<PAGE>
As filed with the Securities and Exchange Commission on August 15, 2000
Registration Statement No. 333-11292
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------
AMENDMENT NO.1
TO
Forms S-4/F-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------------
ASAT (Finance) LLC
(Issuer)
(Exact Name of Registrant as Specified in Its Charter)
Delaware 3674 Not applicable
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
------------
c/o Corporation Trust Center
1209 Orange Street James Healy
ASAT, Inc.
Wilmington, Delaware 19801 46335 Landing Parkway
United States Fremont, California 94338
(302) 658-4205 United States
(Address and telephone number of (510) 249-1222
Registrant's principal executive (Name, address and telephone number
office) of agent for service of process)
------------
Copies to:
Anthony Root, Esq.
Milbank, Tweed, Hadley & McCloy llp
30/F Alexandra House
16 Chater Road
Central, Hong Kong
(011) (852) 2971-4888
------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are to be 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) of the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class of Amount Maximum Aggregate Amount of
Securities to be to be Offering Price Offering Registration
Registered Registered Per Note(1) Price(1)(2) Fee(3)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12.5% Senior Notes due
2006.................... $155,000,000 95.984% $148,775,200 $39,277
--------------------------------------------------------------------------------
Guarantees of
guarantors(/4/)......... -- -- -- --
--------------------------------------------------------------------------------
Total.................. -- -- -- $39,277
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Exclusive of accrued interest, if any.
(3) Calculated pursuant to Rule 457(f)(1).
(4) No separate consideration will be received for the guarantees.
------------
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 that 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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
ADDITIONAL REGISTRANTS (GUARANTORS)
ASAT Holdings Limited
(Exact Name of Registrant as Specified in Its Charter)
Cayman Same as indicated c/o P.O. Box 309 Not 3674
Islands on cover of Ugland House, applicable (Primary
Registration Standard
Statement Industrial
(State or South Church Street (I.R.S. Classification
other George Town, Grand Employer Code
urisdictionj Cayman Identification Number)
of Number)
incorporation
or
organization)
(Name, address
and Cayman Islands
telephone (1-345) 949-8066
number (Address and
of agent for telephone number of
service Registrant's
of process) principal executive
office)
ASAT Limited
(Exact Name of Registrant as Specified in Its Charter)
Hong Kong Same as Not 3674
(State or indicated on 14th Floor applicable (Primary
other cover of 138 Texaco Road Standard
urisdictionjRegistration Tsuen Wan, New (I.R.S. Industrial
of Statement Territories Employer Classification
incorporation Hong Kong Identification Code
or (Name, (011)(852) 2408- Number) Number)
organization) address and 7811
telephone (Address and
number of telephone number of
agent for Registrant's
service principal executive
of process) office)
ASAT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Same as 46335 Landing 77-0202559 3674
California indicated on Parkway (I.R.S. (Primary
(State or cover of Fremont, California Employer Standard
other Registration 94338 Identification Industrial
urisdictionj Statement United States Number) Classification
of (Name, (510) 249-1222 Code
incorporation address and (Address and Number)
or telephone telephone number of
organization) number of Registrant's
agent for principal executive
service office)
of process)
Timerson Limited
(Exact Name of Registrant as Specified in Its Charter)
Hong Kong Same as Not 3674
(State or indicated on 14th Floor applicable (Primary
other cover of 138 Texaco Road Standard
urisdictionjRegistration Tsuen Wan, New (I.R.S. Industrial
of Statement Territories Employer Classification
incorporation Hong Kong Identification Code
or (Name, (011)(852) 2408- Number) Number)
organization) address and 7811
telephone (Address and
number of telephone number of
agent for Registrant's
service principal executive
of process) office)
ASAT (Cayman) Limited
(Exact Name of Registrant as Specified in Its Charter)
Same as c/o P.O. Box 309 Not 3674
Cayman indicated on Ugland House, applicable (Primary
Islands cover of South Church Street (I.R.S. Standard
(State or Registration George Town, Grand Employer Industrial
other Statement Cayman Identification Classification
urisdictionj (Name, Cayman Islands Number) Code
of address and (1-345) 949-8066 Number)
incorporation telephone (Address and
or number of telephone number of
organization) agent for Registrant's
service principal executive
of process) office)
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated August 15, 2000
PROSPECTUS AND CONSENT SOLICITATION
[ASAT LOGO]
ASAT (FINANCE) LLC
Offer to Exchange all Outstanding
Unregistered 12.5% Senior Notes due 2006
for
Registered 12.5% Senior Notes due 2006
and
Consent Solicitation
--------
This exchange offer and consent solicitation will expire at 5:00 p.m., New York
City time, on , 2000, unless we extend it.
--------
. The new notes will, subject to
certain exceptions, be substantially
identical to the original notes, but
will be free from the transfer
restrictions that apply to the
original, unregistered notes.
. The new notes will be fully and
unconditionally guaranteed by ASAT
Holdings Limited and each of its
subsidiaries (other than ASAT
(Finance) LLC).
. You must tender your original
unregistered notes by the deadline to
obtain new registered notes.
. The new notes will not trade on any
established exchange.
. We ask that holders of the original
notes consent to an amendment of the
indenture.
Holders of outstanding notes and prospective
investors in the notes to be issued should
carefully read this prospectus and the
accompanying letter of transmittal before
deciding whether to participate in the exchange
offer. See "Risk Factors" beginning on page 10
for a discussion of certain factors that
investors should consider.
--------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be distributed in the
exchange offer or determined that this prospectus is truthful or complete.
--------
The date of this prospectus is , 2000
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................ 1
Risk Factors...................... 10
Cautionary Statement Regarding
Forward Looking Statements ...... 22
Sources and Uses of Proceeds...... 23
The Exchange Offer................ 24
Unaudited Pro Forma Consolidated
Financial Information............ 32
Selected Historical Consolidated
Financial Data................... 34
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 36
Industry.......................... 45
Business.......................... 48
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management......................... 62
Principal Shareholders............. 67
Related Party Transactions......... 70
Description of Other Indebtedness.. 72
Description of Notes............... 73
Certain Tax Considerations......... 116
ERISA Considerations............... 119
Plan of Distribution............... 121
Available Information.............. 122
Legal Matters...................... 122
Experts............................ 122
Enforceability of Civil Liabili-
ties.............................. 123
Glossary of Semiconductor Terms.... A-1
Index to Financial Statements...... F-1
</TABLE>
------------
In this prospectus, the terms "we", "us", "our", "our company" and "ASAT"
refer, as the context requires, to ASAT Holdings Limited ("ASAT Holdings") and
also to ASAT Limited ("ASAT HK"), ASAT, Inc. ("ASAT US"), ASAT (Finance) LLC
("ASAT Finance"), Timerson Limited ("Timerson") and ASAT (Cayman) Limited
("ASAT Cayman"), which are wholly owned subsidiaries of ASAT Holdings. These
terms also include, as the context requires, our sales representatives in the
Netherlands. ASAT Finance, the issuer of the original notes and the new notes,
is a wholly owned subsidiary of ASAT Holdings. Each of ASAT HK, ASAT Cayman,
ASAT US and Timerson is a wholly owned subsidiary of ASAT Holdings and has
guaranteed the notes.
------------
In this prospectus, we rely on and refer to information regarding the
semiconductor market and our competitors that has been prepared by industry
research firms, including the Semiconductor Industry Association, Electronic
Trend Publications and GartnerGroup's Dataquest, or compiled from market
research reports, analyst reports and other publicly available information.
Although we believe this information is reliable, we cannot guarantee the
accuracy and completeness of the information and have not independently
verified it.
------------
You should rely on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. The information in this prospectus may only be
accurate on the date of this document.
------------
Unless otherwise indicated, all information in this prospectus reflects a
share dividend of 47 ordinary shares for each outstanding ordinary share,
which we undertook contemporaneously with completion of the offering of our
American Depositary Shares, or ADSs, and the reclassification of all shares as
ordinary shares in connection with the offering of our ADSs.
All financial information in this prospectus is in United States dollars,
which are referred to as "Dollars" and "$".
------------
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of original notes in any jurisdiction in which the
exchange offer would violate securities or Blue Sky laws.
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some of the information described in greater detail
in other parts of this prospectus. It does not contain all of the information
that may be important to you. You should read this entire prospectus carefully,
including "Risk Factors" and the financial data and the related notes. For
additional helpful information regarding the technical terms used, see
"Glossary of Semiconductor Terms" in this prospectus.
Our Business
We are one of the world's largest independent providers of semiconductor
assembly and testing services. We offer a broad selection of semiconductor
packages, including standard and advanced leaded packages and ball grid array,
or BGA, packages. Semiconductor packaging protects the enclosed semiconductor
chip and provides a network of connections between the chip and a printed
circuit board. Leaded packages encapsulate the chip in plastic with metal leads
surrounding the edge of the package that connect the chip to the circuit board.
BGA packages connect the chip to the circuit board using solder balls on the
bottom of the package.
In the fiscal year ended April 30, 2000, 65% of our assembly net sales was
from advanced leaded packages and BGA packages. Of our net sales from BGA
packages during this period, 82% was from advanced BGA packages. We also
provide semiconductor testing services, particularly for mixed-signal
semiconductors which perform both analog and digital functions. In the fiscal
year ended April 30, 2000, 52% of our net sales from testing was from the
testing of mixed-signal semiconductors.
We target the communications sector of the semiconductor industry, including
mobile communications, data networking and broadband applications. We
differentiate our company from competitors by providing timely and
comprehensive solutions to customers' complex semiconductor performance needs.
We work closely with customers to design and provide advanced packaging and
test solutions for each new generation of products. We have over 110 customers
and many of our top customers are among the world's largest and fastest growing
semiconductor companies. Our top ten customers by net sales during the fiscal
year ended April 30, 2000 were:
Altera Lucent Technologies
Analog Devices Motorola
Broadcom Philips Electronics
Conexant Systems STMicroelectronics
Infineon Vitesse
Technologies Semiconductor
For the fiscal year ended April 30, 2000, our top ten customers generated 77%
of our net sales and 81% of our net sales was from packaging and testing
semiconductors for communications applications.
We provide assembly and testing services from our Hong Kong facilities where
we operate 510 wire bonders, which are machines that attach connectivity wires
to the semiconductor packages, and 33 semiconductor testing machines, as of
April 30, 2000. We recently purchased an additional testing facility close to
our Hong Kong facilities. We expect our combined facilities will provide us
sufficient space for expanding our advanced assembly and mixed-signal testing
businesses and could accommodate approximately 990 wire bonders and 120
testers. In addition, we have an option to lease an additional 100,000 square
feet in our current Hong Kong building. We also provide package design
services, computer testing of package designs for thermal and electrical
performance and testing support services from our facilities in Fremont,
California and Hong Kong. Our sales offices and representatives are
strategically located in the United States, Europe, Hong Kong, South Korea and
Singapore, allowing us to work directly with customers at their facilities to
provide effective design, testing and customer service. Through this network we
are able to provide highly focused design and production services with rapid
time-to-market design and production solutions.
We believe that we are differentiated from our competitors on the following
bases:
. Leadership in developing innovative advanced packages and providing
advanced semiconductor assembly services;
1
<PAGE>
. Established high growth customer base, particularly communications
companies;
. Demonstrated capabilities in the complex testing of mixed-signal
semiconductors, which are increasingly used in advanced end-products;
. Rapid development and implementation of packaging solutions, which
decreases the time between designing the package and volume production;
. Advanced manufacturing capabilities that allow us to introduce new,
complex packaging technologies into our manufacturing operations in an
efficient, focused and timely manner;
. Experienced senior management team with an average of more than a decade
of experience in the semiconductor industry; and
. Strategically located Hong Kong based operations.
We face a number of competitive challenges in our business, including:
. Continuing to develop innovative advanced packaging and test solutions
within our customers' increasingly demanding timeframes;
. Operating in an industry where some of our competitors have greater
operating capacity and financial resources; and
. Managing our dependence on key customers, the loss of which could have a
significant impact on our revenues.
Strategy
Our strategy is to be the leading developer and provider of advanced
semiconductor assembly and testing services. The principal elements of our
strategy are to:
. Expand our assembly and testing capacity to capture increased demand
from our existing customers and attract other leading semiconductor
companies that require our advanced assembly and test solutions;
. Expand our mixed-signal testing business by increasing the amount of
testing we provide to assembly customers already using our testing
services and by commencing testing services for our other assembly
customers;
. Continue to target high growth, advanced technology industries,
particularly the communications sector;
. Continue timely market introduction of leading innovative packages such
as our flip chip package, a BGA package with advanced interconnect
technology; and
. Maintain high quality of service to customers from initial design
through assembly, testing and delivery of the packaged chip.
Our Contact Information
The principal executive offices for the ASAT group of companies are located
at 138 Texaco Road, Tsuen Wan, New Territories, Hong Kong. Our telephone number
in Hong Kong is (852) 2408-7811. ASAT Finance's registered office in the United
States is c/o Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, United States. The telephone number for ASAT Finance's
registered office in the United States is (302) 658-4205.
2
<PAGE>
Summary of the Terms of the Exchange Offer
On October 29, 1999 we privately placed 155,000 units consisting of 12.5%
senior notes due 2006 and warrants to purchase 371,132 ordinary shares of ASAT
Holdings in a transaction exempt from registration under the Securities Act. In
connection with the private placement, we entered into a registration rights
agreement, dated October 29, 1999, with the initial purchasers of the original
notes. In the registration rights agreement, we agreed to register under the
Securities Act an offer of our new 12.5% senior notes due 2006 in exchange for
the original notes. We also agreed to deliver this prospectus to holders of the
original notes and complete the exchange offer within 210 days of the issuance
of the original notes. In this prospectus, we refer to the original notes and
the new notes together as notes. You should read the discussion under the
heading "Description of Notes" for information regarding the notes.
On July 14, 2000, ASAT Holdings completed its public offering of 20,000,000
of its American Depositary Shares, or ADSs, representing 100,000,000 of its
ordinary shares.
ASAT Holdings will use part of the proceeds of the sale of its ADSs to redeem
35% of the aggregate principal amount outstanding of our original notes. See
"Summary Description of the New Notes and Guarantees--Optional Redemption" and
"Description of Notes--Optional Redemption". We sent a notice of redemption to
the holders of the original notes on July 24, 2000. We are due to redeem 35% of
our outstanding original notes on August 23, 2000.
The Exchange Offer............
We are offering to exchange $1,000 principal
amount of 12.5% senior notes due 2006 which
have been registered under the Securities Act
for each $1,000 principal amount of
outstanding 12.5% senior notes due 2006 which
we issued in October 1999 in a private
offering. In order to exchange, you must
properly tender an original note and we must
accept it. All original notes that are validly
tendered and not validly withdrawn will be
exchanged.
We will issue new notes on or promptly after
the expiration of the exchange offer. As of
this date, there are $155,000,000 principal
amount of notes outstanding. As of August 24,
2000, we anticipate we will have $100,750,000
aggregate principal amount of notes
outstanding.
Transfers of New Notes........ We believe that you may transfer the new notes
without compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that you:
. acquire the new notes in the ordinary
course of your business;
. do not participate, do not intend to
participate, and have no arrangement or
understanding with any person to
participate, in the distribution of the new
notes;
. are not one of our affiliates;
. are not a broker-dealer who purchased such
original notes directly from us for resale
pursuant to Rule 144A or Regulation S or
any other available exemption under the
Securities Act; and
. are not acting on behalf of any person who
could not truthfully make one of the four
representations above.
3
<PAGE>
If our belief is inaccurate and you transfer
any new note without delivering a prospectus
meeting the requirements of the Securities Act
or without an exemption from registration of
your notes, you may incur liability under the
Securities Act.
Each broker-dealer that receives new notes for
its own account in exchange for original
notes, where such original notes 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 new notes. See "Plan of Distribution".
Expiration Date...............
The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2000, unless we
decide to extend the date.
Withdrawal Rights............. You may withdraw the tender of your original
notes at any time prior to the expiration date
by delivering written notice to the exchange
agent, unless your original notes were
previously accepted for exchange.
Termination of the Exchange
Offer......................... We may terminate the exchange offer if we
determine that our ability to proceed with the
exchange offer could be materially impaired
due to any legal or governmental action, new
law, statute, rule or regulation or any
interpretation of the staff of the Securities
and Exchange Commission, or SEC, of any
existing law, statute, rule or regulation.
Procedures for Tendering
Original Notes held in the
Form of Book-Entry See "The Exchange Offer--General Procedures
Interests..................... for Tendering".
If the exchange offer is completed on the
terms and within the period contemplated by
this prospectus, holders of the original notes
will have no further registration or other
rights under the registration rights
agreements, except under limited
circumstances. See "The Exchange Offer--Shelf
Registration".
If you elect not to participate in the
exchange offer, your original notes will not
have any further registration rights and will
continue to be subject to certain transfer
restrictions. The liquidity of the market for
original notes could be significantly
adversely affected.
Exchange Agent................ The Chase Manhattan Bank is serving as
exchange agent in connection with the exchange
offer. The exchange agent can be reached at 55
Water Street, Rm 234, New York, New York,
10041. For more information about the exchange
offer, the telephone and facsimile numbers for
the exchange agent are (212) 638-0459 and
(212) 638-0828.
Use of Proceeds...............
We will not receive any additional cash
proceeds from the issuance of new notes in the
exchange offer.
Federal Income Tax
Consequences.................. The exchange of notes will not be taxable for
United States federal income tax purposes. See
"Certain Tax Considerations--United States
Taxation".
4
<PAGE>
Summary Description of the New Notes and Guarantees
The new notes are substantially identical as the original notes, except that
the new notes will be registered under the Securities Act and thus are not
subject to transfer restrictions and will not be entitled to the benefits of
the registration rights under the registration rights agreement executed as
part of the offering of the original notes.
ASAT (Finance) LLC.
Issuer........................
Guarantees.................... The new notes will be fully and
unconditionally guaranteed by ASAT Holdings
and each of its existing and future
subsidiaries (other than ASAT (Finance) LLC)
that are not designated as unrestricted
subsidiaries.
New Notes Offered.............
$100,750,000 of 12.5% senior notes due 2006.
Maturity Date................. November 1, 2006.
Interest Rate and Payment
Dates......................... Interest on the new notes will be payable at
the rate of 12.5% per annum, payable every six
months in cash in arrears on November 1 and
May 1 of each year, beginning November 1,
2000.
Optional Redemption........... We may redeem the new notes, in whole or in
part, on or after November 1, 2003 at the
redemption prices set forth in this
prospectus, plus accrued and unpaid interest
and liquidated damages, if any, thereon to the
date of redemption.
Prior to November 1, 2002, we are permitted by
the indenture to redeem up to 35% of the notes
with the proceeds of certain public sales of
equity at the price listed in the "Description
of Notes--Optional Redemption". ASAT Holdings
intends to use part of the proceeds from the
sale of its ADSs to redeem 35% of the
outstanding original notes on August 23, 2000
at a price of 112.5% of the aggregate
principal amount of the original notes. As of
this date there are $155,000,000 in aggregate
principal amount of notes outstanding. After
the redemption of 35% of the original notes
outstanding, we anticipate we will have
$100,750,000 principal amount of original
notes outstanding. Consequently, we are
offering $100,750,000 in principal amount of
new notes in exchange for the original notes
in this offering.
Ranking and Security..........
The new notes and the guarantees are unsecured
senior debt obligations, which rank equal in
right of payment to all our existing and
future unsubordinated, unsecured indebtedness.
Because the new notes and the guarantees are
unsecured, the new notes and the guarantees
rank effectively junior to our secured
indebtedness to the extent of assets securing
such indebtedness. As of April 30, 2000, we
had approximately $40 million of outstanding
senior secured indebtedness under the Term
Loan Facility with capacity to borrow an
additional $25 million under the Revolving
Credit Facility. We have used part of the
proceeds from the initial public offering of
our ADSs
5
<PAGE>
which was completed on July 14, 2000, to repay
the Term Loan Facility in full and the balance
of $17 million under the Revolving Credit
Facility in full.
Change of Control.............
Upon the occurrence of change of control
events, you may require us to repurchase all
or a portion of your new notes at 101% of the
principal amount, plus accrued and unpaid
interest and liquidated damages, if any. See
"Description of Notes--Certain Covenants--
Repurchase of Notes at the Option of the
Holder Upon a Change of Control".
Covenants..................... The indenture governing the new notes will
contain covenants that will limit, among other
things, our ability to:
. pay dividends, redeem capital stock and
make certain other restricted payments or
investments;
. incur additional indebtedness or issue
certain equity interests;
. merge, consolidate or sell all or
substantially all of our assets;
. create liens on assets; and
. enter into certain transactions with
affiliates or related persons.
All of these limitations are subject to
important exceptions and qualifications
described under "Description of Notes--Certain
Covenants".
Trustee, Registrar, Exchange,
Transfer and Paying Agent.....
The Chase Manhattan Bank.
Governing Law................. The indenture for the notes is governed by the
laws of the State of New York.
Some Consequences of a Failure To Exchange
We have not registered the original notes under the Securities Act or under
any state securities laws. Holders of original notes cannot offer, sell or
transfer original notes unless the original notes are registered under the
Securities Act and other applicable laws or unless the original notes are
exempt from registration or are offered in a transaction that is exempt from
registration. In addition, the original notes must comply with other conditions
and restrictions in the indenture, including our rights and the trustee's
rights to require delivery of opinions of independent counsel experienced in
Securities Act matters reasonably satisfactory in form and substance to us,
certificates and other information prior to any transfer.
The original notes which remain outstanding after the exchange offer is
completed will continue to bear a legend containing transfer restrictions. We
do not intend to register under the Securities Act any original notes which
remain outstanding after completion of the exchange offer. Holders of original
notes will have no right to require us to register these original notes after
completion of the exchange offer. Accordingly, the trading market for these
remaining original notes could be significantly adversely affected. See "Risk
Factors--If you fail to exchange the original notes you hold, they will remain
subject to transfer restrictions".
6
<PAGE>
The Consent Solicitation
The Consent Solicitation......
In addition to this exchange offer, we are
soliciting consents from the holders of
original notes to amend the indenture relating
to the original notes so that ASAT Holdings
and its subsidiaries will no longer be
required to disclose certain details regarding
compensation, security ownership and certain
other disclosures about payments to its
directors and officers as if it is a United
States issuer of securities under the Exchange
Act. See "The Exchange Offer--The Consent
Solicitation".
Requisite Consents....... We will consider holders of original notes who
properly tender their original notes for
exchange to have given consent unless a box on
the consent and letter of transmittal is
checked "No". Consents of registered holders
of a majority of the original notes is
required.
Revocation of Consents...
You may withdraw your consent at any time
before this exchange offer expires by
following the procedures described in this
prospectus under the heading "The Exchange
Offer -- The Consent Solicitation". If you do
not withdraw your consent before the exchange
offer expires, the consent is irrevocable.
7
<PAGE>
Summary Financial Data
The following table presents summary consolidated financial data of ASAT
Holdings for the five years ended April 30, 2000. We have derived the
historical data below from our audited consolidated financial statements except
for data as of April 30, 1996 and 1997 and for the year ended April 30, 1996
which was derived from our unaudited consolidated financial statements.
You should read the following information in conjunction with "Unaudited Pro
Forma Consolidated Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited
consolidated financial statements and the related notes, included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended April 30,
------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(Dollars in thousands, except for share and ADS
data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $259,362 $213,508 $243,103 $220,623 $312,131
Cost of sales........... 179,278 162,391 167,350 152,469 199,636
-------- -------- -------- -------- --------
Gross profit........... 80,084 51,117 75,753 68,154 112,495
-------- -------- -------- -------- --------
Operating expenses:
Selling, general and
administrative
expenses.............. 31,099 28,552 27,706 26,082 26,453
Research and
development........... 3,668 4,091 4,467 4,437 4,676
Nonrecurring charge for
obsolete equipment.... -- -- -- -- 12,340(/3/)
-------- -------- -------- -------- --------
Total operating
expenses.............. 34,767 32,643 32,173 30,519 43,469
-------- -------- -------- -------- --------
Income from
operations............ 45,317 18,474 43,580 37,635 69,026
Other income, net(/1/).. 2,000 355 1,751 1,184 1,048
Interest expense........ (15,166) (8,772) (9,949) (7,204) (18,994)
Recapitalization costs.. -- -- -- -- (6,813)(/4/)
-------- -------- -------- -------- --------
Income before income
taxes.................. 32,151 10,057 35,382 31,615 44,267
Provision for income
taxes.................. (7,095) (1,970) (5,043) (5,569) (9,558)
-------- -------- -------- -------- --------
Net income............. $ 25,056 $ 8,087 $ 30,339 $ 26,046 $ 34,709
======== ======== ======== ======== ========
Net income per share
(basic and
diluted)(/2/)......... $ 0.04 $ 0.01 $ 0.05 $ 0.05 $ 0.06
======== ======== ======== ======== ========
Net income per ADS
(basic and
diluted)(/2/)......... $ 0.22 $ 0.07 $ 0.26 $ 0.23 $ 0.30
======== ======== ======== ======== ========
Other Operations Data:
Depreciation and
amortization........... $ 27,991 $ 30,788 $ 21,567 $ 24,356 $ 25,513
Capital expenditures.... 22,428 34,379 43,978 27,518 56,036
</TABLE>
<TABLE>
<CAPTION>
As of April 30, 2000
----------------------
As
Actual Adjusted(/5/)
-------- -------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................ $ 10,892 $114,861
Total assets............................................. 283,481 381,741
Total debt............................................... 198,217 96,991
Total shareholders' equity(/6/).......................... 14,124 222,124
</TABLE>
8
<PAGE>
--------------------
(1) Other income, net, mainly consists of net foreign currency exchange gains
(losses), gains on dealing in foreign exchange contracts and options, and
interest income. See note 10 of the notes to our consolidated financial
statements included in this prospectus.
(2) The computation of net income per share is calculated as the net income for
the period divided by the weighted number of shares outstanding during the
year, as adjusted on a retroactive basis for all periods presented to
reflect the 576,000,000 ordinary shares issued and outstanding following a
share dividend of 47 ordinary shares for each outstanding ordinary share,
which we undertook contemporaneously with completion of the offering of our
ADSs.
(3) Reflects a one-time, non-cash charge of $12.3 million for obsolete
equipment. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and note 6 of the notes to our consolidated
financial statements included in this prospectus.
(4) Reflects costs incurred in connection with our recapitalization in October
1999. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and note 2 of the notes to our consolidated
financial statements included in this prospectus.
(5) As adjusted to give effect to the sale of 20,000,000 ADSs in our offering
of ADSs which was completed on July 14, 2000, and the application of net
proceeds from that offering at the initial public offering price of $12.00
per ADS.
(6) In the period in which the term loan facility is repaid and the portion of
the senior notes is redeemed, the premiums paid to redeem this debt and the
relevant portion of the unamortized deferred issuance charges will be
expensed resulting in an extraordinary charge to income of approximately
$14.0 million, net of tax effect.
9
<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 notes. The risks below are not the only ones we face. Additional risks and
uncertainties that we do not currently know about or that we currently deem
immaterial may also impair our business operations. If any of the following
risks actually occur, our business, financial conditions or results of
operations would be materially adversely affected. In that case, you may lose
all or part of your investment.
Risks Relating to our Industry
Our ability to develop new and successful advanced technologies and services
is important to maintaining our competitive position and profitability. Any
inability to meet our customers' schedules for new product introductions could
affect our revenue, growth, future customer relationships and future product
design windows.
The semiconductor industry is characterized by rapid technological
developments. Our customers seek advanced and quick time-to-market assembly
and testing capabilities for their increasingly complex end-applications.
Failure to advance our designs and process technologies successfully and in a
timely manner could have a material adverse effect on our competitiveness and
our profitability. Technological advances typically lead to rapid and
significant decreases in prices for older products. Extended reliance on older
products would reduce our gross margins and profitability, as prices decline
in the face of newer, higher performance products.
Our business has been and will continue to be substantially affected by the
highly cyclical nature of the semiconductor industry, which is beyond our
control.
Our business is substantially affected by market conditions in the
semiconductor industry, which is highly cyclical. The industry has been
subject to significant downturns characterized by reduced product demand,
increased competition and declines in average selling prices and margins.
Semiconductor industry conditions are often affected by manufacturing over-
capacity and reduced demand and pricing in end-user markets. Our operating
results in fiscal years 1997 and 1999 were adversely affected by semiconductor
industry downturns. As we expand, higher levels of capital investment and debt
could reduce our ability to decrease expenses, adjust our operations and
maintain profitability during industry downturns or periods of slow growth in
customer demand. Although we target industries that have been less susceptible
in recent years to price and demand volatility than other industries, these
industries could experience increased volatility.
The semiconductor and packaging industries have experienced strong growth
recently. We have benefited from this growth and achieved levels of
production, revenue, gross margins and operating margins above our historical
levels. We are making investments and incurring expenses as part of a major
expansion strategy in expectation of continued strong industry growth and
sustained demand. We cannot give any assurance that this growth and demand
will occur. Cyclical industry downturns in the past have often been unforeseen
and severe. Such a downturn, combined with our higher levels of expenses and
capacity, could have a severe adverse effect on our financial performance and
condition.
In the semiconductor industry, pricing for products or services typically
declines over time. Generally, we offset these price declines by obtaining
lower raw material and other manufacturing costs. Failure to obtain these
costs savings in the future would seriously hurt our operating results.
Because our industry is highly competitive and many of our competitors have
greater operating and financial resources, we may not be able to secure new
customers or maintain our customer base and we may experience increased price
competition. In addition, if any of our competitors grow through
10
<PAGE>
acquisitions and we are unable to similarly grow, we may have difficulties
competing against those competitors in terms of volume production, price
competitiveness and array of services.
The semiconductor assembly and testing industry is highly competitive, with
over 40 independent providers of semiconductor assembly services worldwide. We
believe our principal competitors include Advanced Semiconductor Engineering,
Inc., Amkor Technology, Inc., ASE Test Limited, ChipPac Inc., Siliconware
Precision Industries Co., Ltd. and ST Assembly Test Services Ltd. Many of our
competitors have greater operating capacity and financial resources than we do
and have proven research and development and marketing capabilities. Lengthy
qualification periods and a familiarity between potential customers and their
current assemblers may limit our ability to secure new customers. We also
compete indirectly with the in-house packaging and testing service resources
of many of our largest customers. These customers may decide to shift some or
all of the packaging and testing services to internally sourced capacity. Due
to this highly competitive environment, we may experience difficulties in
securing additional business from our current customers or even maintaining
our current level of business with our existing customers. We also could
experience increased price competition.
In addition, if any of our competitors grow through acquisitions and we are
unable to similarly grow, we may have difficulties competing against those
competitors. As a result of such growth, they may have increased capacity and
a broader array of services and may be better positioned to increase their
market share by decreasing prices.
Our assembly and testing processes are complex and prone to error, which may
create defects and affect production yields.
Semiconductor assembly and testing, particularly testing of mixed-signal
semiconductors which perform both analog and digital functions, are complex
processes involving sophisticated equipment and requiring high levels of
precision. Both assembly and testing are prone to human error and equipment
malfunction. Defective packages also result from:
. contaminants in the manufacturing environment;
. defective raw materials; or
. defective plating services.
These factors have periodically contributed to lower production yields and may
continue to do so, particularly as we expand our capacity and our offering of
packages.
Our failure to maintain high standards or acceptable production yields, if
significant and prolonged, could result in lost customers, increased costs of
production, delays, substantial amounts of returned goods and related claims
by customers. Any of these problems could have a material adverse effect on
our business, financial condition and results of operations.
Risks Relating to Our Company
A decrease in demand for communications equipment may significantly decrease
the demand for or price of our services.
A significant percentage of our net sales is derived from customers who use
our assembly or test services for semiconductors used in communications
equipment. Any significant decrease in the demand for communications equipment
may decrease the demand for our services and could seriously harm us. In
addition, the declining average selling price of communications equipment
places significant downward pressure on the prices of the components that are
used in this equipment. If the average selling prices of communications
equipment decrease rapidly, the pricing pressure on services provided by us
could increase, which may reduce our net sales and may significantly reduce
our gross profit margin.
11
<PAGE>
Our profitability is affected by capacity utilization rates, which are
significantly influenced by factors outside of our control.
As a result of the capital intensive nature of our business, our operations
are characterized by high fixed costs. Consequently, insufficient utilization
of installed capacity can negatively affect our profitability. Therefore, our
ability to maintain or increase our profitability will continue to be
dependent, in large part, upon our ability to maintain high capacity
utilization rates. Our capacity utilization rates have been affected by a
number of factors and circumstances in the past, including:
. overall industry conditions;
. the level of customer orders; and
. disruption in supply of raw materials.
For example, in calendar 1998, our capacity utilization rates were
negatively affected by a decrease in demand for our assembly and test services
resulting from a downturn in the overall semiconductor industry. Our capacity
utilization rates remain subject to fluctuations due to these factors and may
be affected by other factors such as:
. installation of new equipment in anticipation of future business;
. operating inefficiencies;
. mechanical failure; or
. disruption to operations due to expansion of operations, introduction of
new packages or relocation of equipment, including the relocation of our
testing operations to our newly acquired facility in Hong Kong.
We cannot assure you that our capacity utilization rates will not be
materially adversely affected by future downturns in the semiconductor
industry, declines in industries that purchase semiconductors or other
factors. Any inability on our part to maintain or increase capacity
utilization rates could have a material adverse effect on our business,
financial condition and results of operations.
The terms of the notes contain covenants limiting our financial and operating
flexibility.
Covenants under our senior notes restrict our ability, among other things:
. to incur debt or liens;
. to repay debt;
. to make investments or acquisitions;
. to merge or consolidate; and
. to sell assets and enter new businesses.
These restrictive covenants could limit our ability to pursue our growth
plan, restrict our flexibility in planning for, or reacting to, changes in our
business and industry and increase our vulnerability to general adverse
economic and industry conditions. We may enter into additional financing
arrangements, which could further restrict our flexibility.
We will require a significant amount of cash to service our debt.
Our ability to fund operating and capital expenditures and to service debt
will depend significantly on our ability to generate cash from operations. For
the fiscal year ended April 30, 2000, our ratio of earnings to fixed charges
was 3.0 and for the fiscal year ended April 30, 1999, our ratio of earnings to
fixed charges was 3.8. We will need to continue generating cash flow at
current levels to meet our future debt service requirements. However, we
cannot assure you that we will be able to do so.
12
<PAGE>
Our ability to generate cash is subject to general economic, financial,
competitive, industry, legal and other factors and conditions, many of which
are outside our control. In particular, our operations are subject to cyclical
downturns and price and demand volatility in the semiconductor industry. If we
cannot service our debt, we may have to (among other things) reduce capital
and research and development expenditures, sell assets, restructure our debt
(including the notes), or raise equity. We might not be able to take these
actions or they may not be successful. Our ability to take many of these steps
may be subject to approval by future creditors in addition to holders of the
notes.
We may incur significant capital expenditures in the future. If net sales do
not increase after these expenditures, our profitability may be impaired.
To grow our business, we intend to increase our assembly and test capacity.
This will require substantial capital expenditures for additional equipment.
We will also be required to recruit and train new employees. These
expenditures will likely be made in advance of increased sales. We cannot
assure you that our net sales will increase after these expenditures. Our
failure to increase our net sales after these expenditures could seriously
hurt our profitability and operating results.
We face risks associated with potential acquisitions, investments, strategic
partnerships or other ventures, including whether we can identify
opportunities, complete the transactions and integrate the other parties into
our business. Difficulties in integrating these other parties into our
business could disrupt our business and increase our expenses.
We believe that the semiconductor packaging industry is undergoing
consolidation. We believe it may become increasingly important to acquire or
make investments in complementary businesses, facilities, technologies,
services or products, or enter into strategic partnerships with parties who
can provide access to those assets, if appropriate opportunities arise. From
time to time we have had discussions with companies regarding our acquiring,
investing in or partnering with their businesses, products, services or
technologies, and we regularly engage in such discussions in the ordinary
course of our business. We may not identify suitable acquisition, investment
or strategic partnership candidates, which may place us at a disadvantage if
our competitors are able to grow through acquisition. If we do identify
suitable candidates, we may not complete those transactions on commercially
acceptable terms or at all. If we acquire another company, we could have
difficulty in assimilating that company's personnel, operations and
technology. In addition, the key personnel of the acquired company may decide
not to work for us. If we make other types of acquisitions, we could have
difficulty in integrating the acquired products, services or technologies into
our operations. These difficulties could disrupt our ongoing business,
distract our management and employees and increase our expenses. As of the
date of this prospectus, we have no agreement to enter into any material
investment or acquisition transaction.
We generate a significant amount of revenue from a limited number of
customers. The loss of, or reduced purchases by, one or more of our larger
customers may have an adverse effect on our results of operations.
For the fiscal year ended April 30, 2000, our top five customers accounted
for approximately 57% of net sales and our largest customer accounted for
approximately 16% of our net sales. If any of our key customers were to
significantly reduce its purchases from us, our results of operations could be
adversely affected. While sales to major customers may vary from period to
period, a major customer that permanently discontinues or significantly
reduces its relationship with us could be difficult to replace. In line with
industry practice, new customers usually require us to pass a lengthy and
rigorous qualification process at the customers' cost. Furthermore,
semiconductor companies generally rely on firms with which they have
established relationships to meet their assembly and testing needs for
existing and future generations of applications. Because of this, it may be
difficult for us to attract new major customers.
13
<PAGE>
Because a significant portion of our sales comes from Asia, we are vulnerable
to weaknesses in the economies of Asian countries. A continued economic
downturn may continue to impact our sales.
Most of our important suppliers of raw materials and semiconductor chips
delivered to us for assembly and testing are located in Asia. Although
substantially all our customers are U.S. or European multinational companies,
we estimate that approximately 33% of our net sales in the fiscal year ended
April 30, 2000 represented packages shipped to distribution centers and
destinations within Asia. These factors raise a number of risks, including;
. exposure to economic and political developments;
. changes in laws and taxation;
. currency controls;
. transportation difficulties; and
. unfavorable import/export regulations in Asian countries.
Many of these factors could adversely affect both our operations and the
operations of our suppliers and customers. In addition, the sharp economic
downturn in Asia over the last two years adversely affected our business by
reducing demand for our customers' products in Asia. Future economic downturns
in Asia or elsewhere could be detrimental to our business by constraining our
growth.
There may be political and economic risks associated with doing business in
Hong Kong due to its status as a Special Administrative Region of the People's
Republic of China.
All our operating assets and substantially all our sales are derived from
semiconductor assembly and testing operations located in Hong Kong. As a
result, our financial condition and results of operations may be influenced by
the political and economic situation in Hong Kong. Hong Kong is a Special
Administrative Region of the People's Republic of China, or PRC. Under the
Basic Law governing the Special Administrative Region, Hong Kong has its own
government and is entitled to significant autonomy from the PRC. However,
future political, military or economic developments in the PRC may adversely
affect Hong Kong and our company.
As a result of our recapitalization in October 1999, we now operate as a
stand-alone company. As we adapt to this new independence, we may experience
administrative and managerial difficulties that could negatively affect our
results of operations or financial condition.
Until our recapitalization, we were an indirect, wholly owned subsidiary of
QPL International Holdings Limited. Although we operated our business with a
significant amount of autonomy, we received administrative, managerial and
other assistance from QPL while part of the QPL group of companies. After our
recapitalization, we began operating independently of QPL for the first time
and now have a new chief executive officer and new chief financial officer. As
a result of these changes, we are having to develop our own administrative and
managerial systems and resources and integrate our new management into our
organization. In doing so, we may encounter difficulties in efficiently
integrating our new systems into our current operations and establishing
communication and coordination between new management and our existing
employees and incur expenses that could negatively affect the operations and
financial condition of our company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview--Our
Recapitalization".
With most of our operations conducted in two facilities in Hong Kong, we are
vulnerable to disasters and other disruptive events. Any such occurrence could
temporarily disrupt or even shut down our assembly and testing operations.
Such disruption could render us unable to assemble or test semiconductors,
which could cause us to lose revenue and perhaps lose customers.
We conduct all our assembly operations in one of our facilities in Hong Kong
and our testing operations at our other facility in Hong Kong. Significant
damage or other impediments to either of these facilities, whether as a
14
<PAGE>
result of fire, weather, industrial strikes, breakdowns of equipment,
difficulties or delays in obtaining imported spare parts and equipment,
natural disasters, industrial accidents or other causes could temporarily
disrupt or even shut down our operations, which would have an adverse effect
on our financial condition and operating results. We maintain insurance,
including business interruption insurance, against some, but not all, of these
events and we cannot assure you that our insurance will be adequate to cover
any direct or indirect losses or liabilities resulting from those events.
We may be unable to obtain assembly or testing equipment when we require it,
which would affect our growth.
The semiconductor assembly and test business is capital intensive and
requires investment in expensive capital equipment manufactured by a limited
number of suppliers, who are located principally in the United States, Europe
and Japan. The market for capital equipment used in semiconductor assembly and
testing is characterized, from time to time, by intense demand, limited supply
and long delivery cycles. Our operations and expansion plans are highly
dependent upon our ability to obtain a significant amount of such capital
equipment from a limited number of suppliers. Generally, we have no binding
supply agreements with any of our suppliers and we acquire our equipment on a
purchase order basis, which exposes us to substantial risks. For example,
increased levels of demand for the type of capital equipment required in our
business may cause an increase in the price of such equipment and may lengthen
delivery cycles. If we are unable to obtain assembly equipment such as wire
bonders and testing equipment in a timely manner, we may be unable to fulfill
our customers' orders and implement growth plans. If prices for equipment
increase, we may be unable to pass on additional costs to our customers. These
results would negatively affect our net sales and profitability and could
possibly cause us to permanently lose customers.
Inadequate supplies of key materials such as ball grid array substrates,
leadframes and gold wires could adversely affect our semiconductor assembly
operations. This would limit our ability to grow.
Obtaining raw materials from our vendors in a timely manner, in sufficient
quantities and qualities and at competitive prices is important to our
operations and general competitiveness. We obtain most of our critical
material, such as ball grid array substrates, leadframes and gold wires, from
a limited group of suppliers and have few long-term contracts with our
suppliers. Shortages could occur in these materials due to interruptions of
supply or increased demand in the industry, particularly with advanced
packaging materials that are in high demand due to strong growth in the
communications industry. The transition to a new supplier could take time and
disrupt our business, as a new supplier would need to adjust their product to
meet the specifications of our packages. In addition, most of our suppliers of
raw materials are located in Asia. Many countries in this region have
experienced currency devaluations and difficulties in financing short term
obligations. If such events continue or recur, our suppliers could have
difficulty delivering sufficient quantities of raw materials in a timely
manner or at all. We have occasionally experienced difficulty obtaining
acceptable materials on a timely basis because vendors have extended lead
times or limited supply due to capacity constraints or exceptional demand. Our
market share and sales could be materially and adversely affected if we are
unable to obtain sufficient quantities of materials such as BGA substrates,
leadframes and gold wires and other supplies in a timely manner or if we
cannot pass on to our customers significant increases in the costs of raw
materials.
We rely on substantial amounts of intellectual property in our business. If we
are unable to protect this intellectual property, we may lose advantages in
innovation we may have over our competitors. We could become involved in
infringement claims with third parties. These occurrences might impact our
business significantly.
We have patents, trademarks, confidentiality agreements, collaborator
agreements and other arrangements intended to protect our proprietary
technologies and products. These protections and any future measures we take
might not adequately cover or protect our intellectual property. In
particular, our competitors may be able to develop similar or superior
products. Also, we cannot assure you that the Asian countries in which we
market our products, such as Taiwan and China, will protect our intellectual
property rights to the same extent as the
15
<PAGE>
United States. Even if we have valid protections, we may not have sufficient
financial and legal resources to protect or enforce our rights. Furthermore,
many of our products and technologies are not covered by any patent or pending
patent application.
Third parties may claim that we are infringing their intellectual property
rights. Such claims could have a serious adverse effect on our business and
financial condition. We may seek licenses from such parties, but they could
refuse to grant us a license or demand commercially unreasonable terms. We
might not have sufficient resources to pay for the licenses. Such infringement
claims could also cause us to incur substantial liabilities and to suspend or
permanently cease the use of critical technologies or processes or the
production or sale of major products.
The loss of key executive officers and employees could negatively impact our
business prospects. Our inability to retain key personnel at all levels would
limit our ability to develop new and enhanced packaging and testing services.
We depend on our ability to attract and retain highly skilled technical,
managerial and marketing personnel. Competition for such personnel is intense
and the retention of scientific and engineering personnel in our industry
typically requires attractive compensation packages. In attracting and
retaining such personnel, we may be required to incur significantly increased
compensation costs. We cannot predict whether we will be successful in
attracting and retaining the personnel we need to successfully develop new and
enhanced packaging and testing services and to continue to grow and operate
profitably. In addition, we do not maintain key man insurance on any of our
key personnel.
Environmental, health and safety laws could impose material liability on us
and could require us to incur material capital and operational costs. Any new
regulatory developments are beyond our control, and our financial condition
may be negatively affected if we are required to incur significant costs of
compliance.
We are subject to environmental, health and safety laws in Hong Kong that
impose controls on our air and water discharges, on the storage, handling,
discharge and disposal of chemicals, and on employee exposure to hazardous
substances. These laws could require us to incur costs to maintain compliance
and could impose liability to remedy the effects of hazardous substance
contamination. Although we have not incurred any significant liability under
these laws in the past, stricter enforcement of existing laws, the adoption of
new laws or regulations or our failure to comply with these laws or
regulations could cause us to incur material liabilities and require us to
incur additional expense, curtail our operations and restrict our ability to
expand.
In addition, QPL provides us with chemical waste disposal services due to
our respective facilities being located in the same building. QPL provides
these services pursuant to a license issued by the Hong Kong government that
must be renewed annually. If QPL fails to renew this license, the license is
cancelled for any reason or we fail to otherwise have the benefit of this
license, we will need to obtain a license from the government in order to
dispose of the chemical waste generated by our assembly operations. Any
failure to obtain such a license could materially and adversely affect our
operations.
We are controlled by two principal groups of shareholders and their interests
may conflict with your interests.
Three groups of private equity funds separately managed by or affiliated
with Chase Capital Partners Asia, Olympus Capital Holdings Asia and Orchid
Asia Holdings, respectively, referred to as the investor group in this
prospectus, collectively own 42.6% of the outstanding ordinary shares of ASAT
Holdings. The investor group has signed an agreement generally to vote in
unison. QPL also owns 42.6% of the ordinary shares of ASAT Holdings, assuming
the underwriters have not exercised their over-allotment option in connection
with the issue of our ADSs. In addition, the investor group can acquire
additional shares of ASAT Holdings from QPL in satisfaction of indemnification
claims against QPL and under a credit support arrangement with creditors of
QPL. The investor group and QPL together control ASAT Holdings' board of
directors, management and policies. The
16
<PAGE>
investor group and QPL are not obligated to provide any financing under their
current shareholders' agreement. The investor group and QPL are not obligated
to exercise their rights as shareholders in the interests of ASAT or holders
of the ADSs and may engage in activities that conflict with such interests.
See "Principal Shareholders". Furthermore, disagreements between the investor
group and QPL which cannot be resolved could adversely affect the management
of our company.
Some of our costs are denominated in foreign currencies and any depreciation
of the U.S. dollar against such foreign currencies could increase these costs.
While substantially all of our revenues are U.S. dollar denominated, a
portion of our costs are denominated in other currencies, primarily Hong Kong
dollars and to a lesser extent Japanese yen. The Hong Kong dollar historically
has accounted for the largest share of our costs. Because the exchange rate of
the Hong Kong dollar to the U.S. dollar has remained close to the current
linked rate of HK$7.80 = $1.00 since 1983, we have not experienced significant
foreign exchange gains or losses associated with that currency. However, the
Hong Kong government could change the linked rate or abandon the link
altogether. Depreciation of the U.S. dollar against the Hong Kong dollar or
Japanese yen would generally increase our Hong Kong dollar or Japanese yen
expenses.
We may not have the ability to raise the funds necessary to finance the Change
of Control offer required by the indenture governing the Notes.
If we undergo a Change of Control (as defined in "Description of Notes"), we
must offer to buy back the notes for a price equal to 101% of the principal
amount of the notes, plus accrued and unpaid interest and liquidated damages,
if any. The Senior Secured Facilities which we repaid in full with part of the
proceeds of the initial public offering of our ADSs, in July 2000, effectively
required repayment upon a Change of Control and further prohibited us from
repurchasing the notes until we first repaid the Senior Secured Facilities in
full. We intend to assume more debt. Future debt may also contain similar
provisions. If a Change of Control occurs, we cannot assure you that we will
have sufficient funds to satisfy these other debt obligations and repurchase
the notes. See "Description of Other Indebtedness" and "Description of Notes--
Certain Covenants".
U.S. federal and state laws and Hong Kong laws allow courts, under specific
circumstances, to void debts and require holders of debt to return payments
received from debtors.
United States. Certain provisions of the U.S. Bankruptcy Code and/or
comparable provisions of state fraudulent transfer or conveyance laws restrict
our ability to issue debt under certain circumstances. If at the time we issue
the notes we received less than reasonably equivalent value or fair
consideration for incurring such debt, and we:
. were insolvent when we incurred the debt;
. were rendered insolvent by our incurrence of the debt (and our
application of the proceeds from the debt);
. were engaged or were about to engage in a business or transaction for
which our remaining assets constituted unreasonably small capital to
carry on our businesses; or
. intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they matured or became due;
or if at the time we issue the notes we incurred such debt with the intent to
hinder, delay or defraud creditors, then, in each case, a court of competent
jurisdiction could (1) void, in whole or in part, the notes and direct the
repayment of any amounts paid thereunder to us or a fund for the benefit of
our creditors, (2) subordinate the notes to our obligations to our existing
and future creditors or (3) take other actions detrimental to the holders of
the notes. The measure of insolvency for purposes of the above will vary
depending upon the law applied in the case. Generally, however, we would be
considered insolvent if the sum of our debts, including contingent
17
<PAGE>
liabilities, was greater than all of our assets at fair valuation or if the
present fair saleable value of our assets was less than the amount that would
be required to pay the probable liability on our existing debts, including
contingent liabilities, as they become absolute and matured.
In addition, under U.S. federal bankruptcy or applicable state insolvency
law, if certain bankruptcy or insolvency proceedings were initiated by or
against us within 90 days after we made any payment with respect to the notes
and we were insolvent at the time of such payment, all or a portion of such
payment could be voided as a preferential transfer and the recipient of such
payment could be required to return such payment to us or a fund for the
benefit of our creditors.
Based upon financial and other information currently available to us, we
believe that we are issuing the notes for proper purposes in good faith and
that at the time we issue the notes we will not be insolvent or be rendered
insolvent thereby, will have sufficient capital to carry on our business and
will be able to pay our debts as they mature or become due. In reaching these
conclusions, we have relied on various valuations and estimates of future cash
flow that necessarily involve a number of assumptions and choices of
methodology. However, a court may not adopt the assumptions and methodologies
we have chosen or concur with our conclusion as to our solvency, adequate
capitalization or ability to pay debts as they come due.
Holders of the notes will also be direct creditors of each guarantor by
virtue of its guarantee of the notes. Nonetheless, if such a guarantor becomes
a debtor in a case under the United States Bankruptcy Code or encounters other
financial difficulty, its obligations may be subject to review under United
States federal and state fraudulent transfer laws. Under those laws, among
other things, a court could avoid the guarantor's obligations under its
guarantee if it concludes that the guarantor incurred its obligations for less
than reasonably equivalent value or fair consideration at a time when the
guarantor was insolvent, was rendered insolvent, or was left with inadequate
capital to conduct its business. The obligations of each guarantor under its
guarantee of the notes will be limited in a manner intended to cause it not to
be a fraudulent transfer under applicable law, although we cannot assure you
that a court would give the holder of the notes the benefit of such provision.
Hong Kong. The notes are governed by the laws of the State of New York.
However, Hong Kong law may apply to any winding up of ASAT HK in Hong Kong.
Under Hong Kong liquidation laws, if ASAT HK were to go into liquidation,
payments under its guarantee of the notes or payments under any security given
by ASAT HK in respect of its obligations under the notes could be set aside
under certain circumstances and amounts previously paid by ASAT HK to note
holders may need to be repaid to ASAT HK for the benefit of its creditors.
These results could occur if:
. ASAT Finance were found to have issued the notes or ASAT HK were found
to have given its guarantee of the notes with an intent to defraud ASAT
HK's other creditors or for any fraudulent purpose, and the note holders
were found to have been party to the fraud;
. in the event a liquidation of ASAT HK commenced within 6 months from the
time ASAT HK gave its guarantee of the notes or made a payment under its
guarantee of the notes, ASAT HK was found to have been insolvent at such
time and the recipients of such payments were found to have been
preferred over ASAT HK's other creditors. In certain circumstances, the
6 months period mentioned may be extended to 2 years; or
. ASAT HK's directors were found to be in breach of their fiduciary duties
and the note holders were found to have knowingly assisted in such
breach.
Regardless of whether ASAT HK is in liquidation, under Hong Kong Law, the
guarantees by ASAT HK of the notes and any security given by ASAT HK in
respect of the obligations under the notes could be challenged or set aside by
the shareholders of ASAT HK or any creditor or liquidator if there is no
commercial benefit for ASAT HK.
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Risks Relating to the Offering
We cannot assure you that an active trading market will develop for the notes.
Prior to this offer to exchange, there has not been a public market for the
notes. The initial purchasers of the original notes are entitled to make a
market in the original notes and the new notes. However, the initial
purchasers may cease their market-making activities at any time. In addition,
such market making activities may be limited during the exchange offer and
while the effectiveness of any registration statement is pending. Accordingly,
we cannot assure you that an active trading market will develop for the
original notes or the new notes or how liquid that market will become. Even if
an active trading market for the notes developed, both the liquidity and the
market price for the old notes and new notes may be adversely affected by
prevailing interest rates, our operations, the overall market for emerging
market securities and other factors. We did not list the original notes and we
do not intend to apply for listing the new notes on any securities exchange or
stock market.
If you fail to exchange the original notes you hold, they will remain subject
to transfer restrictions.
Untendered original notes that are not exchanged for new notes pursuant to
this exchange offer will remain restricted securities. Original notes will
continue to be subject to the following restrictions on transfer:
. outstanding notes may be resold only if registered pursuant to the
Securities Act, if an exemption from registration is available
thereunder, or if neither such registration nor such exemption is
required by law,
. original notes shall continue to bear a legend restricting transfer in
the absence of registration or an exemption therefrom, and
. a holder of original notes who desires to sell or otherwise dispose of
all or any part of its original notes under an exemption from
registration under the Securities Act, if requested by ASAT Finance or
the trustee, must deliver opinions of independent counsel experienced in
Securities Act matters, reasonably satisfactory in form and substance to
us, that such exemption is available.
You will have tax consequences resulting from the original issue discount
issued with the original notes.
The original notes were issued with original issue discount for U.S. federal
income tax purposes. The new notes generally will be treated as a continuation
of the original notes for U.S. federal income tax purposes. Consequently,
holders of the new notes generally will be required to include original issue
discount and stated interest on the new notes in gross income for such
purposes. See "Certain Tax Considerations--United States Taxation" for a more
detailed discussion of the U.S. federal income tax consequences for the
holders resulting from the exchange offer.
Unauthorized electronic messages containing one underwriter's projected
price/earnings ratios for ASAT were sent to several institutions; the contents
of these electronic messages, including the projections, should be totally
disregarded; NO INVESTOR SHOULD RELY ON ANY SUCH ELECTRONIC MESSAGES OR
PROJECTIONS WHEN MAKING AN INVESTMENT DECISION.
Prior to the initial public filing of the registration statement covering
ASAT Holdings' ADSs, two salespersons at Donaldson, Lufkin & Jenrette Asia
Limited ("DLJ Asia") without authorization composed and sent electronic
messages to 85 individuals, 31 of whom were located in the United States. DLJ
Asia is an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), which is a joint book-running manager and underwriter in this
offering. Of those 31 individuals located in the United States, 24 were
employed by 14 institutional clients of DLJ. Each of these institutional
clients is a potential investor in this offering in the United States.
The electronic messages may have constituted a prospectus that did not meet
the requirements of the United States Securities Act of 1933. Promptly after
discovering this error, DLJ implemented several measures to minimize the
effects of the unauthorized distribution of the electronic messages and their
contents. With respect
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to the electronic messages sent into the United States, DLJ was able to recall
some of the messages and inform the recipients of the other electronic
messages that such messages were unauthorized, had been sent in error and
should be disregarded and deleted. All those recipients confirmed to DLJ their
understanding of such advice or their deletion of the electronic messages.
DLJ advised recipients of the messages outside the United States that the
messages had been sent in error, should be disregarded and should not be sent
into the United States.
Neither ASAT, the selling shareholders nor any of the other underwriters
were involved in any way in the preparation or sending of these electronic
messages and none of them takes any responsibility for the content of these
electronic messages. No person who received the electronic messages or the
information contained therein should rely upon them in any manner in making a
decision whether to exchange their note in this offering. Instead note holders
should make their investment decision only in reliance on and after carefully
reviewing and evaluating all the information elsewhere in this prospectus.
The electronic messages contained a projected range of price/earnings ratios
for ASAT and various competitors of ASAT. The projected range of
price/earnings ratios for ASAT were stated as being between 14.3 and 18.5
times ASAT's projected earnings for 2001. These ratios were based on the $11
to $14 estimated price range for this offering and DLJ's projected
consolidated net income of ASAT for the year ended January 31, 2002. This net
income projection was, in turn, based upon a financial model prepared by DLJ
which is dependent upon a significant number of estimates and assumptions.
These estimates and assumptions are inherently subject to significant
uncertainties and contingencies. Failure of any one assumption to prove to be
correct could result in one or more other assumptions being incorrect and is
likely to result in the net income projection and range of price/earnings
ratios being incorrect. In particular, the estimates and assumptions reflect
the current strong industry environment and ASAT Holdings' favorable financial
results in recent quarters, which have been substantially above historical
levels. The estimates and assumptions do not take into account the possibility
of an industry downturn, which have occurred frequently and unpredictably in
the past. Such a downturn would cause ASAT Holdings to underperform the
projections, perhaps materially. Among the most important assumptions
underlying these projections were:
. Strong growth in the semiconductor industry significantly above
historical rates and continued rapid expansion in the outsourcing of
packaging services;
. Substantial capital investment by ASAT Holdings in assembly and test
capacity significantly above historic levels;
. Continued increase of advanced packaging products relative to ASAT
Holdings' overall product mix;
. Gross and operating margins at levels in line with recent periods, which
have been above historical levels; and
. Gradual but limited decline in price per lead.
Projections are forward-looking statements that are necessarily speculative
in nature. It is likely that one or more of the assumptions on which such
projected net income was based will not occur. Accordingly, actual net income
for and the actual range of price/earnings ratios for the year ended January
31, 2002 will vary from the projected net income underlying the price earnings
ratios indicated in the electronic messages. This variation may be material
and adverse. ASAT, no selling shareholder and no other underwriter
participated in the preparation or consideration of any of these projections
or the estimates, financial models or assumptions on which these projections
were based. All such persons expressly make no representation as to the
reasonableness or applicability of such assumptions. None of these projections
was prepared with a view toward compliance with published guidelines of the
SEC, the American Institute of Certified Public Accountants, or generally
accepted accounting principles. Neither Deloitte Touche Tohmatsu nor any other
independent accountants have expressed an opinion or any other form of
assurance on these projections.
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The inclusion in this prospectus and the electronic messages of ASAT's
price/earnings ratios for the year ended January 31, 2002 and the implied
earnings projections underlying the ratio are not representations by ASAT, any
selling shareholder, any underwriter or any other person that such projections
or the estimates and assumptions underlying such projections will or may be
achieved. All such parties expressly disclaim all responsibility for these
forward looking statements and estimates and the underlying financial models
and assumptions. The electronic messages also contained projected
price/earnings ratios of three of ASAT's competitors which presented ASAT more
favorably than such competitors. You should not regard the inclusion of such
comparative price/earnings ratios as an indication of ASAT's likely relative
performance or valuation in comparison to such competitors. ASAT, the selling
shareholders and the underwriters expressly disclaim making any representation
to such effect. WE STRONGLY CAUTION YOU NOT TO PLACE ANY RELIANCE ON ANY OF
THESE PROJECTIONS OR COMPARISONS. You should carefully evaluate all of the
other information in this prospectus including the risks described in this
section. Furthermore, we do not make, and in the future do not intend to make,
public financial projections or revisions to existing projections of others.
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
We have made forward looking statements in this prospectus. These statements
include, in particular, statements about our plans, strategies and prospects
under the headings "Prospectus Summary," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business". You can
identify many of these forward looking statements by our use of forward
looking words such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward looking
statements are reasonable, we cannot assure you that such plans, intentions or
expectations will be achieved. We discuss important factors that could cause
actual results to differ materially from the forward looking statements we
make in this prospectus in the "Risk Factors" section and elsewhere in this
prospectus.
In addition, we include estimates and projections in this prospectus
regarding the semiconductor industry (including the assembly and testing
industry) and its anticipated future performance. All of these estimates and
projections were prepared by the industry research firms listed on page i of
this prospectus. These estimates and projections reflect various assumptions
by these industry research firms and we have included them solely for
illustrative purposes. Projections by their very nature are subject to
uncertainties and variation due to unforeseen factors. The actual results of
the semiconductor industry could vary from the projections, possibly
significantly. You should not rely on the projections in evaluating our
business or making your investment decision. All forward looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by this cautionary statement.
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SOURCES AND USES OF PROCEEDS
The net proceeds from the offering of the units, after deducting fees and
expenses of the offering, were approximately $143.9 million. We used the net
proceeds of the offering of the units in connection with the recapitalization.
We will not receive any additional cash proceeds from the issuance of the new
notes in the exchange offer. The original notes surrendered in exchange for
the new notes will be retired and cancelled.
On July 14, 2000, ASAT Holdings completed its public offering of 20,000,000
of its American Depositary Shares, or ADSs, representing 100,000,000 of its
ordinary shares. ASAT Holdings will use part of the proceeds of the sale of
its ADSs to redeem 35% of the aggregate principal amount outstanding of our
original notes. See "Summary Description of the New Notes and Guarantees--
Optional Redemption" and "Description of Notes--Optional Redemption". We sent
a notice of redemption to the holders of the original notes on July 24, 2000.
We are due to redeem 35% of our outstanding original notes on August 23, 2000.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
On October 29, 1999, we entered into a registration rights agreement with
the initial purchasers of the original notes. In the registration rights
agreement, we agreed that:
. Within 60 days of the issuance of the original notes, we will file a
registration statement with the SEC to register an offer to exchange the
original notes for new notes having terms substantially identical to the
original notes.
. Within 180 days after the date of the issuance of the original notes, we
will use our best efforts to cause the registration statement to become
effective under the Securities Act.
. We will use our best efforts to cause the registration statement to be
effective continuously and keep the exchange offer open for at least 20
business days or longer period as required by applicable federal and
state securities laws but in any case not more than 30 days.
We have been required to pay liquidated damages on the original notes since
April 28, 2000 and will continue to pay liquidated damages on the original
notes until the registration statement for this exchange offer is declared
effective, at the rates set forth in "The Exchange Offer--Liquidated Damages".
Terms of the Exchange Offer
Upon the terms and subject to the conditions contained in this prospectus
and in the letter of transmittal that accompanies this prospectus, we are
offering to exchange $1,000 in principal amount at maturity of new notes for
each $1,000 in principal amount at maturity of outstanding original notes. The
terms of the new notes are substantially identical to the terms of the
original notes for which they may be exchanged in the exchange offer, except
that:
(1) the new notes will be freely transferable, other than as described in
this prospectus, and will not contain any legend restricting their
transfer;
(2) holders of the new notes will not be entitled to certain rights of the
holders of the original notes under the registration agreement, which
rights will terminate on completion of the exchange offer; and
(3) the new notes will not contain any provisions regarding the payment of
special interest.
The new notes will evidence the same debt as the original notes and will be
entitled to the benefits of the indenture. See "Description of the Notes".
We are sending this prospectus, together with the accompanying letter of
transmittal, to all registered holders as of , 2000. By tendering original
notes, a holder will be entering into an agreement with us having the terms
and subject to the conditions described in this prospectus and in the letter
of transmittal.
We shall be deemed to have accepted validly tendered original notes when, as
and if we have given oral or written notice thereof to the Exchange Agent. See
"--Exchange Agent". The exchange agent will act as agent for the tendering
holders of original notes for the purpose of receiving new notes from us and
delivering new notes to tendering holders.
Interest on the New Notes
The new notes will bear interest from October 29, 1999, payable semiannually
on November 1 and May 1 of each year commencing on November 1, 2000, at the
rate of 12.5% per annum. Holders of original notes whose original notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the original notes accrued from October 29,
1999 until the date of the issuance of the new notes. Consequently, holders
who exchange their original notes for new notes will receive the same interest
payment on November 1, 2000, the first interest payment date with respect to
the original notes and the new notes, that they would have received had they
not accepted the exchange offer.
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Transfers of New Notes
Based on interpretations by the SEC's staff in no-action letters issued to
other parties, we believe that holders of new notes issued in the exchange
offer may transfer the new notes without complying with the registration and
prospectus delivery requirements of the Securities Act if the holders:
(1) acquired the new notes in the ordinary course of the holders' business;
(2) have no arrangement or understanding with any person to participate in,
a distribution of the new notes;
(3) are not our affiliates within the meaning of Rule 405 under the
Securities Act;
(4) are not broker-dealers who acquired original notes directly from us;
and
(5) are not broker-dealers who acquired original notes as a result of
market-making or other trading activities.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of those new notes. The letter of transmittal that
accompanies this prospectus 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. A participating broker-
dealer may use this prospectus, as it may be amended or supplemented from time
to time, in connection with resales of new notes received in exchange for
original notes where those new notes were acquired by the broker-dealer as a
result of market-making activities or other trading activities. We have agreed
that, starting on the date on which the exchange offer expires and ending on
the close of business one year after that date, we will make this prospectus
available to any broker-dealer for use in connection with any resale of this
kind.
Tendering holders of original notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes relating to the exchange of original notes for new
notes in the exchange offer.
Shelf Registration
In the event that:
. the exchange offer is not permitted by applicable law;
. any holder is prohibited by law or SEC policy from participating in the
exchange offer;
. a holder may not resell the new notes purchased in the exchange offer to
the public without delivering a prospectus and the prospectus contained
in the exchange offer registration statement is not appropriate or
available for such resales by such holders; or
. the holder is a broker-dealer and holds the original notes acquired
directly from ASAT Finance or any of ASAT Finance's affiliates,
then within specified time frame we will:
(1) file a shelf registration statement relating to the offer and sale of
the original notes or the new notes, as the case may be,
(2) cause the shelf registration statement to be declared effective under
the Securities Act and
(3) use our best efforts to keep the shelf registration statement
continuously effective, supplemented and amended until two years after
its effective date.
If we file a shelf registration statement we will:
(1) provide to each holder for whom the shelf registration statement was
filed copies of the prospectus that is a part of the shelf registration
statement,
(2) notify the relevant holders when the shelf registration statement has
become effective, and
(3) take other actions as are required to permit unrestricted resales of
the original notes or the new notes, as the case may be.
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A holder selling notes or new notes pursuant to the shelf registration
statement generally would be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers.
Consequently, the holder will be subject to some of the civil liability
provisions under the Securities Act in connection with those sales and will be
bound by the provisions of the registration rights agreement which are
applicable to the holder, including specified indemnification obligations.
Liquidated Damages
If:
. on or before the 60th day following the date the original notes were
issued, neither the exchange offer registration statement nor the shelf
registration statement has been filed with the SEC;
. on or before the 180th day following the date the original notes were
issued, neither the exchange offer registration statement nor the shelf
registration statement has been declared effective;
. the exchange offer fails to be consummated prior to or on the specified
deadline; or
. after either the exchange offer registration statement or the shelf
registration statement has been declared effective, but thereafter
ceases to be effective or fails to be usable for its intended purpose,
then we jointly and severally agreed to pay to each holder affected liquidated
damages in an amount equal to $0.05 per week per $1,000 in principal amount of
the original or new notes, as the case may be, held by such holder for each
week for the first 90-day period. The amount of liquidated damages shall
increase by additional $0.05 per week per $1,000 in principal amount of
original or new notes with respect to each subsequent 90-day period until the
defaults are cured. The maximum amount of the liquidated damages are $0.30 per
week per $1,000 in principal amount of the original or new notes, as the case
may be. We delayed launching the exchange offer until after completion of the
initial public offering of our ADSs on July 14, 2000. Due to this delay, we
are required to pay liquidated damages from April 28, 2000 until the
registration statement for this exchange offer is declared effective by the
SEC.
The summary of provisions of the registration rights agreement does not
purport to be complete. This summary is subject to and is qualified in its
entirety by reference to all the provisions of the registration rights
agreement. We will provide a copy of the registration rights agreement upon
request.
Expiration Date; Extensions; Amendments
The exchange offer will expire on , 2000 unless we, in our sole discretion,
extend it. In order to extend the exchange offer, we will notify the exchange
agent by oral or written notice and will mail to the record holders of
original notes an announcement of the extension. The notice to both the
exchange agent and the holders of record must be given prior to 9:00 a.m., New
York City time, on the next business day after the date on which the exchange
offer was previously scheduled to expire.
We reserve the right to delay acceptance of any original notes, to extend
the exchange offer or to terminate the exchange offer and to refuse to accept
original notes not previously accepted, if any of the conditions described
under "--Termination" has occurred and we have not waived the condition(s). We
will give oral or written notice of such delay, extension or termination to
the exchange agent. We also reserve the right to amend the terms of the
exchange offer in any manner if we think the amendment would be advantageous
to the holders of the original notes. We will give oral or written notice as
promptly as practicable of any delay in acceptance, extension, termination or
amendment. If we think that the amendment to the exchange offer would be a
material change, we will promptly give notice of the amendment in a manner
that we reasonably calculate will inform the holders of the original notes of
the amendment.
We have discretion as to the manner in which we make any of the
announcements or notices described in the previous paragraph. We will have no
obligation to publish, advertise, or otherwise communicate the public
announcement in any specific manner.
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General Procedures for Tendering
To tender in the exchange offer, a holder must
(1) complete, sign and date the letter of transmittal, or a copy of the
letter of transmittal,
(2) have the signatures guaranteed if the letter of transmittal so
requires, and
(3) mail or otherwise deliver the letter of transmittal, together with the
original notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other
required documents, to the exchange agent before 5:00 p.m., New York
City time, on the expiration date of the exchange offer.
Method of Delivery
Any financial institution that is a participant in the Depository Trust
Company's, or DTC's, Book-Entry Transfer Facility system may make book-entry
delivery of the original notes by causing DTC to transfer its original notes
into the exchange agent's account in accordance with DTC's Automated Tender
Offer Program ("ATOP"). If you are a financial institution, you may deliver
original notes through book-entry transfer into the exchange agent's account
at DTC. However, in addition you must transmit the letter of transmittal, or a
copy of the letter of transmittal, with any required signature guarantees and
any other required documents, and the exchange agent must receive or confirm
the letter of transmittal, along with any required guarantees and documents at
its addresses listed under "--Exchange Agent" before 5:00 p.m., New York City
time, on the expiration date.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
Holders must deliver all documents to the exchange agent at the address
given in this prospectus. A holder may also request that a broker, dealer,
commercial bank, trust company or nominee effect the tender for him.
The method of delivery of original notes and the letters of transmittal and
all other required documents to the exchange agent is at the election and risk
of the holders. Instead of delivery by mail, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure timely delivery. Holders should not send letters of
transmittal or original notes to us.
Who May Tender
Only a holder of original notes may tender those original notes in the
exchange offer. The term "holder" with respect to the exchange offer means any
person in whose name original notes are registered on the books of ASAT
Finance or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose original notes are held of
record by DTC who desires to deliver those original notes by book-entry
transfer at DTC.
Any beneficial holder whose original notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his behalf. If the beneficial holder wishes to
tender on his own behalf, the beneficial holder must, prior to completing and
executing the letter of transmittal and delivering his original notes, either
(a) make appropriate arrangements to register ownership of the original notes
in the beneficial holder's name or (b) obtain a properly completed bond power
from the registered holder. The transfer of record ownership may take
considerable time.
Signatures; Guarantees
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an eligible
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guarantor institution within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, unless the original notes are tendered (1)
by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of an eligible guarantor institution.
If the letter of transmittal is signed by a person other than the registered
holder of any original notes listed therein, those original notes must be
endorsed or accompanied by appropriate bond powers which authorize that person
to tender the original notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the
original notes.
If the letter of transmittal or any original 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 relationship
with a holder, those persons should indicate the nature of the fiduciary or
representative relationship to the holder when signing and submit with the
letter of transmittal evidence satisfactory to us of their authority to act in
that relationship to the holder.
Validity of Tender; Purchase of Original Notes
We will determine in our sole discretion, which determinations will be final
and binding, all questions as to the validity, form, eligibility, including
time of receipt, acceptance and withdrawal of the tendered original notes. We
reserve the absolute right to reject any and all original notes not validly
tendered or any original notes if our counsel advises that it would be
unlawful to accept them. We also reserve the absolute right to waive any
irregularities or conditions of tender as to particular original notes.
Tenders of original notes will not be deemed to have been made until such
irregularities have been cured or waived. If a holder has not properly
tendered original notes to the exchange agent, and we have not waived the
defects or irregularities or the holder has not cured them, then the exchange
agent will transmit them without cost to the tendering holder of the original
notes as soon as practicable following the expiration date of the exchange
offer. The letter of transmittal may provide for terms of the tender that are
different from those in this paragraph.
Our 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 original notes must be cured within such time as we
shall determine. Neither we nor the exchange agent or any other person shall
be under any duty to give notification of defects or irregularities with
respect to tenders of original notes.
In addition, we reserve the right in our sole discretion to (a) purchase or
make offers for any original notes that remain outstanding subsequent to the
expiration date of the exchange offer or to terminate the exchange offer and
(b) to the extent permitted by applicable law, purchase original notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers may differ from the terms of the exchange offer.
Guaranteed Delivery Procedures
Holders who wish to tender their original notes and (1) whose original notes
are not immediately available, (2) who cannot deliver their original notes,
the letter of transmittal, or any other required documents to the exchange
agent prior to the expiration date of the exchange offer, or (3) if such
holder cannot complete the procedure for book-entry transfer on a timely
basis, may effect a tender if:
(a) the holder makes the tender through an eligible guarantor institution;
(b) prior to the expiration date of the exchange offer, the exchange agent
receives from the eligible guarantor institution a properly completed
and duly executed "notice of guaranteed delivery" in the form
accompanying this prospectus, by facsimile transmission, mail or hand
delivery, setting forth:
(1) the name and address of the holder of the original notes,
(2) the certificate number or numbers of such original notes,
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(3) the principal amount of original notes tendered,
(4) a statement that the tender is being made by the notice of
guaranteed delivery, and
(5) a guarantee that, within five business days after the expiration
date of the exchange offer, the letter of transmittal, or a copy of
the letter of transmittal, together with the certificate(s)
representing the original notes to be tendered in proper form for
transfer and any other documents required by the letter of
transmittal, will be deposited by the eligible guarantor
institution with the exchange agent; and
(c) such properly completed and executed letter of transmittal, together
with the certificate(s) representing all tendered original notes in
proper form for transfer, or confirmation of a book-entry transfer into
the exchange agent's account at DTC of original notes delivered
electronically, and all other documents required by the letter of
transmittal are received by the exchange agent within five business
days after the expiration date of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, holders may withdraw tenders of
original notes at any time prior to 5:00 p.m., New York City time, on the
expiration date of the exchange offer unless the original notes have been
previously accepted for exchange.
To withdraw a tender of original notes in the exchange offer, a written 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 business day prior to the expiration date of the exchange offer and
before we have accepted the original notes for exchange. Any notice of
withdrawal must:
(1) specify the name of the person having deposited the original notes to
be withdrawn,
(2) identify the original notes to be withdrawn (including the certificate
number or numbers and principal amount of such original notes),
(3) be signed by the person who deposited the original notes in the same
manner as the original signature on the letter of transmittal by which
the original notes were tendered (including any required signature
guarantees). In the alternative, the notice of withdrawal must be
accompanied by documents of transfer sufficient to permit the trustee
with respect to the original notes to register the transfer of those
original notes into the name of the depositor withdrawing the tender,
and
(4) specify the name in which any such original notes are to be registered,
if different from the name of the depositor.
We will determine all questions as to the validity, form and eligibility
(including time of receipt) for withdrawal notices. Our determination will be
final and binding on all parties. We will not deem any original notes so
withdrawn to have been validly tendered for purposes of the exchange offer and
we will not issue any new notes unless the original notes so withdrawn are
validly tendered. Any original 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 original notes may be
tendered by following one of the procedures described above under "General
Procedures for Tendering", "Method of Delivery" and "Guaranteed Delivery
Procedures" at any time prior to the expiration date of the exchange offer.
Termination
We will not be required to accept for exchange, or exchange new notes for,
any original notes not accepted for exchange. We may terminate or amend the
exchange offer as provided in this prospectus before the acceptance of the
original notes if:
(1) 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 our judgment, might materially impair our ability to proceed
with the exchange offer; or
29
<PAGE>
(2) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is interpreted by the
staff of the SEC or court of competent jurisdiction in a manner, which,
in our judgment, might materially impair our ability to proceed with
the exchange offer.
If we determine that we may terminate the exchange offer, as set forth
above, we may:
(1) refuse to accept any original notes and return any original notes that
have been tendered back to the original holders,
(2) extend the exchange offer and retain all original notes tendered prior
to the expiration of the exchange offer except for tendered original
notes that holders may withdraw, or
(3) waive any termination event with respect to the exchange offer and
accept all properly tendered original notes that have not been
withdrawn.
If any waiver we make under item (3) above is a material change in the
exchange offer, we will disclose the change by means of a supplement to this
prospectus that we will distribute to each registered holder of original
notes. We will also extend the exchange offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders of the original notes, if the exchange
offer would otherwise expire during that period.
Exchange Agent
We have appointed The Chase Manhattan Bank, the trustee under the indenture
executed in connection with the offering of the original notes, as exchange
agent for the exchange offer. You should direct questions and requests for
assistance and requests for additional copies of this prospectus or of the
letter of transmittal to the exchange agent addressed as follows:
By Mail or Hand Delivery:
The Chase Manhattan Bank, Exchange
Agent
55 Water Street
Rm. 234
New York, New York 10041
Attention: Carlos Esteves
Facsimile Transmission: (212) 638-0459
Confirm by Telephone: (212) 638-0828
Fees and Expenses
We will bear the expenses of soliciting tenders pursuant to the exchange. We
are making the principal solicitation for tenders pursuant to the exchange
offer by mail. Officers and regular employees of ASAT Finance, and ASAT
Finance's affiliates, may make additional solicitations for tenders by
facsimile, by telephone or in person.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket expenses. We may
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of
this prospectus, letters of transmittal and related documents to the
beneficial owners of the original notes and in handling or forwarding tenders
for exchange.
We will also pay the expenses to be incurred in connection with the exchange
offer, including fees and expenses of the exchange agent and trustee and
accounting and legal fees.
30
<PAGE>
We will pay all transfer taxes, if any, applicable to the exchange of
original notes pursuant to the exchange offer. However, if:
(1) certificates representing new notes or original notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the original notes tendered,
(2) tendered original notes are registered in the name of any person other
than the person signing the letter of transmittal, or
(3) a transfer tax is imposed for any reason other than the exchange of
original notes pursuant to the exchange offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other person) will be payable by the tendering holder. If the
tendering holder does not submit satisfactory evidence of payment of the taxes
or exemption from the taxes with the letter of transmittal, then the amount of
the transfer taxes will be billed directly to such tendering holder.
The Consent Solicitation
Concurrently with the exchange offer, we are soliciting consents from you to
revise the reporting requirements of ASAT Holdings in section 4.8 of the
indenture. ASAT Holdings is a foreign private issuer but has agreed in section
4.8 of the indenture to file with the SEC, annual and quarterly reports as if
it is a US issuer subject to the requirements of section 13 or 15(d) of the
Exchange Act. We are requesting note holders' consent to revise section 4.8 so
that ASAT Finance, ASAT Holdings and its subsidiaries will not be required to
disclose in such reports certain information regarding their executives and
their compensation as required by rules 400 to 405 of Regulation S-K, as if
they were a US issuer(s) subject to such requirements.
We will make no separate payment for consents delivered in the consent
solicitation.
To amend the indenture, the registered holders of at least a majority of the
outstanding aggregate principal amount of the original notes must tender
consents thereto. There are presently outstanding after taking into account
the redemption of 35% of our outstanding original notes an aggregate principal
amount of $100,750,000 of original notes.
Holders of original notes who tender such original notes for exchange
pursuant to the exchange offer will be deemed to have consented to the
proposed amendments to the indenture and the registration rights agreement
unless the appropriate box voting "No" is checked on the consent and letter of
transmittal.
The proposed amendments to the indenture will not become operative until the
date and time that the requisite consents are given by the holders of the
original notes. If the proposed amendments become operative, each holder of an
original note or an exchange note will be bound by the proposed amendments
regardless of whether such holder consented to the proposed amendments.
Set forth below is the proposed amendment to the indenture in the form that
will be adopted in the first supplemental indenture to the indenture. A copy
of the proposed amendment to the indenture is an exhibit to the registration
statement of which this prospectus is a part, is on file with ASAT Finance and
is available upon request to ASAT Finance.
Section 4.8 of the indenture shall be amended by adding the following
paragraph at the end of the text of section 4.8 as follows:
"Notwithstanding anything to the contrary in the foregoing, ASAT
Holdings, including its subsidiaries, will not be required to include
in the annual, quarterly or other reports set forth in this section
4.8, unless otherwise required by operation of law or the rules of the
SEC, NASDAQ or any other securities exchange on which ASAT Holdings or
its subsidiaries' securities are listed, any information required by
items 400 to 405 of Regulation S-K, as amended."
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following tables present the unaudited pro forma consolidated statement
of operations and other data of ASAT Holdings for the year ended April 30,
2000. These pro forma financial statements give effect to our recapitalization
in October 1999 as if it had occurred as of May 1, 1999. We have derived the
pro forma data by applying pro forma adjustments to ASAT Holdings'
consolidated financial results which are included elsewhere in this
prospectus.
These pro forma financial statements do not purport to represent what ASAT's
financial position or results of operations would have actually been had our
recapitalization in fact occurred on such date, or to project results of
operations for any future period. You should read the statements below in
conjunction with "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements and the
related notes, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended April 30, 2000
-------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(Dollars in thousands, except
share data)
<S> <C> <C> <C>
Statement of Operations Data:
Net sales................................ $ 312,131 $ -- $ 312,131
Cost of sales............................ (199,636) (47)(/1/) (199,683)
--------- ------- ---------
Gross profit........................... 112,495 (47)(/1/) 112,448
Selling, general and administrative
expenses................................ (26,453) (703)(/1/) (27,156)
Research and development................. (4,676) -- (4,676)
Nonrecurring charge for obsolete
equipment .............................. (12,340) -- (12,340)
--------- ------- ---------
Operating income....................... 69,026 (750) 68,276
Other income, net........................ 1,048 -- 1,048
Interest expense......................... (18,994) (7,049)(/2/) (26,043)
Recapitalization costs................... (6,813) -- (6,813)
--------- ------- ---------
Income (loss) before provision for
income taxes.......................... 44,267 (7,799) 36,468
(Provision) benefit for income taxes..... (9,558) 863(/3/) (8,695)
--------- ------- ---------
Net income (loss)...................... $ 34,709 $(6,936) $ 27,773
========= ======= =========
Net income per share(/4/).............. $ 0.06 $ -- $ 0.05
========= ======= =========
Other Financial Data:
Depreciation and amortization............ $ 25,513 -- $ 25,513
Capital expenditures..................... 56,036 -- 56,036
</TABLE>
---------------------
Notes to Unaudited Pro Forma Consolidated Statements of Operations
Year Ended April 30, 2000
1. In connection with our recapitalization, ASAT incurred the following
additional costs:
<TABLE>
<CAPTION>
Year Ended
April 30, 2000
--------------
(Dollars in
thousands)
<S> <C>
(a) Annual compensation for Chief Executive and Financial
Officers................................................ $515
(b) Additional costs for management information service and
other personnel transferred from QPL to ASAT............... 188
----
Adjustment to selling, general and administrative expenses.. $703
====
(c) Additional waste disposal costs under agreement with QPL
included in cost of sales.................................. $ 47
====
</TABLE>
32
<PAGE>
2. The increase to pro forma interest expense as a result of the
recapitalization is summarized as follows:
<TABLE>
<CAPTION>
Year Ended
April 30, 2000
--------------
(Dollars in
thousands)
<S> <C>
Interest on revolving credit facility....................... $ --
Interest on term loan facility--9.5%........................ 3,800
Interest on senior notes due 2006--12.5%.................... 19,375
Bank commitment fees........................................ 188
-------
Cash interest expense....................................... 23,363
Amortization of debt discount and issuance costs............ 2,680
-------
Interest expense from recapitalization related debt
requirements............................................... 26,043
Less: historical interest expense........................... (18,994)
-------
Net increase................................................ $ 7,049
=======
</TABLE>
Interest on the term loan facility is LIBOR plus 3.5%, which for the
purposes of the above table is assumed to be 9.5%.
An increase or decrease in the assumed weighted average interest rate on the
term loan facility of 0.125% would change pro forma interest expense by
$25,000 for the year ended April 30, 2000.
3. The adjustment to income tax expense to reflect the additional expenses
detailed in notes 1 and 2 above, on the basis that such expenses are partially
deductible for tax purposes, has resulted in an effective tax rate of
approximately 11%.
4. The computation of net income per share is calculated as the net income
for the period divided by the weighted number of shares outstanding during the
year, as adjusted on a retroactive basis for all periods presented to reflect
the 576,000,000 ordinary shares issued and outstanding following a share
dividend of 47 ordinary shares for each outstanding ordinary share, which we
undertook contemporaneously with completion of the offering of our ADSs on
July 14, 2000.
33
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents the selected historical consolidated statements
of operations, balance sheet, and other data of ASAT Holdings for the periods
presented, as if these companies were separate from the QPL group of companies
during the periods presented. The selected historical consolidated financial
data below as of April 30, 1999 and 2000 and for the years ended April 30,
1998, 1999 and 2000 was derived from our consolidated financial statements for
such periods. Deloitte Touche Tohmatsu has audited these consolidated
financial statements and their report, together with the consolidated
financial statements and the related notes, are included elsewhere in this
prospectus. The selected historical financial data below as of April 30, 1998
and for the year ended April 30, 1997 was derived from our audited
consolidated financial statements and such data as of April 30, 1996 and 1997
and for the year ended April 30, 1996 was derived from our unaudited
consolidated financial statements.
You should read the following information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our audited consolidated financial statements and the related notes, included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended April 30,
------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(Dollars in thousands, except for share and ADS
data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $259,362 $213,508 $243,103 $220,623 $312,131
Cost of sales........... 179,278 162,391 167,350 152,469 199,636
-------- -------- -------- -------- --------
Gross profit........... 80,084 51,117 75,753 68,154 112,495
-------- -------- -------- -------- --------
Operating expenses:
Selling, general and
administrative
expenses.............. 31,099 28,552 27,706 26,082 26,453
Research and
development........... 3,668 4,091 4,467 4,437 4,676
Nonrecurring charge for
obsolete equipment.... -- -- -- -- 12,340(/3/)
-------- -------- -------- -------- --------
Total operating
expenses.............. 34,767 32,643 32,173 30,519 43,469
-------- -------- -------- -------- --------
Income from
operations............ 45,317 18,474 43,580 37,635 69,026
Other income, net(/1/).. 2,000 355 1,751 1,184 1,048
Interest expense........ (15,166) (8,772) (9,949) (7,204) (18,994)
Recapitalization costs.. -- -- -- -- (6,813)(/4/)
-------- -------- -------- -------- --------
Income before income
taxes.................. 32,151 10,057 35,382 31,615 44,267
Provision for income
taxes.................. (7,095) (1,970) (5,043) (5,569) (9,558)
-------- -------- -------- -------- --------
Net income............. $ 25,056 $ 8,087 $ 30,339 $ 26,046 $ 34,709
======== ======== ======== ======== ========
Net income per share
(basic and
diluted)(/2/)......... $ 0.04 $ 0.01 $ 0.05 $ 0.05 $ 0.06
======== ======== ======== ======== ========
Net income per ADS
(basic and
diluted)(/2/)......... $ 0.22 $ 0.07 $ 0.26 $ 0.23 $ 0.30
======== ======== ======== ======== ========
Balance Sheet Data (at
end of period):
Cash and cash
equivalents............ $ 2,960 $ 2,016 $ 3,248 $ 1,409 $ 10,892
Total assets............ 197,013 202,611 253,068 218,683 283,481
Total debt(/5/)......... 23,367 76,681 95,472 95,142 198,217
Total shareholders'
equity................. 41,945 50,845 82,399 76,994 14,124
Other Data:
Adjusted EBITDA(/6/).... $ 73,308 $ 49,262 $ 65,147 $ 61,991 $105,516
Net cash provided by
operating activities... -- 47,826 47,155 62,272 81,720
Net cash used in
investing activities... -- (35,597) (37,702) (23,905) (69,814)
Net cash used in
financing activities... -- (13,173) (8,221) (40,206) (2,423)
Depreciation and
amortization........... 27,991 30,788 21,567 24,356 25,513
Capital expenditures.... 22,428 34,379 43,978 27,518 56,036
</TABLE>
34
<PAGE>
---------------------
(1) Other income, net, mainly consists of net foreign currency exchange gains
(losses), gains on dealing in foreign exchange contracts and options, and
interest income. See note 10 of the notes to our consolidated financial
statements included in this prospectus.
(2) The computation of net income per share is calculated as the net income
for the period divided by the weighted number of shares outstanding during
the year, as adjusted on a retroactive basis for all periods presented to
reflect the 576,000,000 ordinary shares issued and outstanding following a
share dividend of 47 ordinary shares for each outstanding ordinary share,
which we undertook contemporaneously with completion of the offering of
our ADSs.
(3) Reflects a one-time, non-cash charge of $12.3 million for obsolete
equipment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and note 6 of the notes to our
consolidated financial statements included in this prospectus.
(4) Reflects costs incurred in connection with our recapitalization in October
1999. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and note 2 of the notes to our consolidated
financial statements included in this prospectus.
(5) Debt consists of bank debt, capital lease obligations and secured accounts
payable. At April 30, 2000, debt included the senior notes, the term loan
facility and the revolving credit facility. As of April 30, 1997 and 1998,
debt also included the construction financing loan payable to QPL.
(6) "Adjusted EBITDA" is defined in this prospectus as income from operations,
plus depreciation and amortization and nonrecurring charges, and is
presented because it is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. Adjusted
EBITDA should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities and other income or
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of ASAT's profitability or
liquidity. Adjusted EBITDA, as defined in this prospectus, may not be
comparable to similarly titled measures used by other companies.
35
<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 is based on the financial statements in this prospectus which
were prepared to reflect the consolidated financial position, results of
operations and cash flows of ASAT Holdings. These consolidated financial
statements may not be representative of the consolidated financial condition
and results of operations of ASAT Holdings and its subsidiaries had they
actually operated separately from QPL. Furthermore, the discussion covers
periods prior to the completion of our recapitalization. Since we have a
different capital structure after our recapitalization, the results of
operations for periods after our recapitalization are not necessarily
comparable to prior periods. The following discussion should be read in
conjunction with our consolidated financial statements and the pro forma
financial statements contained elsewhere in this prospectus.
Overview
We are one of the world's largest independent providers of semiconductor
assembly and testing services. We offer a broad selection of semiconductor
packages, including standard and advanced leaded packages and ball grid array,
or BGA, packages. Semiconductor packaging protects the enclosed semiconductor
chip and provides a network of connections between the chip and a printed
circuit board. Leaded packages encapsulate the chip in plastic with metal
leads surrounding the edge of the package that connect the chip to the circuit
board. BGA packages, however, connect the chip to the circuit board using
solder balls on the bottom of the package. We also provide semiconductor
testing services, particularly for mixed-signal semiconductors which perform
both analog and digital functions.
Industry Demand. Our business is substantially affected by market conditions
in the semiconductor industry. According to the Semiconductor Industry
Association, worldwide semiconductor market sales have grown at a compound
annual rate of approximately 15.3% between 1980 and 1999, reaching $149.4
billion in 1999. Semiconductor growth continues to be driven by strong end-
user demand for telecommunications services, networking applications,
computers and consumer products. According to Electronic Trend Publications,
total packaging sales for the semiconductor industry were $18.3 billion in
1999, 39.4% of which were generated by independent assembly companies like
ASAT.
The semiconductor industry is highly cyclical. The industry experienced
sustained growth during the first half of the 1990s as global demand for
semiconductors expanded at an accelerated pace due to the increasing
pervasiveness of semiconductor applications and increased demand for
semiconductors with greater functionality, increased speed and smaller size.
In 1996 and 1998, the industry experienced downturns characterized by reduced
product demand, production over-capacity, increased competition and lower
pricing. More recently, the industry has experienced strong growth which has
allowed us to improve our production levels, revenue, gross margins and
operating margins above our historical levels. Any future industry downturns,
combined with our expected higher levels of expenses and capacity associated
with our upcoming expansion, could have a severe adverse effect on our
financial performance and condition.
We have pursued a strategy of reducing our exposure to the semiconductor
industry's cycles by developing a customer base that produces semiconductor
products for end-user applications that have experienced sustained growth in
recent years. We have decreased our exposure in recent years to semiconductor
applications for the personal computer and memory markets, which experienced
particularly sharp price declines and demand volatility in 1996 and 1998. For
the fiscal year ended April 30, 2000, 4% of our net sales was from assembling
and testing semiconductors for personal computers and memory applications. We
also seek to develop advanced packaging products which generally have been
less affected by industry cycles than standard packaging products.
Technology Migration. The semiconductor industry is subject to technology
migration as increasingly complex semiconductor applications with higher
performance requirements and greater functionality are developed. Typically,
the newest semiconductor applications with the highest performance initially
demand the highest price. Pricing and margins on these products generally
decline as they are replaced by newer products with enhanced performance
characteristics. Accordingly, the semiconductor industry (including the
packaging industry) must continually develop products with greater
functionality and performance.
36
<PAGE>
Our strategy is to capitalize on this technology migration by continually
developing and offering advanced packaging and testing services that enable
our customers' products to achieve high levels of performance. Our results in
recent years reflect this strategy, as sales from BGA packages and advanced
leaded packages increasingly replaced sales from standard leaded packages.
Since fiscal 1997, our overall gross margin generally has increased due to
this shift to advanced packaging. The following table illustrates the growth
of BGA packages and advanced leaded package sales as a percentage of our total
net sales:
<TABLE>
<CAPTION>
Fiscal Year Ended
April 30,
---------------------------------
1996 1997 1998 1999 2000
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Standard leaded packages.................... 86.8% 77.1% 72.5% 37.2% 31.5%
Advanced leaded packages.................... 1.9 9.8 13.5 22.0 24.1
Standard BGA packages....................... -- 1.8 4.1 14.0 6.3
Advanced BGA packages....................... -- -- 1.9 14.2 29.2
Testing..................................... 5.4 6.3 6.5 11.9 8.9
Other....................................... 5.9 5.0 1.5 0.7 --
----- ----- ----- ----- -----
Total..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Going forward, we expect net sales from our advanced packaging, which
includes advanced leaded, standard BGA and advanced BGA packages, and testing
to increase as a percentage of total net sales. Our customers are increasingly
demanding advanced packaging and testing services. We focus our research and
development on creating and improving advanced packages and are increasing our
capacity to produce and test advanced packages. In addition, our customers are
increasingly seeking turnkey services which we intend to provide by expanding
our mixed-signal test capacity. We expect the combination of these factors
will cause our net sales from advanced packaging and testing to increase as a
percentage of our overall net sales.
Pricing and Revenue Recognition. Our pricing is significantly influenced by
general demand in the semiconductor industry and by the sophistication of our
packaging and testing services. Other factors affecting pricing include the
order size, strength and history of our relationship with the customer and our
capacity utilization. We believe that we have been able to obtain favorable
pricing as a result of the premium our customers place on our ability to
provide them with sophisticated, timely and customer-focused design and
production services. Revenues are recognized when the relevant assembly or
testing services are provided.
Cost of Goods Sold and Gross Profit. The most significant components of cost
of goods sold are raw materials, labor and depreciation. Industry trends
significantly affect the price of our services. They also affect our raw
materials costs, which account for a majority of our cost of goods sold.
Accordingly, our gross margin historically has fluctuated less than our gross
profit.
Gross Margins. BGA and advanced leaded packages tend to have higher margins
than standard leaded packages due to the complexity and time sensitivity of
end-products requiring advanced assembly. Testing, particularly mixed-signal
testing, enjoys an even greater gross margin. Manufacturers of end-products
that require advanced semiconductor assembly and testing typically utilize
leading edge technology and compete primarily on the basis of speed to market
and added features. Manufacturers of these advanced products are willing to
pay a premium to receive assembly and testing services at a reduced time-to-
market from the current six to twelve years. During the fourth quarter ended
April 30, 2000, we revised the estimated useful lives for new production and
test equipment to five years from the current six to twelve years. This was
necessitated by the continued rapid rate of advancements in technologies used
in new production and test equipment now available on the market. The net book
value of equipment purchased during the last quarter of fiscal year 2000 which
is subject to the five year useful life is approximately $7.1 million. This
had a limited negative impact on gross margins for the fourth quarter ended
April 30, 2000 but we expect it to have a more significant negative impact
starting in our third quarter of fiscal 2001 and thereafter as we purchase new
equipment in connection with our capacity expansion program. As a result of
this revision to the estimated useful lives for our new production and test
equipment, we expect our depreciation for fiscal year 2001 to increase by
approximately 30.3% over what it would have been if we had not made the
revision.
37
<PAGE>
Nonrecurring Charge for Obsolete Equipment. During the quarter ended January
31, 2000 and as a result of changes that have occurred in manufacturing
technologies, we undertook a review of our property, plant and equipment to
determine whether any of its value had been impaired. Based on this review, we
determined that some of our loose toolings and plant and machinery were no
longer generating income. Due to the evolution of wafer fabrication
technology, semiconductor chip design and packaging technology over the last
few years, some of our older equipment, molds and tools cannot accommodate the
newer formats and technologies. As a result of the specialized nature of these
assets, we do not anticipate any resale value. Accordingly we recorded a non-
cash charge of $12.3 million in the quarter ended January 31, 2000 to reflect
this impairment. These assets were removed from service on or before the date
the charge was recognized.
Research and Development. Because our new packaging technologies usually
involve extensions and evolutions of existing technologies, we have been able
in recent years to develop new products without significantly increasing our
research and development expenditures. Our focus on working closely in the
package design process with customers to develop tailor-made BGA and advanced
leaded packages enables us to use our research and development resources
efficiently. During our last three fiscal years, our research and development
expenditures ranged between $4.4 million and $4.7 million or approximately
2.0% of net sales. We expect to increase our research and development
expenditures as necessary to develop technologies that satisfy our customer's
future requirements.
Foreign Exchange Exposure. Substantially all of our net sales, costs, assets
and liabilities have been denominated in either U.S. dollars or Hong Kong
dollars which have been officially linked to the U.S. dollar at a relatively
fixed rate. As a result of this, we have not experienced material foreign
exchange gains or losses. Substantially all our net sales are denominated and
received in U.S. dollars. We purchase raw materials and machinery and
equipment primarily in a mix of U.S. dollars and Japanese yen. Labor and
administrative costs are incurred primarily in Hong Kong dollars and, to a
lesser extent, U.S. dollars. Overall, we estimate that in the fiscal year
ended April 30, 2000 approximately 29.4% of our costs (excluding depreciation)
were in Hong Kong dollars and 4.8% were in Japanese yen. Historically, our
borrowings have been in both U.S. dollars and Hong Kong dollars, but following
our recapitalization, substantially all of our borrowings have been in U.S.
dollars.
Our Recapitalization. Historically we were a wholly-owned subsidiary of QPL
International Holdings Limited. On October 29, 1999, three groups of private
equity funds separately managed by or affiliated with Chase Capital Partners
Asia, Olympus Capital Holdings Asia and Orchid Asia Holdings purchased a 50%
equity interest in ASAT Holdings. Following the completion of the offering of
our ADSs on July 14, 2000, this investor group held a 42.6% equity interest in
ASAT Holdings. This investor group paid $60,000 to ASAT Holdings as the total
par value of the ordinary shares purchased and $111.6 million directly to QPL
for its causing ASAT Holdings to issue ordinary shares to the investor group.
Under a post-closing adjustment, the investor group is required to pay QPL an
additional $25.0 million due to ASAT's positive financial performance during
calendar 1999. Following our recapitalization, QPL retained a 50% equity
interest in ASAT Holdings. Following the completion of the issue of our ADSs,
QPL held a 42.6% equity interest in ASAT Holdings.
In connection with our recapitalization, we repaid all of our outstanding
debt by issuing units, which consisted of senior notes due 2006 of our finance
subsidiary ASAT Finance and warrants for ordinary shares of ASAT Holdings, and
by obtaining a five year $40.0 million secured term loan facility. We also
obtained a $25 million revolving credit facility. All intercompany payables
and receivables between QPL and ASAT were extinguished and we discontinued our
financial support of QPL. The recapitalization involved a corporate
restructuring, in which ASAT US, our sales operations in the United States,
and Timerson, a company that owns a plot of commercial property in China, were
transferred by QPL to ASAT Holdings and are now indirect wholly owned
subsidiaries of ASAT Holdings. We also acquired an option to purchase ASAT
S.A., QPL's semiconductor assembly and test business in France, on or before
December 31, 2000. Currently, we have not decided whether we will exercise the
option. The decision whether to exercise the option will be made after we
complete our business and legal due diligence. We are carrying the option at
its initial value of $20.0 million, subject to periodic impairment review. If
we choose not to exercise the option or the option expires, we will incur a
one-time, non-cash charge to earnings of the carrying value at that date.
38
<PAGE>
Development of Land in China. ASAT Holdings' subsidiary Timerson owns rights
to use a commercial plot of land in the People's Republic of China which is
subject to development deadlines. Although we have not developed the land and
the deadlines have passed, we have retained rights to use the land. We may be
subject to penalties for failure to develop the land, most of which we have
accrued already. In March 2000, we entered into a Land Swap Memorandum of
Understanding, subject to agreement on final terms, to swap our current land
use right for a new land use right on a similar plot of land in Shenzhen.
Under the Memorandum of Understanding, Shenzhen Hengang Investment Co., Ltd,
the government-related company that owns the land use right, agreed to assist
us in seeking a reduction or exemption from any penalties or liabilities which
may have arisen from our delay in developing the current land. In addition,
once the land swap is completed, we will have new development deadlines for
the new property and will no longer face the risk of confiscation associated
with the lapsed deadlines. We believe that the costs incurred to date to
develop the current land will be transferable to the new land and therefore no
provision for impairment is considered necessary. If we are unable to complete
the land swap and our right to use the current land is revoked, we could incur
a one-time, non-cash charge to earnings of approximately $9.0 million
representing the write down in the book value of such land use right. Although
we are not currently developing this property, we may consider expanding our
operations using this site or an alternative site in Shenzhen at some point
within the next several years.
Customers. For the fiscal year ended April 30, 2000, our largest single
customer accounted for approximately 16% of net sales, our top ten customers
accounted for approximately 77% of net sales and each of Motorola, Analog
Devices and Broadcom accounted for 10% or more of net sales.
39
<PAGE>
Selected Quarterly Information
The following tables set forth our unaudited quarterly results of operations
since May 1, 1998. The results of operations in any quarter are not
necessarily indicative of the results of any future period. We expect that
quarterly sales may fluctuate significantly.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------
July 31, October 31, January 31, April 30, July 31, October 31, January 31, April 30,
1998 1998 1999 1999 1999 1999 2000 2000
-------- ----------- ----------- --------- -------- ----------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $51,112 $52,563 $53,523 $63,425 $65,963 $78,749 $ 83,688 $83,731
Cost of sales........... 37,883 37,102 37,333 40,151 41,961 48,027 53,175 56,473
------- ------- ------- ------- ------- ------- --------- -------
Gross profit........... 13,229 15,461 16,190 23,274 24,002 30,722 30,513 27,258
------- ------- ------- ------- ------- ------- --------- -------
Operating expenses:
Selling, general and
administrative ....... 7,168 7,423 6,357 5,134 6,566 7,550 4,803 7,534
Research and
development........... 1,054 1,054 1,161 1,168 1,157 1,182 1,168 1,169
Nonrecurring charge for
obsolete equipment ... -- -- -- -- -- -- 12,340(/1/) --
------- ------- ------- ------- ------- ------- --------- -------
Total operating
expenses ............. 8,222 8,477 7,518 6,302 7,723 8,732 18,311 8,703
------- ------- ------- ------- ------- ------- --------- -------
Income from
operations............ $ 5,007 $ 6,984 $ 8,672 $16,972 $16,279 $21,990 $ 12,202 $18,555
======= ======= ======= ======= ======= ======= ========= =======
Other Data:
Depreciation and
amortization........... $ 6,328 $ 5,860 $ 6,124 $ 6,044 $ 6,119 $ 6,150 $ 7,145 $ 6,099
<CAPTION>
As a percentage of net sales
-------------------------------------------------------------------------------------------
July 31, October 31, January 31, April 30, July 31, October 31, January 31, April 30,
1998 1998 1999 1999 1999 1999 2000(/1/) 2000
-------- ----------- ----------- --------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 74.1 70.6 69.8 63.3 63.6 61.0 63.5 67.4
------- ------- ------- ------- ------- ------- --------- -------
Gross profit............ 25.9 29.4 30.2 36.7 36.4 39.0 36.5 32.6
------- ------- ------- ------- ------- ------- --------- -------
Operating expenses:
Selling, general and
administrative........ 14.0 14.1 11.9 8.1 9.9 9.6 5.7 9.0
Research and
development........... 2.1 2.0 2.1 1.8 1.8 1.5 1.4 1.4
Nonrecurring charge for
obsolete equipment.... -- -- -- -- -- -- 14.8(/1/) --
------- ------- ------- ------- ------- ------- --------- -------
Total operating
expenses.............. 16.1 16.1 14.0 9.9 11.7 11.1 21.9 10.4
------- ------- ------- ------- ------- ------- --------- -------
Income from
operations............ 9.8 13.3 16.2 26.8 24.7 27.9 14.6 22.2
======= ======= ======= ======= ======= ======= ========= =======
Other Data:
Depreciation and
amortization........... 12.4% 11.1% 11.4% 9.5% 9.3% 7.8% 8.5% 7.3%
======= ======= ======= ======= ======= ======= ========= =======
</TABLE>
---------------------
(1) Reflects a one-time, non-cash charge of $12.3 million for obsolete
equipment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and note 6 of the notes to our
consolidated financial statements included in this prospectus.
As indicated in the above table, we have experienced a strong increase in
net sales and gross profit in the four quarters of the fiscal year ended April
30, 2000 compared to the four quarters of the prior fiscal year. This
improvement reflects:
. growth from newly qualified customers and increased demand from existing
customers;
. our expansion into advanced packaging, particularly advanced BGA
packaging which has been subject to strong demand and generates higher
gross margins than standard packaging; and
. an upswing in demand for the semiconductor industry from its low point
during 1998.
40
<PAGE>
Net sales for the fourth quarter ended April 30, 2000 were approximately the
same as those for the third quarter ended January 31, 2000. This result
reflected a decline in net sales in February and early March due to reduced
wafer deliveries from foundries because of supply constraints experienced by
the semiconductor industry generally. Net sales in the second half of March
and throughout April were strong as wafer supply from foundries normalized.
Gross profits for the fourth quarter were lower than for the second and
third quarters and gross margins for the fourth quarter were lower than for
the prior three quarters primarily due to a temporary shift in product mix.
Fourth quarter gross profits were reduced due to a temporary shift in our
product mix during the first half of the quarter which yielded lower gross
margins. Gross margins significantly improved in the second half of the
quarter. Operating income declined in the fourth quarter compared to the third
quarter due to the foregoing factors and an increase in operating expenses but
was comparable to operating income in the first quarter. Operating expenses in
the third quarter were unusually low due to non-recurring reductions in
selling, general and administrative expenses.
Results of Operations
The following table sets forth ASAT's results of operations as a percentage
of net sales during the periods shown:
<TABLE>
<CAPTION>
Years Ended April 30,
--------------------------
1997 1998 1999 2000
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales................. 100.0% 100.0% 100.0% 100.0%
Cost of sales............. 76.1 68.8 69.1 64.0
----- ----- ----- -----
Gross profit.............. 23.9 31.2 30.9 36.0
----- ----- ----- -----
Operating expenses:
Selling, general and
administrative
expenses................ 13.4 11.4 11.8 8.5
Research and
development............. 1.9 1.8 2.0 1.5
Nonrecurring charge for
obsolete equipment...... -- -- -- 3.9(/1/)
----- ----- ----- -----
Total operating
expenses............... 15.3 13.2 13.8 13.9
----- ----- ----- -----
Income from operations.... 8.6 18.0 17.1 22.1
Other income (expense),
net...................... 0.2 0.7 0.5 0.3
Interest expense.......... 4.1 4.1 3.3 6.1
Recapitalization costs.... -- -- -- 2.2(/2/)
----- ----- ----- -----
Income before income
taxes.................... 4.7 14.6 14.3 14.1
Provision for income
taxes.................... 0.9 2.1 2.5 3.1
----- ----- ----- -----
Net income.............. 3.8% 12.5% 11.8% 11.0%
===== ===== ===== =====
</TABLE>
---------------------
(1) Reflects a one-time, non-cash charge of $12.3 million for obsolete
equipment. See note 6 of the notes to our consolidated financial
statements included in this prospectus.
(2) Reflects costs incurred in connection with our recapitalization in October
1999. See note 2 of the notes to our consolidated financial statements
included in this prospectus.
Fiscal Year Ended April 30, 2000 Compared to Fiscal Year Ended April 30, 1999
Net Sales. Net sales increased 41.5% from $220.6 million in the fiscal year
ended April 30, 1999 to $312.1 million in the fiscal year ended April 30,
2000. This increase was mainly due to improved sales volumes driven by strong
growth in sales of BGA and advanced leaded packages, partially offset by per
unit average selling price reductions which resulted in an overall average
selling price decline of 11.4% in fiscal year 2000 compared to fiscal year
1999. Net sales from BGA and advanced leaded packages accounted for 35.5% and
24.1% of net sales, respectively, in fiscal year 2000 compared to 28.2% and
22.0% of net sales in fiscal year 1999. The sales growth reflected an increase
in our production capacity added during the second half of the fiscal year as
well as the continuation of the recovery of the semiconductor industry from
its low point in 1998.
41
<PAGE>
Gross Profit. Gross profit increased 65.1% from $68.2 million in fiscal year
1999 to $112.5 million in fiscal year 2000, resulting in a gross margin of
36.0% in fiscal year 2000 compared to 30.9% in fiscal year 1999. Gross margin
improved primarily due to our increased unit sales volume and the product mix
shift to increased levels of BGA and advanced leaded packages, which have
higher margins than standard leaded packages. With the increased sales in
fiscal year 2000 giving rise to higher material purchases, we were able to
negotiate lower prices for raw materials from our vendors. In addition, the
higher volume of production enabled us to increase our manufacturing
efficiency and reduce unit labor costs. As a consequence of this and of the
product mix shift to increased levels of BGA and advanced leaded packages, raw
materials and direct labor costs decreased by 2.7% of net sales resulting in a
comparable increase in gross profit. Also, while there was an 18.8% increase
in fixed manufacturing costs from fiscal year 1999, these costs declined as a
proportion of net sales in fiscal year 2000 compared to fiscal year 1999,
resulting in a rise in gross profit.
Selling, General and Administrative. Despite a 41.5% increase in net sales,
selling, general and administrative expenses increased 1.4% from $26.1 million
in fiscal year 1999 to $26.5 million in fiscal year 2000. This increase
reflects higher employee costs, particularly in the fourth quarter, due to
increased personnel in anticipation of our planned growth and higher travel
and entertainment costs due to increased customer demand, offset by a
reduction of management fees and equipment rental expenses as part of our
continued cost reduction efforts.
Research and Development. Research and development expenses increased
approximately 5.4% from $4.4 million in fiscal year 1999 to $4.7 million
during fiscal year 2000. A significant portion of these expenditures were
focused on developing additional advanced semiconductor packaging
technologies.
Other Income and Expense. Other income and expense, combined, included
interest income, foreign currency exchange gains and loss on sale of
marketable securities and decreased from $1.2 million other income in fiscal
year 1999 to $1.0 million other income in fiscal year 2000. This decrease was
due principally to lower gains on foreign exchange transactions, loss on
disposal of marketable securities and offset by the partial recovery of an
amount receivable that had been previously written off.
Interest Expense. Interest expense increased 163.7% from $7.2 million during
fiscal year 1999 to $19.0 million during fiscal year 2000. Of this increase,
$2.4 million was attributable to interest on the $83.25 million note payable
to QPL, which was repaid in October 1999 upon the closing of our
recapitalization. The remaining $9.4 million of this increase represented
interest on our secured term loan facility, our senior unsecured notes and our
revolving credit facility, all of which were obtained as part of our
recapitalization.
Recapitalization Costs. In fiscal year 2000, we incurred costs of
approximately $6.8 million in connection with our recapitalization. The
recapitalization costs represent professional fees attributable to the
issuance of a 50% interest in ASAT Holdings to the investor group.
Income Taxes. Income tax expense increased by $4.0 million from $5.6 million
in fiscal year 1999 to $9.6 million in fiscal year 2000 due to higher taxable
income. The effective tax rate was approximately 21.6% in fiscal year 2000
versus approximately 17.6% in fiscal year 1999, primarily attributable to the
non-deductibility of costs related to our recapitalization.
Fiscal Year Ended April 30, 1999 Compared to Fiscal Year Ended April 30, 1998
Net Sales. Net sales decreased 9.2% from $243.1 million in the fiscal year
ended April 30, 1998 to $220.6 million in the fiscal year ended April 30,
1999. The decrease reflected the decline in semiconductor industry demand in
1998, which led to lower selling prices and volumes. While our traditional
leaded packages were particularly affected by the slowdown, the decline was
partially offset by higher unit sales of BGA and advanced leaded packages
which resulted in a 24.9% increase in our average selling price. Net sales
from BGA and advanced leaded packages accounted for 28.2% and 22.0% of net
sales in fiscal year 1999 compared to 6.0% and 13.5% of net sales in fiscal
year 1998.
42
<PAGE>
Gross Profit. Gross profit decreased 10.0% from $75.8 million in fiscal year
1998 to $68.2 million in fiscal year 1999 primarily due to lower sales
volumes. Gross margins remained approximately the same at 31.2% and 30.9% in
fiscal years 1998 and 1999, respectively, as improved sales of higher margin
BGA and advanced leaded packages offset decreased unit volumes and lower
prices for standard packages.
Selling, General and Administrative. Selling, general and administrative
expenses declined 5.9% from $27.7 million in fiscal year 1998 to $26.1 million
in fiscal year 1999. The decrease in selling, general and administrative
expenses in fiscal 1999 was due to reduction of salaries of $1.2 million and
depreciation of $0.7 million.
Research and Development. Research and development expenses remained
approximately constant at nearly $4.5 million in both fiscal years 1998 and
1999.
Other Income and Expense. Other income and expense, combined, included
interest income, foreign currency exchange gain and loss on sale of marketable
securities and declined 32.4% from $1.8 million other income in fiscal year
1998 to $1.2 million other income in fiscal year 1999 primarily due to lower
gains on foreign exchange transactions.
Interest Expense. Interest expense decreased 27.6% from $9.9 million in
fiscal year 1998 to $7.2 million in fiscal year 1999. This decrease was due to
lower borrowings during the year.
Income Taxes. Income tax expense increased 10.4% from $5.0 million in fiscal
year 1998 to $5.6 million in fiscal year 1999. The effective tax rate was
approximately 14.3% in fiscal year 1998 versus approximately 17.6% in fiscal
year 1999. ASAT Holdings' subsidiary ASAT, Inc., referred to as ASAT US in
this prospectus, incurred tax losses in both fiscal years 1998 and 1999. In
fiscal 1998, the tax loss was utilized by its former 95% U.S. shareholder (a
member of the QPL group) resulting in a reduction to ASAT's effective tax
rate. However, in fiscal 1999, ASAT US's tax loss was not utilized because its
former 95% U.S. shareholder (a member of the QPL group) incurred a loss as
well. Consequently, for fiscal 1999 ASAT US saw its valuation allowance
increase (and also its effective tax rate) due to both the additional tax loss
carryforwards and increased reserves and accruals within its gross deferred
tax assets.
Liquidity and Capital Resources
In fiscal years 1998, 1999 and 2000, our capital expenditures totaled
approximately $44.0 million, $27.5 million and $56.0 million, respectively.
These expenditures were incurred primarily to develop our BGA and other
advanced packaging capabilities and expand our testing capabilities.
We financed these expenditures through net operating cash flow, debt from
outside financial institutions, including capital leases and advances from
QPL. Net cash generated by operating activities was $47.2 million, $62.3
million and $81.7 million in fiscal years 1998, 1999 and 2000. Our net
operating cash flow was also used to support QPL during the financial
difficulties it incurred during the fiscal years 1998 and 1999 and the period
in fiscal 2000 until our recapitalization. Since our recapitalization, we have
discontinued our financial support of QPL.
During fiscal years 1998, 1999 and 2000, we used a varying combination of
short- and long-term, secured and unsecured bank borrowings to finance our
activities. We also made increasing use of capital leases to finance part of
our capital expenditures programs during those years. As part of our
recapitalization in fiscal year 2000, we refinanced our outstanding debt by
issuing $155.0 million aggregate principal amount of senior notes due in 2006
and obtaining a five year $40.0 million secured term loan facility and a $25.0
million revolving credit facility.
43
<PAGE>
We expect our future capital requirements to consist primarily of purchases
of production machinery and equipment to expand capacity. We currently intend
to incur an aggregate of approximately $300.0 million of capital expenditures
during fiscal years 2001 and 2002. We expect to focus these expenditures
primarily on acquiring assembly and test equipment. A portion will also be
used for conversion of available space in our building for assembly use and
expansion of our testing operations using our recently acquired facility in
Hong Kong. We intend to finance our planned expansion of capacity during
fiscal years 2001 and 2002 with the net proceeds from the offering of our ADSs
and cash generated from operations. We also have used approximately
$118.0 million of the net proceeds from the offering of our ADSs to repay our
$40.0 million term loan facility, to repay the approximately $17.0 million
outstanding under our revolving credit facility and to redeem 35% of the
aggregate principal amount of the outstanding notes at a price of 112.5% of
the principal amount which is due to be completed on August 23, 2000. Upon
repayment of the term loan facility, our revolving credit facility terminated.
We intend to obtain a new revolving credit facility for working capital
purposes. We did not incur any expenditures in connection with our undeveloped
property in the People's Republic of China during fiscal year 2000. We cannot
at this time estimate the costs, if any, to be incurred in developing this
property.
We believe that our existing cash balances, cash flow from operations and
the net proceeds from the offering of our ADSs will be sufficient to meet our
projected capital expenditures, working capital and other cash requirements
for fiscal years 2001 and 2002.
Market Sensitivity
We have market risk primarily in connection with the pricing of our
packaging products and services and the purchase of raw materials. Both
pricing and cost of raw materials are significantly influenced by
semiconductor market conditions. Historically, during cyclical industry
downturns, we have been able to offset pricing declines for our products
through a combination of improved product mix and success in obtaining price
reductions in raw material costs.
We generally have not been significantly affected by foreign exchange
fluctuations because (1) substantially all of our revenues are in U.S. dollars
and (2) the largest share of our non-U.S. dollar costs historically has been
in Hong Kong dollars which have been pegged to the U.S. dollar at a relatively
constant exchange rate since 1983.
As of April 30, 2000, we have interest rate market risk in connection with
the senior facilities that bear interest at a floating rate. An increase or
decrease in the assumed weighted average interest rate on the term loan
facility of 0.125% would change our interest expense by approximately $25,000
for fiscal year 2000.
Inflation
We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to
do so could adversely affect our business, financial condition and results of
operations.
44
<PAGE>
INDUSTRY
Semiconductor chips are used in virtually all electronic applications,
ranging from automobiles to computers to communications equipment. As design
and manufacturing technologies have improved and become more complex, smaller
and less costly, prices of electronic products have decreased which has
improved demand. These advances have also increased semiconductor content in
electronic products, both in terms of the number of products using
semiconductors and the number of semiconductors in each electronic product.
According to the Semiconductor Industry Association, or SIA, worldwide
semiconductor market revenues were approximately $149.4 billion in 1999,
growing since 1980 at a compound annual rate of approximately 15.3%. In a June
2000 report, the SIA estimates that revenues for the worldwide semiconductor
market will reach $278.7 billion in 2002, representing a compound annual
growth rate of 23.1% over 1999 revenues. The SIA forecasts that one of the
principal drivers of growth in the semiconductor industry during the next
several years will be increased sales of communications products used in
applications such as cellular telephones, computer modems, internet and
electronic commerce hardware and appliances and networking equipment.
Electronic Trend Publications, or ETP, estimates that independent
semiconductor assembly revenues will grow from $7.2 billion in 1999 to $12.3
billion in 2002, or at a compound annual growth rate of 19.5%, as
semiconductor manufacturers focus on their core strengths, such as chip
design, and continue to outsource their assembly requirements. Some segments
of the independent assembly market are expected to grow at a significantly
higher rate. For example, revenues for the BGA market are expected to grow at
a compound annual growth rate of approximately 32.1% during the same period,
according to ETP.
The following table sets forth the total industry revenues for the
semiconductor manufacturing industry and the semiconductor assembly industry
from 1995 through 1998 and projected total industry revenues for 1999 through
2002:
<TABLE>
<CAPTION>
Historical Projected
-------------------------------------------- -----------------------------------
1995 1996 1997 1998 1999 CAGR 2000 2001 2002 CAGR(1)
------ ------ ------ ------ ------ ---- ------ ------ ------ -------
(Dollars in billions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total semiconductor
manufacturing
revenue(2)............. $144.4 $132.0 $137.2 $125.6 $149.4 0.9% $195.1 $244.3 $278.7 23.1%
Total assembly
revenue(3)............. 12.9 15.3 17.3 16.2 18.3 9.1% 21.5 24.9 28.0 15.2%
Outsourced assembly
revenue(3)............. 3.7 5.0 5.6 6.1 7.2 18.1% 8.5 10.4 12.3 19.5%
% of total assembly
revenue................ 28.9% 32.4% 32.4% 38.0% 39.4% -- 39.6% 41.6% 44.0% --
</TABLE>
---------------------
(1) Represents the projected compound annual growth rate from 1999 through
2002.
(2) Source: The Semiconductor Industry Association.
(3) Source: Electronic Trend Publications.
Semiconductor Assembly Process: Fabrication, Assembly and Testing
The production of a semiconductor is a complex process that requires
sophisticated engineering and manufacturing expertise. The production process
can be broadly divided into three primary stages: (1) wafer fabrication; (2)
assembly and processing of chips into finished semiconductor devices; and (3)
testing of these finished semiconductor devices.
Wafer Fabrication
The wafer fabrication process begins with the generation of a mask that
defines the circuit patterns for the transistors and interconnect layers that
will be formed on the raw silicon wafer. The transistors and other circuit
elements are formed by repeating a series of steps in which a photosensitive
material is first deposited on the wafer, the material is exposed to light
through the mask in a photolithography process, and the unwanted material is
etched away, leaving only the desired circuit pattern on the wafer. By
stacking the various patterns, individual elements of the semiconductor chip
are defined. Each wafer contains a number of individual chips. Wafer probe,
the final step in the wafer fabrication process, involves electrically testing
each individual chip on the wafer in order to identify properly functioning
chips for assembly.
45
<PAGE>
Assembly
Fabricated wafers are then transferred to assembly facilities. Semiconductor
assembly serves to protect the chip, facilitate its integration into
electronic systems, limit electrical interference and enable the dissipation
of heat from the device. In the assembly process, a wafer is diced into many
individual chips which are then separated from the wafer and attached to a
substrate via an epoxy adhesive. Leads on the substrate typically are then
connected by extremely fine gold wires to the input/output terminals on the
chip through the use of automated machines known as wire bonders. Each chip is
then encapsulated in a plastic molding compound, forming the package. The chip
then goes through several additional finishing steps to prepare it for
testing.
Testing
Following assembly, each assembled device is tested utilizing sophisticated
testing equipment and programs which tests different operating specifications
of the semiconductor, including functionality, voltage, current and timing.
The completed devices are either shipped to the customers or to their final
end-use destination.
The three primary steps of the semiconductor production process are
illustrated below:
Outsourcing of Semiconductor Assembly and Testing Services
Historically, vertically integrated semiconductor companies primarily
manufactured semiconductors in their own facilities. Independent semiconductor
assembly and testing services were used only when semiconductor companies'
production requirements exceeded their capacity constraints. Fabless
semiconductor companies, which emerged in the mid-1980s, outsource virtually
every step of the semiconductor production process in order to focus entirely
on semiconductor design. According to Dataquest's 1999 report, fabless
companies generated
46
<PAGE>
approximately $9.1 billion in revenues during 1998 and these revenues are
expected to grow at a compound annual growth rate of 21% from 1998 to 2003.
The ability to outsource nearly every step of the semiconductor manufacturing
process has enabled fabless semiconductor companies to introduce new
semiconductor product designs very quickly without committing significant
amounts of capital and other resources to wafer fabrication, assembly and
testing.
Semiconductor companies are increasingly outsourcing their assembly and test
services for a number of reasons:
Semiconductor Manufacturing is Increasingly Expensive. Semiconductor
assembly and test are complex processes requiring significant investment in
equipment and facilities. Shorter product life cycles, increasing number of
and speed at which new products are being introduced and the need to update or
replace assembly and test equipment to accommodate new products and processes
have made it more difficult for semiconductor companies to sustain the high
levels of capacity utilization required to be cost competitive. Independent
assembly and test providers, 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.
Semiconductor Companies are Experiencing Increased Time-to-Market
Pressures. End-users are increasingly demanding more sophisticated products in
a market in which product life cycles are becoming more compressed and
manufacturers that are "first to market" can gain a significant advantage. As
a result, semiconductor companies are increasingly seeking to shorten their
time-to-market for new products. Having the right assembly and test 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 assembly solutions and test services 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 assembly and test companies to
deliver their new products to market more quickly.
Advanced Semiconductor Applications Require Sophisticated Assembly Expertise
and Technological Innovation. Semiconductor companies are facing ever-
increasing demands for miniaturization, integration of functions, higher lead
counts for more connections and improved thermal and electrical performance
from semiconductor packaging. As a result, semiconductor assembly and test are
now viewed as enabling technologies requiring sophisticated expertise and
technological innovation. Independent providers of assembly and testing
services have developed substantial expertise in semiconductor assembly and
test technologies. Moreover, the multitude of assembly 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 assembly research and development and capacity. For example, BGA
packages, which only commenced large scale production during 1993, accounted
for approximately 38.6% of all outsourced assembly revenues in 1999 according
to ETP.
47
<PAGE>
BUSINESS
We are one of the world's largest independent providers of semiconductor
assembly and testing services. We offer a broad selection of semiconductor
packages, including standard and advanced leaded and ball grid array, or BGA.
Semiconductor packaging protects the enclosed semiconductor chip and provides a
network of connections between the chip and a printed circuit board. Leaded
packages encapsulate the chip in plastic with metal leads surrounding the edge
of the package that connect the chip to the circuit board. BGA packages,
however, connect the chip to the circuit board using solder balls on the bottom
of the package.
During the fiscal year ended April 30, 2000, 65% of our assembly net sales
were from advanced leaded packages and BGA packages. Of our net sales from BGA
packages during this period, 82% was from advanced BGA packages. We also
provide semiconductor testing services, particularly for mixed-signal
semiconductors which perform both analog and digital functions. During the
fiscal year ended April 30, 2000, 52% of our net sales from testing were from
the testing of mixed-signal semiconductors.
We target the communications sector of the semiconductor industry, including
mobile communications, data networking and broadband communications. These
industries have experienced rapid growth over the last several years and this
growth is expected to continue to increase. We differentiate our company from
competitors by providing timely and comprehensive solutions to customers'
complex semiconductor performance needs. We work closely with customers to
design and provide advanced packaging and test solutions for each new
generation of products. We have over 110 customers and many of our top
customers are among the world's largest and fastest growing semiconductor
companies. Our top ten customers by net sales during the fiscal year ended
April 30, 2000 were:
Altera Lucent Technologies
Analog Devices Motorola
Broadcom Philips Electronics
Conexant Systems STMicroelectronics
Infineon
Technologies
For the fiscal year ended April 30, 2000 our top ten customers generated
approximately 77% of our net sales and 81% of our net sales was from packaging
and testing semiconductors for communications applications. During the same
period, approximately 83% of our net sales was generated from sales to U.S.
multinational companies, 16% to European multinational companies and 1% to
Asian companies. In terms of net sales during the same period, we shipped
approximately 63% of our packages to destinations in the United States, 35% to
destinations in Asia and 2% to destinations in Europe.
Vitesse
Semiconductor
We provide assembly and testing services from our Hong Kong facilities where
we operate 510 wire bonders, which are machines that attach connectivity wires
to the semiconductor packages, and 33 semiconductor testing machines as of
April 30, 2000. We recently purchased an additional testing facility close to
our Hong Kong facilities. We expect our combined facilities will provide us
sufficient space for expanding our advanced assembly and mixed-signal testing
businesses and could accommodate approximately 990 wire bonders and 120
testers. In addition, we have an option to lease an additional 100,000 square
feet in our current Hong Kong building. We also provide package design
services, computer testing of package designs for thermal and electrical
performance and testing support services from our facilities in Fremont,
California and Hong Kong. Our sales offices and representatives are
strategically located in the United States, Europe, Hong Kong, South Korea and
Singapore, allowing us to work directly with customers at their facilities to
provide effective design, testing and customer service. Through this network we
are able to provide highly focused design and production services with rapid
time-to-market design and production solutions.
48
<PAGE>
We believe that we are differentiated from our competitors on the following
bases:
. Leadership in Advanced Packaging. We are a leader in developing and
providing advanced semiconductor assembly. We have a proven track record of
introducing innovative packages to the market and in the last two years
have introduced five new types of semiconductor packages, including
advanced tape BGA (TBGA), fine pitch BGA (fpBGA) and leadless plastic chip
carriers (LPCC). We are currently working closely with customers to develop
additional advanced packages for launch in mid to late calendar 2000, such
as flexible BGA (fxBGA), flip chip and CamPak packages, as described more
fully below in "--Assembly of Semiconductor Packages".
. Established High Growth Customer Base. We target customers in high growth
industries, particularly the communications sector. These industries have
the added advantage of having been less susceptible to price and demand
volatility than other industries in recent years, such as the personal
computer and memory markets. Our assembly and testing customer base
includes both established leaders in advanced technology and rapidly
growing emerging companies, such as Altera, Analog Devices, Broadcom,
Conexant, Infineon, Lucent Technologies, Motorola, STMicroelectronics and
Vitesse.
. Demonstrated Capabilities in Complex Mixed-Signal Testing. We have
demonstrated experience in providing complex mixed-signal testing services
to the fast growing communications industry. Mixed-signal testing can be
extremely complex due to the high level of functional integration in mixed-
signal semiconductors. We believe that due to our significant experience in
servicing the mixed-signal testing requirements of the communications
semiconductor industry, we are well positioned to capture a larger portion
of this market both from existing customers and new customers.
. Rapid Time to Volume Production. Through our on-site customer service and
integrated design and assembly facility in Hong Kong, we are able to
rapidly develop and implement packaging solutions for our customers'
complex design and performance requirements. We have teams of customer
application engineers and customer service representatives in Fremont,
California and in four other locations around the United States, as well as
locations in Europe and Hong Kong. These teams work directly with customers
at their facilities to develop packaging solutions. With these capabilities
we can offer our customers assembly and test services adapted to meet the
changing requirements of their end-products while maintaining a rapid time
to volume production.
. Advanced Manufacturing Capabilities. We introduce new, complex packaging
technologies into our manufacturing operations in an efficient and focused
manner. We use computer modelling, computer testing of package designs for
thermal and electrical performance and advanced design capabilities to
address the challenging features of these new technologies and have
developed a comprehensive, flexible and time sensitive approach to
transitioning new packaging technologies into production. This allows us to
provide innovative packaging in high volumes with reduced time to market.
. Experienced Management Team. Our senior managers have on average more than
a decade of experience in the semiconductor industry. Key members of our
engineering and marketing teams have established track records in the
semiconductor assembly and testing industries delivering revenue and
product growth, developing new designs, penetrating new markets, improving
assembly efficiency and streamlining supply chains in the United States,
Europe and Asia.
. Strategically Located Hong Kong Based Operations. We benefit from having
our facilities in Hong Kong, which is Asia's leading communications and
transportation hub with a large, well-educated English speaking labor pool.
Our location in Asia enables us to receive raw materials and distribute
packaged devices rapidly, reduce time-to-market and lower shipping costs.
49
<PAGE>
Strategy
Our strategy is to be the leading developer and provider of advanced
semiconductor assembly and testing services. The principal elements of our
strategy include to:
. Increase Advanced Assembly and Testing Capacity. Demand from our existing
customers for advanced packaging and mixed-signal testing currently exceeds
our capacity. To meet this demand, we plan to significantly increase our
assembly and testing capacity during that time. We believe that by
increasing our capacity to satisfy our customers' current demand and demand
from new customers, we will strengthen our position as a preferred
manufacturing partner for the next generation of semiconductors and end-
applications.
. Increase Mixed-Signal Testing Through Existing Packaging Customers. We
intend to capitalize on our well established advanced packaging customer
base to expand our mixed-signal testing business. We plan to increase the
amount of testing we provide to assembly customers already using our
testing services and commence testing services for our other assembly
customers. To do so, we are expanding our mixed-signal testing capacity and
will seek to increase the number and strength of our strategic
relationships with existing customers. We have developed strategic
relationships with many of our customers through which we provide a turnkey
service involving design, engineering, assembly, testing and drop shipment.
We believe these relationships position us to capture additional assembly
and test outsourcing business, as semiconductor companies generally rely on
firms with which they have established relationships to meet their assembly
and testing needs.
. Continue to Target High Growth, Advanced Technology Industries. We will
continue to focus on leading edge companies in high growth industries that
require advanced semiconductor packaging technologies and testing
solutions. In particular, we are focusing on companies in the
communications industry, many of which use semiconductors that require our
advanced packages and mixed-signal testing capabilities. We believe that
the communications semiconductor market is very attractive because these
semiconductors are used extensively in fast growing communications
applications such as mobile communications, data networking and broadband
communications. With our increased capacity and ability to provide both
advanced assembly and testing services to these companies, we will be well
positioned to provide turnkey solutions to our customers' semiconductor
performance needs.
. Continue Timely Market Introduction of Leading Innovative Packages. We
intend to maintain our leadership in introducing innovative packaging
technology for advanced semiconductors. In the last two years, we have
introduced five new types of advanced semiconductor packages. We intend to
continue working closely with customers to understand their new
semiconductor designs and end-products and to design advanced packaging
solutions for each new generation of products. We recently introduced our
advanced leadless plastic chip carrier product and currently are developing
additional advanced packages for launch in mid to late calendar 2000, such
as, fxBGA, flip chip and CamPak.
. Maintain High Quality of Service to Customers. We will continue to
emphasize providing a superior level of service to customers. We focus on
providing comprehensive and timely solutions to customers' performance
requirements in package design, assembly and testing. We locate customer
application engineers and support personnel near our major customers'
locations to provide prompt and effective service at their facilities. We
also plan to expand our design and engineering services to more fully
participate in the early stages of their design process. We believe our
customers place a premium on this combination of services because they
improve the performance of advanced semiconductor products and enhance our
customers' ability to capture a leading position in the early stages of
product cycles. As our customer base grows, we plan to continue our
interaction with customers by expanding our sales, service and engineering
teams.
50
<PAGE>
Semiconductor Assembly and Testing Services
We offer a broad selection of semiconductor packages, including standard and
advanced leaded and BGA, as well as semiconductor testing services. The
following table sets forth the breakdown of net sales by product category for
the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended April 30,
------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Leaded packages:
Standard.............. $225,107 $164,630 $176,224 $ 82,177 $ 98,215
Advanced.............. 5,010 20,779 32,704 48,578 75,441
-------- -------- -------- -------- --------
Subtotal............. 230,117 185,409 208,928 130,755 173,656
BGA packages:
Standard.............. 11 3,854 10,027 30,678 19,592
Advanced.............. -- 105 4,513 31,429 91,185
-------- -------- -------- -------- --------
Subtotal............. 11 3,959 14,540 62,107 110,777
Testing................. 13,945 13,407 15,855 26,172 27,698
Other................... 15,289 10,733 3,780 1,589 --
-------- -------- -------- -------- --------
Total............... $259,362 $213,508 $243,103 $220,623 $312,131
======== ======== ======== ======== ========
As a percentage of total
net sales:
Leaded packages:
Standard.............. 86.8% 77.1% 72.5% 37.2% 31.5%
Advanced.............. 1.9 9.8 13.5 22.0 24.1
-------- -------- -------- -------- --------
Subtotal............. 88.7 86.9 86.0 59.2 55.6
BGA packages:
Standard.............. 0.0 1.8 4.1 14.0 6.3
Advanced.............. 0.0 0.0 1.9 14.2 29.2
-------- -------- -------- -------- --------
Subtotal............. 0.0 1.8 6.0 28.2 35.5
Testing................. 5.4 6.3 6.5 11.9 8.9
Other................... 5.9 5.0 1.5 0.7 --
-------- -------- -------- -------- --------
Total............... 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
</TABLE>
Assembly of Semiconductor Packages
Semiconductors are an integral component in a wide variety of everyday
products, including telecommunications systems, personal computers, consumer
electronics, office equipment and automotive products. Semiconductor packages
are critical to the chip's performance and functionality and facilitate the
integration of the semiconductor device into the end-product. We offer a wide
range of semiconductor packages for a broad spectrum of electronic products.
Our products can be grouped into three categories: leaded packages, BGA
packages and testing services. In both the leaded and BGA package categories,
we focus our research and development activities, marketing campaigns and
production facilities on advanced packages. Although we have shifted our focus
away from standard to advance packaging over the last several years, we
continue to offer customers a variety of standard packages.
Leaded Packages
Leaded packages are characterized by a semiconductor chip encapsulated in a
plastic mold compound with metal leads surrounding the perimeter of the
package. The chip is attached to a leadframe, which is a multi-site
51
<PAGE>
carrier used in assembly. The chip is then encapsulated in a plastic package,
with the ends of the leadframe 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, reduce the size of packages and enable
multi-chip assembly capability.
The following are illustrations of one of our advanced leaded packages:
Standard Leaded Packages. Standard leaded packages are used in almost every
electronics application, including automobiles, household appliances, desktop
and notebook computers, and telecommunications products. We offer several
types of standard leaded packages to satisfy the variations in our customers'
end-products.
The table below sets forth information regarding our standard leaded
packages(/1/):
<TABLE>
<CAPTION>
Number of
Package Format Leads(2) Description Applications
-------------- --------- ---------------------------------------------- -------------------------------
<S> <C> <C> <C>
Thin Quad Flat Package-- 32-208 QFP with thickness of 1.0 mm for use Mobile phones, notebook
TQFP................... in low profile, space constrained applications computers and hard disk drives
Quad Flat Package--QFP.. 144-208 Package with leads on all four sides attached Networking systems, consumer
to a printed circuit board by surface mounting products and personal computers
Plastic Leaded Chip 28-84 Standard leaded package designed for Personal computers and
Carrier --PLCC......... applications that do not have space consumer electronics
constraints or high numbers of interconnects
</TABLE>
-------------------------------------------------------------------------------
(1)The full names and explanations of these packages and applications are set
forth in the "Glossary of Semiconductor Terms".
(2)Indicates the number of input/output connections between the semiconductor
package and the printed circuit board.
Advanced Leaded Packages. Our advanced leaded packages are similar to
standard leaded packages but have advanced thermal and electrical
characteristics. These advanced characteristics are necessary to maximize the
performance of high frequency semiconductor chips used in sophisticated end-
products. We offer a variety of lead counts and body sizes within this
packaging group.
EDQUAD. Our major patented class of advanced leaded products is EDQUAD.
This group of packages is designed specifically for applications that
require significantly higher thermal and electrical performance than
standard plastic packages can provide.
52
<PAGE>
LPCC. In addition to the packages listed in the table below, we recently
introduced our Leadless Plastic Chip Carrier, or LPCC, packages, a new
class of advanced packaging that could replace current standard leadframe
packages. LPCCs are designed for use in mobile communications, particularly
cellular telephones, and analog to digital interfaces. These packages are
based on a new technology which relies on conventional lead frames as base
material. Unlike traditional leadframe packages, however, the leads in LPCC
packages do not protrude from the package but are flush with the package
surface. LPCCs are chip scale packages with a high density lead count and
improved thermal and electrical performance similar to BGAs, a combination
that enhances board level performance. LPCCs can be manufactured using
conventional tooling, and therefore do not require large scale capital
expenditures.
CamPak. We are developing our CamPak package for use in digital imaging
applications such as fingerprint recognition systems, digital cameras and
video conferencing. This package is a transparent leaded package that
serves to direct images onto the enclosed semiconductor chip. The chip then
converts the image into a digital signal. We are developing CamPak in
response to a customer's interest in replacing aspects of its existing
digital imaging technology. We expect to start the qualification process
during mid to late calendar 2000.
The table below sets forth information regarding our advanced leaded
packages(/1/):
<TABLE>
<CAPTION>
Number of
Package Format Leads(2) Description Applications
-------------- --------- ---------------------------- ------------------------
<S> <C> <C> <C>
Enhanced Dissipation
Quad Flat Pack EDQUAD-- 32-240 Advanced leaded product with Microcontrollers,
QFP.................... significantly better thermal advanced logic and
and electrical performance networking systems,
than conventional plastic advanced testing
packages equipment
EDQUAD Shrink Small
Outline Package--
EDQUAD--SSOP........... 16-28 Thermal enhancement of SSOP Microcontrollers,
packages designed for advanced logic and
portable products which networking systems,
require reduced size and advanced testing
weight equipment
SLUG--QFP............... 32-240 Thermally enhanced QFP with Microcontrollers,
a copper slug attached to advanced logic and
the back of the chip paddle networking systems,
advanced testing
equipment
Integrated Thermally
Enhanced QFP--INT-TEP- 128-208 Thermally enhanced QFP with Microcontrollers,
QFP.................... an aluminum flag attached to advanced logic and
the back of the chip paddle networking systems,
advanced testing
equipment
Leadless Plastic Chip
Carrier Package-LPCC... 8-196 Enhanced thermal and Mobile communications,
electrical performance analog to digital
leaded product with leads interfaces
that are flush with surface
CamPak (under 44 Transparent leaded package Fingerprint recognition
development)........... developed for digital systems, digital
imaging cameras,
video conferencing
</TABLE>
-------------------------------------------------------------------------------
(1) The full names and explanations of these packages and applications are set
forth in the "Glossary of Semiconductor Terms".
(2) Indicates the number of input/output connections between the semiconductor
package and the printed circuit board.
Ball Grid Array Packages
Ball grid array, or BGA, assembly represents the newest and fastest growing
area in the semiconductor assembly industry. BGA technology is used primarily
in high-growth end markets, including hand held consumer
53
<PAGE>
products such as wireless products, personal digital assistants and video
cameras, computing platforms and networks such as high speed
telecommunications switching stations and routers and consumer electronic
products such as digital video disk players and home video game machines.
BGA technology was first developed to accommodate the increasingly high lead
counts required for advanced semiconductors and to provide an increased
circuit density per unit area. In a typical BGA package, the semiconductor
chip is placed on top of a laminate (plastic or tape) substrate rather than a
leadframe. The chip 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 solder balls that connect the
packaged device to a printed circuit board.
BGA packages generally provide semiconductor manufacturers numerous benefits
over leaded packages, including:
. smaller package size;
. more leads per unit area and higher circuit density;
. greater reliability;
. reduced likelihood of damage during handling;
. better electrical and thermal performance; and
. ease of attachment to a printed circuit board.
The following are illustrations of one of our advanced BGA packages:
As with leaded packages, BGA packages can be categorized into standard and
advanced packages.
Standard BGA Packages. Standard BGA packages have a grid array of balls on
the underside of the integrated circuit, and are utilized in high-performance
applications such as personal computer chipsets, graphics controllers and
microprocessors.
54
<PAGE>
The following table sets forth information regarding our standard BGA
packages(/1/):
<TABLE>
<CAPTION>
Package Number of
Format Leads(2) Description Applications
------- --------- ---------------------------------------- ---------------------------
<S> <C> <C> <C>
Plastic 225-388 Standard BGA package Personal computer chipsets,
Ball Grid graphics controllers and
Array-- microprocessors
PBGA.....
BGA 119-208 BGA package with a transfer Personal computer chipsets,
Overmold-- molded encapsulent graphics controllers and
BGA-OM... microprocessors
BGA--GT... 119-208 BGA package with a dispersed epoxy Personal computer chipsets,
encapsulation and higher circuit density graphics controllers and
microprocessors
</TABLE>
-------------------------------------------------------------------------------
(1) The full names and explanations of these packages and applications are set
forth in the "Glossary of Semiconductor Terms".
(2) Indicates the number of input/output connections between the semiconductor
package and the printed circuit board.
Advanced BGA Packages. We specialize in developing and assembling leading
edge BGA packages. We currently offer our customers a variety of advanced
packages and are in the process of designing additional packages as our next
generation of advanced BGA packages. The primary differences between standard
and advanced BGA packages are their electrical and thermal performance levels.
TBGA. Tape BGA packages have higher density than our other standard BGA
packages and are designed for use in complex semiconductor products such as
high speed test systems, wireless communications systems and networking
systems.
Two Layer TBGA. We are currently developing two layer TBGA, which is a two
level tape process that improves electrical performance. This further
enhances the TBGA to allow it to operate at even higher frequencies. This
product is designed for use in complex, high speed applications, such as
internet routers.
Chip Scale Family. The chip scale family includes packages which are
slightly larger than a semiconductor chip and have a substrate base. Chip
scale packages are designed for high pin count semiconductors that require
dense ball arrays in very small package sizes, such as wireless telephones,
personal digital assistants, video cameras, digital cameras and wireless
pagers. Within the chip scale family of packages, we currently offer fpBGA
and are developing fxBGA, a new, flexible BGA package to be introduced in
2000. Our fxBGA packages are thinner, have higher circuit density and
improved electrical and thermal performance.
Flip Chip Packages. Like BGA, flip chip packages use balls to connect to the
printed circuit board. Within the flip chip package, however, the chip is
connected to these balls by the use of an array of solder bumps on the
bottom of the chip as opposed to the traditional method used in BGA of wire
bonding the chip to the balls. This method of attachment further improves
thermal and electrical performance of the chip and enables a higher density
of interconnections which facilitates smaller packages. Flip chip
technology can be used in a wide array of applications ranging from
consumer products to highly sophisticated application specific integrated
circuits, digital signal processors, and memory packages. Flip chip
technology is considered by many in the semiconductor industry to be the
next generation of BGA packaging technology. We intend to offer flip chip
packages to our customers during late calendar 2000.
55
<PAGE>
The following table sets forth information regarding our advanced BGA
packages(/1/):
<TABLE>
<CAPTION>
Number of
Package Format Leads(2) Description Applications
-------------- --------- ------------------------------------------- ---------------------------------------
<S> <C> <C> <C>
Tape BGA--TBGA.......... 208-352 High performance thermal and electrical High speed test systems, wireless
BGA package communication systems and
networking systems, set top boxes
Two Layer TBGA.......... 256-440 Two layer tape process that improves Complex, high speed applications
electrical performance such as internet routers
Fine Pitch BGA--fpBGA... 36-600 A BGA in the chip scale family mounted Wireless telephones, personal digital
on tape substrate that has a solder ball assistants, video cameras, digital
pitch of less than 1.0 mm cameras and wireless pagers
Flexible BGA--fxBGA..... 36-600 A new and flexible advanced BGA in the Wireless telephones, personal digital
chip scale family package that is thinner, assistants, video cameras, digital
has a higher circuit density and improved cameras and wireless pagers
electrical and thermal performance
Flip Chip (under 600+ Semiconductor chip that uses the latest High end wireless telephones and
development)........... interconnect technology and improves personal digital assistants, networking
density, electrical and thermal performance systems and set top boxes
</TABLE>
-------------------------------------------------------------------------------
(1) The full names and explanations of these packages and applications are set
forth in the "Glossary of Semiconductor Terms".
(2) Indicates the number of input/output connections between the semiconductor
package and the printed circuit board.
Testing Services
We provide testing services for digital logic, analog and mixed signal
products. Testing is the final stage in semiconductor production and involves
using sophisticated test equipment and programs to electronically test
different operation specifications of the semiconductor, including
functionality, voltage, current and timing. We are able to test semiconductor
chips upon initial delivery from the foundry as well as when they are packaged
and ready for integration into the end-product. We have engineers and testing
personnel located globally who work closely with customers at their facilities
to develop testing programs and provide testing services.
Mixed-Signal Testing. We specialize in mixed-signal testing, which we began
providing in 1993. We test a variety of mixed-signal semiconductors, including
those used in communications applications such as network routers and
switches; broadband products such as internet and set-top boxes; mobile
telecommunications products such as cellular phones and wireless networks and
consumer electronics products such as personal digital assistants and video
games. Mixed-signal testing involves testing both analog and digital functions
on a single chip. Mixed-signal semiconductors require a large number of
parameters to be tested and a more precise level of measurement of the analog
functions. This in turn requires specialized testing equipment and a high
degree of engineering capability. Our team of engineers has over 35 years of
combined experience in mixed-signal testing with companies such as Analog
Devices, Intel, Texas Instruments and Philips.
Digital Testing. We test a variety of digital semiconductors, including high
performance semiconductors used in personal computers, disk drives, modems and
networking systems. Specific digital semiconductors tested include digital
signal processors, field programmable gate arrays, microcontrollers, central
processing units and application specific integrated circuits.
Design Services
We have a dedicated team of engineers in Hong Kong and the United States to
provide design services and computer modelling. These services focus on both
thermal and electrical performance to ensure that our customers' packaged
semiconductor devices can operate at optimal levels. When the selection of a
package is critical to the overall development of a semiconductor device, our
design engineers select, design and develop the appropriate package for that
device by simulating the semiconductor's performance and end-use environment.
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<PAGE>
Research and Development
We focus our research and development efforts on developing new package
designs and assembly processes and on improving the performance of our
existing packages. We believe that providing timely and effective improvements
in assembly technology is a key factor for success in the advanced packaging
market. We believe we have a distinct advantage in this area. We have a proven
track record of introducing innovative packages to the market. In the last two
years, we have introduced five new types of semiconductor packages, including
our TBGA, fpBGA and LPCC packages. We are currently developing additional
advanced packages for launch in mid to late calendar 2000, such as our fxBGA,
flip chip and CamPak packages. For a further explanation of these packages,
see above "Assembly of Semiconductor Packages--Leaded Packages" and "Assembly
of Semiconductor Packages--Ball Grid Array Packages".
We work closely with our customers to ensure that our assembly and testing
services meet our customers' changing needs. Our design and engineering teams
participate in the early stages of our customers' design process to better
understand the requirements of their end-products. We have teams of customer
application engineers at five locations around the United States and in Hong
Kong to work directly with customers at their facilities. This coordination
with customers allows us to develop timely and innovative package designs to
meet their needs. As an example, we developed our fpBGA, BGA-GT and CamPak
packages through these interactive relationships with customers.
In addition to our internal development work and co-development work with
our customers, we also work closely with our equipment and material suppliers
in developing advanced processing capabilities and materials for use in our
assembly processes.
Marketing, Sales, Distribution and Customer Support
We sell our packaging and test services to our customers and support them
through a network of international offices. To better serve our customers, our
offices are located near our largest customers or near a concentration of
several of our customers. Our offices and representatives are located in the
United States (California, Arizona, Texas, Massachusetts, North Carolina and
South Carolina), Hong Kong, South Korea, the Netherlands, Switzerland and
Singapore. We offer global drop shipment services, whereby we deliver packaged
semiconductors to destinations in any part of the world as instructed by our
customers, including to their end-customers.
We dedicate account managers and support sales staff, application engineers
and customer service representatives to work as teams in servicing customers.
Each of these teams focused on specific customers and/or geographic regions.
As part of this emphasis on customer service, these teams:
. actively participate in the design process at the customers' facilities;
. resolve customer assembly and testing issues; and
. promote timely and individualized resolutions to customers' issues.
Our marketing efforts focus on creating a brand awareness and familiarity
with ASAT and our high-end advanced packaging and testing services. We
emphasize our position as a leader in BGA and advanced leaded packaging and
mixed-signal testing and our focused strategy of providing our customers
comprehensive solutions to their technological requirements. We focus our
marketing efforts on publishing research articles in trade journals and
periodicals, holding technical seminars for advanced packaging engineers and
making technical presentations to our customers' end customers.
Customers
We provide semiconductor assembly and testing services to over 110 customers
worldwide. Substantially all of our customers are either U.S. multinational
companies or European multinational companies. We design,
57
<PAGE>
assemble and test semiconductor packages for end-applications in a variety of
industries. During the fiscal year ended April 30, 2000, 81% of our total net
sales was from assembling and testing semiconductors for communications
semiconductors, 4% from semiconductors for personal computer applications and
the remainder from semiconductors for consumer products and field programmable
logic applications. The table below sets forth information regarding a number
of our customers that are important to our business in terms of percentage of
revenues, volume, strategic relationships, advanced technology demand or
potential growth:
<TABLE>
<CAPTION>
Industry Customers Applications(/1/)
---------------------- ----------------------------------- --------------------------------------------
<S> <C> <C>
Wireless Communication Analog Devices, Inc., Infineon Cellular phones for Alcatel, Bosch,
Technologies Corporation, Ericsson, Motorola, Nokia, Siemens and
Lucent Technologies, Inc., Sony; Global Positioning System
Motorola, Inc., products
STMicroelectronics N.V.
Networking/Broadband Altera Corporation, Broadcom Cable modems; ethernet; high speed
Communication Corporation, Conexant Systems, networking applications; digital
Inc., CommQuest Technologies communication applications; internet set-top
(IBM), Vitesse Semiconductor boxes; network servers and routers;
Corporation optical network systems
Consumer Multimedia Analog Devices, Inc., Philips Camcorders; CD and DVD players;
Electronics N.V., Texas Instruments digital cameras; fingerprint recognition
Inc., VLSI Technology, Inc. systems; home audio and video
entertainment; mobile communications
interface; personal digital assistants;
professional audio applications; set-top
boxes for direct satellite broadcast; video
capture applications
Automotive STMicroelectronics N.V., Temic Automotive entertainment;
Semiconductors (Atmel) instrumentation and systems
Computer Systems and Adaptec, Inc., National CD-recordable products; co-processors;
Peripherals Semiconductor Corporation, Lucent central processing units; high speed
Technologies, Inc., VLSI interfaces; power management systems;
Technology, Inc. printers; system controllers
</TABLE>
-------------------------------------------------------------------------------
(1) An explanation of these applications is set forth in the "Glossary of
Semiconductor Terms".
Many of our customers are leading telecommunications and networking product
manufacturers, whose products require sophisticated semiconductor
capabilities. Our success in becoming a leading provider of advanced BGA and
other advanced technology is due in significant part to (1) our strong
relationships with these customers and (2) our dedication to working closely
with them to develop innovative solutions for their increasingly complex
semiconductor performance requirements. For the fiscal year ended April 30,
2000, our largest single customer accounted for approximately 16% of our net
sales, our top ten customers accounted for approximately 77% of net sales and
each of Motorola, Analog Devices and Broadcom accounted for 10% or more of our
net sales.
Operations and Facilities
Our headquarters, administrative offices and assembly operations are located
in a 250,000 square foot facility in Hong Kong. In this facility, we currently
operate 510 wire bonders. We recently purchased an additional 131,000 square
foot testing facility in Hong Kong that is close to our existing facility. We
have moved our Hong Kong testing operations to this new facility. In this
facility we currently operate 33 testers. We expect our combined facilities
could accommodate approximately 990 wire bonders and 120 testers. We intend to
use the extra space in our existing building to expand our assembly
operations. We expect that our combined facilities will provide us sufficient
space
58
<PAGE>
for our planned expansion of our assembly and testing operations. In addition,
we also have an option to rent an additional 100,000 square feet in our
current Hong Kong building. We lease our current Hong Kong facility from QPL
under a lease with a five year term and have an option to renew for an
additional five years.
We believe that total quality management is a key element of our
semiconductor assembly operations. Our 250,000 square foot facility in Hong
Kong is ISO 9001, ISO 9002, QS-9000 and SAC level 1 certified. ISO 9001 and
9002 are worldwide manufacturing quality certification programs regarding
product design and industrial quality that are administered by an independent
standards organization. QS 9000 is a manufacturing quality certification
program administered by an independent standards organization that is used
primarily by United States automotive manufacturers. SAC level 1 is a
worldwide manufacturing quality certification program administered by the
Subcontractor Assembly Council for which assemblers must be sponsored by a
major customer. We have also received the Hong Kong Governor's Award for
Quality Achievement and are working towards receiving an ISO 14001
certification for environmental control.
Suppliers
The principal materials used in our assembly process are rigid and flexible
substrates, leadframes, gold wire and molding compound. We work closely with
our primary materials suppliers to insure that materials are available and
delivered on time. We are not dependent on any one supplier for our
substrates, gold wire or molding compounds. In the ordinary course of
business, we purchase substantially all of our leadframe requirements from QPL
Limited, a wholly owned subsidiary of QPL, and the remaining amount from three
to four other suppliers. We purchase our substrate requirements from several
suppliers in Japan, Korea and Hong Kong. We purchase our wire bonders from
major international manufacturers, including Kulicke & Soffa Industries and
ESEC and our testing equipment from Teradyne Inc., Credence Systems
Corporation and LTX Corporation. Other than our arrangement with QPL for
leadframes, we have no significant supply contracts or arrangements with any
supplier of materials. See "Risk Factor--Inadequate supplies of key materials
such as ball grid array substrates, leadframes and gold wires could adversely
affect our semiconductor assembly operations. This would limit our ability to
grow". Generally, our customers agree to purchase from us any unused materials
that we purchase to meet their demand forecasts. We believe such agreements
are becoming customary for the semiconductor assembly industry.
We periodically purchase equipment through several suppliers to meet our
assembly and testing requirements. We work closely with major suppliers to
insure that equipment is delivered on time and that the equipment meets our
stringent performance specifications.
Competition
There are over 40 companies worldwide providing independent semiconductor
assembly and testing services. We believe our primary competitors are Advanced
Semiconductor Engineering, Inc., Amkor Technology, Inc., ASE Test Limited,
ChipPac, Inc., Siliconware Precision Industries Co., Ltd., and ST Assembly
Test Services Ltd. We also compete with the internal assembly and testing
resources of many of our largest customers. We compete indirectly with other
semiconductor assemblers, many of whom only focus on specific geographic
regions or do not provide advanced packaging.
We believe the principal elements of competition in the overall independent
semiconductor assembly market include technical competence, sophistication of
design services, quality, time-to-market, array of assembly services,
production yields, customer service and price. In the area of test services,
we compete on the basis of quality, cycle time pricing, location, available
capacity, engineering capability, technical competence, customer service and
flexibility. We believe that generally we compete favorably in these areas. In
addition, we believe that competition in the advanced BGA, advanced leaded
packaging and testing industries centers primarily on service, technology and
expertise.
In general, our customers principally rely on at least two independent
assembly and test providers. Semiconductor assembly and test providers must
pass a lengthy and rigorous qualification process that typically can take from
three to six months. In addition, customers incur substantial costs in
qualifying each new
59
<PAGE>
semiconductor assembler. Due to these factors and the heightened time-to-
market demands of semiconductor end-users, semiconductor manufacturers incur
significant costs in switching assembly and test providers and thus are often
reluctant to change or add their providers.
Each of our primary competitors has significant assembly and testing
capacity, financial resources, research and development operations, marketing
and other capabilities, and has been operating for some time. These companies
have also established relationships with many large semiconductor companies
which are our current or potential customers.
Backlog
Because of the fast-changing technology and functionality of semiconductor
chip design, customers requiring semiconductor assembly and testing services
generally do not place purchase orders far in advance. However, we engage in
discussion with customers starting as early as three months in advance of the
placement of purchase orders regarding such customers' expected assembly and
testing requirements. In addition, our customers generally agree to purchase
from us any unused materials that we purchase to meet their forecasted demand.
While we have long term sales arrangements with a number of customers, our
customers generally may cancel or reschedule orders without significant
penalty. Accordingly, our backlog as of any particular date may not be
indicative of our future sales.
Employees
As of April 30, 2000, we employed approximately 2,295 full-time employees,
of whom 43 were employed in research and development, 1,605 in assembly, 115
in testing services, 330 in quality control and assurance, 112 in marketing,
sales and customer services and 90 in administration. We believe our
relationship with our employees is generally good.
Intellectual Property
We have obtained or applied for patents in the United States relating to a
number of our advanced semiconductor packages. In addition, we have entered
into patent and cross-licensing agreements with leading companies in the
semiconductor industry including Motorola and VLSI Technology (Philips
Electronics). Through these agreements, we have use of technologies and
patents related to packages developed by these leading industry players. Our
primary trademarks, trade names and service marks are "ASAT" and "Total
Testing Services".
We believe that our continued success depends in large part on the
technological skills of our employees and their ability to continue to
innovate. While we will continue to file patent applications when appropriate
to protect our proprietary technologies, we will also encourage our employees
to continue to invent and innovate so as to maintain our competitiveness in
the international marketplace.
Although we are not currently a party to any material litigation regarding
intellectual property, the semiconductor industry is characterized by frequent
claims regarding patent and other intellectual property rights. If a third
party were to bring a valid legal claim against us, we could be required to:
. discontinue the use of any of our processes considered infringing;
. cease the manufacture, use, import and sale of infringing products;
. pay substantial damages;
. develop non-infringing technologies; or
. acquire licenses to the technology that we had allegedly infringed.
We may also need to enforce our patents and other intellectual property
rights against infringements. If any of the above events occurs, we could
incur substantial costs.
60
<PAGE>
Environmental Matters
Semiconductor assembly and testing services produce a small amount of
chemical waste. Since our assembly facility is located in Hong Kong, disposal
and storage of chemical waste from our assembly and testing services are
subject to Hong Kong laws and government regulations which impose various
controls on the generation, storage, handling, discharge, treatment,
transportation and disposal of chemicals. For instance, a manufacturing
facility is required under Hong Kong law to obtain a license from the
government before it can dispose of chemical waste.
Historically we have shared chemical waste treatment and disposal facilities
with QPL, whose leadframe manufacturing operations are located in the same
building as our assembly operations. QPL has obtained the required license
from the Hong Kong government to operate its waste treatment facility pursuant
to which it disposes of chemical waste generated by our facility in Hong Kong.
The license must be renewed annually. Following our recapitalization, we began
sharing these chemical waste treatment and disposal facilities through a long
term agreement with QPL pursuant to which we pay QPL a portion of the costs
associated with our use of the facilities. We do not expect to incur
significant costs relating to our waste disposal under this arrangement. See
"Risk Factors--Environmental, health and safety laws could impose material
liability on us and could require us to incur material capital and operational
costs. Any new regulatory developments are beyond our control, and our
financial condition may be negatively affected if we are required to incur
significant costs of compliance".
The directors believe that we have been and are currently in material
compliance with all the environment-related laws and regulations in Hong Kong.
We do not anticipate making material environmental capital expenditures in
connection with our current operations. We cannot predict whether future
environmental, health and safety laws will require additional capital
equipment or impose other process requirements upon us, curtail our
operations, or restrict our ability to expand our operations. We could be
subject to material liabilities if the government adopts new environmental,
health and safety laws, we fail to comply with new or existing laws, or other
issues relating to hazardous substances arise.
Legal Proceedings
We are not a party to any legal proceedings, the outcome of which the
directors believe would have a material adverse effect on our business,
financial condition or results of operations.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information about the persons who serve as
executive officers and directors of ASAT. Executive officers are appointed by,
and serve at the discretion of, the Board of Directors. All directors hold
office until they resign, are removed or otherwise vacate their office.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jerry Lee........... 58 Director and Chief Executive Officer
Terence Scandrett... 57 Director and Chief Financial Officer
James Healy......... 60 Senior Vice President of Worldwide Sales and Marketing
John Lo............. 48 Senior Vice President of Operations
Joseph Martin....... 51 Senior Vice President of Strategic Planning
Edward Combs........ 54 Vice President of Engineering
Jerry Herrera....... 39 Vice President of Operations
Neil Mclellan....... 38 Chief Technology Officer
Jimmy Ng............ 41 Vice President of Quality Control
Christopher 33 Vice President of Asia/European Sales
Buckley............
Andrew Liu.......... 44 Director and Chairman
Edward Cheng........ 44 Director
Henry Cheng......... 53 Director
Tung Lok Li......... 47 Director
Lawrence Miao....... 35 Director
Gordon Campbell..... 55 Director
Maura Wong.......... 34 Director
</TABLE>
Jerry Lee was hired in September 1999 in connection with our
recapitalization. From 1998 until joining ASAT, Mr. Lee served as Senior Vice
President of SCI Systems, Inc., an electronics manufacturer with $7.0 billion
of sales, where he headed the Asian division. From 1996 until 1998, Mr. Lee
was President of Alpha-TI Ltd., a joint venture wafer fabrication facility in
Thailand and from 1993 to 1995 he was Vice President of International
Operations for Read-Rite, Inc., a corporation with operations in Thailand,
Malaysia and Singapore. Mr. Lee served with Texas Instruments for 28 years in
various capacities, mostly semiconductor related and primarily in
semiconductor assembly and test, the most recent of which was Managing
Director and Country Managing Director of TI Malaysia Sdn. Bhd. Mr. Lee
received an undergraduate degree in science from Texas A&M University.
Terence Scandrett was hired in August 1999 in connection with our
recapitalization. From 1994 until joining ASAT, Mr. Scandrett served as Group
Finance Director of The Grande Holdings Limited, Hong Kong, a manufacturer of
computer monitors and consumer audio products with approximately $1.0 billion
of sales. Between 1964 and 1994, Mr. Scandrett held several positions with
Ernst & Young Canada, most recently as a Senior Audit Partner in the firm's
Toronto office. During his years with Ernst & Young Canada, he also served as
the Partner-in-Charge of the firm's Hong Kong office for five years. Mr.
Scandrett received an undergraduate degree in economics from the University of
Western Ontario, Canada. He is a Chartered Accountant and a Fellow Member of
the Hong Kong Society of Accountants.
James Healy recently joined ASAT. From May 1998 until joining our company,
Mr. Healy was the Executive Vice President of Sales & Marketing, and General
Manager of the WOW Business Unit at FormFactor, Inc., a manufacturer of
process technologies and interfaces. From 1996 to 1998, Mr. Healy was the
President & CEO of Genus Corporation, a manufacturer of semiconductor
fabrication equipment. Mr. Healy has had extensive experience with
semiconductor testing and test equipment manufacturing companies, including as
President and CEO of Credence Systems and in various capacities at Trillium
Corporation (LTX Corporation), GenRad Semiconductor Test Inc. and Fairchild
Semiconductor Corporation (Test Systems Division). Mr. Healy has a Bachelor's
degree and a Master's of Science degree from California State University at
Hayward.
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<PAGE>
John Lo has been with ASAT since May 1999. From 1986 until joining ASAT, Mr.
Lo was Vice President of Operations at Hana Technologies where he was
responsible for semiconductor packaging operations. From 1978 to 1986, Mr. Lo
was the Group Accountant in Swire Pacific Limited. Mr. Lo was Senior Manager
at KPMG in Hong Kong in the auditing department from 1972 to 1978. Mr. Lo is a
certified public accountant and a Fellow Member of the Chartered Association
of Certified Accountants and Hong Kong Society of Accountants.
Joseph Martin has been with ASAT since 1993. From 1983 until to joining
ASAT, Mr. Martin served as Vice President of European Sales and Vice President
of Marketing for advanced products for Amkor Electronics. From 1981 to 1983,
Mr. Martin held several sales and managerial positions with TRW and prior to
1981 he held positions in factory and engineering management at Thompson CSF
and Texas Instruments. Mr. Martin received an undergraduate degree in
chemistry from Lamar University.
Edward Combs has been with ASAT since 1987 and previously served as
Executive Vice President of Customer Engineering at ASAT Inc. From 1985 until
joining ASAT, Mr. Combs served as Vice President of Sales and Marketing at
Swire Technologies, and as Operations Manager at Amkor from 1980 to 1985. Mr.
Combs attended San Diego State University and holds several U.S. and
international patents in semiconductor packaging.
Jerry Herrera has been with ASAT since 1989. From 1986 until joining ASAT,
he worked at Swire Technologies in Hong Kong, where he was primarily
responsible for process development and engineering. From 1982 to 1986, he
worked for the manufacturing division of AMD in the Philippines. Mr. Herrera
received an undergraduate degree in electronics and communications and
engineering from University of Santo Tomas, Philippines.
Neil Mclellan has been with ASAT since 1996. From 1993 until joining ASAT,
he was with Dallas Semiconductor and with Texas Instruments from 1989 until
1993. Mr. Mclellan holds approximately 10 U.S. and international patents in
semiconductor packaging. Mr. Mclellan received a bachelor of science degree in
materials science from Rice University and an MBA from Southern Methodist
University.
Jimmy Ng has been with ASAT since 1989. From 1986 until joining ASAT, Mr. Ng
was with Swire Technologies in Hong Kong, where he was primarily responsible
for engineering. From 1984 to 1986, Mr. Ng worked with National Semiconductor
(Malaysia) and from 1981 to 1984 he worked with Motorola (Malaysia). Mr. Ng
received an undergraduate degree in mechanical and production engineering from
Leeds University, U.K.
Christopher Buckley has been with ASAT since 1990. He has held various
position in ASAT, including Vice President/General Manager, Director of Asia
Sales and Manager of customer services. From 1988 until joining ASAT, he
worked at Integrated Device Technology in Santa Clara, California as a
production control analyst, where he was primarily responsible for analyzing
and forecasting production capacities for its Sub-System Division. Mr. Buckley
also serves as a director on the Board of ASAT France. Mr. Buckley holds a
bachelor of science degree in economics from Santa Clara University.
Andrew Liu was appointed as a director in connection with our
recapitalization on October 29, 1999 and was recently appointed as Chairman of
our Board of Directors. Mr. Liu is the Chief Executive Officer of Chase
Capital Partners Asia. Mr. Liu heads a team of investment professionals
responsible for advising the Chase Asia Investment Fund and the Asia
Opportunity Fund, private investment funds with a combined committed capital
of $1.1 billion. Mr. Liu is also a non-Executive Director of Liu Chong Hing
Bank Limited, a commercial bank based in Hong Kong. He was an Executive
Director of the Bank from September 1997 to May 1999. Mr. Liu joined Morgan
Stanley in 1981 and from 1990 through 1997 was President and Managing Director
of Morgan Stanley Asia Limited. From 1993 to 1997, Mr. Liu was a member of the
Stock Exchange Council of Hong Kong and was also a member of its Listing
Committee.
Edward Cheng was appointed as a director in connection with our
recapitalization on October 29, 1999 and is a member of our audit committee.
Mr. Cheng currently is the Chief Executive of USI Holdings Limited and the Co-
Chairman of SUNDAY Communications Limited. USI, a publicly listed company on
the Hong Kong
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Stock Exchange, is a member of the Wing Tai Asia Group. Mr. Cheng has held
several positions with The Wharf Group from 1987 to 1994, including Executive
Director responsible for Group Finance, Group Corporate Affairs and the Hotel
Group. From 1985 to 1987, he was with the Hutchison Whampoa Group in China
business development. Mr. Cheng currently is a member of the Hong Kong SAR
Government's Mandatory Provident Fund Schemes Appeal Board, the Securities and
Futures Commission's Takeovers and Mergers Panel and the Takeovers Appeal
Committee, the Operations Review Committee of the Independent Commission
Against Corruption, and the Executive Committee of the Hong Kong Housing
Society.
Henry Cheng was appointed as a director in connection with our
recapitalization on October 29, 1999 and is a member of our audit committee.
Dr. Cheng joined the New World Group, a major Hong Kong conglomerate, in 1972.
He is Managing Director of New World Development Company Limited, a publicly
listed company on the Hong Kong Stock Exchange, and Chairman of four other
listed companies in the New World Group. Dr. Cheng is a director of Marriott
International Inc. and HKR International Limited. He is the Chairman of the
Advisory Council for The Better Hong Kong Foundation; Chairman of the Advisory
Panel of the Asian Management Institute, University of Western Ontario; a
member of the Advisory Committee for the Harvard Asia Center and the Asian
Advisory Board of the Prudential Insurance Company of America. He is also a
Committee Member of the Eight & Ninth Chinese People's Political Consultative
Committee of the People's Republic of China. Dr. Cheng received an
undergraduate degree and an MBA from the University of Western Ontario and has
also been awarded honorary doctorates by the Johnson & Wales University, Rhode
Island, and the University of Western Ontario.
Tung Lok Li was previously Chairman of ASAT's Board and has served as the
Chairman of the Board of QPL International Holdings Limited and QPL (Holdings)
Limited since their formation and has served as Chairman of the Board of Peak
Plastic since 1990. Mr. Li holds a bachelor of science degree in chemical
engineering from the University of Wisconsin, Madison.
Lawrence Miao was appointed as a director in connection with our
recapitalization on October 29, 1999. Mr. Miao is a Managing Director and one
of the co-founders of Olympus Capital. From 1994 through 1997, Mr. Miao served
as Executive Director of both Hopewell Holdings Limited and Consolidated
Electric Power Asia, two of Hong Kong's largest developers of private
investment projects. His primary responsibilities included the formation and
management of joint ventures and local partnerships throughout Asia. Mr. Miao
remains on the Board of Directors of Hopewell Holdings Limited. Mr. Miao holds
an MBA from the Stanford Graduate School of Business Administration and a BA
degree from the Woodrow Wilson School for International Affairs at Princeton
University.
Gordon Campbell was recently appointed as a director of ASAT and is a member
of our audit committee. Mr. Campbell has founded and operated numerous Silicon
Valley technology companies, including SEEQ Technology, CHIPS and
Technologies, Inc., 3dfx Interactive and most recently Techfarm. Mr. Campbell
has held positions in engineering, sales, marketing and management at
Honeywell, Intersil and Motorola. Mr. Campbell has pioneered many
technological innovations in the semiconductor industry and has been a driving
force in establishing the fabless semiconductor industry. Mr. Campbell
currently serves as Chairman of the Board of Directors at numerous portfolio
companies, including 3dfx Interactive and Cobalt Networks, and various other
Boards of Directors including Palm, Inc. and Bell Micro.
Maura Wong was recently appointed as a director. Ms. Wong is a Managing
Director of Chase Capital Partners Asia with responsibilities for the private
equity funds' activities in Hong Kong, China and Taiwan. From 1996 to 1999,
she was Vice President of Exor Asia Limited, the international investment
holding company of the Agnelli Group. Prior to that, Ms. Wong was Head of
Business Development of Pacific Century Group, a venture capital group engaged
in technology, telecommunications and financial services in Asia. Before
joining Pacific Century Group, Ms. Wong worked at Goldman Sachs in both New
York and Asia. Ms. Wong received an MBA from Harvard Business School as a
Baker Scholar. She also holds a BA degree from the Woodrow Wilson School for
International Affairs at Princeton University.
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<PAGE>
Board of Directors
Under the Articles of Association, the Board consists of nine directors, at
least three of which shall be independent directors. Shareholders are entitled
to re-elect the Board of Directors at each annual general meeting. Vacancies
on the Board can be filled by a majority of the directors present at a Board
meeting and vacancies of independent director seats also requires approval by
a majority of the independent directors.
Pursuant to the shareholders agreement among the investor group and QPL,
those parties have agreed to vote their shares so that: (1) three of the
directors are individuals selected by QPL, (2) three of the directors are
individuals selected by AOF and (3) three of the independent directors are
individuals selected by AOF and nominated by QPL, subject to decrease as their
respective shareholding decreases. See "Principal Shareholders--Shareholders
Agreement". The investor group and QPL also agreed that as their respective
shareholding decreases below specified thresholds, they will cause a related
number of directors which they previously appointed to resign and those seats
shall be filled by nominee(s) approved by a majority of the continuing
directors present at a Board meeting and a majority of the independent
directors.
Duties of Directors
Under Cayman Islands laws, the directors have a duty of loyalty and must act
honestly and in good faith and in our best interests. The directors also have
a duty to exercise the care, diligence, and skills that a reasonably prudent
person would exercise in comparable circumstances. In fulfilling their duties
to us, the directors must ensure compliance with the Memorandum and Articles
of Association and the class rights vested thereunder in the holders of the
shares. A shareholder may have rights to damages if a duty owed by the
Directors is breached.
Compensation of Directors
ASAT reimburses members of the board of directors for any out-of-pocket
expenses incurred by them in connection with services provided in such
capacity. Although ASAT is permitted to compensate its independent directors
for services provided in such capacity, it currently does not pay any
compensation to its independent directors.
We have entered into an agreement with Mr. Tung Lok Li under which he
provides us strategic planning and sales development services for our assembly
and testing services. Under the agreement, we will pay Mr. Li $1.0 million
annual compensation which is subject to a yearly review by our Board of
Directors.
Executive Compensation
For the year ended April 30, 2000, ASAT paid an aggregate compensation to
its executive officers and directors as a group of approximately $4.6 million.
Assuming our recapitalization had occurred on May 1, 1999, this aggregate
compensation would have increased to $5.1 million. For the year ended April
30, 2000, the aggregate amount accrued by us to provide pension retirement or
similar benefits for our directors and executive officers as a group was
approximately $73,000.
Stock Option Plan
We adopted a stock option plan on July 6, 2000. We expect to authorize
approximately 101,000,000 ordinary shares for issuance under the plan. The
plan is a non-qualified, discretionary option grant program under which
eligible individuals may be granted options to purchase ordinary shares. Under
the plan, the Board will determine which individuals will be granted options,
the number of ordinary shares subject to the option, the exercise price for
the shares, the vesting periods and any other terms that will apply as the
Board deems appropriate. The individuals eligible to participate in our stock
option plan will include key officers, employees, consultants and non-employee
directors of the ASAT group of companies. The plan is designed to attract
employees and important individuals to the ASAT group of companies and to
provide recipients with a proprietary interest in ASAT.
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<PAGE>
Our stock option plan includes the following features:
. The Board will specify the dates each option will begin and terminate
and may also accelerate the date on which the options may be exercised.
The plan will terminate in 10 years, except for options then
outstanding. No options may be granted after this 10 year period.
. The Board will be authorized to grant options for ordinary shares which
may be made available from authorized but unissued ordinary shares or
ordinary shares that we hold in treasury.
. The exercise price for any options granted under the plan may be paid in
cash, or, at the option of the Board, a combination of cash and ordinary
shares owned for at least six months.
. In the event of a merger or other business combination, the Board may
replace granted options with options for shares of the surviving entity
or may cancel outstanding options and cash out the affected participants
for all unexercised options (whether then exercisable or not).
. If a dividend or distribution is made or a recapitalization,
reorganization or other event occurs which would dilute the stock option
plan benefits, the Board may adjust the number of ordinary shares
authorised under the plan, the number of ordinary shares subject to
outstanding options and the exercise price under any option, or cancel
the outstanding options and cash out the affected participants.
. The Board may amend, suspend or terminate the plan and may amend the
terms of any option. If any of these actions would materially and
adversely affect the rights of an option recipient, the Board must first
obtain that individual's consent.
We expect to have stock options for approximately 81,000,000 ordinary shares
outstanding at a per share exercise price equal to the per share equivalent of
the initial public offering price of the ADSs. Of this amount, we expect to
grant options to our directors and executive officers as a group for
approximately 42,000,000 ordinary shares. These amounts are estimates based on
the initial public offering price of $12.00 per ADS.
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PRINCIPAL SHAREHOLDERS
The following table contains information concerning the ownership of our
ordinary shares by each person who we know beneficially owns our ordinary
shares and by all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Before the After the
Ordinary Offering Offering
Shares of our of our
Shareholder Owned(7) ADSs ADSs(8)
----------- ----------- ---------- ---------
<S> <C> <C> <C>
Chase Capital Partners Asia related
funds:(1)(2)
Chase Asia Investment Partners II (Y), LLC.. 74,766,576 12.98% 11.06%
Asia Opportunity Fund, L.P.................. 120,497,424 20.92% 17.83%
----------- ----- -----
195,264,000 33.90% 28.89%
=========== ===== =====
Olympus Capital Holdings Asia related
funds(2)(3)................................. 72,288,000 12.55% 10.69%
=========== ===== =====
Orchid Hong Kong Investment Holdings(2)(4)... 20,448,000 3.55% 3.02%
=========== ===== =====
QPL International Holdings Limited(2)(5)..... 288,000,000 50.00% 42.60%
=========== ===== =====
Directors and executive officers as a
group(6).................................... -- -- --
=========== ===== =====
</TABLE>
---------------------
(1) See "--Chase Capital Partners Asia" below. CAIP and AOF have entered into
a credit support agreement with QPL's creditors which could result in them
acquiring additional shares of ASAT Holdings. See "--Other Arrangements"
below.
(2) QPL has pledged to the investor group a portion of its shares in ASAT
Holdings to secure its indemnification of the investor group with respect
to tax liabilities. See "--Other Arrangements" below.
(3) Held by Olympus Capital Holdings Asia I, L.P., Reservoir-Olympus II, L.P.,
Olympus KB, L.P., Olympus Capital Asia, L.P., Olympus Capital Asia
Offshore, L.P., Olympus Holdings, L.P. and ZAM-Olympus Co-Invest, L.L.C.
and may be transferred among Olympus Capital Holdings Asia affiliates. See
"--Olympus Capital Holdings Asia" below.
(4) See "--Orchid Asia Holdings" below.
(5) Held by The Industrial Investment Company Limited and QPL (US) Inc.
(formerly Worltek International Limited), wholly owned subsidiaries of
QPL. All shares of ASAT Holdings owned by QPL are pledged to the investor
group and a number of QPL's creditors.
(6) Mr. Tung Lok Li, one of our directors, beneficially owns approximately 40%
of QPL, which in turn indirectly owns approximately 42.6% of ASAT
Holdings' ordinary shares. Mr. Andrew Liu, our Chairman of the Board, is
the chief executive officer and a significant equity holder of Chase Asia
Equity Advisors, the management company of CAIP and AOF, who own
approximately 11% and 18% of ASAT Holdings' ordinary shares, respectively.
Mr. Lawrence Miao, one of our directors, is a managing director and
significant equity holder of Olympus Capital Holdings Asia and its
affiliates which manage funds owning approximately 10.70% of ASAT
Holdings' ordinary shares. ASAT Holdings adopted a stock option plan on
July 6, 2000. ASAT expects to have stock options for approximately
81,000,000 ordinary shares outstanding. Of this amount, ASAT expects to
grant options to its directors and executive officers as a group for
approximately 42,000,000 ordinary shares. These amounts are estimates
based on the initial public offering price of $12.00 per ADS.
(7) Takes into account the reclassification of all shares as ordinary shares
in connection with the offering of our ADSs and a share dividend of 47
ordinary shares for each outstanding ordinary share, which we undertook
contemporaneously with completion of the offering of our ADSs.
(8) Assumes no exercise of the underwriters' over-allotment option in
connection with the issue of our ADSs.
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Over-allotment Option
The underwriters have the right to purchase an additional 3,000,000 ADSs,
the equivalent of 15,000,000 ordinary shares, from the selling shareholders to
cover over-allotments, if any. This right is exercisable until August 24,
2000. If the underwriters exercise their over-allotment option in full, Chase
Asia Investment Partners II(Y) will sell 1,947,046 ordinary shares; Asia
Opportunity Fund, L.P. will sell 3,137,954 ordinary shares; Olympus Capital
Holdings Asia related funds will sell 1,882,500 ordinary shares; Orchid Hong
Kong Investment Holdings will sell 532,500 ordinary shares and QPL
International Holdings Limited will sell 7,500,000 ordinary shares. The
ownership interests of the selling shareholders will be reduced as follows:
Chase Asia Investment Partners II (Y) will decrease to 72,819,530 ordinary
shares, Asia Opportunity Fund, L.P. will decrease to 117,359,470 ordinary
shares, Olympus Capital Holdings Asia related funds will decrease to
70,405,500 ordinary shares, Orchid Hong Kong Investment Holdings will decrease
to 19,915,500 ordinary shares and QPL International Holdings Limited will
decrease to 280,500,000 ordinary shares.
Chase Capital Partners Asia
Chase Asia Investment Partners II (Y), LLC ("CAIP") and the Asia Opportunity
Fund L.P. ("AOF") are private equity funds managed by Chase Asia Equity
Advisors LDC, an affiliate of Chase Capital Partners Asia . The funds were
created in April 1999 to capitalize on investment opportunities created by
current economic conditions in Asia. The funds have agreed to co-invest on a
proportional basis in leading companies in Asia and have a combined committed
capital of $1.1 billion. This committed capital includes investment by The
Chase Manhattan Corporation and its affiliates (in the case of CAIP) and by
the International Finance Corporation (the private sector equity and loan
financing arm of the World Bank) and leading Asian and U.S. families (in the
case of AOF). CAIP is the principal direct private equity investment vehicle
of Chase Capital Partners in East and Southeast Asia. Chase Capital Partners
is a global private equity firm managing proprietary funds for The Chase
Manhattan Corporation and is one of the world's largest private equity
organizations, with over $17.0 billion under management.
Olympus Capital Holdings Asia
Olympus Capital Holdings Asia I, L.P., Reservoir-Olympus II, L.P., Olympus
KB, L.P., Olympus Capital Asia, L.P., Olympus Capital Asia Offshore, L.P. and
Olympus Holdings, L.P. are direct investment funds managed by Olympus Capital
Holdings Asia. Olympus Capital Holdings Asia is a direct investment firm that
targets significant investments in public and private companies operating in
Asia. Olympus Capital currently has more than $450 million of committed
capital under management. Since the onset of the Asian crisis, Olympus Capital
has invested and committed over $300 million in investments on behalf of its
funds and partners.
ZAM-Olympus Co-Invest, L.L.C. is a co-investment vehicle for Olympus Capital
Holdings Asia and Ziff Asset Management, L.P., an investment fund managed by
Ziff Brothers Investments for the Ziff family. Ziff Brothers Investments
currently has several billion dollars under management focusing on a number of
areas, including real estate, entertainment, energy, and technology.
Orchid Asia Holdings
Orchid Hong Kong Investment Holdings is managed by Orchid Asia Holdings, a
private equity investment firm headquartered in San Francisco with offices in
Hong Kong and Shanghai. Orchid Asia Holdings and its affiliates have over
$100.0 million of committed capital from a group of leading institutional
investors and families in the United States, approximately $70.0 million of
which is allocated for Asia. Orchid Asia Holdings seeks to invest in high
quality companies with long term potential in Asia. Orchid has invested in
companies focused in consumer goods, high technology, media, and manufacturing
around the region.
QPL International Holdings Limited
QPL (Holdings) Ltd. was formed in 1981 under the name of Quality Platers
Limited and redomiciled as a Bermuda company in 1989 when it changed its name
to QPL International Holdings Limited. QPL International
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Holdings Limited became listed on The Stock Exchange of Hong Kong Limited in
1989 pursuant to a redomicile. In addition to its investment in ASAT Holdings,
QPL International Holdings Limited is involved in the manufacture of
leadframes for semiconductor assembly and owns real estate properties through
its various subsidiaries.
Shareholders Agreement
In connection with our recapitalization, the shareholders listed in the
table above entered into a shareholders agreement relating to transfers of
ASAT Holdings' ordinary shares, voting rights and competition. Under the
shareholders agreement, the parties agreed to vote their ordinary shares and
take all action so that three directors on the Board are appointed by AOF,
three by QPL and three independent directors are selected by AOF and agreed to
by QPL, subject to decrease as their respective shareholding decreases. The
current Board of Directors includes ASAT Holdings' chief executive officer and
chief financial officer as QPL appointees. Under the shareholders agreement,
the investor group and QPL also agreed that as their respective shareholding
decreases below specified thresholds, they will cause a related number of
directors which they previously appointed to resign and those seats shall be
filled by nominee(s) approved by a majority of the continuing directors
present at a Board meeting and a majority of the independent directors.
The agreement also limits the ability of shareholders party to the agreement
to transfer their ordinary shares in ASAT Holdings, except with respect to
sales over an internationally recognized stock exchange or in a registered
offering by the selling shareholder. Under these restrictions:
(1) resales of ASAT Holdings' ordinary shares by the shareholders will be
subject to a right of first offer to the non-selling shareholders;
(2) shareholders generally will have the right to participate in the sale
of ordinary shares by another shareholder to a third party; and
(3) QPL, AOF and CAIP will have the right to force the other shareholders
to participate in a sale of ordinary shares to a third party if the
per share purchase price meets a minimum threshold and other
conditions are met, as more fully described in the shareholders
agreement.
The shareholders agreement also restricts QPL from competing with ASAT in
the design, assembly, testing marketing and sales of integrated circuits so
long as QPL directly or indirectly owns at least 20% of ASAT Holdings'
outstanding ordinary shares, subject to exceptions more fully described in the
shareholders agreement.
The investor group has signed an agreement generally to vote in unison.
Other Arrangements
The investor group has agreed to arrangements whereby shares of ASAT
Holdings owned by QPL may be acquired by members of the investor group. AOF
has entered into a credit support agreement with creditors of QPL. These
arrangements could result in AOF acquiring from QPL on or before the fifth
anniversary of our recapitalization around 30% of ASAT Holdings' outstanding
shares. As part of our recapitalization, QPL indemnified the investor group
for various tax liabilities of ASAT and pledged its shares in its ASAT
Holdings to the investor group to secure this indemnification. The pledge
initially applies to 70% of QPL's shareholding in ASAT Holdings and decreases
in stages to 0% over six years (subject to any tax indemnification amounts
arising prior to the expiration of the six year period and that remain
outstanding upon expiration of this period). Upon the shares being released
from this indemnification pledge, these shares will become subject to a pledge
in favor of QPL's creditors. In addition, as part of these arrangements, QPL
has effectively pledged for the benefit of a number of its creditors all ASAT
Holdings' shares owned by it, subject to inter-creditor arrangements relating
to QPL's indemnity in favor of the investor group and rights of AOF under
these arrangements.
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RELATED PARTY TRANSACTIONS
Before our recapitalization, ASAT Limited and ASAT, Inc., referred to in
this prospectus as ASAT HK and ASAT US, engaged in a wide range of
transactions with affiliates. Most significantly, ASAT HK provided substantial
financial support to QPL to assist it in servicing its debt and other
obligations. ASAT HK also purchased substantially all its leadframe
requirements from QPL, as well as, to a significantly lesser extent, raw
materials, finished goods, production machinery, tooling, testing machines and
spare parts. ASAT HK leased from QPL office and assembly space and obtained a
number of services from QPL, including management information services,
administrative and management services, chemical waste treatment and disposal
facilities and services. The expenses incurred by ASAT HK in connection with
these purchases, leased facilities and services from QPL totaled in the
aggregate approximately $67.2 million, $40.2 million and $53.8 million in
fiscal years 1998, 1999 and 2000, respectively.
During ASAT's 1997 fiscal year, QPL advanced ASAT HK approximately $47.4
million to finance the expansion of its assembly facilities. These advances
were repaid in full in the 1998 and 1999 fiscal years.
ASAT HK has purchased packing materials from and paid tooling charges to
Peak International Limited, a company in which Mr. Tung Lok Li, one of our
directors, indirectly owned approximately 58% of the outstanding share capital
as of June 1, 1999. For the 1998, 1999 and 2000 fiscal years, such purchases
totaled approximately $7.0 million, $2.7 million and $4.4 million
respectively.
As part of our recapitalization, ASAT HK terminated all of its financial
support of QPL and all intercompany payables and receivables between QPL and
ASAT were paid or extinguished. As a result of our recapitalization, ASAT now
operates as a stand-alone company and all its dealings with QPL are on an
arm's length basis on terms no less favorable than with unaffiliated parties.
The terms of our senior notes impose a similar requirement.
We have entered into an agreement with Mr. Li under which he provides
strategic planning and sales development services for our assembly and testing
services. Under the agreement, we will pay Mr. Li $1.0 million annual
compensation which is subject to a yearly review by our board of directors.
We have agreed to grant to the investor group and QPL unlimited demand
registration rights and piggy back registration rights for registration under
the Securities Act, subject to minimum offering amounts of $50 million. The
registration rights apply to all of the 576,000,000 ordinary shares owned by
these shareholders on the date of the agreement. When exercising a demand
registration right, the exercising shareholder may offer to sell all or some
of the ordinary shares it owns. The investor group and QPL are not entitled to
request registration until six months after this offering.
Mr. Li beneficially owns approximately 40% of QPL, which in turn indirectly
owns approximately 42.6% of ASAT Holdings' ordinary shares. Mr. Andrew Liu,
our Chairman of the Board, is the chief executive officer and a significant
equity holder of Chase Asia Equity Advisors, the management company of Chase
Asia Investment Partners II (Y), LLC and Asia Opportunity Fund L.P., who own
approximately 11% and 18% of ASAT Holdings' ordinary shares, respectively. Mr.
Lawrence Miao, one of our directors, is a managing director and significant
equity holder of Olympus Capital Holdings Asia and its affiliates which manage
funds owning approximately 10.70% of ASAT Holdings' ordinary shares.
ASAT Holdings expects to have granted stock options for approximately
42,000,000 ordinary shares to its directors and executive officers as a group
under the stock option plan which it adopted on July 6, 2000. This amount is
an estimate based on the initial public offering price of $12.00 per ADS.
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ASAT Finance
The issuer of the notes is ASAT (Finance) LLC, a Delaware limited liability
company formed on August 23, 1999. ASAT Finance is a wholly owned subsidiary
of ASAT HK. ASAT Finance was formed for the sole purpose of issuing the notes
and has no other business activities other than those related to issuing the
notes. ASAT Finance has loaned the proceeds of the offering of the units to
ASAT HK and ASAT HK has paid the fees and expenses related to the offering and
interest to ASAT Finance in an amount equal to the interest due under the
notes, including required payment of additional amounts and liquidated damages
(as explained in "Description of Notes"), and (3) make principal and premium
payments on such loan in amounts as are necessary in order to permit ASAT
Finance to meet its obligations under the notes and the indenture.
Under the terms of the indenture, ASAT Finance is prohibited from engaging
in any business activity or undertaking any other activity, except activity
related to:
(1)the offering, sale and issuance of the notes,
(2)the lending or otherwise advancing the proceeds thereof to ASAT HK,
(3)the guaranteeing of the debt under the Senior Secured Facilities, and
(4)any other activities in connection therewith.
The registered office of ASAT Finance is c/o Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801, USA.
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DESCRIPTION OF OTHER INDEBTEDNESS
In connection with our recapitalization in October 1999, ASAT HK obtained a
$40 million secured term loan facility and a $25 million secured revolving
facility.
The net proceeds to ASAT Holdings from the offering of its ADSs, after
deducting underwriting discounts and estimated expenses of the offering, were
approximately $222,000,000 based on the initial public offering price of
$12.00 per ADS. We have used approximately $118 million of the net proceeds of
this offering to repay amounts owing under our revolving credit facility and
repay debt that was incurred in October 1999 as part of our recapitalization
to refinance other debt. Specifically:
. ASAT Holdings repaid the full amount owing under our $40 million senior
secured term loan from The Chase Manhattan Bank and other syndicate
banks, bearing interest at a rate of LIBOR plus 3.50% per annum and
maturing on October 29, 2004 with quarterly amortization installments
starting January 31, 2001. This rate was 9.8% per annum as of April 30,
2000;
. ASAT Holdings permanently repaid the approximately $17 million which was
outstanding under our $25 million revolving credit facility at the
completion of the offering of our ADSs. This debt was incurred primarily
to fund purchases of equipment and machinery. The revolving credit
facility has the same maturity and interest rate as the term loan and
terminated upon repayment of the term loan.
. ASAT Holdings will use part of the proceeds to redeem 35% of the
aggregate principal amount outstanding of our original notes, on August
23, 2000, at a price of 112.5% of the principal amount, as provided in
the notes. The notes bear interest at 12.5% per annum. In addition, we
have been required to pay liquidated damages on the original notes since
April 28, 2000 and will continue to pay liquidated damages on the
original notes until the registration statement for this exchange offer
is declared effective, at the rates set forth in "The Exchange Offer--
Liquidated Damages". We sent a notice of redemption to the holders of
our original notes on July 24, 2000. We are due to redeem these notes on
August 23, 2000. As of this date we have $155,000,000 in aggregate
principal amount of original notes outstanding. As of August 24, 2000,
we anticipate we will have $100,750,000 aggregate principal amount of
notes outstanding.
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DESCRIPTION OF NOTES
The forms and terms of the new notes and the original notes are identical in
all respects except that the registration rights, the related contingent
increase in interest rate and the transfer restrictions applicable to the
original notes do not apply to the new notes. Except where the context
otherwise requires, references below to "notes", are references to both
original notes and new notes.
The new notes will be issued under the indenture dated as of October 29,
1999 between ASAT Finance, ASAT Holdings and its subsidiaries as guarantors
and the Chase Manhattan Bank, as trustee. The following discussion includes a
summary of the material provisions of the indenture and the new notes. For
further information regarding the terms and provisions of the indenture and
new notes, including the definitions of certain terms and those terms made
part of the indenture by the Trust Indenture Act of 1939 (the "TIA"), please
refer to the indenture and form of new notes which we have filed as exhibits
to the registration statement.
You can find the definitions of certain capitalized terms in this section
under the subheading "--Certain Definitions".
ASAT Finance is a wholly owned subsidiary of ASAT HK and was formed solely
for the purpose of serving as the issuer of the notes in order to facilitate
the offering of the units. ASAT Finance will not have any operations or assets
and will not have any revenues. As a result, you should not expect ASAT
Finance to participate in servicing the principal, interest, liquidated
damages, if any, premium or any other payment obligations of the notes. See
"--Certain Covenants--Restrictions on Activities of ASAT Holdings and ASAT
Finance".
Brief Description of the notes and the guarantees
The Notes
The notes:
. are unsecured general obligations of ASAT Finance; and
. have been unconditionally, jointly and severally, guaranteed by ASAT
Holdings and each of its existing subsidiaries.
The notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof.
The term "Subsidiaries" as used in this Description of Notes does not
include unrestricted subsidiaries. Under certain circumstances, ASAT Finance
will be able to designate future Subsidiaries as unrestricted subsidiaries.
Unrestricted subsidiaries will not be subject to the restrictive covenants set
forth in the indenture. Currently all of our subsidiaries are restricted
subsidiaries and thus guarantors of the notes.
The Guarantees
The notes will be irrevocably and unconditionally, jointly and severally,
guaranteed on a senior basis by each of the guarantors. The guarantees will
be:
.unsecured general obligations of the guarantors;
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. effectively ranked junior in right of payment to all liabilities,
including trade payables, and preferred stock of each guarantor's non-
guarantor Subsidiaries, excluding ASAT Finance, and to all secured
indebtedness of the guarantor, to the extent of the collateral;
. ranked equally in right of payment to all existing and future
unsubordinated, unsecured indebtedness of the guarantors; and
. ranked senior in right of payment to all existing and future
subordinated indebtedness of the guarantors.
Each guarantor will agree that its obligations under its guarantee will be
as if it were principal obligor and not merely surety, and will be enforceable
irrespective of any invalidity, irregularity or unenforceability of the notes
or the indenture. Each guarantor also will agree to waive its right to require
the trustee to pursue or exhaust its legal or equitable remedies against ASAT
Finance prior to exercising its rights under its guarantee. The guarantees
will not be discharged with respect to any note except by (1) payment in full
of the principal thereof, premium, interest and liquidated damages thereon and
all other amounts payable thereunder or (2) in the circumstances set forth
under "Certain Covenants--Release of Guarantors". Moreover, if at any time any
amount paid under a note is rescinded or must otherwise be restored, the
rights of the holders of the notes under each guarantee will be reinstated
with respect to such payments as though such payments had not been made. The
obligations of each guarantor under its guarantee, however, will be limited in
a manner intended to avoid it being deemed a fraudulent transfer under
applicable law. See "Certain Bankruptcy Limitations" below.
As of April 30, 2000, there were:
(1) in addition to indebtedness under the notes or the guarantees, $40.0
million of outstanding senior indebtedness and capacity to borrow up to
$25.0 million under the revolving credit facility, all of which is
secured and so effectively ranks senior to the notes and the
guarantees, to the extent of the collateral; and
(2) no outstanding indebtedness ranking behind the notes or the guarantees,
as the case may be.
The net proceeds to ASAT Holdings from the initial public offering of ASAT
Holdings' ADSs, after deducting underwriting discounts and estimated expenses
of the offering, were approximately $222 million based on the initial public
offering price of $12.00 per ADS.
Of the net proceeds from its offering of ADSs, ASAT Holdings has used or
intends to use approximately $118 million as follows:
. approximately $40 million was used to repay in full a senior secured
loan from the Chase Manhattan Bank and other syndicate banks;
. approximately $17 million was used to permanently repay all amounts
outstanding under our revolving credit facility, which was used
primarily to fund purchases of equipment and machinery;
. upon this repayment, the revolving credit facility terminated and we
intend to obtain a new revolving credit facility prior to or shortly
after this offering.
. We intend to use part of the proceeds from the sale of ASAT Holdings'
ADSs to redeem 35% of the aggregate principal amount of our $155 million
senior unsecured notes due 2006, at a price of 112.5% of the principal
amount, as provided in the notes. We are due to redeem these notes on
August 23, 2000. As of August 24, 2000, we anticipate we will have
$100,750,000 aggregate principal amount of notes outstanding.
The indenture permits the guarantors, in certain circumstances, to incur
additional indebtedness, including secured and unsecured indebtedness that
ranks pari passu with the notes. Any secured indebtedness will, as to the
collateral securing such indebtedness, be effectively senior to the notes to
the extent of such collateral.
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No provision in the indenture or the notes will affect the obligation of
ASAT Finance or the guarantors, which is absolute and unconditional, to pay,
when due, principal of, premium, if any, interest, or if applicable,
liquidated damages and additional amounts on the notes.
The text of the guarantees are included in the notes, and can also be
obtained at the offices of ASAT Finance.
Principal, Maturity and Interest
ASAT Finance will issue notes with a maximum aggregate principal amount of
$100,750,000. ASAT Finance will issue notes in denominations of $1,000 and
integral multiples of $1,000.
Unless redeemed prior to maturity, the notes will mature on November 1,
2006. The notes will bear interest at the rate per annum stated on the cover
page hereof from the date of issuance or from the most recent date to which
interest has been paid or provided for payable semi-annually in arrears on May
1 and November 1 of each year, commencing November 1, 2000, to the Persons in
whose names such notes are registered at the close of business on the April 15
or October 15 immediately preceding the interest payment date. Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
Methods of Receiving Payments on the Notes
Principal of, premium, if any, interest, and liquidated damages, if any, on
the notes will be payable, and the notes may be presented for registration of
transfer or exchange, at ASAT Finance's office or agency maintained for such
purpose in The City of New York. Except as set forth below, at ASAT Finance's
option, payment of interest may be made by check mailed to the holders of the
notes at the addresses set forth upon ASAT Finance's registry books. No
service charge will be made for any registration of transfer or exchange of
notes, but ASAT Finance may require payment of a sum sufficient to cover any
tax or other connected governmental charge. Until otherwise designated by ASAT
Finance, ASAT Finance's office or agency will be the corporate trust office of
the trustee presently located in the Borough of Manhattan, The City of New
York.
Certain Bankruptcy Limitations
Holders of the notes will be direct creditors of each guarantor by virtue of
its guarantee. Nonetheless, if a guarantor becomes a debtor in a case under
the United States Bankruptcy Code or encounters other financial difficulty,
its obligations may be subject to review under United States federal and state
fraudulent transfer laws. Under those laws, among other things, a court could
avoid the guarantor's obligations under its guarantee if it concludes that the
guarantor incurred its obligations for less than reasonably equivalent value
or fair consideration at a time when the guarantor was insolvent, was rendered
insolvent, or was left with inadequate capital to conduct its business. A
court would likely conclude that a guarantor did not receive reasonably
equivalent value or fair consideration to the extent that the aggregate amount
of its liability on its guarantee exceeds the economic benefits it receives in
the offering of the units. The obligations of each guarantor under its
guarantee will be limited in a manner intended to cause it not to be a
fraudulent transfer under applicable law, although no assurance can be given
that a court would give the holder the benefit of such provision. See "Risk
Factors--U.S. federal and state laws and Hong Kong laws allow courts, under
specific circumstances, to void debts and require holders of debt to return
payments received from debtors".
If the obligations of a guarantor under its guarantee were avoided, holders
of notes would have to look to the assets of any remaining guarantors or ASAT
Finance for payment. There can be no assurance that, in that event, such
assets would suffice to pay the outstanding principal and interest on the
notes.
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The notes are governed by the laws of the State of New York. However, Hong
Kong liquidation laws may apply to any winding-up of ASAT in Hong Kong. Under
Hong Kong law, if ASAT were to go into liquidation, payments under its
guarantee or payments under any security given by ASAT HK in respect of its
obligations under the notes could be set aside under certain circumstances and
amounts previously paid by it to the holders may need to be repaid to ASAT for
the benefit of its creditors. This result could occur if:
. the notes or ASAT's guarantee were found to have been issued with an
intent to defraud other creditors of ASAT or for any fraudulent purpose,
and the holders were found to have been party to the fraud;
. a liquidation commenced within 6 months from the time ASAT gave its
guarantee or made a payment under its guarantee, ASAT were found to have
been insolvent at such time and the recipients of such payments were
found to have been preferred over other ASAT creditors. In certain
circumstances, the 6 months period mentioned may be extended to 2 years;
or
. ASAT's directors were found to be in breach of their fiduciary duties
and the holders were found to have knowingly assisted in such breach.
Regardless of whether ASAT HK is in liquidation, under Hong Kong law, the
guarantees by ASAT HK of the notes and any security given by ASAT HK in
respect of the obligations under the notes could be challenged or set aside by
the shareholders of ASAT HK or any creditor or liquidator if there is no
commercial benefit for ASAT HK.
These consequences could also apply to other guarantors incorporated in Hong
Kong. See "Risk Factors--U.S. federal and state laws and Hong Kong laws allow
courts, under specific circumstances, to void debts and require holders of
debt to return payments received from debtors".
ASAT Holdings currently does not have any unrestricted subsidiaries, but
ASAT Holdings may conduct certain of its operations through unrestricted
subsidiaries. Accordingly, ASAT Finance's and the guarantors' ability to meet
its cash obligations may in part depend upon the ability of future
unrestricted subsidiaries to make cash distributions to ASAT Finance and the
guarantors. In addition, any right ASAT Finance or any guarantor may have to
receive the assets of any unrestricted subsidiary upon the unrestricted
subsidiary's liquidation or reorganization, and the consequent right of the
holders of the notes to participate in the distribution of the proceeds of
those assets, effectively will be subordinated by operation of law to the
claims of the unrestricted subsidiary's creditors, including trade creditors,
and holders of its preferred stock, except to the extent that ASAT Finance or
guarantors are recognized as creditors or preferred stockholders of the
unrestricted subsidiary, in which case ASAT Finance's claims or the claims of
the guarantors would still be subordinate to other indebtedness or preferred
stock of the unrestricted subsidiary.
Optional Redemption
Except as set forth below, ASAT Finance will not have the right to redeem
any notes prior to November 1, 2003.
At any time on or after November 1, 2003, ASAT Finance may redeem the notes
for cash at its option, in whole or in part, upon not less than 30 days nor
more than 60 days notice to each holder of notes, at the following redemption
prices, expressed as percentages of the principal amount, if redeemed during
the 12-month period commencing November 1 of the years indicated below, in
each case together with accrued and unpaid interest and liquidated damages, if
any, thereon to the date of redemption of the notes ("Redemption Date"):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................................................. 106.250%
2004.............................................................. 103.125%
2005 and thereafter............................................... 100.000%
</TABLE>
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At any time prior to November 1, 2002, upon any Public Equity Offering of
Qualified Capital Stock of ASAT Holdings for cash, up to 35% of the aggregate
principal amount of the notes issued pursuant to the indenture may be redeemed
at ASAT Finance's option within 60 days of such Public Equity Offering, on not
less than 30 days, but not more than 60 days, notice to each holder of the
notes to be redeemed, with cash received by ASAT Holdings from the Net Cash
Proceeds of such Public Equity Offering, at a redemption price equal to 112.5%
of principal, together with accrued and unpaid interest and liquidated
damages, if any, thereon to the redemption date; provided, however, that
immediately following such redemption not less than 65% of the aggregate
principal amount of the notes originally issued pursuant to the indenture on
the issue date remain outstanding. ASAT Finance is in the process of redeeming
35% of its original notes. On July 24, 2000, ASAT Finance sent notice to its
note holders of redemption of 35% of the aggregate principal amount of its
original notes. The redemption date, when the redemption price is due and
payable, is August 23, 2000.
If the redemption date is on or after an interest record date on which the
holders of record have a right to receive the corresponding interest due and
liquidated damages and additional amounts, if any, and on or before the
associated interest payment date, any accrued and unpaid interest and
liquidated damages, if any, due on such interest payment date will be paid to
the person in whose name a note is registered at the close of business on such
record date, and such interest and liquidated damages, if any, will not be
payable to holders whose notes are redeemed pursuant to such redemption and
who were not holders on the record date.
Additional Amounts
All payments of principal, premium, interest and liquidated damages, if any,
in respect of each note or the guarantees shall be made free and clear of, and
without withholding or deduction for, any taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld
or assessed by or within Hong Kong, the People's Republic of China or the
United States, and, in the case of a guarantor, the country of residence or
incorporation of the guarantor, or any political subdivision or taxing
authority, unless such withholding or deduction is required by law or by
regulation or governmental policy having the force of law. In the event that
any such withholding or deduction in respect of principal, premium, interest
or liquidated damages is so required, ASAT Finance or the guarantors, as the
case may be, shall pay such additional amounts as will result in receipt by
each holder of any note of such amounts as would have been received by such
holder with respect to such note or guarantee, as applicable, had no such
withholding or deduction been required, except that no additional amounts
shall be payable:
(a) for or on account of:
(1) any tax, duty, assessment or other governmental charge that would
not have been imposed but for
(A) the existence of any present connection between such holder or
the beneficial owner of such note and Hong Kong, the People's
Republic of China or the United States, as the case may be,
other than merely holding such note or the receipt of, or
enforcement of rights under, the guarantees or the notes, or the
receipt of payments in respect thereof, including, without
limitation, such holder or the beneficial owner of such note
being a national, domiciliary or resident or being present or
engaged in a trade or business or having a permanent
establishment; or
(B) the presentation of such note, where presentation is required,
more than 30 days after the date on which the payment in respect
of such note became due and payable or provided for, whichever
is later, except to the extent that such holder would have been
entitled to such additional amounts if it had presented such
note for payment on any day within such period of 30 days;
(2) any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge; or
(3) any combination of items (1) and (2); or
(b) with respect to any payment of the principal of or any premium,
interest, or liquidated damages, on such note or guarantee to such
holder (including a fiduciary or partnership) to the extent that the
beneficial owner of such note would not have been entitled to such
additional amounts had it been the holder of the note.
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Whenever there is mentioned in any context, the payment of principal,
premium, interest or liquidated damages, in respect of any note or the net
proceeds received on the sale or exchange of any note, such mention shall be
deemed to include the payment of additional amounts provided for in the
indenture to the extent that, in such context, additional amounts are, were or
would be payable pursuant to the indenture.
ASAT Finance or the guarantors, as the case may be, will pay any present or
future stamp, court or documentary taxes, or any other excise or property
taxes, charges or similar levies which arise in any jurisdiction from the
execution, delivery, enforcement or registration of the notes or the
guarantees, excluding any such taxes, charges or similar levies imposed by any
jurisdiction outside of Hong Kong, the People's Republic of China or the
United States, except those resulting from, or required to be paid in
connection with, the enforcement of the notes or the guarantees following the
occurrence of any Event of Default with respect to the notes. See "Certain Tax
Considerations" for a description of certain currently applicable withholding
taxes. ASAT Finance and the guarantors will provide to the trustee and paying
agent a certified receipt evidencing payment of withholding taxes within 30
days after payment. Such receipts shall be provided to holders requesting such
copies.
Optional Tax Redemption
If, as a result of any change in or amendment to the laws, regulations or
published tax rulings of Hong Kong, the People's Republic of China or the
United States, or of any other taxing authority, which is proposed and becomes
effective on or after the date of the indenture, in making any payment due or
to become due under the notes or the indenture:
(a)(1) ASAT Finance is or would be required on the next succeeding interest
payment date to pay additional amounts and
(2) each guarantor is, or on the next succeeding interest payment date
would be, unable, for reasons outside its control, to cause ASAT
Finance to pay amounts due under the notes, and with respect to any
amount due under its guarantee or the indenture, each guarantor is,
or would be required on the next succeeding interest payment date,
to pay additional amounts and
(b) the payment of such additional amounts cannot be avoided by the use of
any reasonable measures available to ASAT Finance or such guarantor, as
the case may be, the notes may be redeemed at the option of ASAT
Finance in whole but not in part, upon not less than 30 nor more than
60 days' notice in accordance with the procedures set forth in the
indenture, at any time at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to the date
of redemption. ASAT Finance or such guarantor will also pay to holders
on the date of redemption any additional amounts which are payable.
Prior to the publication of any notice of redemption in accordance with the
foregoing, ASAT Finance shall deliver to the trustee
. an Officer's Certificate stating that such amendment or change has
occurred, irrespective of whether such amendment or change is then
effective, describing the facts leading thereto and stating that such
requirement cannot be avoided by ASAT Finance or the guarantors, as the
case may be, taking reasonable measures available to it and
. an Opinion of Counsel, which counsel shall be reasonably acceptable to
the trustee, to the effect that ASAT Finance has or will become
obligated to pay additional amounts as a result of such change or
amendment. Such notice, once delivered by ASAT Finance to the trustee,
will be irrevocable.
Mandatory Redemption
The notes will not have the benefit of any sinking fund and ASAT Finance
will not be required to make any mandatory redemption payments with respect to
the notes.
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Selection and Notice
In the case of a partial redemption, the trustee shall select the notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The notes may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the holder
of each note to be redeemed to such holder's last address as then shown upon
the registry books of the registrar. Any notice which relates to a note to be
redeemed in part only must state the portion of the principal amount equal to
the current unredeemed portion and must state that on and after the date of
redemption, upon surrender of such note, a new note or notes in a principal
amount equal to the current unredeemed portion will be issued. On and after
the date of redemption, interest will cease to accrue on the notes or portions
called for redemption, unless there exists a default in the payment thereof.
Certain Covenants
The indenture contains certain covenants that, among other things, restrict
ASAT Holdings' and its Subsidiaries' ability to borrow money, pay dividends on
or repurchase capital stock, make investments and sell assets or enter into
mergers or consolidations. The indenture also restricts the activities of ASAT
Holdings and ASAT Finance. The following summary of certain covenants of the
indenture are summaries only, do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of the indenture. You
are urged to read the indenture because it, and not this description, details
your rights as a holder of the notes.
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The indenture will provide that if, after the issue date, a Change of
Control occurs:
. ASAT Finance must promptly notify each holder of notes; and
. each holder of notes will have the right, at such holder's option,
pursuant to an offer, subject only to conditions required by applicable
law, if any, by ASAT Finance (the "Change of Control Offer"), to require
ASAT Finance to repurchase all or any part of such holder's notes,
provided, that the principal amount of such notes must be $1,000 or an
integral multiple thereof, on a date (the "Change of Control Purchase
Date") that is no later than 60 business days after the occurrence of
such Change of Control, at a cash price equal to 101% of the principal
amount thereof (the "Change of Control Purchase Price"), together with
accrued and unpaid interest and liquidated damages, if any, to the
Change of Control Purchase Date.
The Change of Control Offer shall be made within 30 business days following
a Change of Control and shall remain open for 20 business days following its
commencement (the "Change of Control Offer Period"). Upon expiration of the
Change of Control Offer Period, ASAT Finance shall promptly purchase all notes
properly tendered in response to the Change of Control Offer.
As used herein, a "Change of Control" means:
(1) prior to consummation of an Initial Public Equity Offering or
Qualifying Subsidiary IPO, the Excluded Persons shall cease to own
beneficially at least 35% of the Voting Equity Interests of ASAT
Holdings or at least 35% of the Economic Equity Interests of ASAT
Holdings;
(2)(a) any merger or consolidation of ASAT Holdings or ASAT or the IPO
Entity with or into any person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all
of ASAT Holdings' or ASAT's or the IPO Entity's assets, on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group", other than the Excluded
Persons, is or becomes the
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"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the
election of directors, managers, or trustees, as applicable, of the
transferee(s) or surviving entity or entities or more than 50% of the
Economic Equity Interests of the transferee(s) or surviving entity or
entities,
(b) any "person" or "group", other than the Excluded Persons, is or
becomes the "beneficial owner," directly or indirectly, of more than
50% of the total voting power in the aggregate of all classes of
ASAT's or ASAT Holdings' or the IPO Entity's Capital Stock then
outstanding normally entitled to vote in elections of directors or
more than 50% of the Economic Equity Interests of ASAT or ASAT
Holdings or the IPO Entity, or otherwise controls ASAT's or ASAT
Holdings' Board of Directors,
(c) the Continuing Directors cease for any reason to constitute a
majority of ASAT's or ASAT Holding's or the IPO Entity's Board of
Directors then in office, or
(d) ASAT or ASAT Holdings or the IPO Entity adopts a plan of
liquidation;
(3) the first day on which ASAT fails to own 100% of the issued and
outstanding membership interests of ASAT Finance; or ASAT Finance or
ASAT Holdings undertakes Impermissible Activities under the covenant
"Restrictions on Activities of ASAT Holdings and ASAT Finance;"
(4) the first day on which ASAT Holdings fails to beneficially own 100% of
the issued and outstanding share capital of ASAT unless and to the
extent ASAT Holdings has effected a Qualifying Subsidiary IPO, in which
case the first day on which the IPO Entity, if it is not ASAT, fails to
beneficially own 100% of the issued and outstanding share capital of
ASAT;
(5) ASAT Finance is no longer classified as a "disregarded entity" separate
from ASAT for United States federal income tax purposes and, as a
result, either:
. ASAT Finance becomes subject to or is required to withhold income tax
on income necessary to make payments on the notes; or
. any holder is required to file a United States federal income tax
return and such holder would not otherwise have been required to file
such a return; or
(6)(a) ASAT or ASAT Finance receives a written assertion from the Internal
Revenue Service to the effect that activities conducted by ASAT
Finance have resulted in ASAT becoming engaged in a trade or
business in the United States;
(b) the trustee has received the opinion of nationally recognized tax
counsel, reasonably acceptable to the trustee, that it is more likely
than not that the Internal Revenue Service would prevail; and
(c) the amount of net income tax imposed or required to be withheld as
assessed, exceeds 5% of ASAT Holdings' Consolidated EBITDA in respect
of the fiscal year for which such tax is assessed.
provided, however, that if (1) ASAT Holdings is the "beneficial owner" of less
than 10% of ASAT and the IPO Entity (or their successors); and (2) at the
relevant time, no "Change of Control" has occurred as a result of the decrease
in such beneficial ownership since the issue date, any further decrease in
such beneficial ownership shall not, in itself, trigger a "Change of Control".
On or before the Change of Control Purchase Date, ASAT Finance will:
(1) accept for payment of the notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
(2) deposit with the paying agent for ASAT Finance cash sufficient to pay
the Change of Control Purchase Price, together with accrued and unpaid
interest and liquidated damages, if any, of all notes so tendered, and
(3) deliver to the trustee the notes so accepted together with an Officers'
Certificate listing the notes or portions thereof being purchased by
ASAT Finance.
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The paying agent promptly will pay the holders of notes so accepted an
amount equal to the Change of Control Purchase Price, together with accrued
and unpaid interest and liquidated damages, if any, and the trustee promptly
will authenticate and deliver to such holders a new note equal in principal
amount to any unpurchased portion of the note surrendered. Any notes not so
accepted will be delivered promptly by ASAT Finance to the holder thereof.
ASAT Finance publicly will announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Purchase Date.
The indenture provides that, in the event a Change of Control occurs at a
time when ASAT Finance is prohibited from purchasing notes under the Credit
Agreement, prior to the mailing of the notice to holders described in the
first paragraph of this covenant, but in any event within 30 days following
any Change of Control, ASAT Finance shall:
(1) repay in full all indebtedness outstanding under the Credit Agreement
or offer to repay in full all such Indebtedness and repay the
indebtedness owed to each lender which has accepted such offer; or
(2) obtain the requisite consents under the Credit Agreement to the making
of the Change of Control Offer and the purchase of the notes under this
covenant.
ASAT Finance must first comply with the preceding sentence before it shall
be required to purchase notes in the event of a Change of Control; provided,
however, that any failure by ASAT Finance to comply with the preceding
sentence or to make a Change of Control Offer shall constitute a Default under
this covenant and an Event of Default under clause (3) of the covenant
entitled "Events of Default and Remedies".
As a result of the foregoing a holder of the notes may not be able to compel
ASAT Finance to purchase the notes unless ASAT Finance is able at the time to
refinance all Indebtedness outstanding under the Credit Agreement or obtain
requisite consent under the Credit Agreement.
Future indebtedness that ASAT Holdings or any of its Subsidiaries may incur
may also 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 ASAT Finance to repurchase the notes could cause a default under
such indebtedness due to the financial effect of such repurchase on ASAT
Holdings and its Subsidiaries, even if the Change of Control in and of itself
does not cause a default. Finally, ASAT Finance's ability to pay cash to the
holders of notes following the occurrence of a Change of Control may be
limited by ASAT Holdings' and its Subsidiaries' 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 ASAT Finance's 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 at least (1) prior to any Change of
Control occurring, 50%; and (2) following the first Change of Control to occur
hereunder, 66 2/3%, in aggregate principal amount of the notes then
outstanding.
The Change of Control purchase feature of the notes may make more difficult
or discourage a takeover of ASAT Holdings, and, thus, the removal of incumbent
management.
The phrase "all or substantially all" of the assets of ASAT Holdings or ASAT
or the IPO Entity will likely be interpreted under applicable state law and
will be dependent upon particular facts and circumstances. As a result, there
may be a degree of uncertainty in ascertaining whether a sale or transfer of
"all or substantially all" of the assets of ASAT Holdings or ASAT or the IPO
Entity has occurred. In addition, no assurances can be given that ASAT Finance
will be able to acquire notes tendered upon the occurrence of a Change of
Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this covenant, compliance
by ASAT Finance or any guarantor with such laws and regulations shall not in
and of itself cause a breach of ASAT Finance's or the guarantor's obligations
under such covenant.
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If the Change of Control Purchase Date hereunder is on or after an interest
payment record date and on or before the associated interest payment date, any
accrued and unpaid interest, and liquidated damages, if any, due on such
interest payment date will be paid to the Person in whose name a note is
registered at the close of business on such record date, and such interest,
and liquidated damages, if applicable, will not be payable to holders who
tender the notes pursuant to the Change of Control Offer who were not holders
as of such record date.
Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock
The indenture provides that, except as set forth in this covenant, ASAT
Finance and the guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur,
become directly or indirectly liable with respect to, including as a result of
an acquisition, or otherwise become responsible for, contingently or otherwise
incur, any indebtedness, including the issuance of Disqualified Capital Stock
and the incurrence of Acquired Indebtedness, other than Permitted
Indebtedness.
Notwithstanding the foregoing if:
(1) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis
to, such incurrence of indebtedness, and
(2) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of ASAT Holdings for the reference period
immediately preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such indebtedness and, to the extent
set forth in the definition of Consolidated Coverage Ratio, the use of
proceeds thereof, would be at least (a) 2.5 to 1.0 until 24 months
after the issue date; and (b) 3.0 to 1.0 thereafter (the "Debt
Incurrence Ratio"),
then the subsidiary guarantors may incur such indebtedness, including
Disqualified Capital Stock.
In addition, the foregoing limitations of the first paragraph of this
covenant will not prohibit:
(a) the incurrence by any subsidiary guarantor of Purchase Money
Indebtedness; provided, that:
(1) the aggregate amount of such indebtedness incurred and outstanding
at any time pursuant to this paragraph (a) plus any Refinancing
Indebtedness issued to retire, defease, refinance, replace or
refund such indebtedness, shall not exceed $20.0 million,or the
equivalent thereof, at the time of incurrence, in applicable
foreign currency, and
(2) in each case, such indebtedness shall not constitute more than 100%
of the cost, determined in accordance with GAAP in good faith by
ASAT Holdings' Board of Directors, to such subsidiary guarantor, as
applicable, of the property so purchased, constructed, improved or
leased;
(b) if no Event of Default shall have occurred and be continuing, the
incurrence by any subsidiary guarantor of indebtedness, plus any
Refinancing indebtedness incurred to retire, defease, refinance,
replace or refund such indebtedness, in an aggregate amount incurred
and outstanding at any time pursuant to this paragraph (b) of up to
$10.0 million, or the equivalent thereof, at the time of incurrence, in
applicable foreign currency; and
(c) the incurrence by ASAT, and guarantee thereof by ASAT Holdings, ASAT
Finance and other subsidiary guarantors of indebtedness pursuant to the
Credit Agreement, plus any Refinancing indebtedness incurred to retire,
defease, refinance, replace or refund such indebtedness, in an
aggregate amount incurred and outstanding at any time pursuant to this
paragraph (c) of up to the maximum amount, or the equivalent thereof,
at the time of incurrence, in the applicable foreign currency, minus
the amount of any such Indebtedness
(1) retired with the Net Cash Proceeds from any Asset Sale applied to
permanently reduce the outstanding amounts or commitments with
respect to such indebtedness pursuant to clause (2) of the second
paragraph of the covenant "Limitation on Sale of Assets and
Subsidiary Stock" or
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(2) assumed by a transferee in an Asset Sale,
provided, however, that any Refinancing Indebtedness incurred under this
clause (c) shall not exceed $65.0 million in aggregate amount incurred and
outstanding at any time, comprised of a maximum of (1) $40.0 million in a
term loan facility and (2) $25.0 million in a revolving credit facility.
Indebtedness, including Disqualified Capital Stock, of any Person which is
outstanding at the time such Person becomes a Subsidiary, including upon
designation of any Subsidiary or other Person as a Subsidiary, or is merged
with or into or consolidated with ASAT Holdings or one of its Subsidiaries
shall be deemed to have been incurred at the time such Person becomes a
Subsidiary or is merged with or into or consolidated with ASAT Holdings or one
of its Subsidiaries, as applicable.
Accretion or amortization of original issue discount in accordance with the
original terms of any indebtedness will not be deemed to be an incurrence of
indebtedness.
Notwithstanding any other provision of this covenant, but only to avoid
duplication, a guarantee of indebtedness of ASAT Finance or of a guarantor
incurred in accordance with the terms of the indenture issued at the time such
indebtedness was incurred or if later at the time the guarantor thereof became
a Subsidiary, will not constitute a separate incurrence, or amount
outstanding, of indebtedness. Upon each incurrence ASAT Finance may designate
pursuant to which provision of this covenant such indebtedness is being
incurred and such indebtedness shall not be deemed to have been incurred or be
outstanding under any other provision of this covenant, except as stated
otherwise in the foregoing provisions.
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 (1) 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
(2) 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.
The indenture also provides that ASAT Finance and the guarantors will not,
and will not permit any Subsidiary to, incur any indebtedness that is
contractually subordinated in right of payment to any other indebtedness of
any of ASAT Finance, any guarantor or any Subsidiary, unless such indebtedness
is also contractually subordinated in right of payment to the notes on
substantially identical terms; provided, however, that no indebtedness shall
be deemed to be contractually subordinated in right of payment to any other
indebtedness solely by virtue of being unsecured.
Limitation on Restricted Payments
The indenture provides that ASAT Finance and the guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, make any
Restricted Payment prior to the earlier of:
(1) November 1, 2002 and
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(2) the date of consummation of the Initial Public Equity Offering or
Qualifying Subsidiary IPO, unless, at the time of such Restricted
Payment:
(a) ASAT Holdings and its Subsidiaries have no indebtedness of the
types specified in paragraphs (a)(1) or (a)(2) of the definition
thereof outstanding that ranks pari passu to the notes or the
guarantees, it being understood that at no time may (1) ASAT
Holdings have any indebtedness outstanding, except as a guarantor
of the notes and under the Credit Agreement, and (2) ASAT or its
Subsidiaries have any indebtedness outstanding that ranks senior to
the notes or the guarantees, other than pari passu indebtedness not
exceeding $25 million under the revolving credit facility pursuant
to the Credit Agreement;
(b) ASAT Holdings' Consolidated Debt/EBITDA Ratio does not exceed 1.25
to 1.0; and
(c) none of the conditions in clauses (1), (2) or (3) of the following
paragraph exists or is otherwise applicable.
The indenture further provides that ASAT Finance and the guarantors will
not, and will not permit any of their subsidiaries to, directly or indirectly,
make any Restricted Payment after the relevant date, if after giving effect to
such Restricted Payment on a pro forma basis:
(1) a Default or an Event of Default shall have occurred and be continuing,
(2) ASAT is not permitted to incur at least $1.00 of additional
indebtedness pursuant to the Debt Incurrence Ratio in the covenant
"Limitation on Incurrence of Additional indebtedness and Issuance of
Disqualified Capital Stock," or
(3) the aggregate amount of all Restricted Payments made by ASAT Holdings
and its subsidiaries, including after giving effect to such proposed
Restricted Payment, on and after the issue date, would exceed, without
duplication, the sum of:
(a) 50% of the aggregate Consolidated Net Income of ASAT Holdings for
the period, taken as one accounting period, commencing on the first
day of the first full fiscal quarter commencing after the Issue
Date, to and including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation for which
ASAT Holdings' consolidated financial statements are required to be
delivered to the Trustee or, if sooner, filed with the SEC, or, in
the event Consolidated Net Income for such period is a deficit,
then minus 100% of such deficit,
(b) 100% of the aggregate Net Cash Proceeds received by ASAT Holdings
from the sale of its Qualified Capital Stock, other than (1) to one
of its subsidiaries and (2) to the extent applied in connection
with a Qualified Exchange, after the issue date, and
(c) except, in each case, in order to avoid duplication, to the extent
any such payment or proceeds have been included in the calculation
of Consolidated Net Income, an amount equal to the net reduction in
investments, other than returns or proceeds of or from Permitted
Investments, in any person resulting from distributions on or
repayments of any such investments, including payments of interest
on indebtedness, dividends, repayments of loans or advances, or
other distributions or other transfers of assets, in each case to
ASAT Holdings or any Subsidiary or from the Net Cash Proceeds from
the sale of any such investment or from redesignations of
unrestricted subsidiaries as Subsidiaries, not to exceed, in each
case, the amount of such investments previously made by ASAT
Holdings or any Subsidiary in such person, including, if
applicable, such unrestricted subsidiary, less the cost of
disposition.
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit:
(x) any dividend, distribution or other payments by any Subsidiary, other
than the IPO Entity, on its Equity Interests that is paid pro rata to
all holders of such Equity Interests, to the extent it constitutes a
Restricted Payment,
(y) a Qualified Exchange, or
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(z) the payment of any dividend on Qualified Capital Stock within 60 days
after the date of its declaration if such dividend could have been made
on the date of such declaration in compliance with the foregoing
provisions.
Nothing in this covenant "Limitation on Restricted Payments" will prohibit
any cash payment by way of dividends or distributions by (1) ASAT Holdings and
the IPO Entity to their respective shareholders, in an aggregate amount during
the term of the indenture not to exceed the total amount of cash proceeds
actually received in aggregate by ASAT Holdings or the IPO Entity from
payments of the Exercise Price of Warrants, or equivalent securities received
in an Initial Public Equity Offering or a Qualifying Subsidiary IPO, or (2) by
ASAT Holdings of the Net Cash Proceeds actually received by ASAT Holdings from
secondary sales of Capital Stock in the IPO Entity as part of a Qualifying
Subsidiary IPO, in each case only so long as no Default or Event of Default
shall have occurred and be continuing.
The full amount of any Restricted Payment made pursuant to clause (1) of the
immediately preceding paragraph or pursuant to the foregoing clauses (x) and
(z), but not pursuant to clause (y), of this covenant, however, will each be
counted as Restricted Payments made for purposes of the calculation of the
aggregate amount of Restricted Payments available to be made referred to in
clause (3) of the first paragraph of this covenant.
For purposes of this covenant, the amount of any Restricted Payment made or
returned, if other than in cash, shall be the fair market value thereof, as
determined in the good faith reasonable judgment of the Board of Directors of
ASAT Holdings unless stated otherwise, at the time made or returned, as
applicable. Additionally, within five days after each Restricted Payment, ASAT
Finance shall deliver an Officers' Certificate to the trustee describing in
reasonable detail the nature of such Restricted Payment, stating the amount of
such Restricted Payment, stating in reasonable detail the provisions of the
indenture pursuant to which such Restricted Payment was made and certifying
that such Restricted Payment was made in compliance with the terms of the
indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The indenture provides that ASAT Finance and the guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, create,
assume or suffer to exist any consensual restriction on the ability of any
Subsidiary to pay dividends or make other distributions to or on behalf of, or
to pay any obligation to or on
behalf of, or otherwise to transfer assets or property to or on behalf of, or
make or pay loans or advances to or on behalf of, ASAT Holdings or any of its
Subsidiaries, except:
(1) restrictions imposed by the notes or the indenture or by other
indebtedness, which may also be guaranteed by the guarantors, ranking
pari passu with the notes or the guarantees, as applicable; provided,
that such restrictions are no more restrictive, taken as a whole, than
those imposed by the indenture and the notes,
(2) restrictions imposed by applicable law,
(3) existing restrictions under Existing Indebtedness,
(4) restrictions under any Acquired Indebtedness not incurred in violation
of the indenture or any agreement, including any Equity Interests,
relating to any property, asset, or business acquired by any of its
Subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any Person,
other than the Person acquired, or to any property, asset or business,
other than the property, assets and business so acquired,
(5) any restriction imposed by indebtedness incurred under the Credit
Agreement pursuant to clause (c) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Issuance of Disqualified
Capital Stock"; provided, that such restriction or requirement is no
more restrictive, taken as a whole, than those imposed by the Credit
Agreement as of the issue date,
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(6) restrictions with respect solely to any Subsidiary, excluding ASAT,
imposed pursuant to a binding agreement which has been entered into for
the sale or disposition of all or substantially all of the Equity
Interests or assets of such Subsidiary, excluding ASAT; provided, that
such restrictions apply solely to the Equity Interests or assets of
such Subsidiary, excluding ASAT, which are being sold,
(7) restrictions on transfer contained in Purchase Money Indebtedness
incurred pursuant to clause (a) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Issuance of Disqualified
Capital Stock"; provided, that such restrictions relate only to the
transfer of the property acquired with the proceeds of such Purchase
Money Indebtedness,
(8) in connection with and pursuant to Permitted Refinancings, replacements
of restrictions imposed pursuant to clauses (1), (3), (4) or (7) or
this clause (8) of this paragraph that are not more restrictive, taken
as a whole, than those being replaced and do not apply to any other
person or assets than those that would have been covered by the
restrictions in the indebtedness so refinanced,
(9) customary lock-up provisions in an underwriting agreement for a
Qualifying Subsidiary IPO under which ASAT Holdings agrees not to
transfer certain Capital Stock in the IPO Entity for a period not to
exceed six months following the Qualifying Subsidiary IPO.
Notwithstanding the foregoing, (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with industry practice and (b) any asset subject to a
Lien which is permitted under the indenture may be subject to customary
restrictions on the transfer or disposition thereof pursuant to such Lien.
Limitation on Liens
ASAT Finance and the guarantors will not, and will not permit any of the
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any
kind, other than Permitted Liens, upon any of their respective assets now
owned or acquired on or after the date of the indenture or upon any income or
profits therefrom securing any of their Indebtedness, unless ASAT Holdings
provides, and causes its Subsidiaries to provide, concurrently therewith, that
the notes and the applicable guarantees are equally and ratably so secured;
provided that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be contractually subordinate and
junior to the Lien securing the notes, and any related applicable guarantees,
with the same relative priority as such Subordinated Indebtedness shall have
with respect to the notes, and any related applicable guarantees.
Limitation on Sale of Assets and Subsidiary Stock
The indenture provides that ASAT Finance and the guarantors will not, and
will not permit any of their Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of their property, business or assets, including by merger
or consolidation, and including any sale or other transfer or issuance of any
Equity Interests of any Subsidiary, whether by ASAT Holdings or a Subsidiary
and including any sale and leaseback transaction, any of the foregoing, an
"Asset Sale", unless:
(a) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect, on a pro forma basis,
to, such Asset Sale;
(b) ASAT Holdings or its Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares or assets sold or otherwise disposed of; and
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(c) at least 75% of such consideration consists of cash or cash
equivalents; provided, however, that (1) the amount of Purchase Money
Indebtedness secured solely by the assets sold, fully assumed by the
transferee and in respect of which ASAT Holdings and the Subsidiaries
are fully released and (2) any securities, notes or other obligations
received by ASAT Holdings or such Subsidiary from the purchaser that
are converted within 30 days into cash or cash equivalents, to the
extent of the cash or cash equivalents received, shall, in each case,
be deemed to be cash for the purposes of the 75% limitation in clause
(c) of this paragraph.
Within 365 days of the Asset Sale or of any Event of Loss relating to a
Material Facility, any Net Cash Proceeds from such Asset Sale or Event of Loss
may be: (1) invested in assets and property, other than notes, bonds,
obligations and securities, which in the good faith reasonable judgment of the
Board of Directors of ASAT Holdings will immediately constitute or be a part
of a related business of ASAT Holdings or such Subsidiary, if it continues to
be a Subsidiary, immediately following such transaction; or (2) used to retire
and repay Purchase Money Indebtedness secured by the asset which was the
subject of the Asset Sale or to permanently prepay, repay, redeem or purchase
indebtedness permitted pursuant to paragraph (c) of the covenant "Limitation
on Incurrence of Additional Indebtedness and Issuance of Disqualified Capital
Stock", provided that in the case of a revolving credit facility or similar
arrangement that makes credit available, such commitment is so permanently
reduced by such amount. Any Net Cash Proceeds from any Asset Sale or Event of
Loss that are not used in the manner referred to in clauses (1) and (2) of
this paragraph shall constitute "Excess Proceeds" subject to disposition as
provided below.
If the aggregate amount of Excess Proceeds for all Asset Sales equals or
exceeds $10.0 million, ASAT Finance and the guarantors will within 365 days of
the Asset Sale, cause the Excess Proceeds to be applied by ASAT Finance (1) to
make an optional redemption of the notes in accordance with the indenture and
of all other Indebtedness ranking on parity with the notes, on a pro rata
basis in proportion to the respective principal amounts, or accreted values,
if applicable, of the notes and such other indebtedness then outstanding; or
(2) to make an offer, each, an "Asset Sale Offer", to purchase notes and all
other indebtedness on a parity with the notes which has similar provisions
requiring ASAT Holdings or any of its Subsidiaries to make an offer to
purchase such indebtedness with the proceeds from such Asset Sale pursuant to
a cash offer, subject only to conditions required by applicable law, if any,
on a pro rata basis in proportion to the respective principal amounts, or
accreted values, if applicable, of the notes and such other indebtedness then
outstanding, at a purchase price of 100% of the principal amount, or accreted
values, if applicable, thereof, together with accrued and unpaid interest,
liquidated damages and additional amounts, if any, to the date of payment.
To the extent that the aggregate principal amount of notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Subsidiaries may
use such deficiency for general corporate purposes.
In any Asset Sale Offer involving a purchase of notes by ASAT Finance, the
notes shall be purchased by ASAT Finance at the option of the holder thereof,
in whole or in part in integral multiples of $1,000, on a date that is not
later than 30 days from the date the notice is given to holders, or such later
date as may be necessary for ASAT Finance to comply with the requirements
under the Exchange Act. Upon completion of an Asset Sale Offer pursuant to
this covenant, the amount of Excess Proceeds shall be reset to zero.
ASAT Finance and the guarantors will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder, to the
extent such laws and regulations are applicable, in the event that an Asset
Sale occurs and ASAT Finance is required to purchase or redeem notes as
described above.
Notwithstanding, and without complying with, the provisions of this
covenant:
(a) the Subsidiaries may, in the ordinary course of business, (1) convey,
sell, transfer, assign or otherwise dispose of inventory and other
assets acquired and held for resale in the ordinary course of business
and (2) liquidate cash equivalents;
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(b) the Subsidiaries may convey, sell, transfer, assign or otherwise
dispose of assets pursuant to and in accordance with the covenant
"Limitation on Merger, Sale or Consolidation";
(c) the Subsidiaries may sell or dispose of damaged, worn out or other
obsolete personal property in the ordinary course of business so long
as such property is no longer necessary for the proper conduct of the
business of such Subsidiary, as applicable;
(d) the subsidiary guarantors may convey, sell, transfer, assign or
otherwise dispose of assets to any of the other subsidiary guarantors;
(e) the Subsidiaries may, in the ordinary course of business, convey, sell
transfer, assign, or otherwise dispose of assets, or related assets in
related transactions, with an aggregate fair market value during the
term of the Indenture of less than $3.0 million;
(f) the Subsidiaries may make Permitted Investments pursuant to clause (d)
in the definition thereof; and
(g) so long as no Default or Event of Default has occurred and is
continuing, ASAT Holdings may sell Capital Stock in the IPO Entity by
way of secondary sales as part of a Qualifying Subsidiary IPO.
If the payment date in connection with an Asset Sale Offer is on or after an
interest payment record date and on or before the associated interest payment
date, any accrued and unpaid interest, and liquidated damages, if any, due on
such interest payment date, will be paid to the Person in whose name a note is
registered at the close of business on such record date, and such interest, or
liquidated damages, if applicable, will not be payable to holders who tender
notes pursuant to such Asset Sale Offer and who are not holders on the record
date.
Limitation on Transactions with Affiliates
The indenture provides that ASAT Finance and the guarantors will not, and
will not permit any of their Subsidiaries on or after the issue date to, enter
into or suffer to exist any contract, agreement, arrangement or transaction
with any Affiliate, or any series of related affiliate transactions, other
than exempted affiliate transactions,
(1) unless it is determined that the terms of such affiliate transaction
are fair and reasonable to ASAT Holdings or such Subsidiary, as the
case may be, and no less favorable to ASAT Holdings or such Subsidiary,
as the case may be, than could have been obtained in an arm's length
transaction with a non-affiliate, and
(2) if involving consideration to either party in excess of (a) for the 24
month period following the issue date, $1.0 million; and (b) at all
times thereafter, $3.0 million, in each case unless such affiliate
transaction(s) has been approved by a majority of the members of the
Board of Directors of ASAT Holdings that are disinterested in such
transaction, if there are any directors who are so disinterested, and
(3) if involving consideration to either party in excess of (a) for the 24
month period following the issue date, $5.0 million, or $1.0 million if
there are no disinterested directors for such transaction; and (b) at
all times thereafter, $10.0 million, or $3.0 million if there are no
disinterested directors for such transaction, in each case unless in
addition ASAT Holdings, prior to the consummation thereof, obtains a
written favorable opinion as to the fairness of such transaction to
ASAT Holdings from a financial point of view from an independent
investment banking firm of national reputation in the United States or,
if pertaining to a matter for which such investment banking firms do
not customarily render such opinions, an appraisal or valuation firm of
national reputation in the United States.
Limitation on Merger, Sale or Consolidation
The indenture provides that neither ASAT Holdings, ASAT nor ASAT Finance may
consolidate with or merge with or into another Person or, directly or
indirectly, sell, lease, convey or transfer all or substantially all
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of its assets, computed on a consolidated basis, whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons, unless:
(1) either (a) ASAT Holdings, ASAT or ASAT Finance is the continuing
entity, (b) the resulting, surviving or transferee entity is a
corporation organized respectfully under the laws of the Cayman
Islands, Hong Kong or the United States, any state thereof or the
District of Columbia and expressly assumes by supplemental indenture
all of ASAT Holdings', ASAT's or ASAT Finance's obligations in
connection with the indenture, the notes and the guarantees, as
applicable;
(2) no Default or Event of Default shall exist or shall occur immediately
after giving effect on a pro forma basis to such transaction;
(3) immediately after giving effect to such transaction on a pro forma
basis, the consolidated resulting, surviving or transferee entity would
immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in the covenant "Limitation on Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock";
(4) in the case of such a transaction involving ASAT Finance, each
guarantor, unless such guarantor is the person with which ASAT Finance
has entered into a transaction under this section "Limitation on
Merger, Sale or Consolidation" shall have by amendment to its guarantee
confirmed that its guarantee shall apply to the obligations of ASAT
Finance or the surviving entity in accordance with the notes and the
indenture;
(5) the resulting, surviving or transferee entity shall have delivered,
immediately prior to the consummation of the transaction, to the
trustee an Opinion of Counsel, which counsel shall be reasonably
acceptable to the trustee, to the effect that the holders will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such transaction, and will be subject to United
States federal income tax on the same amounts and at the same time as
would be the case as if the transaction had not occurred; and
(6) ASAT Holdings, ASAT or ASAT Finance 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.
Upon any consolidation or merger or any transfer of all or substantially all
of ASAT Finance's ASAT Holdings' or ASAT's assets in accordance with the
foregoing, the successor corporation formed by such consolidation or into
which ASAT Finance, ASAT Holdings or ASAT is merged or to which such transfer
is made shall succeed to and, except in the case of a lease, be substituted
for, and may exercise every right and power of, ASAT Finance, ASAT Holdings,
or ASAT, as the case may be, under the Indenture with the same effect as if
such successor corporation had been named therein as ASAT Finance, ASAT
Holdings or ASAT, and, except in the case of a lease, ASAT Finance, ASAT
Holdings, or ASAT shall be released from its obligations under the notes, the
guarantees and the indenture except with respect to any obligations that arise
from, or are related to, such transaction.
For purposes of the foregoing, the transfer, by lease, assignment, sale or
otherwise, of all or substantially all of the properties and assets of one or
more Subsidiaries, ASAT Holdings' or ASAT's direct or indirect interest in
which constitutes all or substantially all of its properties and assets, shall
be deemed to be the transfer of all or substantially all of ASAT Holdings' or
ASAT's properties and assets.
Release of Guarantors
The indenture provides that no guarantor will consolidate or merge with or
into, whether or not such guarantor is the surviving Person, another Person
unless, subject to the provisions of the following paragraph and certain other
provisions of the indenture,
(1) the Person formed by or surviving any such consolidation or merger, if
other than such guarantor, assumes all the obligations of such
guarantor pursuant to a supplemental indenture in form reasonably
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satisfactory to the trustee, pursuant to which such Person shall
unconditionally guarantee, on a senior basis, all of such guarantor's
obligations under the indenture and such guarantor's guarantee, on the
terms set forth in the indenture; and
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall
have occurred or be continuing.
Upon the complete sale or disposition, whether by merger, stock purchase,
Asset Sale or otherwise, of a guarantor to an entity which is not a guarantor,
a Subsidiary or ASAT Finance, or the designation of a Subsidiary to become an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
indenture, including, without limitation, the provisions of the covenant
"Limitations on Sale of Assets and Subsidiary Stock", such guarantor will be
deemed released from its obligations under its guarantee of the notes;
provided, however, that any such termination shall occur only to the extent
that all obligations of such guarantor under all of its guarantees of any
indebtedness of ASAT Holdings, ASAT Finance or any other Subsidiary shall also
terminate upon such release, sale or transfer and none of its Equity Interests
are pledged for the benefit of any holder of any Indebtedness of ASAT
Holdings, ASAT Finance or any other Subsidiary.
The provisions of this covenant shall not apply to (1) the merger of any
guarantors with and into each other, including with and into ASAT Holdings or
ASAT; or (2) a consolidation or merger or other transaction involving ASAT
Holdings or ASAT to which the covenant entitled "Limitation on Merger, Sale or
Consolidation" shall apply.
Payments for Consent
ASAT Finance and guarantors will not, and will not permit any Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or
for the benefit of any holder of notes for or as an inducement to any consent,
waiver or amendment of any of the terms of provisions of the indenture or the
notes unless such consideration is offered to be paid and is paid to all
holders of the notes that consent, waive or agree to amend in the time frame
set forth in and in accordance with the solicitation documents relating to
such consent, waiver or agreement.
Limitation on Lines of Business
The indenture provides that neither ASAT Holdings or any of its Subsidiaries
will directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of ASAT Holdings, is a related business.
Subsidiary Guarantors
The indenture provides that ASAT Holdings and all of ASAT Holdings' present
and future Subsidiaries, other than ASAT Finance, jointly and severally will
guaranty irrevocably and unconditionally all principal, premium, interest and
liquidated damages and additional amounts, if any, on the notes on a senior
basis. The term Subsidiary does not include unrestricted subsidiaries.
Limitation on Status as Investment Company
The indenture prohibits ASAT Holdings and its Subsidiaries from being
required to register as an "investment company", as that term is defined in
the Investment Company Act of 1940, as amended, or from otherwise becoming
subject to regulation under the Investment Company Act.
Restrictions on Activities of ASAT Holdings and ASAT Finance
Notwithstanding anything contained herein to the contrary, neither ASAT
Holdings nor ASAT Finance may
(1) hold any assets other than cash and cash equivalents,
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(2) become liable for any obligations other than as issuer or guarantor of
the notes and as a guarantor of the indebtedness under the Credit
Agreement,
(3) make any investments except that ASAT Holdings may make permitted
investments,
(4) create, incur, assume or suffer to exist any Lien of any kind other
than Liens specified in clauses (e), (f) or (g) of the definition of
Permitted Liens,
(5) engage in any business activities;
provided that:
(a) ASAT Finance may be the issuer and ASAT Holdings may be a guarantor of
notes;
(b) each of them may be a guarantor of the indebtedness under the Credit
Agreement and may incur Permitted Indebtedness for the refinancing
thereof pursuant to the terms of the indenture;
(c) ASAT Holdings may effect an Initial Public Entity Offering or a
Qualifying Subsidiary IPO, and
(d) each of them may engage in any activities directly related to or
necessary in connection with the activities permitted to be engaged in
by it pursuant to clauses (a) to (c) hereof. The activities described
in the foregoing clauses (1) through (5) together with any other
activities other than the activities described in the foregoing proviso
are Impermissible Activities for ASAT Finance and ASAT Holdings,
respectively.
During the term of the indenture and the notes, ASAT must continue to
directly own, beneficially and of record, 100% of the membership interests
of ASAT Finance, and any successor thereto.
During the term of the indenture and the notes, ASAT Holdings must continue
to own, beneficially, 100% of the issued and outstanding share capital of
ASAT, and any successor thereto, unless and to the extent ASAT Holdings has
effected a Qualifying Subsidiary IPO, in which case the IPO Entity, if it is
not ASAT, must continue to beneficially own 100% of the issued and outstanding
share capital of ASAT.
Reports
The indenture provides that whether or not ASAT Holdings is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act applicable
to a U.S. issuer, ASAT Holdings will deliver to the trustee and, to each
holder and to prospective purchasers of notes identified to ASAT by an initial
purchaser, within five days after ASAT Holdings is or would have been, if ASAT
Holdings were a U.S. issuer subject to such reporting obligations, required to
file such reports with the SEC, annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the SEC, if ASAT Holdings were a U.S. issuer subject to
the requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by ASAT Holdings's
certified independent public accountants as such would be required in such
reports to the SEC, and, in each case, together with a management's discussion
and analysis of financial condition and results of operations which would be
so required and, unless the SEC will not accept such reports, file with the
SEC the annual, quarterly and other reports which ASAT Holdings is or would
have been required to file with the SEC. If ASAT Holdings has designated any
of the Subsidiaries as unrestricted subsidiaries, and if such unrestricted
subsidiaries taken as a whole would constitute a significant Subsidiary, then
the quarterly and annual financial information required by the preceding
paragraph shall include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in "Management's
Discussion and Analysis of Financial Condition and Results of Operations", of
the financial condition and results of operations of ASAT Holdings and the
Subsidiaries separate from the financial condition and results of operations
of the unrestricted subsidiaries of ASAT Holdings.
ASAT Finance is seeking consent in this exchange offer and consent
solicitation to amend these reporting requirements so that neither ASAT
Holdings nor any of its subsidiaries will be required to make disclosure
required by items 400 to 405 of Regulation S-K, as amended. Items 400 to 405
require disclosure of certain information on directors, executive officers,
promoters and control persons of issuers subject to the reporting requirements
of the Exchange Act, including executive compensation and security ownership
of certain beneficial owners and management, among other things.
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Events of Default and Remedies
The indenture defines an "Event of Default" as:
(1) the failure to pay any installment of interest, or additional amounts
or liquidated damages, if any, on the notes as and when the same
becomes due and payable and the continuance of any such failure for 30
days,
(2) the failure to pay all or any part of the principal, or premium, if
any, on the notes when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Change of Control Purchase Price or the
Asset Sale Offer Price on notes validly tendered and not properly
withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as
applicable,
(3) the failure by ASAT Finance, ASAT Holdings or any Subsidiary to observe
or perform any other covenant or agreement contained in the notes or
the indenture and, except for the provisions under "Repurchase of Notes
at the Option of the Holder Upon a Change of Control," "Limitations on
Sale of Assets and Subsidiary Stock," "Limitation on Merger, Sale or
Consolidation" and "Limitation on Restricted Payments" for which no
notice shall be required, the continuance of such failure for a period
of 30 days after written notice is given to ASAT Finance by the trustee
or to ASAT Finance and the trustee by the holders of at least 25% in
aggregate principal amount of the notes outstanding,
(4) certain events of bankruptcy, insolvency or reorganization in respect
of any of the ASAT Finance, ASAT Holdings or any of its Significant
Subsidiaries, including ASAT,
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by ASAT Finance, ASAT Holdings or any
of its Subsidiaries, or the payment of which is guaranteed by ASAT
Finance, ASAT Holdings or any of its Subsidiaries, whether such
indebtedness or guarantee now exists, or is created after the date of
the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or premium,
if any, on such indebtedness prior to the expiration of the grace
period provided in such indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such indebtedness, together
with the principal amount of any other such indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(6) final unsatisfied judgments not covered by insurance aggregating in
excess of $5.0 million, at any one time rendered against ASAT Finance,
ASAT Holdings or any of its Subsidiaries and not stayed, bonded or
discharged within 60 days, or
(7) any guarantee of ASAT Holdings or a guarantor that is a significant
Subsidiary, including ASAT, ceases to be in full force and effect or
becomes unenforceable or invalid or is declared null and void, other
than in accordance with the terms of the guarantee, or ASAT Holdings or
any guarantor that is a significant Subsidiary, including ASAT, denies
or disaffirms its obligations under its guarantee.
The indenture provides that if a Default occurs and is continuing, the
trustee must, within 90 days after the occurrence of such Default, give to the
holders notice of such Default.
If an Event of Default occurs and is continuing, other than an Event of
Default specified in clause (4) above relating to ASAT Finance, ASAT Holdings
or any of its significant Subsidiaries, then in every such case, unless the
principal of all of the notes shall have already become due and payable,
either the trustee or the holders of at least 25% in aggregate principal
amount of the notes then outstanding, by notice in writing to ASAT Finance,
and to the trustee if given by holders, (an "Acceleration Notice"), may
declare all principal, determined as set forth below, and accrued interest,
and liquidated damages, if any, thereon to be due and payable immediately. If
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an Event of Default specified in clause (4), above, relating to ASAT Finance,
ASAT Holdings or any of its significant Subsidiaries occurs, all principal and
accrued interest, and liquidated damages, if any, thereon will be immediately
due and payable on all outstanding notes without any declaration or other act
on the part of the trustee or the holders. The holders of a majority in
aggregate principal amount of notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the notes which have become
due solely by such acceleration and except a Default with respect to any
provision requiring a supermajority approval to amend, which Default may only
be waived by such a supermajority, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders any Default, except a
Default with respect to any provision requiring a supermajority approval to
amend, which Default may only be waived by such a supermajority, and except a
Default in the payment of principal of or interest on any note not yet cured
or a Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding note
affected. Subject to the provisions of the indenture relating to the duties of
the trustee, the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request, order or direction of any
of the holders, unless such holders have offered to the trustee reasonable
security or indemnity.
Subject to all provisions of the indenture and applicable law, the holders
of a majority in aggregate principal amount of the notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee.
In the case of any Event of Default occurring by reason of any willful
action, or inaction, taken, or not taken, by or on behalf of ASAT Finance or
any guarantor with the intention of avoiding payment of any premium that ASAT
Finance or any guarantor would have had to pay if ASAT Finance then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law.
Prescription
Any monies paid by ASAT Finance or the guarantors to the trustee or any
paying agent for the payment of principal of or interest on any note and
remaining unclaimed at the end of two (2) years after such principal or
interest shall have become due and payable shall be repaid to ASAT Finance or
such guarantor, as the case may be, upon its request and the holder of any
note shall then look only to ASAT Finance or such guarantor for such payment.
Legal Defeasance and Covenant Defeasance
The indenture provides that ASAT Finance may, at its option, elect to have
its obligations and the obligations of the guarantors discharged with respect
to the outstanding notes ("Legal Defeasance"). Such Legal Defeasance means
that ASAT Finance shall be deemed to have paid and discharged the entire
indebtedness represented by the notes, and the Indenture shall cease to be of
further effect as to all outstanding notes and guarantees, except as to:
(a) rights of holders to receive payments in respect of the principal of,
premium, if any, and interest, and liquidated damages, if any on such
notes when such payments are due from the trust funds;
(b) ASAT Finance's obligations with respect to such notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed,
lost or stolen notes, and the maintenance of an office or agency for
payment and money for security payments held in trust;
(c) the rights, powers, trust, duties, and immunities of the trustee, and
ASAT Finance's and guarantors' obligations in connection therewith; and
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(d) the Legal Defeasance provisions of the indenture.
In addition, ASAT Finance may, at its option and at any time, elect to have
its obligations and the obligations of the guarantors released with respect to
certain covenants under the indenture, except as described otherwise in the
indenture ("Covenant Defeasance"), and thereafter any failure to comply with
such obligations shall not constitute a Default or Event of Default with
respect to the notes. In the event Covenant Defeasance occurs, certain events,
not including non-payment, non-payment of guarantees, and bankruptcy,
receivership, rehabilitation and insolvency events, relating to ASAT Finance
described under "Events of Default" will no longer constitute an Event of
Default with respect to the notes. ASAT Finance may exercise its Legal
Defeasance option regardless of whether it previously exercised Covenant
Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) ASAT Finance must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the notes, U.S. legal tender, U.S.
Government Obligations or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on such notes on the stated date for payment thereof
or on the redemption date of such principal or installment of principal
of, premium, if any, or interest and liquidated damages, if any, on
such notes, and the holders of notes must have a valid, perfected,
exclusive security interest in such trust;
(2) in the case of Legal Defeasance, ASAT Finance shall have delivered to
the trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that:
(a) ASAT Finance has received from, or there has been published by the
Internal Revenue Service, a ruling or
(b) since the date of the 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 holders of such notes will not recognize income, gain
or loss for United States federal income tax purposes as a result of such
Legal Defeasance and will be subject to United States federal 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 had not occurred;
(3) in the case of Covenant Defeasance, ASAT Finance shall have delivered
to the trustee an opinion of counsel in the United States reasonably
acceptable to such trustee confirming that the holders of such notes
will not recognize income, gain or loss for United States federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to United States 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;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture or
any other material agreement or instrument to which ASAT Finance, ASAT
Holdings or any of its Subsidiaries are a party or by which any of the
foregoing are bound;
(6) ASAT Finance shall have delivered to the trustee an Officers'
Certificate stating that the deposit was not made by ASAT Finance with
the intent of preferring the holders of such notes over any other of
its creditors or with the intent of defeating, hindering, delaying or
defrauding any other creditors or others; and
(7) ASAT Finance shall have delivered to the trustee an Officers'
Certificate and an opinion of counsel, each stating that the conditions
precedent provided for in, in the case of the Officers' Certificate,
(1) through (6) and, in the case of the opinion of counsel, clauses
(1), (with respect to the validity and perfection of the security
interest) (2), (3) and (5) of this paragraph have been complied with
and
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ASAT Finance shall have delivered to the trustee an Officers'
Certificate, subject to such qualifications and exceptions as the
trustee deems appropriate, to the effect that, assuming no holder of the
notes is an insider of ASAT Holdings or any of its Subsidiaries, the
trust funds will not be subject to the effect of any applicable Federal
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' right generally.
If the funds deposited with the trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the
notes when due, then the obligations of ASAT Finance and the guarantors under
the indenture will be revived and no such defeasance will be deemed to have
occurred.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights of registration of transfer or exchange of notes,
as to all outstanding notes when either:
(1) all such notes previously authenticated and delivered, except lost,
stolen or destroyed notes that have been replaced or paid and notes for
whose payment money has previously been deposited in trust or
segregated and held in trust by ASAT Finance and thereafter repaid to
ASAT Finance or discharged from such trust, have been delivered to the
trustee for cancellation; or
(2)(a) ASAT Finance shall have given irrevocable and unconditional notice
of redemption for all of the outstanding notes within 60 days of
such notice pursuant to the redemption provisions of the indenture,
or all notes not previously delivered to the trustee for
cancellation have become due and payable, and ASAT Finance has
irrevocably deposited or caused to be deposited with the trustee as
trust funds in the trust for such purpose an amount of money
sufficient to pay and discharge the entire indebtedness, including
all principal, premium, if any, and accrued interest, and liquidated
damages, if any, on the notes not theretofore delivered to the
trustee for cancellation,
(b) ASAT Finance has paid all sums payable by it under the indenture,
(c) ASAT Finance has delivered irrevocable instructions to the trustee
to apply the deposited money toward the payment of the notes at
maturity or the redemption date, which redemption date must be
within 60 days thereof, as the case may be,
(d) the holders of the notes have a valid, perfected, exclusive security
interest in such trust,
(e) no Default or Event of Default with respect to the notes shall have
occurred and be continuing on such date of deposit; and
(f) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which ASAT Holdings or any Subsidiary is a party or by
which ASAT Holdings or any Subsidiary is bound.
In addition, ASAT Finance must deliver an Officers' Certificate and an
opinion of counsel stating that ASAT Finance has complied with all conditions
precedent to satisfaction and discharge of the indenture.
Amendments and Supplements
The indenture contains provisions permitting ASAT Finance, the guarantors and
the trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the holders. With the consent of the holders of not less
than a majority in aggregate principal amount of the notes at the time
outstanding, ASAT Finance, the guarantors and the trustee are permitted to
amend or supplement the indenture or any supplemental indenture or modify the
rights of the holders; provided, that following the occurrence of the first
Change of Control hereunder, no such modification may, without the consent of
holders of at least 66 2/3% in aggregate
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principal amount of notes at the time outstanding, modify the provisions,
including the defined terms used therein, of the covenant "Repurchase of Notes
at the Option of the Holder upon a Change of Control" and provided, that no
such modification may, without the consent of each holder affected thereby:
(1) change the Stated Maturity on any note, or reduce the principal amount
thereof or the rate, or extend the time for payment, of interest
thereon or any premium payable upon the redemption thereof at ASAT
Finance's option or the amount of liquidated damages or additional
amounts payable thereunder, or change the city of payment where, or the
coin or currency in which, any note or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
or, in the case of redemption at ASAT Finance's option, on or after the
redemption date, or reduce the Change of Control Purchase Price or the
Asset Sale Offer Price after the corresponding Asset Sale or Change of
Control has occurred or alter the provisions, including the defined
terms used therein, regarding ASAT Finance's right to redeem the notes
as a right, or at ASAT Finance's option, in a manner adverse to the
holders, or
(2) reduce the percentage in principal amount of the outstanding notes, the
consent of whose holders is required for any such amendment,
supplemental indenture or waiver provided for in the indenture, or
(3) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding note affected thereby, or
(4) cause the notes or any guarantor to become contractually subordinate in
right of payment to any other indebtedness.
For the purpose of determining a percentage of aggregate principal amount of
notes outstanding at any time, notes held by ASAT Finance, ASAT Holdings or
any of their respective affiliates shall be deemed not to be outstanding.
Governing Law
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York including,
without limitation, Sections 5-1401 and 5-1402 of the New York General
Obligations Law and New York Civil Practice Laws and Rules 327(b).
Enforceability of Judgements
Since substantially all the operating assets of ASAT Finance and the
guarantors are outside of the United States, any judgement obtained in the
United States against ASAT Finance or a guarantor, including judgements with
respect to the payment of principal, interest, liquidated damages, if any,
additional amounts, redemption price and any purchase price with respect to
the notes, may not be collectible within the United States. For a discussion
of the enforceability in Hong Kong of judgements obtained in the United
States, see "Enforceability of Civil Liabilities".
Consent to Jurisdiction and Service
The indenture provides that ASAT Finance and each Guarantor will appoint
ASAT, Inc. as its agent for actions 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.
No Personal Liability of Partners, Stockholders, Officers, Directors
The indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of ASAT Finance or the
guarantors, including ASAT Holdings or any successor entity shall have any
personal liability in respect of the obligations of ASAT Finance or the
guarantors under the indenture or the notes solely by reason of his or its
status as such stockholder, employee, officer or director, except that this
provision shall in no way limit the obligation of any guarantor pursuant to
any guarantee of the notes.
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Certain Definitions
"Acquired Indebtedness" means indebtedness, including Disqualified Capital
Stock, of any Person existing at the time such Person becomes a Subsidiary of
ASAT Holdings, including by designation, or is merged or consolidated into or
with ASAT Holdings or one of its Subsidiaries.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with ASAT Holdings.
For purposes of this definition, the term "control" means the power to direct
the management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise; provided, that with respect to ownership interest in
ASAT Holdings and its Subsidiaries, a Beneficial Owner of 10% or more of the
total voting power normally entitled to vote in the election of directors,
managers or trustees, as applicable, shall for such purposes be deemed to
constitute control. Notwithstanding the foregoing, Affiliate shall not include
Wholly Owned Subsidiaries.
"Attributable Debt" means, all obligations, other than Capitalized Lease
Obligations, of a Person with respect to leases, licenses or similar
arrangements for the use of, personal property. For the purposes of the
Indenture, Attributable Debt shall, at any date as of which the amount thereof
is to be determined, have a value equal to the total net amount of rent
required to be paid by such person under such lease during the remaining term
thereof, whether or not such lease is terminable at the option of the lessee
prior to the end of such term, including any period for which such lease has
been, or may, at the option of the lessor, be extended, discounted from the
last date of such term to the date of determination at a rate per annum equal
to the discount rate which would be applicable to a Capitalized Lease
Obligation with like term in accordance with GAAP.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-
3 and 13d-5 under the Exchange Act, as in effect on the Issue Date, whether or
not applicable, except that a "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.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the
power of the board of directors of such Person.
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Contribution" means any contribution to the equity of ASAT Holdings
from a direct or indirect parent of ASAT Holdings for no consideration other
than the issuance of Qualified Capital Stock.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase, other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock, warrants, options,
participations or other equivalents of or interests, however designated, in
stock issued by that corporation.
"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by the
United States of America or Hong Kong or any agency or instrumentality
thereof, provided, that the full faith and credit of the United States
of America or Hong Kong is pledged in support thereof, or by the Asian
Development Bank, the World Bank or any other similar supranational
organization,
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(2) time deposits and certificates of deposit and commercial paper issued
by the parent corporation of any U.S. commercial bank of recognized
standing having capital and surplus in excess of $500 million,
(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc.,
(4) 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, or
(5) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by an state,
commonwealth or territory of the United States of America, or by an
political subdivision or taxing authority thereof, and rated at least
"A" by Standard & Poor's Corporation or "A" by Moody's Investors
Service, Inc.
and in the case of each of (1), (2), and (3) maturing within one year after
the date of acquisition.
"consolidation" means, with respect to ASAT Holdings, the consolidation of
the accounts of the Subsidiaries with those of ASAT Holdings, all in
accordance with GAAP; provided, that except where the context otherwise
requires "consolidation" will not include consolidation of the accounts of any
unrestricted subsidiary with the accounts of ASAT Holdings. The term
"consolidated" has a correlative meaning to the foregoing.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses, exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of, for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such
Person, exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges
subsequent to the Transaction Date, during the Reference Period; provided,
that for purposes of the calculation of such ratio:
(1) acquisitions which occurred during the Reference Period or subsequent
to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period
without regard to the effect of clause (c) of the definition of
"Consolidated Net Income,"
(2) transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of
the Reference Period without regard to the effect of clause (c) of the
definition of "Consolidated Net Income,"
(3) the incurrence of any Indebtedness, including issuance of any
Disqualified Capital Stock, during the Reference Period or subsequent
to the Reference Period and on or prior to the Transaction Date, and
the application of the proceeds therefrom to the extent used to
refinance or retire other Indebtedness, shall be assumed to have
occurred on the first day of the Reference Period, and
(4) the Consolidated Fixed Charges of such Person attributable to interest
on any Indebtedness or dividends on any Disqualified Capital Stock
bearing a floating interest, or dividend, rate shall be computed on a
pro forma basis as if the average rate in effect from the beginning of
the Reference Period to the Transaction Date had been the applicable
rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap or Hedging Obligation,
which shall remain in effect for the 12-month period immediately
following the Transaction Date, that has the effect of fixing the
interest rate on the date of computation, in which case such rate,
whether higher or lower, shall be used.
"Consolidated Debt/EBITDA Ratio" means, with respect to any Person, on any
date of determination, on a pro forma basis after giving effect, to the extent
applicable, to any Restricted Payment to occur on the payment date, the ratio
of (a) the aggregate amount of Consolidated Indebtedness of such Person then
outstanding to (b)
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the aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses, exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of, for the
reference period, provided, that for purposes of the calculation of such
ratio:
(1) Acquisitions which occurred during the reference period or subsequent
to the reference period and on or prior to the payment date shall be
assumed to have occurred on the first day of the reference period
without regard to the effect of clause (c) of the definition of
"Consolidated Net Income,"
(2) transactions giving rise to the need to calculate the Consolidated
Debt/EBITDA Ratio shall be assumed to have occurred on the first date
of reference period without regard to the effect of clause (c) of the
definition of "Consolidated Net Income," and
(3) the incurrence of any indebtedness, including issuance of any
Disqualified Capital Stock, during the reference period or subsequent
to the reference period and on or prior to the payment date, and the
application of the proceeds therefrom to the extent used to refinance
or retire other indebtedness, shall be assumed to have occurred on the
first day of the reference period.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person for such period adjusted to add
thereto, to the extent deducted from net revenues in determining Consolidated
Net Income, without duplication, the sum of
(a) Consolidated income tax expense,
(b) Consolidated depreciation and amortization expense, and
(c) Consolidated Fixed Charges,
less the amount of all cash payments made by such Person or any of its
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such
period or any prior period; provided, that consolidated income tax expense and
depreciation and amortization of a Subsidiary that is a less than Wholly Owned
Subsidiary shall only be added to the extent of the equity interest of such
Person in such Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount, without duplication and determined in each case in
accordance with GAAP, of:
(a) interest expensed or capitalized, paid, accrued, or scheduled to be
paid or accrued, including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations, of such Person
and its Consolidated Subsidiaries during such period, including
(1) original issue discount and non-cash interest payments or accruals
on any Indebtedness,
(2) the interest portion of all deferred payment obligations, and
(3) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings
and currency and Interest Swap and Hedging Obligations, in each
case to the extent attributable to such period,
(b) one-third of Consolidated Rental Expense for such period attributable
to operating leases of such Person and its Consolidated Subsidiaries,
and
(c) the amount of dividends accrued or payable, or guaranteed, by such
Person or any of its Consolidated Subsidiaries in respect of Preferred
Stock, other than by Subsidiaries of such Person to such Person or such
Person's Wholly Owned Subsidiaries.
For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by such Person to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any indebtedness represented by the guaranty by such Person or
a Subsidiary of such Person of an obligation of another Person shall be deemed
to be the interest expense attributable to the indebtedness guaranteed.
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"Consolidated Net Income" means, with respect to any Person for any period,
the net income, or loss, of such Person and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period,
adjusted to exclude, only to the extent included in computing such net income,
or loss, and without duplication:
(a) all gains, but not losses, which are either extraordinary, as
determined in accordance with GAAP, or are either unusual or
nonrecurring, including any gain from the sale or other disposition of
assets outside the ordinary course of business or from the issuance or
sale of any capital stock,
(b) the net income, if positive, of any other Person, other than a
Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such
Person or a Consolidated Subsidiary of such Person during such period,
but in any case not in excess of such Person's pro rata share of such
other Person's net income for such period,
(c) the net income or loss of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, and
(d) the net income, if positive, of any of such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends
or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary.
"Consolidated Rental Expense" of any Person means the aggregate rental
obligations of such Person and its Consolidated Subsidiaries, not including
taxes, insurance, maintenance and similar expenses that the lessee is
obligated to pay under the terms of the relevant leases, determined on a
Consolidated basis in conformity with GAAP, payable in respect of such period
under leases of real or personal property, net of income from subleases
thereof, not including taxes, insurance, maintenance and similar expenses that
the sublessee is obligated to pay under the terms of such sublease, whether or
not such obligations are reflected as liabilities or commitments on a
Consolidated balance sheet of such Person and its Subsidiaries or in the notes
thereto, excluding, however, in any event, that portion of Consolidated Fixed
Charges of such Person representing payments by such Person or any of its
Consolidated Subsidiaries in respect of Capitalized Lease Obligations.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person, whether now existing or hereafter created or acquired, the financial
statements of which are consolidated for financial statement reporting
purposes with the financial statements of such Person in accordance with GAAP.
"Continuing Director" means during any period of 12 consecutive months after
the issue date, individuals who at the beginning of any such 12-month period
constituted the Board of Directors of ASAT Holdings or ASAT, as applicable,
together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of ASAT Holdings or ASAT, as
applicable, was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the merger,
consolidation or sale, transfer or other conveyance, of all or substantially
all of the assets of ASAT Holdings or ASAT, as applicable, if such agreement
was approved by a vote of such majority of directors.
"Credit Agreement" means the credit agreement, by and among ASAT, certain
financial institutions and The Chase Manhattan Bank, as agent, providing for
(A) an aggregate $40.0 million term loan facility, and (B) an aggregate $25.0
million revolving credit facility, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such credit agreement and/or related documents may be amended,
restated, supplemented, renewed, replaced or otherwise modified from time to
time whether or not with the same agent, trustee, representative lenders or
holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the
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generality of the foregoing, the term "Credit Agreement" shall include
agreements in respect of Interest Swap and Hedging Obligations with lenders
party to the Credit Agreement and shall also include any amendment, amendment
and restatement, renewal, extension, restructuring, supplement or modification
to any Credit Agreement and all refundings, refinancings and replacements of
any Credit Agreement, subject to the proviso to clause (c) of the third
paragraph of the covenant "Limitation on Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock", including any agreement:
(a) extending the maturity of any indebtedness incurred thereunder or
contemplated thereby,
(b) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of ASAT and its Subsidiaries
and their respective successors and assigns,
(c) increasing the amount of indebtedness incurred thereunder or available
to be borrowed thereunder; provided, that on the date such indebtedness
is incurred it would not be prohibited by clause (c) of the third
paragraph of the covenant "Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock", or
(d) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the indenture.
"Currency Agreement" means in respect of any Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or beneficiary.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Capital Stock" means with respect to any Person,
(a) Equity Interests of such Person that, by its terms or by the terms of
any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time or both
would be, required to be redeemed or repurchased, except for customary
change of control and asset sale provisions, including at the option of
the holder thereof, by such Person or any of its Subsidiaries, in whole
or in part, on or prior to 91 days following the Stated Maturity of the
Notes and
(b) any Equity Interests of any Subsidiary of such Person other than any
common equity with no preferences, privileges, and no redemption or
repayment provisions.
"Equity Interests" means Capital Stock or partnership, participation or
membership interests and all warrants, options or other rights to acquire
Capital Stock or partnership, participation or membership interests, but
excluding any debt security that is convertible into, or exchangeable for,
Capital Stock or partnership, participation or membership interests.
"Economic Equity Interests" means Equity Interests which have full rights as
to distributions of capital and rights as to dividends or other distributions,
in liquidation or otherwise.
"Event of Loss" means, with respect to any property or asset, any
(a) loss, destruction or damage of such property or asset or
(b) any condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, of such property or asset, or confiscation
or requisition of the use of such property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Person" means Chase Asia Investment Partners II(Y), LLC, ZAM-
Olympus Co-Invest, L.L.C., Olympus Capital Holdings Asia I, L.P., Reservoir-
Olympus II, L.P., Olympus KB, L.P., Orchid Hong Kong Investment Holdings and
Asia Opportunity Fund, L.P. and all Related Persons of such Person.
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"exempted affiliate transaction" means
(a) customary employee compensation arrangements approved by a majority of
independent, as to such transactions, members of the Board of Directors
of ASAT Holdings, provided that such arrangements are on customary
arm's length terms in the ordinary course of business;
(b) transactions solely among Wholly Owned Subsidiaries, including ASAT;
(c) reasonable and customary financial advisory securities underwriting or
similar arrangements with investment banking firms of national
reputation in the United States;
(d) payment of amounts under the lease with Parent in the form of such
lease as of the Issue Date provided that such payments are made in the
ordinary course of business on customary arm's length terms; and
(e) payments permitted under the Covenant entitled "-Limitation on
Restricted Payments".
"Existing Indebtedness" means the indebtedness of ASAT Finance and the
guarantors, other than indebtedness under the Credit Agreement, in existence
on the issue date, reduced to the extent such amounts are repaid, refinanced
or retired.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's- length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of ASAT Holdings in good faith.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the issue date.
"guarantor" means ASAT Holdings and each of ASAT Holdings' present and
future Subsidiaries, including ASAT but excluding ASAT Finance, that at the
time are guarantors of the notes in accordance with the indenture.
"indebtedness" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of any such
Person, to the extent such liabilities and obligations would appear as
a liability upon the consolidated balance sheet of such Person in
accordance with GAAP,
(1) in respect of borrowed money, whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a
portion thereof,
(2) evidenced by bonds, notes, debentures or similar instruments,
(3) representing the balance deferred and unpaid of the purchase price
of any property or services, except those, other than accounts
payable or other obligations to trade creditors which have remained
unpaid for greater than 60 days past their original due date,
incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors;
(b) all liabilities and obligations, contingent or otherwise, of such
Person
(1) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks,
(2) relating to any Capitalized Lease Obligation or Attributable Debt,
or
(3) evidenced by a letter of credit or a reimbursement obligation of
such Person with respect to any letter of credit;
(c) all net obligations of such Person under Interest Swap and Hedging
Obligations;
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(d) all liabilities and obligations of others of the kind described in the
preceding clauses (a), (b) or (c) that such Person has guaranteed or
provided credit support or that is otherwise its legal liability or
which are secured by any assets or property of such Person;
(e) any and all deferrals, renewals, extensions, refinancing and
refundings, whether direct or indirect, of, or amendments,
modifications or supplements to, any liability of the kind described in
any of the preceding clauses (a), (b), (c) or (d), or this clause (e),
whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such Person, measured at the greater
of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
indebtedness shall be required to be determined pursuant to the indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Disqualified Capital Stock, such Fair Market Value to be determined in good
faith by the board of directors of the issuer, or managing general partner of
the issuer, of such Disqualified Capital Stock.
The amount of any indebtedness outstanding as of any date shall be:
(a) the accreted value thereof, in the case of any indebtedness issued with
original issue discount, but the accretion of original issue discount
in accordance with the original terms of Indebtedness issued with an
original issue discount will not be deemed to be an incurrence and
(b) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other indebtedness.
"Initial Public Equity Offering" means an initial underwritten offering of
ordinary shares of ASAT Holdings for cash pursuant to an effective
registration statement under the Securities Act or other applicable securities
laws following which the ordinary shares of ASAT Holdings are listed on a
national securities exchange or an internationally recognized securities
exchange including, without limitation, The Stock Exchange of Hong Kong
Limited, or quoted on the national market system of the Nasdaq stock market.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"investment" by any Person in any other Person means, without duplication:
(a) the acquisition, whether by purchase, merger, consolidation or
otherwise, by such Person, whether for cash, property, services,
securities or otherwise, of Equity Interests, capital stock, bonds,
notes, debentures, partnership or other ownership interests or other
securities, including any options or warrants, of such other Person or
any agreement to make any such acquisition;
(b) the making by such Person of any deposit with, or advance, loan or
other extension of credit to, such other Person, including the purchase
of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such
other Person, or any commitment to make any such advance, loan or
extension, but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business;
(c) other than guarantees of indebtedness of any guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock," the entering
into by such Person of any guarantee of, or other credit support or
contingent obligation with respect to, indebtedness or other liability
of such other Person;
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(d) the making of any capital contribution by such Person to such other
Person; and
(e) the designation by the Board of Directors of ASAT Holdings of any
Person to be an unrestricted subsidiary.
ASAT Holdings shall be deemed to make an investment in an amount equal to
the fair market value of the net assets of any subsidiary, or, if neither ASAT
Holdings nor any of its Subsidiaries has theretofore made an Investment in
such subsidiary, in an amount equal to the investments being made, at the time
that such subsidiary is designated an unrestricted subsidiary, and any
property transferred to an unrestricted subsidiary from ASAT Holdings or a
Subsidiary shall be deemed an investment valued at its fair market value at
the time of such transfer. ASAT Holdings or any of its Subsidiaries shall be
deemed to have made an investment in a Person that is or was required to be a
Subsidiary of ASAT Holdings if, upon the issuance, sale or other disposition
of any portion of ASAT Holdings' or the Subsidiary's ownership in the Capital
Stock of such Person, such Person ceases to be a Subsidiary of ASAT Holdings.
The fair market value of each investment shall be measured at the time made or
returned, as applicable.
"IPO Entity" means a subsidiary guarantor which (1) is the subject of a
Subsidiary IPO; and (2) on consummation of the Subsidiary IPO, becomes the
holding company for or owns all or substantially all of the business and
operations of ASAT Holdings and its subsidiaries as in existence immediately
prior to the Subsidiary IPO.
"Lien" means any mortgage, charge, pledge, lien, statutory or otherwise,
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Material Facility" means the principal manufacturing and testing facilities
of ASAT and its Subsidiaries from time to time, including, without limitation,
the facilities located at 138 Texaco Road, Tsuen Wan, N.T., Hong Kong.
"Maximum Amount" means $65.0 million, provided that following the date that
is 12 months after the issue date, "Maximum Amount" shall mean the greater of
(1) $65.0 million; and (2) the Consolidated EBITDA of ASAT Holdings for the
reference period immediately preceding the incurrence date for the incurrence
of indebtedness under the Credit Agreement, calculated on a pro forma basis
after giving effect to such incurrence and the use of the proceeds therefrom
as if they had occurred on the first day of the reference period.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by ASAT Holdings in the case of a sale, or Capital Contribution in
respect, of Qualified Capital Stock and by ASAT Holdings and its Subsidiaries
in respect of an Asset Sale or any Event of Loss relating to a Material
Facility, other than any business interruption insurance, plus, in the case of
an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities, including options, warrants, rights and convertible
or exchangeable debt, of ASAT Holdings or the IPO Entity that were issued for
cash on or after the issue date or the proceeds of a secondary sale by ASAT
Holdings of Capital Stock in the IPO Entity as part of a Qualifying Subsidiary
IPO, the amount of cash originally received by ASAT Holdings or the IPO Entity
upon the issuance or sale of such securities, including options, warrants,
rights and convertible or exchangeable debt, less, in each case, the sum of
all payments, fees, commissions and, in the case of Asset Sales, reasonable
and customary, expenses, including, without limitation, the fees and expenses
of legal counsel and investment banking fees and expenses, incurred in
connection with such Asset Sale, sale of Qualified Capital Stock or recovery
of insurance from such Event of Loss, and, in the case of an Asset Sale only,
less the amount, estimated reasonably and in good faith by ASAT Holdings, of
income, franchise, sales and other applicable taxes required to be paid by
ASAT Holdings or any of its respective Subsidiaries in connection with such
Asset Sale in the taxable year that such sale is consummated or in the
immediately succeeding taxable year, the computation of which shall take into
account the reduction in tax liability resulting from any available operating
losses and net operating loss carryovers, tax credits and tax credit
carryforwards, and similar tax attributes.
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"Non-Recourse" means
(a) that none of ASAT Finance, the guarantors or any of the Subsidiaries
(1) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute indebtedness,
(2) is directly or indirectly liable, as a guarantor or otherwise, or
(3) constitutes the lender, and
(b) that no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an
unrestricted subsidiary, would permit, upon notice, lapse of time or
both, any holder of any other indebtedness of ASAT Holdings or any of
its Subsidiaries to declare a default on such other indebtedness or
cause the payment thereof to be accelerated or payable prior to its
stated maturity.
"Notes Registration Rights Agreement" means the Notes Registration Rights
Agreement, dated as of the issue date, by and among ASAT Finance and the other
parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by ASAT Finance or any guarantor under the terms of
the notes, the guarantees or the indenture, including any liquidated damages
due pursuant to the terms of the Notes Registration Rights Agreement.
"Officers' Certificate" means the officers' certificate to be delivered upon
the occurrence of certain events as set forth in the indenture.
"Parent" means QPL International Holdings Limited, a corporation formed
under the laws of Bermuda, or its successor, which indirectly owned 100% of
the Capital Stock of ASAT Holdings prior to the Recapitalization.
"Permitted Indebtedness" means that:
(a) ASAT Finance and the guarantors may incur indebtedness evidenced by the
notes and the guarantees issued pursuant to the indenture up to the
amounts being issued on the original issue date;
(b) ASAT Finance and the guarantors, as applicable, may incur Refinancing
Indebtedness with respect to any indebtedness, including Disqualified
Capital Stock, described in clause (a) of this definition or this
clause (b) or incurred pursuant to the Debt Incurrence Ratio test of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock," or Existing Indebtedness or
which was refinanced pursuant to this clause (b);
(c) any Wholly Owned Subsidiary Guarantor may incur indebtedness owed to,
borrowed from, any other Wholly Owned Subsidiary Guarantor; provided,
that such obligations shall be unsecured and contractually subordinated
in all respects to such Wholly Owned Subsidiary Guarantor's obligations
pursuant to the indenture and the guarantees and any event that causes
such Wholly Owned Subsidiary Guarantor no longer to be a Wholly Owned
Subsidiary Guarantor, including by designation to be an Unrestricted
Subsidiary, shall be deemed to be a new incurrence subject to the
covenant "Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock;"
(d) the Subsidiary Guarantors may incur Interest Swap and Hedging
Obligations that are incurred for the purpose of fixing or hedging
interest rate or currency risk with respect to any fixed or floating
rate indebtedness that is permitted by the indenture to be outstanding
or any receivable or liability the payment of which is determined by
reference to a foreign currency; provided, that the notional amount of
any such Interest Swap and Hedging Obligation does not exceed the
principal amount of Indebtedness to which such Interest Swap and
Hedging Obligation relates;
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(e) the Subsidiary Guarantors may incur indebtedness in connection with one
or more standby letters of credit or performance bonds or pursuant to
self-insurance obligations provided that in each case, such
Indebtedness is incurred on customary terms in the ordinary course of
business and not in connection with the borrowing of money or the
obtaining of advances or credit.
"Permitted Investment" means investments in:
(a) any of the notes;
(b) Cash Equivalents;
(c) intercompany notes to the extent permitted under clause (c) of the
definition of "Permitted Indebtedness;"
(d) investment of any Subsidiary in ASAT Holdings or by ASAT Holdings or a
Subsidiary in any subsidiary guarantor or any investment by any
Subsidiary in a Person in a related business if as a result of such
investment such Person immediately becomes a guarantor or such Person
is immediately merged with or into ASAT Finance or a guarantor in
accordance with the terms of the indenture;
(e) other investments in any Person or Persons, provided, that after giving
pro forma effect to each such Investment, the aggregate amount of all
such investments made on and after the issue date pursuant to this
clause (e) that are outstanding, after giving effect to any such
investments that are returned to the issuer or a guarantor that made
such prior investment, without restriction, in cash on or prior to the
date of any such calculation, but only up to the amount of the
investment made under this clause (e) in such Person, at any time does
not in the aggregate exceed $5.0 million, measured by the value
attributed to the investment at the time made or returned, as
applicable.
"Permitted Lien" means:
(a) Liens existing on the issue date;
(b) (1) Liens securing indebtedness of a Person existing at the time such
Person becomes a Subsidiary or is merged with or into a Subsidiary or
Liens securing indebtedness incurred in connection with an acquisition,
including an acquisition of assets, provided, that such Liens were in
existence prior to the date of such acquisition, merger or
consolidation, were not incurred in contemplation of, or in connection
with, such acquisition, merger or consolidation and do not extend to
any other assets; and (2) any extension, renewal, replacement or other
modification of such Liens, provided that any extension, renewal,
replacement or other modification shall be no more restrictive than the
Lien so extended, renewed, replaced or modified and shall not extend to
any additional property or assets or secure any additional
indebtedness.
(c) Liens arising from Purchase Money Indebtedness permitted to be incurred
pursuant to clause (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock"
provided such Liens relate solely to the property which is subject to
such Purchase Money Indebtedness;
(d) Liens securing Refinancing Indebtedness incurred to refinance any
indebtedness that was previously so secured which Liens securing
Refinancing Indebtedness shall be in a manner no more adverse to the
holders of the notes than the terms of the Liens securing such
refinanced Indebtedness, and provided that the Indebtedness secured is
not increased and the Lien is not extended to any additional assets or
property that would not have been security for the Indebtedness
refinanced;
(e) Liens securing indebtedness incurred under the Credit Agreement in
accordance with the terms of clause (c) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Issuance of Disqualified
Capital Stock";
(f) Liens securing the notes or the guarantees;
(g) Liens imposed by law for taxes, assessments and other governmental
charges on claims that are not yet due or are being diligently
contested in good faith by appropriate proceedings;
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(h) carriers', warehousemen's, mechanics', materialmen's , repairmen's and
other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30
days or are being diligently contested in good faith by appropriate
proceedings;
(i) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(j) deposits to secure the performance of bids, trade contracts, leases,
statutory or regulatory obligations, surety return-of-money and appeal
bonds, performance bonds and other obligations of a like nature, in
each case incurred in a manner consistent with industry practice and in
the ordinary course of business; and
(k) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of
business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of any Subsidiary.
provided that no such Liens under any of clauses (g) to (l), inclusive, shall
secure any indebtedness.
"Person" or "person" means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, limited liability
company, unincorporated association, governmental regulatory entity, country,
state or political subdivision thereof, trust, municipality or other entity.
"Preferred Stock" means any Equity Interests of any class or classes of a
Person, however designated, which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"Pro Forma" or "pro forma" shall have the meaning set forth in Regulation S-
X of the Securities Act, unless otherwise specifically stated herein.
"Public Equity Offering" means, (A) in the case of an offering of Qualified
Capital Stock of ASAT Holdings in the United States, an underwritten public
offering pursuant to a registration statement filed with the SEC in accordance
with the Securities Act of 1933, as amended, and (B) in the case of an
offering of Qualified Capital Stock of ASAT Holdings in any other
jurisdiction, a widely distributed underwritten offering, in which both retail
and institutional investors are eligible to buy in accordance with the
securities laws of such jurisdiction, in each case, to the extent the cash
proceeds therefrom are used as a Capital Contribution to ASAT Holdings.
"Purchase Money Indebtedness" of any Person means any indebtedness of such
Person to any seller or other Person incurred solely to finance the
acquisition, including in the case of a Capitalized Lease Obligation, the
lease, construction, installation or improvement of any machinery or equipment
which, in the reasonable good faith judgment of the Board of Directors of ASAT
Holdings, is (1) being acquired, on customary terms, in the ordinary course of
business, consistent with past practice and (2) directly for use in a Related
Business of such Person, provided that such indebtedness is incurred
concurrently with such acquisition, construction, installation or improvement
and is secured only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock of ASAT Holdings that is
not Disqualified Capital Stock.
"Qualified Exchange" means:
(a) any legal defeasance, redemption, retirement, repurchase or other
acquisition of Capital Stock, of ASAT Holdings issued on or after the
issue date with the Net Cash Proceeds received by ASAT Holdings from
the substantially concurrent sale of its Qualified Capital Stock; or
(b) any issuance of Qualified Capital Stock of ASAT Holdings in exchange
for any Capital Stock or Indebtedness of ASAT Holdings issued on or
after the Issue Date.
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"Qualifying Subsidiary IPO" means a Subsidiary IPO in respect of which the
following occur: (1) prior to consummation of the Subsidiary IPO, all holders
of Warrants and Warrant Shares are given the right to exchange all their
Warrants and Warrant Shares for equivalent equity securities of the IPO
Entity; (2) following any such exchange, such equivalent equity securities of
the IPO Entity, (a) represent at least the same percentage interest in the
equity of the IPO Entity as the Warrants and Warrant Shares indirectly
represented immediately prior thereto; (b) have no fewer rights nor greater
restrictions than the Warrants and Warrant Shares; and (c) otherwise fairly
represent an equivalent security and are fair and equitable to such holders;
and (3) the United States federal and Hong Kong SAR taxation consequences of
the transactions referred to in clauses (1) and (2) are no less favorable to
such holders as a class than the consequences of an Initial Public Equity
Offering by ASAT Holdings would have been for such holders.
"Recapitalization" means consummation of the transactions described as such
in the confidential offering memorandum for the Notes, to be consummated on
the issue date, as contemplated in the Purchase Agreement for the initial sale
and purchase of the notes among ASAT Finance, the guarantors and the initial
purchasers named therein.
"Reference Period" with regard to any Person means the four full fiscal
quarters, or such lesser period during which such Person has been in
existence, ended immediately preceding any date upon which any determination
is to be made pursuant to the terms of the Notes or the Indenture.
"Refinancing Indebtedness" means indebtedness, including Disqualified
Capital Stock, issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in
part, any indebtedness, including Disqualified Capital Stock, or constituting
an amendment, modification or supplement to, or a deferral or renewal of any
indebtedness, including Disqualified Capital Stock, any of the foregoing, a
"Refinancing", in a principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, not to exceed, after deduction of reasonable
and customary fees and expenses incurred in connection with the Refinancing
plus the amount of any premium paid in connection with such Refinancing in
accordance with the terms of the documents governing the indebtedness
refinanced without giving effect to any modification thereof made in
connection with or in contemplation of such refinancing, the lesser of
(1) the principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, of the indebtedness, including Disqualified
Capital Stock, so refinanced and
(2) if such indebtedness being refinanced was issued with an original issue
discount, the accreted value thereof, as determined in accordance with
GAAP, at the time of such refinancing;
provided, that
(A) such Refinancing Indebtedness shall only be used to refinance
outstanding indebtedness, including Disqualified Capital Stock, of such
Person issuing such Refinancing Indebtedness,
(B) such Refinancing Indebtedness shall (x) not have an average life
shorter than the indebtedness, including Disqualified Capital Stock, to
be so refinanced at the time of such refinancing and, (y) in all
respects, be no less contractually subordinated or junior, if
applicable, to the rights of holders of the notes than was the
indebtedness, including Disqualified Capital Stock, to be refinanced,
(C) such Refinancing Indebtedness shall have a final stated maturity or
redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the indebtedness,
including Disqualified Capital Stock, to be so refinanced or, if
sooner, 91 days after the stated maturity of the notes, and
(D) such Refinancing Indebtedness shall be secured, if secured, in a manner
no more adverse to the holders of the notes than the terms of the
Liens, if any, securing such refinanced indebtedness, including,
without limitation, the amount of Indebtedness secured shall not be
increased.
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"Related Business" means the business conducted, or proposed to be
conducted, by ASAT Holdings through ASAT and its Subsidiaries as of the issue
date and any and all businesses that in the good faith judgment of the Board
of Directors of ASAT Holdings are materially related businesses.
"Related Person" means any Person who controls, is controlled by or is under
common control with an Excluded Person; provided, that for purposes of this
definition "control" means the beneficial ownership of more than 50% of the
total voting power of a Person normally entitled to vote in the election of
directors, managers, partners or trustees, as applicable of a Person.
"Restricted Investment" means, in one or a series of related transactions,
any investment, other than other Permitted Investments.
"Restricted Payment" means, with respect to any Person:
(a) the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such Person or any parent or Subsidiary
of such Person,
(b) any payment on account of the purchase, redemption or other acquisition
or retirement for value of Equity Interests of such Person or any
Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially concurrent sale of,
or in exchange for, Refinancing Indebtedness, any purchase, redemption,
or other acquisition or retirement for value of, any payment in respect
of any amendment of the terms of or any defeasance of, any indebtedness
that is subordinated to the notes, directly or indirectly, by such
Person or a parent or Subsidiary of such Person prior to the scheduled
maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such indebtedness, and
(d) any Restricted Investment by such Person.
provided, however, that the term "Restricted Payment" does not include:
(1) any dividend, distribution or other payment on or with respect to
Equity Interests of ASAT Holdings to the extent payable solely in
shares of Qualified Capital Stock of ASAT Holdings,
(2) any dividend, distribution or other payment to ASAT Finance, ASAT
Holdings or to any of its Wholly Owned Subsidiary Guarantors, by any of
their Subsidiaries,
(3) any dividend, distribution or other payment to QPL on or prior to the
issue date as part of the Recapitalization and
(4) any redemption of voting deferred shares of ASAT Holdings by ASAT
Holdings in accordance with the Articles of Association of ASAT
Holdings as currently in effect for consideration not to exceed $0.01
per share.
"SEC" means the Securities and Exchange Commission of the United States of
America.
"Securities Act" means the Securities Act of 1933, as amended, of the United
States of America.
"Significant Subsidiary" shall have the meaning provided under Regulation S-
X of the Securities Act, as in effect on the Issue Date.
"stated maturity," when used with respect to any note, means November 1,
2006 and with respect to any other debt security means the date specified in
such debt security as the fixed date on which the final installment of
principal of such debt security is due and payable.
"Subordinated Indebtedness" means indebtedness of ASAT Finance or a
guarantor that is subordinated in right of payment by its terms or the terms
of any document or instrument relating thereto to the notes or the guarantees,
as applicable, in any respect or has a stated maturity after the stated
maturity.
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"Subsidiary," with respect to any Person, means
(a) a corporation a majority of whose Equity Interests with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by such Person and one or
more Subsidiaries of such Person or by one or more Subsidiaries of such
Person,
(b) any other Person, other than a corporation, in which such Person, one
or more Subsidiaries of such Person, or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest, or
(c) a partnership in which such Person or a subsidiary of such Person is,
at the time, a general partner and in which such Person, directly or
indirectly, at the date of determination thereof has at least a
majority ownership interest. Notwithstanding the foregoing, an
unrestricted subsidiary shall not be a Subsidiary. Unless the context
requires otherwise, Subsidiary means each direct and indirect
Subsidiary of ASAT Holdings, including ASAT Finance and ASAT; provided,
however, that if following a Qualifying Subsidiary IPO, the IPO Entity
is not a Subsidiary of ASAT Holdings, Subsidiary shall be deemed to
mean the IPO Entity and each direct and indirect Subsidiary of the IPO
Entity.
"subsidiary guarantors" means, at the relevant time, each Subsidiary which
is a guarantor.
"Subsidiary IPO" means an initial underwritten offering of ordinary shares
of any Subsidiary of ASAT Holdings, which may, but need not, be ASAT Limited,
for cash pursuant to an effective registration statement under the Securities
Act or other applicable securities laws following which the ordinary shares of
such Subsidiary are listed on a national securities exchange or an
internationally recognized securities exchange including, without limitation,
The Stock Exchange of Hong Kong Limited, or quoted on the national market
system of the Nasdaq stock market.
"unrestricted subsidiary" means any subsidiary of ASAT Holdings that does
not own any Capital Stock of, or own or hold any Lien on any property of, ASAT
Holdings or any Subsidiary and that, at the time of determination, shall be an
Unrestricted Subsidiary, as designated by the Board of Directors of ASAT
Holdings; provided, that such Subsidiary at the time of such designation:
(a) has no indebtedness other than Non-Recourse Indebtedness;
(b) is not party to any agreement, contract, arrangement or understanding
with ASAT Holdings or any Subsidiary unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable
to ASAT Holdings or such Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of ASAT Holdings;
(c) is a Person with respect to which neither ASAT Holdings nor any of its
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(d) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of ASAT Holdings or any of its
Subsidiaries; provided, further, that none of the Subsidiaries on the
issue date nor the European subsidiary of ASAT Holdings to be formed as
contemplated by the Recapitalization or their successors will be
permitted to be designated unrestricted subsidiaries.
Subject to the foregoing, the Board of Directors of ASAT Holdings may
designate any unrestricted subsidiary to be a Subsidiary, provided, that (1)
no Default or Event of Default is existing or will occur as a consequence
thereof and (2) immediately after giving effect to such designation, on a pro
forma basis, ASAT could incur at least $1.00 of indebtedness pursuant to the
Debt Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock". Each such
designation shall be evidenced by filing with the trustee a certified copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
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"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 the covenant "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock," whenever
it is necessary to determine whether ASAT Finance or a guarantor has complied
with any covenant in the indenture or a Default has occurred and an amount is
expected 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 non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Voting Equity Interests" means Equity Interests which at the time are
entitled, or at the election of the holder thereof can be converted into
Equity Interests which are entitled, to vote in the election of, as
applicable, directors, members or partners generally.
"Wholly Owned Subsidiary" means a Subsidiary, all the Equity Interests of
which, other than directors' qualifying Shares, are owned by ASAT Holdings or
one or more Wholly Owned Subsidiaries.
In the event that applicable interpretations of the staff of the SEC do not
permit the Obligors to effect the exchange offer, or if for any other reason
the exchange offer is not consummated within 210 days of the issue date or in
certain other circumstances, the Obligors will, at their own expense:
(1) within 30 days after such filing obligation arises, file a shelf
registration statement covering resales of the notes (a "Shelf
Registration Statement");
(2) use reasonable best efforts to cause this Shelf Registration Statement
to be declared effective under the Securities Act on or prior to 60
days after such obligation arises; and
(3) use reasonable best efforts to keep effective this Shelf Registration
Statement until the earlier of 24 months following the issue date and
such time as all of the notes have been sold thereunder, or otherwise
cease to be a Transfer Restricted Security, as defined in the Notes
Registration Rights Agreement.
The Obligors will, in the event a Shelf Registration Statement is required
to be filed, provide to each holder of the notes copies of the prospectus
which is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement for the notes has become effective and
take other actions as are required to permit unrestricted resales of the
notes. A holder of the notes who sells such notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Notes Registration Rights Agreement which are applicable to
such a holder, including certain indemnification and contribution rights and
obligations.
Although the Obligors intend to file one of the registration statements
described above, there can be no assurance that such registration statement
will be filed or, if filed, that it will become effective. If:
(a) neither of the registration statements described above is filed on or
before the date specified for such filing,
(b) neither of such registration statements is declared effective by the
SEC on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"),
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(c) the exchange offer Registration Statement becomes effective, and the
Obligors fail to consummate the exchange offer within 30 days of the
earlier of the effectiveness of such registration statement or the
Effectiveness Target Date, or
(d) the Shelf Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Notes
during the period specified in the Notes Registration Rights Agreement,
each such event referred to in clauses (a) through (d) above, a
"Registration Default",
then the Obligors will pay liquidated damages, to each holder of transfer-
restricted notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default, subject to increase as
specified below, in an amount equal to $0.05 per week per $1,000 principal
amount of the notes held by such holder. Upon a Registration Default,
liquidated damages will accrue at the rate specified above until such
Registration Default is cured and the amount of liquidated damages will
continue to be payable and will increase by an additional $0.05 per week per
$1,000 principal amount of notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $0.30 per week per $1,000 principal amount of transfer-
restricted notes, regardless of whether one or more than one Registration
Default is outstanding. All accrued liquidated damages will be paid by the
Obligors on May 1 and November 1 of each year to the holders of transfer-
restricted notes by wire transfer of immediately available funds to nominated
amounts or by mailing checks to their registered addresses if no such accounts
have been nominated.
The summary herein of certain provisions of the Notes Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Notes Registration
Rights Agreement, a copy of which will be available upon request.
Book-Entry, Delivery and Form
The original notes have been issued and sold to qualified institutional
buyers in reliance on Rule 144A ("Rule 144A Notes"). Notes also have been
issued and sold in offshore transactions in reliance on Regulation S
("Regulation S Notes").
Rule 144A Notes are represented by one or more notes in registered, global
form without interest coupons, collectively, the "Rule 144A Global Notes". The
Rule 144A Global Notes are deposited with the trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct
or indirect participant as described below. Regulation S Notes initially will
be represented by one or more temporary Global Notes in registered, global
form without interest coupons, collectively, the "Regulation S Temporary
Global Notes". The Regulation S Temporary Global Notes are registered in the
name of a nominee of DTC for credit to the subscribers' respective accounts at
the Euroclear System ("Euroclear") and Clearstream Banking, Societe Anonyme
("Clearstream"). Beneficial interests in the Regulation S Temporary Global
Notes may be held only through Euroclear or Clearstream.
Except as set forth below, the Global Securities may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Securities may not be
exchanged for securities in certificated form ("Certificated Securities")
except in the limited circumstances described below. See "--Book-Entry,
Delivery and Form--Exchange of Book-Entry Securities for Certificated
Securities".
Until the Separation Date, interest in the Global Securities traded only as
units. The units including beneficial interests in the Global Securities are
subject to certain restrictions on transfer and bear a restrictive legend as
described under "Notice to Investors". In addition, transfer of DTC and its
direct or indirect participants, including, if applicable, those of Euroclear
and Clearstream, which may change from time to time.
The securities may be presented for registration of transfer and exchange at
the office of the registrar.
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Depository Procedures
DTC has advised ASAT Finance that DTC is a limited-purpose trust company
created to hold securities for its participants and to facilitate the
clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants. The participants include securities brokers and dealers,
including the initial purchaser, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not participants may beneficially own
securities held by or on behalf of DTC only through the participants or
indirect participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.
DTC has also advised ASAT Finance that pursuant to procedures established by
it,
(1) upon the deposit of the Global Securities, DTC will credit the accounts
of Participants designated by the initial purchaser with portions of
the principal amount of Global Securities; and
(2) ownership of such interests in the Global Securities will be shown on,
and the transfer ownership thereof will be effected only through,
records maintained by DTC, with respect to participants, or by
participants and the indirect participants, with respect to other
owners of beneficial interests in the Global Securities.
Except as described below, owners of interests in the Global Securities will
not have securities registered in their names, will not receive physical
delivery of securities in certificated form and will not be considered the
registered owners or holders thereof under the indenture for any purpose.
Payments in respect of the principal and premium and liquidated damages, if
any, and interest on a Global Notes registered in the name of DTC or its
nominee will be payable by the trustee to DTC or its nominee in its capacity
as the registered holder under the indenture. Under the terms of the
indenture, ASAT Finance, ASAT Holdings and the trustee will treat the persons
in whose names the securities, including the Global Securities are registered
as the owners thereof for the purpose of receiving such payments and for any
and all other purposes whatsoever.
Consequently, none of ASAT Finance, ASAT Holdings, the trustee nor any agent
of ASAT Finance, ASAT Holdings, or the trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of
beneficial ownership interests in the Global Securities, or for
maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the Global Securities; or
(2) any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
DTC has advised ASAT Finance that its current practice, upon receipt of any
payment in respect of securities such as the securities, including principal
and interest and the like, is to credit the accounts of the relevant
participants with the payment on the payment date, in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
relevant security such as the Global Securities as shown on the records of
DTC. Payments by participants and the indirect participants to the beneficial
owners of securities will be governed by standing instructions and customary
practices and will not be the responsibility of DTC, the trustee, ASAT
Holdings, or ASAT Finance. Neither ASAT Finance, ASAT Holdings nor the trustee
will be liable for any delay by DTC or its participants in identifying the
beneficial owners of the securities, and ASAT Finance, ASAT Holdings and the
trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the notes for
all purposes.
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Except for trades involving only Euroclear and Clearstream participants,
interests in the Global Securities will trade in DTC's same-day funds
settlement system and secondary market trading activity in such interests
will therefore settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear and Clearstream will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Securities among
participants in DTC, Euroclear and Clearstream, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may
be discontinued at any time. Under such circumstances, in the event that a
successor securities depository is not obtained, Security certificates will be
printed and delivered. None of ASAT Finance, the initial purchaser or the
trustee will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Exchange of Global Securities for Certificated Securities
A Global Security is exchangeable for Certificated Securities if:
(1) DTC (1)(a) notifies ASAT Finance that it is unwilling or unable to
continue as depository for the Global Security or (b) has ceased to be
a clearing agency registered under the Exchange Act and (2) ASAT
Finance then fails to appoint a successor depository;
(2) ASAT Finance, at its option, notifies the trustee in writing that it
elects to cause the issuance of the notes in certificated securities;
or
(3) in the case of the notes, there shall have occurred and be continuing
to occur a Default or an Event of Default with respect to the notes.
In addition, beneficial interests in a Global Security may be exchanged for
Certificated Securities upon request but only upon at least 20 days' prior
written notice given to the trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, Certificated Securities delivered in
exchange for any Global Security or beneficial interest therein will be
registered in the names, and issued in any approved denominations, requested
by or on behalf of the depository, in accordance with its customary
procedures.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Security may, upon request to the trustee, exchange such beneficial
interest for securities in the form of Certificated Securities. Upon any such
issuance, the trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons, or
the nominee of any thereof. In addition, if:
(1) ASAT Finance notifies the trustee in writing that the depository is no
longer willing or able to act as a depository and the Issuer is unable
to locate a qualified successor within 90 days; or
(2) ASAT Finance, at its option, notifies the trustee in writing that it
elects to cause the issuance of notes in the form of Certificated
Securities under the indenture;
then, upon surrender by the Global Security holder of its Global Security,
Certificated Securities will be issued to each person that the Global Security
holder and the depository identify as being the beneficial owner of the
related securities.
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Neither ASAT Finance, ASAT Holdings nor the trustee will be liable for any
delay by the Global Security holder or the depository in identifying the
beneficial owners of securities and ASAT Finance, ASAT Holdings, and the
trustee may conclusively rely on, and will be protected in relying on,
instructions from the Global Security holder or the depository for all
purposes.
Same Day Settlement and Payment
The indenture requires that payments in respect of the securities
represented by the Global Security, including principal, premium, if any,
interest and liquidated damages, if any, be made by wire transfer of
immediately available next day funds to the accounts specified by the Global
Security holder. With respect to Certificated Securities, ASAT Finance will
make all payments of principal, premium, if any, interest and liquidated
damages, if any, 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. ASAT Finance
expects that secondary trading in the Certificated Securities will also be
settled in immediately available funds.
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CERTAIN TAX CONSIDERATIONS
We discuss below the material United States federal income tax, Hong Kong
and Cayman Islands tax consequences of the exchange offer and the beneficial
ownership and disposition of the notes. Statements regarding Hong Kong tax
law, subject to the qualifications and limitations set forth in this
discussion, represent the opinion of Richards Butler, our Hong Kong counsel as
to certain tax matters. Statements regarding United States federal income tax
law, subject to the qualifications and limitations set forth in this
discussion, represent the opinion of Milbank, Tweed, Hadley & McCloy LLP, our
United States counsel as to certain tax matters. Statements regarding Cayman
Islands tax law, subject to the qualifications and limitations set forth in
this discussion, represent the opinion of Maples and Calder Asia, our Cayman
Islands counsel as to certain tax matters. This discussion is based on laws,
regulations, rulings, income tax conventions (treaties), administrative
practices and judicial decisions in effect at the date of this prospectus.
Subsequent legislative, judicial or administrative changes or interpretations
may be retroactive and could affect your tax consequences.
Your tax treatment as a holder of notes may vary depending upon your
particular situation, and some holders may be subject to special rules not
discussed below. We do not discuss below state, local and foreign (other than
Hong Kong and Cayman Islands) tax consequences of the ownership and
disposition of the notes. This summary does not address all tax aspects that
may be important to you, as a holder of notes.
You are urged to consult your own tax advisors as to your particular tax
consequences of the ownership and disposition of a note, including whether any
state, local or foreign tax laws apply to you.
United States Taxation
The following is a general discussion of certain U.S. federal income tax
consequences of the exchange offer and the ownership and disposition of the
notes. This discussion is based on existing United States federal income tax
law, which is subject to change, possibly retroactively. The discussion
addresses only persons that purchased notes in the original offering, that
hold the notes as capital assets within the meaning of section 1221 of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and that
use the U.S. dollar as their functional currency. The discussion does not
consider the circumstances of particular purchasers, some of which (such as
banks, insurance companies, tax-exempt organizations, dealers, and persons
holding the notes as part of a hedge, straddle, conversion, or integrated
transaction) are subject to special tax rules that differ significantly from
those discussed below. Each of ASAT Holdings and ASAT HK expects, and the
discussion therefore assumes, that it will not be a passive foreign investment
company.
For purposes of this discussion, "U.S. holder" means a beneficial owner of
notes that is (1) an individual who is a citizen or resident of the United
States, (2) a corporation, partnership or other business entity organized in
or under the laws of the United States or any political subdivision thereof,
(3) a trust (a) the administration of which is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust, or (b) that was in existence on August 20, 1996, was treated as a
United States person under the Code on the preceding day, and properly elected
to continue to be so treated, or (4) an estate the income of which is subject
to U.S. federal income taxation regardless of its source. "Non-U.S. holder"
means a beneficial owner of notes that is not a U.S. holder.
Taxation of U.S. holders
Exchange Offer. An exchange of an original note for a new note pursuant to
the exchange offer will not be a taxable event for U.S. federal income tax
purposes. A U.S. holder must continue to include original issue discount on
the new notes and will have the same tax basis and holding period in the new
notes as the original notes.
Allocation of Issue Price of Unit to Note and Warrant. The notes were
originally offered as part of an unit that included the warrants. The purchase
of a unit is treated as the purchase of an "investment unit" for U.S. federal
income tax purposes. Accordingly, the issue price of the note and the warrant
comprising the unit are
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determined by allocating the issue price of the unit between each of the note
and the warrant on the basis of their relative fair market values on the date
of issuance. In addition, a holder's initial tax basis in each of the note and
warrant will be equal to the amount so allocated. Pursuant to the terms of the
Purchase Agreement entered into by the issuer and the initial purchasers of
the units, the issuer and the initial purchasers agreed to allocate the
aggregate purchase price of $977.43 per unit to each of the note and the
warrant comprising such unit in an amount equal to $959.84 per note and $17.59
per warrant. Each U.S. holder is required to adopt this allocation unless the
holder discloses a contrary position on its U.S. federal income tax return.
This allocation is not, however, binding on the U.S. Internal Revenue Service
(the "IRS") and there can be no assurance that the IRS will respect such
allocation.
Original Issue Discount and Stated Interest. The notes were issued with
original issue discount, for U.S. federal income tax purposes in an amount
equal to the excess of the stated redemption price due at maturity over the
initial issue price of the notes. For this purpose, the notes will have a
stated redemption price at maturity equal to their stated principal amount and
an issue price equal to the initial purchase price, allocated as described
above (for these purposes, an issue price equal to $959.84). Accordingly, U.S.
holders are required to include original issue discount in ordinary income
over the period that they hold the notes in advance of the receipt of the cash
attributable thereto. The amount of original issue discount to be included in
income is determined using a constant yield method, which will result in a
greater portion of such discount being included in income in the later part of
the term of the notes. Any amount of discount included in income will increase
a holder's adjusted tax basis in the notes. Payments of stated interest paid
on the notes will be includible in income when received or accrued in
accordance with a holder's regular method of tax accounting.
Liquidated Damages. Under the terms of the original notes, we are required
to pay liquidated damages on the original notes if we fail to register the
notes with the Commission by specific deadlines. As of the original issuance
of the notes, it was determined that the likelihood we would pay liquidated
damages as a result of a failure to register the notes before the deadline was
remote. Accordingly, we took the position that the original notes were not
subject to rules applicable to debt instruments with contingent payments.
Contrary to our expectations, however, the notes were not registered before
the deadline and we commenced paying liquidated damages on April 28, 2000.
Nevertheless, the notes will not be subject to the rules applicable to debt
instruments with contingent payments if the amount of liquidated damages that
will be paid is incidental. Contingent payments generally are incidental if
they are insignificant relative to the total expected amount of the remaining
payments on an instrument. We believe that the amount of liquidated damages is
incidental. There is, however, no authority addressing when a contingent
payment is incidental and the IRS, could disagree with this conclusion. If the
IRS successfully challenged this conclusion, the notes could be treated as
having been reissued subject to the contingent payment debt rules and the
timing, character and amount of income recognized by a holder could be
different.
Sale, Exchange or Disposition of the Notes. Upon the sale, exchange or other
disposition of a note, a U.S. holder generally will recognize capital gain or
loss equal to the difference between the amount of cash and the fair market
value of property received by such U.S. holder (except to the extent
attributable to accrued stated interest, which will be treated as interest)
and such U.S. holder's adjusted tax basis in the note (i.e., its adjusted
issue price). Such capital gain or loss generally will be long-term capital
gain or loss if the U.S. holder has held the note for more than one year.
Long-term capital gains realized by individuals on the sale, exchange or other
disposition of notes generally are subject to a maximum U.S. federal income
tax rate of 20%. The deductibility of capital losses is subject to
limitations.
Taxation of Non-U.S. holders.
Payments of interest (including original issue discount) on a note to a non-
U.S. holder generally will not be subject to U.S. federal income tax unless
such income is effectively connected with the non-U.S. holder's conduct of a
trade or business in the United States. Gain realized by a non-U.S. holder on
the sale or other disposition of a note generally will not be subject to U.S.
federal income tax unless (1) the gain is effectively
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connected with the non-U.S. holder's conduct of a trade or business in the
United States, or (2) the non-U.S. holder is an individual who was present in
the United States for at least 183 days in the taxable year of the sale or
other disposition and certain other conditions are met.
Information Reporting and Backup Withholding.
Payments in respect of notes and proceeds from the sale or other disposition
of the notes may be subject to information reporting to the IRS and to a 31%
U.S. backup withholding tax. Backup withholding will not apply, however, to a
corporation or to a holder who furnishes a correct taxpayer identification
number or certificate of foreign status or who otherwise establishes an
exemption from backup withholding.
Hong Kong Taxation
Profits Tax
No tax in Hong Kong will be withheld from or be chargeable on payments of
principal or interest in respect of the notes.
Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong),
as it is to be applied according to a practice note issued by the Inland
Revenue Department, interest on the notes will not be subject to Hong Kong
profits tax except where the interest is received by or accrued to a financial
institution (as defined in the Inland Revenue Ordinance) and the sums received
or accrued by way of interest arise through or from the carrying on by the
financial institution of its business in Hong Kong.
Hong Kong profits tax may be chargeable on revenue profits arising on the
sale, disposal or redemption of the notes (and enforcement of the notes (or
any judgement relating thereto) where such transactions are or for part of a
trade, profession or business carried on in Hong Kong.
Stamp Duty
No Hong Kong stamp duty will be chargeable upon the transfer of a note.
Estate Duty
No estate duty will be payable under the Estate Duty Ordinance (Chapter 111
of the Laws of Hong Kong) in respect of notes registered outside Hong Kong.
The Exchange Offer
An exchange of original notes for new notes pursuant to the exchange offer
will not be a taxable event for Hong Kong tax purposes, there being no gain
nor loss derived. There will be no stamp duties on the exchange of the
original notes for the new notes pursuant to the exchange offer, since no
stamp duty will be chargeable upon a note, the transfer of which is not
required to be registered in Hong Kong.
Cayman Islands Taxation
The Cayman Islands currently levy no taxes on individuals or corporations
based upon profits, income, gains or appreciation and there is no taxation in
the nature of inheritance tax or estate duty. There are no other taxes likely
to be material to ASAT Holdings levied by the government of the Cayman Islands
except for stamp duties which may be applicable on instruments executed in, or
after execution brought within the jurisdiction of, the Cayman Islands. The
Cayman Islands are not party to any double tax treaties. There are no exchange
control regulations or currency restrictions in the Cayman Islands.
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ERISA CONSIDERATIONS
The United States Employee Retirement Income Security Act of 1974, as
amended ("ERISA") imposes certain requirements on "employee benefit plans" (as
defined in Section 3(3) of ERISA) subject to ERISA, including entities such as
collective investment funds and insurance company separate accounts whose
underlying assets include the assets of such plans (collectively, "ERISA
Plans") and on those persons who are fiduciaries with respect to ERISA Plans.
The fiduciaries of an ERISA Plan should consider, among other things, the
matters described below before determining whether to invest in the notes.
ERISA imposes certain general and specific responsibilities on fiduciaries
with respect to an ERISA plan. Those responsibilities include satisfaction of
the prudence and diversification requirements of ERISA and compliance with
prohibited transaction and other rules and standards. In determining whether a
particular investment is appropriate for an ERISA Plan, United States
Department of Labor regulations provide that the fiduciaries of an ERISA Plan
must give appropriate consideration to, among other things, the role that the
investment plays in the ERISA Plan's portfolio, taking into consideration
whether the investment is designed reasonably to further the ERISA Plan's
purposes, an examination of the risk and return factors, the portfolio's
composition with regard to diversification of the liquidity and current return
of the total portfolio relative to the anticipated cash flow needs of the
ERISA Plan and the projected return of the total portfolio relative to the
ERISA Plan's funding objectives. Before investing the assets of an ERISA Plan
in the notes, a fiduciary should determine whether such an investment is
consistent with its fiduciary responsibilities and the foregoing regulations.
For example, a fiduciary should consider whether an investment in the notes
may be too illiquid or too speculative for a particular ERISA Plan, and
whether the assets of the ERISA Plan would be sufficiently diversified.
Section 406 of ERISA and Section 4975 of the United States Internal Revenue
Code of 1986, as amended (the "Code") prohibit certain transactions involving
the assets of an ERISA Plan (as well as those plans that are not subject to
ERISA but which are subject to 4975 of the Code, such as individual retirement
accounts (together with ERISA Plans, "Plans")) and certain persons (referred
to as "parties in interest" for purposes of ERISA or "disqualified persons"
for purposes of the Code) having certain relationships to Plans, unless a
statutory or administrative exemption is applicable to the transaction. A
party in interest or disqualified person who engages in a non-exempt
prohibited transaction may be subject to non-deductible excise taxes and other
penalties and liabilities under ERISA and the Code.
The Department of Labor, to whom primary responsibility for administering
the fiduciary responsibility provisions of ERISA has been delegated, has
published regulations at 29 C.F.R. (S)2510.3 - 101 (the "Plan Asset
Regulation") providing that, generally, if employee benefit plans (regardless
of whether they are ERISA Plans) hold 25% or more of any class of equity
interest of an entity, such as a unit or a warrant underlying a unit, the
assets of such entity will be treated as "plan assets" unless certain
exceptions are applicable. Entities that are "operating companies", as defined
in the Plan Asset Regulation are exempt from treatment as plan assets.
ASAT Holdings should qualify as an operating company, so that the assets of
ASAT Holdings should not be deemed plan assets under ERISA. There can be no
assurance that ASAT Holdings will in fact always qualify as an operating
company.
If Holdings were unable to comply with the "operating company" requirements,
the assets of Holdings would likely be deemed plan assets. As a result, the
operation and administration of ASAT Holdings would be subject to the
provisions of ERISA, and transactions that ASAT Holdings might enter into, or
may have entered into in the ordinary course of business, might constitute
non-exempt prohibited transactions under ERISA and/or Section 4975 of the Code
and might have to be rescinded.
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Regardless of whether the assets of ASAT Holdings may be deemed to be Plan
assets, the acquisition and holding of the notes by a Plan could, depending
upon the facts and circumstances of such acquisition and holding, be a
prohibited transaction if, for example, either the issuer or any of the
guarantors of the notes was a party in interest or disqualified person with
respect to the Plan. Such a prohibited transaction may, however, be treated as
exempt under ERISA and the Code if the notes were acquired pursuant to and in
accordance with one or more prohibited transaction Class Exemptions ("PTEs")
issued by the United States Department of Labor, such as PTE 90-1 (a Class
Exemption for certain transactions involving insurance company pooled separate
accounts), PTE 91-38 (a Class Exemption for certain transactions involving
bank collective investment funds), PTE 95-60 (a Class Exemption for certain
transactions involving insurance company general accounts), PTE 84-14 (a Class
Exemption for certain transactions determined by independent qualified
professional asset managers) and PTE 96-63 (a Class Exemption for certain
transactions determined by in-house asset managers). If the purchase and/or
holding of the notes were to be a non-exempt prohibited transaction, the
purchase might have to be rescinded.
In this regard, any prospective purchaser of the notes that is an insurance
company investing assets out of its general account should consider the United
States Supreme Court's decision in John Hancock Mutual Life Insurance Co. v.
Harris Trust and Savings Bank, 510 U.S. 86 (1993), which in certain
circumstances treats such general account assets as assets of an ERISA Plan
for certain purposes, as well as the effects of Section 401(c) of ERISA and
the proposed regulations issued by the United States Department of Labor
thereunder.
The sale of notes to a Plan is in no respect a representation by ASAT
Finance, any of the guarantors of the notes, ASAT Holdings, the initial
purchasers or any of their affiliates that such an investment meets all
relevant legal requirements with resect to investments by Plans generally or
any particular Plan, or that such an investment is appropriate for a Plan
generally or any particular Plan.
The discussion of ERISA and Section 4975 of the Code contained in this
prospectus, is, of necessity, general, and does not purport to be complete.
Moreover, the provisions of ERISA and Section 4975 of the Code are subject to
extensive and continuing and administrative and judicial interpretation and
review. Therefore, the matters discussed above may be affected by future
regulations, rulings and court decisions, some of which may have retroactive
application and effect.
Any potential investor considering an investment in the notes that is, or is
acting on behalf of, a Plan is strongly urged to consult its own legal and tax
advisors regarding the consequences of such an investment under ERISA and the
Code.
120
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer who holds the notes that were acquired for the account of
such broker-dealer as a result of market-making activities or other trading
activities (other than original notes acquired directly from ASAT Finance on
any affiliate of ASAT Finance), may exchange such notes pursuant to the
exchange offer.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of those new notes. A broker-dealer may use this
prospectus in connection with resales of new notes. We have agreed that,
starting on the expiration date of the exchange offer and ending on the
closing of business one year after the expiration date of the exchange offer,
we will use our best efforts to keep the exchange offer registration statement
continuously effective and current and make this prospectus available to any
broker-dealer for use in connection with any resale described above.
We will not receive any proceeds from any sale of new notes by broker-
dealers. Broker-dealers who receive new notes for their own account in the
exchange offer may sell the new notes from time to time in the following
transactions:
.one or more transactions in the over-the-counter market,
.negotiated transactions
.through the writing of options on the new notes, or
.a combination of the above methods of resale,
in each case at market prices prevailing at the time of resale, at prices
related to those prevailing market prices or negotiated prices. Broker-dealers
may make these resales directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from the broker-dealer and/or the purchaser of new notes. Any broker-dealer
that resells new notes that it received for its own account in the exchange
offer and any broker or dealer that participates in a distribution of these
new notes may be deemed to be an underwriter within the meaning of the
Securities Act. If so, any profit resulting from any resale of new notes
described in the previous sentence may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal accompanying
this prospectus states that by acknowledging that it will deliver any by
delivery 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 one year after the expiration date of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests these
documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the notes (including any broker-
dealers) against specified liabilities, including liabilities under the
Securities Act.
This prospectus has not been delivered for registration to the Registrar of
Companies in Hong Kong and accordingly, the notes may not be offered or sold
in Hong Kong by means of this prospectus or any other document other than to
persons whose ordinary business is to buy or sell shares or debentures,
whether as principal or agent, or in other circumstances which do not
constitute an offer to the public for the purposes of the Companies Ordinance
(Chapter 32 of the Laws of Hong Kong). Unless permitted to do so by the
securities laws of Hong Kong, no person may issue or cause to be issued in
Hong Kong this prospectus or any amendment or supplement thereto or any other
information, advertisement or documentation relating to the notes to anyone
other than a person whose business involves the acquisition and disposal, or
the holding, of securities, whether as principal or as agent.
121
<PAGE>
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-4/F-4 under
the Securities Act with respect to the new notes offered by this prospectus.
This prospectus, which forms a part of such registration statement, does not
contain all the information in the registration statement. Parts of the
registration statement have been omitted in accordance with the rules and
regulations of the SEC. For further information with respect to ASAT and the
new notes, you should refer to the registration statement. Statements
contained in this prospectus as to the contents of some documents are not
necessarily complete, and, in each instance, you should refer to the copy of
the document filed as an exhibit to the registration statement.
You can inspect and copy the registration statement, as well as other
information, when we file them, at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and
at the SEC's regional offices at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661-2511, and Seven World Trade Center, 13th
Floor, New York, New York 10048. You can also obtain copies of this material
from the SEC at prescribed rates through its Public Reference Section at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or by calling
the SEC at 1-800-SEC-0330. We will also make this material available to
prospective purchasers of the new notes, securities analysis and broker-
dealers upon their written request.
As a foreign private issuer, ASAT Holdings Limited is exempt from rules
under the Exchange Act that require the furnishing of proxy statements and
specify the content to be included in proxy statements and our officers,
directors and principal shareholders are exempt from reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act to
shareholders and relating to short-swing profits reporting and liability.
LEGAL MATTERS
Certain legal matters with respect to the notes offered hereby will be
passed upon for ASAT by Milbank, Tweed, Hadley & McCloy LLP, New York, New
York as to U.S. and New York law, by Robert T. Borawski as to California law,
by Maples & Calder Asia as to Cayman Islands law and by Richards Butler as to
Hong Kong law. Mr. Robert Charles Nicholson, a partner of Richards Butler, is
a director of QPL International Holdings Limited. Milbank, Tweed, Hadley &
McCloy LLP represented the Equity Investors in connection with their purchase
of a 50% equity interest in ASAT Holdings.
EXPERTS
The consolidated financial statements of ASAT as of April 30, 1999 and 2000,
and for each of the years ended April 30, 1998, 1999 and 2000 included in this
prospectus have been audited by Deloitte Touche Tohmatsu, independent
auditors, as stated in their report appearing in this prospectus. Such
consolidated financial statements have been included in this prospectus in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
122
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
ASAT HK is incorporated in Hong Kong under the Companies Ordinance, Chapter
32 of the Laws of Hong Kong (the "Companies Ordinance"). All of ASAT HK's
directors and most of its executive officers reside in Hong Kong. All or a
substantial portion of the assets of such persons and ASAT HK are located
outside the United States. As a result, it may not be possible for persons
purchasing the notes to effect service of process within the United States
upon such persons or ASAT HK or to enforce against them in U.S. courts
judgments predicated upon the civil liability provisions of the federal
securities laws of the United States. ASAT HK has been advised by its
Hong Kong legal advisors, Richards Butler, that judgments of courts in the
United States, including judgments predicated upon the civil liability
provisions of the federal securities laws of the United States, are not
enforceable in Hong Kong as of right and enforceability is subject to the
discretion of the Hong Kong courts.
ASAT Holdings is duly incorporated as a limited liability company under the
laws of the Cayman Islands. A majority of the directors and officers of ASAT
Holdings will reside outside the United States. All or a substantial portion
of the assets of ASAT Holdings and of such directors and officers are located
outside of the United States. As a result, it may be difficult for persons
purchasing the notes to effect service of process within the United States
upon ASAT Holdings or such persons or to enforce, in the United States courts,
judgment against ASAT Holdings or such persons or judgments obtained in such
courts predicted upon the civil liability provisions of the federal securities
laws of the United States.
ASAT Holdings has been advised by its Cayman Islands counsel, Maples and
Calder Asia, that although there is no statutory enforcement in the Cayman
Islands of judgments obtained in New York, the courts of the Cayman Islands
will, based on the principle that a judgment by a competent foreign court
imposes upon the judgment debtor an obligation to pay the sum for which
judgment has been given, recognise and enforce a foreign judgment of a court
of competent jurisdiction if such judgment is final, for a liquidated sum not
in respect of taxes or a fine or penalty, is not inconsistent with a Cayman
Islands judgment in respect of the same matters, and was not obtained in a
manner, and is not a kind of the enforcement of which is, contrary to the
public policy of the Cayman Islands. There is doubt, however, as to whether
the courts of the Cayman Islands will (a) recognise or enforce judgments of
United States courts predicated upon the civil liability provisions of the
securities laws of the United States or any state of the United States, or (b)
in original actions brought in the Cayman Islands, impose liabilities
predicated upon the civil liability provisions of the securities laws of the
United States or any state thereof, on the grounds that such provisions are
penal in nature.
A Cayman Islands' court may stay proceedings if concurrent proceedings are
being brought elsewhere.
123
<PAGE>
GLOSSARY OF SEMICONDUCTOR TERMS
This glossary contains definitions and other terms as they relate to our
businesses and as they are used in this prospectus. As such, these definitions
may not correspond to standard industry definitions.
Analog device............. A non-digital circuit which processes
signals in an analog mode.
Array..................... A group of items (elements, leads, bonding
pads, circuits, etc.) arranged in rows and
columns.
BGA....................... A type of packaging known as ball grid
array, where the chip is placed on top of a
laminate substrate that has a grid of solder
balls underneath connecting the packaged
device to a printed circuit board.
BGA-GT.................... BGA with glob top encapsulation.
BGA-OM.................... BGA overmold, a BGA package with a transfer
molded cap (as compared to a glob top
cap).
Bond surface.............. The aluminum metalization area of a
semiconductor die that accepts
ultrasonically welded gold wire.
Burn-In................... Pretest operation of semiconductor devices,
frequently at high temperatures, which
stabilizes characteristics and identifies
early failures.
CamPak.................... A transparent leaded package that serves as
a lens to direct images onto the enclosed
semiconductor chip. The chip then converts
the image into a digital signal for use in
digital imaging applications.
Ceramic................... A ring of aluminum oxide dielectric that is
used to thermally mate a copper heat
spreader with the inner leads of an EDQUAD-
QFP.
Chip...................... An individual integrated circuit that has
not yet been packaged. Also used as a
generic term for semiconductor devices.
Chip attach............... A step in the packaging process of an
integrated circuit in which the individual
chip 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.
Chip attach epoxy......... A dispensable adhesive material that is used
to attach semiconductor chips to either
leadframe paddles or BGA substrates.
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 semiconductor chip.
A-1
<PAGE>
Co-processor.............. Semiconductor chip that coordinates and
controls the operation of a
microprocessor.
Conductive interface...... Two material layers in contact which can
exchange either thermal energy or electrical
signals.
Deposition................ A term applied to growing thin layers wither
in a vacuum condensation mode, or via
electroplating techniques.
Diffusion................. The migration of one atomic species through
a bulk solid.
DVD....................... Digital video disk.
EDQUAD-QFP................ Enhanced Dissipation Quad Flat Pack, which
is an advanced leaded product with better
thermal and electrical performance than
conventional plastic packages.
EDQUAD-SSOP............... EDQUAD-Shrink Small Outline Package, an
advanced leaded package.
EDQUAD2-QFP...............
A type of EDQUAD-QFP which does not require
ceramic rings for cost reduction potential.
Encapsulation............. Enclosing the die in an organic medium
either by transfer mold process or glob top
techniques.
Etch...................... Creating metal trace patterns using a
technique of photo imaging and chemical etch
removal.
Ethernet.................. A widely used type of local area network
(LAN).
Fab....................... Short for wafer fabrication.
Fabless semiconductor
companies................. A new class of semiconductor companies that
design, test and sell integrated circuits,
but subcontract wafer manufacturing by
forming alliances with silicon wafer
manufacturers.
fpBGA..................... Fine Pitch Ball Grid Array. A version of a
BGA package, mounted on tape substrate, that
has a solder ball pitch of less than 1.0mm.
fxBGA..................... A new and flexible advanced BGA package that
is thinner, has a higher circuit density and
improved electrical and thermal performance.
Field programmable logic....... A type of semiconductor device which can
have its functionality altered via
electronic means to conform to a custom
application.
Flip chip................. Type of BGA package which uses an array of
solder bumps on the bottom of the
semiconductor chip to connect the chip to
the balls on the bottom of the package.
Global Positioning System
(GPS).....................
A system for identifying locations across
the planet.
A-2
<PAGE>
Heatspreader..............
An aluminum flag attached to the back of an
enhanced QFP package to improve thermal
performance. "Heatspreader" also refers to
the etched copper base of a TBGA package.
Input/Output..............
A connector which interconnects the chip to
the package or one package level to the next
level in the hierarchy. Also referred to as
pin out connections or terminals.
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
integrated circuits with thousands of
transistors.
Interposer ring........... A common electrical plane in a QFP or BGA
package that can act as either a common
power plane or ground plane. The ring
enhances the electrical performance and
flexibility of the package.
INT-TEP-QFP...............
A QFP package with an aluminum flag attached
to the back of the die paddle to enhance
thermal dissipation of the package.
Laminate substrate........
An organic substrate used for the routing of
BGA products between the chip pads and the
solder ball pads.
Leadframe.................
A metal frame, connected to the bonding pads
of the chip by lead, that provides
electrical connection to external points.
Logic device or system.... A device that contains digital integrated
circuits that process, rather than store,
information.
LPCC...................... Leadless Plastic Chip Carrier, a leadframe
based chip scale package.
Mask......................
A piece of glass on which an integrated
circuit's circuitry design is laid out.
Integrated circuits may require up to 20
different layers of design, each with its
own masks. In the semiconductor production
process, a light shines through the mask
leaving an image of the design on the wafer.
Also known as a reticle.
Microcontrollers..........
Similar to microprocessor, but dealing with
a simpler information set.
Microprocessor............ A standard circuit design that provides
functions similar to central processing
units by interpreting and executing
instructions, usually incorporating
arithmetic capabilities.
Mixed signal products..... Products that can process both digital and
analog data.
Mold locking cones........
Heatslug bodies to improve the attachment of
the molding compound to the slug interface.
Molding................... Encapsulating the chip, leadframe and
wirebondings in molded plastic with leads
protruding. The molded plastic is an epoxy
based material called "molding compound".
A-3
<PAGE>
Optical network system.... A localized network of personal computers
that are connected by high frequency fiber
optic lines.
Parametric test........... An electrical test which verifies that a
semiconductor package is correctly assembled
by checking such things as pin open and pin
short.
PBGA...................... Plastic Ball Grid Array, which is a standard
BGA package.
Photolithography.......... A lithographic technique used to transfer
the design of the circuit paths and
electronic elements on a chip onto a wafer's
surface.
Pitch..................... The center-to-center distance between
adjacent leads on a package.
PLCC...................... Plastic Leaded Chip Carrier which is a
standard leaded package.
Polyimide................. A high temperature stable organic material
often used in flexible film substrates.
Power management system... A class of semiconductor packages that
incorporate features to increase the thermal
dissipation properties of the package.
Printed circuit board..... A laminate sheet into which integrated
circuits are soldered. Wires on the board
connect the circuits with each other,
forming a larger functional unit. Printed
circuit boards generally are a subsystem
within a larger electronic system.
Probe..................... Wafer probers test device functionality
before the chips are separated and packaged.
QFP....................... Quad Flat Pack, which is a semiconductor
package with leads on all four sides
attached to a printed circuit board by
surface mounting.
Routers................... Interconnections between two or more data
communications networks.
Servers................... A centralized computer that either manages a
personal computer network or allows
decentralized access.
Set-top box...............
An electronic device which sits on top of a
television to allow cable and/or internet
access and can be supported either by phone
lines or direct satellite access.
Singulation............... Separating individual semiconductor packages
processed in a strip or array format.
SLUG-QFP.................. A QFP package that has been thermally
enhanced by attaching a copper slug to the
back of the chip paddle. This slug will then
protrude and be exposed to the external
surface.
A-4
<PAGE>
Solder ball............... A tin lead alloy sphere that is attached to
a BGA substrate to allow for printed circuit
board attachment.
Soldermask................ The organic coating of a tape or substrate
package which prevents the solder from
spreading along the interconnect traces.
Substrate................. The underlying material upon which a device,
circuit, or epitaxial layer is fabricated,
normally a silicon wafer.
Surface mount............. A circuit board packaging technique in which
the leads (pins) on the chips and components
are soldered on top of the board.
System controller......... A high performance semiconductor which is
the primary control function provider for
complex electronic systems.
TBGA...................... Tape Ball Grid Array, which is a BGA package
with a more flexible substrate and higher
density than conventional plastic
packages.
Thermoset adhesive........ A two part adhesive that sets after mixing
and thermal curing.
TQFP...................... Thin Quad Flat Package, which is a standard
leaded package.
Two Layer TBGA............ Two level tape process in BGA packaging that
doubles the density available in a given
area.
Wafer..................... Thin, round, flat piece of silicon that is
the base of most integrated circuits.
Wire bonding.............. The method used to attach very fine wire to
semiconductor components in order to provide
electrical continuity between the
semiconductor chip and a terminal.
A-5
<PAGE>
ASAT HOLDINGS LIMITED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets as of April 30, 1999, and 2000................. F-3
Consolidated Statements of Operations and Comprehensive Income
for the years ended April 30, 1998, 1999 and 2000......................... F-4
Consolidated Statements of Shareholders' Equity
for the years ended April 30, 1998, 1999 and 2000......................... F-5
Consolidated Statements of Cash Flows for the years ended
April 30, 1998, 1999 and 2000............................................. F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the board of directors and shareholders of ASAT Holdings limited
We have audited the accompanying consolidated balance sheets of ASAT
Holdings Limited and subsidiaries (the "Company") as of April 30, 1999 and
2000, and the related consolidated statements of operations and comprehensive
income, shareholders' equity and cash flows for the years ended April 30,
1998, 1999 and 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of ASAT Holdings
Limited and subsidiaries as of April 30, 1999 and 2000, and the consolidated
results of their operations and their cash flows for the years ended April 30,
1998, 1999 and 2000 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte Touche Tohmatsu
Hong Kong
June 9, 2000, except for
Note 18, as to which
the date is July 6, 2000
F-2
<PAGE>
ASAT HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
April 30,
------------------
1999 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,409 $ 10,892
Restricted cash........................................... 665 --
Marketable equity securities.............................. 27 --
Accounts receivable-trade (net of allowance for doubtful
accounts of $863 and $290 at April 30, 1999 and 2000,
respectively)............................................ 36,986 40,566
Inventories (Note 5)...................................... 13,645 23,302
Prepaid expenses and other current assets................. 4,982 10,911
-------- --------
Total current assets..................................... 57,714 85,671
Property, plant and equipment, net (Note 6)................ 159,490 166,461
Option to acquire ASAT S.A., at cost (Note 2).............. -- 20,000
Deferred charges (Note 3).................................. -- 10,907
Noncompete covenants, net (Note 3)......................... 1,479 442
-------- --------
Total assets............................................. $218,683 $283,481
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings (Note 7)....................... $ 55,743 $ 9,000
Current portion of other long-term debt (Note 9).......... 35,422 5,000
Accounts payable.......................................... 15,055 24,549
Accrued liabilities....................................... 6,009 6,155
Income taxes payable...................................... 5,282 12,847
Amount due to QPL Group (Note 4).......................... -- 5,300
Amount due to a related company (Note 4).................. 15 297
-------- --------
Total current liabilities................................ 117,526 63,148
Deferred income taxes (Note 11)............................ 20,186 21,992
12.5% Senior notes due 2006 (Note 8)....................... -- 149,217
Other long-term debt (Note 9).............................. 3,977 35,000
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock (Note 12).................................... 5,760 5,760
Additional paid-in capital................................ 8,910 12,457
Retained earnings (deficit)............................... 62,572 (4,093)
Accumulated other comprehensive income.................... (248) --
-------- --------
Total shareholders' equity............................... 76,994 14,124
-------- --------
Total liabilities and shareholders' equity............... $218,683 $283,481
======== ========
</TABLE>
See notes to Consolidated Financial Statements
F-3
<PAGE>
ASAT HOLDING LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------
1998 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Net sales
-- third parties....................... $ 243,009 $ 220,587 $ 312,030
-- QPL Group (Note 4).................. 94 36 101
----------- ----------- -----------
Total net sales........................ 243,103 220,623 312,131
----------- ----------- -----------
Cost of sales:
-- Purchases from QPL Group and other
related party (Note 4)................ 62,838 35,372 53,893
-- Other costs......................... 104,512 117,097 145,743
----------- ----------- -----------
Total cost of sales.................... 167,350 152,469 199,636
----------- ----------- -----------
Gross profit............................ 75,753 68,154 112,495
----------- ----------- -----------
Operating expenses:
Selling, general and administrative.... 27,706 26,082 26,453
Research and development............... 4,467 4,437 4,676
Non recurring charges for obsolete
equipment (Note 6).................... -- -- 12,340
----------- ----------- -----------
Total operating expenses............... 32,173 30,519 43,469
----------- ----------- -----------
Income from operations.................. 43,580 37,635 69,026
Other income, net (Note 10)............. 1,751 1,184 1,048
Interest expense:
-- amortization of deferred charges
(Note 3).............................. -- -- (922)
-- third parties....................... (5,043) (6,795) (15,668)
-- QPL Group (Note 4).................. (4,906) (409) (2,404)
Recapitalization costs (Note 2)......... -- -- (6,813)
----------- ----------- -----------
Income before income taxes.............. 35,382 31,615 44,267
Provision for income taxes (Note 11).... (5,043) (5,569) (9,558)
----------- ----------- -----------
Net income.............................. 30,339 26,046 34,709
Other comprehensive income:
Unrealized holding loss on marketable
securities............................ (188) (60) --
----------- ----------- -----------
Comprehensive income.................... $ 30,151 $ 25,986 $ 34,709
=========== =========== ===========
Net income per share.................... $ 0.05 $ 0.05 $ 0.06
=========== =========== ===========
Weighted average number of shares....... 576,000,000 576,000,000 576,000,000
=========== =========== ===========
</TABLE>
See notes to Consolidated Financial Statements
F-4
<PAGE>
ASAT HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Common Additional Retained other
stock paid-in earnings comprehensive
(Note 12) capital (deficit) income Total
--------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance as of May 1,
1997................... $5,760 $ 6,099 $ 38,986 $ -- $ 50,845
Net income for the
year................... -- -- 30,339 -- 30,339
Costs incurred by QPL
Group on behalf of ASAT
(Note 1)............... -- 1,403 -- -- 1,403
Unrealized holding loss
for the year........... -- -- -- (188) (188)
------ ------- --------- ----- ---------
Balance as of April 30,
1998................... 5,760 7,502 69,325 (188) 82,399
Net income for the
year................... -- -- 26,046 -- 26,046
Costs incurred by QPL
Group on behalf of ASAT
(Note 1)............... -- 1,408 -- -- 1,408
Distribution of net
balance with QPL Group
(Note 4)............... -- -- (32,799) -- (32,799)
Increase in unrealized
holding loss for the
year................... -- -- -- (60) (60)
------ ------- --------- ----- ---------
Balance as of April 30,
1999................... 5,760 8,910 62,572 (248) 76,994
Net income for the
year................... -- -- 34,709 -- 34,709
Issue of shares......... -- 120 -- -- 120
Fair value of warrants
attached to the senior
notes.................. -- 2,726 -- -- 2,726
Costs incurred by QPL
Group on behalf of ASAT
(Note 1)............... -- 701 -- -- 701
Distribution of net
balance with QPL Group
(Note 4)............... -- -- 27,614 -- 27,614
Dividend................ -- -- (128,988) -- (128,988)
Holding loss realized
during the year........ -- -- -- 248 248
------ ------- --------- ----- ---------
Balance as of April 30,
2000................... $5,760 $12,457 $ (4,093) $ -- $ 14,124
====== ======= ========= ===== =========
</TABLE>
See notes to Consolidated Financial Statements
F-5
<PAGE>
ASAT HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended April 30,
-----------------------------
1998 1999 2000
-------- -------- ---------
<S> <C> <C> <C>
Operating activities:
Net income..................................... $ 30,339 $ 26,046 $ 34,709
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization:
Property, plant and equipment and noncompete
covenants................................... 21,567 24,356 24,150
Deferred charges and debt discount........... -- -- 1,363
Deferred income taxes.......................... 5,250 710 1,806
Loss on disposal of property, plant and
equipment..................................... 105 35 608
Non recurring charges for obsolete equipment... -- -- 12,340
Provision for doubtful accounts................ 200 188 (580)
Cost incurred by QPL Group on behalf of ASAT... 1,403 1,408 701
Others......................................... -- (267) 156
Changes in operating assets and liabilities:
Accounts receivable--trade..................... (18,118) 8,987 (3,000)
Inventories.................................... (2,559) 1,082 (9,657)
Prepaid expenses and other current assets...... 300 (1,305) (1,170)
Accounts payable............................... 6,930 (2,726) 12,302
Accrued liabilities............................ (657) 1,533 145
Amount due to a related company................ 2,267 (2,631) 282
Income taxes payable........................... 128 4,856 7,565
-------- -------- ---------
Net cash provided by operating activities...... 47,155 62,272 81,720
-------- -------- ---------
Investing activities:
Proceeds from sale of property, plant and
equipment..................................... 6,276 4,278 5,438
Acquisition of property, plant and equipment... (43,978) (27,518) (56,036)
(Increase) decrease in restricted cash......... -- (665) 665
Proceeds from sale of marketable securities.... -- -- 119
Option to acquire ASAT SA...................... -- -- (20,000)
-------- -------- ---------
Net cash used in investing activities.......... (37,702) (23,905) (69,814)
-------- -------- ---------
Financing activities:
Net increase (decrease) in short-term bank
borrowings.................................... 19,488 15,525 (39,255)
Proceeds from accounts receivable financing.... -- 18,328 40,221
Repayment under accounts receivable financing.. -- (10,840) (47,709)
Issue of 12.5% senior notes.................... -- -- 151,502
Increase in other long-term debt............... 32,539 5,284 40,000
Repayment of other long-term debt.............. (14,856) (6,912) (39,399)
Repayment of construction financing loan from
QPL Group..................................... (28,479) (18,915) --
Net (decrease) increase in other amounts due
from/to QPL Group............................. (16,913) (42,676) 32,914
Dividend to QPL................................ -- -- (128,988)
Deferred charges............................... -- -- (11,829)
Issue of shares................................ -- -- 120
-------- -------- ---------
Net cash used in financing activities.......... (8,221) (40,206) (2,423)
-------- -------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... 1,232 (1,839) 9,483
Cash and cash equivalents at beginning of the
year........................................... 2,016 3,248 1,409
-------- -------- ---------
Cash and cash equivalents at end of the year.... $ 3,248 $ 1,409 $ 10,892
======== ======== =========
Non cash investing activities:
Conversion of accounts receivable to marketable
equity securities............................. $ 275 $ -- $ --
Acquisition of property, plant and equipment
financed by capital lease obligations......... 8,301 1,275 --
Long term borrowings accelerated by standstill
and reclassified to short term................ -- (24,000) --
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest....................................... 9,926 6,649 17,709
Income taxes................................... 946 46 189
</TABLE>
See notes to Consolidated Financial Statements
F-6
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. ORGANIZATION AND BASIS OF PRESENTATION
ASAT Holdings Limited (together with its subsidiaries "ASAT" or the
"Company") was formed on October 20, 1999 by QPL International Holdings
Limited ("QPL" and together with its subsidiaries the "QPL Group"). On
October 26, 1999, ASAT acquired by exchange of shares QPL Group's 99.9%
ownership of its wholly owned subsidiaries, ASAT Limited and Timerson
Limited, both incorporated in the Hong Kong Special Administrative Region
("Hong Kong") of the People's Republic of China ("PRC"), and ASAT, Inc.,
incorporated in California, United States of America ("US"), together with
recently incorporated wholly owned subsidiaries ASAT (Finance) LLC, a
Delaware, US, incorporated company, and ASAT (Cayman) Limited, incorporated
in the Cayman Islands. This exchange of shares has been accounted for as a
reorganization of entities under common control. The financial statements
have been prepared to reflect the consolidated financial position, results
of operations and cash flows of these companies for all the periods
presented in a manner similar to the pooling-of-interests method. All
significant intra-group transactions and balances have been eliminated on
consolidation.
ASAT is principally engaged in provision of assembly and testing services
of integrated circuits to customers in the semiconductor industry. The
Company's principal production facilities are located in Hong Kong and the
Company maintains sales offices in Hong Kong, Europe, South Korea and the
US.
Prior to the reorganization described above, QPL Group has provided
certain administrative, management and waste disposal services to the
Company.
Also, prior to the recoganization described above, the consolidated
statements of operations included 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. Such allocated
expenses were determined according to allocation bases deemed appropriate
for the nature of each expense item, including relative headcount and
relative use of shared facilities. Most of such costs were included in
payables to QPL Group. Certain other common costs, including the
compensation of the Chairman, were incurred on behalf of ASAT and have been
credited to additional paid-in capital.
Management believes that these allocation methods were based on
assumptions that are reasonable under the circumstances. However, the
financial information included herein may not be representative of the
consolidated 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.
The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles in the United
States of America ("US GAAP") which differ from those used in the statutory
accounts of ASAT Limited. The principal adjustments made to conform the
statutory accounts of ASAT Limited to US GAAP are the recognition of
research and development expense as an expense when incurred, the recording
of certain common costs incurred by QPL Group on behalf of ASAT, capital
adjustments through shareholder's equity for the distribution of the net
balance with QPL Group, and the recognition of dividends as a liability
when declared. On July 17, 1999, the directors of ASAT Limited declared a
dividend of $83,250 which under accounting principles generally accepted in
Hong Kong ("HK GAAP") is recorded as a payable in the accounts at April 30,
1999. The dividend was paid during year ended April 30, 2000 and was
included in the total dividend of $128,988 paid to QPL in connection with
the recapitalization described in Note 2. The dividend is payable out of
the retained earnings of ASAT Limited which ASAT believes are sufficient
under the laws of Hong Kong to pay this dividend. At April 30, 1999 and
2000, the remaining retained earnings under HK GAAP available for
distribution after provision for this dividend were $30,329 and $17,673,
respectively.
Unless otherwise stated all dollar amounts in these financial statements
are presented in United States dollars.
F-7
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
2.RECAPITALIZATION
On October 29, 1999, the QPL Group and ASAT completed a significant
recapitalization. Effective that date, QPL Group reduced its ownership in
ASAT from 100% to 50% and certain independent shareholders collectively own
the remaining 50%.
Prior to the recapitalization, during the year ended April 30, 1999, QPL
Group experienced significant liquidity problems through the withdrawal of
bank credit lines and ceased to be in compliance with the financial
covenants of certain of its loan and financing agreements. Accordingly, the
Company's $24,000 bank loan became repayable on demand and was classified
as a current liability. In December 1998, QPL Group entered into a
standstill agreement with its principal lenders. The holders of the
guaranteed floating rate notes ("FRNs") issued by QPL Group, which are due
in 2002, were not a party to the standstill agreement, but received the
benefit of the security over all of the unpledged assets of QPL Group and
the Company, as though they were a party thereto. The Company was a
guarantor of the FRNs and also other QPL Group debt totalling $170,712 at
April 30, 1999. Under the standstill agreement as amended and restated with
its bankers and certain finance lease companies (together the "Lenders")
the Lenders agreed not to demand repayment of facilities granted to QPL
Group, including the Company, for a period up to and including October 31,
1999. At the same time, the holders of the FRNs also agreed not to demand
repayment before September 30, 1999 in respect of the amount due under the
FRNs. Substantially all the Company's assets were pledged as collateral
under the standstill agreement. QPL Group had also guaranteed the Company's
debt facilities amounting to $140,280 at April 30, 1999 of which $95,142
was utilized at that date.
As part of the recapitalization, ASAT procured a secured term loan
facility of $40 million and a revolving credit facility of $25 million and,
through a subsidiary, ASAT (Finance) LLC, issued 12.5% senior notes of $155
million due 2006. The proceeds from the term loan facility and the senior
notes were used to repay all of ASAT's consolidated debt. In addition, ASAT
was released of its guarantees and other financial arrangements supporting
QPL Group debt or other obligations and all intercompany receivable and
payables between ASAT and QPL Group were extinguished or cancelled.
Further, as part of the recapitalization, ASAT acquired an option from
QPL Group at a consideration of $20,000 entitling ASAT to acquire the
entire issued share capital of ASAT S.A., a French wholly owned subsidiary
of QPL, at a consideration of one United States dollar, exercisable at any
time up to December 31, 2000. In accordance with the option agreement, the
QPL Group will cause ASAT S.A. to maintain a net asset value of at least
$23,000 (adjusted to US GAAP) and will cause ASAT S.A., prior to exercise,
to have a cash balance of no less than $1,300 (adjusted to US GAAP). The
fair value of the option was based primarily upon the value of the
underlying asset, ASAT S.A, and was the basis for determining the
consideration to be paid for the option. Management determined the fair
value of ASAT S.A. using a multiple of annualized projected cash flows
discounted for the existing relationship that ASAT S.A. has with the QPL
Group and ASAT. A similar methodology was used by the independent
shareholders to value ASAT in connection with the recapitalization
discussed above. At this time the Company has not yet made a decision
whether it will exercise the option. The decision whether to exercise the
option will be made after the Company completes its business and legal due
diligence.
The option was initially recorded at its fair value. Prior to the
decision to exercise, the option will be carried at its initial cost and
will be subject to a periodic impairment review whenever events or changes
in circumstances indicate that the carrying value may no longer be
recoverable. The carrying value of the option would be considered impaired
when the fair market value is less than its carrying value. As of
F-8
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
2.RECAPITALIZATION--continued
April 30, 2000, no provision for impairment is considered necessary because
the Company believes the underlying value ASAT S.A. has not declined since
the option was granted and the probability of exercising the option is not
remote since the Company continues to actively consider the possibility of
exercising the option (through its legal and business due diligence
efforts, discussions with legal, accounting and financial advisors and
ongoing review of ASAT S.A.'s financial and operational performance). If
the option is exercised ASAT S.A. will be considered a wholly owned
subsidiary, at that date, and be accounted for as a purchase. If the
Company determines it will not exercise the option or determines that the
likelihood of exercising the option is remote or upon expiration of the
option, the carrying value of the option at that date will be charged to
earnings.
In connection with the recapitalization, ASAT incurred recapitalization
costs of $6,813 which represent professional fees attributable to the
disposal of the 50% interest in ASAT and have been charged to earnings. An
underwriting discount, placement fees, legal, accounting and other
professional fees totalling $11,829 were incurred in connection with the
procurement of the term loan facility and the issue of the senior notes and
have been deferred and are being amortized over the lives of the respective
facilities.
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents--Cash and cash equivalents include cash on
hand, cash accounts, interest bearing savings accounts, and time
certificates of deposit with original maturity of three months or less,
less any amounts which are restricted as to use.
Investment in marketable equity securities--The Company classifies its
marketable equity securities as available-for-sale and carries them at
market value with a corresponding recognition of net unrealized holding
gain or loss (net of tax) as a separate component of shareholders' equity
until realized. Gains and losses on sales of securities are computed on a
specific identification basis. Marketable equity securities comprise:
<TABLE>
<CAPTION>
April 30,
-----------
1999 2000
----- ----
<S> <C> <C>
Equity securities listed in the United States:
Cost........................................................... $ 275 $--
Gross unrealized losses........................................ (248) --
----- ---
Market value..................................................... $ 27 $--
===== ===
</TABLE>
Inventories--Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method. Cost of work-in-progress
includes costs of direct materials, direct labor and an appropriate
proportion of production overheads. The production overheads are absorbed
in work-in-progress based on units of production. The Company does not
maintain any significant amount of finished goods as all products are made
to order and generally shipped immediately on completion.
F-9
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--continued
Property, plant and equipment--Property, plant and equipment is stated at
cost less accumulated depreciation. Depreciation and amortization is
provided using the straight-line method so as to allocate the cost of
depreciable assets in use to operations based upon the following estimated
useful lives:
<TABLE>
<C> <S>
Land use rights and buildings Over the unexpired lease
term
Plant and machinery 5 - 12 years
Leasehold improvements Over the shorter of
lease term or the
estimated useful life
ranging from 2 to 8
years
Furniture, fixtures, office equipment and motor vehicles 5 - 8 years
Loose toolings 5 - 10 years
</TABLE>
Assets held under capital leases are depreciated over their estimated
useful lives on the same basis as owned assets.
Management engaged an independent third party to review the physical
condition technological capability and the economic value of the packages
produced by the property, plant and equipment. As a result of the review,
with effect from May 1, 1997, the Company reestimated the depreciable lives
of property, plant and equipment, with the exception of land use rights and
buildings, increasing the maximum lives to between 8 to 12 years, depending
on asset category, from the previous maximum of between 5 to 8 years. As a
result the depreciation and amortization expense for the year ended
April 30, 1998 was reduced by approximately $12,650.
Effective in the fourth quarter of the year ended April 30, 2000,
management revised the estimated useful lives for new production and test
equipment and loose toolings to 5 years from the current 6 to 12 years and
6 to 10 years, respectively. This was necessitated by the continued rapid
rate of advancements in technologies used in production and test equipment
now available on the market. The net book value of new production and test
equipment purchased was approximately $7,058 as of April 30, 2000. As a
result the depreciation expense for the year ended April 30, 2000 was
increased by approximately $42.
Costs incurred in constructing the new factory, including progress
payments and other costs relating to the construction, are capitalized and
transferred to property, plant and equipment on completion and depreciated
from that time. No interest was capitalized in 1999 and 2000 and interest
capitalized was $353 in 1998.
Valuation of long-lived assets--The Company periodically evaluates the
carrying value of long-lived assets to be held and used when events and
circumstances warrant such a review. The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flow
from such asset is separately identifiable and is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses on long-
lived assets to be disposed of are determined in a similar manner, except
that fair market values are reduced for the costs to dispose.
Deferred charges--Fees and expenses directly related to the issue of
senior notes and the incurrence of long term bank loan are capitalized and
are being amortized over the life of the notes and bank loan respectively.
Deferred charges are stated at cost of $11,829 less accumulated
amortization of $922 at April 30, 2000.
F-10
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--continued
Noncompete covenants--Payments made to former employees under
noncompetion agreements are being amortized over the six-year life of the
agreements. Noncompete covenants are stated at cost of $5,704 less
accumulated amortization of $4,225 at April 30, 1999 and $5,262 at April
30, 2000.
Research and development expenditure--Expenditure on research and
development is expensed in the period incurred.
Income taxes--Income taxes are calculated under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes". Deferred income taxes include the effects of temporary
differences between financial and taxable amounts of assets and liabilities
and operating loss and tax credit carryforwards.
Prior to the recapitalization described in Note 2, ASAT, Inc prepared its
income tax provision based on its former 95% U.S. shareholder's (a member
of the QPL Group) consolidated returns. However the provision as calculated
for ASAT, Inc would approximate the provision if prepared on a separate
return basis. The current and deferred tax expenses represent the Company's
separately computed tax liability (benefit), including recording a benefit
to the Company if either its current year tax loss or its net operating
loss carryforwards (subject to full valuation allowances) are utilized by
its former 95% U.S. shareholder's (a member of the QPL Group) consolidated
tax return.
Foreign exchange contracts--The Company has entered into foreign exchange
forward contracts and options to mitigate the effect of foreign currency
movements on its assets and liabilities. To date the 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 outstanding forward contracts and options at April
30, 1999 or 2000.
Foreign currency translation--The Company and ASAT, Inc. use the United
States dollar as their reporting currency. Monetary assets and liabilities
denominated in currencies other than United States dollars are translated
into United States dollars at the rates of exchange ruling at the balance
sheet date. Transactions in currencies other than United States dollars
during the year are converted into United States dollars at the rates of
exchange ruling at the transaction dates. Exchange differences are
recognized in the statements of income.
On consolidation, the financial statements of ASAT Limited and Timerson
Limited are translated from Hong Kong dollars, being their functional
currency, into United States dollars in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation".
Accordingly all assets and liabilities are translated at the exchange rate
prevailing at the balance sheet date and all income and expenditure items
are translated at the average rates for each of the years. The Hong Kong
dollar has been officially linked to the United States dollar at a
relatively fixed rate throughout the periods covered by these financial
statements, therefore, no exchange differences arise on translation.
Recognition of revenue--The Company assembles and tests semiconductor
packages, some of the materials being consigned to the Company for assembly
or testing and some which the Company purchases. Revenues are recognized
when the relevant assembly or testing services are provided. Customer
supplied materials are not reflected in sales or cost of sales.
F-11
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--continued
Net income per share--The computation of net income per share is
calculated as the net income for the period divided by the weighted number
of shares outstanding during the year, as adjusted on a retroactive basis
for the reclassification of shares and the share dividend as discussed in
Note 18. Diluted net income per share is not shown due to absence of
potential dilutive shares.
Concentration of credit risk--Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents and trade accounts receivable.
The Company places its temporary cash investment with various financial
institutions and limits the amount of credit exposure to any one financial
institution. The Company believes that no significant credit risk exists as
these investments are made with high-credit, quality financial
institutions.
The Company's business activities and accounts receivable are with
customers in the semiconductor industry, the majority of which are located
throughout Asia and the United States of America. The Company performs
ongoing credit evaluations of its customers. The Company believes that no
significant credit risk exists as credit losses, when realized, have been
within the range of management's expectations.
Comprehensive income--The Company has adopted SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and display
of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Financial instruments--The carrying value of financial instruments, which
consist of cash and cash equivalents, accounts receivable and accounts
payable, approximates fair value due to the short-term nature of these
instruments. The carrying value of long-term borrowings approximate fair
value based upon rates available to the Company for borrowings with similar
terms and maturities.
New accounting standard not yet adopted--In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
record derivatives on the balance sheet as assets or liabilities, measured
at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for the Company's year ending April 30, 2002. The Company has
not yet determined the impact, if any, on its financial position, results
of operations or cash flows.
Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
4.RELATED PARTY TRANSACTIONS
(i) QPL Group
During the three years ended April 30, 2000, the Company had various
business arrangements with QPL Group. Such arrangements are summarized as
follows:
Purchase of materials--The Company purchased leadframes from QPL Group
amounting to $48,031, $22,692 and $34,218 in the years ended April 30,
1998, 1999 and 2000, respectively.
F-12
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
4.RELATED PARTY TRANSACTIONS--continued
The Company also purchased other raw materials and finished goods from
QPL Group amounting to $7,856, $9,983 and $15,236 for the years ended April
30, 1998, 1999 and 2000, respectively.
Purchase and sale of property, plant and equipment--The Company acquired
certain plant and equipment from QPL Group amounting to $7,867, $3,912 and
$1,172 for the years ended April 30, 1998, 1999 and 2000, respectively. The
Company also transferred certain plant and equipment to QPL Group for use
in QPL Group's operations at an amount equivalent to then carrying amount
of such plant and equipment of $6,265, $3,070 and $102 for the years ended
April 30, 1998, 1999 and 2000, respectively.
Rental expenses--The Company leases its Hong Kong office premises and
manufacturing premises from QPL Group under a lease agreement which expires
on September 30, 2004 and paid rental expense of $2,583, $2,830 and $2,796
in the years ended April 30, 1998, 1999 and 2000, respectively.
Administrative and management services--QPL Group absorbed salaries and
benefits of various executives providing management services to ASAT Inc.
prior to the reorganization described in paragraph one of Note 1. The costs
were calculated by allocating certain executives proportional time spent on
ASAT Inc. and amounted to $898, $816 and $425 in the years ended April 30,
1998, 1999 and 2000, respectively.
Construction financing--QPL advanced amounts of $47,394 in 1997 to
finance plant construction under loan agreements which carried interest at
7.7% per annum. The loans were repaid in the years ended April 30, 1998 and
1999. The Company paid interest thereon to QPL Group of $4,906, $409 and
nil for the years ended April 30, 1998, 1999 and 2000, respectively.
Distribution of net balance--In recent years, QPL Group has utilized the
cash flow of ASAT to fund the activities of the QPL Group including the
payment of expenses on behalf of QPL Group. These advances were made
interest-free and without repayment terms. The net amounts transferred to
and from QPL Group, including the other purchases and sales transactions
but excluding the construction financing amounted to $16,913, $42,676 and
$32,914 in the years ended April 30, 1998, 1999 and 2000, respectively. In
view of the inability of QPL Group at April 30, 1999 to repay the net
receivable balance the Company concluded that the outstanding amounts are
impaired. Accordingly, the net amount due to ASAT is essentially a capital
distribution by ASAT to QPL Group and the transaction has been reflected as
such. As described in Note 2, the Company's net balances with QPL Group
were cancelled to the extent legally permitted on the recapitalization of
the Company.
Promissory note--On July 17, 1999, ASAT Limited declared a dividend of
$83,250 to QPL Group. The dividend was evidenced by a promissory note
bearing interest at 10.1% per annum repayable on the closing of the
recapitalization of ASAT, which together with accrued interest of $2,404
amounted to $85,654 at October 29, 1999. The promissory note and the
interest were repaid as at October 29, 1999.
Others--During the year ended April 30, 1998, the Company forgave an
account receivable of approximately $521 from a third party customer, in
exchange for shares in that company's stock. The remaining balance of $246
was assumed and ultimately paid by QPL Group.
(ii) Peak Plastic
Mr. T.L. Li, the Chairman of QPL Group and a shareholder in QPL Group,
also has an indirect equity interest in the ultimate holding company of
Peak Plastic & Metal Products (International) Limited ("Peak Plastic"). The
Company purchases packing materials from Peak Plastic.
F-13
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
4.RELATED PARTY TRANSACTIONS--continued
The total purchases from QPL Group and Peak Plastic during the relevant
periods are as follows:
<TABLE>
<CAPTION>
Year ended April 30,
-----------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
QPL Group............................................ $55,887 $32,675 $49,454
Peak Plastic......................................... 6,951 2,697 4,439
------- ------- -------
$62,838 $35,372 $53,893
======= ======= =======
</TABLE>
5.INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
April 30,
---------------
1999 2000
------- -------
<S> <C> <C>
Raw materials................................................ $12,514 $20,726
Work-in-progress............................................. 1,131 2,576
------- -------
$13,645 $23,302
======= =======
</TABLE>
6.PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
April 30,
-------------------------
1999 2000
--------- ---------
<S> <C> <C> <C>
Plant and machinery.............................. $ 194,918 $ 194,922
Land and building................................ -- 10,478
Land use right and factory under construction.... 9,370 9,370
Leasehold improvements........................... 1,847 1,956
Furniture, fixtures, equipment and motor
vehicles........................................ 40,074 43,320
Loose toolings................................... 54,742 26,476
--------- ---------
300,951 286,522
Less: Accumulated depreciation and amortization.. (141,461) (120,061)
--------- ---------
$ 159,490 $ 166,461
========= =========
</TABLE>
As a result of changes that have occurred in manufacturing technologies,
the Company undertook an impairment review of its property, plant and
equipment. In its assessment the Company determined that certain of its
loose toolings and plant and machinery were no longer in service and not
generating income. Due to the specialized nature of these assets, the
Company does not anticipate any resale value. Accordingly, in the year
ended April 30, 2000, the Company recorded a write-off of $12,340, which
represented the difference between book value and nil fair value.
The Company has a land use right for state-owned land in Shenzhen, PRC
for a period of 50 years. Pursuant to the agreement for acquisition of the
land use right, the Company was obligated to develop the land by December
29, 1999 or else the land use right would be subject to confiscation.
Although the
F-14
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
6.PROPERTY, PLANT AND EQUIPMENT--continued
Company has not developed the property and the deadline has passed, the
Company retains the rights to the land. The Company may be subject to
penalties for failure to develop the land. In March 2000, the Company
entered into a Land Swap Memorandum of Understanding (subject to agreement
to final terms) to swap the current land use right for a new land use right
on a similar plot of land in Shenzhen. Under the Memorandum of
Understanding, the government related company that owns the land use right
agreed to assist the Company in seeking an extension of the development
deadlines and a reduction or exemption from any penalties or liabilities
which may have arisen from the delay in developing the current land. The
Company believes that the costs incurred to date to develop the current
land will be transferable to the new land and therefore no provision for
impairment is considered necessary. The Company cannot at this time
estimate the ultimate costs, if any are to be incurred, of developing the
property.
Included in property, plant and equipment are assets held under capital
leases with the following net book values:
<TABLE>
<CAPTION>
April 30,
-------------
1999 2000
------- ----
<S> <C> <C>
At cost......................................................... $21,568 $--
Less: accumulated depreciation and amortization................. (4,008) --
------- ---
$17,560 $--
======= ===
</TABLE>
Depreciation and amortization of plant and machinery held under capital
leases, which is included in depreciation and amortization expense in the
accompanying consolidated statements of operations was $1,469, $1,207 and
$900 in the years ended April 30, 1998, 1999 and 2000, respectively. All
capital leases were repaid on October 29, 1999.
7.SHORT-TERM BANK BORROWINGS
Short-term bank borrowings comprise:
<TABLE>
<CAPTION>
April 30,
--------------
1999 2000
------- ------
<S> <C> <C>
Bills payable:
-- secured.................................................... $17,033 $ --
-- unsecured.................................................. -- --
Bank overdrafts:
-- secured.................................................... 5,818 --
-- unsecured.................................................. -- --
Short-term bank loans:
-- secured.................................................... 32,892 9,000
-- unsecured.................................................. -- --
------- ------
$55,743 $9,000
======= ======
</TABLE>
At April 30, 1999 such facilities carried interest rates varying between
6.1% per annum to 17.9% per annum with a weighted average rate of interest
7.5%. At April 30, 2000 the outstanding facility carried an interest rate
of 9.8%.
F-15
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
7.SHORT-TERM BANK BORROWINGS--continued
As a result of the standstill agreement entered into between QPL Group
and its lenders prior to the Recapitalization as discussed in Note 2, the
Company's banking facilities were frozen.
Substantially all of the Company's assets have been pledged as collateral
for the short-term borrowings and long-term debt, including the amount
reported in current liabilities, set out in note 9.
8.12.5% SENIOR NOTES DUE 2006
<TABLE>
<CAPTION>
April
30, 2000
--------
<S> <C>
155,000 units 12.5% senior notes due November 2006................. $149,217
========
</TABLE>
The senior notes (the "Notes") are unsecured. Up to 35% of the aggregate
principal amount of the Notes may be redeemed at any time prior to November
1, 2002, at the option of the Company upon certain public offerings of
capital stock of the Company for cash. In addition, the Notes may be
redeemed, at the option of the Company, at any time on or after November 1,
2003 at various redemption prices set out in the agreement for the issue of
the Notes. The senior notes contain covenants restricting the ability of
ASAT Finance, the guarantors and their affiliates to act in a number of
ways. These covenants include restrictions on their ability to incur debt,
to make restricted payments, to incur liens, to sell assets, to engage in
related party transactions, to undertake a business combination, to change
their line of business and to make investments of a specified nature. The
senior notes also generally restrict ASAT Finance, the guarantors and their
affiliates from paying dividends to equity holders unless ASAT meets the
financial ratio tests included in the indenture. No event of default under
the indenture has occurred and the aggregate amount of restricted payments
together with the proposed restricted payment would not exceed the
threshold as defined in the indenture.
The Notes were issued with warrants which entitle the holders thereof to
subscribe for 17,814,336 ordinary shares of the Company at an exercise
price of approximately $0.39 per ordinary share, subject to adjustment, at
any time from November 1, 2001 to November 1, 2006. The warrants do not
provide holders any voting rights but the shares to be issued upon exercise
of the warrants will be voting shares. The fair value of the warrants has
been deducted from the gross proceeds from the issuance of the Notes and
has been allocated to additional paid-in capital. The fair value of the
warrants was determined using the Black-Scholes pricing model, which takes
into account a number of factors, including expected volatility of a
stock's return, the level of interest rates, the relationship of the
underlying stock's price to the strike price of the option, and the time
remaining until the option expires.
F-16
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
9.OTHER LONG-TERM DEBT
Long-term debt comprises:
<TABLE>
<CAPTION>
April 30,
-----------------
1999 2000
-------- -------
<S> <C> <C>
Secured bank loan with interest at London InterBank
Offered Rate ("LIBOR") + 3.5% per annum due November 2004
(1)...................................................... $ -- $40,000
Debt subject to standstill agreement:
Secured bank loan with interest at LIBOR + 2.0% per annum
(8.9% as of April 30, 1999).............................. 24,000 --
Other secured bank loans bearing interests at rates
varying between LIBOR + 1.5% to LIBOR/Singapore InterBank
Offered Rate ("SIBOR") + 2.0% per annum (6.5% to 6.9375%
as of April 30, 1999), repayable by installments with
maturities varying from March 2000 to May 2001........... 5,475 --
Capital lease obligations bearing interest at rates
varying between SIBOR + 1 3/4% to SIBOR + 2.75% per annum
(6.7% to 8.4% as of April 30, 1999), repayable by
installments up to May 2001.............................. 2,084 --
Debt not subject to standstill agreement:
Capital lease obligations bearing interest at rates
varying between LIBOR + 2.0% to Hong Kong prime rate +
0.5% per annum (5.7% to 10.0% as of April 30, 1999),
repayable by installments up to March 2002............... 6,299 --
Secured accounts payable bearing interest at 8.75% per
annum repayable by installments up to February 2001...... 1,541 --
-------- -------
39,399 40,000
Less: Current portion..................................... (35,422) (5,000)
-------- -------
$ 3,977 $35,000
======== =======
</TABLE>
(1) This bank loan is secured by all the assets of the Company and the
capital stock of the subsidiaries of the Company.
Maturities of long-term debt at April 30, 2000 are as follows:
<TABLE>
<CAPTION>
Bank
loans
-------
<S> <C>
Year ending April 30:
2002.................................................................. $10,000
2003.................................................................. 10,000
2004.................................................................. 10,000
2005.................................................................. 5,000
-------
$35,000
=======
</TABLE>
As a result of a standstill agreement entered into between QPL and its
bankers and certain finance lease companies during the year ended April 30,
1999 as detailed in Note 2, the bank loans and certain obligations under
capital leases of the Company covered by the standstill agreement have been
reclassified as borrowings repayable within one year.
F-17
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
10.OTHER INCOME, NET
Other income, net consisted of the following:
<TABLE>
<CAPTION>
Year ended April 30,
--------------------
1998 1999 2000
------ ------ ------
<S> <C> <C> <C>
Interest income........................................ $ 179 $ 125 $ 250
Foreign currency exchange gain, net.................... 604 406 229
Gain arising from transactions in foreign exchange
contracts and options................................. 475 267 --
Loss on sale of marketable securities.................. -- -- (156)
Bad debt recovered..................................... -- -- 465
Others................................................. 493 386 260
------ ------ ------
$1,751 $1,184 $1,048
====== ====== ======
</TABLE>
11.INCOME TAXES
Income is subject to taxation in the various countries in which the
Company operates. The components of income before income taxes are as
follows:
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
Hong Kong........................................... $36,254 $34,298 $38,219
United States....................................... (872) (2,683) 6,048
------- ------- -------
$35,382 $31,615 $44,267
======= ======= =======
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Year ended April 30,
---------------------
1998 1999 2000
------ ------ ------
<S> <C> <C> <C>
Income tax:
Current:
Hong Kong.............................................. $ 475 $4,857 $7,118
United States.......................................... (682) 2 634
Deferred income tax:
Hong Kong.............................................. 5,250 710 1,806
------ ------ ------
$5,043 $5,569 $9,558
====== ====== ======
</TABLE>
Included in amounts due from/to QPL Group are income tax receivable
amounts of $493 and $Nil at April 30, 1999 and 2000, respectively,
resulting from U.S. intercompany transactions between ASAT, Inc. and its
former 95% U.S. shareholder (a member of the QPL Group).
F-18
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
11.INCOME TAXES--continued
The components of the net deferred income tax (assets) liabilities are as
follows:
<TABLE>
<CAPTION>
April 30,
-----------------
1998 1999
-------- -------
<S> <C> <C>
Deferred income tax (assets) liabilities:
Depreciation............................................. $ 20,066 $20,772
Deferred charges......................................... -- 836
Reserves and accruals not currently deductible........... (876) (166)
Net operating loss carryforwards......................... (2,590) (1,393)
Valuation allowance...................................... 3,586 1,943
-------- -------
$ 20,186 $21,992
======== =======
</TABLE>
The Company has placed a full valuation allowance against the deferred
tax assets due to the uncertainty surrounding the realizability of these
benefits in future tax returns.
The effective tax rate of the Company varied from the Hong Kong tax rate
for the following reasons:
<TABLE>
<CAPTION>
April 30,
----------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Hong Kong tax rate....................................... 16.0% 16.0% 16.0%
Tax effect of difference in Hong Kong and United States
taxation rates.......................................... (0.4) (2.2) 3.3
Non-deductible expenses.................................. -- -- 3.2
Change in valuation allowances........................... (1.0) 4.1 (3.7)
Other.................................................... (0.3) (0.3) 2.8
---- ---- ----
Effective tax rate....................................... 14.3% 17.6% 21.6%
==== ==== ====
</TABLE>
As of April 30, 2000, the Company had United States federal and state net
operating loss carryforwards of approximately $4,097 and nil, respectively,
beginning to expire from 2008 to 2019 for federal tax purposes. The extent
to which the loss carryforwards can be used to offset future taxable income
to taxes may be limited, depending on the extent of ownership changes
within any three-year period as provided by Section 382 of the Internal
Revenue Code and applicable California state tax law.
12.COMMON STOCK
<TABLE>
<S> <C>
Ordinary shares of $0.01 per share; authorized 3,000,000,000 shares;
issued and outstanding: 576,000,000 shares at April 30, 1999 and at
April 30, 2000 .................................................... $5,760
======
</TABLE>
F-19
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
13.EMPLOYEE BENEFIT PLAN
The Company has established a defined contribution benefit plan for its
Hong Kong employees. The assets of the plan are held under provident funds
managed by independent trustees. The employees can elect not to make
contributions to the plan or they can elect to contribute a fixed
percentage from 1% to 5% (in 1% increments) of an individual employee's
monthly basic salary. The employer's contributions are based on the % of
contribution by the employee of the individual employee's monthly basic
salary. The employees are entitled to the whole of the employer's
contributions and accrued interest thereon after 10 years of complete
service or at a reduced scale of 30% to 90%, after completion of 3 to 9
years of service, respectively. Hong Kong employees who have served the
Company for not less than five years, are entitled to a long service
payment when their employment is terminated under certain conditions. The
long service payments are determined on the basis of the number of years of
service and final pay, less amounts set aside in the defined contribution
benefit plan. Any liabilities for such post-employment benefits are accrued
when they are probable of occurrence.
The aggregate employers' contributions which have been made are as
follows:
<TABLE>
<CAPTION>
Year ended April
30,
-----------------
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Employers' contributions................................... $ 439 $ 499 $ 554
===== ===== =====
</TABLE>
In addition, ASAT, Inc. has a 401(k) plan which covers all employees with
six months or more of service. Employees who participate in the plan may
contribute a portion of their salary up to a limit specified by law. The
Company's contribution to the plan is made at the discretion of the Board
of Directors, which elected to make no contributions for the year ended
April 30, 1998 and 1999. The Company's contribution to the plan for year
ended April 30, 2000 was $347.
F-20
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
14.COMMITMENTS AND CONTINGENCIES
(a) Capital expenditure
As of April 30, 1999 and April 30, 2000, the Company had contracted
for capital expenditure on property, plant and equipment of $1,061 and
$55,561, respectively.
(b) Operating leases
The Company leases certain land and buildings including those leased
from QPL Group (Note 4), and plant and machinery, under operating
leases, most of which do not contain renewal options and escalation
clauses, which expire through September, 2004. Rental expense under
operating leases for the years ended April 30, 1998, 1999 and 2000,
amounted to $10,259, $11,693 and $10,830, respectively.
The aggregate annual minimum operating lease commitments under all
non-cancelable leases as of April 30, 2000 are as follows:
<TABLE>
<S> <C>
Years ending April 30,
2001............................................................... $ 9,049
2002............................................................... 4,615
2003............................................................... 3,245
2004............................................................... 3,127
2005............................................................... 1,298
-------
$21,334
=======
</TABLE>
(c) The guarantees totalling $170,712 the Company had provided for banking
facilities granted to QPL Group at April 30, 1999 were cancelled on
completion of the Recapitalization as discussed in Note 2. No
guarantees were outstanding at April 30, 2000.
(d) Accounts receivable
During the year ended April 30, 1999, the Company entered into a
$10,000 receivable financing agreement. As of April 30, 1999, the
Company had a current liability recorded in the amount of $7,488
included in short-term bank borrowings on the consolidated balance
sheet which was fully repaid as of October 31, 1999. In accordance with
this agreement, the bank will at all times require and retain a reserve
equal to 10.00% of the current outstanding balance. On a monthly basis
the bank shall return to the Company any amount remaining in the
reserve account in excess of the amount of the required reserve as
determined solely by the bank. As of April 30, 1999, the reserve
balance totaled $791 and was recorded in accounts receivable. Under the
terms of the agreement, the Company is charged a monthly maintenance
fee equal to 0.75% of the outstanding balance of all accounts aged 60
days or more from the invoice date. A discount of 1.25% of the face
amount of all invoices purchased by the bank is also charged. During
the year ended April 30, 1999, the total discount fee charged was $229.
As of April 30, 1999, the Company's cash of $665 and accounts
receivable of $20,153 were pledged as collateral under this agreement.
The agreement expired during the year ended April 30, 2000.
F-21
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
15.SEGMENT INFORMATION
The Company operates in one business segment, assembly and testing
services to the semiconductor industry. The geographic distributions of the
Company's identifiable assets and net sales are summarized as follows:
<TABLE>
<CAPTION>
Hong United
Kong PRC States Eliminations Combined
-------- ------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Year ended April 30, 1998
Net sales to third parties.. $ 76,607 $ -- $166,402 $ -- $243,009
Net sales to QPL Group...... -- -- 94 -- 94
Transfer between geographic
areas...................... 146,089 -- 307 (146,396) --
-------- ------ -------- --------- --------
Total net sales............ $222,696 $ -- $166,803 $(146,396) $243,103
-------- ------ -------- --------- --------
Total identifiable assets... $200,717 $8,489 $ 43,862 $ -- $253,068
======== ====== ======== ========= ========
Year ended April 30, 1999
Net sales to third parties.. $ 96,491 $ -- $124,096 $ -- $220,587
Net sales to QPL Group...... -- -- 36 -- 36
Transfer between geographic
areas...................... 104,914 -- 157 (105,071) --
-------- ------ -------- --------- --------
Total net sales............ $201,405 $ -- $124,289 $(105,071) $220,623
======== ====== ======== ========= ========
Total identifiable assets... $183,075 $9,370 $ 26,238 $ -- $218,683
======== ====== ======== ========= ========
Year ended April 30, 2000
Net sales to third parties.. $107,707 $ -- $204,323 $ -- $312,030
Net sales to QPL Group...... -- -- 101 -- 101
Transfer between geographic
areas...................... 172,941 -- -- (172,941) --
-------- ------ -------- --------- --------
Total net sales............ $280,648 $ -- $204,424 $(172,941) $312,131
======== ====== ======== ========= ========
Total identifiable assets... $236,727 $9,370 $ 37,384 $ -- $283,481
======== ====== ======== ========= ========
</TABLE>
Intercompany sales between geographic areas are recorded at cost plus a
mark-up. Such transfers are eliminated on consolidation.
An analysis of sales by geographic destinations is as follows:
<TABLE>
<CAPTION>
Year ended April
30,
-------------------
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
United States............................................ 68.0% 52.0% 63.3%
Asia..................................................... 28.5 25.0 19.3
Hong Kong................................................ 2.3 21.9 15.4
Europe................................................... 1.2 1.1 2.0
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Asia represents Singapore, Philippines, Taiwan, Japan, Malaysia, PRC
(excluding Hong Kong) and South Korea.
F-22
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
(In thousands, except share data)
16.MAJOR CUSTOMERS
Sales to customer A represented 21.8% and 14.8% of net sales in the years
ended April 30, 1999 and 2000, respectively. Sales to customer B
represented 13.2% in the year ended April 30, 1998 and 15.7% in the year
ended April 30, 2000. Sales to customer C represented 11.2% in the year
ended April 30, 1998. Sales to customer D represented 11.6% in the year
ended April 30, 2000.
17.COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
current year's presentation.
18.SUBSEQUENT EVENT
On July 6, 2000, the Company amended its articles of association to
reclassify all shares as ordinary shares and increase its authorized shares
to 3,000,000,000. Also, on July 6, 2000, the Company authorized a share
split in the form of a share dividend of 47 ordinary shares for each
outstanding ordinary share. The Company's consolidated financial statements
have been retroactively adjusted to show the effect of the reclassification
and the share dividend for all periods presented.
F-23
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
, 2000
[LOGO OF ASAT APPEARS HERE]
ASAT (FINANCE) LLC
------------------------
PROSPECTUS
------------------------
Offer to Exchange All Outstanding
Unregistered 12.5% Senior Notes due 2006
for
Registered 12.5% Senior Notes due 2006 and Consent Solicitation
-------------------------------------------------------------------------------
Until , all dealers that effect transactions in the notes, whether or not
participating in the offering of the notes, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotment or subscriptions. No dealer, salesperson or other person is
authorized to give any information or to represent anything not contained in
this prospectus. You must not rely on any unauthorized information. This
prospectus is an offer to sell or to buy only the notes offered by this
prospectus, but only under circumstances and in jurisdictions where it is
lawful to do so. The information in this prospectus is current only as of its
date.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers and Managers.
The Issuer
Section 18-108 of Subchapter I of the Delaware Limited Liability Company Act
provides: Subject to standards and restrictions set forth in its limited
liability company agreement, a limited liability company may, and shall have
the power to, indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands whatsoever.
Section 4.3 of Article IV of the Limited Liability Company Operating
Agreement of ASAT (Finance) LLC provides: The Company shall indemnify and hold
harmless the Managers and their agents from and against all claims and demands
whatsoever against, and for all costs, losses, liabilities, damages and
expenses (including attorneys' fees) paid or accrued by, the Managers or their
agents in connection with the business of the Company, to the fullest extent
provided or allowed by the laws of the State. The satisfaction of any
indemnification and any holding harmless shall be from and limited to Company
Property. Such right of indemnification shall be subordinate and junior in
right of payment to the payment of other debts of the Company.
The Guarantors
ASAT Holdings Limited
Article 133 of the Restated Articles of Association of ASAT Holdings Limited
provides that every director, manager, officer and to a certain extent,
auditor, shall be indemnified out of the funds of ASAT Holdings Limited
against all liabilities incurred from defending any proceedings, whether civil
or criminal, in which judgement is given in his favor, or which he is
acquitted, or in connection with any application under the statute in which
relief from liability is granted to him by the court.
ASAT (Cayman) Limited
Article 123 of the Articles of Association of ASAT (Cayman) Limited provides
that every director, officer or trustee of ASAT (Cayman) Limited shall be
indemnified out of the assets of ASAT (Cayman) Limited against any costs,
charges, expenses, loss or liability incurred by him in or about the execution
of or otherwise in relation to his office except those incurred or sustained
by or through the own willful neglect or default respectively.
ASAT Limited
ASAT Limited is a company incorporated under the laws of Hong Kong. Section
165 of the Companies Ordinance of Hong Kong contains a general prohibition
against a company indemnifying its officers against any liability for
negligence, default, breach of duty or breach of trust, except for legal costs
incurred in defending proceedings in which judgment is given in the officer's
favor or in which the officer is acquitted or where relief is granted under
Section 358 of the Companies Ordinance. Section 358 empowers the court to
grant relief in certain circumstances to officers of a company in proceedings
for negligence, breach of duty or breach of trust against such officer.
Article 137 of ASAT Limited's Articles of Association provides that every
director, managing director, agent, auditor, secretary and other officer shall
be indemnified out of the assets of ASAT Limited against any
II-1
<PAGE>
liability incurred by him in relation to ASAT Limited in defending
proceedings, whether civil or criminal, in which judgment is given in his
favor or in which he is acquitted or in connection with an application under
Section 358 of the Companies Ordinance in which relief is granted to him by
the court.
Timerson Limited
Sections 165 and 358 of the Companies Ordinance of Hong Kong provide for
indemnification of directors and officers under certain circumstances. See "--
ASAT Limited" above.
Article 144 of the Articles of Association of Timerson Limited provides
that, subject to the Companies Ordinance of Hong Kong, every director and
other officer of Timerson Limited (including an auditor) shall be indemnified
out of the assets of Timerson Limited against any costs, charges, expenses,
loss or liability incurred by him in or about the execution of or otherwise in
relation to his office.
ASAT, Inc
Section 317 of the California Corporations Code provides for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expense incurred) arising under the
Securities Act.
Section 204 of the California Corporations Code allows a corporation,
subject to certain limitations, 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. Corporations
may not eliminate or limit the liability of a director for any act or omission
occurring prior to the date when the provision becomes effective and they may
not 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.
Under Section 204, corporations 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 concerning contacts or transactions between the
corporation and a director, or
(7) under Section 316 concerning directors' liability for improper
dividends, loans and guarantees.
Section 5.1 of ASAT, Inc.'s Articles of Incorporation provides that ASAT,
Inc. shall, to the maximum extent and in the manner permitted by the
California Corporations Code, indemnify each of its directors and officers
against costs and expenses incurred from any legal proceedings arising by
reason that such person is or was an agent of the corporation.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<C> <S>
1.1 Purchase Agreement, dated as of October 26, 1999, between ASAT
Holdings Limited, ASAT (Finance) LLC, ASAT Limited and its other
subsidiaries and Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc.*
3.1 Limited Liability Company Operating Agreement of ASAT (Finance)
LLC.*
3.2 Restated Memorandum and Articles of Association of ASAT Holdings
Limited as adopted on July 14, 2000.
3.3 Memorandum and Articles of Association of VASTEARN Limited now
incorporated under the name of ASAT Limited.*
3.4 Articles of Association of ASAT, Inc.*
3.5 Memorandum and Articles of Association of Timerson Limited.*
3.6 Memorandum and Articles of Association of ASAT (Cayman) Limited.*
4.1 Registration Rights Agreement dated as of October 29, 1999, between
ASAT (Finance) LLC, ASAT Holdings Limited, ASAT Limited and its
other subsidiaries and Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc.*
4.2 Indenture dated as of October 29, 1999, between ASAT (Finance) LLC,
ASAT Holdings Limited and its subsidiaries, and The Chase Manhattan
Bank, as trustee.*
4.3 Form of the First Supplemental Indenture dated as of August ,
2000.
4.4 Form of New Note.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding the
validity of the 12 1/2% Senior Notes being registered.**
5.2 Opinion of counsel of ASAT, Inc. regarding the validity of the 12
1/2% Senior Notes being registered.**
5.3 Opinion of Maples and Calder Asia regarding the validity of the 12
1/2% Senior Notes being registered.**
5.4 Opinion of Slaughter and May regarding the validity of the 12 1/2%
Senior Notes being registered.**
8.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding tax
matters.**
10.1 Amended and Restated Shareholders Agreement among Asia Opportunity
Fund, L.P., Chase Asia Investment Partners II (Y) LLC, the Co-
Investors listed therein, QPL International Holdings Limited, The
Industrial Investment Company Limited, QPL (US) Inc. (formerly
Worltek International, Ltd.) and ASAT Holdings Limited, dated as of
July 14, 2000.
10.2 Shared Costs and Services Agreement among ASAT Limited, QPL
International Holdings Limited and QPL Limited, dated October 5,
1999.*
10.3 Lease Agreement among Sanwah Group Limited and ASAT Limited, dated
October 29, 1999.*
10.4 Agreement among ASAT, S.A., QPL International Holdings Limited,
ASAT (Cayman) Limited, ASAT Limited and ASAT, Inc. dated October
29, 1999 regarding sales agency and option to purchase ASAT, S.A.*
10.5 Agreement for Sale and Purchase between Motorola Semiconductors
Hong Kong Limited and ASAT Limited dated March 9, 2000 regarding
purchase of new facility in Hong Kong.+
10.6 Amended and Restated Co-Investment Agreement among Asia Opportunity
Fund, L.P., Chase Asia Investment Partners II (Y) LLC and the Co-
Investors listed therein dated as of July 14, 2000.
10.7 Indemnity Agreement dated July 14, 2000 among Chase Asia Investment
Partners II (Y) LLC, Asia Opportunity Fund, L.P., Orchid Hong Kong
Investment Holdings, Reservoir-Olympus II, L.P., Olympus Capital
Asia, L.P., Olympus Capital Asia Offshore, L.P., Olympus Holdings,
L.P., Olympus-ASAT I, L.L.C., Olympus-ASAT II, L.L.C., The
Industrial Investment Company Limited and ASAT Holdings Limited.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte Touche Tohmatsu.
23.2 Consent of Milbank, Tweed, Hadley & McCloy (included in the
opinions filed as Exhibit 5.1 and Exhibit 8.1 hereto).**
24.1 Power of Attorney.*
25.1 Statement of Eligibility of the Trustee.**
99.1 Form of Letter of Consent and Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees regarding the Exchange Offering.
99.4 Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees regarding the Exchange Offering.
99.5 Form of Exchange Agency Agreement.
</TABLE>
---------------------
* Previously filed.
** To be filed by amendment.
+ Incorporated herein by reference to registration statement on Form F-1
(Registration No. 333-12124).
Item 22. Undertakings.
The undersigned registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrants' annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(3) That every prospectus: (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10 (a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
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 respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, ASAT (Finance) LLC has
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 15, 2000.
ASAT (Finance) LLC
/s/ Terence Scandrett
By: _____________________________
Name:Terence Scandrett
Title:Manager
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Manager
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Manager
---------------------------------------
Terence Scandrett
* Manager
---------------------------------------
Andrew Liu
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, ASAT Holdings Limited
has duly caused this Registration Statement or amendment thereto to be signed
on its behalf by the undersigned, thereunto duly authorized, on August 15,
2000.
ASAT Holdings Limited
By: _____________________________
/s/ Terence Scandrett
Name:Terence Scandrett
Title: Chief Financial
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Executive Officer and Director
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Chief Financial Officer and Director
---------------------------------------
Terence Scandrett
Finance Director
* (principal accounting officer)
---------------------------------------
Arthur Tsui
* Director and Chairman
---------------------------------------
Andrew Liu
* Director
---------------------------------------
Li Tung Lok
* Director
---------------------------------------
Lawrence Miao
Director
---------------------------------------
Gordon Campbell
Director
---------------------------------------
Maura Wong
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Director
----------------------------------------
Edward Cheng
* Director
----------------------------------------
Henry Cheng
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, ASAT Limited has duly
caused this Registration Statement or amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on August 15, 2000.
ASAT Limited
/s/ Terence Scandrett
By: _____________________________
Name:Terence Scandrett
Title: Chief Financial
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
* Chief Executive Officer and Director
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Chief Financial Officer and Director
---------------------------------------
Terence Scandrett
Finance Director
* (principal accounting officer)
---------------------------------------
Arthur Tsui
* Director
---------------------------------------
Andrew Liu
* Director
---------------------------------------
Li Tung Lok
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, ASAT, Inc. has duly
caused this Registration Statement or amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on August 15, 2000.
ASAT, Inc.
/s/ Terence Scandrett
By: _____________________________
Name:Terence Scandrett
Title: Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
Principal executive officer
---------------------------------------
James Healy
Principal financial officer and
* principal accounting officer
---------------------------------------
Fe Maliwat
* Director
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Director
---------------------------------------
Terence Scandrett
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Timerson Limited has
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 15, 2000.
Timerson Limited
/s/ Terence Scandrett
By: _____________________________
Name:Terence Scandrett
Title: Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
* Director
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Director
---------------------------------------
Terence Scandrett
* Director
---------------------------------------
Andrew Liu
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, ASAT (Cayman) Limited
has duly caused this Registration Statement or amendment thereto to be signed
on its behalf by the undersigned, thereunto duly authorized, on August 15,
2000.
ASAT (Cayman) Limited
/s/ Terence Scandrett
By: _____________________________
Name:Terence Scandrett
Title: Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 2000.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
* Director
---------------------------------------
Jerry Lee
/s/ Terence Scandrett Director
---------------------------------------
Terence Scandrett
</TABLE>
/s/ Terence Scandrett
*By: __________________
Terence Scandrett
Attorney-in-Fact
II-11
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the undersigned in the capacity
indicated on August 15, 2000.
<TABLE>
<CAPTION>
Name Capacity
---- --------
<S> <C>
Director of ASAT, Inc., Authorized
Representative of ASAT Holdings Limited, ASAT
Limited, Timerson Limited, ASAT (Cayman)
/s/Terence Scandrett Limited
---------------------------------------
Terence Scandrett
</TABLE>
II-12
<PAGE>
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents are to be filed with the Securities and Exchange commission
by amendment.
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<C> <S>
1.1 Purchase Agreement dated as of October 26, 1999, between ASAT
Holdings Limited, ASAT (Finance) LLC, ASAT Limited and its other
subsidiaries and Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc.*
3.1 Limited Liability Company Operating Agreement of ASAT (Finance)
LLC.*
3.2 Restated Memorandum and Articles of Association of ASAT Holdings
Limited as adopted on July 14, 2000.
3.3 Memorandum and Articles of Association of VASTEARN Limited now
incorporated under the name of ASAT Limited.*
3.4 Articles of Association of ASAT, Inc.*
3.5 Memorandum and Articles of Association of Timerson Limited.*
3.6 Memorandum and Articles of Association of ASAT (Cayman) Limited.*
4.1 Registration Rights Agreement dated as of October 29, 1999, between
ASAT (Finance) LLC, ASAT Holdings Limited, ASAT Limited and its
other subsidiaries and Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc.*
4.2 Indenture dated as of October 29, 1999, between ASAT (Finance) LLC,
ASAT Holdings Limited and its subsidiaries, and The Chase Manhattan
Bank, as trustee.*
4.3 Form of the First Supplemental Indenture dated as of August ,
2000.
4.4 Form of New Note.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding the
validity of the 12 1/2% Senior Notes being registered.**
5.2 Opinion of counsel of ASAT, Inc. regarding the validity of the 12
1/2% Senior Notes being registered.**
5.3 Opinion of Maples and Calder Asia regarding the validity of the 12
1/2% Senior Notes being registered.**
5.4 Opinion of Slaughter and May regarding the validity of the 12 1/2%
Senior Notes being registered.**
8.1 Opinion of Milbank, Tweed, Hadley & McCloy regarding tax matters.**
10.1 Amended and Restated Shareholders Agreement among Asia Opportunity
Fund, L.P., Chase Asia Investment Partners II (Y) LLC, the Co-
Investors listed therein, QPL International Holdings Limited, The
Industrial Investment Company Limited, QPL (US) Inc. (formerly
Worltek International, Ltd.) and ASAT Holdings Limited, dated as of
July 14, 2000.
10.2 Shared Costs and Services Agreement among ASAT Limited, QPL
International Holdings Limited and QPL Limited, dated October 5,
1999.*
10.3 Lease Agreement among Sanwah Group Limited and ASAT Limited, dated
October 29, 1999.*
10.4 Agreement among ASAT, S.A., QPL International Holdings Limited,
ASAT (Cayman) Limited, ASAT Limited and ASAT, Inc. dated October
29, 1999 regarding sales agency and option to purchase ASAT, S.A.*
10.5 Agreement for Sale and Purchase between Motorola Semiconductors
Hong Kong Limited and ASAT Limited dated March 9, 2000 regarding
purchase of new facility in Hong Kong.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<C> <S>
10.6 Amended and Restated Co-Investment Agreement among Asia Opportunity
Fund, L.P., Chase Asia Investment Partners II (Y) LLC and the Co-
Investors listed therein dated as of July 14, 2000.
10.7 Indemnity Agreement dated July 14, 2000 among Chase Asia Investment
Partners II (Y) LLC, Asia Opportunity Fund L.P., Orchid Hong Kong
Investment Holdings, Reservoir-Olympus II, L.P., Olympus Capital
Asia, L.P., Olympus Capital Asia Offshore, L.P., Olympus Holdings,
L.P., Olympus-ASAT I, L.L.C., Olympus-ASAT II, L.L.C., The
Industrial Investment Company Limited and ASAT Holdings Limited.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte Touche Tohmatsu.
23.2 Consent of Milbank, Tweed, Hadley & McCloy (included in the
opinions filed as Exhibit 5.1 and Exhibit 8.1 hereto).**
24.1 Power of Attorney.*
25.1 Statement of Eligibility of the Trustee.**
99.1 Form of Letter of Consent and Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees regarding the Exchange Offering.
99.4 Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees regarding the Exchange Offering.
99.5 Form of Exchange Agency Agreement.
</TABLE>
---------------------
* Previously filed.
** To be filed by amendment.
+ Incorporated herein by reference to registration statement on Form F-1
(Registration No. 333-12124).
2
