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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-30540
PROSPECTUS
April 24, 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
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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 April 18, 2000 was $72 3/16 per share.
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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TABLE OF CONTENTS
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Summary.................................................................... 1
The Offering............................................................... 2
Risk Factors............................................................... 3
Use of Proceeds............................................................ 13
Ratio of Earnings to Fixed Charges......................................... 13
Description of Notes....................................................... 14
Description of Capital Stock............................................... 23
Certain Federal Income Tax Considerations.................................. 24
Selling Securityholders.................................................... 30
Plan of Distribution....................................................... 34
Legal Matters.............................................................. 35
Experts.................................................................... 36
Where You Can Find More Information........................................ 36
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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 March 31, 2000, we had
senior indebtedness outstanding in the
amount of approximately $1.1 million, and
our subsidiaries had approximately $66.4
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 statements.
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
. 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
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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
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
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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 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
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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;
. 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:
. 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;
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. 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
. 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
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. 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 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.
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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 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 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
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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.
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
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<PAGE>
. 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
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 March 31, 2000, we had senior indebtedness outstanding in the amount of
approximately $1.1 million and our subsidiaries had approximately $66.4
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 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."
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<PAGE>
WE MAY INCUR ADDITIONAL INDEBTEDNESS IN THE FUTURE, WHICH COULD INCREASE THE
RISKS DESCRIBED ABOVE
On March 31, 2000 we had total indebtedness of approximately $176.2 million
(excluding letters of credit) and a debt to equity ratio of approximately 0.55
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 March 31, 2000, 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.
OUR STOCK PRICE MAY CONTINUE TO EXPERIENCE LARGE SHORT-TERM FLUCTUATIONS THAT
MAY SIGNIFICANTLY AFFECT THE TRADING PRICE OF THE 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 Six months
September 30, ended
------------------------ March 31,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......... 26X 5X 18X 2X -- 14X
</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 the
registration statement of which this prospectus is a part.
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:
. 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."
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<PAGE>
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 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;
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<PAGE>
(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 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;
. 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."
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<PAGE>
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 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.
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<PAGE>
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.
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.
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 March 31, 2000, we had senior indebtedness outstanding in the amount
of approximately $1.1 million, and our subsidiaries had $66.4 million of debt
and other liabilities outstanding, excluding inter-company
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<PAGE>
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;
(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;
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. 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:
. 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.
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;
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. 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 April 14, 2000, there were 24,020,358 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 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. 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, increased by
the amount of any market discount taken into income as ordinary income (as
discussed below) or decreased by any bond premium previously amortized with
respect to the note (as discussed below). 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.
MARKET DISCOUNT
The market discount rules discussed below apply to any note purchased after
its original issuance at a price which is less than its principal amount as
well as to any note purchased at its original issuance for an amount which is
less than the price at which a substantial amount of the notes were originally
sold.
A U.S. Holder who purchases a note at a market discount generally will be
required to treat any principal payments on, or any gain on the disposition or
maturity of, such note as ordinary income to the extent of the accrued market
discount (not previously included in income) at the time of such payment or
disposition. In general, subject to a de minimis exception, market discount is
the amount by which the note's principal amount exceeds the holder's tax basis
in the note immediately after the note is acquired. A note is not treated as
purchased at a market discount, however, if the market discount is less than
.25 percent of the principal amount of the note multiplied by the number of
complete years to maturity from the acquisition date. Market discount on a
note will accrue on a straight-line basis, unless the holder elects to accrue
such discount on a constant yield to maturity basis. This election is
irrevocable and applies only to the note for which it is made. A holder may
also elect to include market discount in income currently as it accrues. This
election, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies
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and may not be revoked without the consent of the IRS. If a U.S. Holder
disposes of a note acquired at a market discount in any nontaxable transaction
(other than a nonrecognition transaction defined in Section 1276(c) of the
Internal Revenue Code), accrued market discount will be includible in the U.S.
Holder's income as ordinary income as if the U.S. Holder had sold the note at
its fair market value. The U.S. Holder may be required to defer until the
maturity of the note or, in certain circumstances, its earlier disposition,
the deduction or all or a portion of the interest expense attributable to debt
incurred or continued to purchase or carry a note with market discount, unless
the U.S. Holder makes an election to include the market discount on a current
basis.
AMORTIZABLE BOND PREMIUM
A U.S. Holder who purchases a note for an amount in excess of its principal
amount generally will be considered to have purchased the note with
"amortizable bond premium". Such a U.S. Holder generally may elect to amortize
such premium using the constant yield to maturity method. The amount amortized
in any year will generally be treated as a reduction of interest income on the
note. If the amortizable bond premium allocable to a year exceeds the amount
of interest allocable to that year, the excess would be allowed as a deduction
for that year but only to the extent of the U.S. Holder's prior interest
inclusions on the note. If the U.S. Holder does not make such an election, the
premium on the note will decrease the gain or increase the loss otherwise
recognized on the sale, redemption, retirement or other disposition of the
note. The election to amortize the premium on a constant yield to maturity
method, once made, generally applies to all bonds held or subsequently
acquired by the U.S. Holder on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent
of the Internal Revenue Service.
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 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.
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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.
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 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).
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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 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.
29
<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 we received from the selling
securityholders on or before April 18, 2000, with respect to the selling
securityholders and the principal amount of notes and the underlying common
stock beneficially owned by each selling securityholder prior to the offering
and that may be offered using this prospectus.
<TABLE>
<CAPTION>
Principal Amount Number of
at Maturity of Shares of Number of
Notes Common Stock Shares of
Beneficially Percentage Owned Prior Common Stock Percentage of
Owned that May of Notes to the that May Common Stock
Name Be Sold Outstanding Offering Be Sold(1) Outstanding(2)
---- ---------------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Aftra Health Fund....... $ 250,000 * 5,459 5,459 *
Alscott Investments,
LCC.................... 4,000,000 2.3% 87,338 87,338 *
Allstate Insurance
Company................ 1,050,000 * 22,926 22,926 *
Alpine Associates....... 3,950,000 2.3% 86,246 86,246 *
Alpine Partners, L.P. .. 550,000 * 12,009 12,009 *
American Masters Fund
"AG Absolute Return
Series" Limited........ 500,000 * 10,917 10,917 *
Argent Classic
Convertible Arbitrage
Fund (Bermuda) L.P. ... 500,000 * 10,917 10,917 *
Aristeia International
Ltd. .................. 975,000 * 21,289 21,289 *
Aristeia Trading, LLC... 525,000 * 11,463 11,463 *
Associated Electric &
Gas Insurance Services
Limited................ 300,000 * 6,550 6,550 *
Bank Austria Cayman
Island, Ltd. .......... 3,000,000 1.7% 65,503 65,503 *
Bear, Stearns & Co.
Inc. .................. 2,225,000 1.3% 48,581 48,581 *
BNP Arbitrage SNC....... 5,750,000 3.3% 125,548 125,548 *
Boulder Capital Inc. ... 1,900,000 1.1% 41,485 41,485 *
Boulder II Limited...... 5,800,000 3.3% 126,639 126,639 *
Chrysler Corporation
Master Retirement
Trust.................. 1,980,000 1.1% 43,232 43,232 *
CIBC World Markets...... 9,000,000 5.1% 196,510 196,510 *
CIBC World Markets
International Arbitrage
Corp. ................. 5,500,000 3.1% 120,089 120,089 *
Coastal Convertibles
Ltd. .................. 1,000,000 * 21,834 21,834 *
Daimler Chrysler Corp.
Emp. #1 Plan dated
4/1/89................. 3,239,000 1.9% 70,722 70,722 *
Delaware PERS........... 1,925,000 1.1% 42,031 42,031 *
Delta Air Lines Master
Trust.................. 905,000 * 19,760 19,760 *
Deutshe Bank
Securities............. 680,000 * 14,847 14,847 *
Employee Benefit
Convertible Securities
Fund................... 155,000 * 3,384 3,384 *
Family Service Life
Insurance Co. ......... 200,000 * 4,367 4,367 *
Fidelity Financial
Trust: Fidelity
Convertible Securities
Fund................... 4,000,000 2.3% 87,338 87,338 *
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Amount Number of
at Maturity of Shares of Number of
Notes Common Stock Shares of
Beneficially Percentage Owned Prior Common Stock Percentage of
Owned that May of Notes to the that May Common Stock
Name Be Sold Outstanding Offering Be Sold(1) Outstanding(2)
---- ---------------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Forest Alternative
Strategies Fund Series
II A5M................. $ 75,000 * 1,638 1,638 *
Forest Fulcrum Fund
L.P. .................. 500,000 * 10,917 10,917 *
Forest Global
Convertible Fund A5.... 3,725,000 2.1% 81,333 81,333 *
Franklin & Marshall
College................ 241,000 * 5,262 5,262 *
Frederic C. Hamilton.... 800,000 * 17,468 17,468 *
GE Pension Trust........ 1,708,000 * 37,293 37,293 *
GLG Global Convertible
Fund................... 2,825,000 1.6% 61,682 61,682 *
GLG Global Convertible
UCITS Fund............. 675,000 * 14,738 14,738 *
Global Bermuda Limited
Partnership............ 1,000,000 * 41,234 21,834 *
Grace Brothers, Ltd. ... 500,000 * 10,917 10,917 *
Guardian Life Insurance
Co. ................... 3,200,000 1.8% 69,870 69,870 *
Guardian Pension Trust.. 100,000 * 2,183 2,183 *
Hamilton Family Trust... 355,000 * 7,751 7,751 *
ICI American Holdings
Trust.................. 925,000 * 22,926 22,926 *
Jefferies and Company... 1,000,000 * 21,834 21,834 *
JMG Convertible
Investments............ 1,250,000 * 27,293 27,293 *
John M. Olin Foundation,
Inc. .................. 1,000,000 * 21,834 21,834 *
KD Offshore C.V. ....... 500,000 * 10,917 10,917 *
Kellner, DiLeo and
Co. ................... 500,000 * 10,917 10,917 *
Kentfield Trading,
Ltd. .................. 10,660,000 6.1% 232,755 232,755 *
Lakeshore International
Ltd. .................. 1,500,000 * 61,752 32,752 *
LLT Limited............. 200,000 * 4,367 4,367 *
Mainstay Convertible
Fund................... 2,950,000 1.7% 64,411 64,411 *
Mainstay Strategic Value
Fund................... 150,000 * 3,275 3,275 *
Mainstay VP Convertible
Portfolio.............. 1,000,000 * 21,834 21,834 *
Mark IV Industries, Inc.
and Subsidiaries Master
Trust.................. 280,000 * 6,114 6,114 *
Mary Ann Hamilton....... 517,000 * 11,288 11,288 *
McMahan Securities Co.
L.P. .................. 12,000 * 262 262 *
Michael Angelo, L.P. ... 1,500,000 * 32,752 32,752 *
Morgan Stanley Dean
Witter Convertible
Securities Trust....... 2,000,000 1.1% 43,669 43,669 *
Motion Picture Industry
Health Plan--Active
Member Fund............ 175,000 * 3,821 3,821 *
Motion Picture Industry
Health Plan-- Retiree
Member Fund............ 90,000 * 1,965 1,965 *
Mount Sinai School of
Medicine............... 658,000 * 14,367 14,367 *
Museum of Fine Arts,
Boston................. 57,000 * 1,245 1,245 *
Nalco Chemical Company.. 160,000 * 3,494 3,494 *
Nations Convertible
Securities Fund........ 2,255,000 1.3% 49,237 49,237 *
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Principal Amount Number of
at Maturity of Shares of Number of
Notes Common Stock Shares of
Beneficially Percentage Owned Prior Common Stock Percentage of
Owned that May of Notes to the that May Common Stock
Name Be Sold Outstanding Offering Be Sold(1) Outstanding(2)
---- ---------------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
New Hampshire Retirement
System................. $ 336,000 * 7,336 7,336 *
New York Life Separate
Account #7............. 850,000 * 18,559 18,559 *
Nomura Securities
International Inc. .... 5,000,000 2.9% 109,472 109,172 *
OCM Convertible Limited
Partnership............ 75,000 * 1,638 1,638 *
Onex Industrial Partners
Limited................ 2,550,000 1.5% 55,678 55,678 *
Pacific Innovations
Trust Capital Income
Fund................... 300,000 * 6,550 6,550 *
Paloma Securities
L.L.C. ................ 5,570,000 3.2% 121,618 121,618 *
Paloma Strategic
Securities Limited..... 13,070,000 7.5% 285,376 285,376 1.2%
Parker--Hannifin
Corporation............ 68,000 * 1,485 1,485 *
Partner Reinsurance
Company Ltd. .......... 395,000 * 8,625 8,625 *
Pebble Capital Inc. .... 250,000 * 5,459 5,459 *
Penn Treaty Network
America Insurance Co .. 226,000 * 4,935 4,935 *
PIMCO Convertible Bond
Fund................... 2,500,000 1.4% 54,586 54,586 *
Pitney Bowes Retirement
Fund................... 4,700,000 2.7% 102,622 102,622 *
ProMutual............... 208,000 * 4,542 4,542 *
Putnam Balanced
Retirement Fund........ 98,000 * 2,140 2,140 *
Putnam Convertible
Income--Growth Trust... 2,081,000 1.2% 45,437 45,437 *
Putnam Convertible
Opportunities and
Income Trust........... 155,000 * 3,384 3,384 *
Quattro Fund Ltd. ...... 1,000,000 * 21,834 21,834 *
Ramius Capital Group
Holdings, Ltd. ........ 1,000,000 * 21,834 21,834 *
Ramius, L.P. ........... 1,000,000 * 21,834 21,834 *
RCG Baldwin, L.P. ...... 500,000 * 10,917 10,917 *
Spear, Leeds & Kellog... 1,200,000 * 26,201 26,201 *
State Employees'
Retirement Fund of the
State of Delaware...... 345,000 * 7,533 7,533 *
State of Connecticut
Combined Investment
Funds.................. 2,390,000 1.4% 52,184 52,184 *
Sylvan IMA Ltd. ........ 1,000,000 * 21,834 21,834 *
Tennessee Consolidated
Retirement System...... 1,000,000 * 21,834 21,834 *
The Northwestern Mutual
Life Insurance
Company................ 5,000,000 2.9% 109,172 109,172 *
Triarc Companies Inc. .. 500,000 * 10,917 10,917 *
Triton Capital
Investments, Ltd. ..... 1,250,000 * 27,293 27,293 *
University of
Rochester.............. 53,000 * 1,157 1,157 *
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Amount Number of
at Maturity of Shares of Number of
Notes Common Stock Shares of
Beneficially Percentage Owned Prior Common Stock Percentage of
Owned that May of Notes to the that May Common Stock
Name Be Sold Outstanding Offering Be Sold(1) Outstanding(2)
---- ---------------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
U.S. Olympic
Foundation............. $ 440,000 * 9,607 9,607 *
Value Line Convertible
Fund, Inc. ............ 500,000 * 10,917 10,917 *
Van Kempen Harbor Fund.. 4,245,000 2.4% 92,687 92,687 *
Vanguard Convertible
Securities Fund,
Inc. .................. 1,550,000 * 33,843 33,843 *
Victory Convertible
Securities Fund........ 650,000 * 14,192 14,192 *
Warburg Dillion Reed
LLC.................... 1,000,000 * 21,834 21,834 *
Wells Fargo Bank,
N.A. .................. 235,000 * 5,131 5,131 *
White River Securities
LLC.................... 2,225,000 1.3% 48,582 48,582 *
Zeneca Holdings Pension
Trust.................. 500,000 * 21,834 21,834 *
Any other holder of
notes or future
transferee, pledgee,
donee or successor of
any holder(3)(4)....... 4,083,000 2.3% 89,150 89,150 *
</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 24,020,358
shares of common stock outstanding as of April 14, 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, to the extent provided to us by the selling securityholders, in
prospectus supplements, if and when necessary.
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."
33
<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
. 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;
. through the writing of put or call options;
. through the distribution of the securities by any selling securityholder
to its partners, members or shareholders; or
34
<PAGE>
. through a combination of any of the above.
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 or other financial
institutions, 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 pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
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."
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 notes and the indenture under
which the notes were issued.
35
<PAGE>
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 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.
36
<PAGE>
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
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.
37
<PAGE>
[K&S Logo]
