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As filed with the Securities and Exchange Commission on February 16, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KULICKE AND SOFFA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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PENNSYLVANIA 23-1498399
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
Clifford G. Sprague
Senior Vice President
and Chief Financial Officer
2101 Blair Mill Road 2101 Blair Mill Road
Willow Grove, PA 19090 Willow Grove, PA 19090
(215) 784-6000 (215) 784-6000
(Address, Including Zip Code, and Telephone Number, Including (Name, Address, Including Zip Code, and Telephone
Area Code, of Registrant's Principal Executive Offices) Number, Including Area Code, of Agent For Service)
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COPY TO:
H. John Michel, Jr.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
_______________________
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered per Security Offering Price Registration Fee
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4 3/4% Convertible Subordinated Notes due 2006 $175,000,000 100% $175,000,000 $46,200
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Common stock, no par value (1) (1) (1) (2)
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(1) Includes 3,821,019 shares of common stock initially upon conversion of the
notes at the conversion price of $45.7993 per share of common stock.
Pursuant to Rule 416 under the Securities Act, such number of shares of
common stock registered hereby shall include an indeterminate number of
shares of common stock that may be issued in connection with a stock split,
stock dividend, recapitalization or similar event.
(2) Pursuant to Rule 457(i), there is no additional filing fee with respect to
the shares of common stock issuable upon conversion of the notes because no
additional consideration will be received in connection with the exercise of
the conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling securityholders 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 FEBRUARY 16, 2000
$175,000,000
KULICKE AND SOFFA INDUSTRIES, INC.
4 3/4% Convertible Subordinated Notes due 2006 and
The Common Stock issuable upon conversion of the Notes
We issued the notes in a private placement in December 1999. This
prospectus will be used by selling securityholders to resell their notes and the
common stock issuable upon conversion of their notes.
The notes are convertible before maturity into common stock at an initial
conversion price of $45.7993 per share, subject to adjustment in certain events.
We will pay interest on the notes on June 15 and December 15 of each year,
beginning on June 15, 2000. The notes will mature on December 15, 2006, unless
earlier converted or redeemed.
We may redeem all or a portion of the notes on or after December 19, 2002.
In addition, the holders may require us to repurchase the notes if we experience
a fundamental change before December 15, 2006.
Our common stock is traded on the Nasdaq National Market under the symbol
"KLIC." The reported last sales price of our common stock on the Nasdaq National
Market on February 15, 2000 was $67 9/16 per share.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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This prospectus is dated , 2000
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TABLE OF CONTENTS
Page
SUMMARY.................................... 1
THE OFFERING............................... 2
RISK FACTORS............................... 3
USE OF PROCEEDS............................ 17
RATIO OF EARNINGS TO FIXED CHARGES......... 17
DESCRIPTION OF NOTES....................... 18
DESCRIPTION OF CAPITAL STOCK............... 30
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.. 32
SELLING SECURITYHOLDERS.................... 39
PLAN OF DISTRIBUTION....................... 42
LEGAL MATTERS.............................. 44
EXPERTS.................................... 44
WHERE YOU CAN FIND MORE INFORMATION........ 45
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SUMMARY
This summary highlights some information from this prospectus, and it may
not contain all of the information that is important to you. It is qualified in
its entirety by the more detailed information and consolidated financial
statements, including the notes to the consolidated financial statements,
included or incorporated by reference in this prospectus. You should read the
full text of, and consider carefully the more specific details contained in,
this prospectus. When used in this prospectus, the terms "Kulicke & Soffa,"
"we," "our" and "us" refer to Kulicke and Soffa Industries, Inc. and not to the
selling securityholders.
We design, manufacture and market capital equipment and packaging materials
for sale to companies that manufacture and assemble semiconductor devices. We
also service, maintain, repair and upgrade assembly equipment. Our business is
divided into three segments: equipment, packaging materials and advanced
packaging technology.
Our principal product line is our family of wire bonders, which are used to
connect extremely fine wires, typically made of gold or aluminum, between the
bonding pads on the die and the leads on the integrated circuit (IC) package to
which the die has been bonded. In addition to wire bonders, we produce and
distribute other types of semiconductor assembly equipment, including wafer
dicing saws and die bonders, flip chip assembly systems and factory automation
and integration systems. We offer a range of packaging materials to
semiconductor device assemblers which we sell under the brand names "American
Fine Wire," "Micro-Swiss," "Semitec" and "Advanced Polymer Solutions." We
continuously evaluate investments in advanced packaging technologies. We entered
into a joint venture with Delco Electronics Corporation to license flip chip
technology and to provide wafer bumping services on a contract basis through
Flip Chip Technologies, LLC. We acquired the X-LAM technology of MicroModule
Systems(TM), a Cupertino, California company, to enable production of high
performance ball grid alloy substrates, daughter cards and multilayer boards.
Kulicke and Soffa Industries, Inc. was incorporated in Pennsylvania in
1956. Our principal offices are located at 2101 Blair Mill Road, Willow Grove,
Pennsylvania 19090, our telephone number is (215) 784-6000 and our website can
be accessed at www.kns.com. Information contained on our website does not
constitute part of this prospectus. Unless the context otherwise indicates, as
used in this prospectus, the term "Kulicke & Soffa" means Kulicke and Soffa
Industries, Inc. and its consolidated and unconsolidated subsidiaries.
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THE OFFERING
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Securities Offered............................ $175,000,000 principal amount of 4 3/4%
Convertible Subordinated Notes due 2006.
Interest...................................... 4 3/4% per year. We will pay interest on June
15 and December 15 of each year, beginning
June 15, 2000.
Conversion.................................... You may convert each note into common stock at
any time on or before December 15, 2006 at a
conversion price of $45.7993 per share,
subject to adjustment if certain events
affecting our common stock occur.
Subordination................................. The notes are subordinated to all of our
existing and future senior indebtedness and to
all or our subsidiaries' debt and other
liabilities. As of December 31, 1999, we had
senior indebtedness outstanding in the amount
of approximately $2.0 million, and our
subsidiaries had approximately $36.8 million
of debt and other liabilities outstanding.
Neither we nor our subsidiaries are limited
from incurring additional debt, including
senior indebtedness, under the indenture.
Optional Redemption........................... On or after December 19, 2002, we may redeem
the notes at the redemption prices listed in
this prospectus, together with accrued and
unpaid interest.
Fundamental Change............................ You have the right, at your option, in the
event of a fundamental change, to require us
to redeem your notes at 100% of the principal
amount of the notes to be redeemed plus
accrued interest.
Use Of Proceeds............................... We will not receive any of the proceeds from
the sale by any selling securityholder of the
notes or the underlying common stock.
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RISK FACTORS
You should carefully consider and evaluate all of the information in this
prospectus, including the risk factors listed below. Any of these risks could
materially and adversely affect our business, financial condition and operating
results. This, in turn, could materially and adversely affect the price of the
notes and the common stock and impair our ability to pay interest on the notes
and repay the principal amount of the notes.
It is particularly important for you to consider the risk factors set forth
below and in the documents incorporated herein by reference when you are reading
"forward-looking" statements included in this prospectus and the documents
incorporated herein by reference. Forward-looking statements relate to our
expectations for future events and time periods. Generally, the words
"anticipate," "expect," "intend," "believe," "may," and similar expressions
identify forward-looking statements. Forward-looking statements are based on
current expectations and involve risks and uncertainties, and future events and
circumstances could differ significantly from those anticipated by the forward-
looking statments.
RISKS RELATED TO OUR BUSINESS
OUR QUARTERLY OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND MAY CONTINUE TO
DO SO IN THE FUTURE
In the past, our quarterly operating results have fluctuated significantly.
Although these fluctuations are partly due to the volatile nature of the
semiconductor industry, they also reflect the impact of other factors, some of
which are outside of our control.
Some of the factors that could cause our revenues and/or operating margins
to fluctuate significantly from period to period are:
. the mix of products that we sell because, for example:
- packaging materials generally have lower margins than assembly
equipment,
- some lines of equipment are more profitable than others, and
- some sales arrangements have higher margins than others.
. the volume and timing of orders for our products and any order
postponements and cancellations by our customers;
. adverse changes in our pricing, or that of our competitors;
. higher than anticipated costs of development or production of new
equipment models;
. the availability and cost of key components for our products;
. market acceptance of our new products and upgraded versions of our
products;
. our announcement of, or perception by others that we will introduce, new
or upgraded products, which could delay customers from purchasing our
products;
. the timing of acquisitions; and
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. our competitors' introduction of new products.
Many of our expenses, such as research and development and selling, general
and administrative expenses, do not vary directly with our net sales. As a
result, a decline in our net sales would adversely affect our operating results.
In addition, if we were to incur additional expenses in a quarter in which we
did not experience comparable increased net sales, our operating results would
decline. Factors that could cause our expenses to fluctuate from period to
period include:
. the timing and extent of our research and development efforts;
. severance and other costs of relocating facilities or resizings in market
downturns; and
. inventory writeoffs due to obsolescence.
Because our revenues and operating results are volatile and difficult to
predict, we believe that period-to-period comparisons of our operating results
are not a good indication of our future performance.
THE SEMICONDUCTOR INDUSTRY AS A WHOLE IS VOLATILE, AS ARE OUR FINANCIAL
RESULTS
Our operating results are significantly affected by the capital
expenditures of semiconductor manufacturers and assemblers worldwide.
Expenditures by semiconductor manufacturers and assemblers depend on the current
and anticipated market demand for semiconductors and products that use
semiconductors, such as personal computers, telecommunications, consumer
electronics and automotive goods. Any significant downturn in the market for
semiconductor devices or in general economic conditions would likely reduce
demand for our products and adversely affect our business, financial condition
and operating results.
Historically, the semiconductor industry has been volatile with sharp
periodic downturns and slowdowns. These downturns have been characterized by,
among other things, diminished product demand, excess production capacity and
accelerated erosion of selling prices. This has severely and negatively
affected the industry's demand for capital equipment, including the assembly
equipment that we manufacture and market and, to a lesser extent, the packaging
materials that we sell. These downturns and slowdowns have adversely affected
our operating results. In the 1998 downturn, for example, our net sales
declined from approximately $501.9 million in fiscal 1997 to $411.0 million in
fiscal 1998 and continued to decline in the first half of fiscal 1999.
Downturns in the future could similarly adversely affect our business, financial
condition and operating results.
THE TRANSFER OF OUR AUTOMATIC BALL BONDER MANUFACTURING TO SINGAPORE COULD
DISRUPT OUR ABILITY TO SUPPLY OUR CUSTOMERS AND MAY NOT RESULT IN THE COST
SAVINGS WE ANTICIPATE
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The transfer of our automatic ball bonder manufacturing to Singapore has
required and will continue to require us to relocate equipment, hire and train
production, engineering and management personnel, qualify suppliers and develop
a purchasing and delivery infrastructure. In addition, we expect to experience
increased selling, general and administrative expenses in fiscal 2000 in
connection with start up costs. We plan to source a significantly higher
percentage of materials from suppliers in Singapore. To the extent we
experience availability, reliability or quality problems as a result of this
shift in supply source, our business would be adversely affected. In addition,
we do not intend to move our research and development function from Willow
Grove, Pennsylvania to the Singapore facility. If we are unable to accomplish
the move efficiently and commence full production as scheduled, our ability to
fill orders could be hurt, which could damage our relationships with customers.
In addition, our ability to meet production requirements may be adversely
affected by any problems associated with the start up of this facility. We also
anticipate cost savings from the transfer of our automatic ball bonder
manufacturing as a result of reduced costs of labor, shipping and materials.
However, we cannot assure you that we will realize these savings.
OUR BUSINESS DEPENDS ON ATTRACTING AND RETAINING MANAGEMENT, MARKETING AND
TECHNICAL EMPLOYEES WHO ARE IN GREAT DEMAND
As is the case with all technology companies, our future success depends on
our ability to hire and retain qualified management, marketing and technical
employees. Competition is intense in personnel recruiting in the semiconductor
and semiconductor equipment industries, particularly with respect to some
engineering disciplines. In particular, we have experienced periodic shortages
of software engineers. If we are unable to continue to attract and retain the
technical and managerial personnel we require, our business, financial condition
and operating results could be adversely affected.
WE MAY NOT BE ABLE TO RAPIDLY DEVELOP AND MANUFACTURE NEW AND ENHANCED
PRODUCTS REQUIRED TO MAINTAIN OR EXPAND OUR BUSINESS
We believe that our continued success will depend on our ability to
continuously develop and manufacture or acquire new products and product
enhancements on a timely and cost-effective basis. We also must introduce these
products and product enhancements into the market in response to customers'
demands for higher performance assembly equipment. Our competitors may develop
enhancements to or future generations of competitive products that will offer
superior performance, features and lower prices that may render our products
noncompetitive. We may not be able to develop and introduce products
incorporating new technologies in a timely manner or at a price that will
satisfy future customers' needs or achieve market acceptance. For example, our
introduction of the Model 8020 wire bonder in 1998 was less successful than we
had hoped because of higher than anticipated design and production costs and
lower than anticipated sales prices.
WE MAY NOT BE ABLE TO ACCURATELY FORECAST DEMAND FOR OUR PRODUCT LINES
We typically operate our business with a relatively short backlog and order
supplies and otherwise plan production based on internal forecasts of demand.
Due to these factors, we have
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in the past, and may again in the future, fail to accurately forecast demand, in
terms of both volume and configuration for either our current or next-generation
wire bonders. This has led to and may in the future lead to delays in product
shipments or, alternatively, an increased risk of inventory obsolescence. For
example, we inaccurately forecasted demand for the Model 8020 wire bonder in
1998 and consequently recorded writeoffs for excess inventory. Also, we
underestimated the magnitude of the improvement in the semiconductor industry at
the end of fiscal 1999 and the demand for the new Model 8028 ball bonder; as a
result some customer shipments may be delayed in fiscal 2000.
If we fail to accurately forecast demand for our products, our business,
financial condition and operating results could be materially and adversely
affected.
ADVANCED PACKAGING TECHNOLOGIES OTHER THAN WIRE BONDING MAY RENDER SOME OF
OUR PRODUCTS OBSOLETE AND OUR STRATEGY FOR PURSUING THESE OTHER TECHNOLOGIES MAY
BE COSTLY AND INEFFECTIVE
Advanced packaging technologies have emerged that may improve device
performance or reduce the size of an integrated circuit or IC package, as
compared to traditional die and wire bonding. These technologies include flip
chip, chip scale packaging and tape automated bonding. In general, these
advanced technologies eliminate the need for wires to establish the electrical
connection between a die and its package. For some assemblies, these advanced
technologies have largely replaced wire bonding. However, today most ICs still
employ die and wire bonding technology, and the possible extent, rate and timing
of change is difficult, if not impossible, to predict. In fact, wire bonding
has proved more durable than we originally anticipated, largely because of its
reliability and cost. However, we cannot assure you that the semiconductor
industry will not, in the future, shift a significant part of its volume into
advanced packaging technologies, such as those discussed above. Presently,
Intel, Motorola, IBM and Advanced Micro Devices, for example, have developed
flip chip technologies for internal use, and a number of other companies are
also increasing their investments in advanced packaging technologies. If a
significant shift to advanced technologies were to occur, demand for our wire
bonders and related packaging materials would diminish.
One component of our strategy is to develop the capacity to use advanced
technologies to allow us to compete in those portions of the market that
currently use these advanced technologies and to prepare for any eventual
decline in the use of wire bonding technology. There are a number of risks
associated with our strategy to diversify into new technologies:
. The technologies that we have invested in represent only some of the
advanced technologies that may one day supercede wire bonding;
. Other companies are developing similar or alternative advanced
technologies;
. Wire bonding may continue as the dominant technology for longer than we
anticipate;
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. The cost of developing advanced technologies may be significantly greater
than we expect; and
. We may not be able to develop the necessary technical, research,
managerial and other related skills to develop, produce, market and
support these advanced technologies.
As a result of these risks, we cannot assure you that any of our attempts
to develop alternative technologies will be profitable or that we will be able
to realize the benefits that we anticipate from them.
BECAUSE WE HAVE A SMALL NUMBER OF PRODUCTS, A DECLINE IN DEMAND FOR, OR THE
PRICE OF, ANY OF OUR PRODUCTS COULD CAUSE OUR REVENUES TO DECLINE SIGNIFICANTLY
Historically, our wire bonders have comprised at least 55% of our net
sales. If demand for, or pricing of, our wire bonders declines because our
competitors introduce superior or lower cost systems, the semiconductor industry
changes or because of other occurrences beyond our control, our business,
financial condition and operating results would be materially and adversely
affected.
BECAUSE A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR NEARLY ALL OUR SALES, OUR
REVENUES COULD DECLINE IF WE LOSE ANY SIGNIFICANT CUSTOMER
The semiconductor manufacturing industry is highly concentrated, with a
relatively small number of large semiconductor manufacturers and subcontract
assemblers purchasing a substantial portion of semiconductor assembly equipment
and packaging materials. Sales to our five largest customers accounted for
approximately 45.2% of our fiscal 1997 net sales, 41.4% of our fiscal 1998 net
sales and 31.7% of our fiscal 1999 net sales. In fiscal 1997, our sales to Anam
accounted for 12.5% of our net sales, and sales to Intel accounted for 10.2% of
our net sales. In fiscal 1998, sales to Intel accounted for 17.6% of our net
sales. During fiscal 1999, no customer accounted for more than 10% of our net
sales.
We expect that sales of our products to a limited number of customers will
continue to account for a high percentage of our net sales for the foreseeable
future. If we lose orders from a significant customer, or if a significant
customer reduces its orders substantially, these losses or reductions will
adversely affect our business, financial condition and operating results.
WE DEPEND ON A SMALL NUMBER OF SUPPLIERS FOR MATERIALS AND, IF OUR
SUPPLIERS DO NOT DELIVER THEIR PRODUCTS TO US, WE MAY BE UNABLE TO DELIVER OUR
PRODUCTS TO OUR CUSTOMERS
Our products are complex and require materials, components and
subassemblies of an exceptionally high degree of reliability, accuracy and
performance. We rely on subcontractors to manufacture many of the components
and subassemblies for our products and we rely on sole source suppliers for some
material components. Our reliance involves a number of significant risks,
including:
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. loss of control over the manufacturing process;
. changes in our manufacturing processes, dictated by changes in the
market, that have delayed our shipments;
. our inadvertent use of defective or contaminated materials;
. the relatively small operations and limited manufacturing resources of
some of our contractors and suppliers, which may limit their ability to
manufacture and sell subassemblies, components or parts in the volumes we
require and at quality levels and prices we can accept;
. reliability and quality problems we experience with certain key
subassemblies provided by single source suppliers; and
. delays in the delivery of subassemblies, which, in turn, have caused
delays in some of our shipments.
If we are unable to deliver products to our customers on time for these or
any other reasons, or if we do not maintain acceptable product quality or
reliability in the future, our business, financial condition and operating
results would be materially and adversely affected.
WE ARE EXPANDING AND DIVERSIFYING OUR OPERATIONS, AND IF WE FAIL TO MANAGE
OUR EXPANDING AND MORE DIVERSE OPERATIONS SUCCESSFULLY, OUR BUSINESS AND
FINANCIAL RESULTS MAY BE MATERIALLY AND ADVERSELY AFFECTED
In recent years, we have broadened our product offerings to include
significantly more packaging materials. Although our strategy is to diversify
our products and services, we may not be able to develop, acquire, introduce or
market new products in a timely or cost-effective manner and the market may not
accept any new or improved products we develop, acquire, introduce or market.
Our diversification into new lines of business and our expansion through
acquisitions and alliances has increased, and is expected to continue to
increase, demand on our management, financial resources and information and
internal control systems. Our success depends in significant part on our
ability to manage and integrate acquisitions, joint ventures and other alliances
and to continue to implement, improve and expand our systems, procedures and
controls. If we fail to do this at a pace consistent with the development of
our business, our business, financial condition and operating results would be
materially and adversely affected.
As we seek to expand our operations, we expect to encounter a number of
risks, which will include:
. risks associated with hiring additional management and other critical
personnel;
. risks associated with adding equipment and capacity; and
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. risks associated with increasing the scope, geographic diversity and
complexity of our operations.
In addition, sales and servicing of packaging materials and advanced
technologies require different organizational and managerial skills than sales
of traditional wire bonding technology. We cannot assure you that we will be
able to develop the necessary skills to successfully produce and market these
different products.
WE MAY BE UNABLE TO CONTINUE TO COMPETE SUCCESSFULLY IN THE HIGHLY
COMPETITIVE SEMICONDUCTOR EQUIPMENT AND PACKAGING MATERIALS INDUSTRIES
The semiconductor equipment and packaging materials industries are
intensely competitive. Significant competitive factors in the semiconductor
equipment market include performance quality, customer support and price. Our
major equipment competitors include:
. ASM Pacific Technology, Shinkawa, Kaijo and ESEC in wire bonders;
. ESEC, Nichiden, ASM Pacific Technology and Alphasem in die bonders; and
. Disco Corporation in dicing saws.
Competitive factors in the semiconductor packaging materials industry
include price, delivery and quality. Our significant packaging materials
competitors with respect to expendable tools and blades include:
. Gaiser Tool Co. and Small Precision Tools, Inc. in expendable tools; and
. Disco Corporation in blades;
and in the bonding wire market:
. Tanaka Electronic Industries and Sumitomo Metal Mining.
In each of the markets we serve, we face competition and the threat of
competition from established competitors and potential new entrants, some of
which may have greater financial, engineering, manufacturing and marketing
resources than we have. Some of these competitors are Japanese or Korean
companies that have had and may continue to have an advantage over us in
supplying products to local customers because many of these customers appear to
prefer to purchase from local suppliers, without regard to other considerations.
We expect our competitors to improve their current products' performance,
and to introduce new products with improved price and performance
characteristics. New product introductions by our competitors or by new market
entrants could hurt our sales. If a particular semiconductor manufacturer or
subcontract assembler selects a competitor's product for a particular assembly
operation, we may not be able to sell a product to that manufacturer or
assembler for a significant period of time because manufacturers and assemblers
sometimes
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develop lasting relations with suppliers, and products in our industry often go
years without requiring replacement. In addition, we may have to lower our
prices in response to price-cuts by our competitors, which could materially and
adversely affect our business, financial condition and operating results. We
cannot assure you that we will be able to continue to compete in these or other
areas in the future.
WE SELL MOST OF OUR PRODUCTS TO CUSTOMERS LOCATED OUTSIDE OF THE U.S. AND
WE HAVE SUBSTANTIAL MANUFACTURING OPERATIONS LOCATED OUTSIDE OF THE U.S., BOTH
OF WHICH SUBJECT US TO RISKS FROM CHANGES IN TRADE REGULATIONS, CURRENCY
FLUCTUATIONS, POLITICAL INSTABILITY AND WAR
Approximately 85% of our net sales for fiscal 1997, 80% of our net sales
for fiscal 1998 and 83% of our net sales for fiscal 1999 were attributable to
sales to customers for delivery outside of the United States. We expect our
sales outside of the United States to continue to represent a substantial
portion of our future revenues. Our future performance will depend, in
significant part, on our ability to continue to compete in foreign markets,
particularly in Asia. Asian economies have been highly volatile, resulting in
significant fluctuation in local currencies, and political and economic
instability. These conditions may continue or worsen, which could materially
and adversely affect our business, financial condition and operating results.
In addition, we rely on non-U.S. suppliers for materials and components used in
the equipment that we sell. We also maintain substantial manufacturing
operations in countries other than the United States, including operations in
Israel and Singapore. As a result, a major portion of our business is subject
to the risks associated with international commerce such as, risks of war and
civil disturbances or other events that may limit or disrupt markets;
expropriation of our foreign assets; longer payment cycles in foreign markets;
international exchange restrictions; the difficulties of staffing and managing
dispersed international operations; tariff and currency fluctuations; changing
political conditions; foreign governments' monetary policies; and less
protective foreign intellectual property laws.
Because most of our foreign sales are denominated in United States dollars,
an increase in value of the United States dollar against foreign currencies,
particularly the Japanese yen, will make our products more expensive than those
offered by some of our foreign competitors. Our ability to compete overseas in
the future could be materially and adversely affected by a strengthening of the
United States dollar against foreign currencies.
The ability of our international operations to prosper also will depend, in
part, on a continuation of current trade relations between the United States and
foreign countries in which our customers operate and in which our subcontractors
have assembly operations. A change toward more protectionist trade legislation
in either the United States or foreign countries in which we do business, such
as a change in the current tariff structures, export compliance or other trade
policies, could adversely affect our ability to sell our products in foreign
markets.
OUR SUCCESS DEPENDS IN PART ON OUR INTELLECTUAL PROPERTY, WHICH WE MAY BE
UNABLE TO PROTECT
Our success depends in part on our proprietary technology. To protect this
technology, we rely principally on contractual restrictions, such as
nondisclosure and confidentiality
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agreements, in our agreements with employees, vendors, consultants and customers
and on the common law of trade secrets and proprietary "know-how." We
secondarily rely, in some cases, on patent and copyright protection, which may
become more important to us as we expand our investment in advanced packaging
technologies. We may not be successful in protecting our technology for a number
of reasons, including:
. Our competitors may independently develop technology that is similar to
or better than ours;
. Employees, vendors, consultants and customers may not abide by their
contractual agreements, and the cost of enforcing those agreements may be
prohibitive, or those agreements may prove to be unenforceable or more
limited than we anticipate;
. Foreign intellectual property laws may not adequately protect our
intellectual property rights; and
. Our patent and copyright claims may not be sufficiently broad to
effectively protect our technology; patents or copyrights may be
challenged, invalidated or circumvented; and we may otherwise be unable
to obtain adequate protection for our technology.
In addition, our partners in joint ventures and alliances may also have
rights to technology we develop through those joint ventures and alliances. If
we are unable to protect our technology, we could weaken our competitive
position or face significant expense to protect or enforce our intellectual
property rights.
THIRD PARTIES MAY CLAIM WE ARE INFRINGING ON THEIR INTELLECTUAL PROPERTY,
WHICH COULD CAUSE US TO INCUR SIGNIFICANT LITIGATION COSTS OR OTHER EXPENSES, OR
PREVENT US FROM SELLING SOME OF OUR PRODUCTS
The semiconductor industry is characterized by rapid technological change,
with frequent introductions of new products and technologies. As a result,
industry participants often develop products and features similar to those
introduced by others, increasing the risk that their products and processes may
give rise to claims that they infringe on the intellectual property of others.
We may unknowingly infringe on the intellectual property rights of others and
incur significant liability for that infringement. If we are found to infringe
on the intellectual property rights of others, we could be enjoined from
continuing to manufacture, market or use the affected product, or be required to
obtain a license to continue manufacturing or using the affected product. A
license could be very expensive to obtain or may not be available at all.
Similarly, changing our products or processes to avoid infringing the rights of
others may be costly or impractical.
Occasionally, third parties assert that we are, or may be, infringing on or
misappropriating their intellectual property rights. In these cases, we will
defend against claims or negotiate licenses where we consider these actions
appropriate. Intellectual property cases are uncertain and involve complex
legal and factual questions. If we become involved in this
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<PAGE>
type of litigation, it could consume significant resources and divert our
attention from our business.
Some of our customers have received notices of infringement from the
Lemelson Medical, Education and Research Foundation Limited Partnership (the
"Lemelson Foundation"), alleging that equipment we have supplied to our
customers, and processes this equipment performs, infringes on patents held by
the Lemelson Foundation. These notices increased substantially in 1998, the
year in which the Lemelson Foundation settled its suit against the Ford Motor
Company, and entered into license agreements with Ford, GM and Chrysler. Since
the settlement, a number of our customers, including Intel, have been sued by
the Lemelson Foundation.
Some of our customers have requested that we defend and indemnify them
against the Lemelson Foundation's claims or contribute to any settlement the
customer reaches with the Lemelson Foundation. We have received opinions from
our outside patent counsel with respect to various Lemelson Foundation patents.
We are not aware that any equipment we market or that any process performed by
our equipment infringes on the Lemelson Foundation patents and we do not believe
that the Lemelson Foundation matter or any other pending intellectual property
claim against us will materially and adversely affect our business, financial
condition or operating results. The ultimate outcome of any infringement or
misappropriation claim affecting us is uncertain, however, and we cannot assure
you that our resolution of this litigation will not materially and adversely
affect our business, financial condition and operating results.
OTHER RISKS
YEAR 2000
If our products or our internal data management, accounting, manufacturing
or operating software and systems do not adequately or accurately process or
manage day or date information beyond the year 1999, our operations could be
affected adversely. To address the issue, we created an internal task force to
assess our state of readiness for possible "Year 2000" issues and to take the
necessary actions to ensure our Year 2000 compliance. The taskforce evaluated:
. our products and our internal business systems and software; and
. our vulnerability to possible Year 2000 exposure due to suppliers' and
other third parties' lack of preparedness for the year 2000.
To evaluate equipment that we sell and equipment, tools or software that we
use, we employed Year 2000 Readiness Test scenarios established by SEMATECH, an
industry group comprised of U.S. semiconductor manufacturers. Based on this
assessment, we do not believe the operation of the equipment that we sell or the
equipment, tools and software that we use will be affected by the transition to
the year 2000. We completed our review, material corrective measures and
contingency planning in September 1999.
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<PAGE>
In connection with our review and corrective measures, we replaced the
business and accounting systems of our U.S. and Israeli equipment manufacturing
sites with a new Enterprise Resource Planning System that was represented to us
to be Year 2000 compliant. We spent approximately $9.8 million on hardware,
software, consulting costs and internal expenses to implement this new system.
In addition, we have been in contact with our suppliers and other third
parties to determine the extent to which they may be vulnerable to Year 2000
issues. We have received representations as to the Year 2000 compliance of our
major suppliers.
We believe that the reasonably anticipated worst case scenario for our
business resulting from Year 2000 problems would be unexpected delays of
supplier deliveries and customer shipments. If these delays are significant,
customers may cancel orders and long-term customer relationships could be
damaged.
To date we have experienced no material Year 2000 issues, and we expect
minimal future Year 2000 issues based on the performance to date of internal
systems that we use and the products we supply to our customers.
ANTI-TAKEOVER PROVISIONS IN OUR ARTICLES OF INCORPORATION AND BYLAWS AND
PENNSYLVANIA LAW MAY DISCOURAGE OTHER COMPANIES FROM ATTEMPTING TO ACQUIRE US
Some provisions of our articles of incorporation and bylaws and of
Pennsylvania law may discourage some transactions where we would otherwise
experience a change in control. For example, our articles of incorporation and
bylaws contain provisions that:
. classify our Board of Directors into four classes, with one class being
elected each year;
. permit our Board to issue "blank check" preferred stock without
shareholder approval; and
. prohibit us from engaging in some types of business combinations with a
holder of 20% or more of our voting securities without super-majority
board or shareholder approval.
Further, under the Pennsylvania Business Corporation Law, because our
bylaws provide for a classified Board of Directors, shareholders may only remove
directors for cause. These provisions and some provisions of the Pennsylvania
Business Corporation Law could delay, defer or prevent us from experiencing a
change in control and may adversely affect our common stockholders' voting and
other rights.
RISKS OF INVESTING IN THESE NOTES
THE NOTES ARE SUBORDINATED IN RIGHT OF PAYMENT TO OTHER INDEBTEDNESS
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<PAGE>
The notes are unsecured obligations subordinated in right of payment to all
of our existing and future senior indebtedness. As a result, our assets will be
available to pay obligations on the notes only after all senior indebtedness has
been paid in full, and we may not have sufficient assets remaining to repay in
full all of the notes then outstanding, if any of the following occur:
. we become insolvent or are forced to liquidate our assets;
. we default on our senior indebtedness payments; or
. the notes are accelerated due to any other event of default.
The notes are also effectively subordinated in right of payment to all of
our subsidiaries' indebtedness and other liabilities, including trade payables.
The incurrence of additional indebtedness and other liabilities could materially
and adversely affect our ability to pay our obligations on the notes. The
indenture under which the notes are issued does not limit our ability to incur
senior indebtedness, and does not limit our ability or the ability of our
subsidiaries to incur other indebtedness or other liabilities. As of December
31, 1999, we had senior indebtedness outstanding in the amount of approximately
$2.0 million and our subsidiaries had approximately $36.8 million of outstanding
debt and other liabilities excluding inter-company liabilities. See
"Description of Notes--Subordination of the Notes."
WE MAY BE UNABLE TO REDEEM THE NOTES IF WE EXPERIENCE A FUNDAMENTAL CHANGE
If we experience a fundamental change, you are entitled to redeem all or a
portion of your notes, but we may not have enough funds to pay the redemption
price for all tendered notes. In addition, some fundamental changes would
result in events of default under our existing credit facility. Any future
credit agreements or other agreements relating to our indebtedness may:
. contain similar provisions; or
. expressly prohibit our repurchase of the notes after a fundamental
change.
If we experience a fundamental change at a time when we are prohibited from
purchasing or redeeming notes, we could seek the consent of our lenders to
redeem the notes or could attempt to refinance the debt. If we should fail to
obtain our lenders' consent or refinance the debt, we could not purchase or
redeem the notes. Our failure to redeem tendered notes would constitute an
event of default under the indenture, which, in turn, might constitute a default
under the terms of our other indebtedness. If this were to occur, or if a
fundamental change were to cause us to default under our senior indebtedness,
the indenture's subordination provisions would restrict us from paying you.
The term "fundamental change" is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. If we were to experience a
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<PAGE>
fundamental change, our obligation to offer to redeem the notes would not
necessarily afford you protection. See "Description of Notes--Redemption at
Option of the Holder."
WE MAY INCUR ADDITIONAL INDEBTEDNESS IN THE FUTURE, WHICH COULD INCREASE
THE RISKS DESCRIBED ABOVE
On December 31, 1999 we had total indebtedness of approximately $176.2
million (excluding letters of credit and foreign exchange contract obligations)
and a debt to equity ratio of approximately 0.61 to 1. The indebtedness
represented by the notes could increase our vulnerability to adverse economic
and industry conditions, limit our flexibility in planning for, or reacting to,
changes in our business and the semiconductor industry or place us at a
competitive disadvantage compared to our competitors with less debt or debt that
has more favorable terms.
More importantly, the terms of the notes do not prohibit us from incurring
substantial additional indebtedness in the future, and we may do so. If we add
new debt to our current debt levels, the risks described above could increase.
At December 31, 1999, our credit facilities would permit us to borrow up to $60
million, and all of those borrowings would be senior to the notes.
WE MAY BE UNABLE TO GENERATE ENOUGH CASH TO SERVICE OUR DEBT
Our ability to make payments on our indebtedness, including the notes, and
to fund planned capital expenditures and other activities will depend on our
ability to generate cash in the future. This, to some extent, is subject to the
volatile nature of our business, and general economic, competitive and other
factors that are beyond our control. Accordingly, we cannot assure you that our
business will generate sufficient cash flow to service our debt.
Based on our current level of operations, we believe our cash flow from
operations, proceeds from our December 1999 offering of the notes, available
cash and available borrowings under our credit facilities will be adequate to
meet our future liquidity needs for at least the next twelve months.
We may need to refinance all or a portion of our indebtedness on or before
maturity. We cannot assure you that we will be able to refinance any of our
indebtedness on commercially reasonable terms, if at all.
A PUBLIC MARKET MAY NOT DEVELOP FOR THE NOTES
The initial purchasers in the initial private placement have advised us
that they intend to make a market in the notes. However, the initial purchasers
are not obligated to make a market in the notes and may discontinue this market
making activity at any time without notice. In addition, market making activity
by the initial purchasers will be subject to the limits imposed by the
Securities Act and the Exchange Act. As a result, we cannot assure you that any
market for the notes will develop or, if one does develop, that it will be
maintained. If an active market for the notes fails to develop or be sustained,
the trading price of the notes could be materially adversely affected.
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<PAGE>
OUR STOCK PRICE MAY CONTINUE TO EXPERIENCE LARGE SHORT-TERM FLUCTUATIONS
THAT MAY SIGNIFICANTLY AFFECT THE TRADING PRICE OF THESE NOTES
In recent years, the price of our common stock has fluctuated greatly.
Fluctuations in the trading price of our common stock will affect the trading
price of the notes. Past price fluctuations have been rapid and severe and have
left investors little time to react. The price of our common stock may continue
to fluctuate greatly in the future due to a variety of company and industry
specific factors, including:
. quarter to quarter variations in our operating results;
. shortfalls in our revenue or earnings from levels expected by securities
analysts;
. announcements of technological innovations or new products by us or other
companies; and
. a slowdown or downturn in the semiconductor industry.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the notes or the underlying common stock.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
---------------------------------- Three months ended December
1995 1996 1997 1998 1999 31, 1999
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 26X 5X 18X 2X -- 19X
</TABLE>
These computations include us and our consolidated subsidiaries. These
ratios are computed by dividing (a) income (loss) before taxes plus fixed
charges and equity in loss of joint ventures by (b) fixed charges, which
includes interest expense plus the portion of rent expense under operating
leases we deem to be representative of the interest factor and amortization of
debt issue costs.
We would have had to generate additional earnings of $16.2 million in
fiscal 1999 to achieve a ratio of 1:1.
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<PAGE>
DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of December 13, 1999,
between Kulicke & Soffa and Chase Manhattan Trust Company, National Association,
as trustee. You may request a copy of the indenture from the trustee. A copy
of the indenture has been included as an exhibit to this registration statement.
The following description is a summary of the material provisions of the notes
and the indenture. It does not purport to be complete. This summary is subject
to and is qualified by reference to all the provisions of the indenture,
including the definitions of certain terms used in the indenture. Wherever
particular provisions or defined terms of the indenture or form of note are
referred to, these provisions or defined terms are incorporated in this
prospectus by reference.
As used in this "Description of Notes" section, references to "we," "our" or
"us" refer solely to Kulicke & Soffa Industries, Inc., and not its subsidiaries.
GENERAL
We issued $175,000,000 of notes in a private placement in December 1999. The
notes are general unsecured obligations. Our payment obligations under the
notes will be subordinated to our senior indebtedness as described under "--
Subordination of the Notes." The notes are convertible into common stock as
described under "--Conversion of the Notes." The notes were issued only in
denominations of $1,000 and multiples of $1,000. The notes will mature on
December 15, 2006, unless earlier converted, redeemed at our option or redeemed
at your option upon a fundamental change.
We are not subject to any financial covenants under the indenture. In
addition, we are not restricted under the indenture from paying dividends,
incurring debt, including senior indebtedness, or issuing or repurchasing our
securities.
You are not afforded protection in the event of a highly leveraged transaction
or a change in control of Kulicke & Soffa under the indenture except to the
extent described below under "--Redemption at Option of the Holder."
The interest rate on the notes is 4 3/4% per year. We will pay interest on
June 15 and December 15 of each year, beginning June 15, 2000, to record holders
at the close of business on the preceding June 1 and December 1, as the case may
be, except:
. interest payable upon redemption will be paid to the person to whom
principal is payable, unless the redemption date is an interest payment
date; and
. as set forth in the next sentence.
In case you convert your note into common stock during the period after any
record date but prior to the next interest payment date, either:
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<PAGE>
. we will not be required to pay interest on the interest payment date if the
note has been called for redemption on a redemption date that occurs during
this period;
. we will not be required to pay interest on the interest payment date if the
note is to be redeemed in connection with a fundamental change on a
repurchase date that occurs during this period; or
. if otherwise, any note not called for redemption that is submitted for
conversion during this period must also be accompanied by an amount equal
to the interest due on the interest payment date on the converted principal
amount, unless at the time of conversion there is a default in the payment
of interest on the notes. See "--Conversion of the Notes."
We will maintain an office in the Borough of Manhattan, the City of New York
for the payment of interest, which shall initially be an office or agency of the
trustee.
We may pay interest either:
. by check mailed to your address as it appears in the note register,
provided that if you are a holder with an aggregate principal amount in
excess of $2.0 million, you shall be paid, at your written election, by
wire transfer in immediately available funds; or
. by transfer to an account maintained by you in the United States.
However, payments to The Depository Trust Company, New York, New York, which
we refer to as DTC, will be made by wire transfer of immediately available funds
to the account of DTC or its nominee. Interest will be computed on the basis of
a 360-day year composed of twelve 30-day months.
CONVERSION OF THE NOTES
You may convert your notes, in whole or in part, into common stock through the
final maturity date of the notes, subject to prior redemption of the notes. If
we call the notes for redemption, you may convert your notes only until the
close of business on the business day prior to the redemption date unless we
fail to pay the redemption price. If you have submitted your notes for
redemption upon a fundamental change, you may convert your notes only if you
withdraw your redemption election. You may convert your notes in part so long
as this part is $1,000 principal amount or an integral multiple of $1,000. If
any notes not called or submitted for redemption are converted after a record
date for any interest payment date and prior to the next interest payment date,
the notes must be accompanied by an amount equal to the interest payable on the
interest payment date on the converted principal amount, unless at the time of
conversion there is a default in the payment of interest on the notes.
The initial conversion price for the notes is $45.7993 per share of common
stock, subject to adjustment as described below. We will not issue fractional
shares of common stock upon
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<PAGE>
conversion of the notes. Instead, we will pay cash equal to the market price of
the common stock on the business day prior to the conversion date. Except as
described below, you will not receive any accrued interest or dividends upon
conversion.
To convert your note into common stock you must:
. complete and manually sign the conversion notice on the back of the note or
facsimile of the conversion notice and deliver this notice to the
conversion agent;
. surrender the note to the conversion agent;
. if required, furnish appropriate endorsements and transfer documents;
. if required, pay all transfer or similar taxes; and
. if required, pay funds equal to interest payable on the next interest
payment date.
The date on which you comply with these requirements is the conversion date
under the indenture.
We will adjust the conversion price if the following events occur:
(1) we issue common stock as a dividend or distribution on our common stock;
(2) we issue to all holders of common stock certain rights or warrants to
purchase our common stock;
(3) we subdivide or combine our common stock;
(4) we distribute to all common stock holders capital stock, evidences of
indebtedness or assets, including securities but excluding:
. rights or warrants listed in (2) above;
. dividends or distributions listed in (1) above; and
. cash distributions listed in (5) below;
(5) we distribute cash, excluding any quarterly cash dividend on our common
stock to the extent that the aggregate cash dividend per share of common
stock in any quarter does not exceed the greater of:
. the amount per share of common stock of the next preceding quarterly
cash dividend on the common stock to the extent that the preceding
quarterly dividend did not require an adjustment of the conversion
price pursuant to this
20
<PAGE>
clause (5), as adjusted to reflect subdivisions or combinations of the
common stock; and
. 3.75% of the average of the last reported sale price of the common
stock during the ten trading days immediately prior to the declaration
date of the dividend;
and excluding any dividend or distribution in connection with our
liquidation, dissolution or winding up.
If an adjustment is required to be made under this clause (5) as a result
of a distribution that is a quarterly dividend, the adjustment would be
based upon the amount by which the distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant to this clause
(5). If an adjustment is required to be made under this clause (5) as a
result of a distribution that is not a quarterly dividend, the adjustment
would be based upon the full amount of the distribution;
(6) we (or one of our subsidiaries) make a payment in respect of a tender
offer or exchange offer for our common stock to the extent that the cash
and value of any other consideration included in the payment per share of
common stock exceeds the current market price per share of common stock
on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer; and
(7) someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the closing
date of the offer, our board of directors is not recommending rejection
of the offer. The adjustment referred to in this clause (7) will only be
made if:
. the tender offer or exchange offer is for an amount that increases the
offeror's ownership of common stock to more than 25% of the total
shares of common stock outstanding; and
. the cash and value of any other consideration included in the payment
per share of common stock exceeds the current market price per share
of common stock on the business day next succeeding the last date on
which tenders or exchanges may be made pursuant to the tender or
exchange offer.
However, the adjustment referred to in this clause (7) will generally not
be made if, as of the closing of the offer, the offering documents
disclose a plan or an intention to cause us to engage in a consolidation
or merger of Kulicke & Soffa or a sale of all or substantially all of our
assets.
In the event of:
. any reclassification of our common stock;
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<PAGE>
. a consolidation, merger or combination involving Kulicke & Soffa; or
. a sale or conveyance to another person of the property and assets of
Kulicke & Soffa as an entirety or substantially as an entirety,
in which holders of common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, holders of
the notes will generally be entitled thereafter to convert their notes into the
same type of consideration received by common stock holders immediately prior to
one of these types of events.
You may, in certain situations, be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of common stock or in certain other situations
requiring a conversion price adjustment. See "Certain Federal Income Tax
Considerations."
We may, from time to time, reduce the conversion price for a period of at
least 20 days if our board of directors has made a determination that this
reduction would be in our best interests. Any such determination by our board
will be conclusive. We would give holders at least 15 days' notice of any
reduction in the conversion price. In addition, we may reduce the conversion
price if our board of directors deems it advisable to avoid or diminish any
income tax to holders of common stock resulting from any stock distribution.
See "Certain Federal Income Tax Considerations."
We will not be required to make an adjustment in the conversion price unless
the adjustment would require a change of at least one percent in the conversion
price. However, we will carry forward any adjustments that are less than one
percent of the conversion price. Except as described above in this section, we
will not adjust the conversion price for any issuance of our common stock or
convertible or exchangeable securities or rights to purchase our common stock or
convertible or exchangeable securities.
OPTIONAL REDEMPTION BY KULICKE & SOFFA
The notes are not entitled to any sinking fund. At any time on or after
December 19, 2002, we may redeem the notes in whole or in part at the following
prices expressed as a percentage of the principal amount:
<TABLE>
<CAPTION>
Redemption
------------
PERIOD PRICE
- ---------------------------------------------------------------------- ------------
<S> <C>
Beginning on December 19, 2002 and ending on December 14, 2003 ..... 102.714%
Beginning on December 15, 2003 and ending on December 14, 2004 ..... 102.036%
Beginning on December 15, 2004 and ending on December 14, 2005 ..... 101.357%
Beginning on December 15, 2005 and ending on December 14, 2006 ..... 100.679%
</TABLE>
and 100% at December 15, 2006. In each case, we will pay interest to, but
excluding, the redemption date. If the redemption date is an interest payment
date, interest shall be paid to the
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<PAGE>
record holder on the relevant record date. We are required to give notice of
redemption by mail to holders not more than 60 but not less than 30 days prior
to the redemption date.
If less than all of the outstanding notes are to be redeemed, the trustee
shall select the notes to be redeemed in principal amounts of $1,000 or integral
multiples of $1,000 by lot, pro rata or by another method the trustee considers
fair and appropriate. If a portion of your notes is selected for partial
redemption and you convert a portion of your notes, the converted portion shall
be deemed to be of the portion selected for redemption.
We may not redeem the notes if we have failed to pay any interest or premium
on the notes and such failure to pay is continuing. We will issue a press
release if we redeem the notes.
REDEMPTION AT OPTION OF THE HOLDER
If a fundamental change occurs prior to December 15, 2006, you may require us
to redeem your notes, in whole or in part, on a repurchase date that is 30 days
after the date of our notice of the fundamental change. The notes will be
redeemable in multiples of $1,000 principal amount.
We shall redeem the notes at a price equal to 100% of the principal amount to
be redeemed, plus accrued interest to, but excluding, the repurchase date. If
the repurchase date is an interest payment date, we will pay interest to the
record holder on the relevant record date.
We will mail to all record holders a notice of the fundamental change within
10 days after the occurrence of the fundamental change. We are also required to
deliver to the trustee a copy of the fundamental change notice. If you elect to
redeem your notes, you must deliver to us or our designated agent, on or before
the 30th day after the date of our fundamental change notice, your redemption
notice and any notes to be redeemed, duly endorsed for transfer. We will
promptly pay the redemption price for notes surrendered for redemption following
the repurchase date.
A "fundamental change" is any transaction or event in connection with which
all or substantially all of our common stock shall be exchanged for, converted
into, acquired for or constitute solely the right to receive consideration,
whether by means of an exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or otherwise, which is
not all or substantially all common stock that is, or that will be immediately
after the transaction or event:
. listed on a United States national securities exchange; or
. approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities
prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
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These fundamental change redemption rights could discourage a potential
acquiror from acquiring us. However, this fundamental change redemption feature
is not the result of management's knowledge of any specific effort to obtain
control of us by means of a merger, tender offer or solicitation, or part of a
plan by management to adopt a series of anti-takeover provisions. The term
"fundamental change" is limited to certain specified transactions and may not
include other events that might adversely affect our financial condition. In
addition, our obligation to offer to redeem the notes upon a fundamental change
would not necessarily afford you protection.
We may be unable to redeem the notes in the event of a fundamental change. If
a fundamental change were to occur, we may not have enough funds to pay the
redemption price for all tendered notes. In addition, in certain situations, a
fundamental change would result in an event of default under our existing credit
facility. Any future credit agreements or other agreements relating to our
indebtedness may contain a provision which expressly prohibits the repurchase of
the notes upon a fundamental change or may provide that a fundamental change
constitutes an event of default under that agreement. If a fundamental change
occurs at a time when we are prohibited from purchasing or redeeming the notes,
we could seek the consent of our lenders to redeem the notes or could attempt to
refinance this debt. If we do not obtain a consent or refinance the debt, we
could not purchase or redeem the notes. Our failure to redeem tendered notes
would constitute an event of default under the indenture, which might constitute
a default under the terms of our other indebtedness. In such circumstances, or
if a fundamental change would constitute an event of default under our senior
indebtedness, the subordination provisions of the indenture would restrict
payments to the holders of notes.
SUBORDINATION OF THE NOTES
Payment on the notes will, to the extent provided in the indenture, be
subordinated in right of payment to the prior payment in full of all of our
senior indebtedness. The notes also are effectively subordinated to all debt
and other liabilities, including trade payables and lease obligations, if any,
of our subsidiaries.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of, or premium, if
any, interest, and liquidated damages, if any, on the notes will be subordinated
in right of payment to the prior payment in full in cash or other payment
satisfactory to the holders of senior indebtedness of all senior indebtedness.
In the event of any acceleration of the notes because of an event of default,
the holders of any outstanding senior indebtedness would be entitled to payment
in full in cash or other payment satisfactory to the holders of senior
indebtedness of all senior indebtedness obligations before the holders of the
notes are entitled to receive any payment or distribution. We are required under
the indenture to notify holders of senior indebtedness promptly under the loan
agreement, if payment of the notes is accelerated because of an event of
default.
We may not make any payment on the notes if:
. a default in the payment of designated senior indebtedness occurs and is
continuing beyond any applicable period of grace (called a "payment
default"); or
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<PAGE>
. a default other than a payment default on any designated senior
indebtedness occurs and is continuing that permits holders of designated
senior indebtedness to accelerate its maturity, or in the case of a lease,
a default occurs and is continuing that permits the lessor either to
terminate the lease or require us to make an irrevocable offer to terminate
the lease following an event of default under the lease, and the trustee
receives a notice of such default (called a "payment blockage notice")
from us or any other person permitted to give such notice under the
indenture (called a "non-payment default").
We may resume payments and distributions on the notes:
. in case of a payment default, upon the date on which such default is cured
or waived or ceases to exist; and
. in case of a non-payment default, the earlier of the date on which such
nonpayment default is cured or waived or ceases to exist, or 179 days after
the date on which the payment blockage notice is received, if the maturity
of the designated senior indebtedness has not been accelerated, or in the
case of any lease, 179 days after notice is received if we have not
received notice that the lessor under such lease has exercised its right to
terminate the lease or require us to make an irrevocable offer to terminate
the lease following an event of default under the lease.
No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless 365 days have elapsed since the initial effectiveness of
the immediately prior payment blockage notice. No non-payment default that
existed or was continuing on the date of delivery of any payment blockage notice
shall be the basis for any later payment blockage notice.
If the trustee or any holder of the notes receives any payment or distribution
of our assets in contravention of the subordination provisions on the notes
before all senior indebtedness is paid in full in cash or other payment
satisfactory to holders of senior indebtedness, then such payment or
distribution will be held in trust for the benefit of holders of senior
indebtedness or their representatives to the extent necessary to make payment in
full in cash or payment satisfactory to the holders of senior indebtedness of
all unpaid senior indebtedness.
In the event of our bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of the notes may
receive less, ratably, than our other creditors. This subordination will not
prevent the occurrence of any event of default under the indenture.
The notes are exclusively obligations of Kulicke & Soffa. A substantial
portion of our operations are conducted through our subsidiaries. As a result,
our cash flow and our ability to service our debt, including the notes, is
dependent upon the earnings of our subsidiaries. In addition, we are dependent
on the distribution of earnings, loans or other payments by our subsidiaries to
us.
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Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes. Our subsidiaries are
not required to provide us with funds for our payment obligations, whether by
dividends, distributions, loans or other payments. In addition, any payment of
dividends, distributions, loans or advances by our subsidiaries to us could be
subject to statutory or contractual restrictions. Payments to us by our
subsidiaries will also be contingent upon our subsidiaries' earnings and
business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors. In addition, even if we
were a creditor to any of our subsidiaries, our rights as a creditor would be
subordinate to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries senior to that held by us.
As of December 31, 1999, we had senior indebtedness outstanding in the amount
of approximately $2.0 million, and our subsidiaries had $36.8 million of debt
and other liabilities outstanding, excluding inter-company liabilities. Neither
we nor our subsidiaries are prohibited from incurring debt, including senior
indebtedness, under the indenture. We may, from time to time, incur additional
debt, including senior indebtedness. Our subsidiaries may also, from time to
time, incur other additional debt and liabilities.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties relating to the notes. The
trustee's claims for these payments will generally be senior to those of
noteholders in respect of all funds collected or held by the trustee.
CERTAIN DEFINITIONS
"designated senior indebtedness" means senior indebtedness under the loan
agreement and our obligations under any other particular senior indebtedness
that expressly provides that such senior indebtedness shall be "designated
senior indebtedness" for purposes of the indenture. Any agreement for
designated senior indebtedness may place limitations and conditions on the right
of the creditor to exercise the rights of designated senior indebtedness.
"indebtedness" means:
(1) all indebtedness, obligations and other liabilities for borrowed
money, including overdrafts, foreign exchange contracts, currency
exchange agreements, interest rate protection agreements, and any
loans or advances from banks, or evidenced by bonds, debentures,
notes, or similar instruments, other than any account payable or other
accrued current liability or obligation incurred in the ordinary
course of business in connection with the obtaining of materials or
services;
(2) obligations with respect to letters of credit, bank guarantees or
bankers' acceptances;
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(3) obligations in respect of leases required in conformity with generally
accepted accounting principles to be accounted for as capitalized
lease obligations on our balance sheet;
(4) all obligations and other liabilities under any lease or related
document in connection with the lease of real property that provides
that we are contractually obligated to purchase or cause a third party
to purchase the leased property, and thereby guarantee a minimum
residual value of the leased property to the lessor and our
obligations under the lease or related document to purchase or to
cause a third party to purchase the leased property;
(5) all obligations with respect to an interest rate or other swap, cap or
collar agreement or foreign currency hedge, exchange or purchase
agreement;
(6) all direct or indirect guaranties or similar agreements in respect of,
and any obligations or liabilities to purchase, acquire or otherwise
assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of others of the type described in (1)
through (5) above;
(7) any obligations described in (1) through (6) above secured by any
mortgage, pledge, lien or other encumbrance existing on property which
is owned or held by us; and
(8) any amendments or modifications to (1) through (7) above.
"loan agreement" means the amended and restated loan agreement, dated as of
March 26, 1998, between Kulicke & Soffa Industries, Inc. and PNC Bank, National
Association.
"senior indebtedness" means the principal, premium, if any, interest,
including any interest accruing after bankruptcy, and rent or termination
payment on or other amounts due on our current or future indebtedness, whether
created, incurred, assumed, guaranteed or in effect guaranteed by us, including
any deferrals, renewals, extensions, refundings, amendments, modifications or
supplements to the above. However, senior indebtedness does not include:
. indebtedness that expressly provides that it shall not be senior in right
of payment to the notes or expressly provides that it is on parity with or
junior to the notes;
. our indebtedness to any of our majority-owned subsidiaries; and
. the notes.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
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. we fail to pay principal or premium, if any, upon maturity or redemption or
otherwise on the notes, whether or not the payment is prohibited by the
subordination provisions of the indenture;
. we fail to pay any interest or liquidated damages, if any, on the notes,
whether or not the payment is prohibited by the subordination provisions of
the indenture;
. we fail to perform or observe any of the covenants in the indenture for 60
days after notice; or
. some events involving our bankruptcy, insolvency or reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, and accrued interest and liquidated damages, if any, on the
outstanding notes to be immediately due and payable. In case of some events of
our bankruptcy or insolvency, the principal, premium and accrued interest and
liquidated damages, if any, on the notes will automatically become due and
payable. However, if we cure all defaults, except the nonpayment of principal,
premium, interest or liquidated damages, if any, that became due as a result of
the acceleration, and meet certain other conditions, with certain exceptions,
this declaration may be cancelled and the holder of a majority of the principal
amount of outstanding notes may waive these past defaults. Payments of
principal, premium, or interest on the notes that are not made when due will
accrue interest at the annual rate of 4 3/4% from the required payment date.
The holders of a majority of outstanding notes will have the right to
direct the time, method and place of any proceedings for any remedy available to
the trustee, subject to limitations specified in the indenture.
No holder of notes may pursue any remedy under the indenture, except in the
case of a default in the payment of principal, premium or interest on the notes,
unless:
. the holder has given the trustee written notice of an event of default;
. the holders of at least 25% in principal amount of outstanding notes make a
written request, and offer reasonable indemnity, to the trustee to pursue
the remedy;
. the trustee does not receive an inconsistent direction from the holders of
a majority in principal amount of the notes; and
. the trustee fails to comply with the request within 60 days after receipt.
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MODIFICATION OF THE INDENTURE
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each affected
note if it would:
. extend the fixed maturity of any note;
. reduce the rate or extend the time for payment of interest of any note;
. reduce the principal amount or premium of any note;
. reduce any amount payable upon redemption of any note;
. adversely change our obligation to redeem any note upon a fundamental
change;
. impair the right of a holder to institute suit for payment on any note;
. change the currency in which any note is payable;
. impair the right of a holder to convert any note; or
. adversely modify the subordination provisions of the indenture.
Any modification or amendment that reduces the percentage of notes required
for consent to any modification of the indenture requires the consent of the
holder of each outstanding note.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
INFORMATION CONCERNING THE TRUSTEE
We have appointed Chase Manhattan Trust Company, National Association, the
trustee under the indenture, as paying agent, conversion agent, note registrar
and custodian for the notes. The trustee or its affiliates may provide banking
and other services to us in the ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, as
long as it or any of its affiliates remains our creditor, to obtain payment of
claims in certain cases or to realize on certain property received on any claim
as security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, without par value, and 5,000,000 shares of preferred stock, without par
value. As of February 7, 2000, there were 23,729,918 shares of common stock and
no shares of preferred stock outstanding. The following description of our
capital stock is qualified in its entirety by reference to our articles of
incorporation and bylaws, each as amended.
COMMON STOCK
The holders of the common stock are entitled to one vote per share for each
share held of record on all matters submitted to a vote of shareholders.
Subject to preferential rights with respect to any series of preferred stock
that may be issued, holders of the common stock are entitled to receive ratably
such dividends as may be declared by the board of directors on the common stock
out of funds legally available therefor and, in the event of a liquidation,
dissolution or winding-up of our affairs, are entitled to share equally and
ratably in all of our remaining assets and funds. In the election of directors,
the holders of the common stock may multiply the number of votes the shareholder
is entitled to cast by the total number of directors to be elected at a meeting
of shareholders and cast the whole number of votes for one candidate or
distribute them among some or all candidates. The holders of the common stock
have no preemptive rights or rights to convert shares of the common stock into
any other securities and are not subject to future calls or assessments by us.
All outstanding shares of the common stock are fully paid and nonassessable.
PREFERRED STOCK
By resolution of the board of directors and without any further vote or
action by the shareholders, we have the authority to issue preferred stock in
one or more series and to fix from time to time the number of shares to be
included in each such series and the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
such series. Our ability to issue preferred stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of the holders of the common stock and could
have the effect of making it more difficult for a person to acquire, or of
discouraging a person from attempting to acquire, control of us. We have no
present plans to issue any of the preferred stock.
CERTAIN CHARTER PROVISIONS
Some parts of our articles of incorporation and bylaws and Pennsylvania law
may discourage certain transactions involving a change in control of Kulicke &
Soffa. For example, our articles of incorporation and bylaws contain provisions
that (i) classify the board of directors into four classes, with one class being
elected each year, (ii) permit the board to issue "blank check" preferred
stock without shareholder approval and (iii) prohibit us from engaging in
certain business combinations with a holder of 20% or more of our voting
securities without super-majority board or shareholder approval. Further, under
the Pennsylvania Business Corporation Law, because our bylaws provide for a
classified board of directors, shareholders
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may only remove directors for cause. These provisions and provisions of the
Pennsylvania Business Corporation Law could have the effect of delaying,
deferring or preventing a change in control of Kulicke & Soffa and may adversely
affect the voting and other rights of holders of common stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company is the transfer agent and
registrar for our common stock, with offices in New York, New York.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted, but does not purport to be a
complete analysis of all the potential tax considerations relating thereto.
This summary is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change or differing interpretation possibly with
retroactive effect. Except as specifically discussed below with regard to Non-
U.S. Holders (as defined below), this summary applies only to beneficial owners
that will hold notes and common stock into which notes may be converted as
"capital assets" (within the meaning of section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code")) and who, for U.S. federal income tax
purposes, are (i) individual citizens or residents of the U.S., (ii)
corporations, partnerships or other entities created or organized in or under
the laws of the U.S. or of any political subdivision thereof (unless, in the
case of a partnership, Treasury Regulations otherwise provide), (iii) estates,
the incomes of which are subject to U.S. federal income taxation regardless of
the source of such income or (iv) trusts subject to the primary supervision of a
U.S. court and the control of one or more U.S. persons ("U.S. Holders").
Persons other than U.S. Holders ("Non-U.S. Holders") are subject to special
U.S. federal income tax considerations, some of which are discussed below. This
discussion does not address tax considerations applicable to an investor's
particular circumstances or to investors that may be subject to special tax
rules, such as banks, holders subject to the alternative minimum tax, tax-exempt
organizations, insurance companies, foreign persons or entities (except to the
extent specifically set forth below), dealers in securities or currencies,
persons that will hold notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes or persons deemed to
sell notes or common stock under the constructive sale provisions of the Code.
This summary discusses the tax considerations applicable to persons who purchase
the notes in this offering at their "issue price" as defined in section 1273
of the Code and does not discuss the tax considerations applicable to subsequent
purchasers of the notes. We have not sought any ruling from the Internal
Revenue Service (the "IRS") or an opinion of counsel with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the IRS will agree with such statements and
conclusions. In addition, the IRS is not precluded from successfully adopting a
contrary position. This summary does not consider the effect of the federal
estate or gift tax laws or the tax laws (except as set forth below with respect
to Non-U.S. Holders) of any applicable foreign, state, local or other
jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL
OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
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U.S. HOLDERS
TAXATION OF INTEREST
Interest paid on the notes will be included in the income of a U.S. Holder as
ordinary income at the time it is treated as received or accrued, in accordance
with such holder's regular method of accounting for U.S. federal income tax
purposes. Under Treasury Regulations, the possibility of an additional payment
under a note may be disregarded for purposes of determining the amount of
interest or original issue discount income to be recognized by a holder in
respect of such note (or the timing of such recognition) if the likelihood of
the payment, as of the date the notes are issued, is remote. Our failure to
file or cause to be declared effective a shelf registration statement as
described under "Description of Notes--Registration Rights of the Noteholders"
may result in the payment of predetermined liquidated damages in the manner
described therein. In addition, a holder may require us to redeem any and all
of his notes in the event of a fundamental change. We believe that the
likelihood of a liquidated damages payment with respect to the notes is remote
and do not intend to treat such possibility as affecting the yield to maturity
of any note. Similarly, we intend to take the position that a "fundamental
change" is remote under the Treasury Regulations, and likewise do not intend to
treat the possibility of a "fundamental change" as affecting the yield to
maturity of any note. In the event either contingency occurs, it would affect
the amount and timing of the income that must be recognized by a U.S. Holder of
notes. There can be no assurance that the IRS will agree with such positions.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange (other than a conversion) or redemption of a note,
a U.S. Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income not previously included
in income, which will be taxable as ordinary income, or is attributable to
accrued interest that was previously included in income, which amount may be
received without generating further income) and (ii) such holder's adjusted tax
basis in the note. A U.S. Holder's adjusted tax basis in a note generally will
equal the cost of the note to such holder. Such capital gain or loss will be
long-term capital gain or loss if the U.S. Holder's holding period in the note
is more than one year at the time of sale, exchange or redemption. Long-term
capital gains recognized by certain noncorporate U.S. Holders, including
individuals, will generally be subject to a maximum rate of tax of 20%. The
deductibility of capital losses is subject to limitations.
CONVERSION OF THE NOTES
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to cash received in
lieu of a fractional share of common stock. A U.S. Holder's tax basis in the
common stock received on conversion of a note will be the same as such holder's
adjusted tax basis in the note at the time of conversion (reduced by any basis
allocable to a fractional share interest), and the holding period for the
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common stock received on conversion will generally include the holding period of
the note converted.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share).
DIVIDENDS
Distributions, if any, made on the common stock after a conversion
generally will be included in the income of a U.S. Holder as ordinary dividend
income to the extent of our current or accumulated earnings and profits.
Distributions in excess of our current and accumulated earnings and profits will
be treated as a return of capital to the extent of the U.S. Holder's basis in
the common stock and thereafter as capital gain.
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments
provided in the notes (including, without limitation, adjustments in respect of
taxable dividends to our stockholders) will not qualify as being pursuant to a
bona fide reasonable adjustment formula. If such adjustments are made, the U.S.
Holders of notes will be deemed to have received constructive distributions
taxable as dividends to the extent of our current and accumulated earnings and
profits even though they have not received any cash or property as a result of
such adjustments. In certain circumstances, the failure to provide for such an
adjustment may result in taxable dividend income to the U.S. Holders of common
stock.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such U.S. Holder's adjusted tax basis in the common stock.
Such capital gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period in common stock is more than one year at the time of the
sale or exchange. Long-term capital gains recognized by certain non-corporate
U.S. Holders, including individuals, will generally be subject to a maximum rate
of tax of 20%. A U.S. Holder's basis and holding period in common stock
received upon conversion of a note are determined as discussed above under
"Conversion of the Notes." The deductibility of capital losses is subject to
limitations.
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SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
In general, subject to the discussion below concerning backup withholding:
(a) payments of principal or interest on the notes by us or any paying
agent to a beneficial owner of a note that is a Non-U.S. Holder will not be
subject to U.S. withholding tax, provided that, in the case of interest, (i)
such Non-U.S. Holder does not own, actually or constructively, 10% or more of
the total combined voting power of all of our classes of stock entitled to
vote within the meaning of section 871(h)(3) of the Code, (ii) such Non-U.S.
Holder is not a "controlled foreign corporation" with respect to which we
are a "related person" within the meaning of the Code, (iii) such Non-U.S.
Holder is not a bank receiving interest described in section 881(c)(3)(A) of
the Code, and (iv) the certification requirements under section 871(h) or
section 881(c) of the Code and Treasury Regulations thereunder (discussed
below) are satisfied;
(b) a Non-U.S. Holder of a note or common stock will not be subject to U.S.
federal income tax on gains realized on the sale, exchange or other
disposition of such note or common stock unless (i) such Non-U.S. Holder is an
individual who is present in the U.S. for 183 days or more in the taxable year
of sale, exchange or other disposition, and certain conditions are met, (ii)
such gain is effectively connected with the conduct by the Non-U.S. Holder of
a trade or business in the U.S. and, if certain U.S. income tax treaties
apply, is attributable to a U.S. permanent establishment maintained by the
Non-U.S. Holder, (iii) the Non-U.S. Holder is subject to Code provisions
applicable to certain U.S. expatriates, or (iv) in the case of common stock
held by a person who holds more than 5% of such stock, we are or have been, at
any time within the shorter of the five-year period preceding such sale or
other disposition or the period such Non-U.S. Holder held the common stock, a
U.S. real property holding corporation (a "USRPHC") for U.S. federal income
tax purposes. We do not believe that we currently are a USRPHC or that we
will become one in the future; and
(c) interest on notes not excluded from U.S. withholding tax as described
in (a) above and dividends on common stock after conversion generally will be
a subject to U.S. withholding tax at a 30% rate, except where an applicable
tax treaty provides for the reduction or elimination of such withholding tax.
To satisfy the certification requirements referred to in (a) (iv) above,
sections 871(h) and 881(c) of the Code and currently effective Treasury
Regulations thereunder require that either (i) the beneficial owner of a note
must certify, under penalties of perjury, to us or our paying agent, as the case
may be, that such owner is a Non-U.S. Holder and must-provide such owner's name
and address, and U.S. taxpayer identification number ("TIN"), if any, or (ii)
a securities clearing organization, bank or other financial institution that
holds customer securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the note on behalf of the beneficial owner
thereof must certify, under penalties of perjury, to us or our paying agent, as
the case may be, that such certificate has been received from the beneficial
owner and must furnish the payor with a copy thereof. Such requirement will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8 or
successor form, under penalties of perjury, that it is a Non-U.S. Holder and
provides its name and address or any Financial
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Institution holding the note on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such a statement
from the beneficial owner (and furnishes the withholding agent with a copy
thereof).
Treasury Regulations effective for payments made after December 31, 2000,
will provide alternative methods for satisfying the certification requirements
described above and below, subject to certain grandfathering provisions. These
new regulations also require, in the case of notes held by a foreign
partnership, that (i) the certification be provided by the partners rather than
by the foreign partnership and (ii) the partnership provide certain information,
including a TIN. A look-through rule will apply in the case of tiered
partnerships.
If a Non-U.S. Holder of a note or common stock is engaged in a trade or
business in the U.S. and if interest on the note, dividends on the common stock,
or gain realized on the sale, exchange or other disposition of the note or
common stock is effectively connected with the conduct of such trade or business
(and, if certain tax treaties apply, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S.
Holder, although exempt from U.S. withholding tax (provided that the
certification requirements discussed in the next sentence are met), will
generally be subject to U.S. federal income tax on such interest, dividends or
gain on a net income basis in the same manner as if it were a U.S. Holder. In
lieu of the certificate described above, such a Non-U.S. Holder will be
required, under currently effective Treasury Regulations, to provide us with a
properly executed IRS Form 4224 or successor form in order to claim an exemption
from withholding tax. In addition, if such Non-U.S. Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
U.S. FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen or
resident of the U.S. (as specially defined for U.S. federal estate tax purposes)
will not be subject to U.S. federal estate tax if the individual did not
actually or constructively own 10% or more of the total combined voting power of
all of our classes of stock and, at the time of the individual's death, payments
with respect to such note would not have been effectively connected with the
conduct by such individual of a trade or business in the U.S. common stock held
by an individual who at the time of death is not a citizen or resident of the
U.S. (as specially defined for U.S. federal estate tax purposes) will be
included in such individual's estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty otherwise applies.
Non-U.S. Holders should consult with their tax advisors regarding U.S. and
foreign tax consequences with respect to the notes and common stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments pursuant to the terms of a note or common stock to a U.S. Holder that
is not an "exempt recipient" and that fails to provide certain identifying
information (such as the holder's TIN) in
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the manner required. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a note or common stock must be reported to the Service, unless the
U.S. Holder is an exempt recipient or otherwise establishes an exemption.
In the case of payments of interest on a note to a Non-U.S. Holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite certification
has been received or an exemption has otherwise been established (provided that
neither we nor a paying agent has actual knowledge that the holder is a U.S.
Holder or that the conditions of any other exemption are not in fact satisfied).
Dividends on the common stock paid to Non-U.S. Holders that are subject to
U.S. withholding tax, as described above, generally will be exempt from U.S.
backup withholding tax but will be subject to certain information reporting.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a U.S. broker or a foreign office of a broker that
is a U.S. related person (either a "controlled foreign corporation" (within
the meaning of the Code) or a foreign person, 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment was effectively connected with the conduct of a trade
or business within the U.S.) are currently subject to certain information
reporting requirements, unless the payee is an exempt recipient or such broker
has evidence in its records that the payee is a Non-U.S. Holder and no actual
knowledge that such evidence is false and certain other conditions are met.
Temporary Treasury Regulations indicate that such payments are not currently
subject to backup withholding.
Under current Treasury Regulations, payments of the proceeds of a sale of a
note or common stock to or through the U.S. office of a broker will be subject
to information reporting and backup withholding unless the payee certifies under
penalties of perjury as to his or her status as a Non-U.S. Holder and satisfies
certain other qualifications (and no agent of the broker who is responsible for
receiving or reviewing such statement has actual knowledge that it is incorrect)
and provides his or her name and address or the payee otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules from a payment to a
holder of a note or common stock will be allowed as a refund or credit against
such holder's U.S. federal income tax provided that the required information is
furnished to the IRS in a timely manner.
As noted above, new regulations will generally be applicable to payments
made after December 31, 2000. In general, these new regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
reliance standards. Under these new regulations, special rules apply which
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. A holder of a
note or common stock
37
<PAGE>
should consult with his or her tax advisor regarding the application of the
backup withholding rules to his or her particular situation, the availability of
an exemption therefrom, the procedure for obtaining such an exemption, if
available, and the impact of these new regulations on payments made with respect
to notes or common stock after December 31, 2000.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS OR HER OWN TAX ADVISER AS TO THE
PARTICULAR U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING,
HOLDING AND DISPOSING OF OUR NOTES AND COMMON STOCK. TAX ADVISORS SHOULD ALSO BE
CONSULTED AS TO THE U.S. ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR NOTES AND COMMON STOCK,
AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
38
<PAGE>
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement in December 1999.
Selling securityholders may offer and sell the notes and the underlying common
stock using this prospectus.
The following table contains information as of February 14, 2000, with
respect to the selling securityholders and the principal amount of notes and the
underlying common stock beneficially owned by each selling securityholder that
may be offered using this prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF NUMBER OF
NOTES SHARES OF
BENEFICIALLY COMMON STOCK PERCENTAGE OF
OWNED THAT MAY BE PERCENTAGE OF THAT MAY BE COMMON STOCK
NAME SOLD NOTES OUTSTANDING SOLD (1) OUTSTANDING (2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allstate Insurance Company $1,500,000 * 32,751 *
- -----------------------------------------------------------------------------------------------------------------------
Argent Classic Convertible Arbitrage 500,000 * 10,917 *
Fund (Bermuda) L.P.
- -----------------------------------------------------------------------------------------------------------------------
Arkansas Public Employees Retirement 400,000 * 8,733 *
Systems
- -----------------------------------------------------------------------------------------------------------------------
Bank Austria Cayman Island, Ltd. 2,000,000 1.1% 43,668 *
- -----------------------------------------------------------------------------------------------------------------------
Bear, Stearns & Co. Inc. 500,000 * 10,917 *
- -----------------------------------------------------------------------------------------------------------------------
Boulder Capital 900,000 * 19,650 *
- -----------------------------------------------------------------------------------------------------------------------
Boulder II Limited 1,800,000 1% 39,301 *
- -----------------------------------------------------------------------------------------------------------------------
Chrysler Corporation Master Retirement 2,645,000 1.5% 57,751 *
Trust
- -----------------------------------------------------------------------------------------------------------------------
CIBC World Markets 6,225,000 3.6% 135,919 *
- -----------------------------------------------------------------------------------------------------------------------
CIBC World Markets International 5,500,000 3.1% 120,089 *
Arbitrage
- -----------------------------------------------------------------------------------------------------------------------
City of Richmond Retirement Systems 43,000 * 938 *
- -----------------------------------------------------------------------------------------------------------------------
Delaware PERS 2,200,000 1.3% 48,035 *
- -----------------------------------------------------------------------------------------------------------------------
Delta Air Lines Master Trust 1,205,000 * 26,310 *
- -----------------------------------------------------------------------------------------------------------------------
Detroit Medical Center 100,000 * 2,183 *
Endowment/Depreciation Fund
- -----------------------------------------------------------------------------------------------------------------------
Detroit Medical Center Pension Plan 175,000 * 3,821 *
- -----------------------------------------------------------------------------------------------------------------------
Dow Corning Retirement Plan 350,000 * 7,642 *
- -----------------------------------------------------------------------------------------------------------------------
Employee Benefit Convertible Securities 275,000 * 6,004 *
Fund
- -----------------------------------------------------------------------------------------------------------------------
ICA American Holdings Trust 1,050,000 * 22,926 *
- -----------------------------------------------------------------------------------------------------------------------
Mainstay Convertible Fund 850,000 * 18,559 *
- -----------------------------------------------------------------------------------------------------------------------
Mainstay Strategic Value Fund 150,000 * 3,275 *
- -----------------------------------------------------------------------------------------------------------------------
Mainstay VP Convertible Portfolio 100,000 * 2,183 *
- -----------------------------------------------------------------------------------------------------------------------
Metropolitan Life Loomis Sayles High 300,000 * 6,550 *
Yield Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------------
MFS Funds - US Emerging Growth Fund 13,000 * 283 *
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF NUMBER OF
NOTES SHARES OF
BENEFICIALLY COMMON STOCK PERCENTAGE OF
OWNED THAT MAY BE PERCENTAGE OF THAT MAY BE COMMON STOCK
NAME SOLD NOTES OUTSTANDING SOLD (1) OUTSTANDING (2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Institutional Emerging Equities Fund 51,500 * 1,124 *
- -----------------------------------------------------------------------------------------------------------------------
MFS Meridian Global Growth Fund 6,000 * 131 *
- -----------------------------------------------------------------------------------------------------------------------
MFS Meridian US Emerging Growth Fund 100,000 * 2,183 *
- -----------------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan - 315,000 * 6,877 *
Active Member Fund
- -----------------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan - 155,000 * 3,384 *
Retiree Member Fund
- -----------------------------------------------------------------------------------------------------------------------
Nalco Chemical Company 435,000 * 9,497 *
- -----------------------------------------------------------------------------------------------------------------------
Nations Capital Income Fund 4,135,000 2.4% 90,285 *
- -----------------------------------------------------------------------------------------------------------------------
New England Strategic Income Fund 1,000,000 * 21,834 *
- -----------------------------------------------------------------------------------------------------------------------
OCM Convertible Trust 1,455,000 * 31,769 *
- -----------------------------------------------------------------------------------------------------------------------
OCM Convertible Limited Partnership 100,000 * 2,183 *
- -----------------------------------------------------------------------------------------------------------------------
Onex Industrial Partners Limited 550,000 * 12,008 *
- -----------------------------------------------------------------------------------------------------------------------
Pacific Innovations Trust Capital Income 300,000 * 6,550 *
Fund
- -----------------------------------------------------------------------------------------------------------------------
Partner Reinsurance Company Ltd. 530,000 * 11,572 *
- -----------------------------------------------------------------------------------------------------------------------
Pebble Capital Inc. 250,000 * 5,458 *
- -----------------------------------------------------------------------------------------------------------------------
Peter & Elizabeth Tower Foundation 25,000 * 545 *
- -----------------------------------------------------------------------------------------------------------------------
PIMCO Convertible Bond Fund 2,500,000 1.4% 54,585 *
- -----------------------------------------------------------------------------------------------------------------------
Ramius Capital Group Holdings, Ltd. 1,000,000 * 21,834 *
- -----------------------------------------------------------------------------------------------------------------------
Spear, Leeds & Kellog 200,000 * 4,366 *
- -----------------------------------------------------------------------------------------------------------------------
State Employees' Retirement Fund of the 1,345,000 * 29,367 *
State of Delaware
- -----------------------------------------------------------------------------------------------------------------------
State of Connecticut Combined Investment 3,190,000 1.8% 69,651 *
Funds
- -----------------------------------------------------------------------------------------------------------------------
State of Rhode Island Employees 1,500,000 * 32,751 *
Retirement System
- -----------------------------------------------------------------------------------------------------------------------
Teamsters Affiliates Pension Plan 400,000 * 8,733 *
- -----------------------------------------------------------------------------------------------------------------------
Teamsters Retirement & Family Protection 30,000 * 655 *
Plan
- -----------------------------------------------------------------------------------------------------------------------
Tennessee Consolidated Retirement System 1,000,000 * 21,834 *
- -----------------------------------------------------------------------------------------------------------------------
UA General Officers Retirement Plan 20,000 * 436 *
- -----------------------------------------------------------------------------------------------------------------------
UA Local Union Officers & Employees 150,000 * 3,275 *
Pension
- -----------------------------------------------------------------------------------------------------------------------
UA Office Employees Retirement Plan 7,000 * 152 *
- -----------------------------------------------------------------------------------------------------------------------
Vanguard Convertible Securities Fund, 2,060,000 1.2% 44,978 *
Inc.
- -----------------------------------------------------------------------------------------------------------------------
Victory Convertible Securities Fund 700,000 * 15,284 *
- -----------------------------------------------------------------------------------------------------------------------
White River Securities LLC 500,000 * 10,917 *
- -----------------------------------------------------------------------------------------------------------------------
Zeneca Holdings Trust 1,000,000 * 21,834 *
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF NUMBER OF
NOTES SHARES OF
BENEFICIALLY COMMON STOCK PERCENTAGE OF
OWNED THAT MAY BE PERCENTAGE OF THAT MAY BE COMMON STOCK
NAME SOLD NOTES OUTSTANDING SOLD (1) OUTSTANDING (2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Any other holder of notes or future 121,209,500 69% 2,646,563 10%
transferee, pledgee, donee or successor
of any holder(3)(4)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) Assumes conversion of all of the holder's notes at a conversion price of
$45.7993 per share of common stock. However, this conversion price will be
subject to adjustment as described under "Description of Notes--Conversion
of Notes." As a result, the amount of common stock issuable upon
conversion of the notes may increase or decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 23,729,918
shares of common stock outstanding as of February 7, 2000. In calculating
this amount, we treated as outstanding the number of shares of common stock
issuable upon conversion of all of that particular holder's notes.
However, we did not assume the conversion of any other holder's notes.
(3) Information about other selling security holders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of notes, or any future transferees,
pledgees, donees or successors of or from any of these other holders of
notes, do not beneficially own any common stock other than the common stock
issuable upon conversion of the notes at the initial conversion rate.
We prepared this table based on the information supplied to us by the
selling securityholders named in the table.
The selling securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their notes since the date on which the
information in the above table is presented. Information about the selling
securityholders may change over time. Any changed information will be set forth
in prospectus supplements.
Because the selling securityholders may offer all or some of their notes or
the underlying common stock from time to time, we cannot estimate the amount of
the notes or underlying common stock that will be held by the selling
securityholders upon the termination of any particular offering. See "Plan of
Distribution."
41
<PAGE>
PLAN OF DISTRIBUTION
We are registering the notes and the underlying common stock to allow the
selling securityholders and their successors, including their transferees,
pledgees and donees and their successors, to sell these securities to the public
from time to time after the date of this prospectus. The selling securityholders
may sell the securities directly or through underwriters, broker-dealers or
agents. If the selling securityholders sell the securities through underwriters
or broker-dealers, the selling securityholders will be responsible for
underwriting discounts or commissions or agents' commissions. We have agreed to
pay substantially all of the expenses incidental to the registration, offering
and sale of the securities to the public other than commissions, fees and
discounts of underwriters, brokers, dealers and agents.
The total proceeds to the selling securityholders from selling the
securities will be the purchase price of the securities, less any discounts and
commissions paid by the selling securityholders. We will not receive any of the
proceeds from the sale of the securities offered by this prospectus.
The SEC may deem the selling securityholders and any broker-dealers or
agents who participate in the distribution of the securities to be
"underwriters." As a result, the SEC may deem any profits the selling
securityholders make by selling the securities and any discounts, commissions or
concessions received by any broker-dealers or agents to be underwriting
discounts and commissions under the Securities Act. Selling securityholders who
are "underwriters" will be subject to the prospectus delivery requirements of
the Securities Act and may also be subject to liabilities under the securities
laws, including Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act. To our knowledge, there are currently no plans,
arrangements or understandings between any selling securityholders and any
underwriter, broker-dealer or agent regarding the sale of the securities.
The selling securityholders and any other person who participates in
distributing the securities will be subject to the Exchange Act. The Exchange
Act rules include Regulation M, which may limit the timing of purchases and
sales of any of the securities by the selling securityholders and any other
person. In addition, Regulation M may restrict the ability of any person engaged
in the distribution of the securities to engage in market-making activities with
respect to the particular securities being distributed for a period of up to
five business days before beginning to distribute the securities. This may
affect the securities' marketability and the ability of any person or entity to
engage in market-making activities with respect to the securities.
The selling securityholders may sell the securities in one or more
transactions at:
. fixed prices;
. prevailing market prices at the time of sale;
. varying prices determined at the time of sale; or
42
<PAGE>
. negotiated prices.
These sales may be effected in transactions:
. on any national securities exchange or quotation service on which the
securities are listed or quoted at the time of the sale, including the
Nasdaq National Market in the case of the common stock;
. in the over-the-counter market;
. in transactions other than transactions on national securities exchanges,
quotation services or in the over-the-counter market; or
. through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
transaction.
In connection with sales of the securities or otherwise, any selling
securityholder may:
. enter into hedging transactions with broker-dealers, who may in turn
engage in short sales of the securities in the course of hedging the
positions they assume;
. sell the securities short and deliver the securities to close out their
short positions; or
. loan or pledge the securities to broker-dealers, who may in turn sell
the securities.
We cannot assure you that any selling securityholder will sell any or all
of the securities using this prospectus. In addition, any securities covered by
this prospectus that qualify for sale under Rule 144 or Rule 144A of the
Securities Act may be sold under Rule 144 or Rule 144A rather than under this
prospectus. The selling securityholders also may transfer, devise or gift the
securities by other means not described in this prospectus.
To comply with the securities laws of some states, if applicable, the
selling securityholders may only sell the securities in these jurisdictions
through registered or licensed brokers or dealers.
Our common stock trades on the Nasdaq National Market under the symbol
"KLIC." We do not intend to apply for listing of the notes on any securities
exchange or for quotation through Nasdaq. Accordingly, we cannot assure you that
selling securityholders will be able to sell the notes or that any trading
market for the notes will develop. See "Risk Factors--A public market may not
develop for the notes."
43
<PAGE>
With respect to a particular offering of the securities, to the extent
required, we will file an accompanying prospectus supplement or, if appropriate,
a post-effective amendment to the registration statement of which this
prospectus is a part, disclosing the following information:
. the specific notes or common stock to be offered and sold;
. the names of the selling securityholders;
. the respective purchase prices and public offering prices and other
material terms of the offering;
. the names of any participating agents, broker-dealers or underwriters;
and
. any applicable commissions, discounts, concessions and other items
constituting compensation from the selling securityholders.
The registration rights agreement filed as an exhibit to this registration
statement provides that we and the selling securityholders will indemnify each
other and each other's directors, officers and controlling persons against
specified liabilities, including liabilities under the Securities Act, or that
we will be entitled to contribution from each other in connection with these
liabilities.
LEGAL MATTERS
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania will provide us with
an opinion as to the validity of our issuance of the securities offered by this
prospectus. Hughes Hubbard & Reed LLP, New York, New York will provide us with
an opinion as to the enforceability of the indenture under which the notes were
issued.
EXPERTS
The consolidated financial statements of Kulicke & Soffa Industries, Inc.
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
for the year ended September 30, 1999 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Flip Chip Technologies, L.L.C. as of September 30,
1999 and for the year then ended incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended September 30, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Flip Chip Technologies, L.L.C. as of September 30,
1998 and 1997 and for the years ended September 30, 1998 and 1997 and for the
period from inception (February 28, 1996) through September 30, 1996
incorporated by reference to our Annual
44
<PAGE>
Report on Form 10-K for the year ended September 30, 1999, have been audited by
Arthur Andersen LLP, independent public accountants.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC in
accordance with the Securities Exchange Act of 1934. You may read and copy our
reports, proxy statements and other information we file at the SEC's public
reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's following regional offices: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade
Center, 13th Floor, New York, New York 10048. You may obtain copies of these
materials at prescribed rates from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-
0330 for further information about the public reference rooms. Our reports,
proxy statements and other information filed with the SEC are available to the
public on the internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information by referring you to those documents. The information we incorporate
by reference is considered to be a part of this prospectus. Information that we
file later with the SEC will automatically update and supersede the
information contained in this prospectus, including the other information
incorporated by reference in this prospectus. We incorporate by reference the
documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the selling
securityholders sell all of the notes or the shares of common stock offered by
this prospectus.
. Our Annual Report on Form 10-K for our fiscal year ended September 30,
1999;
. Our Quarterly Report on Form 10-Q for our fiscal quarter ended
December 31, 1999;
. Our Proxy Statement for our 2000 annual meeting of stockholders;
. Our Current Report on Form 8-K filed on November 30, 1999;
. Our Current Report on Form 8-K filed on December 2, 1999;
. Our Current Report on Form 8-K filed on December 9, 1999;
. Our Current Report on Form 8-K filed on December 14, 1999; and
. Our Current Report on Form 8-K filed on December 16, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
45
<PAGE>
Investor Relations Department
Kulicke & Soffa Industries, Inc.
2101 Blair Mill Road
Willow Grove, PA 19090
Telephone: (215) 784-6000
You should rely only on the information incorporated by reference or
provided in this prospectus. You should not assume the information in this
prospectus is accurate as of any date other than the date on the front of those
documents. We have not authorized anyone else to provide you with different
information.
46
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The aggregate estimated (other than the registration fee) expenses to be
paid by the Registrant in connection with the sale of the notes and common stock
being registered are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................................ $ 46,200
--------------
Nasdaq Additional Share Listing Fee................................................ $ 17,500
--------------
Accounting fees and expenses....................................................... $ 10,000
--------------
Legal fees and expenses............................................................ $ 25,000
--------------
Miscellaneous...................................................................... $ 5,000
--------------
Total.............................................................................. $103,700
==============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF KULICKE & SOFFA
Our By-laws require us to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed proceeding
by reason of the fact that he or she is or was our director or officer or is or
was serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best interests, and, with
respect to any criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Such indemnification as to expenses is mandatory to
the extent the individual is successful on the merits or otherwise in defense of
the matter or in defense of any claim, issue or matter therein. In addition,
Pennsylvania law permits us to provide similar indemnification to employees and
agents who are not directors or officers. Our By-laws provide, however, that we
will not indemnify a director who has breached or failed to perform the duties
of his office in a manner that constituted self-dealing, willful misconduct or
recklessness. The determination of whether an individual meets the applicable
standard of conduct set forth in our By-laws may be made by disinterested
directors, independent legal counsel or the shareholders. Pennsylvania law also
permits indemnification in connection with a proceeding brought by or in our
right to procure a judgement in our favor.
In addition, the registration rights agreement filed as an exhibit to this
registration statement provides that we and the selling securityholders will
indemnify each other and each other's directors, officers and controlling
persons against specified liabilities, including liabilities under the
Securities Act, or that we will be entitled to contribution from each other in
connection with these liabilities.
II-1
<PAGE>
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS
<S> <C>
</TABLE>
The following exhibits are filed with or incorporated by reference in this
registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
----------------- ------------------------------------------------
<S> <C>
3.1 The Company's Amended and Restated Articles of
Incorporation as of March 3, 1998, filed as Exhibit 3(i)
to the Company's quarterly report on Form 10-Q for the
quarterly period ended March 31, 1998 and Form of
Amendment of Articles of Incorporation effective March
12, 1999, filed as Exhibit 3(i), to the Company's
quarterly report on Form 10-Q for the quarterly period
ended March 31, 1999, are incorporated herein by
reference.
3.2 The Company's By-Laws, as amended through June 26, 1990,
filed as Exhibit 2.2 to the Company's Form 8-A12G dated
September 8, 1995, is incorporated herein by reference.
4.1 Indenture dated as of December 13, 1999 between the
Company and Chase Manhattan Trust Company, National
Association, as Trustee, filed as Exhibit 4.1 to the
Company's Form 8-K dated December 13, 1999, is
incorporated herein by reference.
4.2 Registration Rights Agreement dated as of December 13,
1999 between the Company and Morgan Stanley & Co.
Incorporated, filed as Exhibit 4.2 to the Company's Form
8-K dated December 13, 1999, is incorporated herein by
reference.
4.3 Form of Note (included in Exhibit 4.1)
5.1* Opinion of Drinker Biddle & Reath LLP
5.2* Opinion of Hughes Hubbard & Reed LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to Kulicke & Soffa Industries, Inc.
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to Flip Chip Technologies, LLC
23.3 Consent of Arthur Andersen LLP, Independent Public Accountants
23.4* Consent of Drinker Biddle & Reath LLP (included in
Exhibit 5.1)
23.5* Consent of Hughes Hubbard & Reed LLP (included in Exhibit
5.2)
24.1 Power of Attorney of certain directors and officers of
Kulicke & Soffa Industries, Inc. (see page II-5 of this
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Form S-3)
25.1 Form T-1 Statement of Eligibility of Trustee for
Indenture under the Trust Indenture Act of 1939
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement,
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities, other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this Registration Statement on Form
S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Willow Grove, Commonwealth of Pennsylvania, on February 16, 2000.
KULICKE AND SOFFA INDUSTRIES, INC.
By:/s/ C. Scott Kulicke
--------------------
C. Scott Kulicke
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints C. Scott Kulicke and Clifford G.
Sprague, and each of them acting individually, as his attorney-in-fact, each
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement on Form S-3, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or any substitute, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Name Capacity Date
- ------------------------------------- ------------------------------------- ----------------------------
<S> <C> <C>
/s/ C. Scott Kulicke Chairman and Chief Executive Officer February 16, 2000
- ------------------------------------- (Principal Executive Officer)
C. Scott Kulicke
/s/ James W. Bagley Director February 16, 2000
- -------------------------------------
James W. Bagley
/s/ John A. O'Steen Director February 16, 2000
- -------------------------------------
John A. O'Steen
/s/ Allison F. Page Director February 16, 2000
- -------------------------------------
Allison F. Page
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ MacDonnell Roehm, Jr. Director February 16, 2000
- -------------------------------------
MacDonnell Roehm, Jr.
/s/ Larry D. Striplin, Jr. Director February 16, 2000
- -------------------------------------
Larry D. Striplin, Jr.
/s/ C. William Zadel Director February 16, 2000
- -------------------------------------
C. William Zadel
/s/ Clifford G. Sprague Senior Vice President and Chief February 16, 2000
- ------------------------------------- Financial Officer (Principal
Clifford G. Sprague Financial and Accounting Officer)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------------------- ---------------------------------------------------
<C> <S> <C>
5.1* Opinion of Drinker Biddle & Reath LLP
5.2* Opinion of Hughes Hubbard & Reed LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to Kulicke & Soffa Industries, Inc.
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to Flip Chip Technologies, LLC
23.3 Consent of Arthur Andersen LLP, Independent Public Accountants
23.4* Consent of Drinker Biddle & Reath LLP (included in
Exhibit 5.1)
23.5* Consent of Hughes Hubbard & Reed LLP (included in Exhibit
5.2)
24.1 Power of Attorney of certain directors and officers of
Kulicke & Soffa Industries, Inc. (see page II-5 of this
Form S-3)
25.1 Form T-1 Statement of Eligibility of Trustee for
Indenture under the Trust Indenture Act of 1939
</TABLE>
* To be filed by amendment.
II-7
<PAGE>
EXHIBIT 12.1
Kulicke and Soffa Industries, Inc.
Fixed Charge Coverage Ratio Calculation
(In thousands, except ratios)
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year ended September 30, December 31,
1995 1996 1997 1998 1999 1999
---------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense, including
amortization of debt issuance costs $ 1,431 $ 3,288 $ 2,331 $ 262 $ 215 $ 556
---------------------------------------------- ------------
Portion of rental expense
deemed to represent
interest 785 847 1,064 999 1,072 445
---------------------------------------------- ------------
Total fixed charges $ 2,216 $ 4,135 $ 3,395 $ 1,261 $ 1,287 $ 1,001
============================================== ============
Earnings before fixed
charges:
Income (loss) before income tax
and minority interest $55,613 $15,630 $51,782 $(7,357) $(26,185) $17,346
Equity in loss of joint ventures - 994 6,701 8,715 10,000 346
Fixed charges 2,216 4,135 3,395 1,261 1,287 1,001
Total earnings (loss) before
---------------------------------------------- ------------
fixed charges $57,829 $20,759 $61,878 $ 2,619 $(14,898) $18,693
============================================== ============
Ratio of earnings to
fixed charges (1) 26 5 18 2 - 19
============================================== ============
</TABLE>
(1) We would have had to generate additional earnings of $16.2 million in fiscal
1999 to achieve a ratio of 1:1.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated December 6, 1999, except as to Note 15
which is as of December 15, 1999, relating to the financial statements and
financial statement schedule of Kulicke and Soffa Industries, Inc. which appears
in Kulicke and Soffa Industries, Inc.'s Annual Report on Form 10-K for the year
ended September 30, 1999. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 15, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated December 6, 1999 relating to the
financial statements of Flip Chip Technologies, LLC as of and for the year ended
September 30, 1999 which appears in Kulicke and Soffa Industries, Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1999. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 15, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated November 19, 1998
on the financial statements of Flip Chip Technologies, LLC as of September 30,
1998 incorporated by reference in the Form 10-K of Kulicke & Soffa Industries,
Inc. for the year ended September 30, 1999 and to all references to our firm
included in this registration statement. It should be noted that we have not
audited any financial statements of Flip Chip Technologies, LLC subsequent to
September 30, 1998 or performed any audit procedures subsequent to the date of
our report.
/s/ Arthur Andersen LLP
Phoenix, Arizona
February 16, 2000
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)
________________________________________
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
29-2933369
(State of incorporation if not a national bank) (I.R.S. employer identification No.)
</TABLE>
ONE OXFORD CENTER, SUITE 1100
301 GRANT STREET, PITTSBURGH, PA 15219
(Address of principal executive offices) (Zip Code)
WILLIAM H. MCDAVID
THE CHASE MANHATTAN BANK
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
PENNSYLVANIA 23-1498399
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
<TABLE>
<CAPTION>
<S> <C>
C. SCOTT KULICKE
2101 BLAIR MILL ROAD CHIEF EXECUTIVE OFFICER
WILLOW GROVE, PA 19090 2101 BLAIR MILL ROAD
(215) 784-6000 WILLOW GROVE, PA 19090
(Address, including zip code, and telephone number, (215) 784-6000
including area code of principal executive offices) (Name, address, including zip code and telephone
number, including area code of agent for service)
</TABLE>
Copy to:
H. John Michel, Jr.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
-----------
4 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
-----------
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
YES.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.
ITEM 16. LIST OF EXHIBITS
----------------
List below all exhibits filed as a part of this Statement of Eligibility.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE (PREVIOUSLY KNOWN AS
NEW TRUST COMPANY, NATIONAL ASSOCIATION,) TO COMMENCE BUSINESS. ALSO
INCLUDED IN EXHIBIT 16(2) ARE LETTERS DATED NOVEMBER 24, 1997 FROM THE
COMPTROLLER OF THE CURRENCY AUTHORIZING THE EXERCISE OF FIDUCIARY POWERS
BY THE TRUSTEE AND ACKNOWLEDGING THE NAME CHANGE OF THE TRUSTEE.
3. THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST IS CONTAINED
IN EXHIBIT 16(2).
4. A COPY OF THE BY-LAWS OF THE TRUSTEE AS NOW IN EFFECT.
5. NOT APPLICABLE
6. THE TRUSTEE'S CONSENT REQUIRED BY SECTION 321(B) OF THE ACT.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE, PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
8. NOT APPLICABLE
9. NOT APPLICABLE
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America , has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
Philadelphia and State of Pennsylvania, on the 16th day of February, 2000.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By \s\ Karen Vera
--------------
Karen Vera
Assistant Vice President
<PAGE>
EXHIBIT 16(1)
[LOGO OF CHASE]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
CHARTER NO. 23548
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to perform any lawful activities of
a national bank, the undersigned do enter into the following Articles of
Association:
FIRST. The title of this Association shall be Chase Manhattan Trust Company,
National Association (the "Association").
SECOND. The main office of the Association shall be in the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania. The business of the
Association shall be limited to the fiduciary powers and the support of
activities incidental to the exercise of those powers. The Association will
obtain the prior written approval of the Office of the Comptroller of the
Currency before amending these Articles of Association to expand the scope of
its activities and services.
THIRD. The board of directors of this Association shall consist of not less
than five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his
directorship, shall own common or preferred stock of the Association or of a
holding company owning the Association, with an aggregate par, fair market or
equity value of not less than $1,000. Any vacancy in the board of directors may
be filled by action of the shareholders or a majority of the remaining
directors.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It
shall be held at the main office or any other convenient place the board of
directors may designate, on the day of each year specified therefore in the by-
laws, or if that day falls on a legal holiday in the state in which the
Association is located, on the next following banking day. If no election is
held on the day fixed or in event of a legal holiday, on the following banking
day, an election may be held on any subsequent day within 60 days of the day
fixed, to be designated by the board of directors, or, if the directors fail to
fix the day, by shareholders representing two-thirds of the shares issued and
outstanding. Advance notice of the meeting may be duly waived by the sole
shareholder in accordance with 12 C.F.R. 7.2001.
A director may resign at any time by delivering written notice to the board of
directors, its Chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause.
FIFTH. The authorized amount of capital stock of this Association shall be five
million dollars ($5,000,000), divided into fifty thousand (50,000) shares of
common stock of the par value of one hundred dollars ($ 100) each; but said
capital stock may be increased or decreased from time to time, according to the
provisions of the laws of the United States.
<PAGE>
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right to subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors may appoint one of its members President of this
Association, and one of its members Chairperson of the board or two of its
members as Co-Chairpersons of the board, and shall have the power to appoint one
or more Vice Presidents, a Secretary who shall keep minutes of the directors'
and shareholders' meetings and be responsible for authenticating the records of
the Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the by-laws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with applicable
law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and fix the penalty thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of the
Association shall be made, provided that nothing herein shall restrict the power
of shareholders to increase or decrease the capital of the Association in
accordance with law.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial by-laws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of the
Association.
(10) Amend or repeal by-laws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other location permitted under applicable law, without
the approval of the shareholders, and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location permitted under applicable law, without the approval of the
shareholders subject to approval by the Office of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's board of directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE>
EXHIBIT 16(2)
Comptroller of the Currency
=================== [PICTURE OF ====================
TREASURY DEPARTMENT TREASURY DEPARTMENT OF THE UNITED STATES
=================== APPEARS HERE] ====================
Washington, D.C.
Whereas, satisfactory evidence has been presented to the Comptroller of the
Currency that NEW TRUST COMPANY, NATIONAL ASSOCIATION located in PITTSBURGH
State of PENNSYLVANIA has complied with all provisions of the statutes of the
United States required to be complied with before being authorized to commence
the business of banking as a National Banking Association;
Now, therefore, I hereby certify that the above named association is
authorized to commence the business of banking as a National Banking
Association.
In testimony whereof, witness my signature and seal of office this 24th day
of NOVEMBER 1997
SEAL APPEARS HERE] Charter No. 23548 [SIGNATURE APPEARS HERE]
<PAGE>
[LETTERHEAD OF COMPTROLLER OF THE CURRENCY APPEARS HERE]
November 24, 1997
Mr. Daryl J. Zupan
President and CEO New Trust Company, National Association
c/o Mellon Bank, N.A., Corporate Trust
Two Mellon Bank Center, Suite 325
Pittsburgh, Pennsylvania 15259
Re: Charter for a National Trust Bank, New Trust Company, National
Association, Pittsburgh, Pennsylvania
ACN 97 NE 01 0022
Dear Mr. Zupan:
The Comptroller of the Currency (OCC) has found that you have met all conditions
imposed by the OCC and completed all steps necessary to commence the business of
banking. Your charter certificate is enclosed. You are authorized to commence
business on November 24, 1997.
This letter also constitutes OCC authorization to exercise fiduciary powers.
You are reminded that several of the standard conditions contained in the
preliminary approval letter dated October 23, 1997 will continue to apply once
the bank opens and by opening, you agree to subject your association to these
conditions of operation. Some of the conditions bear reiteration here:
1. Regardless of the association's FDIC insurance status, the association is
subject to the Change in Bank Control Act (12 U.S.C. 1817(j)) by virtue of
its national bank charter. Please refer to item 4 in the list of standard
conditions sent with the preliminary approval letter.
2. The board of directors is responsible for regular review and update of
policies and procedures and for assuring ongoing compliance with them. This
includes maintaining an internal control system that ensures compliance with
the currency reporting and record keeping requirements of the Bank Secrecy
Act (BSA). The board is expected to train its personnel in BSA procedures
and designate one person or a group to monitor day-to-day compliance.
<PAGE>
Mr. Daryl J. Zupan
Page two
3. The bank will not engage in full commercial powers authorized to national
banks without the OCC's prior approval. Following the commencement of
operations, bank management is urged to become familiar with the
requirements of the Securities Exchange Act of 1934 and Part 11 of the
Comptroller's regulations relative to the registration of the bank's equity
securities and related periodic reports. These requirements will be
applicable to your bank when the number of shareholders of record is
maintained at 500 or more. Such registration may be subsequently terminated
pursuant to the Act only when the number of shareholders of record is
reduced to fewer than 300.
Should you have any questions regarding the supervision of your bank, please
contact the portfolio manager who will be responsible for OCC's ongoing
supervisory effort at your institution. You will be notified of the name and
number of the appropriate individual in the near future.
Sincerely,
/s/ Michael G. Tiscia
Michael G. Tiscia
Licensing Manager
Enclosure
cc: Official File
Field File
<PAGE>
[LOGO APPEARS HERE]
- - -------------------------------------------------------------------
- - Comptroller of the Currency Administrator of National Banks
- - -------------------------------------------------------------------
Northeastern District
1114 Avenue of the Americas, Suite 3900
New York, New York 10036
November 24, 1997
Joseph R. Bielawa
Vice President and Assistant General Counsel
The Chase Manhattan Bank
270 Park Avenue, 39th Floor
New York, New York 10017
Re: Change in Corporate Title
New Trust Company, National Association (Bank)
Pittsburgh, Pennsylvania
Dear Mr. Bielawa:
The Office of the Comptroller of the Currency (OCC) has received your
submission, concerning the change and amendment to Article First of the above-
referenced Bank's Articles of Association. The OCC has amended its records to
reflect that effective November 24, 1997, the corporate title of New Trust
Company, National Association, Charter Number 23548, was changed to "Chase
Manhattan Trust Company, National Association."
You are reminded that the OCC does not approve national bank name changes nor
does it maintain official titles or the retention of alternate titles. The use
of other titles or the retention of the rights to any previously used title is
the responsibility of the Bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours,
/s/ Linda Leickel
Linda Leickel
Senior Licensing Analyst
Charter No.: 23548
Control No.: 97 NE 04 010 w/97 NE 01 022
<PAGE>
Exhibit 16(4)
[LOGO OF CHASE]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
BY-LAWS
Article I. MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the Association, or such other
place as the board may designate, and at such time in each year as may be
designated by the board of directors. Unless otherwise provided by law, notice
of the meeting may be waived by the Association's sole shareholder in accordance
with 12 C.F.R. (S) 7.2001. If, for any cause, an election of directors is not
made on that date, or in the event of a legal holiday, on the next following
banking day, an election may be held on any subsequent day within 60 days of the
date fixed, to be designated by the board, or, if the directors fail to fix the
date, by shareholders representing two thirds of the shares issued and
outstanding.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by a majority of the board of directors or by any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of the Association or by the Chairperson of the board of directors or the
President. Unless otherwise provided by law, advance notice of a special
meeting may be waived by the Association's Sole Shareholder in accordance with
12 C.F.R. (S) 7.2001.
SECTION 1.3. NOMINATIONS OF DIRECTORS. Nominations for election to the board
of directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the Association, shall be made in writing and shall
be delivered or mailed to the President of the Association and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
President of the Association and to the Comptroller of the Currency not later
than the close of business on the seventh (7th) day following the day on which
the notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Association that will
be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned by the
notifying shareholder. Nominations not made in accordance herewith may, in
his/her discretion, be disregarded by the Chairperson of the meeting, and upon
his/her instructions, the vote tellers may disregard all votes cast for each
such nominee.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing, but no officer or employee of this
Association shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting above
requirements submitted at any time during a meeting shall be accepted.
SECTION 1.5 QUORUM. A majority of the outstanding capital stock, represented
in person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 10.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association, or by the shareholders or directors pursuant to Section
10.2. Any action required or
<PAGE>
permitted to be taken by the shareholders may be taken without a meeting by
unanimous written consent of the shareholders to a resolution authorizing the
action. The resolution and the written consent shall be filed with the minutes
of the proceedings of the shareholders.
ARTICLE II. DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors ("board") shall have
the power to manage and administer the business and affairs of the Association.
Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the board.
SECTION 2.2. NUMBER. The board shall consist of not less than five nor more
than twenty-five persons, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof; provided, however, that a majority of the full board may not
--------- --------
increase the number of directors to a number which: (1) exceeds by more than
two the number of directors last elected by shareholders where such number was
15 or less; and (2) exceeds by more than four the number of directors last
elected by shareholders where such number was 16 or more, but in no event shall
the number of directors exceed 25.
SECTION 2.3. ORGANIZATION MEETING. The Secretary shall notify the directors-
elect of their election and of the time at which they are required to meet at
the main office of the Association to organize the new board and elect and
appoint officers of the Association for the succeeding year. Such meeting shall
be held on the day of the election or as soon thereafter as practicable, and, in
any event, within 30 days thereof. If, at the time fixed for such meeting,
there shall not be a quorum, the directors present may adjourn the meeting, from
time to time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The time and location of regular meetings of
the board shall be set by the board. Such meetings may be held without notice.
Any business may be transacted at any regular meeting. The board may adopt any
procedures for the notice and conduct of any meetings as are not prohibited by
law.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board may be called at
the request of the Chairperson or Co-Chairperson of the board, the President, or
three or more directors. Each member of the board shall be given notice stating
the time and place, by telegram, telephone, letter or in person, of each such
special meeting at least one day prior to such meeting. Any business may be
transacted at any special meeting.
SECTION 2.6. ACTION BY THE BOARD. Except as otherwise provided by law,
corporate action to be taken by the board shall mean such action at a meeting of
the board. Any action required or permitted to be taken by the board or any
committee of the board may be taken without a meeting if all members of the
board or the committee consent in writing to a resolution authorizing the
action. The resolution and the written consents thereto shall be filed with the
minutes of the proceedings of the board or committee. Any one or more members
of the board or any committee may participate in a meeting of the board or
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such
meeting.
SECTION 2.7. WAIVER OF NOTICE. Notice of a special meeting need not be given
to any director who submits a signed waiver of notice, whether before or after
the meeting, or who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to him or her.
SECTION 2.8. QUORUM AND MANNER OF ACTING. Except as otherwise required by law,
the Articles of Association or these by-laws, a majority of the directors shall
constitute a quorum for the transaction of any business at any meeting of the
board and the act of a majority of the directors present and voting at a meeting
at which a quorum is present shall be the act of the board. In the absence of a
quorum, a majority of the directors present may adjourn any meeting, from time
to time, until a quorum is present and no notice of any adjourned meeting need
be given. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.9. VACANCIES. In the event a majority of the full board increases
the number of directors to a number which exceeds the number of directors last
elected by shareholders, as permitted by Section 2.2, directors may be appointed
to fill the resulting vacancies by vote of such majority of the full board. In
the event of a vacancy
<PAGE>
in the board for any other cause, a director may be appointed to fill such
vacancy by vote of a majority of the remaining directors then in office.
SECTION 2.10. REMOVAL OF DIRECTORS. The vacancy created by the removal of a
director pursuant to this Section may be filled by the board in accordance with
Section 2.9 of these by-laws or by the shareholders.
ARTICLE III. COMMITTEES
SECTION 3.1. EXECUTIVE COMMITTEE. There may be an executive committee
consisting of the Chairperson or Co-Chairperson of the board and not less than
two other directors appointed by the board annually or more often. Subject to
the limitations in Section 3.4(g) of these by-laws, the executive committee
shall have the maximum authority permitted by law.
SECTION 3.2. AUDIT COMMITTEE. There may be an audit committee composed of not
less than two directors, exclusive of any active officers, appointed by the
board annually or more often, whose duty it shall be to make an examination at
least once during each calendar year and within fifteen months of the last
examination into the affairs of the Association, or cause continuous suitable
examinations to be made, by auditors responsible only to the board, and to
report the results of any such examinations in writing to the board from time to
time. Such examinations shall include audits of the fiduciary business of the
Association as may be required by law or regulation.
SECTION 3.3. OTHER COMMITTEES. The board may appoint, from time to time, other
committees of one or more persons, for such purposes and with such powers as the
board may determine.
SECTION 3.4. GENERAL. (a) Each committee shall elect a Chairperson from among
the members thereof and shall also designate a Secretary of the committee, who
shall keep a record of its proceedings.
(b) Vacancies occurring from time to time in the membership of any committee
shall be filled by the board for the unexpired term of the member whose
departure causes such vacancy. The board may designate one or more alternate
members of any committee, who may replace any absent member or members at any
meeting of such committee.
(c) Each committee shall adopt its own rules of procedure and shall meet at
such stated times as it may, by resolution, appoint. It shall also meet
whenever called together by its Chairperson or the Chairperson of the board.
(d) No notice of regular meetings of any committee need be given. Notice of
every special meeting shall be given either by mailing such notice to each
member of such committee at his or her address, as the same appears in the
records of the Association, at least two days before the day of such meeting, or
by notifying each member on or before the day of such meeting by telephone or by
personal notice, or by leaving a written notice at his or her residence or place
of business on or before the day of such meeting. Waiver of notice in writing
of any meeting, whether prior or subsequent to such meeting, or attendance at
such meeting, shall be equivalent to notice of such meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at any
special meeting.
(e) All committees shall, with respect to all matters, be subject to the
authority and direction of the board and shall report to it when required.
(f) Unless otherwise required by law, the Articles of Association or these by-
laws, a quorum at any meeting of any committee shall be one-third of the full
membership and present shall be the act of the committee.
(g) No committee shall have authority to take any action which is expressly
required by law or regulation to be taken at a meeting of the board or by a
specified proportion of directors.
ARTICLE IV. OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRPERSON OF THE BOARD. The board shall appoint one of its
members to be the Chairperson of the board, or two persons to serve as Co-
Chairperson of the board to serve at its pleasure. Such person shall preside at
all meetings of the board. The Chairperson or Co-Chairpersons of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these by-laws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board.
<PAGE>
SECTION 4.2. PRESIDENT. The board may appoint one of its members to be the
President of the Association. In the absence of the Chairperson or Co-
Chairpersons, the President shall preside at any meeting of the board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of President, or imposed by these by-laws. The President shall
also have and may exercise such further powers and duties as from time to time
may be conferred, or assigned by the board.
SECTION 4.3. VICE PRESIDENT. The board may appoint one or more Vice
Presidents. Each Vice President shall have such powers and duties as may be
assigned by the board.
SECTION 4.4. SECRETARY. The board shall appoint a Secretary, Cashier, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these by-laws; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Cashier, or imposed by these by-laws;
and shall also perform such other duties as may be assigned from time to time,
by the board.
SECTION 4.5. OTHER OFFICERS. The board may appoint one or more Assistant Vice
Presidents, one or more Trust Officers, one or more Assistant Secretaries, one
or more Assistant Cashiers, one or more Managers and Assistant Managers of
branches and such other officers and attorneys in fact as from time to time may
appear to the board to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the board, the Chairperson or Co-Chairpersons of the board,
or the President. The board may authorize an officer to appoint one or more
officers or assistant officers.
SECTION 4.6. RESIGNATION. An officer may resign at any time by delivering
notice to the Association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE V. FIDUCIARY ACTIVITIES
SECTION 5.1. TRUST COMMITTEE. There shall be a Trust Committee of this
Association composed of four or more members, who shall be capable and
experienced officers or directors of the Association. The Committee is charged
with the responsibility for the investment, retention, or disposition of assets
held in accounts with respect to which the Association has investment authority;
for the review of the assets of accounts for which the Association has
investment authority promptly after the acceptance of such an account and at
least once during every calendar year thereafter to determine the advisability
of retaining or disposing of such assets; for the determination of the manner in
which proxies received for accounts for which the Association has responsibility
for the voting of proxies shall be voted; for the determination of all
substantial questions involving discretionary authority of the Association of a
non-investment nature, including, but not limited to, distribution of principal
and/or income in respect of any account; for providing advice as to the
investment, retention, or disposition of assets in investment advisory accounts
maintained by the Association; for the making of such reports as this board
shall require; and for such other responsibilities as may be assigned by this
board. The Trust Committee, in discharging its aforementioned responsibilities,
may authorize officers of the Association to exercise such powers and under such
conditions as the Committee may from time to time prescribe.
SECTION 5.2. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the Association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under applicable law.
SECTION 5.3. TRUST AUDIT COMMITTEE. The board shall appoint a committee of at
least two directors, exclusive of any active officer of the association, which
shall, at least once during each calendar year make suitable audits of the
association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the board, and at such time shall ascertain whether
fiduciary powers have been administered according to law, Part 9 of the
Regulations of the Comptroller of the Currency, and sound fiduciary principles.
SECTION 5.4. FIDUCIARY FILES. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
<PAGE>
ARTICLE VI. STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights of the prior
holder of such shares.The board may impose conditions upon the transfer of the
stock reasonably calculated to simplify the work of the Association with respect
to stock transfers, voting at shareholder meetings, and related matters and to
protect it against fraudulent transfers.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the Chairperson or Co-Chairpersons of the board or President (which
may be engraved, printed or impressed), and shall be signed manually or by
facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant
Cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer, and the seal of the Association shall be
engraved thereon. Each certificate shall recite on its face that the stock
represented thereby is transferable only upon the books of the Association
properly endorsed. In case any such officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
before such certificate is issued, it may be issued by the Association with the
same effect as if such officer had not ceased to be such at the time of its
issue. The corporate seal may be a facsimile, engraved or printed.
ARTICLE VII. CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The Chairperson, the President, the Cashier, the
Secretary or any Assistant Cashier or Assistant Secretary, or other officer
thereunto designated by the board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such seal
shall be substantially in the following form: A circle, with the words "Chase
Manhattan Trust Company, National Association" within such circle.
Article VIII. MISCELLANEOUS PROVISIONS
SECTION 8.1. FISCAL YEAR. The fiscal year of the Association shall be the
calendar year.
SECTION 8.2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Association by the Chairperson or Co-Chairpersons of the board, or the
President, or any Vice Chairperson, or any Managing Director, or any Vice
President, or any Assistant Vice President, or the Chief Financial Officer, or
the Controller, or the Secretary, or the Cashier, or, if in connection with
exercise of fiduciary powers of the Association, by any of those officers or by
any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the Association in such other
manner and by such other officers as the board may from time to time direct.
The provisions of this Section 8.2 are supplementary to any other provision of
these by-laws.
SECTION 8.3. RECORDS. The Articles of Association, the by-laws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the Secretary,
Cashier or other officer appointed to act as Secretary of the meeting.
SECTION 8.4. CORPORATE GOVERNANCE PROCEDURES. To the extent not inconsistent
with applicable Federal banking law, bank safety and soundness or these by-laws,
the corporate governance procedures found in the Delaware General Corporation
Law shall be followed by the Association.
ARTICLE IX. INDEMNIFICATION
<PAGE>
SECTION 9.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Association or is or was serving at the request of
the Association as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Association to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Association to provide broader indemnification rights than such law permitted
the Association to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 9.3 of these by-laws with respect to proceedings
to enforce rights to indemnification, the Association shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
board.
SECTION 9.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 9.1 of these by-laws shall include the right to be paid by
the Association the expenses (including attorney's fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Association of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 9.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 9.1 and 9.2 of these by-laws shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 9.3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 9.1
or 9.2 of these by-laws is not paid in full by the Association within sixty (60)
days after a written claim has been received by the Association except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Association to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Association to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (1) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) any suit brought by the Association to recover an
advancement of expenses pursuant to the terms of an undertaking, the Association
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Association
(including the board, the Association's independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Association (including the board, the Association's independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Association to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article IX or otherwise shall be on the Association.
SECTION 9.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in this Article IX shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Association's Articles of Association, by-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
<PAGE>
SECTION 9.5. INSURANCE. The Association may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Association or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Association would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 9.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE ASSOCIATION. The
Association may, to the extent authorized from time to time by the board, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Association to the fullest extent of the provisions of this Article
IX with respect to the indemnification and advancement of expenses of directors
and officers of the Association.
ARTICLE X. BY-LAWS
SECTION 10.1. INSPECTION. A copy of the by-laws, with all amendments, shall at
all times be kept in a convenient place at the main office of the Association,
and shall be open for inspection to all shareholders during banking hours.
SECTION 10.2. AMENDMENTS. The by-laws may be amended, altered or repealed, at
any regular meeting of the board by a vote of a majority of the total number of
the directors except as provided below. The Association's shareholders may
amend or repeal the by-laws even though the by-laws may be amended or repealed
by its board.
<PAGE>
EXHIBIT 16(6)
Consent for Records of Governmental Agencies
to be Made Available to the Commission
--------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association, pursuant
to Section 321(b) of The Trust Indenture Act of 1939, hereby authorizes the
Board of Governors of the Federal Reserve System, the Federal Reserve Banks, the
Treasury Department, the Comptroller of the Currency and the Federal Deposit
Insurance Corporation, under such conditions as they may prescribe, to make
available to the Commission such reports, records or other information as they
may have available with respect to the undersigned as a prospective trustee
under an indenture to be qualified under the aforesaid Trustee Indenture Act of
1939 and to make through their examiners or other employees for the use of the
Commission, examinations of the undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust Indenture Act
of 1939, consents that reports of examination by the Federal, State, Territorial
or District authorities may be furnished by such authorities to the Commission
upon request therefor.
Dated this 16th day of February, 2000.
Chase Manhattan Trust Company,
National Association
By: \s\ Karen Vera
--------------
Karen Vera
Assistant Vice President
<PAGE>
EXHIBIT 16(7)
Chase Manhattan Trust Company, National Association
STATEMENT OF CONDITION
DECEMBER 31,1999
<TABLE>
<CAPTION>
<S><C> <C> <C>
($000)
--------
ASSETS
Cash and Due From Banks $ 12,526
Securities Available for Sale 4,857
Premises and Fixed Assets 4,452
Intangible Assets 157,494
------------
Total Assets $179,329
============
LIABILITIES
Sundry Liabilities and Accrued Expenses $ 6,300
------------
STOCKHOLDER'S EQUITY
Common Stock $ 5,000
Surplus 156,892
Retained Earnings 11,137
------------
Total Stockholder's Equity $173,029
------------
Total Liabilities and Stockholder's Equity $179,329
============
</TABLE>
