements with the Company or any of its Subsidiaries or,
in the absence of any such written employment arrangements, "Cause" shall mean
(i) the commission of a felony or any other act or omission involving
dishonesty, disloyalty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform duties as
reasonably directed by the Company's board of directors or management, (iv)
gross negligence or willful misconduct with respect to the Company or any of its
Subsidiaries or (v) any other material breach of this Agreement.
"Fair Market Value" of each share of Employee Stock means the market
-----------------
value as determined in good faith by the Company's board of directors.
-4-
<PAGE>
"Original Cost" of each share of Employee Stock will be equal to the
-------------
price paid by the Employee for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other recapitalizations
affecting the Common Stock subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Employee is no longer
-----------------
employed by the Company or any of its Subsidiaries for any reason (the date of
such termination being referred to herein as the "Termination Date"), the
----------------
Employee Stock, whether held by Employee or one or more transferees, will be
subject to repurchase by the Company and the Investors (each of the
aforementioned, solely at their option) pursuant to the terms and conditions set
forth in this paragraph 3 (the "Repurchase Option").
-----------------
(c) Repurchase Price. If Employee is no longer employed by the
----------------
Company or any of its Subsidiaries for any reason, then on or after the
Termination Date, the Company and the Investors may elect to purchase (i) in the
case of Employee's termination for Cause or in the case of Employee's
participation in any Competitive Activity during the Noncompete Period (as each
such term is defined in Section 12 hereof), all or any portion of the Employee
Stock at a price per share equal to the lower of Original Cost or Fair Market
Value (as of the Termination Date) and (ii) in any other case, all or any
portion of the Unvested Shares at a price per share equal to Fair Market Value
(as of the Termination Date).
(d) Repurchase Procedures. The Company may elect to exercise the
---------------------
right to purchase all or any portion of the shares of Employee Stock pursuant to
the Repurchase Option by delivering written notice (the "Repurchase Notice") to
-----------------
the holder or holders of the Employee Stock within 45 days of the Termination
Date (or in the case of Employee's participation in any Competitive Activity
during the Noncompete Period, within 45 days of the date the Company becomes
aware of any such participation, but in no event later than the 45/th/ day after
the expiration of the Noncompete Period). The Repurchase Notice will set forth
the number of shares of Employee Stock to be acquired from such holder(s), the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction. If any Employee Stock is held by any
transferees of Employee, the Company shall purchase the shares elected to be
purchased from such holder(s) of Employee Stock, pro rata according to the
number of shares of Employee Stock held by such holder(s) at the time of
delivery of such Repurchase Notice (determined as nearly as practicable to the
nearest share). If Employee Stock of different classes is to be purchased by
the Company and Employee Stock is held by any transferees of Employee, the
number of shares of each class of Employee Stock to be purchased will be
allocated among such holders, pro rata according to the total number of shares
of Employee Stock to be purchased from such persons.
(e) Investor Rights.
---------------
(i) If for any reason the Company does not elect to purchase all of
the Employee Stock pursuant to the Repurchase Option prior to the 45/th/ day
following the Termination Date (or
-5-
<PAGE>
in the case of Employee's participation in any Competitive Activity during the
Noncompete Period, within 45 days of the date the Company becomes aware of any
such participation, but in no event later than the 45/th/ day after the
expiration of the Noncompete Period), the Investors will be entitled to exercise
the Repurchase Option, in the manner set forth in this paragraph 3, for the
Employee Stock the Company has not elected to purchase (the "Available Shares").
----------------
As soon as practicable, but in any event within thirty (30) days after the
Company determines that there will be any Available Shares (and in no event
later than the 45/th/ day following the Termination Date (or the 45/th/ day
following the date the Company becomes aware of Employee's participation in any
Competitive Activity, but in no event later than the 45/th/ day after the
expiration of the Noncompete Period)), the Company will deliver written notice
(the "Option Notice") to the Investors setting forth the number of Available
-------------
Shares and the price for each Available Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share (based upon the number of shares of Common Stock then held by
such Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period, the Company will, if necessary,
notify the Investors electing to purchase Available Shares of any Available
Shares which Investors have elected not to purchase and each of the electing
Investors will be entitled to purchase the remaining Available Shares on the
same terms as described above (the "Second Option Notice"); provided that if in
--------------------
the aggregate such Investors elect to purchase more than the remaining Available
Shares, such remaining Available Shares purchased by each such Investor will be
reduced on a pro rata basis based upon the number of shares of Common Stock then
held by such Investors. Each Investor may elect to purchase any of the
remaining Available Shares available to such Investor by delivering written
notice to the Company within 5 days after the delivery of the Second Option
Notice (with such 5-day period referred to herein as the "Second Election
---------------
Period").
- ------
(iv) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period or the Second Election Period (if
any) the Company will, if necessary, notify the holder(s) of Employee Stock as
to the number of shares of Employee Stock being purchased from the holder(s) by
the Investors (the "Supplemental Repurchase Notice"). At the time the Company
------------------------------
delivers a Supplemental Repurchase Notice to the holder(s) of Employee Stock,
the Company will also deliver to each electing Investor written notice setting
forth the number of shares of Employee Stock the Company and each Investor will
acquire, the aggregate purchase price to be paid and the time and place of the
closing of the transaction.
(f) Closing. The closing of the transactions contemplated by this
-------
paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Employee
Stock to be purchased pursuant to the Repurchase Option by delivery of, in the
case of each Investor,
-6-
<PAGE>
a check payable to the holder of such Employee Stock, and in the case of the
Company (i) first, by cancellation of any amounts due and owing under any
promissory note issued by Employee to the Company, (ii) second, by a check
payable to the holder of such Employee Stock up to the amount of the Original
Cost therefor paid in cash by Employee and (iii) a note or notes payable in one
installment on the first anniversary of the closing of such purchase and bearing
interest at a rate per annum equal to 8% (it being agreed that the Company may,
in its sole discretion, elect to make any payment under this clause (iii) in
cash), in any case in the aggregate amount of the purchase price for such
shares. Any notes issued by the Company pursuant to this paragraph 3(f) shall be
subject to any restrictive covenants to which the Company is subject at the time
of such purchase. Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company will be subject to
applicable restrictions contained in the California General Corporation Law and
in the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Employee Stock hereunder which
the Company is otherwise entitled to make, the Company may make such repurchases
as soon as it is permitted to do so under such restrictions. The Company and/or
the Investors, as the case may be, will receive customary representations and
warranties from each seller regarding the sale of the Employee Stock, including,
but not limited to, the representation that such seller has good and marketable
title to the Employee Stock to be transferred free and clear of all liens,
claims and other encumbrances.
(g) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the first date subsequent to the date that the Company sells any shares
of its common stock pursuant to a registration statement filed under the 1933
Act (collectively, a "Termination Event").
-----------------
4. Restrictions on Transfer.
------------------------
(a) Transfer of Employee Stock. Employee will not sell, pledge or
--------------------------
otherwise transfer any interest in any shares of Employee Stock, except pursuant
to the provisions of paragraphs 3, 4(b), 4(c), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Employee Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among Employee's
Family Group (as defined below), provided that the restrictions contained in
this paragraph 4 will continue to be applicable to the Employee Stock after any
such transfer and the transferees of such Employee Stock shall agree in writing
to be bound by the provisions of this Agreement. "Family Group" means
------------
Employee's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Employee and/or Employee's spouse and/or descendants.
Any transferee of Employee Stock pursuant to a transfer in accordance with the
provisions of this subparagraph 4(b) is herein referred to as a "Permitted
---------
Transferee." Upon the transfer of Employee Stock pursuant to this paragraph
- ----------
4(b), Employee will deliver a written notice (the "Transfer Notice") to the
---------------
Company. The Transfer Notice will disclose in reasonable detail the identity of
the Permitted Transferee(s).
(c) Participation Rights.
--------------------
-7-
<PAGE>
(i) At least 30 days prior to any transfer of shares of any class of
Common Stock by an Investor (other than a transfer among the Investors or
their affiliates or to an employee or director of the Company or its
Subsidiaries), the transferring Investor will deliver written notice (the
"Sale Notice") to the Company, Employee and all other holders of such class
-----------
of Common Stock that have been granted participation rights similar to the
participation rights granted herein (Employee and such other holders of
Common Stock with participation rights collectively referred to as the
"Other Stockholders"), specifying in reasonable detail the identity of the
------------------
prospective transferee(s) and the terms and conditions of the transfer.
Notwithstanding the restrictions contained in this paragraph 4, the Other
Stockholders may elect to participate in the contemplated transfer by
delivering written notice to the transferring Investor within 10 days after
delivery of the Sale Notice. If any Other Stockholders have elected to
participate in such transfer, each of the transferring Investor and such
Other Stockholders will be entitled to sell in the contemplated transfer,
at the same price and on the same terms, a number of shares of such class
of Common Stock equal to the product of (A) the quotient determined by
dividing the number of shares of such class of Common Stock owned by such
person by the aggregate number of shares of such class of Common Stock
owned by the transferring Investor and the Other Stockholders participating
in such sale and (B) the number of shares of such class of Common Stock to
be sold in the contemplated transfer. Notwithstanding the foregoing, in
the event that the transferring Investor(s) intend to transfer shares of
more than one class of Common Stock, the Other Stockholders participating
in such transfer shall be required to sell in the contemplated transfer a
pro rata portion of shares of all such classes of Common Stock, which
portion shall be determined in the manner set forth immediately above.
For example (by way of illustration only), if the Sale Notice contemplated
-----------------------------------------
a sale of 100 shares of Class L Common by the transferring Investor, and if
the transferring Investor at such time owns 30% of the Class L Common and
if one Other Stockholder elects to participate and owns 20% of the Class L
Common, the transferring Investor would be entitled to sell 60 shares
(30% / 50% x 100 shares) and the Other Stockholder would be entitled to
sell 40 shares (20% / 50% x 100 shares).
(ii) The transferring Investor will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
Other Stockholders in any contemplated transfer, and the transferring
Investor will not transfer any of its shares of Common Stock to the
prospective transferee(s) unless (A) simultaneously with such transfer, the
prospective transferee or transferees purchase from the Other Stockholders
the shares of Common Stock which the Other Stockholders are entitled to
sell to such prospective transferee(s) pursuant to paragraph 4(c)(i) above
or (B) simultaneously with such transfer, the transferring Investor
purchases the number of shares of such class of Common Stock from the Other
Stockholders which the Other Stockholders would have been entitled to sell
pursuant to paragraph 4(c)(i) above.
(d) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of a Termination Event.
-8-
<PAGE>
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Employee Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EMPLOYEE STOCK
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF _________ __, 1999, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) No holder of Employee Stock may sell, transfer or dispose of any
Employee Stock (except pursuant to an effective registration statement under the
Securities Act of 1933) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel shall be reasonably acceptable to the Company) that registration under
the 1933 Act is not required in connection with such transfer.
6. Definition of Employee Stock. For all purposes of this Agreement,
----------------------------
Employee Stock will continue to be Employee Stock in the hands of any holder
other than Employee (except for the Company, the Investors or purchasers
pursuant to an offering registered under the 1933 Act or purchasers pursuant to
a Rule 144 transaction (other than a Rule 144(k) transaction occurring prior to
the time of a closing of a Public Offering (as defined in Section 8 below)), and
each such other holder of Employee Stock will succeed to all rights and
obligations attributable to Employee as a holder of Employee Stock hereunder.
Employee Stock will also include shares of the Company's capital stock issued
with respect to shares of Employee Stock by way of a stock split, stock dividend
or other recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of the Company's
common stock held by the Investors approve (and, in the case of any sale or
other fundamental change which requires the approval of the board of directors
of a California corporation pursuant to the California General Corporation Law,
the Company's board of directors shall have approved such sale) a sale of all or
substantially all of the Company's assets determined on a consolidated basis or
a sale of all or substantially all of the Company's outstanding capital stock
(whether by merger, recapitalization,
-9-
<PAGE>
consolidation, reorganization, combination or otherwise) to an Independent Third
Party or group of Independent Third Parties (an "Approved Sale"), each holder of
-------------
Employee Stock will vote for, consent to and raise no objections against such
Approved Sale. If the Approved Sale is structured as (i) a merger or
consolidation, each holder of Employee Stock will waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Employee Stock will agree to
sell all of his or her shares of Employee Stock and rights to acquire shares of
Employee Stock on the terms and conditions approved by the Company's board of
directors and the holders of a majority of the Company's common stock then
outstanding. Each holder of Employee Stock will take all necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Company.
(b) The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Articles of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Employee Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Employee Stock appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Employee Stock declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(d) Employee and the other holders of Employee Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Employee Stock pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Employee and the other holders of Employee Stock on their own behalf will not be
considered costs of the transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the
closing of a Public Offering (as defined below).
-10-
<PAGE>
8. Public Offering. In the event that the Company's board of
---------------
directors and the holders of a majority of the Company's shares of common stock
then outstanding approve an initial public offering and sale of the Company's
common stock (a "Public Offering") pursuant to an effective registration
---------------
statement under the 1933 Act, the holders of Employee Stock will take all
necessary or desirable actions in connection with the consummation of the Public
Offering. In the event that such Public Offering is an underwritten offering
and the managing underwriters advise the Company in writing that in their
opinion the Common Stock structure will adversely affect the marketability of
the offering, each holder of Employee Stock will consent to and vote for a
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Company's board of directors and
holders of a majority of the shares of Common Stock then outstanding find
acceptable and will take all necessary or desirable actions in connection with
the consummation of the recapitalization, reorganization and/or exchange.
9. Voting Agreement. Each holder of Employee Stock hereby agrees to
----------------
vote all of his or her shares of Employee Stock (and, in the event such holder
is entitled to vote any of the Company's other securities for the election of
directors, such holder shall vote all such securities) and take all other
necessary actions (whether in such holder's capacity as a stockholder, director
or officer of the Company), and the Company shall take all necessary or
desirable actions as are requested by the Investors, in order to cause any
representatives designated by the Investors to be elected as members of the
Company's board of directors. In addition, no holder shall vote his or her
shares of Employee Stock (or such other securities) in connection with the
removal of any of the Investors' designees as a director unless and until the
Investors direct such holder how to vote on such removal. Except as otherwise
provided herein, each holder of Employee Stock shall at all times retain the
right to vote his or her Employee Stock (and such other securities) in his or
her sole discretion on all other matters presented to the Company's stockholders
for a vote. All Investor determinations under this paragraph 9 shall be made by
the Investors holding a majority of the Common Stock held by all Investors (in
each case determined on a fully-diluted basis). The provisions of this
paragraph 9 shall terminate upon the occurrence of a Termination Event.
10. Confidential Information. Employee acknowledges that the
------------------------
information, observations and data obtained by him or her while employed by the
Company and its Subsidiaries concerning the business or affairs of the Company
or any of its Subsidiaries ("Confidential Information") are the property of the
------------------------
Company or such Subsidiary. Therefore, Employee agrees that he or she shall not
disclose to any unauthorized person or use for his or her own purposes any
Confidential Information without the prior written consent of the Company's
board of directors, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Employee's acts or omissions. Employee shall deliver to the Company
as of the Termination Date, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of the
Company or any Subsidiary which he or she may then possess or have under his or
her control.
11. Inventions and Patents. Employee acknowledges that all
----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all
-11-
<PAGE>
similar or related information (whether or not patentable) which relate to the
Company's or any of its Subsidiaries' actual or anticipated business, research
and development or existing or future products or services and which are
conceived, developed or made by Employee while employed by the Company or its
Subsidiaries ("Work Product") belong to the Company or such Subsidiary.
------------
Employee shall promptly disclose such Work Product to the Company's board of
directors and perform all actions reasonably requested by the Company's board of
directors (whether during or after the period of Employee's employment with the
Company or its Subsidiaries) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).
12. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the sale and purchase of the
Company's stock hereunder and the other stock sales and stock options made
available to Employee pursuant to separate agreements, Employee acknowledges
that in the course of his or her employment with the Company or its Subsidiaries
he or she shall become familiar with the Company's and its Subsidiaries' trade
secrets and with other Confidential Information concerning the Company and its
Subsidiaries and that his or her services shall be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, Employee
agrees that, during the period of his or her employment with the Company or its
Subsidiaries and, at the Company's option, so long as the Company elects to pay
Employee's monthly base salary during any such month (it being agreed that the
Company's payment of any severance or other termination payments pursuant to any
separate employment or other agreement between the Company and Employee which
provides Employee with severance or other termination payments (whether on a
periodic basis or in a lump sum) not less than Employee's monthly base salary
shall be deemed to satisfy the aforementioned requirement), on a month to month
basis thereafter for a period not to exceed twelve months (the
"Noncompete Period"), he or she shall not directly or indirectly own any
-----------------
interest in, manage, control, participate in, consult with, render services for,
or in any manner engage in any business competing with the businesses of the
Company or its Subsidiaries, as such businesses exist or are in process on the
date of the termination of Employee's employment, anywhere in the world (any of
the foregoing, a "Competitive Activity"). Nothing herein shall prohibit
--------------------
Employee from being a passive owner of not more than 2% of the outstanding stock
of any class of a corporation which is publicly traded, so long as Employee has
no active participation in the business of such corporation.
(b) During the Noncompete Period, Employee shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any Subsidiary at any time during Employee's period
of employment with the Company or its Subsidiaries or (iii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor, franchisee or business
relation
-12-
<PAGE>
and the Company or any Subsidiary (including, without limitation, making any
negative statements or communications about the Company or its Subsidiaries).
13. Enforcement. If, at the time of enforcement of paragraph 10, 11
-----------
or 12 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Employee's services are unique and because Employee has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would not be an adequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security). In addition, in the event of an alleged breach or violation by
Employee of paragraph 12, the Noncompete Period shall be tolled until such
breach or violation has been duly cured. Employee agrees that the restrictions
contained in paragraph 12 are reasonable.
14. Other Businesses. As long as Employee is employed by the Company
----------------
or any of its Subsidiaries, Employee agrees that he or she will not, except with
the express written consent of the Company's board of directors, become engaged
in, or render services for, any business other than the business of the Company
or any of its Subsidiaries.
15. Holdback Agreement. No holder of Employee Stock will effect any
------------------
public sale or distribution (including sales pursuant to Rule 144 of the 1933
Act) of any Employee Stock or of any other capital stock or equity securities of
the Company, or any securities, options or rights convertible into or
exchangeable or exercisable for such stock or securities, during the seven days
prior to and the 180-day period beginning on the effective date of any
underwritten public offering of the Company's common stock, except as part of
such underwritten public offering. The restrictions on the transfer set forth
in this Section 15 shall continue with respect to each share of Employee Stock
until the date on which such share has been transferred pursuant to an offering
registered under the 1933 Act or to the public through a broker, dealer or
market maker pursuant to the provisions of Rule 144 (other than Rule 144(k)),
adopted under the 1933 Act.
16. Employee's Representations. Employee hereby represents and
--------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Employee do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or by which he or she is bound, (ii)
Employee is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and (iii)
upon the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Employee, enforceable in accordance
with its terms.
17. Survival. Paragraphs 10, 11 and 12 shall survive and continue in
--------
full force in accordance with their terms notwithstanding any termination of
Employee's employment.
-13-
<PAGE>
18. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered or sent by guaranteed overnight
delivery service, to the Investors and Employee at the addresses indicated in
the Company's records and to the Company at the address indicated below:
To the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attn: CEO
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or deposited with such delivery service.
19. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. In the
event that any ruling of any court or governmental authority calls into question
the validity of any portion of this Agreement, the parties hereto shall consult
with each other concerning such matters and shall negotiate in good faith a
modification to this Agreement which would obviate any such questions as to
validity while preserving, to the extent possible, the intent of the parties and
the economic and other benefits of this Agreement and the portion thereof whose
validity is called into question.
20. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
21. Counterparts. This Agreement may be executed in separate
------------
counterparts (any one of which may be delivered by facsimile), each of which
will be deemed to be an original and all of which taken together will constitute
one and the same agreement.
-14-
<PAGE>
22. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Employee, the Company, the
Investors and their respective successors and assigns, provided that Employee
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement.
23. GOVERNING LAW. ALL ISSUES CONCERNING THE ENFORCEABILITY,
-------------
VALIDITY AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION IN ANY STATE OR FEDERAL COURT LOCATED IN THE
STATE OF CALIFORNIA AND WAIVES ANY CLAIM OF IMPROPER JURISDICTION OR LACK OF
VENUE IN CONNECTION WITH ANY CLAIM OR CONTROVERSY WHICH MAY BE BROUGHT IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO MAINTAINS SUBSTANTIAL
CONTACTS WITH THE STATE OF CALIFORNIA, AND A SIGNIFICANT PORTION OF THE PARTIES'
RELATIONSHIP SHALL BE CARRIED OUT IN THE STATE OF CALIFORNIA, BY REASON OF THE
COMPANY'S SANTA CLARA, CALIFORNIA FACILITY. EACH PARTY AGREES THAT THE
COVENANTS PROVIDED IN THIS SECTION 23 ARE A MATERIAL INDUCEMENT TO EACH PARTY TO
ENTER INTO THIS AGREEMENT, AND EACH PARTY RELIED ON SUCH COVENANTS IN ENTERING
INTO THIS AGREEMENT.
24. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
25. Effect of Transfers in Violation of Agreement. The Company will
----------------------------------------------
not be required (a) to transfer on its books any shares of Employee Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
have been transferred in violation of this Agreement.
26. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the board of directors
of the Company, the Investors who hold 70% of the Common Stock held by the
Investors, and Employee; provided that in the event that such amendment or
waiver would adversely affect an Investor or a group of Investors in a manner
different than any other Investor, then such amendment or waiver will require
the consent of such Investor or a majority of the Common Shares held by such
group of Investors adversely affected.
-15-
<PAGE>
27. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
* * * * *
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CHIPPAC, INC.
By: _______________________________
Its: _______________________________
____________________________________
Employee Name
-17-
<PAGE>
Exhibit B
---------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
. 1999 ChipPAC, Inc. Stock Purchase and Option Plan
. Key Employee Purchased Stock Agreement
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of capital stock of ChipPAC,
Inc. (the "Company") under certain circumstances and impose other restrictions
-------
on such capital stock. I agree that my spouse's interest in the capital stock
is subject to the agreements referred to above and the other agreements referred
to therein and any interest I may have in such capital stock shall be
irrevocably bound by these agreements and the other agreements referred to
therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints Employee N
ame, who is the spouse of the undersigned spouse (the "Shareholder") as the
-----------
undersigned's true and lawful attorney and proxy in the undersigned's name,
place and stead to sign, make, execute, acknowledge, deliver, file and record
all documents which may be required, and to manage, vote, act and make all
decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of capital stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
capital stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
__________________________ __________________________________
Signature Signature
__________________________ __________________________________
Printed Name Printed Name
__________________________ __________________________________
Dated Dated
<PAGE>
Exhibit C
---------
ELECTION TO INCLUDE STOCK IN GROSS INCOME
PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned acquired shares of Class L Common Stock, par value
$.01 per share and shares of Class A Common Stock, par value $.01 per share
(collectively, the "Shares"), of ChipPAC, Inc., a California corporation (the
------
"Company"), on _________ __, 1999. The Company and certain of its shareholders
-------
have the right to repurchase certain of the Shares at cost from the undersigned
(or from the holder of the Shares, if different from the undersigned) should the
undersigned cease to be employed by the Company or its subsidiaries. Hence, the
Shares are subject to a substantial risk of forfeiture. The Shares are also
non-transferable. The undersigned desires to make an election to have the
Shares taxed under (S)83(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), at the time he or she acquired the Shares.
----
Therefore, pursuant to Code (S)83(b) and Treasury Regulation (S)1.83-2
promulgated thereunder, the undersigned hereby makes an election with respect to
the Shares, to report as taxable income in 1999 the excess of the Shares' fair
market value on _________ __, 1999 over the acquisition price thereof.
The following information is supplied in accordance with Treasury
Regulation (S)1.83-2(e):
1. The name, address and social security number of the undersigned:
__________________
__________________
__________________
Social Security No.: ____________
2. A description of the property, with respect to which the election
is being made: ________ shares of the Company's Class L Common Stock, par value
$.01 per share and ________ shares of the Company's Class A Common Stock, par
value $.01 per share.
3. The date on which the property was transferred: _________ __,
1999. The taxable year for which such election is made: Calendar 1999.
4. The restrictions to which the property is subject: If, at any
time prior to the first to occur of (i) a sale of the Company and (ii) the first
date subsequent to the date that the Company sells any shares of its common
stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, the undersigned ceases to be employed by the Company or any of
its subsidiaries, the unvested portion of the Shares shall be subject to
repurchase by the Company at fair market value, except in the case of the
undersigned's termination for cause or in the event that the undersigned
participates in any competitive activity during the period not to exceed 12
months
<PAGE>
from the date of the undersigned's termination of employment with the Company or
any of its subsidiaries, in which event all of the Shares shall be subject to
repurchase by the Company at the lower of original cost or fair market value.
Twenty percent of the Shares shall become vested as of August 5, 2000, an
additional 20% of the Shares shall become vested as of August 5, 2001, an
additional 30% of the Shares shall become vested as of August 5, 2002 and the
final 30% of the Shares shall become vested on August 5, 2003; provided that if
the undersigned's termination of employment with the Company or its subsidiaries
occurs at any time after August 5, 2000 and prior to August 5, 2003, the
percentages of Shares to become vested shall be determined on a pro-rata fiscal
quarter basis; provided further, that upon any change in control, all of the
Shares shall become vested.
5. The fair market value on _________ __, 1999 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: ________.
6. The amount paid for such property: _______________.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations (S)1.83-2(e)(7).
Dated: _________ __, 1999
___________________________________
Employee Name
-2-
<PAGE>
Annex 1
-------
PROMISSORY NOTE
---------------
$__________________ _________ __, 1999
For value received, ______ ("Employee") promises to pay to the order
--------
of ChipPAC, Inc., a California corporation (the "Company"), at its offices at
-------
3151 Coronado Drive, Santa Clara, California 95054, or such other place as
designated in writing by the holder hereof, the aggregate principal sum of
_______________. This Note was issued pursuant to and is subject to the terms
of the Key Employee Purchased Stock Agreement, dated as of the date hereof (the
"Employee Stock Agreement"), between the Company and Employee.
------------------------
Employee shall pay the then outstanding principal amount of this Note,
together with interest accrued thereon, to the holder of this Note on the
earlier of (a) the fifth anniversary of the date hereof, (b) the date on which
Employee is no longer employed by the Company or any subsidiaries, (c) upon the
liquidation, dissolution or winding up of the Company (whether voluntary or
involuntary), including, without limitation, any such deemed liquidation,
dissolution or winding up of the Company pursuant to the Company's Articles of
Incorporation and (d) Employee's bankruptcy, insolvency or petition for relief
(whether voluntary or involuntary) under any bankruptcy or insolvency law
(collectively, the "Maturity Date"). In addition, Employee shall pay, to the
-------------
extent of any proceeds received in connection with any sale, pledge or transfer
of the Employee Stock (as defined in the Employee Stock Agreement), the then
outstanding principal amount of this Note, together with interest accrued
thereon, to the holder of this Note, on the date on which Employee sells,
pledges or otherwise transfers any interest in any shares of Employee Stock.
Employee may prepay all or any portion of the outstanding principal amount of
this Note, together with the full amount of any accrued interest on this Note
through the date of prepayment, at any time without premium or penalty. No such
prepayment shall relieve Employee of his obligation to repay in full the
outstanding principal amount of this Note, together with all accrued interest
thereon, on the Maturity Date. Any prepayment of this Note shall be applied
first to accrued interest and then to the principal amount of this Note.
Interest will accrue on the outstanding principal amount of this Note
at a rate equal to eight percent per annum, and shall be compounded semi-
annually, commencing at the end of the first six month anniversary subsequent to
the date of this Note and shall be due and payable at the end of each six month
period thereafter so long as all or any portion of this Note remains unpaid,
commencing at the end of the first six month anniversary subsequent to the date
of this Note.
The amounts due under this Note are secured by a pledge of certain
shares of Employee Stock (as defined in the Employee Stock Agreement) purchased
by Employee pursuant to the Employee Stock Agreement. In addition to any other
remedies set forth in this Note or the pledge agreement, the Company shall be
entitled to set-off any amounts due or payable to Employee from the Company or
any of its subsidiaries against any amount due or payable to the Company by
Employee pursuant to this Note.
<PAGE>
In the event Employee fails to pay any amounts due hereunder when due,
Employee shall pay to the holder hereof, in addition to such amounts due, all
costs of collection, including reasonable attorneys' fees.
Employee, and his successors and assigns, hereby waive diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agree that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of Employee hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of California.
___________________________
Employee Name
-2-
<PAGE>
Annex 2
-------
STOCK
PLEDGE AGREEMENT
----------------
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made as of _________
---------
__, 1999, between ______ ("Pledgor") and ChipPAC, Inc., a California corporation
-------
(the "Company").
-------
The Company and Pledgor are parties to a Key Employee Purchased Stock
Agreement, dated as of the date hereof (the "Employee Stock Agreement"),
------------------------
pursuant to which Pledgor purchased certain shares of Employee Stock (as defined
in the Employee Stock Agreement) (the "Pledged Shares"), which Pledged Shares
--------------
have been financed (in whole or in part) by delivery to the Company of Pledgor's
promissory note dated as of the date hereof (the "Note"). This Pledge Agreement
----
provides the terms and conditions upon which the Note is secured by a pledge to
the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to finance (in whole or
in part) Pledgor's purchase of the Pledged Shares, Pledgor and the Company
hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment sufficient
to transfer title thereto to the Company.
3. Voting Rights; Cash Dividends. Notwithstanding anything to the
-----------------------------
contrary contained herein, during the term of this Pledge Agreement until such
time as there exists a default in the payment of principal or interest on the
Note or any other default under the Note, Pledgor shall be entitled to all
voting rights with respect to the Pledged Shares and shall be entitled to
receive all cash dividends paid in respect of the Pledged Shares. Upon the
occurrence of and during the continuance of any such default, the Company shall
retain all such cash dividends payable on the Pledged Shares as additional
security hereunder.
4. Stock Dividends; Distributions, etc. If, while this Pledge
------------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a stock dividend or
otherwise), Pledgor shall accept such securities or other property on behalf of
and for the benefit of the Company as additional security for Pledgor's
obligations under the Note and shall promptly deliver such additional security
to the Company together with duly executed forms of assignment, and such
additional security shall be deemed to be part of the Pledged Shares hereunder.
<PAGE>
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note as it becomes due (whether upon demand, maturity,
acceleration or otherwise) or any other event of default under the Note occurs
(including the bankruptcy or insolvency of Pledgor), the Company may exercise
any and all the rights, powers and remedies of any owner of the Pledged Shares
(including the right to vote the shares and receive dividends and distributions
with respect to such shares) and shall have and may exercise without demand any
and all of the rights and remedies granted to a secured party upon default under
the Uniform Commercial Code of the State of California or otherwise available to
the Company under applicable law. Without limiting the foregoing, the Company
is authorized to sell, assign and deliver at its discretion, from time to time,
all or any part of the Pledged Shares at any private sale or public auction, on
not less than ten days written notice to Pledgor, at such price or prices and
upon such terms as the Company may deem advisable. Pledgor shall have no right
to redeem the Pledged Shares after any such sale or assignment. At any such
sale or auction, the Company may bid for, and become the purchaser of, the whole
or any part of the Pledged Shares offered for sale. In case of any such sale,
after deducting the costs, attorneys' fees and other expenses of sale and
delivery, the remaining proceeds of such sale shall be applied to the principal
of and accrued interest on the Note; provided, however, that after payment in
full of the indebtedness evidenced by the Note, the balance of the proceeds of
sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to
the return of any of the Pledged Shares remaining in the hands of the Company.
Pledgor shall be liable for any deficiency if the remaining proceeds are
insufficient to pay the indebtedness under the Note in full, including the fees
of any attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses, including
-------------------------
reasonable attorneys' fees, incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor will execute and
deliver such further documents and do such further acts and things as the
Company may reasonably request in order to effect the purposes of this Pledge
Agreement.
8. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Company, any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of
-2-
<PAGE>
any other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
10. Waivers, Amendments; Applicable Law. None of the terms or
-----------------------------------
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto. This
Agreement and all obligations of the Pledgor hereunder shall together with the
rights and remedies of the Company hereunder, inure to the benefit of the
Company and its successors and assigns. This Pledge Agreement shall be governed
by, and be construed and interpreted in accordance with, the laws of the State
of California.
* * * * *
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the
date first above written.
CHIPPAC, INC.
By: _______________________________
Its: ______________________________
______________________________
Employee Name
-3-
<PAGE>
Exhibit 10.23
-------------
TRANCHE I STOCK OPTION AGREEMENT
--------------------------------
TRANCHE I STOCK OPTION AGREEMENT (this "Agreement") dated as of
---------
_________ __, 1999, by and between ChipPAC, Inc., a California corporation (the
"Company") and _________ ("Director").
------- --------
Pursuant to the Company's 1999 Stock Purchase and Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A, the Company and
---- ---------
Director desire to enter into an agreement pursuant to which the Company shall
grant to Director certain options to acquire certain shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common"), which
--------------
will be referred to herein as the "Tranche I Option." The Tranche I Option is
----------------
sometimes hereinafter referred to individually as an "Option" and collectively
------
as the "Options." The Company's Class L Common Stock, par value $.01 per share
-------
and the Class A Common are collectively referred to herein as the "Common
------
Stock." All of such shares of Common Stock issuable upon the exercise of any
portion of the Options and all shares of the Company's capital stock hereafter
acquired by Director are referred to herein as "Director Stock."
--------------
The parties hereto agree as follows:
OPTION PROVISIONS
1. Representations and Warranties.
------------------------------
(a) In connection with the grant of the Options hereunder, Director
represents and warrants to the Company that:
(i) The Director Stock which may be acquired by Director
pursuant to this Agreement will be acquired for Director's own account and
not with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the "1933 Act"), or any applicable
--------
state securities laws, and the Director Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) This Agreement constitutes the legal, valid and binding
obligation of Director, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Director does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Director is a party or any judgment, order
or decree to which Director is subject.
(iii) Director has consulted, or has had an opportunity to
consult with, independent legal counsel regarding his or her rights and
obligations under this Agreement and he or she fully understands the terms
and conditions contained herein.
(b) Acknowledgment. As an inducement to the Company to grant the
--------------
Option to Director, and as a condition thereto, Director acknowledges and agrees
that:
<PAGE>
(i) the Company will have no duty or obligation to disclose to
Director, and Director will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior to,
upon or in connection with the repurchase of Director Stock upon the
termination of Director's service with the board of directors of the
Company or its Subsidiaries or as otherwise provided hereunder; and
(ii) neither the issuance of the Director Stock to Director nor
any provision contained herein shall entitle Director to remain a member of
the board of directors of the Company or its Subsidiaries.
(c) Plan Acknowledgment. The Company and Director acknowledge and
-------------------
agree that this Agreement has been executed and delivered, and the Director
Stock which may be issued hereunder will be issued, in connection with and as
part of the compensation and incentive arrangements between the Company and
Director. The grant of the Options hereunder is pursuant to, and subject to all
the terms and conditions of the Plan, attached hereto as Exhibit A.
---------
2. Stock Options.
-------------
(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
common stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's common stock and
who is not the spouse or descendant (by birth or adoption) of any such 10% owner
of the Company's common stock.
"Investors" means Bain Capital Fund VI, L.P., BCIP Associates II, BCIP
---------
Associates II-B, BCIP Associates II-C, BCIP Trust Associates II, BCIP Trust
Associates II-B, PEP Investments Pty., Ltd., Randolph Street Partners 1998 DIF,
LLC, Randolph Street Partners II and SXI Group LLC and any of their transferees.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
-2-
<PAGE>
(b) Tranche I Option.
----------------
(i) Tranche I Option Grant. The Company hereby grants to Director,
----------------------
pursuant to the Plan, the Tranche I Option to purchase up to _________ shares of
Class A Common ("Tranche I Option Shares"), at a price per share of $0.1111 (the
-----------------------
"Tranche I Option Price"). The Tranche I Option Price and the number of Tranche
----------------------
I Option Shares will be equitably adjusted for any stock split, stock dividend,
reclassification or recapitalization of the Company which occurs subsequent to
the date of this Agreement. The Tranche I Option will expire on the close of
business on the tenth anniversary of the date hereof (the "Expiration Date"),
---------------
subject to earlier expiration as provided in Section 2(c) below. The Tranche I
Option is intended to be an "incentive stock option" within the meaning of
Section 422A of the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder (the "Code").
----
(ii) Exercisability. On each date set forth below the Tranche I
--------------
Option will have vested and become exercisable with respect to the cumulative
percentage of Tranche I Option Shares set forth opposite such date if Director
is, and has been, continuously a member of the Company's board of directors from
the date of this Agreement through such date:
Cumulative Percentage
of Tranche I Option
Date Shares Vested
---- -------------
August 5, 2000 20%
August 5, 2001 40%
August 5, 2002 70%
August 5, 2003 100%
; provided that, if Director's Termination Date (as defined in paragraph 3(b)
hereof) occurs at any time after August 5, 2000 and prior to August 5, 2003, the
cumulative percentage of Tranche I Option Shares to become vested shall be
determined on a pro rata basis according to the number of fiscal quarters (i.e.,
fiscal quarters ending November 1, February 1, May 1 and August 1) elapsed since
the prior annual vesting date and provided further, that upon any Change in
Control (as defined below), so long as Director was a member of the Company's
board of directors on the day immediately prior to such Change in Control, all
of the Tranche I Options granted to Director shall become vested and immediately
exercisable. For purposes hereof, a "Change in Control" shall be deemed to
-----------------
occur upon the first date that the Investors and their affiliates collectively
cease to own at least 35% of the aggregate number of shares of common stock of
the Company that they own on the date hereof (as adjusted for stock splits,
stock dividends and recapitalization and for exchanges in connection with a
merger, consolidation, reorganization or sale).
(c) Early Expiration of Options. Any portion of the Options that has
---------------------------
not vested and become exercisable prior to the Termination Date (as defined in
Section 3(b) below) will expire on the Termination Date and may not be exercised
under any circumstance. Any portion of the Options that has vested and become
exercisable prior to the Termination Date will expire on the earlier of
-3-
<PAGE>
(i) 30 days after the Termination Date (provided that such period shall be
extended to six (6) months after the Termination Date, in the event of
Director's termination due to death or "disability" (as defined in Code Section
22(a)(3))) and (ii) the Expiration Date. Notwithstanding any provision in this
Agreement to the contrary, any portion of the Options which has not been
exercised prior to or in connection with a Sale of the Company shall expire upon
the consummation of any such transaction.
(d) Procedure for Exercise. At any time after all or any portion of
----------------------
the Options have become exercisable with respect to any Option Shares (as
defined in Section 3(a) hereof) and prior to the Expiration Date (except as
provided for in Section 2(c) above), Director may exercise all or a portion of
the Options with respect to Option Shares vested pursuant to paragraph 2(b)(ii)
above by delivering written notice of exercise to the Company, together with (i)
a written acknowledgment that Director has read and has been afforded an
opportunity to ask questions of management of the Company regarding all
financial and other information provided to Director regarding the Company, (ii)
an executed consent from Director's spouse (if any) in the form of Exhibit B
---------
attached hereto and (iii) payment in full by delivery of a certified bank check,
wire transfer of immediately available funds or a personal check in the amount
(the "Option Price") equal to the product of the Tranche I Option Price
------------
multiplied by the number of Tranche I Option Shares to be acquired. As a
condition to any exercise of the Options, Director will permit the Company to
deliver to him or her all financial and other information regarding the Company
and its Subsidiaries which it believes necessary to enable Director to make an
informed investment decision. If, at any time subsequent to the date Director
exercises any portion of the Options and prior to the occurrence of a
Termination Event (as defined in Section 3(g) hereof), Director becomes legally
married (whether in the first instance or to a different spouse), Director shall
cause Director's spouse to execute and deliver a consent in the form of Exhibit
-------
B attached hereto. Director's failure to deliver the Company an executed
- -
consent in the form of Exhibit B at any time when Director would otherwise be
---------
required to deliver such consent shall constitute Director's continuing
representation and warranty that Director is not legally married as of such
date.
(e) Securities Laws Restrictions. Director represents that when
----------------------------
Director exercises any of the Options he or she will be purchasing Option Shares
for Director's own account and not on behalf of others. Director understands
and acknowledges that federal and state securities laws govern and restrict
Director's right to offer, sell or otherwise dispose of any Option Shares unless
Director's offer, sale or other disposition thereof is registered under the 1933
Act and state securities laws or, in the opinion of the Company's counsel, such
offer, sale or other disposition is exempt from registration thereunder.
Director agrees that he or she will not offer, sell or otherwise dispose of any
Option Shares in any manner which would: (i) require the Company to file any
registration statement (or similar filing under state law) with the Securities
and Exchange Commission or to amend or supplement any such filing or (ii)
violate or cause the Company to violate the 1933 Act, the rules and regulations
promulgated thereunder or any other state or federal law. Director further
understands that the certificates for any Option Shares which Director purchases
will bear the legend set forth in paragraph 5 hereof or such other legends as
the Company deems necessary or desirable in connection with the 1933 Act or
other rules, regulations or laws.
-4-
<PAGE>
(f) Non-Transferability of Options. The Options are personal to
------------------------------
Director and are not transferable by Director except by will or pursuant to the
laws of descent or distribution. Only Director or his legal guardian or
representative may exercise the Options.
3. Repurchase Option.
-----------------
(a) Definitions. The following terms are defined as follows:
-----------
"Fair Market Value" of each share of Director Stock means the market
-----------------
value as determined in good faith by the Company's board of directors.
"Option Shares" means the Tranche I Option Shares. For purposes of
-------------
this paragraph 3 and paragraph 4, Option Shares issued upon exercise of any
Options will be deemed to be Director Stock.
"Original Cost" of each share of Director Stock will be equal to the
-------------
price paid by the Director for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other recapitalizations
affecting the Common Stock subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Director is no longer a
-----------------
member of the Company's board of directors for any reason (the date of such
termination being referred to herein as the "Termination Date"), the Director
----------------
Stock, whether held by Director or one or more transferees, will be subject to
repurchase by the Company and the Investors (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in this
paragraph 3 (the "Repurchase Option").
-----------------
(c) Repurchase Price. If Director is no longer a member of the
----------------
Company's board of directors for any reason, then on or after the Termination
Date, the Company and the Investors may elect to purchase up to 50% of the
Director Stock at a price per share equal to Fair Market Value (as of the
Termination Date).
(d) Repurchase Procedures. The Company may elect to exercise the
---------------------
right to purchase all or any portion of the shares of Director Stock pursuant to
the Repurchase Option by delivering written notice (the "Repurchase Notice") to
-----------------
the holder or holders of the Director Stock within 45 days of the Termination
Date (provided that such notice may be delivered in the case of any Director
Stock issued after the Termination Date, within 45 days of the date any such
Director Stock is issued). The Repurchase Notice will set forth the number of
shares of Director Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. If any Director Stock is held by any transferees of
Director, the Company shall purchase the shares elected to be purchased from
such holder(s) of Director Stock, pro rata according to the number of shares of
Director Stock held by such holder(s) at the time of
-5-
<PAGE>
delivery of such Repurchase Notice (determined as nearly as practicable to the
nearest share). If Director Stock of different classes is to be purchased by the
Company and Director Stock is held by any transferees of Director, the number of
shares of each class of Director Stock to be purchased will be allocated among
such holders, pro rata according to the total number of shares of Director Stock
to be purchased from such persons.
(e) Investor Rights.
---------------
(i) If for any reason the Company does not elect to purchase all of
the Director Stock pursuant to the Repurchase Option prior to the last to occur
of (i) the 45/th/ day following the Termination Date or (ii) the 45/th/ day
following the date any Director Stock is issued, in the case of any Director
Stock issued after the Termination Date, the Investors will be entitled to
exercise the Repurchase Option, in the manner set forth in this paragraph 3, for
the Director Stock the Company has not elected to purchase (the "Available
---------
Shares"). As soon as practicable, but in any event within thirty (30) days
- ------
after the Company determines that there will be any Available Shares (and in no
event later than the last to occur of (i) the 45/th/ day following the
Termination Date or (ii) the 45/th/ day following the date any Director Stock is
issued, in the case of any Director Stock issued after the Termination Date),
the Company will deliver written notice (the "Option Notice") to the Investors
-------------
setting forth the number of Available Shares and the price for each Available
Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share (based upon the number of shares of Common Stock then held by
such Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period, the Company will, if necessary,
notify the Investors electing to purchase Available Shares of any Available
Shares which Investors have elected not to purchase and each of the electing
Investors will be entitled to purchase the remaining Available Shares on the
same terms as described above (the "Second Option Notice"); provided that if in
--------------------
the aggregate such Investors elect to purchase more than the remaining Available
Shares, such remaining Available Shares purchased by each such Investor will be
reduced on a pro rata basis based upon the number of shares of Common Stock then
held by such Investors. Each Investor may elect to purchase any of the
remaining Available Shares available to such Investor by delivering written
notice to the Company within 5 days after the delivery of the Second Option
Notice (with such 5-day period referred to herein as the "Second Election
---------------
Period").
- ------
(iv) As soon as practicable but in any event within five days after
the expiration of the Election Period or the Second Election Period (if any) the
Company will, if necessary, notify the holder(s) of Director Stock as to the
number of shares of Director Stock being purchased from the holder(s) by the
Investors (the "Supplemental Repurchase Notice"). At the time the Company
------------------------------
delivers a Supplemental Repurchase Notice to the holder(s) of Director Stock,
the Company will also deliver to each electing Investor written notice setting
forth the number of shares of Director Stock
-6-
<PAGE>
the Company and each Investor will acquire, the aggregate purchase price to be
paid and the time and place of the closing of the transaction.
(f) Closing. The closing of the transactions contemplated by this
-------
paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Director
Stock to be purchased pursuant to the Repurchase Option by delivery of, in the
case of each Investor, a check payable to the holder of such Director Stock, and
in the case of the Company (i) first, by cancellation of any amounts due and
owing under any promissory note issued by Director to the Company, (ii) second,
by a check payable to the holder of such Director Stock up to the amount of the
Original Cost therefor paid in cash by Director and (iii) a note or notes
payable in one installment on the first anniversary of the closing of such
purchase and bearing interest at a rate per annum equal to 8% (it being agreed
that the Company may, in its sole discretion, elect to make any payment under
this clause (iii) in cash), in any case in the aggregate amount of the purchase
price for such shares. Any notes issued by the Company pursuant to this
paragraph 3(f) shall be subject to any restrictive covenants to which the
Company is subject at the time of such purchase. Notwithstanding anything to
the contrary contained in this Agreement, all repurchases of Director Stock by
the Company will be subject to applicable restrictions contained in the
California General Corporation Law and in the Company's and its Subsidiaries'
debt and equity financing agreements. If any such restrictions prohibit the
repurchase of Director Stock hereunder which the Company is otherwise entitled
to make, the Company may make such repurchases as soon as it is permitted to do
so under such restrictions. The Company and/or the Investors, as the case may
be, will receive customary repre sentations and warranties from each seller
regarding the sale of the Director Stock, including, but not limited to, the
representation that such seller has good and marketable title to the Director
Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(g) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the first date subsequent to the date that the Company sells any shares
of its common stock pursuant to a registration statement filed under the 1933
Act (collectively, a "Termination Event").
-----------------
4. Restrictions on Transfer.
------------------------
(a) Transfer of Director Stock. Director will not sell, pledge or
--------------------------
otherwise transfer any interest in any shares of Director Stock, except pursuant
to the provisions of paragraphs 3, 4(b), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Director Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among Director's
Family Group (as defined below), provided that the restrictions contained in
this paragraph 4 will continue to be applicable to the Director Stock after any
such transfer and the transferees of such Director Stock shall agree in writing
to be bound by the provisions of this Agreement. "Family Group" means
------------
Director's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Director and/or Director's spouse and/or
-7-
<PAGE>
descendants. Any transferee of Director Stock pursuant to a transfer in
accordance with the provisions of this subparagraph 4(b) is herein referred to
as a "Permitted Transferee." Upon the transfer of Director Director Stock
--------------------
pursuant to this paragraph 4(b), Director will deliver a written notice (the
"Transfer Notice") to the Company. The Transfer Notice will disclose in
---------------
reasonable detail the identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of a Termination Event.
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Director Stock and Option
Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK OPTION
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND A DIRECTOR OF THE
COMPANY DATED AS OF _________ __, 1999, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) No holder of Director Stock or Options Shares may sell, transfer
or dispose of any Director Stock or Option Shares (except pursuant to an
effective registration statement under the Securities Act of 1933) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company (which counsel shall be reasonably acceptable to
the Company) that registration under the 1933 Act is not required in connection
with such transfer.
6. Definition of Director Stock and Option Shares. For all purposes
----------------------------------------------
of this Agreement, Director Stock and Option Shares will continue to be Director
Stock and Option Shares in the hands of any holder other than Director (except
for the Company, the Investors or purchasers pursuant to an offering registered
under the 1933 Act or purchasers pursuant to a Rule 144 transaction (other than
a Rule 144(k) transaction occurring prior to the time of a closing of a Public
Offering (as defined in Section 8 below)), and each such other holder of
Director Stock and Option Shares will succeed to all rights and obligations
attributable to Director as a holder of Director Stock and Option Shares
hereunder. Director Stock and Option Shares will also include shares of the
-8-
<PAGE>
Company's capital stock issued with respect to shares of Director Stock and
Option Shares by way of a stock split, stock dividend or other recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of the Company's
common stock held by the Investors approve (and, in the case of any sale or
other fundamental change which requires the approval of the board of directors
of a California corporation pursuant to the California General Corporation Law,
the Company's board of directors shall have approved such sale) a sale of all or
substantially all of the Company's assets determined on a consolidated basis or
a sale of all or substantially all of the Company's outstanding capital stock
(whether by merger, recapitalization, consolidation, reorganization, combination
or otherwise) to an Independent Third Party or group of Independent Third
Parties (an "Approved Sale"), each holder of Director Stock and Option Shares
-------------
will vote for, consent to and raise no objections against such Approved Sale.
If the Approved Sale is structured as (i) a merger or consolidation, each holder
of Director Stock and Options Shares will waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Director Stock and Option
Shares will agree to sell all of his or her shares of Director Stock and Options
Shares and rights to acquire shares of Director Stock and Option Shares on the
terms and conditions approved by the Company's board of directors and the
holders of a majority of the Company's common stock then outstanding. Each
holder of Director Stock and Option Shares will take all necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Company.
(b) The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Articles of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Director Stock and Option
Shares will, at the request of the Company, appoint a purchaser representative
(as such term is defined in Rule 501) reasonably acceptable to the Company. If
any holder of Director Stock or Option Shares appoints a purchaser
representative designated by the Company, the Company will pay the fees of such
purchaser representative, but if any holder of Director Stock or Option Shares
declines to appoint the purchaser representative designated by the Company, such
holder will
-9-
<PAGE>
appoint another purchaser representative, and such holder will be responsible
for the fees of the purchaser representative so appointed.
(d) Director and the other holders of Director Stock and Option
Shares (if any) will bear their pro-rata share (based upon the number of shares
sold) of the costs of any sale of Director Stock and Option Shares pursuant to
an Approved Sale to the extent such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Director and the other holders of Director
Stock and Option Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the
closing of a Public Offering (as defined below).
8. Public Offering. In the event that the Company's board of
---------------
directors and the holders of a majority of the Company's shares of common stock
then outstanding approve an initial public offering and sale of the Company's
common stock (a "Public Offering") pursuant to an effective registration
---------------
statement under the 1933 Act, the holders of Director Stock and Option Shares
will take all necessary or desirable actions in connection with the consummation
of the Public Offering. In the event that such Public Offering is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the Common Stock structure will adversely affect
the marketability of the offering, each holder of Director Stock and Option
Shares will consent to and vote for a recapitalization, reorganization and/or
exchange of the Common Stock into securities that the managing underwriters, the
Company's board of directors and holders of a majority of the shares of Common
Stock then outstanding find acceptable and will take all necessary or desirable
actions in connection with the consummation of the recapitalization,
reorganization and/or exchange.
9. Holdback Agreement. No holder of Director Stock or Option Shares
------------------
will effect any public sale or distribution (including sales pursuant to Rule
144 of the 1933 Act) of any Director Stock or Option Shares or of any other
capital stock or equity securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such stock or
securities, during the seven days prior to and the 180-day period beginning on
the effective date of any underwritten public offering of the Company's common
stock, except as part of such underwritten public offering. The restrictions on
the transfer set forth in this Section 9 shall continue with respect to each
share of Director Stock and Option Shares until the date on which such share has
been transferred pursuant to an offering registered under the 1933 Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 (other than Rule 144(k)), adopted under the 1933 Act.
10. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered or sent by guaranteed overnight
delivery service, to the Investors and Director at the addresses indicated in
the Company's records and to the Company at the address indicated below:
-10-
<PAGE>
To the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attn: CEO
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or deposited with such delivery service.
11. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. In the
event that any ruling of any court or governmental authority calls into question
the validity of any portion of this Agreement, the parties hereto shall consult
with each other concerning such matters and shall negotiate in good faith a
modification to this Agreement which would obviate any such questions as to
validity while preserving, to the extent possible, the intent of the parties and
the economic and other benefits of this Agreement and the portion thereof whose
validity is called into question.
12. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in separate
------------
counterparts (any one of which may be delivered by facsimile), each of which
will be deemed to be an original and all of which taken together will constitute
one and the same agreement.
14. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Director, the Company, the
Investors and their respective successors and assigns, provided that Director
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement.
-11-
<PAGE>
15. GOVERNING LAW. ALL ISSUES CONCERNING THE ENFORCEABILITY, VALIDITY
-------------
AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION IN ANY STATE OR FEDERAL COURT LOCATED IN THE
STATE OF CALIFORNIA AND WAIVES ANY CLAIM OF IMPROPER JURISDICTION OR LACK OF
VENUE IN CONNECTION WITH ANY CLAIM OR CONTROVERSY WHICH MAY BE BROUGHT IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO MAINTAINS SUBSTANTIAL
CONTACTS WITH THE STATE OF CALIFORNIA, AND A SIGNIFICANT PORTION OF THE PARTIES'
RELATIONSHIP SHALL BE CARRIED OUT IN THE STATE OF CALIFORNIA, BY REASON OF THE
COMPANY'S SANTA CLARA, CALIFORNIA FACILITY. EACH PARTY AGREES THAT THE
COVENANTS PROVIDED IN THIS SECTION 15 ARE A MATERIAL INDUCEMENT TO EACH PARTY TO
ENTER INTO THIS AGREEMENT, AND EACH PARTY RELIED ON SUCH COVENANTS IN ENTERING
INTO THIS AGREEMENT.
16. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
17. Effect of Transfers in Violation of Agreement. The Company will
---------------------------------------------
not be required (a) to transfer on its books any shares of Director Stock or
Option Shares which have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) to treat as owner of such shares,
to accord the right to vote as such owner or to pay dividends to any transferee
to whom such shares have been transferred in violation of this Agreement.
18. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the board of directors
of the Company, the Investors who hold 70% of the Common Stock held by the
Investors, and Director; provided that in the event that such amendment or
waiver would adversely affect an Investor or a group of Investors in a manner
different than any other Investor, then such amendment or waiver will require
the consent of such Investor or a majority of the Common Shares held by such
group of Investors adversely affected.
19. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
* * * * *
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CHIPPAC, INC.
By: _______________________________
Its: _______________________________
____________________________________
Employee Name
-13-
<PAGE>
Exhibit B
---------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
. 1999 ChipPAC, Inc. Stock Purchase and Option Plan
. Tranche I Stock Option Agreement
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of capital stock of ChipPAC,
Inc. (the "Company") under certain circumstances and impose other restrictions
-------
on such capital stock. I agree that my spouse's interest in the capital stock
is subject to the agreements referred to above and the other agreements referred
to therein and any interest I may have in such capital stock shall be
irrevocably bound by these agreements and the other agreements referred to
therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints Employee
Name, who is the spouse of the undersigned spouse (the "Shareholder") as the
-----------
undersigned's true and lawful attorney and proxy in the undersigned's name,
place and stead to sign, make, execute, acknowledge, deliver, file and record
all documents which may be required, and to manage, vote, act and make all
decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of capital stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
capital stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
__________________________ __________________________________
Signature Signature
__________________________ __________________________________
Printed Name Printed Name
__________________________ __________________________________
Dated Dated
<PAGE>
Exhibit 10.24
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TRANCHE I STOCK OPTION AGREEMENT
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TRANCHE I STOCK OPTION AGREEMENT (this "Agreement") dated as of
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_________ __, 1999, by and between ChipPAC, Inc., a California corporation (the
"Company") and ___________ ("Employee").
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Pursuant to the Company's 1999 Stock Purchase and Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A, the Company and
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Employee desire to enter into an agreement pursuant to which the Company shall
grant to Employee certain options to acquire certain shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common"), which
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will be referred to herein as the "Tranche I Option." The Tranche I Option is
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sometimes hereinafter referred to individually as an "Option" and collectively
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as the "Options." The Company's Class L Common Stock, par value $.01 per share
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and the Class A Common are collectively referred to herein as the "Common
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Stock." All of such shares of Common Stock issuable upon the exercise of any
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portion of the Options and all shares of the Company's capital stock hereafter
acquired by Employee are referred to herein as "Employee Stock."
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The parties hereto agree as follows:
OPTION PROVISIONS
1. Representations and Warranties.
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(a) In connection with the grant of the Options hereunder, Employee
represents and warrants to the Company that:
(i) The Employee Stock which may be acquired by Employee
pursuant to this Agreement will be acquired for Employee's own account and
not with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the "1933 Act"), or any applicable
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state securities laws, and the Employee Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) This Agreement constitutes the legal, valid and binding
obligation of Employee, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Employee is a party or any judgment, order
or decree to which Employee is subject.
(iii) Employee has consulted, or has had an opportunity to
consult with, independent legal counsel regarding his or her rights and
obligations under this Agreement and he or she fully understands the terms
and conditions contained herein.
(b) Acknowledgment. As an inducement to the Company to grant the
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Option to Employee, and as a condition thereto, Employee acknowledges and agrees
that:
<PAGE>
(i) the Company will have no duty or obligation to disclose to
Employee, and Employee will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Employee Stock upon the
termination of Employee's employment with the Company or its Subsidiaries
or as otherwise provided hereunder; and
(ii) neither the issuance of the Employee Stock to Employee nor
any provision contained herein shall entitle Employee to remain in the
employment of the Company or its Subsidiaries or affect the right of the
Company to terminate Employee's employment at any time for any reason.
(c) Plan Acknowledgment. The Company and Employee acknowledge and
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agree that this Agreement has been executed and delivered, and the Employee
Stock which may be issued hereunder will be issued, in connection with and as
part of the compensation and incentive arrangements between the Company and
Employee. The grant of the Options hereunder is pursuant to, and subject to all
the terms and conditions of the Plan, attached hereto as Exhibit A.
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2. Stock Options.
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(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
common stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's common stock and
who is not the spouse or descendant (by birth or adoption) of any such 10% owner
of the Company's common stock.
"Investors" means Bain Capital Fund VI, L.P., BCIP Associates II, BCIP
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Associates II-B, BCIP Associates II-C, BCIP Trust Associates II, BCIP Trust
Associates II-B, PEP Investments Pty., Ltd., Randolph Street Partners 1998 DIF,
LLC, Randolph Street Partners II and SXI Group LLC and any of their transferees.
"Person" means an individual, a partnership, a joint venture, a
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corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and
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an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
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<PAGE>
(b) Tranche I Option.
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(i) Tranche I Option Grant. The Company hereby grants to Employee,
----------------------
pursuant to the Plan, the Tranche I Option to purchase up to __________ shares
of Class A Common ("Tranche I Option Shares"), at a price per share of $0.1111
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(the "Tranche I Option Price"). The Tranche I Option Price and the number of
----------------------
Tranche I Option Shares will be equitably adjusted for any stock split, stock
dividend, reclassification or recapitalization of the Company which occurs
subsequent to the date of this Agreement. The Tranche I Option will expire on
the close of business on the tenth anniversary of the date hereof (the
"Expiration Date"), subject to earlier expiration as provided in Section 2(c)
---------------
below. The Tranche I Option is intended to be an "incentive stock option"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder (the "Code").
----
(ii) Exercisability. On each date set forth below the Tranche I
--------------
Option will have vested and become exercisable with respect to the cumulative
percentage of Tranche I Option Shares set forth opposite such date if Employee
is, and has been, continuously employed by the Company or its Subsidiaries from
the date of this Agreement through such date:
Cumulative Percentage
of Tranche I Option
Date Shares Vested
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August 5, 2000 20%
August 5, 2001 40%
August 5, 2002 70%
August 5, 2003 100%
; provided that, if Employee's Termination Date (as defined in paragraph 3(b)
hereof) occurs at any time after August 5, 2000 and prior to August 5, 2003, the
cumulative percentage of Tranche I Option Shares to become vested shall be
determined on a pro rata basis according to the number of fiscal quarters (i.e.,
fiscal quarters ending November 1, February 1, May 1 and August 1) elapsed since
the prior annual vesting date and provided further, that upon any Change in
Control (as defined below), so long as Employee was employed by the Company or
any of its Subsidiaries on the day immediately prior to such Change in Control,
all of the Tranche I Options granted to Employee shall become vested and
immediately exercisable. For purposes hereof, a "Change in Control" shall be
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deemed to occur upon the first date that the Investors and their affiliates
collectively cease to own at least 35% of the aggregate number of shares of
common stock of the Company that they own on the date hereof (as adjusted for
stock splits, stock dividends and recapitalization and for exchanges in
connection with a merger, consolidation, reorganization or sale).
(c) Early Expiration of Options. Any portion of the Options that has
---------------------------
not vested and become exercisable prior to the Termination Date (as defined in
Section 3(b) below) will expire on the Termination Date and may not be exercised
under any circumstance. Any portion of the Options
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<PAGE>
that has vested and become exercisable prior to the Termination Date will expire
on the earlier of (i) 30 days after the Termination Date (provided that such
period shall be extended to six (6) months after the Termination Date, in the
event of Employee's termination due to death or "disability" (as defined in Code
Section 22(a)(3))) and (ii) the Expiration Date. Notwithstanding any provision
in this Agreement to the contrary, any portion of the Options which has not been
exercised prior to or in connection with a Sale of the Company shall expire upon
the consummation of any such transaction.
(d) Procedure for Exercise. At any time after all or any portion of
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the Options have become exercisable with respect to any Option Shares (as
defined in Section 3(a) hereof) and prior to the Expiration Date (except as
provided for in Section 2(c) above), Employee may exercise all or a portion of
the Options with respect to Option Shares vested pursuant to paragraph 2(b)(ii)
above by delivering written notice of exercise to the Company, together with (i)
a written acknowledgment that Employee has read and has been afforded an
opportunity to ask questions of management of the Company regarding all
financial and other information provided to Employee regarding the Company, (ii)
an executed consent from Employee's spouse (if any) in the form of Exhibit B
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attached hereto and (iii) payment in full by delivery of a certified bank check,
wire transfer of immediately available funds or a personal check in the amount
(the "Option Price") equal to the product of the Tranche I Option Price
------------
multiplied by the number of Tranche I Option Shares to be acquired. As a
condition to any exercise of the Options, Employee will permit the Company to
deliver to him or her all financial and other information regarding the Company
and its Subsidiaries which it believes necessary to enable Employee to make an
informed investment decision. If, at any time subsequent to the date Employee
exercises any portion of the Options and prior to the occurrence of a
Termination Event (as defined in Section 3(g) hereof), Employee becomes legally
married (whether in the first instance or to a different spouse), Employee shall
cause Employee's spouse to execute and deliver a consent in the form of Exhibit
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B attached hereto. Employee's failure to deliver the Company an executed
- -
consent in the form of Exhibit B at any time when Employee would otherwise be
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required to deliver such consent shall constitute Employee's continuing
representation and warranty that Employee is not legally married as of such
date.
(e) Securities Laws Restrictions. Employee represents that when
----------------------------
Employee exercises any of the Options he or she will be purchasing Option Shares
for Employee's own account and not on behalf of others. Employee understands
and acknowledges that federal and state securities laws govern and restrict
Employee's right to offer, sell or otherwise dispose of any Option Shares unless
Employee's offer, sale or other disposition thereof is registered under the 1933
Act and state securities laws or, in the opinion of the Company's counsel, such
offer, sale or other disposition is exempt from registration thereunder.
Employee agrees that he or she will not offer, sell or otherwise dispose of any
Option Shares in any manner which would: (i) require the Company to file any
regi stration statement (or similar filing under state law) with the Securities
and Exchange Commission or to amend or supplement any such filing or (ii)
violate or cause the Company to violate the 1933 Act, the rules and regulations
promulgated thereunder or any other state or federal law. Employee further
understands that the certificates for any Option Shares which Employee purchases
will bear the legend set forth in paragraph 5 hereof or such other legends as
the Company deems necessary or desirable in connection with the 1933 Act or
other rules, regulations or laws.
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<PAGE>
(f) Non-Transferability of Options. The Options are personal to
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Employee and are not transferable by Employee except by will or pursuant to the
laws of descent or distribution. Only Employee or his legal guardian or
representative may exercise the Options.
3. Repurchase Option.
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(a) Definitions. The following terms are defined as follows:
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"Cause" shall have the meaning assigned to such term in Employee's
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written employment arrangements with the Company or any of its Subsidiaries or,
in the absence of any such written employment arrangements, "Cause" shall mean
(i) the commission of a felony or any other act or omission involving
dishonesty, disloyalty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform duties as
reasonably directed by the Company's board of directors or management, (iv)
gross negligence or willful misconduct with respect to the Company or any of its
Subsidiaries or (v) any other material breach of this Agreement.
"Competitive Activity" shall have the meaning assigned to such term in
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any separate employee stock agreement between the Company and Employee.
"Fair Market Value" of each share of Employee Stock means the market
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value as determined in good faith by the Company's board of directors.
"Noncompete Period" shall have the meaning assigned to such term in
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any separate employee stock agreement between the Company and Employee.
"Option Shares" means the Tranche I Option Shares. For purposes of
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this paragraph 3 and paragraph 4, Option Shares issued upon exercise of any
Options will be deemed to be Employee Stock.
"Original Cost" of each share of Employee Stock will be equal to the
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price paid by the Employee for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other recapitalizations
affecting the Common Stock subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
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majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Employee is no longer
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employed by the Company or any of its Subsidiaries for any reason (the date of
such termination being referred to herein as the "Termination Date"), the
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Employee Stock, whether held by Employee or one or more transferees, will be
subject to repurchase by the Company and the Investors (each of the
aforementioned, solely at their option) pursuant to the terms and conditions set
forth in this paragraph 3 (the "Repurchase Option").
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<PAGE>
(c) Repurchase Price. If Employee is no longer employed by the
----------------
Company or any of its Subsidiaries for any reason, then on or after the
Termination Date, the Company and the Investors may elect to purchase (i) in the
case of Employee's termination for Cause or in the case of Employee's
participation in any Competitive Activity during the Noncompete Period, all or
any portion of the Employee Stock at a price per share equal to the lower of
Original Cost or Fair Market Value (as of the Termination Date) and (ii) in any
other case, up to 50% of the Employee Stock at a price per share equal to Fair
Market Value (as of the Termination Date).
(d) Repurchase Procedures. The Company may elect to exercise the
---------------------
right to purchase all or any portion of the shares of Employee Stock pursuant to
the Repurchase Option by delivering written notice (the "Repurchase Notice") to
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the holder or holders of the Employee Stock within 45 days of the Termination
Date (provided that such notice may be delivered (i) in the case of any Employee
Stock issued after the Termination Date, within 45 days of the date any such
Employee Stock is issued or (ii) in the case of Employee's participation in any
Competitive Activity during the Noncompete Period, within 45 days of the date
the Company becomes aware of any such participation, but in no event later than
the 45/th/ day after the expiration of the Noncompete Period). The Repurchase
Notice will set forth the number of shares of Employee Stock to be acquired from
such holder(s), the aggregate consideration to be paid for such shares and the
time and place for the closing of the transaction. If any Employee Stock is
held by any transferees of Employee, the Company shall purchase the shares
elected to be purchased from such holder(s) of Employee Stock, pro rata
according to the number of shares of Employee Stock held by such holder(s) at
the time of delivery of such Repurchase Notice (determined as nearly as
practicable to the nearest share). If Employee Stock of different classes is to
be purchased by the Company and Employee Stock is held by any transferees of
Employee, the number of shares of each class of Employee Stock to be purchased
will be allocated among such holders, pro rata according to the total number of
shares of Employee Stock to be purchased from such persons.
(e) Investor Rights.
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(i) If for any reason the Company does not elect to purchase all of
the Employee Stock pursuant to the Repurchase Option prior to the last to occur
of (i) the 45/th/ day following the Termination Date, (ii) the 45/th/ day
following the date any Employee Stock is issued, in the case of any Employee
Stock issued after the Termination Date or (iii) the 45/th/ day after the date
the Company becomes aware of Employee's participation in any Competitive
Activity during the Noncompete Period (but in no event later than the 45/th/ day
after the expiration of the Noncompete Period), in the case of any such
participation, the Investors will be entitled to exercise the Repurchase Option,
in the manner set forth in this paragraph 3, for the Employee Stock the Company
has not elected to purchase (the "Available Shares"). As soon as practicable,
----------------
but in any event within thirty (30) days after the Company determines that there
will be any Available Shares (and in no event later than the last to occur of
(i) the 45/th/ day following the Termination Date, (ii) the 45/th/ day following
the date any Employee Stock is issued, in the case of any Employee Stock issued
after the Termination Date or (iii) the 45/th/ day after the date the Company
becomes aware of Employee's participation in any Competitive Activity during the
Noncompete Period (but in no event later than the 45/th/ day after the
expiration of the Noncompete Period), in the case of any such participation),
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<PAGE>
the Company will deliver written notice (the "Option Notice") to the Investors
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setting forth the number of Available Shares and the price for each Available
Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share (based upon the number of shares of Common Stock then held by
such Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
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(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period, the Company will, if necessary,
notify the Investors electing to purchase Available Shares of any Available
Shares which Investors have elected not to purchase and each of the electing
Investors will be entitled to purchase the remaining Available Shares on the
same terms as described above (the "Second Option Notice"); provided that if in
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the aggregate such Investors elect to purchase more than the remaining Available
Shares, such remaining Available Shares purchased by each such Investor will be
reduced on a pro rata basis based upon the number of shares of Common Stock then
held by such Investors. Each Investor may elect to purchase any of the
remaining Available Shares available to such Investor by delivering written
notice to the Company within 5 days after the delivery of the Second Option
Notice (with such 5-day period referred to herein as the "Second Election
---------------
Period").
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(iv) As soon as practicable but in any event within five days after
the expiration of the Election Period or the Second Election Period (if any) the
Company will, if necessary, notify the holder(s) of Employee Stock as to the
number of shares of Employee Stock being purchased from the holder(s) by the
Investors (the "Supplemental Repurchase Notice"). At the time the Company
------------------------------
delivers a Supplemental Repurchase Notice to the holder(s) of Employee Stock,
the Company will also deliver to each electing Investor written notice setting
forth the number of shares of Employee Stock the Company and each Investor will
acquire, the aggregate purchase price to be paid and the time and place of the
closing of the transaction.
(f) Closing. The closing of the transactions contemplated by this
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paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Employee
Stock to be purchased pursuant to the Repurchase Option by delivery of, in the
case of each Investor, a check payable to the holder of such Employee Stock, and
in the case of the Company (i) first, by cancellation of any amounts due and
owing under any promissory note issued by Employee to the Company, (ii) second,
by a check payable to the holder of such Employee Stock up to the amount of the
Original Cost therefor paid in cash by Employee and (iii) a note or notes
payable in one installment on the first anniversary of the closing of such
purchase and bearing interest at a rate per annum equal to 8% (it being agreed
that the Company may, in its sole discretion, elect to make any payment under
this clause (iii) in cash), in any case in the aggregate amount of the purchase
price for such shares. Any notes issued by the Company pursuant to this
paragraph 3(f) shall be subject to any restrictive covenants to which the
Company is subject at the time of such purchase.
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<PAGE>
Notwithstanding anything to the contrary contained in this Agreement, all
repurchases of Employee Stock by the Company will be subject to applicable
restrictions contained in the California General Corporation Law and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled to make, the Company may make such repurchases as
soon as it is permitted to do so under such restrictions. The Company and/or the
Investors, as the case may be, will receive customary representations and
warranties from each seller regarding the sale of the Employee Stock, including,
but not limited to, the representation that such seller has good and marketable
title to the Employee Stock to be transferred free and clear of all liens,
claims and other encumbrances.
(g) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the first date subsequent to the date that the Company sells any shares
of its common stock pursuant to a registration statement filed under the 1933
Act (collectively, a "Termination Event").
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4. Restrictions on Transfer.
------------------------
(a) Transfer of Employee Stock. Employee will not sell, pledge or
--------------------------
otherwise transfer any interest in any shares of Employee Stock, except pursuant
to the provisions of para graphs 3, 4(b), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Employee Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among Employee's
Family Group (as defined below), provided that the restrictions contained in
this paragraph 4 will continue to be applicable to the Employee Stock after any
such transfer and the transferees of such Employee Stock shall agree in writing
to be bound by the provisions of this Agreement. "Family Group" means
------------
Employee's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Employee and/or Employee's spouse and/or descendants.
Any transferee of Employee Stock pursuant to a transfer in accordance with the
provisions of this subparagraph 4(b) is herein referred to as a "Permitted
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Transferee." Upon the transfer of Employee Stock pursuant to this paragraph
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4(b), Employee will deliver a written notice (the "Transfer Notice") to the
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Company. The Transfer Notice will disclose in reasonable detail the identity of
the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of a Termination Event.
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Employee Stock and Option
Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE
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<PAGE>
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN A STOCK OPTION AGREEMENT BETWEEN THE
ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE COMPANY DATED
AS OF _________ __, 1999, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) No holder of Employee Stock or Options Shares may sell, transfer
or dispose of any Employee Stock or Option Shares (except pursuant to an
effective registration statement under the Securities Act of 1933) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company (which counsel shall be reasonably acceptable to
the Company) that registration under the 1933 Act is not required in connection
with such transfer.
6. Definition of Employee Stock and Option Shares. For all purposes
----------------------------------------------
of this Agreement, Employee Stock and Option Shares will continue to be Employee
Stock and Option Shares in the hands of any holder other than Employee (except
for the Company, the Investors or purchasers pursuant to an offering registered
under the 1933 Act or purchasers pursuant to a Rule 144 transaction (other than
a Rule 144(k) transaction occurring prior to the time of a closing of a Public
Offering (as defined in Section 8 below)), and each such other holder of
Employee Stock and Option Shares will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock and Option Shares
hereunder. Employee Stock and Option Shares will also include shares of the
Company's capital stock issued with respect to shares of Employee Stock and
Option Shares by way of a stock split, stock dividend or other recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of the Company's
common stock held by the Investors approve (and, in the case of any sale or
other fundamental change which requires the approval of the board of directors
of a California corporation pursuant to the California General Corporation Law,
the Company's board of directors shall have approved such sale) a sale of all or
substantially all of the Company's assets determined on a consolidated basis or
a sale of all or substantially all of the Company's outstanding capital stock
(whether by merger, recapitalization, consolidation, reorganization, combination
or otherwise) to an Independent Third Party or group of Independent Third
Parties (an "Approved Sale"), each holder of Employee Stock and Option Shares
-------------
will vote for, consent to and raise no objections against such Approved Sale.
If the Approved Sale is structured as (i) a merger or consolidation, each holder
of Employee Stock and Options Shares will waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger or
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<PAGE>
consolidation or (ii) sale of stock, each holder of Employee Stock and Option
Shares will agree to sell all of his or her shares of Employee Stock and Options
Shares and rights to acquire shares of Employee Stock and Option Shares on the
terms and conditions approved by the Company's board of directors and the
holders of a majority of the Company's common stock then outstanding. Each
holder of Employee Stock and Option Shares will take all necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Company.
(b) The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Articles of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Employee Stock and Option
Shares will, at the request of the Company, appoint a purchaser representative
(as such term is defined in Rule 501) reasonably acceptable to the Company. If
any holder of Employee Stock or Option Shares appoints a purchaser
representative designated by the Company, the Company will pay the fees of such
purchaser representative, but if any holder of Employee Stock or Option Shares
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Employee and the other holders of Employee Stock and Option
Shares (if any) will bear their pro-rata share (based upon the number of shares
sold) of the costs of any sale of Employee Stock and Option Shares pursuant to
an Approved Sale to the extent such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Employee and the other holders of Employee
Stock and Option Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the
closing of a Public Offering (as defined below).
8. Public Offering. In the event that the Company's board of
---------------
directors and the holders of a majority of the Company's shares of common stock
then outstanding approve an initial public offering and sale of the Company's
common stock (a "Public Offering") pursuant to an
---------------
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<PAGE>
effective registration statement under the 1933 Act, the holders of Employee
Stock and Option Shares will take all necessary or desirable actions in
connection with the consummation of the Public Offering. In the event that such
Public Offering is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the Common Stock structure will
adversely affect the marketability of the offering, each holder of Employee
Stock and Option Shares will consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock into securities that the
managing underwriters, the Company's board of directors and holders of a
majority of the shares of Common Stock then outstanding find acceptable and will
take all necessary or desirable actions in connection with the consummation of
the recapitalization, reorganization and/or exchange.
9. Voting Agreement. Each holder of Employee Stock and Option Shares
----------------
hereby agrees to vote all of his or her shares of Employee Stock and Option
Shares (and, in the event such holder is entitled to vote any of the Company's
other securities for the election of directors, such holder shall vote all such
securities) and take all other necessary actions (whether in such holder's
capacity as a stockholder, director or officer of the Company), and the Company
shall take all necessary or desirable actions as are requested by the Investors,
in order to cause any representatives designated by the Investors to be elected
as members of the Company's board of directors. In addition, no holder shall
vote his or her shares of Employee Stock and Option Shares (or such other
securities) in connection with the removal of any of the Investors' designees as
a director unless and until the Investors direct such holder how to vote on such
removal. Except as otherwise provided herein, each holder of Employee Stock and
Option Shares shall at all times retain the right to vote his or her Employee
Stock and Option Shares (and such other securities) in his or her sole
discretion on all other matters presented to the Company's stockholders for a
vote. All Investor determinations under this paragraph 9 shall be made by the
Investors holding a majority of the Common Stock held by all Investors (in each
case determined on a fully-diluted basis). The provisions of this paragraph 9
shall terminate upon the occurrence of a Termination Event.
10. Other Businesses. As long as Employee is employed by the Company
----------------
or any of its Subsidiaries, Employee agrees that he or she will not, except with
the express written consent of the Company's board of directors, become engaged
in, or render services for, any business other than the business of the Company
or any of its Subsidiaries.
11. Holdback Agreement. No holder of Employee Stock or Option Shares
------------------
will effect any public sale or distribution (including sales pursuant to Rule
144 of the 1933 Act) of any Employee Stock or Option Shares or of any other
capital stock or equity securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such stock or
securities, during the seven days prior to and the 180-day period beginning on
the effective date of any underwritten public offering of the Company's common
stock, except as part of such underwritten public offering. The restrictions on
the transfer set forth in this Section 11 shall continue with respect to each
share of Employee Stock and Option Shares until the date on which such share has
been transferred pursuant to an offering registered under the 1933 Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 (other than Rule 144(k)), adopted under the 1933 Act.
-11-
<PAGE>
12. Employee's Representations. Employee hereby represents and
--------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Employee do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or by which he or she is bound, (ii)
Employee is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and (iii)
upon the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Employee, enforceable in accordance
with its terms.
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered or sent by guaranteed overnight
delivery service, to the Investors and Employee at the addresses indicated in
the Company's records and to the Company at the address indicated below:
To the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attn: CEO
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or deposited with such delivery service.
14. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. In the
event that any ruling of any court or governmental authority calls into question
the validity of any portion of this Agreement, the parties hereto shall consult
with each other concerning such matters and shall negotiate in good faith a
modification to this Agreement which would obviate any such questions as to
validity while preserving, to the extent possible, the intent of the parties and
the economic and other benefits of this Agreement and the portion thereof whose
validity is called into question.
-12-
<PAGE>
15. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts (any one of which may be delivered by facsimile), each of which
will be deemed to be an original and all of which taken together will constitute
one and the same agreement.
17. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Employee, the Company, the
Investors and their respective successors and assigns, provided that Employee
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement.
18. GOVERNING LAW. ALL ISSUES CONCERNING THE ENFORCEABILITY, VALIDITY
-------------
AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION IN ANY STATE OR FEDERAL COURT LOCATED IN THE
STATE OF CALIFORNIA AND WAIVES ANY CLAIM OF IMPROPER JURISDICTION OR LACK OF
VENUE IN CONNECTION WITH ANY CLAIM OR CONTROVERSY WHICH MAY BE BROUGHT IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO MAINTAINS SUBSTANTIAL
CONTACTS WITH THE STATE OF CALIFORNIA, AND A SIGNIFICANT PORTION OF THE PARTIES'
RELATIONSHIP SHALL BE CARRIED OUT IN THE STATE OF CALIFORNIA, BY REASON OF THE
COMPANY'S SANTA CLARA, CALIFORNIA FACILITY. EACH PARTY AGREES THAT THE
COVENANTS PROVIDED IN THIS SECTION 18 ARE A MATERIAL INDUCEMENT TO EACH PARTY TO
ENTER INTO THIS AGREEMENT, AND EACH PARTY RELIED ON SUCH COVENANTS IN ENTERING
INTO THIS AGREEMENT.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Effect of Transfers in Violation of Agreement. The Company will
----------------------------------------------
not be required (a) to transfer on its books any shares of Employee Stock or
Option Shares which have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) to treat as owner of such shares,
to accord the right to vote as such owner or to pay dividends to any transferee
to whom such shares have been transferred in violation of this Agreement.
-13-
<PAGE>
21. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the board of directors
of the Company, the Investors who hold 70% of the Common Stock held by the
Investors, and Employee; provided that in the event that such amendment or
waiver would adversely affect an Investor or a group of Investors in a manner
different than any other Investor, then such amendment or waiver will require
the consent of such Investor or a majority of the Common Shares held by such
group of Investors adversely affected.
22. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
* * * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CHIPPAC, INC.
By: _______________________________
Its: _______________________________
____________________________________
Employee Name
-15-
<PAGE>
Exhibit B
---------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
. 1999 ChipPAC, Inc. Stock Purchase and Option Plan
. Tranche I Stock Option Agreement
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of capital stock of ChipPAC,
Inc. (the "Company") under certain circumstances and impose other restrictions
-------
on such capital stock. I agree that my spouse's interest in the capital stock
is subject to the agreements referred to above and the other agreements referred
to therein and any interest I may have in such capital stock shall be
irrevocably bound by these agreements and the other agreements referred to
therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints ________,
who is the spouse of the undersigned spouse (the "Shareholder") as the
-----------
undersigned's true and lawful attorney and proxy in the undersigned's name,
place and stead to sign, make, execute, acknowledge, deliver, file and record
all documents which may be required, and to manage, vote, act and make all
decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of capital stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
capital stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
__________________________ __________________________________
Signature Signature
__________________________ __________________________________
Printed Name Printed Name
__________________________ __________________________________
Dated Dated
-16-
<PAGE>
Exhibit 10.25
-------------
TRANCHE II STOCK OPTION AGREEMENT
---------------------------------
TRANCHE II STOCK OPTION AGREEMENT (this "Agreement") dated as of
---------
_________ __, 1999, by and between ChipPAC, Inc., a California corporation (the
"Company") and _________ ("Employee").
------- --------
Pursuant to the Company's 1999 Stock Purchase and Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A, the Company and
---- ---------
Employee desire to enter into an agreement pursuant to which the Company shall
grant to Employee certain options to acquire certain shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common"), which
--------------
will be referred to herein as the "Tranche II Option." The Tranche II Option is
-----------------
sometimes hereinafter referred to individually as an "Option" and collectively
------
as the "Options." The Company's Class L Common Stock, par value $.01 per share
-------
and the Class A Common are collectively referred to herein as the "Common
------
Stock." All of such shares of Common Stock issuable upon the exercise of any
- -----
portion of the Options and all shares of the Company's capital stock hereafter
acquired by Employee are referred to herein as "Employee Stock."
--------------
The parties hereto agree as follows:
OPTION PROVISIONS
1. Representations and Warranties.
------------------------------
(a) In connection with the grant of the Options hereunder, Employee
represents and warrants to the Company that:
(i) The Employee Stock which may be acquired by Employee
pursuant to this Agreement will be acquired for Employee's own account and
not with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the "1933 Act"), or any applicable
--------
state securities laws, and the Employee Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) This Agreement constitutes the legal, valid and binding
obligation of Employee, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Employee is a party or any judgment, order
or decree to which Employee is subject.
(iii) Employee has consulted, or has had an opportunity to
consult with, independent legal counsel regarding his or her rights and
obligations under this Agreement and he or she fully understands the terms
and conditions contained herein.
(b) Acknowledgment. As an inducement to the Company to grant the
--------------
Option to Employee, and as a condition thereto, Employee acknowledges and agrees
that:
<PAGE>
(i) the Company will have no duty or obligation to disclose to
Employee, and Employee will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Employee Stock upon the
termination of Employee's employment with the Company or its Subsidiaries
or as otherwise provided hereunder; and
(ii) neither the issuance of the Employee Stock to Employee nor
any provision contained herein shall entitle Employee to remain in the
employment of the Company or its Subsidiaries or affect the right of the
Company to terminate Employee's employment at any time for any reason.
(c) Plan Acknowledgment. The Company and Employee acknowledge and
-------------------
agree that this Agreement has been executed and delivered, and the Employee
Stock which may be issued hereunder will be issued, in connection with and as
part of the compensation and incentive arrangements between the Company and
Employee. The grant of the Options hereunder is pursuant to, and subject to all
the terms and conditions of the Plan, attached hereto as Exhibit A.
---------
2. Stock Options.
-------------
(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
common stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of the Company's common stock and
who is not the spouse or descendant (by birth or adoption) of any such 10% owner
of the Company's common stock.
"Investors" means Bain Capital Fund VI, L.P., BCIP Associates II, BCIP
---------
Associates II-B, BCIP Associates II-C, BCIP Trust Associates II, BCIP Trust
Associates II-B, PEP Investments Pty., Ltd., Randolph Street Partners 1998 DIF,
LLC, Randolph Street Partners II and SXI Group LLC and any of their transferees.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
-2-
<PAGE>
(b) Tranche II Option.
-----------------
(i) Tranche II Option Grant. The Company hereby grants to Employee,
-----------------------
pursuant to the Plan, the Tranche II Option to purchase up to _____________
shares of Class A Common ("Tranche II Option Shares"), at a price per share of
------------------------
$2.10 (the "Tranche II Option Price"). The Tranche II Option Price and the
-----------------------
number of Tranche II Option Shares will be equitably adjusted for any stock
split, stock dividend, reclassification or recapitalization of the Company which
occurs subsequent to the date of this Agreement. The Tranche II Option will
expire on the close of business on the tenth anniversary of the date hereof (the
"Expiration Date"), subject to earlier expiration as provided in Section 2(c)
---------------
below. The Tranche II Option is intended to be an "incentive stock option"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder (the "Code").
----
(ii) Exercisability. On each date set forth below the Tranche II
--------------
Option will have vested and become exercisable with respect to the cumulative
percentage of Tranche II Option Shares set forth opposite such date if Employee
is, and has been, continuously employed by the Company or its Subsidiaries from
the date of this Agreement through such date:
Cumulative Percentage
of Tranche II Option
Date Shares Vested
---- -------------
August 5, 2000 20%
August 5, 2001 40%
August 5, 2002 70%
August 5, 2003 100%
; provided that, if Employee's Termination Date (as defined in paragraph 3(b)
hereof) occurs at any time after August 5, 2000 and prior to August 5, 2003, the
cumulative percentage of Tranche II Option Shares to become vested shall be
determined on a pro rata basis according to the number of fiscal quarters (i.e.,
fiscal quarters ending November 1, February 1, May 1 and August 1) elapsed since
the prior annual vesting date and provided further, that upon any Change in
Control (as defined below), so long as Employee was employed by the Company or
any of its Subsidiaries on the day immediately prior to such Change in Control,
all of the Tranche II Options granted to Employee shall become vested and
immediately exercisable. For purposes hereof, a "Change in Control" shall be
-----------------
deemed to occur upon the first date that the Investors and their affiliates
collectively cease to own at least 35% of the aggregate number of shares of
common stock of the Company that they own on the date hereof (as adjusted for
stock splits, stock dividends and recapitalization and for exchanges in
connection with a merger, consolidation, reorganization or sale).
(c) Early Expiration of Options. Any portion of the Options that has
---------------------------
not vested and become exercisable prior to the Termination Date (as defined in
Section 3(b) below) will expire on the Termination Date and may not be exercised
under any circumstance. Any portion of the Options
-3-
<PAGE>
that has vested and become exercisable prior to the Termination Date will expire
on the earlier of (i) 30 days after the Termination Date (provided that such
period shall be extended to six (6) months after the Termination Date, in the
event of Employee's termination due to death or "disability" (as defined in Code
Section 22(a)(3))) and (ii) the Expiration Date. Notwithstanding any provision
in this Agreement to the contrary, any portion of the Options which has not been
exercised prior to or in connection with a Sale of the Company shall expire upon
the consummation of any such transaction.
(d) Procedure for Exercise. At any time after all or any portion of
----------------------
the Options have become exercisable with respect to any Option Shares (as
defined in Section 3(a) hereof) and prior to the Expiration Date (except as
provided for in Section 2(c) above), Employee may exercise all or a portion of
the Options with respect to Option Shares vested pursuant to paragraph 2(b)(ii)
above by delivering written notice of exercise to the Company, together with (i)
a written acknowledgment that Employee has read and has been afforded an
opportunity to ask questions of management of the Company regarding all
financial and other information provided to Employee regarding the Company, (ii)
an executed consent from Employee's spouse (if any) in the form of Exhibit B
---------
attached hereto and (iii) payment in full by delivery of a certified bank check,
wire transfer of immediately available funds or a personal check in the amount
(the "Option Price") equal to the product of the Tranche II Option Price
------------
multiplied by the number of Tranche II Option Shares to be acquired. As a
condition to any exercise of the Options, Employee will permit the Company to
deliver to him or her all financial and other information regarding the Company
and its Subsidiaries which it believes necessary to enable Employee to make an
informed investment decision. If, at any time subsequent to the date Employee
exercises any portion of the Options and prior to the occurrence of a
Termination Event (as defined in Section 3(g) hereof), Employee becomes legally
married (whether in the first instance or to a different spouse), Employee shall
cause Employee's spouse to execute and deliver a consent in the form of Exhibit
-------
B attached hereto. Employee's failure to deliver the Company an executed
- -
consent in the form of Exhibit B at any time when Employee would otherwise be
---------
required to deliver such consent shall constitute Employee's continuing
representation and warranty that Employee is not legally married as of such
date.
(e) Securities Laws Restrictions. Employee represents that when
----------------------------
Employee exercises any of the Options he or she will be purchasing Option Shares
for Employee's own account and not on behalf of others. Employee understands
and acknowledges that federal and state securities laws govern and restrict
Employee's right to offer, sell or otherwise dispose of any Option Shares unless
Employee's offer, sale or other disposition thereof is registered under the 1933
Act and state securities laws or, in the opinion of the Company's counsel, such
offer, sale or other disposition is exempt from registration thereunder.
Employee agrees that he or she will not offer, sell or otherwise dispose of any
Option Shares in any manner which would: (i) require the Company to file any
regi stration statement (or similar filing under state law) with the Securities
and Exchange Commission or to amend or supplement any such filing or (ii)
violate or cause the Company to violate the 1933 Act, the rules and regulations
promulgated thereunder or any other state or federal law. Employee further
understands that the certificates for any Option Shares which Employee purchases
will bear the legend set forth in paragraph 5 hereof or such other legends as
the Company deems necessary or desirable in connection with the 1933 Act or
other rules, regulations or laws.
-4-
<PAGE>
(f) Non-Transferability of Options. The Options are personal to
------------------------------
Employee and are not transferable by Employee except by will or pursuant to the
laws of descent or distribution. Only Employee or his legal guardian or
representative may exercise the Options.
3. Repurchase Option.
-----------------
(a) Definitions. The following terms are defined as follows:
-----------
"Cause" shall have the meaning assigned to such term in Employee's
-----
written employment arrangements with the Company or any of its Subsidiaries or,
in the absence of any such written employment arrangements, "Cause" shall mean
(i) the commission of a felony or any other act or omission involving
dishonesty, disloyalty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform duties as
reasonably directed by the Company's board of directors or management, (iv)
gross negligence or willful misconduct with respect to the Company or any of its
Subsidiaries or (v) any other material breach of this Agreement.
"Competitive Activity" shall have the meaning assigned to such term in
--------------------
any separate employee stock agreement between the Company and Employee.
"Fair Market Value" of each share of Employee Stock means the market
-----------------
value as determined in good faith by the Company's board of directors.
"Noncompete Period" shall have the meaning assigned to such term in
-----------------
any separate employee stock agreement between the Company and Employee.
"Option Shares" means the Tranche II Option Shares. For purposes of
-------------
this paragraph 3 and paragraph 4, Option Shares issued upon exercise of any
Options will be deemed to be Employee Stock.
"Original Cost" of each share of Employee Stock will be equal to the
-------------
price paid by the Employee for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other recapitalizations
affecting the Common Stock subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Employee is no longer
-----------------
employed by the Company or any of its Subsidiaries for any reason (the date of
such termination being referred to herein as the "Termination Date"), the
----------------
Employee Stock, whether held by Employee or one or more transferees, will be
subject to repurchase by the Company and the Investors (each of the
aforementioned, solely at their option) pursuant to the terms and conditions set
forth in this paragraph 3 (the "Repurchase Option").
-----------------
-5-
<PAGE>
(c) Repurchase Price. If Employee is no longer employed by the
----------------
Company or any of its Subsidiaries for any reason, then on or after the
Termination Date, the Company and the Investors may elect to purchase (i) in the
case of Employee's termination for Cause or in the case of Employee's
participation in any Competitive Activity during the Noncompete Period, all or
any portion of the Employee Stock at a price per share equal to the lower of
Original Cost or Fair Market Value (as of the Termination Date) and (ii) in any
other case, up to 50% of the Employee Stock at a price per share equal to Fair
Market Value (as of the Termination Date).
(d) Repurchase Procedures. The Company may elect to exercise the
---------------------
right to purchase all or any portion of the shares of Employee Stock pursuant to
the Repurchase Option by delivering written notice (the "Repurchase Notice") to
-----------------
the holder or holders of the Employee Stock within 45 days of the Termination
Date (provided that such notice may be delivered (i) in the case of any Employee
Stock issued after the Termination Date, within 45 days of the date any such
Employee Stock is issued or (ii) in the case of Employee's participation in any
Competitive Activity during the Noncompete Period, within 45 days of the date
the Company becomes aware of any such participation, but in no event later than
the 45/th/ day after the expiration of the Noncompete Period). The Repurchase
Notice will set forth the number of shares of Employee Stock to be acquired from
such holder(s), the aggregate consideration to be paid for such shares and the
time and place for the closing of the transaction. If any Employee Stock is
held by any transferees of Employee, the Company shall purchase the shares
elected to be purchased from such holder(s) of Employee Stock, pro rata
according to the number of shares of Employee Stock held by such holder(s) at
the time of delivery of such Repurchase Notice (determined as nearly as
practicable to the nearest share). If Employee Stock of different classes is to
be purchased by the Company and Employee Stock is held by any transferees of
Employee, the number of shares of each class of Employee Stock to be purchased
will be allocated among such holders, pro rata according to the total number of
shares of Employee Stock to be purchased from such persons.
(e) Investor Rights.
---------------
(i) If for any reason the Company does not elect to purchase all of
the Employee Stock pursuant to the Repurchase Option prior to the last to occur
of (i) the 45/th/ day following the Termination Date, (ii) the 45/th/ day
following the date any Employee Stock is issued, in the case of any Employee
Stock issued after the Termination Date or (iii) the 45/th/ day after the date
the Company becomes aware of Employee's participation in any Competitive
Activity during the Noncompete Period (but in no event later than the 45/th/ day
after the expiration of the Noncompete Period), in the case of any such
participation, the Investors will be entitled to exercise the Repurchase Option,
in the manner set forth in this paragraph 3, for the Employee Stock the Company
has not elected to purchase (the "Available Shares"). As soon as practicable,
----------------
but in any event within thirty (30) days after the Company determines that there
will be any Available Shares (and in no event later than the last to occur of
(i) the 45/th/ day following the Termination Date, (ii) the 45/th/ day following
the date any Employee Stock is issued, in the case of any Employee Stock issued
after the Termination Date or (iii) the 45/th/ day after the date the Company
becomes aware of Employee's participation in any Competitive Activity during the
Noncompete Period (but in no event later than the 45/th/ day after the
expiration of the Noncompete Period), in the case of any such participation),
-6-
<PAGE>
the Company will deliver written notice (the "Option Notice") to the Investors
-------------
setting forth the number of Available Shares and the price for each Available
Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share (based upon the number of shares of Common Stock then held by
such Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period, the Company will, if necessary,
notify the Investors electing to purchase Available Shares of any Available
Shares which Investors have elected not to purchase and each of the electing
Investors will be entitled to purchase the remaining Available Shares on the
same terms as described above (the "Second Option Notice"); provided that if in
--------------------
the aggregate such Investors elect to purchase more than the remaining Available
Shares, such remaining Available Shares purchased by each such Investor will be
reduced on a pro rata basis based upon the number of shares of Common Stock then
held by such Investors. Each Investor may elect to purchase any of the
remaining Available Shares available to such Investor by delivering written
notice to the Company within 5 days after the delivery of the Second Option
Notice (with such 5-day period referred to herein as the "Second Election
---------------
Period").
- ------
(iv) As soon as practicable but in any event within five days after
the expiration of the Election Period or the Second Election Period (if any) the
Company will, if necessary, notify the holder(s) of Employee Stock as to the
number of shares of Employee Stock being purchased from the holder(s) by the
Investors (the "Supplemental Repurchase Notice"). At the time the Company
------------------------------
delivers a Supplemental Repurchase Notice to the holder(s) of Employee Stock,
the Company will also deliver to each electing Investor written notice setting
forth the number of shares of Employee Stock the Company and each Investor will
acquire, the aggregate purchase price to be paid and the time and place of the
closing of the transaction.
(f) Closing. The closing of the transactions contemplated by this
-------
paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Employee
Stock to be purchased pursuant to the Repurchase Option by delivery of, in the
case of each Investor, a check payable to the holder of such Employee Stock, and
in the case of the Company (i) first, by cancellation of any amounts due and
owing under any promissory note issued by Employee to the Company, (ii) second,
by a check payable to the holder of such Employee Stock up to the amount of the
Original Cost therefor paid in cash by Employee and (iii) a note or notes
payable in one installment on the first anniversary of the closing of such
purchase and bearing interest at a rate per annum equal to 8% (it being agreed
that the Company may, in its sole discretion, elect to make any payment under
this clause (iii) in cash), in any case in the aggregate amount of the purchase
price for such shares. Any notes issued by the Company pursuant to this
paragraph 3(f) shall be subject to any restrictive covenants to which the
Company is subject at the time of such purchase.
-7-
<PAGE>
Notwithstanding anything to the contrary contained in this Agreement, all
repurchases of Employee Stock by the Company will be subject to applicable
restrictions contained in the California General Corporation Law and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled to make, the Company may make such repurchases as
soon as it is permitted to do so under such restrictions. The Company and/or the
Investors, as the case may be, will receive customary representations and
warranties from each seller regarding the sale of the Employee Stock, including,
but not limited to, the representation that such seller has good and marketable
title to the Employee Stock to be transferred free and clear of all liens,
claims and other encumbrances.
(g) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the first date subsequent to the date that the Company sells any shares
of its common stock pursuant to a registration statement filed under the 1933
Act (collectively, a "Termination Event").
-----------------
4. Restrictions on Transfer.
------------------------
(a) Transfer of Employee Stock. Employee will not sell, pledge or
--------------------------
otherwise transfer any interest in any shares of Employee Stock, except pursuant
to the provisions of para graphs 3, 4(b), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Employee Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among Employee's
Family Group (as defined below), provided that the restrictions contained in
this paragraph 4 will continue to be applicable to the Employee Stock after any
such transfer and the transferees of such Employee Stock shall agree in writing
to be bound by the provisions of this Agreement. "Family Group" means
------------
Employee's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Employee and/or Employee's spouse and/or descendants.
Any transferee of Employee Stock pursuant to a transfer in accordance with the
provisions of this subparagraph 4(b) is herein referred to as a "Permitted
---------
Transferee." Upon the transfer of Employee Stock pursuant to this paragraph
- ----------
4(b), Employee will deliver a written notice (the "Transfer Notice") to the
---------------
Company. The Transfer Notice will disclose in reasonable detail the identity of
the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of a Termination Event.
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Employee Stock and Option
Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE
-8-
<PAGE>
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN A STOCK OPTION AGREEMENT BETWEEN THE
ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE COMPANY DATED
AS OF _________ __, 1999, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) No holder of Employee Stock or Options Shares may sell, transfer
or dispose of any Employee Stock or Option Shares (except pursuant to an
effective registration statement under the Securities Act of 1933) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company (which counsel shall be reasonably acceptable to
the Company) that registration under the 1933 Act is not required in connection
with such transfer.
6. Definition of Employee Stock and Option Shares. For all purposes
----------------------------------------------
of this Agreement, Employee Stock and Option Shares will continue to be Employee
Stock and Option Shares in the hands of any holder other than Employee (except
for the Company, the Investors or purchasers pursuant to an offering registered
under the 1933 Act or purchasers pursuant to a Rule 144 transaction (other than
a Rule 144(k) transaction occurring prior to the time of a closing of a Public
Offering (as defined in Section 8 below)), and each such other holder of
Employee Stock and Option Shares will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock and Option Shares
hereunder. Employee Stock and Option Shares will also include shares of the
Company's capital stock issued with respect to shares of Employee Stock and
Option Shares by way of a stock split, stock dividend or other recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of the Company's
common stock held by the Investors approve (and, in the case of any sale or
other fundamental change which requires the approval of the board of directors
of a California corporation pursuant to the California General Corporation Law,
the Company's board of directors shall have approved such sale) a sale of all or
substantially all of the Company's assets determined on a consolidated basis or
a sale of all or substantially all of the Company's outstanding capital stock
(whether by merger, recapitalization, consolidation, reorganization, combination
or otherwise) to an Independent Third Party or group of Independent Third
Parties (an "Approved Sale"), each holder of Employee Stock and Option Shares
-------------
will vote for, consent to and raise no objections against such Approved Sale.
If the Approved Sale is structured as (i) a merger or consolidation, each holder
of Employee Stock and Options Shares will waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger or
-9-
<PAGE>
consolidation or (ii) sale of stock, each holder of Employee Stock and Option
Shares will agree to sell all of his or her shares of Employee Stock and Options
Shares and rights to acquire shares of Employee Stock and Option Shares on the
terms and conditions approved by the Company's board of directors and the
holders of a majority of the Company's common stock then outstanding. Each
holder of Employee Stock and Option Shares will take all necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Company.
(b) The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Articles of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Employee Stock and Option
Shares will, at the request of the Company, appoint a purchaser representative
(as such term is defined in Rule 501) reasonably acceptable to the Company. If
any holder of Employee Stock or Option Shares appoints a purchaser
representative designated by the Company, the Company will pay the fees of such
purchaser representative, but if any holder of Employee Stock or Option Shares
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Employee and the other holders of Employee Stock and Option
Shares (if any) will bear their pro-rata share (based upon the number of shares
sold) of the costs of any sale of Employee Stock and Option Shares pursuant to
an Approved Sale to the extent such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Employee and the other holders of Employee
Stock and Option Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the
closing of a Public Offering (as defined below).
8. Public Offering. In the event that the Company's board of
---------------
directors and the holders of a majority of the Company's shares of common stock
then outstanding approve an initial public offering and sale of the Company's
common stock (a "Public Offering") pursuant to an
---------------
-10-
<PAGE>
effective registration statement under the 1933 Act, the holders of Employee
Stock and Option Shares will take all necessary or desirable actions in
connection with the consummation of the Public Offering. In the event that such
Public Offering is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the Common Stock structure will
adversely affect the marketability of the offering, each holder of Employee
Stock and Option Shares will consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock into securities that the
managing underwriters, the Company's board of directors and holders of a
majority of the shares of Common Stock then outstanding find acceptable and will
take all necessary or desirable actions in connection with the consummation of
the recapitalization, reorganization and/or exchange.
9. Voting Agreement. Each holder of Employee Stock and Option Shares
----------------
hereby agrees to vote all of his or her shares of Employee Stock and Option
Shares (and, in the event such holder is entitled to vote any of the Company's
other securities for the election of directors, such holder shall vote all such
securities) and take all other necessary actions (whether in such holder's
capacity as a stockholder, director or officer of the Company), and the Company
shall take all necessary or desirable actions as are requested by the Investors,
in order to cause any representatives designated by the Investors to be elected
as members of the Company's board of directors. In addition, no holder shall
vote his or her shares of Employee Stock and Option Shares (or such other
securities) in connection with the removal of any of the Investors' designees as
a director unless and until the Investors direct such holder how to vote on such
removal. Except as otherwise provided herein, each holder of Employee Stock and
Option Shares shall at all times retain the right to vote his or her Employee
Stock and Option Shares (and such other securities) in his or her sole
discretion on all other matters presented to the Company's stockholders for a
vote. All Investor determinations under this paragraph 9 shall be made by the
Investors holding a majority of the Common Stock held by all Investors (in each
case determined on a fully-diluted basis). The provisions of this paragraph 9
shall terminate upon the occurrence of a Termination Event.
10. Other Businesses. As long as Employee is employed by the Company
----------------
or any of its Subsidiaries, Employee agrees that he or she will not, except with
the express written consent of the Company's board of directors, become engaged
in, or render services for, any business other than the business of the Company
or any of its Subsidiaries.
11. Holdback Agreement. No holder of Employee Stock or Option Shares
------------------
will effect any public sale or distribution (including sales pursuant to Rule
144 of the 1933 Act) of any Employee Stock or Option Shares or of any other
capital stock or equity securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such stock or
securities, during the seven days prior to and the 180-day period beginning on
the effective date of any underwritten public offering of the Company's common
stock, except as part of such underwritten public offering. The restrictions on
the transfer set forth in this Section 11 shall continue with respect to each
share of Employee Stock and Option Shares until the date on which such share has
been transferred pursuant to an offering registered under the 1933 Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 (other than Rule 144(k)), adopted under the 1933 Act.
-11-
<PAGE>
12. Employee's Representations. Employee hereby represents and
--------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Employee do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or by which he or she is bound, (ii)
Employee is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and (iii)
upon the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Employee, enforceable in accordance
with its terms.
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered or sent by guaranteed overnight
delivery service, to the Investors and Employee at the addresses indicated in
the Company's records and to the Company at the address indicated below:
To the Company:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attn: CEO
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or deposited with such delivery service.
14. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. In the
event that any ruling of any court or governmental authority calls into question
the validity of any portion of this Agreement, the parties hereto shall consult
with each other concerning such matters and shall negotiate in good faith a
modification to this Agreement which would obviate any such questions as to
validity while preserving, to the extent possible, the intent of the parties and
the economic and other benefits of this Agreement and the portion thereof whose
validity is called into question.
-12-
<PAGE>
15. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts (any one of which may be delivered by facsimile), each of which
will be deemed to be an original and all of which taken together will constitute
one and the same agreement.
17. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Employee, the Company, the
Investors and their respective successors and assigns, provided that Employee
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement.
18. GOVERNING LAW. ALL ISSUES CONCERNING THE ENFORCEABILITY, VALIDITY
-------------
AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. EACH OF THE PARTIES
HERETO SUBMITS TO THE JURISDICTION IN ANY STATE OR FEDERAL COURT LOCATED IN THE
STATE OF CALIFORNIA AND WAIVES ANY CLAIM OF IMPROPER JURISDICTION OR LACK OF
VENUE IN CONNECTION WITH ANY CLAIM OR CONTROVERSY WHICH MAY BE BROUGHT IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO MAINTAINS SUBSTANTIAL
CONTACTS WITH THE STATE OF CALIFORNIA, AND A SIGNIFICANT PORTION OF THE PARTIES'
RELATIONSHIP SHALL BE CARRIED OUT IN THE STATE OF CALIFORNIA, BY REASON OF THE
COMPANY'S SANTA CLARA, CALIFORNIA FACILITY. EACH PARTY AGREES THAT THE
COVENANTS PROVIDED IN THIS SECTION 18 ARE A MATERIAL INDUCEMENT TO EACH PARTY TO
ENTER INTO THIS AGREEMENT, AND EACH PARTY RELIED ON SUCH COVENANTS IN ENTERING
INTO THIS AGREEMENT.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Effect of Transfers in Violation of Agreement. The Company will
----------------------------------------------
not be required (a) to transfer on its books any shares of Employee Stock or
Option Shares which have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) to treat as owner of such shares,
to accord the right to vote as such owner or to pay dividends to any transferee
to whom such shares have been transferred in violation of this Agreement.
-13-
<PAGE>
21. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the board of directors
of the Company, the Investors who hold 70% of the Common Stock held by the
Investors, and Employee; provided that in the event that such amendment or
waiver would adversely affect an Investor or a group of Investors in a manner
different than any other Investor, then such amendment or waiver will require
the consent of such Investor or a majority of the Common Shares held by such
group of Investors adversely affected.
22. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
* * * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CHIPPAC, INC.
By: _______________________________
Its: _______________________________
____________________________________
Employee Name
-15-
<PAGE>
Exhibit B
---------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
. 1999 ChipPAC, Inc. Stock Purchase and Option Plan
. Tranche II Stock Option Agreement
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of capital stock of ChipPAC,
Inc. (the "Company") under certain circumstances and impose other restrictions
-------
on such capital stock. I agree that my spouse's interest in the capital stock
is subject to the agreements referred to above and the other agreements referred
to therein and any interest I may have in such capital stock shall be
irrevocably bound by these agreements and the other agreements referred to
therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints Employee
Name, who is the spouse of the undersigned spouse (the "Shareholder") as the
-----------
undersigned's true and lawful attorney and proxy in the undersigned's name,
place and stead to sign, make, execute, acknowledge, deliver, file and record
all documents which may be required, and to manage, vote, act and make all
decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of capital stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
capital stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
__________________________ __________________________________
Signature Signature
__________________________ __________________________________
Printed Name Printed Name
__________________________ __________________________________
Dated Dated
<PAGE>
Exhibit 12.1
ChipPAC Inc.
Computation of Ratio of Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Years Ended December 31, Ended September 30,
-------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income
(loss) from continuing
operations (A) $ 3,879 $ 2,075 $ (2,742) $ (55,789) $ 52,867 $ 47,081 $ (3,690)
======== ======== ========= ========== ========= ========= =========
Fixed Charges:
Capitalized interest (B) - 152 510 1,122 - - -
Interest expense 2,423 3,151 5,780 10,972 13,340 10,037 12,089
Rentals:
Rental expenses (C) 1,619 1,730 1,667 1,445 2,532 1,526 3,138
Preferred stock dividend
accretion (A) - - - - - - 2,787
-------- -------- --------- ---------- --------- --------- ---------
Total fixed charges $ 4,042 $ 5,003 $ 7,957 $ 13,539 $ 15,872 $ 11,563 $ 18,014
======== ======== ========= ========== ========= ========= =========
Pre-tax income
(loss) from continuing
charges, dividend
accretion $ 7,921 $ 7,108 $ 5,215 $ (42,250) $ 68,739 $ 58,644 $ 11,537
======== ======== ========= ========== ========= ========= =========
Ratio of earnings
to fixed charges 2.0x 1.4x (D) (D) 4.3x 5.1x (D)(E)
======== ======== ========= ========== ========= ========= =========
</TABLE>
(A) The mandatorily redeemable preferred stock dividend accretion is excluded
from the numerator of the ratio calculation for the nine months ended September
30, 1999 because such amount was not deducted in arriving at ChipPAC's pre-tax
Income (loss) from continuing operations.
(B) Capitalized interest relates to the costs of plant and building improvements
in China and building improvements in Korea.
(C) Amounts represented one-third operating lease rental expense as a reasonable
approximation of the interest portion thereof.
(D) Due to ChipPAC's losses in the twelve months ended December 31, 1996 and
1997 and the nine months ended September 30, 1999, the ratio coverage was less
than 1:1. In order to achieve a coverage ratio of 1:1 for those periods, ChipPAC
had to generate additional earnings of $2,742, $55,789, and $6,477,
respectively. The amount of additional earnings for the nine months ended
September 30, 1999 differs from the pre-tax loss from continuing operations of
$3,690 because the preferred stock dividend accretion requirement was not
deducted in arriving at such amount.
(E) Included in earnings for the nine months ended September 30, 1999 was a
non-recurring loss of $11,842 before income taxes relating to the change of
control expenses. If these expenses had not occurred, the ratio of earnings to
fixed charges would have been 1.5x.
<PAGE>
EXHIBIT 21.1
<TABLE>
State or other jurisdiction of
------------------------------
Subsidiaries of ChipPAC, Inc. incorporation or organization
----------------------------- -----------------------------
<S> <C>
ChipPAC International Company Limited British Virgin Islands
ChipPAC Liquidity Management Hungary
Limited Liability Company Hungary
ChipPAC Luxembourg S.a.R.L. Luxembourg
ChipPAC (Barbados) Ltd. Barbados
ChipPAC Limited British Virgin Islands
ChipPAC Assembly and Test (Shanghai)
Company Ltd. China
ChipPAC (Shanghai) Company Ltd. China
ChipPAC Korea Company Ltd. South Korea
Subsidiaries of ChipPAC International State or other jurisdiction of
------------------------------------- -----------------------------
Company Limited incorporation or organization
--------------- -----------------------------
ChipPAC Liquidity Management Hungary Hungary
Limited Liability Company
ChipPAC Luxembourg S.a.R.L. Luxembourg
Subsidiaries of ChipPAC (Barbados) State or other jurisdiction of
---------------------------------- ------------------------------
Ltd. incorporation or organization
---- -----------------------------
ChipPAC Limited British Virgin Islands
ChipPAC Assembly and Test (Shanghai) China
Company Ltd.
ChipPAC (Shanghai) Company Ltd. China
ChipPAC Korea Company Ltd. South Korea
</TABLE>
<PAGE>
<TABLE>
State or other jurisdiction of
------------------------------
Subsidiaries of ChipPAC Limited incorporation or organization
------------------------------- -----------------------------
<S> <C>
ChipPAC Assembly and Test (Shanghai) China
Company Ltd.
ChipPAC (Shanghai) Company Ltd. China
ChipPAC Korea Company Ltd. South Korea
Subsidiaries of ChipPAC Korea State or other jurisdiction of
----------------------------- ------------------------------
Company Ltd. incorporation or organization
------------ -----------------------------
None. N/A
</TABLE>
<TABLE>
State or other jurisdiction of
------------------------------
Subsidiaries of ChipPAC Luxembourg S.a.R.L. incorporation or organization
------------------------------------------- -----------------------------
<S> <C>
None. N/A
Subsidiaries of ChipPAC Liquidity State or other jurisdiction of
------------------------------------ ------------------------------
Management Hungary Limited Liability incorporation or organization
------------------------------------ -----------------------------
Company
-------
None. N/A
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on form S-4 of
ChipPAC International Company Limited, ChipPAC, Inc., ChipPAC Liquidity
Management Hungary Limited Liability Company, ChipPAC Luxembourg S.a.R.L.,
ChipPAC Korea Company Limited, ChipPAC Limited, ChipPAC (Barbados) Ltd. of our
report dated May 17, 1999 relating to the combined financial statements of
ChipPAC, which appears in such Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
San Jose, California
November 23, 1999
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________________
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
_______________________________
FIRSTAR BANK, N.A.
f/k/a FIRSTAR BANK OF MINNESOTA, N.A.
(Exact name of Trustee as specified in its charter)
A National Banking Association 41-0122055
(State of incorporation if (IRS Employer
not a national bank) Identification No.)
101 East Fifth Street
Corporate Trust Department
St. Paul, Minnesota 55101
(Address of principal executive offices) (Zip Code)
FIRSTAR BANK, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
(651) 229-2600
(Exact name, address and telephone number of agent for service)
_______________________________
ChipPAC International Company Limited
(Exact name of registrant as specified in its charter)
British Virgin Islands
66-0573152
(State of incorporation or (IRS Employer
other jurisdiction) Identification No.)
Craigmuir Chambers
Road Town
Tortola, British Virgin Islands
(Address of principal executive offices) (Zip Code)
___________________________________________________
12 3/4% Series B Senior Subordinated Notes due 2009
(Title of Indenture Securities)
<PAGE>
<TABLE>
<S> <C>
ChipPAC, Inc.
California 77-0463-48
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ChipPAC Liquidity Management Hungary Limited Liability Company
Hungary 98-0209814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ChipPAC Luxembourg S.a.R.L
Luxembourg 98-0209817
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ChipPAC Korea Company, Ltd.
Republic of Korea 98-0209695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ChipPAC Limited
British Virgin Islands 98-0209699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ChipPAC (Barbados) Ltd.
Barbados 98-0209821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<PAGE>
Item 1. General Information. Furnish the following information as to the
-------------------
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, DC
Federal Deposit Insurance Corporation
Washington, DC
The Board of Governors of the Federal Reserve System
Washington, DC
(b) The Trustee is authorized to exercise corporate trust powers.
GENERAL
Item 2. Affiliations with Obligor and Underwriters. If the obligor or any
------------------------------------------
underwriter for the obligor is an affiliate of the Trustee, describe
each such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's knowledge the
---------------------------------------------------------------------
obligor is not in default under any Indenture for which the Trustee acts as
- ---------------------------------------------------------------------------
Trustee.
- -------
Item 16. List of Exhibits. Listed below are all the exhibits filed as a part of
----------------
this statement of eligibility and qualification. Exhibits 1-4 are
incorporated by reference from filing 333-48849. Exhibit 7 is
incorporated by reference from filing 333-79659.
Exhibit 1. Copy of Articles of Association of the trustee now in
effect.
Exhibit 2. a. A copy of the certificate of the Comptroller of Currency
dated June 1, 1965, authorizing Firstar Bank, N.A. to
act as fiduciary.
b. A copy of the certificate of authority of the trustee to
commence business issued June 9, 1903 by the Comptroller
of the Currency to Firstar Bank, N.A.
<PAGE>
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued by the Federal Reserve Board.
Exhibit 4. Copy of the By-Laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4.
Exhibit 6. The consent of the trustee required by Section 321(b) of
the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, a national banking association organized and existing under the laws of
the United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Saint Paul and State of Minnesota on the 27th day of September, 1999.
FIRSTAR BANK, N.A.
(Seal)
/s/ Angela M. Weidell-LaBathe
-----------------------------
Angela M. Weidell-LaBathe
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, Firstar Bank, N.A., hereby consents that reports of examination of
the undersigned by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon its
request therefor.
Dated: September 27, 1999
FIRSTAR BANK, N.A.
/s/ Angela M. Weidell-LaBathe
-----------------------------
Angela M. Weidell-LaBathe
Assistant Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001097583
<NAME> CHIPPAC INTERNATIONAL COMPANY LIMITED
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 68,767 33,142
<SECURITIES> 0 0
<RECEIVABLES> 43,813 35,680
<ALLOWANCES> (1,162) (1,001)
<INVENTORY> 10,325 12,420
<CURRENT-ASSETS> 125,469 90,489
<PP&E> 375,143 394,379
<DEPRECIATION> (146,141) (181,110)
<TOTAL-ASSETS> 359,472 322,461
<CURRENT-LIABILITIES> (145,789) (60,392)
<BONDS> 0 (150,000)
0 (71,366)
0 (10,000)
<COMMON> (173,417) (109,069)
<OTHER-SE> 60,226 228,818
<TOTAL-LIABILITY-AND-EQUITY> (359,472) (322,461)
<SALES> (334,081) (267,671)
<TOTAL-REVENUES> (334,081) (267,671)
<CGS> 270,365 227,792
<TOTAL-COSTS> 293,652 262,678
<OTHER-EXPENSES> (25,778) (3,406)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,340 12,089
<INCOME-PRETAX> (52,867) 3,690
<INCOME-TAX> 20,564 (1,823)
<INCOME-CONTINUING> (32,303) 1,867
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 1,372
<CHANGES> 0 0
<NET-INCOME> (32,303) 3,239
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
12 3/4% Senior Subordinated Notes due 2009
of
CHIPPAC INTERNATIONAL COMPANY LIMITED
Pursuant to the Prospectus Dated , 2000
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 2000 UNLESS EXTENDED.
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed and submitted to the Exchange Agent:
By Overnight Courier & By Hand up to By Registered or Certified Mail:
4:30 p.m. on
the expiration date only:
Firstar Bank of Minnesota, N.A. 101 Firstar Bank of Minnesota, N.A. 101
East Fifth Street St. Paul, Minnesota East Fifth Street St. Paul, Minnesota
55101-1860 Attn: Frank P. Leslie, III 55101-1860 Attn: Frank P. Leslie, III
Facsimile Transmission: 651-229-6415
Confirm by Telephone: 651-229-2600 Attn: Frank P. Leslie, III
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE
NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
The undersigned acknowledges receipt of the Prospectus, dated , 2000
(as it may be supplemented and amended from time to time the "Prospectus") of
ChipPAC International Limited (the "Company") and this Letter of Transmittal
(the "Letter of Transmittal"), which together describe the Company's offer
(the "Exchange Offer") to exchange $1,000 principal amount of its 12 3/4%
Series B Senior Subordinated Notes due 2009 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement, for each $1,000 principal amount
of its outstanding 12 3/4% Senior Subordinated Notes due 2009 (the "Notes"),
of which $150,000,000 principal amount is outstanding. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on , 2000, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term shall mean the latest date and time to which the Exchange Offer is
extended. The term "Holder" with respect to the Exchange Offer means any
person in whose name Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. Capitalized terms used but not defined herein have the
respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
<PAGE>
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes to the extent provided herein or (iii) tender of the Notes is to be made
according to the guaranteed delivery procedures described in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2 below. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the
Exchange Offer may be effected by a participant in the Book-Entry Transfer
Facility tendering Notes through the Book-Entry Transfer Facility's Automated
Tender Offer Program ("ATOP") where the Exchange Agent receives an Agent's
Message prior to the Expiration Date. Accordingly, such participant must
electronically transmit its acceptance to the Book-Entry Transfer Facility
through ATOP, and then the Book-Entry Transfer Facility will edit and verify
the acceptance, execute a book-entry delivery to the Exchange Agent's account
at the Book-Entry Transfer Facility and send an Agent's Message to the
Exchange Agent for its acceptance. By tendering through ATOP, participants in
the Book-Entry Transfer Facility will expressly acknowledge receipt of this
Letter of Transmittal and agree to be bound by its terms and the Company will
be able to enforce such agreement against such Book-Entry Transfer Facility
participants.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Notes must
complete this letter in its entirety.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Notes: ________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing
Notes, an Agent's Message or other required documents to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 below.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (See Instruction 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
2
<PAGE>
BOX 2 SPECIAL REGISTRATION INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be issued in a name other than the name appearing in Box 1 above.
Issue certificate(s) to:
Name ___________________________________________________________________________
(Please Print)
Address ________________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
BOX 3 SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be sent to an address other than the address appearing in Box 1 above,
or if Box 2 is filled in, to an address other than the address appearing in Box
2.
Deliver certificate(s) to:
Name ___________________________________________________________________________
(Please Print)
Address ________________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
BOX 4 BROKER-DEALER STATUS
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. If this box is checked, a copy of this Letter of Transmittal
must be received within five business days after the Expiration Date to
Tony Lin, Chief Financial Officer, ChipPAC, Inc., via facsimile: (408)
486-5914.
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company, the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (iii) present such Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Notes, all in accordance with the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Notes
tendered hereby and that the Company will acquire good, valid and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims, when the same are acquired
by the Company. The undersigned hereby further represents that any Exchange
Notes acquired in exchange for Notes tendered hereby will have been acquired
in the ordinary course of business of the person receiving such Exchange
Notes, whether or not such person is the undersigned, that neither the
undersigned nor any other such person has any arrangement or understanding
with any person to participate in the distribution of such Exchange Notes and
that neither the undersigned nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. In addition, the
undersigned and any such person acknowledge that (a) any person participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must,
in the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes and cannot rely on the position of the
staff of the Securities and Exchange Commission enunciated in no-action
letters and (b) failure to comply with such requirements in such instance
could result in the undersigned or such person incurring liability under the
Securities Act for which the undersigned or such person is not indemnified by
the Company. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the assignment, transfer and purchase of
the Notes tendered hereby. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a Prospectus in connection
with any resale of such Exchange Notes, however, by so acknowledging and by
delivering a Prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Unless otherwise
notified in accordance with the instructions set forth herein in Box 4 under
"Broker-Dealer Status," the Company will assume that the undersigned is not a
Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent (such notice if given orally, to be confirmed in
writing).
If any Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Notes
will be returned, without expense, to the undersigned at the address shown
below or to a different address as may be indicated herein in Box 3 under
"Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
4
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates
for Notes not tendered or not exchanged, in the name(s) of the registered
holder of the Notes appearing in Box 1 above. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for
the Notes accepted for exchange and any certificates for Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event
that the box entitled "Special Registration Instructions" and the box entitled
"Special Delivery Instructions" both are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Notes
accepted for exchange in the name(s) of, and return any certificates for Notes
not tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's
Message, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date, may tender their Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2 below.
5
<PAGE>
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Notes to
which this Letter of Transmittal relates are held of record by two or more
joint holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
x
-------------------------------------------------------- ----------------
Date
x
-------------------------------------------------------- ----------------
Date
Area Code and Telephone Number:
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (i) set forth
his or her full title below and (ii) submit evidence satisfactory to the
Company of such person's authority so to act. See Instruction 5.
Name(s): ____________________________________________________________________
(Please Print)
Capacity: ___________________________________________________________________
Address: ____________________________________________________________________
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: __________________________
(Authorized Signature)
-----------------------------------------------------------------------------
(Title)
-----------------------------------------------------------------------------
(Name of Firm)
-----------------------------------------------------------------------------
(Address, Include Zip Code)
-----------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated _______________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or, in the
case of a book-entry transfer, an Agent's Message), a Substitute Form W-9 and
any other documents required by this Letter of Transmittal must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of certificates for Notes and all other required
documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holder may wish to use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. Neither the
Company nor the Exchange Agent is under an obligation to notify any tendering
holder of the Company's acceptance of tendered Notes prior to the completion
of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account with the Book-Entry Transfer Facility),
together with this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message) and all other
documents required by the Letter of Transmittal must be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such
Notes in the Exchange Offer. Any beneficial owner of Notes who is not the
registered holder and who wishes to tender should arrange with such Holder to
execute and deliver this Letter of Transmittal on such owner's behalf or must,
prior to completing and executing this Letter of Transmittal and delivering
such Notes, either make appropriate arrangements to register ownership of the
Notes in such owner's name or obtain a properly completed bond power from the
registered holder.
7
<PAGE>
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Principal Amount Tendered" of the box
entitled "Description of Notes" (Box 1) above. The entire principal amount of
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of Notes is not
tendered, Notes for the principal amount of Notes not tendered and Exchange
Notes exchanged for any Notes tendered will be sent to the holder at his or
her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not
accepted for exchange are to be sent, if different from the name and address
or account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the tendering
holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Notes to the Company or its order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
8
<PAGE>
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a holder
of any Notes which are accepted for exchange must provide the Company (as
payer) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the Notes are registered in more than one name or are
not in the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Notes, but shall not
incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of
Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given notice thereof to the Exchange Agent (such
9
<PAGE>
notice if given orally, to be confirmed in writing). If any tendered Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Notes will be returned, without expense, to the undersigned at the address
shown above or at a different address as may be indicated under "Special
Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYER'S NAME: ChipPAC International Company Limited
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR Social Security Number
TAXPAYER IDENTIFICATION or TIN
NUMBER ("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
/ /
-----------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3408(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject
to backup withholding.
-----------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF Part 3--
SUBSTITUTE PERJURY, I CERTIFY THAT THE INFORMATION Awaiting TIN
PROVIDED ON THIS FORM IS TRUE, CORRECT (right
AND COMPLETE. arrow) [_]
Form W-9
SIGNATURE __________________________ DATE
-----------------------------------------------------------
Department of the TreasuryInternal Revenue Service
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part I
below. See instructions if your name has changed.)
Payer's Request for Taxpayer Identification Number (TIN)
Note:FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-----------------------------------------------------------
Address
-----------------------------------------------------------
City, State and ZIP Code
-----------------------------------------------------------
List account number(s) here (optional)
10
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
With Respect to
CHIPPAC INTERNATIONAL COMPANY LIMITED
12 3/4% Senior Subordinated Notes due 2009
This form must be used by a holder of 12 3/4% Senior Subordinated Notes due
2009 (the "Notes") of ChipPAC International Company Limited (the "Company"),
who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the
related Letter of Transmittal. Any holder who wishes to tender Notes pursuant
to such guaranteed delivery procedures must ensure that the Exchange Agent
receives this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings ascribed
to them in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
2000, UNLESS EXTENDED (THE "EXPIRATION DATE").
To: Firstar Bank of Minnesota, N.A.
(the "Exchange Agent")
By Overnight Courier & By Hand up to By Registered or Certified Mail:
4:30 p.m. on the expiration date only:
Firstar Bank of Minnesota, N.A. Firstar Bank of Minnesota, N.A.
101 East Fifth Street 101 East Fifth Street
St. Paul, Minnesota 55101-1860 St. Paul, Minnesota 55101-1860
Attn: Frank P. Leslie, III Attn: Frank P. Leslie, III
Facsimile Transmission: 651-229-6415
Confirm by Telephone: 651-229-2600
Attn: Frank P. Leslie, III
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount at
maturity of Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 2 of the Letter of
Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
Certificate Number(s) (if known) of Notes
or Account Aggregate Principal Aggregate Principal
Number at the Book-Entry Transfer Facility Amount Represented Amount Tendered
<S> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
Signature of Registered Holder(s) or Date: ________________________ , 2000
Authorized Signatory: _______________ Address: ____________________________
------------------------------------- -------------------------------------
------------------------------------- Area Code and Telephone No.: ________
Name of Registered Holder(s): _______
-------------------------------------
-------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Notes or on a security
position listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees that either the Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility as described in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures"), together with a properly
completed Letter of Transmittal (or facsimile thereof) (or, in the case of a
book-entry transfer, an Agent's Message) and any other required documents
will be received by the Exchange Agent by 5:00 p.m., New York City time, on
the third New York Stock Exchange trading day following the Expiration Date.
Name of Firm: _______________________
-------------------------------------
Authorized Signature
Address: ____________________________
Name: _______________________________
-------------------------------------
Title: ______________________________
Area Code and Telephone No.: ________
Date: ________________________ , 1999
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face
of the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent
at the address set forth on the first page of this Notice of Guaranteed
Delivery. Holders may also contact their broker, dealer, commercial bank, trust
company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
Exhibit 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT
FROM BENEFICIAL OWNER OF
CHIPPAC INTERNATIONAL COMPANY LIMITED
12 3/4% Senior Subordinated Notes due 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 2000, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated , 2000
(the "Prospectus"), of ChipPAC International Company Limited (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 12 3/4% Series B Senior Subordinated Notes due
2009 (the "Exchange Notes"), for each $1,000 principal amount of its
outstanding 12 3/4% Senior Subordinated Notes due 2009 (the "Notes").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 12 3/4% Senior Subordinated Notes due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED):
$
[_] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Act"), in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot
rely
<PAGE>
on the position of the staff of the Securities and Exchange Commission set
forth in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resale of the Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of
the Company; (b) to agree, on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as necessary under
the Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO
ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE
INSTRUCTIONS TO TONY LIN, CHIEF FINANCIAL OFFICER, CHIPPAC, INC., VIA
FACSIMILE: (408) 486-5914.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
2
