As filed with the Securities and Exchange Commission on January 17, 2002
Registration No. 333-69704
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ChipPAC International Company Limited
ChipPAC, Inc.
ChipPAC Liquidity Management Hungary Limited Liability Company
ChipPAC Luxembourg S.a.R.L.
ChipPAC Korea Company Ltd.
ChipPAC Limited
ChipPAC (Barbados) Ltd.
ChipPAC Malaysia Sdn. Bhd.
(Exact Name of Registrant as Specified in Its Charter)
British Virgin Islands 66-0573152
Delaware 77-0463048
Hungary 98-0209814
Luxembourg 98-0209817
Republic of Korea 98-0209695
British Virgin Islands 98-0209699
Barbados 98-0209821
Malaysia 98-0361633
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
47400 Kato Road, Fremont, California 94538
(510) 979-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Dennis P. McKenna
President & Chief Executive Officer
ChipPAC, Inc.
47400 Kato Road, Fremont, California 94538
(510) 979-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copy to:
Eva Herbst Davis, Esq.
Kirkland & Ellis
777 South Figueroa Street
Los Angeles, California 90017
(213) 680-8400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Amount to Be Offering Price Aggregate Registration
Title of Each Class of Securities to Be Registered Registered Per Unit Offering Price Fee
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12 3/4% Senior Subordinated Notes due 2009.... $15,000,000 100% $15,000,000 $3,750(1)
Guarantees.................................... -- -- -- (2)
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(1)Fee was paid with previous filing of the Registration Statement.
(2)Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate fee is payable.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus not complete and may be changed. These
securities may not be sold until the registration statement is filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated January 17, 2002.
[LOGO] ChipPac (Logo)
$15,000,000 12 3/4% Senior Subordinated Notes Due 2009
Unconditionally guaranteed on a senior subordinated basis by
ChipPAC, Inc.
ChipPAC Liquidity Management Hungary Limited Liability Company
ChipPAC Luxembourg S.a.R.L.
ChipPAC Korea Company Ltd.
ChipPAC Limited
ChipPAC (Barbados) Ltd.
ChipPAC Malaysia Sdn. Bhd.
This prospectus covers $15,000,000 aggregate principal amount of our 12 3/4%
senior subordinated notes due 2009 which we issued on June 22, 2001 in a
private placement and which may be offered and sold from time to time by the
selling security holder, CVC Capital Funding, LLC. We will receive no part of
the proceeds of the sales of the securities in this offering.
We will pay interest on the notes on each August and February 1. We may
redeem the notes on and after August 1, 2004. There is no sinking fund for the
notes. The notes are subordinated in right of payment to all existing and
future senior indebtedness of ChipPAC, of which there was $147.0 million
outstanding as of September 30, 2001.
The notes are eligible for trading in The PORTAL Market, a subsidiary of The
Nasdaq Stock Market, Inc.
Investing in the notes involves risks. See "Risk Factors" beginning on page
4.
The date of this prospectus is , 2001.
TABLE OF CONTENTS
Page
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ABOUT THIS PROSPECTUS...................................... 1
OUR COMPANY................................................ 1
RECENT DEVELOPMENTS........................................ 2
RISK FACTORS............................................... 4
FORWARD-LOOKING STATEMENTS................................. 15
RATIO OF EARNINGS TO FIXED CHARGES......................... 16
USE OF PROCEEDS............................................ 16
SELLING SECURITY HOLDER.................................... 17
PLAN OF DISTRIBUTION....................................... 18
DESCRIPTION OF NOTES....................................... 20
LEGAL MATTERS.............................................. 62
EXPERTS.................................................... 62
INCORPORATION BY REFERENCE................................. 63
WHERE YOU CAN FIND MORE INFORMATION........................ 63
i
ABOUT THIS PROSPECTUS
This prospectus is a part of the registration statement that we filed with
the Securities and Exchange Commission, or SEC. The selling security holders
named in this prospectus may from time to time sell the securities described in
this prospectus. You should read this prospectus together with additional
information described below under the next headings "Where You Can Find More
Information" and "Incorporation by Reference."
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer of sale is not permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or any sale of the securities. In
this prospectus, the "company," "ChipPAC," "we," "us" and "our" refer to
ChipPAC, Inc. Our principal executive offices are located at 47400 Kato Road,
Fremont, California, 94538, and our telephone number is (510) 979-8000.
OUR COMPANY
ChipPAC is one of the world's largest providers of semiconductor packaging,
test, and distribution services. We offer a full portfolio of leaded integrated
circuit, or IC, laminate and power packaging to leading semiconductor companies
that service the computing, communications and multi-application end markets.
We are a leader in providing high end packaging solutions, including ball grid
array packages, or BGA packages, the most advanced type of mass produced
package. We are the largest semiconductor packaging and test service provider
in mainland China. As consumers demand smaller form factors with more
functionality, there is a greater requirement for power regulation and
generation, which should drive demand for our power devices. We also provide
advanced packaging products that address the needs of semiconductors used in
wireless communications applications, including flip-chip, chip-scale and
stacked die technologies.
Outsourcing of packaging and test services to independent packagers like
ChipPAC continues to expand due to several factors, including time-to-market
pressures, cost reduction, resource allocation, equipment utilization, the
increased technological complexity of packaging, and the growth of fabless
semiconductor manufacturers. Historically, outsourced semiconductor
manufacturing services have grown faster than the semiconductor market.
According to Electronic Trend Publications, outsourcing for high-end package
solutions such as BGA and chip-scale packages or CSP, is forecasted to grow at
a compounded annual rate of 38.8% from 2000 to 2005.
Our headquarters are located in Fremont, California and our manufacturing
facilities are strategically located in South Korea, China and Malaysia to
address the needs of our customers. We also have design centers in Arizona and
South Korea to provide 24-hour support to our customers.
1
RECENT DEVELOPMENTS
We expect revenue of approximately $76.5 million for the three months ended
December 31, 2001, which represents an increase from our revenue of $74.6
million for the three months ended September 30, 2001. We expect to report an
adjusted net loss for the three months ended December 31, 2001 of $(0.22) per
share, as compared to an actual loss of $(0.24) per share for the three months
ended September 30, 2001. The loss for the three months ended December 31, 2001
excludes previously announced planned restructuring, one-time charges, and an
asset write down. We expect the one-time charges and restructuring charges to
be approximately $3.0 million and the asset write down to be between $30.0
million and $35.0 million.
The asset write down relates primarily to our manufacturing assets in our
assembly and test facilities in South Korea and Malaysia. We determined that
due to excess capacity, the future expected cash flows related to equipment for
certain package types will not be sufficient to recover the carrying value of
the manufacturing equipment for those package types in those facilities. The
carrying values of these assets were written down to our estimate of fair
market value and will continue to be depreciated over their remaining useful
lives.
The weakness in demand for packaging and test services as a result of the
current downturn in the semiconductor industry has and is expected to continue
to adversely affect our cash flow from operations. We believe that our existing
cash balances, cash flows from operations, available equipment lease financing
and available borrowings under our senior credit facilities provide sufficient
cash resources to meet our projected operating and other cash requirements for
the next twelve months.
We have signed an amendment to our senior credit facilities pursuant to
which, among other things, our senior lenders waived compliance with our
financial covenants until December 31, 2002 and replaced those covenants with
new covenants that apply for the year ended December 31, 2002 which better
reflect current conditions in the semiconductor industry. However, the
amendment stipulates that we raise at least $20.0 million of net proceeds of
permitted junior capital and prepay the outstanding senior credit facilities on
or prior to March 1, 2002 in an aggregate principal amount equal to the greater
of (i) $20.0 million and (ii) 50% of those net proceeds. If we do not complete
an offering and repayment on or prior to March 1, 2002, the waiver expires on
that date and we believe we would be in violation of the covenants regarding
the minimum interest coverage ratio we must maintain and the maximum leverage
ratio and the maximum senior leverage ratio we are permitted. If the
transaction providing us with the net proceeds is a registered offering of
securities and if the SEC reviews that offering, then we have until March 31,
2002 to apply those net proceeds and obtain the benefits of the waiver by our
senior lenders.
The amendment to our senior credit facilities defines permitted junior
capital as (1) our capital stock or (2) subordinated, unsecured indebtedness.
However, permitted junior capital cannot require any scheduled payment of
principal or return of capital prior to the maturity date of our 8% convertible
subordinated notes due 2011. Furthermore, in the case of indebtedness, the
subordination provisions and other non-pricing terms and conditions of the
indebtedness that is to qualify as permitted junior capital can be no less
favorable to us, our subsidiaries and our lenders under the senior credit
facilities than the analogous provisions of the notes we are offering through
this prospectus.
Should we fail to meet the requirements of the waiver by the expiration
date, we expect to enter into negotiations with our senior lenders. We cannot
assure that we will be able to raise the net proceeds on or prior to March 1,
2002 (or March 31, 2002 in the event of an SEC review) or, if we do not raise
these proceeds, that we will be in compliance with the existing covenants.
Failure to comply with any of our existing covenants would constitute a default
under the senior credit facilities. A default could cause a cross default under
the indenture governing these notes, which in turn could cause a substantial
majority of our aggregate indebtedness to become due and payable immediately.
An event of default under any debt instrument, if not cured or waived, could
have a material adverse effect on us. We may require capital sooner than
currently expected.
2
We currently intend to raise all of the permitted junior capital required by
our recent senior credit facility amendment through the issuance of
approximately 8,000,000 shares of our Class A common stock pursuant to a
registration statement filed with the SEC. We cannot assure you that the common
stock offering will be successful or that additional financing will be
available when we need it or, if available, that it will be available on
satisfactory terms. In addition, the terms of our senior credit facilities and
these notes significantly reduce our ability to incur additional debt. Failure
to obtain any required additional financing could have a material adverse
effect on our company.
See "If we have not raised at least $20.0 million of net proceeds from the
issuance of permitted junior capital and pre-paid the outstanding senior credit
facilities with at least this amount, we will be in violation of our existing
senior credit facilities" and "The senior revolving credit facility and the
indenture governing the notes impose limitations on how we conduct our
business; as a result, we may not be able to pursue strategies that could be in
the best interest of holders of the notes" on pages 3, 4 and 5 of "Risk
Factors."
3
RISK FACTORS
You should carefully consider the following factors in addition to the other
information set forth in this document in analyzing an investment in ChipPAC.
We believe that the risks and uncertainties described below are the current
material risks facing us. If any of the following risks actually occur, our
business, financial condition or results of operations will likely suffer. In
that case, the trading price of our publicly traded stock or notes could fall,
and you may lose all or part of the money you invested.
If we have not raised at least $20.0 million of net proceeds from the issuance
of permitted junior capital and prepaid the outstanding senior credit
facilities with at least this amount, we will be in violation of our existing
senior credit facilities.
The weakness in demand for packaging and test services as a result of the
current downturn in the semiconductor industry has and is expected to continue
to adversely affect our cash flow from operations. We believe that our existing
cash balances, cash flows from operations, available equipment lease financing
and available borrowings under our senior credit facilities provide sufficient
cash resources to meet our projected operating and other cash requirements for
the next twelve months. We have signed an amendment to our senior credit
facilities pursuant to which, among other things, our senior lenders waived
compliance with our financial covenants until December 31, 2002 and replaced
those covenants with new covenants that apply for the year ended December 31,
2002 which better reflect current conditions in the semiconductor industry.
However, the amendment stipulates that we raise at least $20.0 million of net
proceeds of permitted junior capital and prepay the outstanding senior credit
facilities on or prior to March 1, 2002 in an aggregate principal amount equal
to the greater of (i) $20.0 million and (ii) 50% of those net proceeds. If we
do not complete an offering and repayment on or prior to March 1, 2002, the
waiver expires on that date and we believe we would be in violation of the
covenants regarding the minimum interest coverage ratio we must maintain and
the maximum leverage ratio and the maximum senior leverage ratio we are
permitted. If the transaction providing us with the net proceeds is a
registered offering of securities and if the SEC reviews that offering, then we
have until March 31, 2002 to apply those net proceeds and obtain the benefits
of the waiver by our senior lenders. Should we fail to meet the requirements of
the waiver by the expiration date, we expect to enter into negotiations with
our senior lenders. We cannot assure that we will be able to raise the net
proceeds on or prior to March 1, 2002 (or March 31, 2002 in the event of an SEC
review) or, if we do not raise these proceeds, that we will be in compliance
with the existing covenants. Failure to comply with any of our existing
covenants would constitute a default under the senior credit facilities. A
default could cause a cross default under the indenture governing these notes,
which in turn could cause a substantial majority of our aggregate indebtedness
to become due and payable immediately. An event of default under any debt
instrument, if not cured or waived, could have a material adverse effect on us.
We may require capital sooner than currently expected. We cannot assure you
that additional financing will be available when we need it or, if available,
that it will be available on satisfactory terms. In addition, the terms of our
senior credit facilities and these notes significantly reduce our ability to
incur additional debt. Failure to obtain any required additional financing
could have a material adverse effect on our company.
4
Risks to Noteholders
Our substantial indebtedness could adversely affect our financial health, make
us vulnerable to adverse economic and industry conditions and prevent us from
fulfilling our obligations under our outstanding, publicly-traded notes.
As of September 30, 2001, our total indebtedness was $362.0 million,
including $165.0 million aggregate principal amount of the notes (which
includes $15.0 million of the notes being offered). Our substantial
indebtedness could have important consequences to you. For example, it could:
. make it more difficult for us to satisfy our obligations relating to the
notes;
. increase our vulnerability to general adverse economic and industry
conditions by limiting our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thus reducing the availability
of our cash flow to fund working capital, capital expenditures, research
and development efforts and other general corporate purposes;
. place us at a competitive disadvantage relative to our competitors that
have less debt; and
. limit, along with the financial and other restrictive covenants in our
indebtedness, our ability to borrow additional funds. Furthermore, failing
to comply with those covenants could result in an event of default which,
if not cured or waived, could have a material adverse effect on our
ability to increase our revenues and profitability and meet our growth
objectives.
Despite our current levels of indebtedness, we still may be able to incur
substantially more debt which could increase the risks created by our
substantial indebtedness.
We may be able to incur substantial additional indebtedness in the future.
For example, we have the ability to increase our revolving line of credit by
$25.0 million without further consent from our existing lenders. Our senior
credit provides for revolving loans up to $50.0 million, including letters of
credit. Additionally, the indenture for these notes permits us to incur
additional indebtedness if we meet a test measuring our cash flow relative to
our required interest payments. This indenture also allows us to incur debt
under our senior credit facility. The indenture for our convertible
subordinated notes does not limit our ability to incur additional indebtedness.
All of the borrowings under our senior credit facility are secured by all of
our assets and those of our subsidiaries, except those of our Chinese operating
subsidiary. The addition of new debt to our current debt levels could intensify
the debt-related risks that we now face that are described above.
ChipPAC International Company Limited or ChipPAC International will rely on
intercompany loans through its direct and indirect subsidiaries to satisfy
obligations of its indebtedness; as a result, if these subsidiaries are not
able to make payments on these intercompany loans, we may not be able to pay
our noteholders interest on the notes when due.
The only source of cash for ChipPAC International to pay principal and
interest on the notes will be through payments of interest and principal on
intercompany notes, capital contributions from the parent company or dividends
or distributions from ChipPAC International's subsidiaries, which dividends or
distributions would be funded through payments on intercompany notes. We will
rely principally on funds generated by ChipPAC International's operating
subsidiaries to fund payments on the notes and other indebtedness. If these
subsidiaries are unable to make payments on their intercompany loans, we may
not be able to satisfy obligations under our debt instruments, including
payment of interest on the senior revolving credit facility and the notes.
5
Our ability to pay our obligations under the notes may be reduced because
ChipPAC International's Chinese operating subsidiaries, which hold 26.0% of our
consolidated assets and generated 17.5% of our consolidated revenues for the
nine months ended September 30, 2001, are not guarantors of the notes.
Our Chinese subsidiaries are not guarantors of the notes. For the nine
months ended September 30, 2001, the total revenues for our Chinese
subsidiaries were $44.1 million, representing approximately 17.5% of our
consolidated revenues. The combined fixed assets for our Chinese subsidiaries
at September 30, 2001 were approximately $158.3 million, representing
approximately 26.0% of our consolidated assets.
Claims of creditors of our Chinese operating subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness or guaranties
issued by these subsidiaries, will generally have priority on the assets and
earnings of these subsidiaries, over the claims of creditors of our company,
including holders of our notes, even if the obligations of our Chinese
operating subsidiaries do not constitute senior indebtedness. Since the
company's Chinese subsidiaries will not guarantee the notes, holders of the
notes will have to rely solely on dividends or distributions from the company's
Korean, Malaysian and British Virgin Islands subsidiaries to satisfy their
respective obligations under the notes should the company's Chinese
subsidiaries be unable to make dividends or distributions.
The senior revolving credit facility and the indenture governing the notes
impose limitations on how we conduct our business; as a result, we may not be
able to pursue strategies that could be in the best interests of holders of the
notes.
The senior revolving credit facility and the indenture governing the notes
contain restrictions on us that could increase our vulnerability to general
adverse economic and industry conditions by limiting our flexibility in
planning for and reacting to changes in our business and industry.
Specifically, these restrictions limit our ability to:
. incur additional debt;
. pay dividends and make other distributions;
. prepay subordinated debt;
. make investments and other restricted payments;
. enter into sale and leaseback transactions;
. create liens;
. sell assets;
. enter into transactions with affiliates; and
. consolidate or merge.
Our senior credit facility contains financial covenants that require us to
meet specified financial tests, including, without limitation, a minimum
interest coverage ratio, a maximum leverage ratio, a maximum consolidated
capital expenditure amount, a minimum fixed charge coverage ratio, a maximum
senior leverage ratio and a minimum consolidated adjusted EBITDA amount. As a
result of these restrictions, we may not be able to pursue business strategies
that could be in the best interests of holders of our notes. In our most recent
bank amendment, our senior lenders have waived compliance with the minimum
interest coverage ratio, the maximum leverage ratio and the maximum senior
leverage ratio from December 31, 2001 to and including December 31, 2002 and
replaced those covenants with new covenants that apply for the year ended
December 31, 2002 which better reflect current conditions in the semiconductor
industry. In a prior bank amendment, our senior lenders have also waived
compliance with the minimum fixed charge coverage ratio for the calculation
periods ending during the period commencing on and including September 30, 2001
and ending on and including December 31, 2002.
6
The covenants waived for 2002 under the most recent bank amendment include:
(1) the minimum interest coverage ratio of 1.6 to 1.0 through March 31, 2002,
1.75 to 1.0 through June 30, 2002 and 1.85 to 1.0 through December 31, 2002;
(2) the maximum leverage ratio of 5.0 to 1.0 through June 30, 2002 and 4.5 to
1.0 through December 31, 2002; and (3) the maximum senior leverage ratio of 2.5
to 1.0 through December 31, 2002. These three covenants were waived under the
current amendment and replaced for 2002 with (1) a minimum consolidated
adjustable EBITDA amount of $30.0 million, $26.0 million, $32.0 million and
$40.0 million for the twelve months ended March 31, June 30, September 30 and
December 31, 2002, respectively, and (2) a new maximum capital expenditure
amount of $30.0 million. Pursuant to a prior amendment, the minimum fixed
charge coverage ratio of 1.05 to 1.0 was waived through December 31,2002.
At September 30, 2001, we were in compliance with all of our financial
covenants, except the minimum fixed charge coverage ratio whose compliance was
waived. In addition, at September 30, 2001, our interest coverage ratio was
1.83 to 1.0; our leverage ratio was 4.83 to 1.0; and our senior leverage ratio
was 2.28 to 1.0. For the nine months ended September 30, 2001, our consolidated
capital expenditures were approximately $33.7 million. While we were not
required to maintain consolidated adjusted EBITDA for any periods ending on or
prior to December 31, 2001, our consolidated adjusted EBITDA for the twelve
months ended September 30, 2001 was $64.5 million.
If we fail to comply with the restrictions in the senior credit facilities,
a default may also occur under the indenture governing these notes and any
other financing agreements. This default may allow some creditors, if their
respective agreements so provide, to accelerate payments owed on such debt as
well as any other indebtedness as to which a cross-acceleration or
cross-default provision applies. The creditors who may be entitled to
accelerated payments in the event of a default are: (1) the holders of our
12 3/4% senior subordinated notes issued in the aggregate principal amount of
$165.0 million (which includes these notes being offered), under an indenture
dated July 29, 1999 by and among us, ChipPAC International Company Limited, and
Firstar Bank, N.A. as trustee; and (2) the senior credit facility lenders,
including Credit Suisse First Boston, New York branch, BankBoston N.A.,
State Street Bank and Trust Company, Balanced High-Yield Fund II Limited, CIBC
Inc., First Source Financial LLP, Heller Financial, Inc., The First National
Bank of Chicago and IBM Credit Corporation (the "senior facility lenders"),
under our senior credit facility, dated as of August 5, 1999 by and among the
us, ChipPAC International Company Limited, and Credit Suisse First Boston, New
York branch, as the administrative agent, collateral agent and sole lead
arranger for the Senior Facility Lenders. As of September 30, 2001, the
aggregate principal amount of the senior credit facility was $168.6 million of
which approximately $147.0 million was outstanding. In addition, our lenders
may be able to terminate any commitments they had made to supply us with
further funds. See "Description of Notes."
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture governing the notes.
If the company undergoes a change of control (as defined in the indenture
governing the notes) we may need to refinance large amounts of our debt,
including the notes and borrowings under the senior revolving credit facility.
If a change of control occurs, we must offer to buy back the notes for a price
equal to 100.0% of the principal amount of the notes, plus any accrued and
unpaid interest. We cannot assure you that there will be sufficient funds
available for us to make any required repurchases of the notes upon a change of
control. In addition, our senior revolving credit facility will prohibit us
from repurchasing the notes until we first repay the senior revolving credit
facility in full. If we fail to repurchase the notes in that circumstance, we
will go into default under both the indenture governing the notes and the
senior revolving credit facility. Any future debt which we incur may also
contain restrictions on repayment upon a change of control. If any change of
control occurs, we cannot assure you that we will have sufficient funds to
satisfy all of the company's debt obligations. These buyback requirements may
also delay or make it harder for others to effect a change of control. However,
certain other corporate events, such as leveraged recapitalizations that would
increase our level of indebtedness, would not constitute a change of control
under the indenture governing the notes.
7
Risks Related to Our Business
Our operating results for the quarters ended September 30, 2001, June 30, 2001
and March 31, 2001 declined significantly from the quarters ended September 30,
2000, June 30, 2000 and March 31, 2000.
Our gross margins, net income and operating income for the quarters ended
September 30, 2001, June 30, 2001 and March 31, 2001 decreased as compared to
our results in the quarters ended September 30, 2000, June 30, 2000 and
March 31, 2000 as a result of a decline in our revenues. Our revenues for the
quarters ended September 30, 2001, June 30, 2001 and March 31, 2001 were $74.7
million, $87.4 million and $89.9 million, respectively, compared to $155.8
million, $109.0 million and $97.5 million, respectively, in the same periods
for 2000. The decline is attributable to the continued semiconductor industry
demand slowdown and resulting inventory buildup caused by ongoing end market
demand weakness. Our net loss has increased from $9.7 million and $9.4 million
in the quarters ended March 31, 2001 and June 30, 2001, respectively, to $16.4
million in the quarter ended September 30, 2001. In addition to the effect of
the decline in operating income, net income was further reduced in the third
quarter of 2001 compared to the other quarters by the change in the effective
tax rate from 20.0% to 0%. We cannot assure you that our business will not
continue to decline or that our performance will improve.
We may not be able to continue to implement our cost saving strategy. Even if
we do, it may not reduce our operating expenses by as much as we anticipated
and could even compromise the development of our business.
In response to the recent weakness in demand for semiconductors, we
implemented cost saving measures, including significant reduction in our
workforce, furloughs, reduced work shift schedules, reductions in discretionary
spending, reduced materials cost and lower capital expenditures and redesign of
our manufacturing processes to improve productivity.
As a result of these cost saving measures, we have incurred approximately
$3.0 million in restructuring charges during the nine months ended September
30, 2001. Additionally, we expect there to be approximately $3.0 million in
charges in the three months ended December 31, 2001. However, we cannot assure
you that these cost saving measures will increase productivity nor that the
expected net savings will occur during this period or at any other time in the
expected amounts, if at all. In fact, our cost saving measures could adversely
affect our revenue, as it could create inefficiencies in our business
operations, result in labor disruptions and limit our ability to expand and
grow our business.
The cyclicality of the semiconductor industry could adversely affect our
operating results.
Our operations are substantially affected by market conditions in the
semiconductor industry, which is highly cyclical and, at various times, has
experienced significant economic downturns characterized by reduced product
demand and production overcapacity which can result in rapid erosion of average
selling prices. At the end of 2000, we experienced a general slowdown in the
semiconductor industry. Beginning in 1997 and continuing through the beginning
of 1999, we experienced particularly intense competition and a general slowdown
in the semiconductor industry.
In addition, we increase our level of operating expenses and investment in
packaging services capacity based on customer demand forecast(s) and
anticipated revenue growth. If our revenues do not grow as anticipated or the
forecasts upon which we rely are inaccurate, and we are unable to decrease
these expenses, our operating income would decrease.
Our profitability is affected by average selling prices which tend to decline.
Decreases in the average selling prices of our packaging and test services
can have a material adverse effect on our profitability. The average selling
prices of packaging and test services have declined historically, with
8
packaging services in particular experiencing severe pricing pressure. This
pricing pressure for packaging and test services is likely to continue. Our
ability to maintain or increase our profitability will continue to be
dependent, in large part, upon our ability to offset decreases in average
selling prices by improving production efficiency, increasing unit volumes
packaged or tested, or by shifting to higher margin packaging and test
services. If we are unable to do so, our business, financial condition and
results of operations could be materially and adversely affected.
If we are unable to develop and market new technologies, we may not remain
competitive within the semiconductor packaging industry.
The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of packaging services. As a result,
we expect that we will need to continually introduce more advanced package
designs in order to respond to competitive industry conditions and customer
requirements. The requirement to develop, license and maintain advanced
packaging capabilities and equipment could require significant research and
development and capital expenditures in future years. Any failure by us to
achieve advances in package design or to obtain access to advanced package
designs developed by others could reduce our growth prospects and operating
income.
The intensity of competition in our industry could result in the loss of our
customers, which could adversely affect our revenues and profits.
We face substantial competition from a number of established independent
packaging companies and with the internal capabilities of many of our largest
customers. Amkor Technology is our dominant competitor, and Advanced
Semiconductor Engineering Group and Siliconware Precision Industries Co., Ltd.
are the other companies that offer a broad range of packages and services that
compete with ours. Other than Amkor, the listed companies only compete in some
package types or for some test services. We compete based on breadth of
service, quality, and price. We offer a broad portfolio of assembly and test
services compared to all but the largest of our competitors. We offer
approximately the same types of services as our largest competitors and our
service offerings in power packaging is not shared with our largest
competitors. Prices are set by the market and the ability to deliver profitable
service at market prices is key. Each of our primary competitors has
significant operational capacity, financial resources, research and development
operations, and established relationships with many large semiconductor
companies, which are current or potential customers of ours. Furthermore, our
competitors may in the future capture our existing or potential customers
through superior responsiveness, service quality, product design, technical
competence or other factors, which we view as principal elements of competition
in our industry. In addition, our primary customers may, in the future, shift
more of their packaging and test service demand internally. As a result, we may
have reduced revenues and profits.
Our research and development efforts may not yield profitable and commercially
viable services; thus, we may have significant short-term research and
development expenses, which will not necessarily result in increases in revenue.
Our research and development efforts may not yield commercially viable
packages or test services. The qualification process for new customers is
conducted in various stages which may take one or more years to complete, and
during each stage there is a substantial risk that we will have to abandon a
potential package or test service which is no longer marketable and in which we
have invested significant resources. In the event we are able to qualify new
packages, a significant amount of time will have elapsed between our investment
in new packages and the receipt of any related revenues.
We could lose customers, and thus revenue, if we cannot maintain the quality of
our services.
The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the operational
9
environment, human error, equipment malfunction, use of defective materials and
plating services and inadequate sample testing. From time to time, we expect to
experience lower than anticipated yields as a result of these factors,
particularly in connection with any expansion of capacity or change in
processing steps. In addition, our yield on new packaging could be lower during
the period necessary for us to develop the requisite expertise and experience
with these processes. Any failure by us to maintain high quality standards or
acceptable yields, if significant and sustained, could result in the loss of
customers, delays in shipments, increased costs and cancellation of orders.
Our business may be adversely affected by the loss of, or reduced purchases
by, Atmel Corporation, Fairchild Semiconductor International, Inc., Intel
Corporation, Intersil Corporation, LSI Logic Corporation, nVIDIA Corporation or
any other large customer. Additionally, we may encounter difficulties in
soliciting new customers.
For the nine months ended September 30, 2001, sales to our top five
customers in the aggregate accounted for approximately 73.2% of total net
revenues. During this same period, our three largest customers, Intersil,
Intel, and LSI Logic, respectively, produced 21.2%, 18.8% and 14.5% of our
sales revenues. If any of our main customers were to purchase significantly
less of our services in the future, these decreased levels of purchases could,
ultimately, harm our operating results.
Semiconductor packaging companies must pass a lengthy and rigorous
qualification process that can take up to six months at a cost to the customer
of approximately $250,000 to $300,000. If we fail to qualify packages with
potential customers or customers with which we have recently become qualified
do not use our services, then our customer base could become more concentrated
with a limited number of customers accounting for a significant portion of our
revenues. Moreover, we believe that once a semiconductor company has selected a
particular packaging and test foundry company's services, the semiconductor
company generally relies on that vendor's packages for specific applications
and, to the extent possible, subsequent generations of that vendor's packages.
Accordingly, it may be difficult to achieve significant sales to a particular
or potential customer once it selects another vendor's packaging services.
Economic crisis in Asia where most of our suppliers are located could prevent
us from securing adequate supplies of materials, which could, in turn, prevent
us from meeting the requirements of our customers and result in a decrease in
our revenues.
Most of our materials suppliers are located in Asia. Historically, over half
of our substrate costs were incurred from the purchase of materials from
Japanese suppliers. In the future, we expect that a growing portion of these
materials will be supplied by sources in South Korea and Taiwan. Several
countries in this region have experienced currency devaluation and/or
difficulties in financing short-term obligations. We cannot assure you that the
effect of an economic crisis on our suppliers will not impact operations, or
that the effect on our customers in that region will not adversely affect both
the demand for our services and the collectibility of receivables.
The failure of our vendors to supply sufficient quantities of materials on a
timely basis could prevent us from fulfilling our customers' orders. In
addition, we may not be able to pass on any unexpected increase in the cost of
these materials to our customers.
We obtain materials to fill orders for our packaging and test services
directly from vendors. To maintain competitive packaging operations, we must
obtain from our vendors, in a timely manner, sufficient quantities of
acceptable materials at expected prices. We source most of our materials,
including critical materials like laminate substrates, lead frames, mold
compounds and gold wires, from a limited group of suppliers. We purchase all of
our materials on a purchase order basis and have no long-term contracts with
any suppliers. From time to time, vendors have extended lead times or limited
the supply of required materials to us because of vendor capacity constraints
and, consequently, we have experienced difficulty in obtaining acceptable
materials
10
on a timely basis. Our business and results could be negatively impacted if our
ability to obtain sufficient quantities of materials and other supplies in a
timely manner were substantially diminished or if there were significant
increases in the cost of materials that we could not pass on to our customers.
If we are unable to obtain capital equipment in a timely manner, we may be
unable to meet the increased demands of our customers which could result in a
decrease in our revenues.
Our facilities currently have sufficient packaging and test services
capacity to meet the current and expected demands of our customers.
Nonetheless, in the event there are significant increases in overall
semiconductor demand or demand for some of our products and services, we may
not be able to meet those increased demands of our customers. Moreover, because
the semiconductor packaging and test services business requires investment in
expensive capital equipment and is characterized, from time to time, by intense
demand, limited supply and long delivery cycles, we may not be able to readily
increase our operating capacity. This would lead to a loss of sales of our
packaging and test services, could ultimately lead to a loss in market share
and have a negative impact on our results of operations.
We depend upon intellectual property and license critical technology from Hynix
Semiconductor, Inc., Motorola, Inc., Tessera, Inc., LSI Logic and Intersil. To
the extent these licenses are not perpetual and irrevocable, our net revenues
could be materially adversely affected if our rights under these licenses
expire or are terminated.
We seek to protect our proprietary information and know-how through the use
of trade secrets, confidentiality agreements and other security measures. We
may not obtain patent protection for the patent applications that we file, or
if we are granted patents, those patents may not offer meaningful protection.
Additionally, we cannot assure you that our competitors will not develop,
patent or gain access to similar know-how and technology, or reverse engineer
our packaging services, or that any confidentiality agreements upon which we
rely to protect our trade secrets and other proprietary information will be
adequate to protect our proprietary technology.
Any patents and utility model, design right and computer program right
registrations obtained relating to technology that we developed prior to our
recapitalization are owned by Hynix Semiconductor, formerly Hyundai Electronics
Inc. In connection with our recapitalization, we entered into a patent and
technology license agreement by which Hynix Semiconductor granted us license to
use specific intellectual property rights in our semiconductor packaging and
test activities. We expect to seek patents and utility model, design right and
computer program right registrations, as applicable, on new packaging process
and package design technologies that we develop as a means of protecting
technology and market position.
We have a non-exclusive sublicense from Hynix Semiconductor to use patented
BGA technologies owned by Motorola, which expires on December 31, 2002.
Motorola licenses these patents to others, including our competitors. After
giving pro forma effect to the acquisition of the Malaysian business as if it
had occurred at the beginning of 2000, these BGA technologies contributed 41.1%
of our net revenues in 2000.
We have a worldwide, royalty-bearing, non-exclusive license under specified
Tessera patents, technical information and trademarks relating to Tessera's
proprietary IC packages. This license will expire sometime after February 2018.
We also have two separate license agreements with LSI Logic under which we
have worldwide, royalty-bearing, non-exclusive licenses to use LSI packaging
technology and technical information to manufacture, use and sell flip-chip
semiconductor devices having at least 200 solder balls and semiconductor device
assemblies having an overall height of less than 1.2 millimeters, respectively.
The LSI Logic license relating to flip-chip semiconductor devices becomes
perpetual and irrevocable upon our payment of fees or January 1, 2004,
whichever occurs first. The other LSI Logic license is perpetual but may be
terminated by LSI Logic in the event of our uncured breach or bankruptcy.
11
In addition, we have a worldwide, royalty-free, non-exclusive license under
Intersil patents, copyrights and technical information which are used in or
related to the operation of the Malaysian business. This Intersil license is
perpetual and irrevocable. Any intellectual property rights in the bonding
diagrams, test programs, maskworks and test boards uniquely related to the
Intersil products for which we provide packaging and test services are licensed
to us only for use in providing those services.
To the extent these licenses are not perpetual and irrevocable, we may be
unable to utilize the technologies under these licenses if they are not
extended or otherwise renewed or if any of these licenses are terminated by the
licensor due to our uncured breach or bankruptcy. Alternatively, if we are able
to renew these arrangements, we cannot assure you that they will be on the same
terms as currently exist. Any failure to extend or renew these license
arrangements could cause us to incur substantial liabilities and to suspend the
packaging services and processes that utilized these technologies.
The loss of our skilled technical, marketing and sales personnel or our key
executive officers could have a material adverse effect on our research and
development, marketing and sales efforts.
Our competitiveness will depend in large part upon whether we can attract
and retain skilled technical, marketing and sales personnel and can retain
members of our executive team. Competition for skilled personnel is intense,
and we may not be successful in attracting and retaining the technical
personnel or executive managers we require to develop new and enhanced
packaging and test services and to continue to grow and operate profitably. If
we cannot attract or retain skilled personnel, we may not be able to operate
successfully in the future.
If we encounter future labor problems, we may fail to deliver our products in a
timely manner which could adversely affect our revenues and profitability.
Our employees at our Ichon, South Korea facility are represented by ChipPAC
Korea Labor Union and are covered by collective bargaining and wage agreements.
The collective bargaining agreement, which covers basic union activities,
working conditions and welfare programs, among other things, is effective to
May 1, 2003 and the wage agreement is effective to May 1, 2002. As of December
31, 2001, approximately 78% of our employees were represented by the ChipPAC
Korea Labor Union. In addition, one of our Chinese subsidiaries experienced
labor protests and a two-day work stoppage in July 1998 in connection with
proposed work force reductions. We cannot assure you that issues with the labor
union or other employees will be resolved favorably for us in the future, that
we will not experience significant work stoppages in future years or that we
will not record significant charges related to those work stoppages. In
addition, potential efficiency enhancement efforts, including personnel
reductions, following our recent acquisition of the Malaysian business may
create the risk of labor problems in Malaysia or at other facilities.
New laws and regulations, currency devaluation and political instability in
foreign countries, particularly in South Korea, China and Malaysia, could make
it more difficult for us to operate successfully.
For the nine months ended September 30, 2001 and the years ended December
31, 2000, 1999 and 1998, we generated approximately 10.7%, 16.7%, 11.3%, and
7.2% of total revenues, respectively, from international markets, primarily
from customers in Southeast Asia and Europe. In addition, all of the facilities
currently used to provide our packaging services are located in South Korea,
China and Malaysia. Moreover, many of our customers' operations are located in
countries outside of the United States. We cannot determine if our future
operations and earnings will be affected by new laws, new regulations, a
volatile political climate, changes in or new interpretations of existing laws
or regulations or other consequences of doing business outside the U.S.,
particularly in South Korea, China and Malaysia. If future operations are
negatively affected by these changes, our sales or profits may suffer.
12
Fluctuations in the exchange rate of the U.S. dollar and foreign currencies
could have a material adverse effect on our financial performance and
profitability.
A portion of our costs are denominated in foreign currencies, like the South
Korean Won, the Chinese Renminbi or RMB and the Malaysian Ringgit. As a result,
changes in the exchange rates of these currencies or any other applicable
currencies to the U.S. dollar will affect our costs of goods sold and operating
margins and could result in exchange losses. We cannot fully predict the impact
of future exchange rate fluctuations on our profitability. From time to time,
we may engage in exchange rate hedging activities in an effort to mitigate the
impact of exchange rate fluctuations. However, we cannot assure you that any
hedging technique we may implement will be effective. If it is not effective,
we may experience reduced operating margins.
We could suffer adverse tax and other financial consequences if U.S. or foreign
taxing authorities do not agree with our interpretation of applicable tax laws.
Our corporate structure is based, in part, on assumptions about the various
tax laws, including withholding tax, and other relevant laws of applicable
non-U.S. jurisdictions. We cannot assure you that foreign taxing authorities
will agree with our interpretations or that they will reach the same
conclusions. Our interpretations are not binding on any taxing authority and,
if these foreign jurisdictions were to change or to modify the relevant laws,
we could suffer adverse tax and other financial consequences or have the
anticipated benefits of our corporate structure materially impaired.
Because the Malaysian business previously operated as a subsidiary of Intersil,
our future financial results may be significantly different from those
experienced historically.
Prior to our acquisition of our Malaysian business in 2000, it was operated
as a subsidiary of Intersil. All the historical revenues of the Malaysian
business represent intercompany sales to Intersil on terms determined by
Intersil. Although we expect to retain this business pursuant to a five-year
supply agreement with Intersil, volume, product mix and pricing may change in
the future, and we cannot assure you that Intersil will perform under our
supply agreement.
We entered into supply contracts with Intersil in connection with our
acquisition of our Malaysian business and with Fairchild Semiconductor
following Fairchild's acquisition of Intersil's discrete power business, and
any decrease in the purchase requirements of Intersil or Fairchild or the
inability of Intersil or Fairchild to meet its contractual obligations could
substantially reduce the financial performance of our Malaysian subsidiary.
Historically, the Malaysian business generated all of its revenues from the
sale of products and services to affiliated Intersil companies. The revenue of
the Malaysian business for the first six months of 2000 prior to our
acquisition of it and for all of 1999 was $41.9 million and $101.9 million,
respectively. As a result of our acquisition of the Malaysian business, we have
numerous arrangements with Intersil, including arrangements relating to
packaging and test services as a vendor to affiliated Intersil companies and
other services. Any material adverse change in the purchase requirements of
Intersil or in its ability to fulfill its other contractual obligations could
have a material adverse effect on our Malaysian subsidiary. Moreover, we may be
unable to sell any products and services to affiliated Intersil companies
beyond the term of our five-year supply agreement with Intersil. In connection
with Fairchild Semiconductor's acquisition of Intersil's discrete power
business, we entered into an assignment agreement that assigned Intersil's
portion of the supply agreement relating to this business to Fairchild. We have
also entered into a three-year IT services agreement with Intersil under which
the Malaysian business will continue to obtain a number of these services from
Intersil. We cannot assure you that Fairchild will perform under the supply
agreement or that Intersil will perform under the supply and services
agreements or that upon termination of these agreements we will be able to
obtain similar services on comparable terms.
13
We may not be able to consummate future acquisitions, and consequences of those
acquisitions which we do complete may adversely affect us.
We plan to continue to pursue additional acquisitions of related businesses.
The expense incurred in consummating the future acquisition of related
businesses, or our failure to integrate those businesses successfully into our
existing business, could result in our incurring unanticipated expenses and
losses. We plan to continue to pursue additional acquisitions of related
businesses in the future. We may be unable to identify or finance additional
acquisitions or realize any anticipated benefits from those acquisitions.
Should we successfully acquire another business, the process of integrating
acquired operations into our existing operations may result in unforeseen
operating difficulties and may require significant financial resources that
would otherwise be available for the ongoing development or expansion of our
existing operations. Possible future acquisitions could result in the
incurrence of contingent liabilities and amortization expenses related to
goodwill and other intangible assets, all of which could have a material
adverse effect on our financial condition and operating results.
In addition, we may finance future acquisitions with additional
indebtedness. We have a substantial amount of outstanding indebtedness and
will, subject to compliance with our debt instruments, have the ability to
incur additional indebtedness. We will be required to generate cash flow from
operations to service that indebtedness and there can be no assurance that we
will generate sufficient cash flow to service that indebtedness. We may be
required to refinance our indebtedness upon its maturity, and we cannot assure
you that we will be able to refinance our indebtedness at all or on terms
acceptable to us.
Terrorist attacks, such as the attacks that occurred in New York and
Washington, D.C. on September 11, 2001, and other acts of violence or war may
affect the markets on which the notes trade, the markets in which we operate,
our operations and our profitability.
Terrorist attacks may negatively effect our operations and your investment.
There can be no assurance that there will not be further terrorist attacks
against the United States or United States businesses. These attacks or armed
conflicts may directly impact our physical facilities or those of our suppliers
or customers. Our current facilities include administrative, sales, and R&D
facilities in the United States of America and manufacturing facilities in
South Korea, Malaysia and China. Furthermore, these attacks may make travel and
the transportation of our supplies and products more difficult and more
expensive and ultimately affect the sales of our products in the United States
and overseas.
Also as a result of terrorism, the United States may enter into an armed
conflict which could have a further impact on our domestic and international
sales, our supply chain, our production capability and our ability to deliver
product to our customers. Political and economic instability in some regions of
the world may also result and could negatively impact our business. The
consequences of any of these armed conflicts are unpredictable, and we may not
be able to foresee events that could have an adverse effect on our business or
your investment.
A limited number of persons indirectly control us and may exercise their
control in a manner adverse to your interests.
At December 31, 2001, Citicorp Venture Capital, Ltd. and its affiliates
owned or had the right to acquire 23,849,399 shares or approximately 34.4% of
our outstanding common stock. At December 31, 2000, funds affiliated with Bain
Capital, Inc. owned 16,303,749 shares or approximately 23.5%, of our
outstanding common stock. By virtue of this stock ownership, these entities
collectively have the power to direct our affairs and will be able to determine
the outcome of all matters required to be submitted to stockholders for
approval, including the election of a majority of our directors, any merger,
consolidation or sale of all or substantially all of our assets and amendment
of our certificate of incorporation. Because a limited number of persons
control us, transactions could be difficult or impossible to complete without
the support of those persons. It is possible that these persons will exercise
control over us in a manner adverse to your interests.
14
If our relationship with Hynix Semiconductor, our previous owner, deteriorates,
our business operations could be interrupted.
Our facilities in Ichon, South Korea occupy a portion of a building located
on property owned by Hynix Semiconductor, a current stockholder and former
majority owner. In addition, Hynix Semiconductor is one of our current
customers. An unfavorable change in our relations with Hynix Semiconductor
could adversely affect services we receive from them at this facility and the
revenue we derive from the products and services we provide to them.
Environmental, health and safety laws could require us to incur capital and
operational costs to maintain compliance and could impose liability to remedy
the effects of hazardous substance contamination.
We are subject to liabilities and compliance obligations arising under
environmental, health and safety laws. These laws impose various controls on
the quality of our air and water discharges, on the storage, handling,
discharge and disposal of chemicals the company uses, and on employee exposure
to hazardous substances in the workplace. Environmental, health and safety laws
could require us to incur capital and operational costs to maintain compliance
and could impose liability to remedy the effects of hazardous substance
contamination. We cannot assure you that applicable environmental, health and
safety laws will not in the future impose the need for additional capital
equipment or other process requirements upon the company, curtail its
operations, or restrict its ability to expand its operations. The adoption of
new environmental, health and safety laws, the failure to comply with new or
existing laws, or issues relating to hazardous substance contamination could
subject the company to future material liability.
FORWARD-LOOKING STATEMENTS
This prospectus, including the section entitled "Risk Factors," contains
forward-looking statements. These statements relate to future events or our
future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. Such risks and other factors
include, among other things, those listed under "Risk Factors" and elsewhere in
this prospectus. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue" or the negative of
such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks outlined under "Risk Factors." These factors may cause our actual
results to differ materially from any forward-looking statement.
15
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 and
for the nine months ended September 30, 2001.
September 30,
2001
--------------
(in thousands)
Total indebtedness........................................... $362,000
Years Ended December 31,
------------------------ Nine Months Ended
2000 1999 1998 1997 1996 September 30, 2001
---- ---- ---- ---- ---- ------------------
Ratio of earnings to fixed charges..... 1.4x -- 4.3x -- -- --
For purposes of the computation of ratio of earnings to fixed charges in the
table above, earnings are defined as income (loss) before provision for income
taxes and fixed charges. Fixed charges are interest costs and amortization of
debt issuance cost. For the years ended December 31, 1996, 1997 and 1999 and
the nine months ended September 30, 2001, earnings were insufficient to cover
fixed charges by $2.7 million, $55.8 million, $4.0 million and $37.9 million,
respectively.
The ratios provided above are often used by investors to evaluate a
company's capital structure and its ability to make payments on its debt. The
ratio of earnings to fixed charges attempts to capture the relative protection
that operating profitability provides our noteholders by permitting them to
assess the probability of our failing to make required principal and interest
payments on the notes. If adverse economic and industry conditions adversely
affect our operating earnings, the subsequent worsening of this ratio would
indicate to our noteholders that we are at a greater risk of failing to meet
our interest payment obligations.
USE OF PROCEEDS
We will receive no proceeds from this offering. The selling security holders
will receive the proceeds from this offering.
16
SELLING SECURITY HOLDER
We initially issued the notes in a private placement in June 2001. The
selling security holder, CVC Capital Funding, LLC, may offer and sell the notes
pursuant to this prospectus.
As shown in the table below this paragraph, CVC Capital Funding, LLC holds
$15,000,000 aggregate principal amount of the notes, which is 9.09% of the
total amount of notes outstanding. The selling security holder is an affiliate
of Citicorp Venture Capital, Ltd. which, along with its affiliates, owns or has
the right to acquire approximately 32.1% of our outstanding stock. This
information is based on information provided by or on behalf of CVC Capital
Funding, LLC. The term "selling security holder" includes, without duplication,
CVC Capital Funding, LLC and its transferees, pledgees, donees or other
successors. The information concerning the selling security holder may change
from time to time and any changed information will be set forth in supplements
to this prospectus if and when necessary.
Principal Amount of
Notes Outstanding to be
Principal Amount of Owned
Name of Selling Notes Owned Prior to after Completion of
Security Holder Offering Offering
- ------------------------- ------------------------- -------------------------
CVC Capital Funding, LLC $15,000,000 0/0%
The selling security holder may offer all, some of none of the notes and as
a result, no estimate can be give as to the amount of the notes that will be
held by the selling security holder upon termination of any offering.
17
PLAN OF DISTRIBUTION
The notes covered by this prospectus may be sold from time to time to
purchasers directly by the selling security holders. Alternatively, the selling
security holders may from time to time offer the securities through
underwriters, broker-dealers or agents who may receive compensation in the form
of underwriting discounts, concessions or commissions from the selling security
holders and/or the purchasers of securities for whom they may act as agent. The
selling security holders and any underwriters, broker-dealers or agents that
participate in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, or
the Securities Act, and any profit on the sale of securities by them and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker-dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act. We will not receive any of the
proceeds from the offering of the notes by the selling security holders.
Because the selling security holders may be deemed to be "underwriters"
within the meaning of the Securities Act, the selling security holders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling security holders that the anti-manipulation provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
The notes covered by this prospectus may be sold from time to time 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.
Such prices will be determined by the selling security holders or by
agreement between the selling security holders and underwriters and dealers who
may receive fees or commissions in connection therewith.
The sale of the securities may be effected in transactions:
. on any national securities exchange or quotation service on which the
notes may be listed or quoted at the time of sale;
. in the over-the-counter market;
. in transactions other than on such exchanges or in the over-the-counter
market;
. through the writing of options; or
. in any other lawful manner.
These transactions may include block transaction or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
At the time of a particular offering of securities by a selling security
holder, a supplement to this prospectus, if required, will be distributed
setting forth the aggregate amount and type of securities being offered and the
terms of the offering, including the name or names of any underwriters,
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling security holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the securities will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities may not be offered or sold (unless they have been
registered or qualified for sale) in such jurisdictions or an exemption from
registration or qualification is available and is complied with.
18
We originally sold the notes in June 2001 to Citicorp Capital Investors,
Limited in a private placement. Citicorp Capital Investors, Limited then
transferred the notes to an affiliate, CVC Capital Funding, LLC. We agreed
pursuant to a registration rights agreement to use commercially reasonable
efforts to cause the registration statement to which this prospectus relates to
become effective within 180 days after the date the notes were issued and to
keep the registration statement effective until the earlier of two years or the
time when all of the notes have been sold pursuant to this registration
statement or Rule 144 or can be sold pursuant to Rule 144(k). CVC Capital
Funding, LLC has represented to us that it is not a broker-dealer. Nonetheless,
CVC Capital Funding, LLC has represented to us that it is an affiliate of a
broker-dealer. Because Citicorp Inc. ultimately controls one or more registered
broker-dealers and CVC Capital Funding, LLC, CVC Capital Funding, LLC may be
viewed as under common control with the broker-dealer entities and, therefore,
an affiliate of those broker-dealer entities. CVC Capital Funding, LLC,
however, has advised us that it originally purchased the securities for its own
account and that it purchased the securities in the ordinary course of business
with no pre-arrangements, either directly or indirectly with any person, to
sell such securities. Pursuant to the registration rights agreement, we will
pay all expenses of the registration of the notes including, without
limitation, SEC filing fees and expenses of compliance with state securities or
"blue sky" laws and the reasonable fees and expenses of counsel to the selling
security holders. The selling security holders are responsible for all
underwriting discounts and selling commissions, if any. We and the selling
security holders will indemnify each other against certain liabilities,
including certain liabilities under the Securities Act.
19
DESCRIPTION OF NOTES
General
You can find the definitions of terms used in this description that are not
defined when first used under the subheading of "Definitions." In this section
of the prospectus, unless the context requires otherwise, the words "ChipPAC,"
"Company," "we," "our," "ours" and "us" refer only to ChipPAC, Inc. and not to
any of its subsidiaries. The "Issuer" refers to ChipPAC International Company
Limited, a wholly owned subsidiary of ChipPAC, Inc.
ChipPAC International Company Limited issued the notes under an indenture
dated July 29, 1999 by and among itself, ChipPAC, Inc. and U.S. Bank, N.A.,
formerly known as Firstar Bank, N.A., as trustee. The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939, as amended.
The form and terms of the notes are identical in all material respects to
the form and terms of the $150,000,000 aggregate principal amount of
outstanding notes issued under the same indenture in 1999, referred to
hereafter as the "original notes," except that:
. the notes have a later issue date than the original notes;
. the first interest payment date on the notes is August 1, 2001; and
. the holders of the notes have rights under a registration rights agreement
that is separate from the registration rights agreement for the benefit of
the holders of the original notes, and the registration rights agreement
for the holders of the notes provides for liquidated damages relating to
the timing of this registration statement.
The notes will evidence the same debt as the original notes and will be
entitled to the same benefits of the indenture. The notes will rank equally
with the original notes. Accordingly, unless the context otherwise requires,
references to and descriptions of the "notes" also includes the original notes.
The following description is only a summary of the material provisions of
the indenture, which is filed as an exhibit to the registration statement of
which this prospectus forms a part. We urge you to read the indenture because
it, and not this description, defines your rights as holders of the notes. You
may request copies of these agreements at our address provided under "Where You
Can Find More Information."
Brief Description of the Notes and the Guaranties
The Notes
These notes:
. are unsecured senior subordinated obligations of ChipPAC International
Company Limited;
. rank equally in right of payment with any future senior subordinated
Indebtedness of ChipPAC International Company Limited;
. are subordinated in right of payment to all existing and future Senior
Indebtedness of ChipPAC International Company Limited; and
. are senior in right of payment to any future Subordinated Obligations of
ChipPAC International Company Limited and preferred dividends.
20
The Guaranties
The Company Guaranty and each Subsidiary Guaranty:
. unconditionally guarantee on a joint and several basis the obligations of
ChipPAC International Company Limited under the notes;
. rank equally in right of payment with any future senior subordinated
Indebtedness of the Guarantor; and
. are senior subordinated obligations of the Company and the relevant
Subsidiary Guarantor, as the case may be.
Principal, Maturity and Interest
The notes:
. will be limited in aggregate principal amount to $165.0 million (including
the original notes);
. will be issued in denominations of $1,000 and any integral multiple of
$1,000; and
. will mature on August 1, 2009.
Contingent upon our compliance with the covenant described under the caption
"--Significant Covenants--Limitation on Indebtedness," we are permitted to
issue more notes, which we refer to as "Additional Notes," under the indenture
in an unlimited principal amount. Any Additional Notes that are actually issued
will be treated as issued and outstanding notes and as the same class as the
outstanding notes for all purposes of the indenture and this "Description of
the Notes," unless the context indicates otherwise.
Interest on these notes will accrue at the rate of 12 3/4% per annum and
will be payable semiannually in arrears on August 1 and February 1. We will
make each interest payment to the holders of record of these notes on the
immediately preceding July 15 and January 15. We will pay interest on overdue
principal at 1% per annum in excess of the above rate and will pay interest on
overdue installments of interest at a higher rate to the extent lawful.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Optional Redemption
Except as provided below under this section or under the section "Redemption
for Changes in British Virgin Islands Withholding Taxes," we will not be
entitled to redeem the notes at our option prior to August 1, 2004.
On and after August 1, 2004, we will be entitled at our option to redeem all
or a portion of these notes. We can do so by providing between 30 and 60 days'
notice of our intent to redeem. The redemption prices, which are expressed as
percentages of principal amount, are specified below if redeemed during the
12-month period beginning on August 1 in the years indicated below:
Year Percentage
---- ----------
2004............................................. 106.375%
2005............................................. 104.250%
2006............................................. 102.125%
2007 and thereafter.............................. 100.000%
In addition, prior to August 1, 2002, we may at our option on one or more
occasions redeem notes, including Additional Notes, if any, in an aggregate
principal amount not to exceed 35% of the aggregate principal amount of notes,
including the original notes and Additional Notes, if any, originally issued
under the indenture. These notes can be redeemed at a redemption price of
112 3/4% of their principal amount with the net cash proceeds from one or more
Equity Offerings. If the Equity Offering is an offering by the Company, a
portion of the Net
21
Cash Proceeds equal to the amount required to redeem any notes is contributed
to the equity capital of ChipPAC International Company Limited. Following this
redemption:
(1)at least 65% of the aggregate principal amount of notes, which includes
the original notes and Additional Notes, if any, must remain outstanding
immediately after the occurrence of each redemption, other than exchange
notes held, directly or indirectly, by us or our Affiliates; and
(2)each redemption must occur within 60 days after the date of the closing
of the related Equity Offering.
Selection and Notice of Redemption
If we are redeeming less than all the notes at any time, the trustee will
select notes on a pro rata basis, by lot or by another method as the trustee in
its sole discretion shall deem to be fair and appropriate.
Notes redeemed in part will be redeemed only in principal amounts of $1,000.
We will cause notices of redemption to be mailed by first-class mail at least
30 but not more than 60 days before the redemption date to each holder of notes
to be redeemed at its registered address.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that note shall state the portion of the principal
amount to be redeemed. We will issue a new exchange note in principal amount
equal to the unredeemed portion of the original exchange note in the name of
the holder upon cancellation of the original exchange note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
Withholding Taxes
All payments made under the notes or under the Guaranties must be made free
and clear of and without withholding or deduction for any present or future
tax, duty, levy, impost, assessment or other governmental charge of whatever
nature. These charges, which we refer to as "taxes," include penalties,
interest and other related liabilities, imposed by any jurisdiction from or
through which payment is made or in which the payor is organized, resident or
engaged in business for tax purposes, unless any of ChipPAC International
Company Limited or the guarantors is required to withhold or deduct taxes by
law. If ChipPAC International Company Limited or a guarantor is required to
withhold or deduct any amount for any taxes from any payment made under the
notes or under a Guaranty, ChipPAC International Company Limited or guarantor,
will pay additional amounts to make up for these taxes. These additional
amounts cannot be made to any holder connected with the British Virgin Islands.
The procedures for reimbursing holders for these additional amount are
specified in the indenture.
ChipPAC International Company Limited or the guarantors will pay any taxes,
that arise in any jurisdiction from the execution, delivery, enforcement or
registration of the notes or a Guaranty, or the receipt of any payments on the
notes or a Guaranty, imposed by any jurisdiction other than:
. the British Virgin Islands;
. any other jurisdiction in which any of ChipPAC International Company
Limited or the guarantors is organized, resident or engaged in business
for tax purposes;
. any jurisdiction in which any successor to ChipPAC International Company
Limited or the guarantors is organized, resident or engaged in business
for tax purposes; or
. any jurisdiction in which a paying agent is located.
In addition, ChipPAC International Company Limited and the guarantors will
agree to indemnify the Holders, on an after-tax basis, for any taxes paid by
these Holders.
The obligations described under this heading shall survive any termination,
defeasance or discharge of the indenture.
22
Redemption for Changes in British Virgin Islands Withholding Taxes
The notes may be redeemed, at the option of ChipPAC International Company
Limited, at any time as a whole at 100% of the principal amount, in the event
ChipPAC International Company Limited has become or will become obligated to
pay for, any withholding taxes on additional amounts as a result of a change in
or an amendment to the laws or regulations of the British Virgin Islands. The
redemption must be made within 30 to 60 days from the date of notice of the
redemption. No notice of redemption may be given earlier than 60 days prior to
the earliest date on which additional amounts are due and payable on the notes.
Prior to giving any notice of redemption under this provision, ChipPAC
International Company Limited will deliver to the applicable trustee:
. an Officers' Certificate stating that it is entitled to effect the
redemption and setting forth a statement of facts showing that the
conditions precedent to its right to so redeem have occurred; and
. an Opinion of Counsel in the British Virgin Islands that ChipPAC
International Company Limited has become or will become obligated to pay
the Additional Amounts as a result of the amendment or change.
Guaranties
We and each of the Subsidiary Guarantors will jointly and severally
guarantee, on a senior subordinated basis, our obligations under the notes.
Each Subsidiary Guaranty will be limited as necessary to prevent a Subsidiary
Guaranty from being rendered voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
Each Subsidiary Guarantor that makes a payment under its Subsidiary Guaranty
will be entitled to a contribution from each other Subsidiary Guarantor in an
amount equal to the other Subsidiary Guarantor's pro rata portion of the
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of the payment determined consistent with GAAP.
If a Subsidiary Guaranty were to be rendered voidable, it could be
subordinated by a court to all other indebtedness, including guarantees and
other contingent liabilities, of the applicable Subsidiary Guarantor. Depending
on the amount of the indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guaranty could be reduced to zero.
Under the indenture, ChipPAC International Company Limited, ChipPAC, Inc. or
a Subsidiary Guarantor may consolidate with, merge with or into, or transfer
all or substantially all its assets to any other Person to the extent described
below under "--Significant Covenants--Merger and Consolidation." However, that
if the surviving Person is not ChipPAC International Company Limited, ChipPAC,
Inc. or the Subsidiary Guarantor, as the case may be, ChipPAC International
Company Limited's obligations under the notes, our obligations under the
Company Guaranty or the Subsidiary Guarantor's obligations under its Subsidiary
Guaranty, as the case may be, must be expressly assumed by the surviving Person.
A Subsidiary Guarantor will be released and relieved from all its
obligations under its Subsidiary Guaranty:
. upon the sale or other disposition, including by way of consolidation or
merger, of all or substantially all the capital stock of the Subsidiary
Guarantor in one or more related transactions; or
. upon the sale, assignment, transfer or disposition of all or substantially
all the assets of the Subsidiary Guarantor in one or more related
transactions;
in each case other than to ChipPAC International Company Limited or an
Affiliate of ChipPAC International Company Limited and as permitted by the
indenture.
23
Ranking
Notes and Guaranties Versus Senior Indebtedness
The indebtedness evidenced by the notes, the Company Guaranty and the
Subsidiary Guaranties will be senior subordinated obligations. The payment of
the principal of, premium, if any, and interest on the notes and the payment of
the Company Guaranty and any Subsidiary Guaranty is subordinate in right of
payment to the prior payment in full in cash when due of all Obligations on
Senior Indebtedness, including the obligations under the Credit Agreement.
As of September 30, 2001,
. the Senior Indebtedness of ChipPAC International Company Limited was
$147.0 million, all of which is secured indebtedness under the Credit
Agreement;
. the Senior Indebtedness of ChipPAC, Inc. was $147.0 million, consisting of
our senior guaranty of ChipPAC International Company Limited's obligations
under the Credit Agreement; and
. the Senior Indebtedness of the Subsidiary Guarantors was approximately
$147.0 million, consisting of the Subsidiary Guarantors' senior guaranty
of ChipPAC International Company Limited's obligations under the Credit
Agreement.
In addition, ChipPAC International Company Limited has additional
availability of $25.0 million for borrowings of Senior Indebtedness under the
Credit Agreement. Although the indenture contains limitations on the amount of
additional Indebtedness that ChipPAC International Company Limited, ChipPAC,
Inc. and the Subsidiary Guarantors may be able to incur an amount of the
Indebtedness that is substantial and, in any case, the Indebtedness may be
Senior Indebtedness. See "--Significant Covenants--Limitation on Indebtedness."
Guaranties Versus Other Liabilities of Subsidiaries
All of our operations are conducted through our subsidiaries that are not
subsidiaries of ChipPAC International Company Limited. Our Chinese subsidiaries
are not guaranteeing the notes or ChipPAC International Company Limited's
obligations under the Credit Agreement. Claims of creditors of the
non-guarantor subsidiaries, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by the non-guarantor
subsidiaries, and claims of preferred stockholders, if any, of the
non-guarantor subsidiaries generally will have priority on the assets and
earnings of the non-guarantor subsidiaries over the claims of creditors of
ChipPAC International Company Limited, including holders of the notes, even if
the obligations do not constitute Senior Indebtedness. The notes, the Company
Guaranty and each Subsidiary Guaranty, therefore, will be effectively
subordinated to creditors, including trade creditors, and preferred
stockholders of the non-guarantor subsidiaries of the Company.
As of September 30, 2001, the total liabilities of our non-guarantor
subsidiaries were approximately $72.8 million. Although the indenture limits
the incurrence of Indebtedness and preferred stock of our subsidiaries, the
limitation is significantly qualified. Moreover, the indenture does not impose
any limitation on the incurrence by the subsidiaries of liabilities that are
not considered Indebtedness or Preferred Stock under the indenture. See
"--Significant Covenants--Limitation on Indebtedness."
Notes and Guaranties Versus Other Senior Subordinated Indebtedness
Only Indebtedness of ChipPAC International Company Limited, ChipPAC, Inc. or
a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the
notes, the Company Guaranty and the relevant Subsidiary Guaranty consistent
with the provisions of the indenture. The notes, the Company Guaranty and each
Subsidiary Guaranty will in all respects rank equally with all other Senior
Subordinated Indebtedness of ChipPAC International Company Limited, ChipPAC,
Inc. and the relevant Subsidiary Guarantor, respectively. All Indebtedness of a
Subsidiary of ours that is not a Subsidiary Guarantor will be structurally
senior to the notes.
24
ChipPAC International Company Limited, ChipPAC, Inc. and each Subsidiary
Guarantor have agreed in the indenture that they will not Incur, directly or
indirectly, any Indebtedness that is subordinate or junior in ranking in right
of payment to its Senior Indebtedness unless the Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be
subordinated or junior to Secured Indebtedness merely because it is unsecured.
Payment of Notes
We are not permitted to pay principal of, premium, if any, or interest on,
the notes or defease, repurchase, redeem or otherwise retire any notes, which
we collectively refer to as, "pay the notes", if either of the following, which
we refer to as a "Payment Default", occurs:
. any Obligations under Senior Indebtedness are not paid in full when due; or
. any other default on Senior Indebtedness occurs and the maturity of the
Senior Indebtedness is accelerated consistent with its terms.
We may, however pay the notes if, the Payment Default has been cured or
waived and any acceleration has been rescinded in writing or the Senior
Indebtedness has been paid in full in cash. Notwithstanding the provisions of
the first sentence of this paragraph, we are permitted to pay the notes if
ChipPAC International Company Limited and the trustee receive written notice
approving the payment from the representative of the Senior Indebtedness
relating to the Payment Default that has occurred and is continuing.
During the continuance of any Designated Senior Indebtedness default, other
than a Payment Default, resulting in immediate acceleration, we are not
permitted to pay the notes for a 179-day payment blockage period. The payment
blockage period will end earlier if terminated:
. by written notice to the trustee and ChipPAC International Company Limited
from the Person or Persons who gave the payment blockage notice;
. because no defaults continue in existence which would permit the
acceleration of the maturity of any Designated Senior Indebtedness at that
time; or
. because the Designated Senior Indebtedness has been repaid in full in cash.
Notwithstanding these provisions, unless the Designated Senior Indebtedness
has accelerated or any Payment Default exists, we are permitted to resume
payments on the notes after the end of the payment blockage period. There
cannot be more than one payment blockage period in any consecutive 360-day
period, no matter how many defaults on Designated Senior Indebtedness result
during the period. If any blockage notice is delivered to the trustee by or on
behalf of holders of Designated Senior Indebtedness, other than holders of the
Bank Indebtedness, a representative of holders of Bank Indebtedness may give
another blockage notice within the period. However, in no event may the total
number of days during which any payment blockage period or periods is in effect
exceed 179 days in the aggregate during any 360 consecutive day period, and
there must be 181 days during any 360-day consecutive period during which no
payment blockage period is in effect.
Upon any payment or distribution by ChipPAC International Company Limited
upon any liquidation, dissolution, winding up, assignment for the benefit of
creditors or marshaling of assets of ChipPAC International Company Limited or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to ChipPAC International Company Limited or its property:
(1)the holders of Senior Indebtedness will be entitled to receive payment
in full in cash of all Obligations relating to the Senior Indebtedness
before the noteholders are entitled to receive any payment or
distribution; and
(2)until all Obligations under the Senior Indebtedness are paid in full in
cash, any payment or distribution to which noteholders would be entitled
but for the subordination provisions of the indenture will be
25
made to holders of the Senior Indebtedness as their interests may
appear, except that holders of notes may receive Capital Stock and
subordinated debt obligations.
If a distribution is made to noteholders that, due to the subordination
provisions, should not have been made to them, the noteholders are required to
hold it in trust for the holders of Senior Indebtedness and pay it over to them
as their interests may appear.
If payment of the notes is accelerated because of an Event of Default, we or
the trustee shall promptly notify the holders of Designated Senior Indebtedness
or the Representative of holders of the acceleration. If any Designated Senior
Indebtedness is outstanding at the time of acceleration, none of ChipPAC
International Company Limited, ChipPAC, Inc. nor any Subsidiary Guarantor may
pay the notes until five Business Days after the Representatives of all the
issues of Designated Senior Indebtedness receive notice of acceleration and,
thereafter, may pay the notes only if the indenture otherwise permits payment
at that time.
Our obligations under the Company Guaranty and of a Subsidiary Guarantor
under its Subsidiary Guaranty are senior subordinated obligations. Accordingly,
the rights of noteholders to receive payment by the Company or by a Subsidiary
Guarantor under the Company Guaranty or a Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior
Indebtedness of the Company or the Subsidiary Guarantor, as the case may be.
The terms of the subordination provisions described above relating to ChipPAC
International Company Limited's obligations under the notes apply equally to
the Company and a Subsidiary Guarantor and the obligations of the Company and
the Subsidiary Guarantor under the Company Guaranty or a Subsidiary Guaranty,
as the case may be.
By reason of the subordination provisions contained in the indenture, in the
event of insolvency, creditors of ChipPAC International Company Limited, the
Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of
ChipPAC International Company Limited, the Company or a Subsidiary Guarantor,
as the case may be, may recover more, ratably, than the noteholders, and
creditors of ChipPAC International Company Limited who are not holders of
Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in
trust by the trustee for the payment of principal of and interest on the notes
under the provisions described under "--Defeasance," if these subordination
provisions were not violated at the time the respective amounts were deposited
under the defeasance provisions.
Book-Entry, Delivery and Form
We will initially issue the notes in the form of one or more global notes,
which we refer to as the "Global Note." The Global Note will be deposited with,
or on behalf of, the Depository and registered in the name of the Depository or
its nominee. Except as provided below, the Global Note may be transferred, in
whole and not in part, only to the Depository or another nominee of the
Depository. You may hold your beneficial interests in the Global Note directly
through the Depository if you have an account with the Depository or indirectly
through organizations which have accounts with the Depository.
The Depository has advised ChipPAC International Company Limited as follows:
. The Depository is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" as defined in the New York Uniform Commercial Code,
and "a clearing agency" registered under the provisions of Section 17A of
the Exchange Act.
. The Depository was created to hold securities of institutions that have
accounts with the Depository which we refer to as "participants," and to
facilitate the clearance and settlement of securities transactions
26
among its participants in securities through electronic book-entry changes
in accounts of the participants, eliminating the need for physical
movement of securities certificates.
. The Depository's participants include securities brokers and dealers,
which may include the initial purchasers, banks, trust companies, clearing
corporations and other organizations.
. Access to the Depository's book-entry system is also available to others
as banks, brokers, dealers and trust companies, which we refer to
collectively, as the "indirect participants," that clear through or
maintain a custodial relationship with a participant, whether directly or
indirectly.
ChipPAC International Company Limited expects that the Depository will
credit, on its book-entry registration and transfer system, the principal
amount of notes represented by the Global Note to the accounts of participants.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer
of those ownership interests will be effected only through, records maintained
by the Depository. These records relate to the laws of various jurisdictions
may require that purchasers of securities take physical delivery of securities
in definitive form. These limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or the nominee, as the case may be,
will be considered the sole legal owner and holder of any related notes
evidenced by the Global Note. Except as provided below, as an owner of a
beneficial interest in the Global Note:
. you will not be entitled to have the notes represented by the Global Note
registered in your name;
. you will not receive or be entitled to receive physical delivery of
certificated notes; and
. you will not be considered to be the owner or holder of any exchange notes
under the Global Note.
We understand that under existing industry practice, in the event an owner
of a beneficial interest in the Global Note desires to take any action that the
Depository would authorize the participants to take action, and the
participants would authorize beneficial owners owning through participants to
take action or would otherwise act upon the instructions of beneficial owners
owning through them.
We will make payments of principal, premium, if any, and interest on notes
represented by the Global Note registered in the name of and held by the
Depository or its nominee to the Depository or its nominee, as the case may be,
as the registered owner and holder of the Global Note.
We expect that the Depository or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests. We also expect that payments by participants
or indirect participants to owners of beneficial interests in the Global Note
held through these participants will be governed by standing instructions and
customary practices and will be the responsibility of these participants. We
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Note for any note or for maintaining, supervising or reviewing any
records relating to these procedures.
Although the Depository has agreed to these procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform these
procedures. These procedures may be discontinued at any time. Neither the
trustee nor ChipPAC International Company Limited will have any responsibility
or liability for the performance by the Depository or its participants or
indirect participants of their obligations under the rules and procedures
governing their operations.
27
Certificated Notes
Contingent upon conditions specified in the indenture, the notes represented
by the Global Note are exchangeable for certificated notes in definitive form
in denominations of $1,000 and integral multiples of $1,000 if:
. the Depository notifies ChipPAC International Company Limited that it is
unwilling or unable to continue as Depository for the Global Note or if at
any time the Depository ceases to be a clearing agency registered under
the Exchange Act and, in either case, we are unable to appoint a qualified
successor within 90 days;
. we in our discretion at any time determine not to have all the exchange
notes represented by the Global Note; or
. a default entitling the holders of the notes to accelerate their maturity
has occurred and is continuing.
Any note that is exchangeable as described above is exchangeable for
certificated notes issuable in authorized denominations and registered in those
names as the Depository shall direct. The Global Note is not exchangeable,
except for a Global Note of the same aggregate denomination to be registered in
the name of the Depository or its nominee.
Same-Day Payment
The indenture requires us to make payments on the notes, including
principal, premium, if any, and interest, by wire transfer of immediately
available funds to the accounts specified by the holders or, if no account is
specified, by mailing a check to each holder's registered address.
Change of Control
Upon the occurrence of any of the following events, each of which we refer
to as a "Change of Control," each holder shall have the right to require that
ChipPAC International Company Limited repurchase the holder's notes. The
purchase price shall be in cash and equal to 101% of the holder's principal
amount of notes. The change of control events are:
(1) any "person," as the term is used in Sections 13(d) and 14(d) of the
Exchange Act, other than one or more Permitted Holders, is or becomes
the beneficial owner, directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of the Company;
(2) individuals who on the Issue Date constituted the Board of Directors,
together with any new directors:
(A) whose election by the Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of
a majority of the directors of the Company then still in office who
were either directors on the Issue Date or whose election or
nomination for election was previously so approved; or
(B) who were elected to the Board of Directors under the Shareholders
Agreement, as amended, modified or supplemented from time to time,
cease for any reason to constitute a majority of the Board of
Directors then in office; or
(3) the merger or consolidation of the Company with or into another Person
or the merger of another Person with or into the Company, or the sale of
all or substantially all the assets of the Company to another Person, in
each case other than a Person that is controlled by the Permitted
Holders, if 100% of the aggregate voting power of the Voting Stock of
the Company is changed into or exchanged for cash, securities or
property, and do not represent, at least a majority of the aggregate
voting power of the Voting Stock of the surviving Person or transferee.
28
For the purposes of this clause (1), the person will be considered to
beneficially own any Voting Stock of a Person held by a "parent entity" if the
Person is the beneficial owner, directly or indirectly, of more than 50% of the
voting power of the Voting Stock of the parent entity.
Within 30 days following any Change of Control, but contingent upon
compliance with the immediately succeeding paragraph, ChipPAC International
Company Limited shall mail a notice to each holder with a copy to the trustee
stating:
(1) that a Change of Control has occurred and that the holder has the right
to require ChipPAC International Company Limited to purchase the
holder's notes at a purchase price in cash equal to 101% of the holder's
principal amount of notes plus any accrued and unpaid interest to the
date of purchase, limited by holders of record on the relevant record
date to receive interest on the relevant interest payment date;
(2) the circumstances and relevant facts regarding a Change of Control;
(3) the repurchase date which shall be no earlier than 30 days nor later
than 60 days from the date the notice is mailed; and
(4) the instructions determined by ChipPAC International Company Limited,
consistent with this covenant, that a holder must follow in order to
have its notes purchased.
If the terms of the Credit Agreement prohibit ChipPAC International Company
Limited from making this offer upon a Change of Control or from purchasing any
notes, ChipPAC International Company Limited covenants to:
(1) repay in full all indebtedness outstanding under the Credit Agreement or
offer to repay in full that indebtedness and repay the indebtedness of
each lender who has accepted the offer; or
(2) obtain the requisite consent under the Credit Agreement to permit the
purchase of the notes as described above.
ChipPAC International Company Limited must first comply with the covenant in
the prior paragraph before it will be required to purchase notes in the event
of a Change of Control; provided, however, that ChipPAC International Company
Limited's failure to comply with the covenant in the prior paragraph or to make
a Change of Control offer because of any failure shall constitute a Default. As
a result, a holder of notes may not be able to compel ChipPAC International
Company Limited to purchase the notes unless ChipPAC International Company
Limited is able at the time to refinance all indebtedness outstanding under the
Credit Agreement or obtain requisite consents under the Credit Agreement.
The Change of Control purchase feature was a result of negotiations between
ChipPAC International Company Limited and the initial purchasers. We have no
present intention to engage in a transaction involving a Change of Control,
although we could decide to do so in the future. We may, in the future, be able
to enter into specified types of transactions, including acquisitions,
refinances or other recapitalizations, that would not constitute a Change of
Control under the indenture, but that could increase the amount of indebtedness
outstanding at that time or otherwise affect our capital structure or credit
ratings. Restrictions on our ability to incur additional Indebtedness are
contained in the covenants described under "--Significant Covenants--Limitation
on Indebtedness." These restrictions can only be waived with the consent of the
holders of a majority in principal amount of the notes then outstanding. Except
for the limitations contained in these covenants, however, the indenture will
not contain any covenants or provisions that may provide holders of the notes
protection in the event of a highly leveraged transaction.
The Credit Agreement prohibits us from purchasing any notes, and provides
that the occurrence of change of control events constitute a default under the
Credit Agreement. In the event a Change of Control occurs at a time when
ChipPAC International Company Limited is prohibited from purchasing notes,
ChipPAC International
29
Company Limited could seek the consent of its lenders to the purchase of notes
or could attempt to refinance the borrowings that contain this prohibition. If
ChipPAC International Company Limited does not obtain a consent or repay these
borrowings, ChipPAC International Company Limited will remain prohibited from
purchasing notes. In that case, ChipPAC International Company Limited's failure
to comply with this covenant would constitute a Default under the indenture
which would, in turn, constitute a default under the Credit Agreement. In these
circumstances, the subordination provisions in the indenture would likely
restrict payment to the holders of notes.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of events that would constitute a Change of Control or require that
this indebtedness be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require us to repurchase the notes
could cause a default under this indebtedness, even if the Change of Control
itself does not, due to the financial effect of the repurchase on us. Finally,
our ability to pay cash to the holders of notes following the occurrence of a
Change of Control may be limited by our then existing financial resources.
There can be no assurance that sufficient funds will be available when
necessary to make any required repurchases. The provisions under the indenture
relating to our obligation to make an offer to repurchase the notes as a result
of a Change of Control may be waived or modified with the written consent of
the holders of a majority in principal amount of the notes.
Significant Covenants
The indenture contains covenants which include the following:
Limitation on Indebtedness
(a) We shall not, and shall not permit any Restricted Subsidiary to, Incur,
directly or indirectly, any Indebtedness, except that ChipPAC and
ChipPAC International Company Limited may Incur Indebtedness if, after
giving pro forma effect to the Incurrence, the Consolidated Coverage
Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the provisions of paragraph (a), ChipPAC and its
Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness of us or any Restricted Subsidiary Incurred under any
Revolving Credit Facility; provided, however, that, immediately
after giving effect to the Incurrence, the aggregate principal
amount of all Indebtedness incurred under this clause (1) and then
outstanding does not exceed the greater of (A) $50.0 million and (B)
the sum of (x) $20.0 million, (y) 50% of the book value of our
inventory and that of our Restricted Subsidiaries and (z) 80% of the
book value of our accounts receivables and that of our Restricted
Subsidiaries; provided, however, that the Indebtedness may only be
Incurred by a Restricted Subsidiary if the Indebtedness, when added
together with the amount of all other Indebtedness Incurred by
Restricted Subsidiaries under this clause (1) and then outstanding,
does not exceed an amount equal to 50% of the greater of (x) the
amount in clause (A) above and (y) the amount determined in clause
(B) above;
(2) Indebtedness of ChipPAC International Company Limited Incurred under
any Term Loan Facilities; provided, however, that, after giving
effect to the Incurrence, the aggregate principal amount of all
Indebtedness Incurred under this clause (2) and then outstanding
does not exceed $190.0 million less the aggregate sum of all
principal payments actually made from time to time after the Issue
Date relating to the Indebtedness under paragraph (a)(3)(A) of the
covenant described under "--Limitation on Sales of Assets and
Subsidiary Stock";
(3) Indebtedness of ChipPAC International Company Limited Incurred prior
to August 5, 2001 under any Capital Expenditure Facility (and
Refinancing Indebtedness of that Indebtedness) in an aggregate
principal amount not to exceed $20.0 million;
(4) Indebtedness of us or any Restricted Subsidiary owed to and held by
us or a Restricted Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock which results
in a
30
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of the Indebtedness (other than to the Company
or another Restricted Subsidiary) will be considered, in each case,
to constitute the Incurrence of the Indebtedness by the issuer of
that Indebtedness;
(5) Indebtedness consisting of the notes, other than Additional Notes;
(6) Indebtedness outstanding on the Issue Date, other than Indebtedness
described in clause (1), (2), (3), (4) or (5) of this covenant;
(7) Refinancing Indebtedness relating to Indebtedness Incurred under
paragraph (a) or under clause (4), (5), (6), (8) or this clause (7)
of this paragraph (b); provided, however, that to the extent the
Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Subsidiary Incurred under clause (8), the
Refinancing Indebtedness shall be Incurred only by that Subsidiary;
(8) Indebtedness of a Person Incurred and outstanding on or prior to the
date on which the Person was acquired by the Company or a Restricted
Subsidiary, other than Indebtedness Incurred in anticipation of, in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions where the Person was acquired by the Company or
a Restricted Subsidiary; provided, however, that after giving pro
forma effect to the transaction or series of related transactions,
(a) the Consolidated Coverage Ratio increases as a consequence of
the incurrence and related acquisition and (b) the Consolidated
Coverage Ratio is at least 1.5 to 1.0;
(9) Hedging Obligations of ours or any Restricted Subsidiary under
Interest Rate Agreements and Currency Agreements entered into in the
ordinary course of business and not for the purpose of speculation;
(10) Indebtedness of ours or any Restricted Subsidiary in the form of
performance bonds, completion guarantees and surety or appeal bonds
entered into by us and our Restricted Subsidiaries in the ordinary
course of their business;
(11) Indebtedness consisting of the Guaranties and Guarantees of other
Indebtedness otherwise permitted to be Incurred under the indenture;
(12) Indebtedness of ours or any Restricted Subsidiary arising from the
honoring by a bank or other financial institution of a check, draft
or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course
of business, provided that the Indebtedness is satisfied within five
business days of Incurrence;
(13) Indebtedness, including Capital Lease Obligations, Incurred by us or
any of our Restricted Subsidiaries to finance the purchase, lease or
improvement of real or personal property or equipment, whether
through the direct purchase of assets or the Capital Stock of any
Person owning the assets, in an aggregate principal amount which,
when added together with the amount of Indebtedness Incurred under
this clause (13) and then outstanding, does not exceed the greater
of (A) $15.0 million and (B) 5% of Total Assets (in each case
including any Refinancing Indebtedness of that Indebtedness);
(14) Indebtedness Incurred by us or any of our Restricted Subsidiaries
constituting reimbursement obligations under letters of credit
issued in the ordinary course of business including, without
limitation, letters of credit to procure raw materials, or relating
to workers' compensation claims or self-insurance, or other
Indebtedness relating to reimbursement-type obligations regarding
workers' compensation claims;
(15) Indebtedness of ours issued to any of our directors, employees,
officers or consultants or a Restricted Subsidiary in connection
with the redemption or purchase of Capital Stock that, by its terms,
is subordinated to the notes, is not secured by any of our assets or
our Restricted Subsidiaries and does not require cash payments prior
to the Stated Maturity of the notes and
31
Refinancing Indebtedness of that Indebtedness, in an aggregate
principal amount which, when added together with the amount of
Indebtedness Incurred under this clause (15) and then outstanding,
does not exceed $5.0 million;
(16) Indebtedness arising from agreements of ours or a Restricted
Subsidiary providing for indemnification, adjustment of purchase
price, earn-out or other similar obligations, in each case, incurred
or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of ours, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of
the business, assets or Restricted Subsidiary for the purpose of
financing the acquisition; provided that the maximum assumable
liability of all the Indebtedness shall at no time exceed the gross
proceeds actually received by us and our Restricted Subsidiaries in
connection with the disposition;
(17) Indebtedness arising from the Recapitalization Agreement providing
for indemnification, adjustment of purchase price, earn-out or other
similar business obligations; and
(18) Indebtedness of ours or a Restricted Subsidiary in an aggregate
principal amount which, together with all other Indebtedness of
ChipPAC and the Restricted Subsidiaries outstanding on the date of
Incurrence (other than Indebtedness permitted by clauses (1) through
(17) above or paragraph (a) above) does not exceed $20.0 million.
(c) Notwithstanding this provision, we shall not, and shall not permit any
Restricted Subsidiary to, Incur any Refinancing Indebtedness under the
prior paragraph (b) if the proceeds from the Refinancing Indebtedness
are used, directly or indirectly, to Refinance any Subordinated
Obligations unless the Indebtedness shall be subordinated to the notes
or the relevant Guaranty, as applicable, to at least the same extent as
the Subordinated Obligations.
(d) For purposes of determining compliance with this covenant,
(1) if an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, ChipPAC International Company
Limited, in its sole discretion, will classify the item of
Indebtedness at the time of its Incurrence and only be required to
include the amount and type of the Indebtedness in one of the above
clauses; and
(2) an item of Indebtedness may be divided and classified in more than
one of the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, neither we nor ChipPAC
International Company Limited shall, and we shall not permit any
Subsidiary Guarantor to, Incur (1) any Indebtedness if the Indebtedness
is subordinate or junior in ranking in any respect to any Senior
Indebtedness of ChipPAC International Company Limited, the ChipPAC or
the Subsidiary Guarantor, as applicable, unless the Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right
of payment to Senior Subordinated Indebtedness or (2) any Secured
Indebtedness (other than trade payables incurred in the ordinary course
of business) that is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the notes or the
relevant Guaranty, as applicable, equally and ratably with the Secured
Indebtedness for so long as the Secured Indebtedness is secured by a
Lien.
(f) For purposes of determining compliance with any U.S. dollar denominated
restriction on the Incurrence of Indebtedness where the Indebtedness
Incurred is denominated in a different currency, the amount of the
Indebtedness will be the U.S. Dollar Equivalent determined on the date
of the Incurrence of the Indebtedness, provided, however, that if any of
the Indebtedness denominated in a different currency is governed by a
Currency Agreement relating to U.S. dollars, covering all principal,
premium, if any, and interest payable on the Indebtedness, the amount of
Indebtedness expressed in U.S. dollars will be as provided in the
Currency Agreement. The principal amount of any Refinancing Indebtedness
Incurred in the same currency as the Indebtedness being Refinanced will
be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to
the extent that (i) the U.S. Dollar Equivalent was determined
32
based on a Currency Agreement, in which case the Refinancing
Indebtedness will be determined compliance the preceding sentence, and
(ii) the principal amount of the Refinancing Indebtedness exceeds the
principal amount of the Indebtedness being Refinanced, in which case the
U.S. Dollar Equivalent of the excess will be determined on the date the
Refinancing Indebtedness is Incurred.
Limitation on Restricted Payments
(a) We shall not, and shall not permit any Restricted Subsidiary, directly
or indirectly, to make a Restricted Payment if at the time that we or
the Restricted Subsidiary makes the Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result as a
result of making the Restricted Payment);
(2) we are not able to Incur an additional $1.00 of Indebtedness under
paragraph (a) of the covenant described under "--Limitation on
Indebtedness;" or
(3) the aggregate amount of the Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum,
without duplication, of:
(A) 50% of the Consolidated Net Income accrued during the period,
treated as one accounting period, from the beginning of the
fiscal quarter immediately following the fiscal quarter during
which the notes are originally issued to the end of the most
recent fiscal quarter for which internal financial statements are
available on or prior to the date of the Restricted Payment, or,
in case Consolidated Net Income shall be a deficit, minus 100% of
the deficit;
(B) the aggregate Net Cash Proceeds received by us from the issuance
or sale of, or capital contribution relating to, its Capital
Stock, other than Disqualified Stock, subsequent to the Issue
Date, other than an issuance or sale to a Subsidiary of ours and
other than an issuance or sale to an employee stock ownership
plan or to a trust established by us or any of our Subsidiaries
for the benefit of employees to the extent that the purchase by
the plan or trust is financed by Indebtedness of the plan or
trust to us or any Subsidiary or Indebtedness Guaranteed by us or
any Subsidiary, and the fair market value, as determined in good
faith by resolution of our Board of Directors, of property, other
than cash that would constitute Temporary Cash Equivalents or a
Related Business, received by us or a Restricted Subsidiary
subsequent to the Issue Date as a contribution to its common
equity capital, other than from a Subsidiary or that was financed
with loans from us or any Restricted Subsidiary;
(C) the amount by which Indebtedness of ours or any Restricted
Subsidiary is reduced on our consolidated balance sheet upon the
conversion or exchange, other than by a Subsidiary of ours
subsequent to the Issue Date of any Indebtedness of ours or any
Restricted Subsidiary convertible or exchangeable for our Capital
Stock, other than Disqualified Stock, less the amount of any
cash, or the fair value of any other property, distributed by us
or any Restricted Subsidiary upon the conversion or exchange; and
(D) an amount equal to the sum of (i) the net reduction in
Investments in any Person resulting from dividends, repayments of
loans or advances or other transfers of assets subsequent to the
Issue Date, in each case to us or any Restricted Subsidiary from
the Person, and (ii) the portion, proportionate to our equity
interest in the Subsidiary, of the fair market value of the net
assets of an Unrestricted Subsidiary at the time the Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that this sum shall not exceed, in the case of any
Person, the amount of Investments previously made, and treated as
a Restricted Payment, by us or any Restricted Subsidiary in the
Person.
(b) The provisions of the prior paragraph (a) shall not prohibit:
(1) any Restricted Payment made by exchange for, or out of the proceeds
of the substantially concurrent sale of, or capital contribution
relating to, our Capital Stock, other than Disqualified
33
Stock and other than Capital Stock issued or sold to a Subsidiary of
ours or an employee stock ownership plan or to a trust established
by us or any of our Subsidiaries for the benefit of employees to the
extent that the purchase by the plan or trust is financed by
Indebtedness of the plan or trust to us or any Subsidiary of ours or
Indebtedness Guaranteed by us or any Subsidiary of ours; provided,
however, that (A) the Restricted Payment shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from the sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made
by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness which is permitted to be Incurred
under the covenant described under "--Limitation on Indebtedness;"
provided, however, that the purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(3) any purchase or redemption of Disqualified Stock of ChipPAC or a
Restricted Subsidiary made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Disqualified Stock of
ChipPAC or a Restricted Subsidiary which is permitted to be Incurred
under the covenant described under "--Limitation on Indebtedness;"
provided, however, that the purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments;
(4) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock;"
provided, however, that the purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments;
(5) upon the occurrence of a Change of Control and within 60 days after
the completion of the offer to repurchase the notes under the
covenant described under "Change of Control" above, including the
purchase of the notes tendered, any purchase or redemption of
Subordinated Obligations required under the terms of the
Subordinated Obligations as a result of the Change of Control at a
purchase or redemption price not to exceed the outstanding principal
amount of the Subordinated Obligations, plus any accrued and unpaid
interest; provided, however, that:
(A) at the time of the purchase or redemption no Default shall have
occurred and be continuing or would result from the purchase or
redemption;
(B) we would be able to Incur an additional $1.00 of Indebtedness
under paragraph (a) of the covenant described under
"--Limitation on Indebtedness" after giving pro forma effect to
the Restricted Payment; and
(C) the purchase or redemption shall be included in the calculation
of the amount of Restricted Payments;
(6) dividends paid within 60 days after the date of declaration of the
dividends if, at the date of declaration, the dividends would have
complied with this covenant; provided, however, that the dividends
shall be included in the calculation of the amount of Restricted
Payments;
(7) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its
Subsidiaries from employees, former employees, consultants, former
consultants, directors or former directors of the Company or any of
its Subsidiaries, or permitted transferees of these employees,
former employees, consultants, former consultants, directors or
former directors), under the terms of the agreements, including
employment and consulting agreements, or plans, or amendments
approved by the Board of Directors under which these individuals
purchase or sell or are granted the option to purchase or sell,
shares of the common stock; provided, however, that the aggregate
amount of the repurchases shall not exceed the sum of:
(x) $5.0 million;
34
(y) the Net Cash Proceeds from the sale of Capital Stock to members
of management or directors of the Company and its Subsidiaries
that occurs after the Issue Date, to the extent the Net Cash
Proceeds from the sale have not otherwise been applied to the
payment of Restricted Payments by virtue of clause (3)(B) of
paragraph (a) above; and
(z) the cash proceeds of any "key man" life insurance policies that
are used to make the repurchases; provided further, however,
that (A) the repurchases shall be excluded in the calculation of
the amount of Restricted Payments and (B) the Net Cash Proceeds
from the sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
(8) payments required under the terms of the Recapitalization Agreement
to consummate the recapitalization; provided, however, that the
payments shall be excluded in the calculation of the amount of
Restricted Payments;
(9) payments relating to the Hyundai Earn-out under the terms of the
Recapitalization Agreement as in effect on the Issue Date; provided,
however, that the payments shall be excluded in the calculation of
the amount of Restricted Payments;
(10) payments of in-kind dividends when due or the accrual or cumulation
of dividends on the Hyundai Preferred Stock under the terms of the
Hyundai Preferred Stock as in effect on the Recapitalization Closing
Date; provided, however, that the payments shall be excluded in the
calculation of the amount of Restricted Payments;
(11) payments of cash dividends when due on and after 5 1/2 years from
the Recapitalization Closing Date on the Hyundai Preferred Stock
under the terms of the Hyundai Preferred Stock as in effect on the
Recapitalization Closing Date; provided, however, that the payments
shall be included in the calculation of the amount of Restricted
Payments;
(12) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if the Capital Stock represents a portion of the
exercise price of the stock options; provided, however, that the
payments shall be excluded in the calculation of the amount of
Restricted Payments;
(13) payments not to exceed $200,000 in the aggregate solely to enable us
to make payments to holders of our Capital Stock in lieu of the
issuance of fractional shares of our Capital Stock; provided,
however, that the payments shall be excluded in the calculation of
the amount of Restricted Payments;
(14) Restricted Payments not to exceed $15.0 million payable on Capital
Stock, including Disqualified Stock, issued to customers, clients,
suppliers or purchasers or sellers of goods or services of ours or a
Restricted Subsidiary in connection with a strategic investment in
us or a Restricted Subsidiary by the customers, clients, suppliers
or purchasers or sellers of goods or services; provided, however,
that the payments shall be included in the calculation of the amount
of Restricted Payments;
(15) Restricted Payments not exceeding $15.0 million in the aggregate for
any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations;
provided, however, that (A) at the time of the Restricted Payments,
no Default shall have occurred and be continuing or result from the
Restricted Payments, and (B) the Restricted Payments shall be
included in the calculation of the amount of Restricted Payments;
(16) the distribution, as a dividend or otherwise, of shares of Capital
Stock or assets of an Unrestricted Subsidiary provided that the fair
market value, as determined in good faith by our Board of Directors,
of the shares of Capital Stock or assets shall not exceed the amount
of the Investments that were made, and not subsequently reduced
under clause (3)(D) of paragraph (a) above, by us in the
Unrestricted Subsidiary and were treated as Restricted Payments or
were
35
included in the calculation of the amount of Restricted Payments
previously made; provided, however, that (A) the distributions shall
be excluded in the calculation of the amount of Restricted Payments
and (B) any net reduction in Investments in the Unrestricted
Subsidiary resulting from the distribution shall be excluded from
the calculation of amounts under clause (3)(D) of paragraph (a)
above; or
(17) Restricted Payments not exceeding $7.5 million in the aggregate;
provided, however, that (A) at the time of the Restricted Payments,
no Default shall have occurred and be continuing or result from the
restricted payments and (B) the Restricted Payments shall be
included in the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
We shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to
(a) pay dividends or make any other distributions on its Capital Stock to us or
any Restricted Subsidiary or pay any Indebtedness owed to ChipPAC International
Company Limited or us, (b) make any loans or advances to ChipPAC International
Company Limited or us or (c) transfer any of its property or assets to ChipPAC
International Company Limited or us, except:
(1) any encumbrance or restriction under an agreement in effect at or
entered into on the Issue Date, including the indenture, the notes and
the Guaranties, or, in the case of the Credit Agreement, as in effect
on the Recapitalization Closing Date;
(2) any encumbrance or restriction relating to a Restricted Subsidiary
under an agreement relating to any Indebtedness Incurred by the
Restricted Subsidiary on or prior to the date on which the Restricted
Subsidiary was acquired by us, other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions where the Restricted Subsidiary became a
Restricted Subsidiary or was acquired by us, and outstanding on that
date;
(3) any encumbrance or restriction under an agreement (A) evidencing
Indebtedness Incurred without violation of the indenture or (B)
effecting a Refinancing of Indebtedness Incurred under an agreement
referred to in clause (1) or (2) of this covenant or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or
(2) of this covenant or this clause (3); provided, however, that in the
case of clauses (A) and (B), the encumbrances and restrictions relating
the Restricted Subsidiary contained in the refinancing agreement or
amendment are, in the good faith judgment of the Board of Directors, no
more restrictive in any material respect than the encumbrances and
restrictions relating to the Restricted Subsidiary contained in
agreements of the Restricted Subsidiary in effect at, or entered into
on, the Issue Date or the Recapitalization Closing Date;
(4) any encumbrance or restriction consisting of customary non- assignment
provisions in leases governing leasehold interests to the extent the
provisions restrict the transfer of the lease or the property leased
thereunder or in licenses entered into in the ordinary course of
business to the extent the licenses restrict the transfer of the
license or the property licensed under the license;
(5) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted
Subsidiary so long as the restrictions solely restrict the transfer of
the property governed by the security agreements or mortgages;
(6) restrictions on the transfer of assets under any Lien permitted under
the indenture imposed by the holder of the Lien;
(7) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so acquired of the
nature described in clause (c) above;
36
(8) provisions relating to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(9) any restriction relating to a Restricted Subsidiary imposed under an
agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of the Restricted
Subsidiary pending the closing of the sale or disposition;
(10) any restriction arising under applicable law, regulation or order;
(11) any agreement or instrument governing Capital Stock, other than
Disqualified Stock, of any Person that is in effect on the date the
Person is acquired by us or a Restricted Subsidiary;
(12) any restriction on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(13) any restriction in any agreement that is not more restrictive than the
restrictions under the terms of the Credit Agreement as in effect on
the Recapitalization Closing Date.
Limitation on Sales of Assets and Subsidiary Stock
(a) We shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) we or the Restricted Subsidiary receives consideration at the time of
the Asset Disposition at least equal to the fair market value,
including as to the value of all non-cash consideration, as
determined in good faith by the Board of Directors, of the shares and
assets that are part of the Asset Disposition;
(2) at least 75% of the consideration received by us or the Restricted
Subsidiary from the Asset Disposition is in the form of cash or cash
equivalents; and
(3) an amount equal to 100% of the Net Available Cash from the Asset
Disposition is applied by us or the Restricted Subsidiary, as the
case may be, in one or more of the following ways:
(A) to the extent we elect or are required by the terms of any
Indebtedness, to prepay, repay, redeem or purchase Senior
Indebtedness of ChipPAC International Company Limited or
Indebtedness, other than any Disqualified Stock, of ours or
another Restricted Subsidiary of ours, in each case other than
Indebtedness owed to the Company or an Affiliate of the Company,
within one year from the later of the closing date of the Asset
Disposition and the receipt of the Net Available Cash;
(B) to the extent we elect, to acquire Additional Assets within one
year from, or enter into a binding commitment to acquire
Additional Assets; provided that the commitment shall be subject
only to customary conditions, other than financing, and the
acquisition shall be consummated within two years from the later
of the closing date of the Asset Disposition and the receipt of
the Net Available Cash; and
(C) to the extent we elect, or to the extent of the balance of the
Net Available Cash after application in compliance with clauses
(A) and (B), to make an offer to the holders of the notes and to
holders of other Senior Subordinated Indebtedness of ChipPAC
International Company Limited designated by ChipPAC International
Company Limited to purchase notes and the other Senior
Subordinated Indebtedness in compliance with the conditions
contained in the indenture;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness under clause (A) or (C) above, we or the
Restricted Subsidiary shall permanently retire the Indebtedness and, in
the case of any revolving facility, shall cause the related loan
commitment, if any, to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
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Notwithstanding the provisions of this paragraph, we and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
compliance with this paragraph except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
compliance with this paragraph exceeds $10.0 million. Pending
application of Net Available Cash under this covenant, the Net Available
Cash shall be invested in Permitted Investments or used to temporarily
reduce loans outstanding under any revolving credit facility.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:
(x) the assumption of Indebtedness of ours or any Restricted Subsidiary
and the release of us or the Restricted Subsidiary from all liability
on the Indebtedness as part of the Asset Disposition;
(y) securities, notes or other obligations received by us or any
Restricted Subsidiary from the transferee that are promptly converted
by us or the Restricted Subsidiary into cash; and
(z) any Additional Assets, so long as the Additional Assets were acquired
for fair market value in connection with the transaction giving rise
to the Asset Disposition, as determined in good faith by the board of
directors of the Company or the Restricted Subsidiary, as applicable,
which Additional Assets will be considered to have been acquired
under clause (A) of the preceding paragraph as part of the Asset
Disposition.
(b) In the event of an Asset Disposition that requires the purchase of the
notes under clause (a)(3)(C) above, and the purchase of other Senior
Subordinated Indebtedness, ChipPAC International Company Limited will be
required to purchase notes tendered in an offer by ChipPAC International
Company Limited for the notes, and other Senior Subordinated
Indebtedness, at a purchase price of 100% of their principal amount,
without premium, plus accrued but unpaid interest, or, relating to the
other Senior Subordinated Indebtedness, the lesser price, if any, as may
be provided for by the terms of the Senior Subordinated Indebtedness in
compliance with the procedures, including prorating in the event of
oversubscription, in the indenture. If the aggregate purchase price of
the notes, and any other Senior Subordinated Indebtedness, tendered
exceeds the Net Available Cash allotted to the purchase of the notes,
and any other Senior Subordinated Indebtedness, ChipPAC International
Company Limited will select the notes, and any other Senior Subordinated
Indebtedness, to be purchased on a pro rata basis but in denominations
of $1,000 or multiples of $1,000. ChipPAC International Company Limited
shall not be required to make an offer to purchase notes, and other
Senior Subordinated Indebtedness, under this covenant if the Net
Available Cash available for the offer is less than $10.0 million, which
lesser amount shall be carried forward for purposes of determining
whether an offer is required for the Net Available Cash from any
subsequent Asset Disposition.
(c) ChipPAC International Company Limited shall comply with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of notes under this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, ChipPAC
International Company Limited shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached
its obligations under this clause as a result of complying with the
provisions of any securities laws or regulations.
Limitation on Affiliate Transactions
(a) We shall not, and shall not permit any Restricted Subsidiary to, enter
into or permit to exist any transaction, including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or
the rendering of any service, with any Affiliate of ours involving
aggregate consideration in excess of $2.5 million (an "Affiliate
Transaction") unless the terms of that transaction:
(1) are no less favorable to us or the Restricted Subsidiary than those
that could be obtained at the time of the transaction in arm's-length
dealings with a Person who is not an Affiliate;
38
(2) have been approved by a majority of the disinterested members of the
Board of Directors; and
(3) if the Affiliate Transaction involves an amount in excess of $10.0
million, have been determined by (A) a nationally recognized
investment banking firm to be fair, from a financial standpoint, to
us and our Restricted Subsidiaries or (B) an accounting or appraisal
firm nationally recognized in making determinations of this kind to
be on terms that are not less favorable to us and our Restricted
Subsidiaries than the terms that could be obtained in an arms-length
transaction from a Person that is not our Affiliate.
(b) The provisions of the prior paragraph (a) shall not prohibit;
(1) any Restricted Payment permitted to be paid under the covenant
described under "--Limitation on Restricted Payments;"
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise under, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the
Board of Directors;
(3) the grant of stock options or similar rights to our employees and
directors or those of our Restricted Subsidiaries under plans or
agreements approved by the Board of Directors;
(4) loans or advances to employees, directors, officers or consultants
(A) in the ordinary course of business or (B) otherwise in an
aggregate amount not to exceed $5.0 million in the aggregate
outstanding at any one time;
(5) reasonable fees, compensation or employee benefit arrangements to and
indemnity provided for the benefit of employees, directors, officers
or consultants of ours or any Subsidiary in the ordinary course of
business;
(6) any transaction exclusively between or among us and our Restricted
Subsidiaries or between or among Restricted Subsidiaries; provided,
however, that the transactions are not otherwise prohibited by the
indenture;
(7) the payment of management, consulting and advisory fees and related
expenses made under the Advisory Agreements as in effect on the
Recapitalization Closing Date and the payment of other customary
management, consulting and advisory fees and related expenses to the
Principals and their Affiliates made under any financial advisory,
financing, underwriting or placement agreement or under other
investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which fees and expenses
are made under arrangements approved by our board of directors or
that of the Restricted Subsidiary in good faith;
(8) any Affiliate Transaction with Hyundai Electronics and its Affiliates
under written agreements in effect on the Recapitalization Closing
Date and as amended, renewed or extended from time to time; provided,
however, that any amendment, renewal or extension shall not contain
terms which are materially less favorable to us and our Restricted
Subsidiaries than those in the agreements in effect on the
Recapitalization Closing Date;
(9) any agreement with us or any Restricted Subsidiary as in effect as of
the Recapitalization Closing Date or any amendment or replacement or
any transaction contemplated thereby, including under any amendment,
so long as any amendment or replacement agreement is not more
disadvantageous to us or the Restricted Subsidiary in any material
respect than the original agreement as in effect on the
Recapitalization Closing Date;
(10)the existence of, or the performance by us or any of our Restricted
Subsidiaries of obligations under the terms of, the Shareholders
Agreement and any similar agreements which it may enter into
thereafter; provided, however, that the existence of, or the
performance by us or any of our Restricted Subsidiaries of
obligations under, any future amendment to any existing agreement or
39
under any similar agreement entered into after the Recapitalization
Closing Date shall only be permitted by this clause (10) to the
extent that the terms of the amendment or new agreement are not more
disadvantageous to us or the Restricted Subsidiary in any material
respect;
(11) transactions with customers, clients, suppliers, joint venture
partners or purchasers or sellers of goods or services, in each case
in the ordinary course of business, including, without limitation,
under joint venture agreements, and otherwise in compliance with the
terms of the indenture which are fair to us and our Restricted
Subsidiaries, in the reasonable determination of the board of
directors or the senior management thereof, or are on terms at least
as favorable as might reasonably have been obtained at the time from
an unaffiliated party; and
(12) the issuance or sale of any of our Capital Stock, other than
Disqualified Stock.
Merger and Consolidation
Neither ChipPAC International Company Limited nor we shall consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
series of related transactions, all or substantially all its assets to, any
Person, unless:
(1) the resulting, surviving or transferee Person, that we refer to as a
"Successor Company," shall be a Person organized and existing under the
laws of the British Virgin Islands or of the United States of America,
any State thereof or the District of Columbia and the Successor Company,
if not us or ChipPAC International Company Limited, shall expressly
assume, by a supplemental indenture executed and delivered to the
trustee, in form satisfactory to the trustee, all the obligations of
ChipPAC International Company Limited or us, as applicable, under the
indenture and the Company Guaranty or the notes, as applicable;
(2) immediately after giving effect to the transaction, and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of the transaction as having been Incurred by the
Successor Company or the Subsidiary at the time of the transaction, no
Default shall have occurred and be continuing;
(3) immediately after giving effect to the transaction, (A) the Successor
Company would be able to Incur an additional $1.00 of Indebtedness under
paragraph (a) of the covenant described under "--Limitation on
Indebtedness" or (B) the Consolidated Coverage Ratio for the Successor
Company and its Restricted Subsidiaries would be equal to or greater
than the same ratio for us and our Restricted Subsidiaries immediately
prior to the transaction;
(4) ChipPAC International Company Limited or us, as applicable, shall have
delivered to the trustee an Officers' Certificate and an Opinion of
Counsel, each stating that the consolidation, merger or transfer and any
supplemental indenture comply with the indenture;
(5) If the merging corporation is organized and existing under the laws of
the British Virgin Islands and the Successor Company is organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia or if the merging corporation is
organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company
is organized and existing under the laws of the British Virgin Islands,
which we refer to any of the previous events as a "Foreign Jurisdiction
Merger," ChipPAC International Company Limited or ChipPAC, as
applicable, shall have delivered to the trustee an Opinion of Counsel
that the Holders will not recognize income, gain or loss for U.S.
Federal income tax purposes as a result of the transaction and will be
governed by U.S. Federal income tax on the same amounts and at the same
times as would have been the case if the transaction had not occurred;
and
(6) In the event of a Foreign Jurisdiction Merger, ChipPAC International
Company Limited or ChipPAC, as applicable, shall have delivered to the
trustee an Opinion of Counsel in the British Virgin Islands or other
applicable jurisdiction that (A) any payment of interest or principal
under or relating to the notes
40
or the Guaranties will, after the consolidation, merger, conveyance,
transfer or lease of assets, be exempt from the Taxes described under
"--Withholding Taxes" and (B) no other taxes on income, including
capital gains, will be payable under the laws of the British Virgin
Islands or any other jurisdiction where the Successor Company is or
becomes organized, resident or engaged in business for tax purposes
relating to the acquisition, ownership or disposition of the notes,
including the receipt of interest or principal thereon, provided that
the holder does not use or hold, and is not deemed to use or hold the
notes in carrying on a business in the British Virgin Islands or other
jurisdiction where the Successor Company is or becomes organized,
resident or engaged in business for tax purposes,
provided, however, that clause (3) above shall not apply (x) if, in the good
faith determination of the Board of Directors, whose determination shall be
evidenced by a resolution of the Board of Directors, the principal purpose and
effect of the transaction is to change the jurisdiction of incorporation of
ChipPAC International Company Limited or the Company or (y) in the case of a
merger of ChipPAC International Company Limited or the Company with or into a
Wholly Owned Subsidiary of ours.
The Successor Company shall be the successor to us or ChipPAC International
Company Limited, as the case may be, and shall succeed to, and be substituted
for, and may exercise every right and power of, ChipPAC International Company
Limited or us under the indenture, and the predecessor Issuer or Company,
except in the case of a lease, shall be automatically released from its
obligations under the Company Guaranty, the notes and the indenture.
We will not permit any Subsidiary Guarantor to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person if not the Subsidiary
shall be a Person organized and existing under the laws of the
jurisdiction under which the Subsidiary was organized or under the laws
of the United States of America, or any State thereof or the District of
Columbia, and the Person shall expressly assume, by executing a
supplemental indenture or Guaranty Agreement, as applicable, all the
obligations of the Subsidiary under the indenture or its Subsidiary
Guaranty and under the notes and the indenture;
(2) immediately after giving effect to the transaction or transactions on a
pro forma basis, and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result
of the transaction as having been issued by the Person at the time of
the transaction, no Default shall have occurred and be continuing; and
(3) we deliver to the trustee an Officers' Certificate and an Opinion of
Counsel, each stating that the consolidation, merger or transfer and the
supplemental indenture or Guaranty Agreement, if any, complies with the
indenture.
The provisions of clauses (1) and (2) above shall not apply to any one or
more transactions involving a Subsidiary Guarantor which constitute an Asset
Disposition if we have complied with the applicable provisions of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock" above.
Future Guarantors
If, after the Issue Date, we form or otherwise acquire, directly or
indirectly, any Restricted Subsidiary, we shall cause the Restricted Subsidiary
to Guarantee the notes under a Subsidiary Guaranty on the terms and conditions
in the indenture and the Subsidiary Guaranty Agreement; provided, however, in
the event we or a Restricted Subsidiary forms or otherwise acquires, directly
or indirectly, a Restricted Subsidiary organized under the laws of a
jurisdiction other than the United States and the jurisdiction prohibits by
law, regulation or order the Restricted Subsidiary from providing a Guarantee,
we shall use all commercially reasonable efforts, including pursuing required
waivers, over a period up to one year, to provide the Guarantee; provided,
however, that we shall not be required to use commercially reasonable efforts
relating to the subsidiaries for more than a one-year
41
period or a shorter period as we shall determine in good faith that we have
used all commercially reasonable efforts. If we or the Restricted Subsidiary is
unable during the period to obtain an enforceable Guarantee in the
jurisdiction, then the Restricted Subsidiary shall not be required to provide a
Guarantee of the notes under to the Subsidiary Guaranty so long as the
Restricted Subsidiary does not Guarantee any other Indebtedness of ours and our
Restricted Subsidiaries.
Limitation on Assets of Non-Subsidiary Guarantors
We shall not permit our Restricted Subsidiaries that are not Subsidiary
Guarantors, excluding ChipPAC Assembly and Test (Shanghai) Company, Ltd. and
ChipPAC (Shanghai) Company Ltd. or any successors, to collectively hold at any
one time more than 33 1/3% of the consolidated assets of ours and our
Restricted Subsidiaries.
Limitation on Sale of the Capital Stock of ChipPAC International Company
Limited
For so long as any of the notes are outstanding, ChipPAC International
Company Limited will continue to be, directly or indirectly, a Wholly Owned
Subsidiary of ours.
SEC Reports
Whether or not we must comply with the reporting requirements of Section 13
or 15(d) of the Exchange Act, we will file with the SEC and provide the trustee
and noteholders with annual reports and information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation that would be required to make these filings,
at the times specified for the filings under these Sections. However, we will
not be required to file any reports, documents or other information if the SEC
will not accept a filing.
Defaults
Each of the following is an Event of Default:
(1) a default in the payment of interest or any Additional Amounts on the
notes when due, continued for 30 days;
(2) a default in the payment of principal of any note when due at its Stated
Maturity, upon redemption, upon required repurchase, upon declaration or
otherwise;
(3) the failure by us, ChipPAC International Company Limited or any
Subsidiary Guarantor to comply with its obligations under "--Significant
Covenants--Merger and Consolidation" above;
(4) the failure by us or any Restricted Subsidiary to comply for 30 days
after notice with any of its obligations in the covenants described
above under "--Change of Control," other than a failure to purchase the
exchange notes, or under "--Significant Covenants" under "--Limitation
on Indebtedness," "--Limitation on Restricted Payments," "--Limitation
on Restrictions on Distributions from Restricted Subsidiaries,"
"--Limitation on Sales of Assets and Subsidiary Stock," other than a
failure to purchase the notes, "--Limitation on Affiliate Transactions,"
"--Future Guarantors," "--Limitation on Assets of Non-Subsidiary
Guarantors," "--Limitation on Sale of the Capital Stock of ChipPAC
International Company Limited" or "--SEC Reports;"
(5) the failure by us or any Restricted Subsidiary to comply for 60 days
after notice with our or its other agreements contained in the indenture;
(6) Indebtedness of ours, ChipPAC International Company Limited or any
Significant Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof
42
because of a default and the total amount of the Indebtedness unpaid or
accelerated exceeds $10.0 million which we refer to as the "cross
acceleration provision;"
(7) events of bankruptcy, insolvency or reorganization of us, ChipPAC
International Company Limited or a Significant Subsidiary as specified
in the indenture, which we refer to as the "bankruptcy provisions;"
(8) any judgment or decree for the payment of money in excess of $10.0
million is entered against us, ChipPAC International Company Limited or
a Significant Subsidiary, remains outstanding for a period of 60 days
following the judgment and is not discharged, waived or stayed within 10
days after notice which we refer to as the "judgment default provision;"
or
(9) the Company Guaranty or any Subsidiary Guaranty of a Significant
Subsidiary ceases to be in full force and effect, other than in
compliance with the terms of the Company Guaranty or the Subsidiary
Guaranty or the ChipPAC or any Significant Subsidiary that is a
Subsidiary Guarantor denies or disaffirms its obligations under the
Company Guaranty or its Subsidiary Guaranty, as the case may be.
However, a default under clauses (4), (5) and (8) will not constitute an
Event of Default until the trustee or the holders of 25% in principal amount of
the outstanding notes notify ChipPAC International Company Limited and us of
the default and ChipPAC International Company Limited or ChipPAC does not cure
the default within the time specified after receipt of the notice.
If an Event of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the outstanding notes may declare the
principal of and accrued but unpaid interest on all the notes to be due and
payable. Upon a declaration, the principal and interest shall be due and
payable immediately; provided, however, that if upon the declaration there are
any amounts outstanding under the Credit Agreement and the amounts thereunder
have not been accelerated, the principal and interest shall be due and payable
upon the earlier of the time the amounts are accelerated or five Business Days
after receipt by ChipPAC International Company Limited and us and the
Representative under the Credit Agreement of the declaration. If an Event of
Default relating to specific events of bankruptcy, insolvency or reorganization
of us or ChipPAC International Company Limited occurs and is continuing, the
principal of and interest on all the notes will become and be immediately due
and payable without any declaration or other act on the part of the trustee or
any holders of the notes. The holders of a majority in principal amount of the
outstanding notes may rescind any acceleration relating to the notes and its
consequences.
Contingent upon the provisions of the indenture relating to the duties of
the trustee, in case an Event of Default occurs and is continuing, the trustee
will be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the notes unless
the holders have offered to the trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium, if any, or interest when due, no holder of a
note may pursue any remedy under the indenture or the notes unless:
(1) the holder has previously given the trustee notice that an Event of
Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding notes
have requested the trustee to pursue the remedy;
(3) the holders have offered the trustee reasonable security or indemnity
against any loss, liability or expense;
(4) the trustee has not complied with the request within 60 days after
receiving the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount of the outstanding notes
have not given the trustee a direction inconsistent with the request
within the 60-day period.
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If conditions in the indenture are met, holders of a majority in principal
amount of the outstanding notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or of exercising any trust or power conferred on the trustee. The trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial to the rights of
any other holder of a note or that would involve the trustee in personal
liability.
The indenture provides that if a Default occurs and is continuing and is
known to the trustee, the trustee must mail to each holder of the notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any note, the trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the holders of the
notes. In addition, ChipPAC International Company Limited is required to
deliver to the trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether its signers know of any Default that occurred
during the previous year. ChipPAC International Company Limited also is
required to deliver to the trustee, within 30 days, written notice of any event
which would constitute specific types of Defaults, their status and what action
ChipPAC International Company Limited is taking or proposes to take.
Amendments and Waivers
If conditions in the indenture are met, the indenture may be amended with
the consent of the holders of a majority in principal amount of the notes then
outstanding, including consents obtained in connection with a tender offer or
exchange for the notes, and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the notes then outstanding. However, without the consent of each
holder of an outstanding note so affected, no amendment may:
(1) reduce the amount of notes whose holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any
note;
(3) reduce the principal of or extend the Stated Maturity of any note;
(4) reduce the premium payable upon the redemption of any note or change the
time at which any note may be redeemed as described under "--Optional
Redemption" or "--Redemption for Changes in British Virgin Islands
Withholding Taxes" above;
(5) make any note payable in money other than that stated in the note;
(6) impair the right of any holder of the notes to receive payment of
principal of and interest on the holder's notes on or after the due
dates therefor or to institute suit for the enforcement of any payment
on or relating to the holder's notes;
(7) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions; or
(8) make any change in the Company Guaranty or any Subsidiary Guaranty that
would adversely affect the Noteholders.
In addition, any amendment to the subordination provisions of the indenture
that would adversely affect the holders of the notes will require the consent
of the holders of at least 75% in aggregate principal amount of the notes then
outstanding. However, no amendment may be made to the subordination provisions
of the indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of that Senior Indebtedness,
or their Representative, consents to the change.
Without the consent of any holder of the notes, ChipPAC International
Company Limited and trustee may amend the indenture to cure any ambiguity,
omission, defect or inconsistency, to provide for the assumption by a successor
corporation of the obligations of ChipPAC International Company Limited under
the indenture, provided, that ChipPAC International Company Limited or ChipPAC
delivers to the trustee the Opinions of
44
Counsel described in clauses five and six of "Significant Covenants--Merger and
Consolidation" if the opinions are required by the provisions of these clauses,
to provide for uncertificated notes in addition to or in place of certificated
notes, provided that the uncertificated notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner that the uncertificated
notes are described in Section 163(f)(2)(B) of the Code, to add guarantees of
the notes, to release a Subsidiary Guaranty when permitted by the indenture, to
secure the notes, to add to our covenants and those of our Restricted
Subsidiaries for the benefit of the holders of the notes or to surrender any
right or power conferred upon us and our Restricted Subsidiaries, to make any
change that does not adversely affect the rights of any holder of the notes or
to comply with any requirement of the SEC in connection with the qualification
of the indenture under the Trust Indenture Act.
The consent of the holders of the notes is not necessary under the indenture
to approve the particular form of any proposed amendment. It is sufficient if
the consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, ChipPAC
International Company Limited is required to mail to holders of the notes a
notice briefly describing the amendment. However, the failure to give notice to
all holders of the notes, or any defect in the notice, will not impair or
affect the validity of the amendment.
Transfer
The notes will be issued in registered form and will be transferable only
upon the surrender of the notes being transferred for registration of transfer.
ChipPAC International Company Limited may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge payable in connection
with transfers and exchanges.
Defeasance
ChipPAC International Company Limited and ChipPAC at any time may terminate
all of our obligations under the notes and the indenture, which we refer to as
"legal defeasance," except for obligations respecting the defeasance trust and
obligations to register the transfer or exchange of the notes, to replace
mutilated, destroyed, lost or stolen notes and to maintain a registrar and
paying agent for the notes. ChipPAC International Company Limited or ChipPAC at
any time may terminate our obligations under "--Change of Control" and under
the covenants described under "--Significant Covenants," other than the
covenant described under "--Merger and Consolidation," the operation of the
cross acceleration provision, the bankruptcy provisions relating to Significant
Subsidiaries and the judgment default provision described under "--Defaults"
above and the limitations contained in clause (3) of the first paragraph under
"--Significant Covenants--Merger and Consolidation" above, which we refer to as
"covenant defeasance."
ChipPAC International Company Limited and ChipPAC may exercise our legal
defeasance option notwithstanding the prior exercise of their covenant
defeasance option. If ChipPAC International Company Limited or ChipPAC
exercises its legal defeasance option, payment of the notes may not be
accelerated because of an Event of Default. If ChipPAC International Company
Limited or ChipPAC exercises its covenant defeasance option, payment of the
notes may not be accelerated because of an Event of Default specified in clause
(4), clause (6), clause (7) with respect only to Significant Subsidiaries or
clause (8) under "--Defaults" above or because of the failure of us to comply
with clause (3) of the first paragraph under "--Significant Covenants--Merger
and Consolidation" above or the failure of ChipPAC International Company
Limited or any Subsidiary Guarantor to comply with the limitation under the
third paragraph under "--Significant Covenants--Merger and Consolidation"
above. If ChipPAC International Company Limited or ChipPAC exercises its legal
defeasance option or its covenant defeasance option, we and each Subsidiary
Guarantor will be released from all of our obligations relating to the Company
Guaranty or its Subsidiary Guaranty, as the case may be.
In order to exercise either defeasance option, ChipPAC International Company
Limited or ChipPAC must irrevocably deposit in trust, which we refer to as the
"defeasance trust," with the trustee money or
45
U.S. Government Obligations for the payment of principal and interest on the
notes to redemption or maturity, as the case may be, and must comply with other
conditions, including delivery to the trustee of
(i) an Opinion of Counsel that holders of the notes will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result of
the deposit and defeasance and will be governed by U.S. Federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if the deposit and defeasance had not occurred,
and, in the case of legal defeasance only, the Opinion of Counsel must
be based on a ruling of the Internal Revenue Service or other change in
applicable U.S. Federal income tax law, and
(ii) an Opinion of Counsel in each of the British Virgin Islands and any
other jurisdiction in which ChipPAC International Company Limited or
ChipPAC is organized, resident or engaged in business for tax purposes
that:
(A) holders of the notes will not recognize income gain or loss for
purposes of the tax laws of the jurisdiction as a result of legal
defeasance or covenant defeasance, as applicable, and will be subject
for purposes of the tax laws of that jurisdiction to income tax on
the same amounts, in the same manner and at the same times as would
have been the case if legal defeasance or covenant defeasance had not
occurred; and
(B) payments from the defeasance trust will be free or exempt from any
and all withholding and other taxes of whatever nature of the
jurisdiction or any political subdivision or taxing authority except
in the case of a payment made to a holder which can be taxed by
reason of the holder's carrying on a business in the British Virgin
Islands or other jurisdiction.
Concerning the Trustee
U.S. Bank, N.A. is the trustee under the indenture and will be the registrar
and paying agent with regard to the notes.
The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, with exceptions
provided in the indenture. The indenture provides that if an Event of Default
occurs and is not cured, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of his own
affairs. The trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request of any holder of notes, unless the
holder shall have offered to the trustee security and indemnity satisfactory to
it against any loss, liability or expense and then only to the extent required
by the terms of the indenture.
Governing Law
The indenture provides that it and the notes will be governed by the laws of
the State of New York without giving effect to conflicts of laws rules.
Enforceability of Judgments
Since substantially all of the operating assets of ChipPAC International
Company Limited, ChipPAC and their Subsidiaries are outside the United States,
any judgment obtained in the United States against ChipPAC International
Company Limited, ChipPAC or a Subsidiary Guarantor, including judgments
relating to the payment of principal, interest, Additional Amounts, redemption
price and any purchase price of the notes, may not be collectible within the
United States.
ChipPAC International Company Limited has been informed by its British
Virgin Island counsel, Harney Westwood & Riegels, that in its opinion the
applicable laws of the British Virgin Islands permit an action to be
46
brought in a court of competent jurisdiction in the British Virgin Islands on a
final and conclusive judgment in personam of a United States federal court or a
court of the State of New York sitting in the Borough of Manhattan in The City
of New York, respecting the enforcement of the notes or the indenture,
including the Company Guaranty and the Subsidiary Guaranties, that is not
impeachable as void or voidable under the laws of the State of New York and
that is for a specified sum in money if:
. the New York court that rendered the judgment has jurisdiction over the
judgment debtor, as recognized by the courts of the British Virgin Islands
and in compliance with the British Virgin Islands' conflict of laws rules
and submission by ChipPAC International Company Limited, ChipPAC, Inc. and
the Subsidiary Guarantors in the indenture to the jurisdiction of the New
York court will be sufficient for this purpose;
. the judgment was not obtained by fraud or in a manner contrary to natural
justice and the enforcement thereof would not be inconsistent with public
policy, as that term is understood under the applicable laws of the
British Virgin Islands;
. the enforcement of the judgment does not constitute, directly or
indirectly, the enforcement of foreign revenue, expropriator, public or
penal laws;
. no new admissible evidence relevant to the action is discovered prior to
the rendering of judgment by the British Virgin Islands; and
. the action to enforce the judgment is commenced within six years after the
date of the judgment.
Furthermore, ChipPAC International Company Limited has been advised by its
counsel that they do not know of any reason under present laws of the British
Virgin Islands for avoiding recognition of the judgment of New York court under
the indenture, including the Company Guaranty and the Subsidiary Guaranties, or
on the notes based upon a reasonable interpretation of public policy.
Consent to Jurisdiction and Service
The indenture provides that ChipPAC International Company Limited, ChipPAC
and each Subsidiary Guarantor will appoint CT Corporation System, 1633
Broadway, New York, New York 10019 as its agent for actions brought under
Federal or state securities laws brought in any Federal or state court located
in the Borough of Manhattan in The City of New York and will submit to that
jurisdiction.
Definitions
"Additional Assets" means:
(1) any property or assets, other than Indebtedness and Capital Stock, in a
Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of the Capital Stock by the Company or another
Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that is a
Restricted Subsidiary;
provided, however, that the Restricted Subsidiary described in clauses (2) or
(3) above is primarily engaged in a Related Business.
"Advisory Agreements" mean each of the advisory agreements by and between
ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and each
Principal entered into on the Recapitalization Closing Date, as the same may be
amended from time to time in a manner that is not more disadvantageous to us in
any material respect than the original agreement as in effect on the
Recapitalization Closing Date.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with the specified Person. For the purposes of this definition,
47
"control" when used relating to any Person means the power to direct the
management and policies of Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have correlative meanings. For purposes of the
provisions described under "--Significant Covenants--Limitation on Restricted
Payments," "--Significant Covenants--Limitation on Affiliate Transactions" and
"--Significant Covenants--Limitation on Sales of Assets and Subsidiary Stock"
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of our Voting Stock, on a
fully diluted basis, or of rights or warrants to purchase the Capital Stock,
whether or not currently exercisable and any Person who would be an Affiliate
of the beneficial owner under the first sentence of this definition.
"Asset Disposition" means any sale, lease, other than operating leases
entered into in the ordinary course of business, transfer or other disposition,
or series of related sales, leases, transfers or dispositions by us or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction, each referred to for the purposes of this
definition as a "disposition," of (1) any shares of Capital Stock of a
Restricted Subsidiary, other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than us or a Restricted
Subsidiary, (2) all or substantially all the assets of any division or line of
business of ours or any Restricted Subsidiary or (3) any other assets of ours
or any Restricted Subsidiary outside of the ordinary course of our business or
that of the Restricted Subsidiary, other than, in the case of (1), (2) and
(3) above, (w) a disposition by a Restricted Subsidiary to us or by us or a
Restricted Subsidiary to a Restricted Subsidiary, (x) for purposes of the
covenant described under "--Significant Covenants--Limitation on Sales of
Assets and Subsidiary Stock" only, a disposition that constitutes a Restricted
Payment permitted by the covenant described under "--Significant
Covenants--Limitation on Restricted Payments," (y) sales or other dispositions
of obsolete, uneconomical, negligible, worn-out or surplus assets in the
ordinary course of business, including but not limited to equipment and
intellectual property and (z) disposition of assets with a fair market value of
less than $1,000,000; provided, however, that a disposition of all or
substantially all of our assets and our Restricted Subsidiaries taken as a
whole will be governed by the provisions of the indenture described above under
the caption "--Change of Control" and/or the provisions described above under
the caption "--Merger and Consolidation" and not by the provisions of the
"--Limitation on Sales of Assets and Subsidiary Stock" covenant.
"Attributable Debt" relating to a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in the
Sale/Leaseback Transaction, including any period for which the lease has been
extended.
"Average Life" means, as of the date of determination, relating to any
Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of the Indebtedness or
redemption or similar payment relating to the Preferred Stock multiplied by the
amount of the payment by (2) the sum of all the payments.
"Bain" means Bain Capital, Inc.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations under the Credit Agreement.
"Board of Directors" means the Board of Directors of ChipPAC or any
committee of the Board duly authorized to act on behalf of the Board.
"Business Day" means each day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law to
close in New York City.
48
"Capital Expenditure Facility" means the capital expenditure facility
contained in the Credit Agreement.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purpose
compliance with GAAP, and the amount of Indebtedness represented by the
obligation shall be the capitalized amount of the obligation determined in
compliance with GAAP; and the Stated Maturity of the obligation shall be the
date of the last payment of rent or any other amount due under the lease prior
to the first date upon which the lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in, however designated, equity of the Person, including any Preferred
Stock, but excluding any debt securities convertible into equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Guaranty" means the Guarantee by us of ChipPAC International
Company Limited's obligations relating to the notes contained in the indenture.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (a) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available ending on or prior to the date of determination to (b) Consolidated
Interest Expense for the four fiscal quarters; provided, however, that:
(1) if ChipPAC or any Restricted Subsidiary has Incurred any Indebtedness
since the beginning of the period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for the period shall be calculated after
giving effect on a pro forma basis to the Indebtedness as if the
Indebtedness had been Incurred on the first day of the period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of the new Indebtedness as if the
discharge had occurred on the first day of the period;
(2) if ChipPAC or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of
the period or if any Indebtedness is to be repaid, repurchased, defeased
or otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless the Indebtedness has been
permanently repaid and has not been replaced) on the date of the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for the period
shall be calculated on a pro forma basis as if the discharge had
occurred on the first day of the period and as if ChipPAC or the
Restricted Subsidiary has not earned the interest income actually earned
during the period relating to cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge the Indebtedness;
(3) if since the beginning of the period we or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for the period shall
be reduced by an amount equal to the EBITDA, if positive, directly
attributable to the assets which are the subject of the Asset
Disposition for the period, or increased by an amount equal to the
EBITDA, if negative, directly attributable for the period and
Consolidated Interest Expense for the period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of ours or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged relating to us and our
continuing Restricted Subsidiaries in connection with the Asset
Disposition for the period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for the period
directly attributable to the Indebtedness of the Restricted Subsidiary
to the extent we and our continuing Restricted Subsidiaries are no
longer liable for the Indebtedness after the sale);
(4) if since the beginning of the period ChipPAC or any Restricted
Subsidiary, by merger or otherwise, shall have made an Investment in any
Restricted Subsidiary, or any person which becomes a Restricted
49
Subsidiary, or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or substantially
all of an operating unit of a business, EBITDA and Consolidated Interest
Expense for the period shall be calculated after giving their pro forma
effect, including the Incurrence of any Indebtedness, as if the
Investment or acquisition occurred on the first day of the period; and
(5) if since the beginning of the period any Person, that subsequently
became a Restricted Subsidiary or was merged with or into us or any
Restricted Subsidiary since the beginning of the period, shall have made
any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment under clause (3) or (4) above if made
by us or a Restricted Subsidiary during the period, EBITDA and
Consolidated Interest Expense for the period shall be calculated after
giving their pro forma effect as if the Asset Disposition, Investment or
acquisition occurred on the first day of the period.
For purposes of this definition, whenever pro forma effect is to be given to
an acquisition or disposition of assets, the amount of income or earnings
relating to the acquisition or disposition and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in connection with,
the acquisition or disposition, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of ChipPAC and
shall include any applicable Pro Forma Cost Savings. If any Indebtedness bears
a floating rate of interest and is being given pro forma effect, the interest
of the Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period, taking into
account any Interest Rate Agreement applicable to the Indebtedness if the
Interest Rate Agreement has a remaining term in excess of 12 months.
"Consolidated Interest Expense" means, for any period, our total interest
expense and that of our consolidated Restricted Subsidiaries determined in
compliance with GAAP, plus, to the extent not included in total interest
expense, and to the extent incurred by us or our Restricted Subsidiaries,
without duplication:
(1) interest expense attributable to Capital Lease Obligations and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, in each case, determined in compliance with
GAAP;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed relating to
letters of credit and bankers' acceptance financing;
(6) net costs associated with Hedging Obligations involving any Interest
Rate Agreement, including amortization of fees, determined compliance
GAAP;
(7) dividends paid in cash or Disqualified Stock relating to (A) all
Preferred Stock of Restricted Subsidiaries and (B) all of our
Disqualified Stock, in each case, held by Persons other than us or a
Wholly Owned Subsidiary;
(8) interest actually paid by us or a Restricted Subsidiary under any
Guarantee of Indebtedness of any other Person; and
(9) the cash contributions to any employee stock ownership plan or similar
trust to the extent the contributions are used by the plan or trust to
pay interest or fees to any Person other than us in connection with
Indebtedness Incurred by the plan or trust;
and less, to the extent included in total interest expense, (A) the
amortization during the period of capitalized financing costs associated with
the recapitalization and the financing of the recapitalization and (B) the
amortization during the period of other capitalized financing costs.
50
"Consolidated Net Income" means, for any period, the net income of us and
our consolidated Subsidiaries determined in compliance with GAAP; provided,
however, that there shall not be included in the Consolidated Net Income:
(1) any net income of any Person other than us if the Person is not a
Restricted Subsidiary, except that (A) limited by the exclusion
contained in clause (4) below, our equity in the net income of the
Person for the period shall be included in Consolidated Net Income up to
the aggregate amount of cash actually distributed by the Person during
the period to us or a Restricted Subsidiary as a dividend or other
distribution subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in clause
(3) below and (B) our equity in a net loss of the Person for the period
shall be included in determining the Consolidated Net Income;
(2) any net income or loss of any Person acquired by us or a Subsidiary in a
pooling of interests transaction for any period prior to the date of the
acquisition;
(3) any net income of any Restricted Subsidiary if the Restricted Subsidiary
is restricted, directly or indirectly, in its ability to pay dividends
or make distributions, directly or indirectly, to us, except that (A)
limited by the exclusion contained in clause (4) below, our equity in
the net income of the Restricted Subsidiary for the period shall be
included in Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by the Restricted Subsidiary consistent
with these restrictions during the period to us or another Restricted
Subsidiary as a dividend or other distribution subject, in the case of a
dividend or other distribution paid to another Restricted Subsidiary, to
the limitation contained in this clause, and (B) our equity in a net
loss of any the Restricted Subsidiary for the period shall be included
in determining Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of any of
our assets or those of our consolidated Subsidiaries, including under
any sale-and-leaseback arrangement, which is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person;
(5) any extraordinary or unusual gains or losses and the related tax effect
in compliance with GAAP;
(6) any translation gains and losses due solely to fluctuations in currency
values and the related tax effect in compliance with GAAP;
(7) any cash charges resulting from the recapitalization to the extent the
cash charges are paid or payable by Hyundai Electronics, Hyundai
Electronics America or any of their Affiliates; or
(8) the cumulative effect of a change in accounting principles.
Notwithstanding these provisions, for the purposes of the covenant described
under "--Significant Covenants--Limitation on Restricted Payments" only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to us or a Restricted Subsidiary to the extent the dividends, repayments or
transfers increase the amount of Restricted Payments permitted under the
covenant under clause (a)(3)(D) thereof.
"Credit Agreement" means the Credit Agreement entered into by and among
ChipPAC International Company Limited, ChipPAC, most of its Subsidiaries, the
lenders referred to therein and Credit Suisse First Boston, as Administrative
Agent, together with the related documents, including without limitation the
term loans and revolving loans thereunder, any guarantees and security
documents, as amended, extended, renewed, restated, supplemented or otherwise
modified, in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions, from time to time, and any
agreement, and related document governing Indebtedness incurred to refund or
refinance, in whole or in part, the borrowings and commitments then outstanding
or permitted to be outstanding under the Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
51
"Currency Agreement" of a Person means any foreign exchange contract,
currency swap agreement or other similar agreement to which the Person is a
party or beneficiary.
"CVC" means Citicorp Venture Capital, Ltd.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" of any Person means:
(1) the Bank Indebtedness of the Person; provided, however, that Bank
Indebtedness outstanding under any Credit Agreement that is Refinanced
in part, but not in whole, the previously outstanding Bank Indebtedness
shall only constitute Designated Senior Indebtedness if it meets the
requirements of succeeding clause (2); and
(2) any other Senior Indebtedness of the Person which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders of the other
Senior Indebtedness are committed to lend up to, at least $10.0 million
and is specifically designated by the Person in the instrument
evidencing or governing the Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the indenture.
"Disqualified Stock" of any Person means any Capital Stock which by its
terms, or by the terms of any security into which it is convertible or for
which it is exchangeable, or upon the happening of any event:
(1) matures or is mandatorily redeemable under a sinking fund obligation or
otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified Stock; or
(3) is redeemable at the option of the holder of the Disqualified Stock, in
whole or in part, in each case on or prior to the first anniversary of
the Stated Maturity of the notes;
provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions giving its holders the right to require
the Person to repurchase or redeem the Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to the Capital Stock
are not more favorable to the holders of the Capital Stock than the provisions
described under "--Change of Control" and under "--Significant
Covenants--Limitation on Sales of Assets and Subsidiary Stock." Notwithstanding
these provisions, the Intel Preferred Stock as in effect on the date of
issuance will not be considered to be Disqualified Stock.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following in the amount deducted in
calculating Consolidated Net Income, without duplication:
(1) all income tax expense of ours and our consolidated Restricted
Subsidiaries;
(2) depreciation expense of ours and our consolidated Restricted
Subsidiaries;
(3) amortization expense of ours and our consolidated Restricted
Subsidiaries, excluding amortization expense other than the amortization
of capitalized financing costs, attributable to a prepaid cash item that
was paid in a prior period; and
(4) all other non-cash charges of ours and our consolidated Restricted
Subsidiaries, excluding any the non-cash charge in the amount that it
represents an accrual of or reserve for cash expenditures in any future
period;
in each case for the period. Notwithstanding these provisions, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added
52
to Consolidated Net Income to compute EBITDA only in an amount that and in the
same proportion that the net income of the Restricted Subsidiary was included
in calculating Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to us by the
Restricted Subsidiary without prior approval that has not been obtained, under
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to the
Restricted Subsidiary or its stockholders.
"Equity Offering" means a primary offering of our Capital Stock other than
Disqualified Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those provided in:
(1) the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards
Board; and
(3) other statements by other entities as approved by a significant segment
of the accounting profession.
All ratios and computations based on GAAP contained in the indenture shall
be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of the Person:
(1) to purchase or pay or advance or supply funds for the purchase or
payment of the Indebtedness or other obligation of the Person, whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or otherwise;
or
(2) entered into for the purpose of assuring in any other manner the obligee
of the Indebtedness of the payment of the Indebtedness or to protect the
obligee against loss of the Indebtedness in whole or in part;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit or standard contractual indemnities, in each case, in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guaranty" means the Company Guaranty and each Subsidiary Guaranty, as
applicable.
"Guaranty Agreement" means a supplemental indenture, in a form reasonably
satisfactory to the trustee, providing for a Guaranty by a Subsidiary Guarantor.
"Hedging Obligations" of any Person means the obligations of the Person
under any Interest Rate Agreement or Currency Agreement.
"holder" or "noteholder" means the Person in whose name a note is registered
on the Registrar's books.
"Hyundai Earn-out" means the cash payment to Hyundai Electronics of up to an
additional $55.0 million during the four-year period following January 1, 1999
in the event we exceed levels of EBITDA specified in the Recapitalization
Agreement; provided, however, in the event the final $20.0 million of the $55.0
million in cash is required to be paid to Hyundai Electronics, it shall be paid
by the mandatory redemption of an equal amount of Hyundai Preferred Stock.
53
"Hyundai Electronics" means Hyundai Electronics Industries Company Ltd., a
Republic of Korea corporation.
"Hyundai Preferred Stock" means the 12.5% mandatorily redeemable Preferred
Stock issued to Hyundai Electronics and/or Hyundai Electronics America in
connection with the recapitalization.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time the Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) will be considered to be Incurred by
the Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when
used as a noun shall have a correlative meaning. The accretion of principal of
a non-interest bearing or other discount security, and the issuance as interest
or dividend payments of pay-in-kind securities having identical terms to the
underlying security and which pay-in-kind securities were contemplated on the
issue date of the underlying security, in each case shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" of any Person on any date of determination means, without
duplication:
(1) the principal of and premium, if any, of (A) indebtedness of the Person
for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which the Person
is responsible or liable;
(2) all Capital Lease Obligations of the Person and all Attributable Debt of
Sale/Leaseback Transactions entered into by the Person;
(3) all obligations of the Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of the Person and
all obligations of the Person under any title retention agreement, but
excluding trade accounts and accrued expenses payable arising in the
ordinary course of business;
(4) all obligations of the Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction,
other than obligations under letters of credit securing obligations,
other than obligations described in clauses (1) through (3) above,
entered into in the ordinary course of business of the Person to the
extent the letters of credit are not drawn upon or, if and to the extent
drawn upon, the drawing is reimbursed no later than the tenth Business
Day following payment on the letter of credit;
(5) the amount of all obligations of the Person relating to the redemption,
repayment or other repurchase of any Disqualified Stock or, relating to
any Subsidiary of the Person, the liquidation preference relating to,
any Preferred Stock, but excluding, in each case, any accrued dividends;
(6) all obligations of the type referred to in clauses (1) through (5) of
other Persons and all dividends of other Persons for the payment of
which, in either case, the Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of
any Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6) of
other Persons secured by any Lien on any property or asset of the
Person, whether or not the obligation is assumed by the Person, the
amount of the obligation being deemed to be the lesser of the value of
the property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of the Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at the date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at the date; provided,
however, that the amount outstanding at any time of any Indebtedness issued
with original issue discount will be considered to be the face amount of the
Indebtedness less the remaining unamortized portion of the original issue
discount of the indebtedness at the time as determined in compliance with GAAP.
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"Intel" means Intel Corporation.
"Intel Preferred Stock" means the 10.0% convertible Preferred Stock issuable
to Intel under to the Stock Purchase Agreement dated August 5, 1999 by and
between Intel and ChipPAC, Inc.
"Interest Rate Agreement" of a Person means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Person against fluctuations in interest
rates.
"Investment" by any Person means all investments by the Person in other
Persons in the forms of any direct or indirect advance, loan other than (A)
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the lender and (B) commission,
travel and similar advances to officers and employees made in the ordinary
course of business, or other extensions of credit, including by way of
Guarantee or similar arrangement, or capital contribution to, by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others, or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by the other
Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and the covenant described under
"--Significant Covenants--Limitation on Restricted Payments":
(1) "Investment" shall include the portion, proportionate to our equity
interest in the Subsidiary, of the fair market value of the net assets
of any Subsidiary of our at the time that the Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation
of the Subsidiary as a Restricted Subsidiary, we will be considered to
continue to have a permanent "Investment" in an Unrestricted Subsidiary
equal to an amount, if positive, equal to (x) our "Investment" in the
Subsidiary at the time of the redesignation less (y) the portion,
proportionate to our equity interest in the Subsidiary, of the fair
market value of the net assets of the Subsidiary at the time of the
redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of the transfer, in each
case as determined in good faith by the Board of Directors.
"Issue Date" means July 29, 1999.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any conditional sale or other title retention
agreement or lease in the nature thereof.
"Net Available Cash" from an Asset Disposition means cash payments received
from the Asset Disposition, including any cash payments received by way of
deferred payment of principal under a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to the properties or assets or
received in any other non-cash form, in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of the Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets
that are part of the Asset Disposition, in compliance with the terms of
any Lien upon or other security agreement of any kind relating to the
assets, or which must by its terms, or in order to obtain a necessary
consent to the Asset Disposition, or by applicable law be, repaid out of
the proceeds from the Asset Disposition;
(3) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of the
Asset Disposition; and
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in compliance with GAAP, against any liabilities associated
with the property or other assets disposed in the Asset Disposition and
retained by the Company or any Restricted Subsidiary after the Asset
Disposition.
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"Net Cash Proceeds" relating to any issuance or sale of Capital Stock, means
the cash proceeds of the issuance or sale net of attorneys' fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees actually incurred in connection with the
issuance or sale and net of taxes paid or payable as a result the issuance or
sale and any reserve for adjustment in the sale price of the asset or assets
established in compliance with GAAP.
"Obligations" means relating to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable under the documentation governing the
Indebtedness.
"Permitted Holders" means (1) the Principals and any Related Party of a
Principal and (2) any group of investors if deemed to be a "person," as these
terms is used in Section 13(d)(3) of the Exchange Act by virtue of the
Shareholders Agreement, as it may be amended, modified or supplemented from
time to time, provided that:
(1) a Principal is party to the Shareholders Agreement,
(2) the persons party to the Shareholders Agreement, as so amended,
supplemented or modified from time to time that were not parties and are
not Affiliates of persons who were parties, to the Shareholders
Agreement as of the Recapitalization Closing Date, together with their
respective Affiliates whom we refer to as, collectively, the "New
Investors," are not direct or indirect beneficial owners, determined
without reference to the Shareholders Agreement, of more than 50% of the
Voting Stock owned by all parties to the Stockholders' Agreement as so
amended, supplemented or modified, and
(3) the New Investors, individually or in the aggregate, do not, directly or
indirectly, have the right, under the Shareholders Agreement, as so
amended, supplemented or modified from time to time, or otherwise to
designate more than 50% of the members of our Board of Directors or any
direct or indirect parent entity of ours.
"Permitted Investment" means an Investment by us or any Restricted
Subsidiary in:
(1) a Restricted Subsidiary or a Person that will, upon the making of the
Investment, become a Restricted Subsidiary; provided, however, that the
primary business of the Restricted Subsidiary is a Related Business;
(2) another Person if as a result of the Investment the other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, us or a Restricted Subsidiary;
provided, however, that the Person's primary business is a Related
Business;
(3) Temporary Cash Investments;
(4) receivables owing to us or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or
dischargeable compliance customary trade terms; provided, however, that
the trade terms may include the concessionaire trade terms as ChipPAC
or the Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are expected
at the time of the advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees, directors, officers or consultants made
in the ordinary course of our business or that of the Restricted
Subsidiary;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to us or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent the Investment represents the non-cash portion
of the consideration received for an Asset Disposition as permitted
under the covenant described under "Significant Covenants--Limitation
on Sales of Assets and Subsidiary Stock;"
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(9) Currency Agreements and Interest Rate Agreements entered into in the
ordinary course of our business and otherwise in compliance with the
indenture; and
(10) so long as no Default shall have occurred and be continuing or results
from the Investment, any Person in an aggregate amount which, when
added together with the amount of all the Investments made under this
clause (10) which at the time of the Investment have not been repaid
through repayments of loans or advances or other transfers of assets,
does not exceed the greater of (A) $30.0 million and (B) 7.5% of Total
Assets, with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes however designated which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of the
Person, over shares of Capital Stock of any other class of the Person.
"Principal" of a note means the principal of the note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Principal" means Bain and SXI Holders.
"Pro Forma Cost Savings" during any period means the reduction in costs that
were:
(1) directly attributable to an asset acquisition and calculated on a basis
that is consistent with Regulation S-X under the Securities Act in
effect and applied as of the Issue Date; or
(2) implemented by the business that was the subject of the asset
acquisition within six months of the date of the asset acquisition and
that are supportable and quantifiable by the underlying accounting
records of the business, as if, in the case of each of clause (1) and
(2), all the reductions in costs had been effected as of the beginning
of the period.
"Recapitalization" means the plan of recapitalization and merger under the
Agreement and Plan of Recapitalization and Merger dated as of March 13, 1999 as
amended on or prior to the Issue Date, among Hyundai Electronics Industries
Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.
"Recapitalization Closing Date" means August 5, 1999.
"Refinance" of any Indebtedness means to refinance, extend, renew, refund,
repay, prepay, redeem, defease or retire, or to issue other Indebtedness in
exchange or replacement for, the indebtedness. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of ours or any Restricted Subsidiary existing on the Issue Date or
Incurred in compliance with the indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time the
Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced; and
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(3) the Refinancing Indebtedness has an aggregate principal amount, or if
Incurred with original issue discount, an aggregate issue price, that is
equal to or less than the aggregate principal amount, or if Incurred
with original issue discount, the aggregate accreted value, then
outstanding or committed, plus fees and expenses, including any premium
and defeasance costs, under the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary that Refinances Indebtedness of ours or (y)
Indebtedness of ours or a Restricted Subsidiary that Refinances Indebtedness of
an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
our businesses and those of our Restricted Subsidiaries on the Issue Date.
"Related Party" of any Principal means:
(1) any controlling stockholder, or 80% or more owned Subsidiary of the
Principal;
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or
more controlling interest of which consist of the Principal and/or the
other Persons referred to in the immediately preceding clause (1); or
(3) any Affiliate of any Principal.
"Representative" means any trustee, agent or representative, if any, for an
issue of our Senior Indebtedness; provided, however, that if and for so long as
any Senior Indebtedness lacks the representative, then the Representative for
the Senior Indebtedness shall at all times be the holders of a majority in
outstanding principal amount of the Senior Indebtedness.
"Restricted Payment" of any Person means:
(1) the declaration or payment of any dividends or any other distributions
of any sort relating to its Capital Stock, including any payment in
connection with any merger or consolidation involving the Person, or
similar payment to the direct or indirect holders of its Capital Stock
in their capacity as other than dividends or distributions payable
solely in its Capital Stock other than Disqualified Stock, and dividends
or distributions payable solely to us or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation;
(2) the purchase, redemption or other acquisition or retirement for value of
any of our Capital Stock held by any Person or of any Capital Stock of a
Restricted Subsidiary held by any Affiliate of ours other than a
Restricted Subsidiary, including the exercise of any option to exchange
any Capital Stock, other than into our Capital Stock that is not
Disqualified Stock;
(3) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment
or scheduled sinking fund payment of any Subordinated Obligations, other
than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition; or
(4) the making of any Investment in any Person other than a Permitted
Investment.
In determining the amount of any Restricted Payment made in property other
than cash, the amount shall be the fair market value of the property at the
time of the Restricted Payment, as determined in good faith by the Board of
Directors.
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"Restricted Subsidiary" means any Subsidiary of ours, including ChipPAC
International Company Limited, that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances or replaces, in whole or in part, the revolving credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby ChipPAC or a Restricted Subsidiary
transfers the property to a Person and ChipPAC or a Restricted Subsidiary
leases it from the Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of ours secured by a Lien.
"Senior Indebtedness" of any Person means all:
(1) Bank Indebtedness of or guaranteed by the Person, whether outstanding on
the Issue Date or thereafter Incurred; and
(2) Indebtedness of the Person, whether outstanding on the Issue Date or
thereafter Incurred, including interest thereon, relating to (A)
Indebtedness for money borrowed, (B) Indebtedness evidenced by exchange
notes, debentures, bonds or other similar instruments for the payment of
which the Person is responsible or liable and (C) Hedging Obligations,
unless, in the case of (1) and (2), in the instrument creating or
evidencing the Indebtedness, it is provided that the obligations are
subordinate in right of payment to the obligations under the exchange
notes; provided, however, that Senior Indebtedness shall not include:
. any obligation of the Person to any subsidiary of the Person;
. any liability for Federal, state, local or other taxes owed or owing
by the Person;
. any accounts payable or other liability to trade creditors arising in
the ordinary course of business, including guarantees thereof or
instruments evidencing the liabilities;
. any Indebtedness of the Person, and any accrued and unpaid interest on
the Indebtedness, which is subordinate or junior by its terms to any
other Indebtedness or other obligation of the Person; or
. that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the indenture, but as to any the Indebtedness
under the Credit Agreement, no the violation will be considered to
exist if the Representative of the Lenders thereunder shall have
received an officers' certificate of ChipPAC that the issuance of the
Indebtedness does not violate the covenant and setting forth in
reasonable detail the reasons supporting that statement.
"Senior Subordinated Indebtedness" means:
(1) regarding ChipPAC International Company Limited, the notes and any other
Indebtedness of ChipPAC International Company Limited that specifically
provides that the Indebtedness is to rank pari passu with the notes in
right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of ChipPAC International
Company Limited which is not Senior Indebtedness of ChipPAC
International Company Limited; and
(2) regarding ChipPAC or a Subsidiary Guarantor, their respective Guarantees
of the notes and any other Indebtedness of the Person that specifically
provides that the Indebtedness ranks pari passu with the Guaranty in
right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Person which is
not Senior Indebtedness of the Person.
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"Shareholders Agreement" means the Shareholders Agreement entered into on
the Recapitalization Closing Date by and among Hyundai Electronics, Hyundai
Electronics America, SXI Group LLC, Bain Related Parties specified in the
agreement and ChipPAC, Inc.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of ours within the meaning of Rule 1-02 under
Regulation S-X of the SEC.
"Stated Maturity" of any security means the date specified in the security
as the fixed date on which the final payment of principal of the security is
due and payable, including under any mandatory redemption provision, but
excluding any provision providing for the repurchase of the security at the
option of the holder upon the happening of any contingency unless the
contingency has occurred.
"Subordinated Obligation" means any Indebtedness of ChipPAC International
Company Limited, of us or any Subsidiary Guarantor, whether outstanding on the
Issue Date or thereafter Incurred, which is subordinate or junior in right of
payment to, in the case of ChipPAC International Company Limited, the notes or,
in the case of ChipPAC or the Subsidiary Guarantor, its Guaranty, under a
written agreement to that effect.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests, including partnership interests,
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees is at the time owned or controlled,
directly or indirectly, by (1) the Person, (2) the Person and one or more
Subsidiaries of the Person or (3) one or more Subsidiaries of the Person.
"Subsidiary Guarantor" means each of ChipPAC (Barbados) Ltd., ChipPAC
Limited, ChipPAC Korea Company Ltd., ChipPAC Luxembourg S.a.R.L. and ChipPAC
Liquidity Management Hungary Limited Liability Company, ChipPAC Malaysia Sdn.
Bhd. and any other subsidiary of ours that Guarantees ChipPAC International
Company Limited's obligations under the notes.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the
Issuer's obligations under the notes.
"Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement
dated the Recapitalization Closing Date between the Subsidiary Guarantors and
ChipPAC International Company Limited.
"SXI Group LLC" means SXI Group LLC, a Delaware limited liability company.
"SXI Holders" means:
(1) CVC;
(2) SXI Group LLC; and
(3) any officer, employee or director of CVC or any trust, partnership or
the entity established solely for the benefit of the officers, employers
or directors.
"Temporary Cash Investments" means any of the following:
(1) any evidence of indebtedness, maturing not more than one year after the
date of investment by us, ChipPAC International Company Limited or any
other Restricted Subsidiary, issued by the United States of America or
any of its instrumentality agencies or by the Republic of Korea or any
of its instrumentalities or agencies, or by the Asian Development Bank,
the World Bank or any other supranational organization, which we refer
to as the "Government Entities," and guaranteed or otherwise backed,
directly or indirectly fully as to principal, premium, if any, and
interest, by the Government Entity issuing the indebtedness;
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(2) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of the investments'
acquisition issued by a bank or trust company which is organized under
the laws of the United States of America, any state of the United States
or any foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits aggregating
in excess of $250.0 million, or the foreign currency equivalent thereof,
and has outstanding debt which is rated "A," or a similar equivalent
rating, or higher by at least one nationally recognized statistical
rating organization, as defined in Rule 436 under the Securities Act, or
any money-market fund sponsored by a registered broker dealer or mutual
fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation, other than an
Affiliate of ours, organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" or higher according to Moody's Investors
Service, Inc. or "A-1" or higher according to Standard and Poor's
Ratings Group; and
(5) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority of the United States, and
rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.
"Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part the term loan facility.
"Total Assets" means our total consolidated assets and those of our
Restricted Subsidiaries, as provided in our most recent consolidated balance
sheet.
"Unrestricted Subsidiary" means (1) any Subsidiary of ours that at the time
of determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (2) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
ours, including any newly acquired or newly formed Subsidiary, to be an
Unrestricted Subsidiary unless the Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of,
ChipPAC or any other Subsidiary of ChipPAC that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if the
Subsidiary has assets greater than $1,000, the designation would be permitted
under the covenant described under "--Significant Covenants--Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to the designation (x) we could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Significant
Covenants--Limitation on Indebtedness" and (y) no Default shall have occurred
and be continuing. The designation by the Board of Directors shall be evidenced
to the trustee by promptly filing with the trustee a copy of the resolution of
the Board of Directors giving effect to the designation and an Officers'
Certificate certifying that the designation complied with these provisions.
"U.S. Dollar Equivalent" of any monetary amount in a currency other than
U.S. dollars means, at any time for determination thereof, the amount of U.S.
dollars obtained by converting the foreign currency involved in the computation
into U.S. dollars at the spot rate for the purchase of U.S. dollars with the
applicable foreign currency as published in The Wall Street Journal in the
"Exchange Rates" column under the heading "Currency Trading" on the date two
Business Days prior to the determination.
Except as described under "--Significant Covenants--Limitation on
Indebtedness," whenever it is necessary to determine whether we have complied
with any covenant in the indenture or a Default has occurred
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and an amount is expressed in a currency other than U.S. dollars, the amount
will be treated as the U.S. Dollar Equivalent determined as of the date the
amount is initially determined in the currency.
"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in the obligations, of the United States of
America, including any agency or instrumentality of the United States, for the
payment of which the full faith and credit of the United States of America is
pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests, including partnership interests, of the Person then outstanding and
normally entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers or trustees.
"Wholly Owned Subsidiary" means a Restricted Subsidiary the Capital Stock of
which (other than directors' qualifying shares) is at least 95% owned by us or
one or more Wholly Owned Subsidiaries.
LEGAL MATTERS
Some of the legal matters in connection with the validity of the notes will
be passed upon for us by Kirkland & Ellis, Los Angeles, California. Partners of
Kirkland & Ellis are partners in Randolph Street Partners, which acquired less
than 1.0% of our common stock in connection with the closing of our 1999
recapitalization. Kirkland & Ellis has, from time to time, represented, and may
continue to represent, Citicorp Venture Capital, Ltd. and some of their
affiliates (including our company and our direct and indirect subsidiaries) in
connection with legal matters.
EXPERTS
The financial statements incorporated in this prospectus by reference to our
Annual Report on Form 10-K for the year ended December 31, 2000, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we filed with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information in documents that we file later with the SEC will automatically
update and supersede information in this prospectus. We incorporate by
reference the documents listed below into this prospectus, and any future
filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, until our
offering is complete. The documents we incorporate by reference are:
. Our Annual Report on Form 10-K for the year ended December 31, 2000 filed
on April 2, 2001.
. Our Proxy Statements on Form 14A filed with the SEC on February 22, 2001
and April 30, 2001.
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
filed on May 15, 2001.
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
filed on August 14, 2001.
. Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001
filed on November 14, 2001.
. Our Current Report on Form 8-K dated December 31, 2001 filed on January
10, 2002.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
ChipPAC, Inc.
47400 Kato Road
Fremont, California 94538
Attention: Corporate Secretary
Telephone: (510) 979-8000
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can inspect, read and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC at:
. Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549; and
. Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511.
You can also obtain copies of these materials from the public reference
facilities of the SEC at prescribed rates. You can obtain information on the
operation of the public reference facilities by calling the SEC at
1-800-SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that
makes available reports, proxy statements and other information regarding
issuers that file electronically with it.
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[LOGO] ChipPAC logo for Back Cover
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses to be
incurred in connection with the registration and distribution of the securities
being registered hereunder. All such fees and expenses shall be borne by the
company.
Commission Registration Fee...................... $ 3,750
Legal Fees and Expenses.......................... $20,000
Accounting Fees and Expenses..................... $15,000
Printing, Engraving and Mailing Expenses......... $10,000
-------
Total......................................... $48,750
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ChipPAC International Company Limited
As in most United States jurisdictions, the board of directors of a British
Virgin Islands company is charged with the management and affairs of the
company, and subject to any limitations to the contrary in the Memorandum of
Association of a company, the Board of Directors is entrusted with the power to
manage the business and affairs of the company (hereinafter, the "Issuer"). In
most United States jurisdictions, directors owe a fiduciary duty to a company
and its shareholders, including a duty of care, pursuant to which directors
must properly apprise themselves of all reasonably available information, and a
duty of loyalty, pursuant to which they must protect the interests of the
company and refrain from conduct that injures the company or its shareholders
or that deprives the company or its shareholders of any profit or advantage.
Many United States jurisdictions have enacted various statutory provisions
which permit the monetary liability of directors to be eliminated or limited.
Under British Virgin Islands law, liability of a director or officer of a
company director is, for the most part, limited to cases of willful malfeasance
in the performance of duties or to cases where such director or officer, as
applicable, has not acted honestly, in good faith and with a view to the
company's best interests.
Under its Memorandum of Association, the Issuer is authorized to indemnify
any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or liquidator
of the Issuer, provided such person acted honestly and in good faith and with a
view to the best interests of the Issuer and, in the case of a criminal
proceeding, such person had no reasonable cause to believe that his conduct was
unlawful. The Issuer's Memorandum of Association also permits it to indemnify
any director, officer or liquidator of the Issuer who was successful in any
proceeding against expenses and judgments, fines and amounts paid in settlement
and reasonably incurred in connection with the proceeding, where such person
met the standard of conduct described in the preceding sentence. The Issuer has
provisions in its Memorandum of Association that insure or indemnify, to the
full extent allowed by the laws of the Territory of the British Virgin Islands,
directors, officers, employees, agents or persons serving in similar capacities
in other enterprises at the request of the Issuer. The Issuer may obtain a
directors' and officers' insurance policy.
ChipPAC, Inc.
ChipPAC is incorporated under the laws of the State of Delaware. Section 145
("Section 145") of the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended (the "General Corporation Law"), inter
alia, provides that a Delaware corporation may indemnify any persons who were,
are or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation),
by
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reason of the fact that such person is or was an officer, director, employee or
agent of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amount paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was illegal. A Delaware corporation may indemnify any
persons who are, were or are threatened to be made, a party to any threatened,
pending or completed action or suit by or in the right of the corporation by
reasons of the fact that such person was a director, officer, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys' fees), actually and
reasonably incurred by such person in connection with the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred. Section
145 further authorizes a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
ChipPAC's Certificate of Incorporation and By-laws provide for the
indemnification of officers and directors to the fullest extent permitted by
the General Corporation Law. ChipPAC maintains a policy of directors and
officers liability insurance covering certain liabilities incurred by its
directors and officers in connection with the performance of their duties.
ChipPAC (Barbados) Ltd.
Paragraph 10 of ChipPAC (Barbados) Ltd.'s ("ChipPAC Barbados") By-Laws
provides for the indemnification of its officers and directors (and such
persons' executors and administrators) against any and all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred by such person in connection with any claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director or officer of ChipPAC
Barbados, or is or was serving at the request of ChipPAC Barbados as a director
or officer, of any other corporation, partnership, joint venture, trust,
enterprise or organization, except with respect to any matter for which
indemnification would be void pursuant to the Companies Act, 1982 of Barbados
(the "Companies Act"). Under the Companies Act, indemnification of the officers
and directors of ChipPAC Barbados against any liability which would attach by
reason of any contract entered into or act or thing done or omitted to be done
by them in performance of their office or in any way in the discharge of their
duties, if the same happens through their not acting in good faith and in the
best interest of ChipPAC Barbados is void.
ChipPAC Limited
As in most United States jurisdictions, the board of directors of a British
Virgin Islands company is charged with the management and affairs of the
company, and subject to any limitations to the contrary in the Memorandum of
Association of a company, its Board of Directors is entrusted with the power to
manage the company's business and affairs. In most United States jurisdictions,
directors owe a fiduciary duty to the company and its shareholders, including a
duty of care, pursuant to which directors must properly apprise themselves of
all reasonably available information, and a duty of loyalty, pursuant to which
they must protect the interests of the company and refrain from conduct that
injures the company or its shareholders or that deprives the company or its
shareholders of any profit or advantage. Many United States jurisdictions have
enacted various statutory provisions which permit the monetary liability of
directors to be eliminated or limited. Under British Virgin Islands law,
liability of a director or officer of a company is basically limited to cases
of willful malfeasance in the performance of his duties or to cases where the
director has not acted honestly and in good faith and with a view to the best
interests of the company.
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Under its Memorandum of Association, ChipPAC Limited is authorized to
indemnify any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or liquidator
of ChipPAC Limited, provided such person acted honestly and in good faith and
with a view to the best interests of ChipPAC Limited and, in the case of a
criminal proceeding, such person had no reasonable cause to believe that his
conduct was unlawful. ChipPAC Limited's Memorandum of Association also permits
it to indemnify any director, officer or liquidator who was successful in any
proceeding against expenses and judgments, fines and amounts paid in settlement
and reasonably incurred in connection with the proceeding, where such person
met the standard of conduct described in the preceding sentence. ChipPAC
Limited has provisions in its Memorandum of Association that insure or
indemnify, to the full extent allowed by the laws of the Territory of the
British Virgin Islands, directors, officers, employees, agents or persons
serving in similar capacities in other enterprises at the request of ChipPAC
Limited. ChipPAC Limited may obtain a directors' and officers' insurance policy.
ChipPAC Korea Company Ltd.
The Republic of Korea Commercial Act (the "Commercial Act") governs the
liability relationship between companies and their officers and directors in
both joint stock companies (chusik hoesa) and limited liability companies
(yuhan hoesa). Articles 399 and 400 of the Commercial Act describe the
circumstances in which officers and directors may be held liable to the
company, while Article 401 of the Commercial Act outlines the circumstances in
which officers and directors may be held liable to third parties. The latter
provides that third parties which are harmed by a willful act or gross
negligence of an officer or director may have recourse against both the
applicable officer or director and the company. In the event that third parties
are harmed through the mere negligence of an officer or director, such third
party may only have recourse against the company. In the event the company
incurs damages as a result of the negligence of its directors and officers, it
may the seek indemnification from the negligent party.
The organizational documents of ChipPAC Korea Company Ltd. ("ChipPAC Korea")
are silent as to the issue of indemnification of officers and directors. In
addition, ChipPAC Korea, like many Korean companies, does not carry directors
and officers liability insurance.
ChipPAC Luxembourg S.a.R.L.
Under Luxembourg law, civil liability of directors both to ChipPAC
Luxembourg S.a.R.L. ("ChipPAC Luxembourg") and to third parties is generally
considered to be a matter of public policy. It is possible that Luxembourg
courts would declare void an explicit or even implicit contractual limitation
on directors' liability to ChipPAC Luxembourg. ChipPAC Luxembourg, however, can
validly agree to indemnify its directors against the consequences of liability
actions brought by third parties (including shareholders if such shareholders
have personally suffered a damage which is independent of and distinct from the
damage caused to the company).
Under Luxembourg law, an employee of ChipPAC Luxembourg can only be liable
to ChipPAC Luxembourg for damages brought about by his or her willful acts or
gross negligence. Any arrangement providing for the indemnification of officers
against claims of ChipPAC Luxembourg would be contrary to public policy.
Employees are liable to third parties under general tort law and may enter into
arrangements with ChipPAC Luxembourg providing for indemnification against
third party claims.
Under Luxembourg law, an indemnification agreement can never cover a willful
act or gross negligence.
ChipPAC Luxembourg's Articles of Incorporation are silent as to the issue of
indemnification of its officers and directors.
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ChipPAC Liquidity Management Hungary Limited Liability Company
The organizational documents of ChipPAC Liquidity Management Hungary Limited
Liability Company ("ChipPAC Hungary") are silent as to the issue of
indemnification of the managing director. ChipPAC Hungary has no other officers
or directors. Therefore, in the event any case arises which involves the
liability of a managing director, such case must be settled in accordance with
the applicable provisions of the Hungarian Companies Act (the "Companies Act")
and the Hungarian Civil Code (the "Civil Code").
Under the Companies Act, a managing director must conduct himself in respect
of the management of a company with "increased care," as opposed to the
standard of "general care" which is prescribed by the Civil Code. A managing
director may be held liable in the event of a culpable breach of any provision
of the Companies Act, a company's Deed of Foundation or any validly enacted
resolutions of the company's Founder. If the aforementioned duty of care is
breached, a managing director may be held liable under the rules of the Civil
Code for any damages to the company where such managing director's actions were
(i) in contravention of Hungarian law, (ii) caused damage to the company and
(iii) were not undertaken with the requisite degree of care specified in the
Companies Act.
Enforcement of liability claims against a managing director is in the sole
discretion of the Founder. A Founder may exercise his or her rights against a
managing director within one year of the company's deletion from the Company
Registry. A managing director is only obliged to compensate the company for
damages, and is not liable to third parties for acts that are within the scope
of his or her role or responsibility as a managing director. Third parties may
only seek damages from the company. Should the company be required to pay
damages to a third party for acts of the managing director, however, it may
have recourse against the managing director for damages incurred as a result of
third party claims.
ChipPAC Malaysia Sdn. Bhd.
ChipPAC Malaysia Sdn. Bhd. ("ChipPAC Malaysia") is incorporated under the
laws of Malaysia. Under Section 140(1) of the Companies Act of Malaysia (the
"Companies Act"), any provision, whether contained in the articles of
association or in any contract with a company or otherwise, for exempting any
officer or director of the company from, or indemnifying him against, any
liability which by law would otherwise attach to him in respect of any
negligence, default, breach of duty or breach of trust, of which he may be
guilty in relation to the company, shall be void. Section 140(2) of the
Companies Act however provides that notwithstanding Section 140(1), a company
may, pursuant to its articles of association or otherwise, indemnify any
officer or Director against any liability incurred by him in defending any
proceedings, whether civil or criminal, in which judgment is given in his favor
or in which he is acquitted or in connection with any application in relation
thereto in which relief is under this Act granted to him by the Court.
Section 354 of the Companies Act provides that if in any proceedings for
negligence, default, breach of duty or breach of trust against an officer or
director of the company it appears to the court before which the proceedings
are taken that he is or may be liable in respect thereof but that he has acted
honestly and reasonably and that, having considered all the circumstances of
the case including those connected with his appointment, he ought fairly to be
excused for the negligence, default or breach the court may relieve him either
wholly or partly from his liability on such terms as the court thinks fit. The
protection of this statutory provision has been afforded to the officers and
directors of ChipPAC Malaysia pursuant to Article 152 of its Articles of
Association which provides that its officers and directors can be indemnified
for liability incurred by them in defending any proceedings, whether civil or
criminal in which judgment is given in their favor or in which they are is
acquitted or in connection with any application made under Section 354 of the
Companies Act.
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ITEM 16. EXHIBITS
Number Description
- ------ -----------
2.1 Amended and Restated Agreement and Plan of Merger of ChipPAC, Inc., a California corporation, and
ChipPAC, Inc., a Delaware corporation.**
2.2 Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999, by and among Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.3 First Amendment to Agreement and Plan of Recapitalization and Merger, dated as of June 16, 1999, by and
among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC
Merger Corp.*
2.4 Second Amendment to Agreement and Plan of Recapitalization and Merger, dated as of August 5, 1999, by and
among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC
Merger Corp.*
4.1 Purchase Agreement, dated as of June 22, 2001, by and among ChipPAC International Company Limited and
Citicorp Capital Investors, Limited.***
4.2 Indenture, dated as of July 29, 1999, by and among ChipPAC International Limited, ChipPAC Merger Corp. and
Firstar Bank of Minnesota, N.A., as trustee.*
4.3 First Supplemental Indenture, dated as of August 5, 1999, by and among ChipPAC International Company
Limited, ChipPAC, Inc. and Firstar Bank of Minnesota, N.A., as trustee.*
4.4 Form of 12- 3/4% Senior Subordinated Notes Due 2009.*
4.5 Subsidiary Guaranty Agreement, dated as of August 5, 1999, by and among ChipPAC Korea Company Ltd.,
ChipPAC Limited, ChipPAC (Barbados) Ltd., ChipPAC Luxembourg S.a.R.L., ChipPAC Liquidity
Management Hungary Limited Liability Company and ChipPAC International Company Limited, in favor of
Credit Suisse First Boston Corp. and executed October 12, 2001 by ChipPAC Malaysia Sdn. Bhd.+
4.6 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited
and Citicorp Capital Investors Limited.+
4.7 Subsidiary Guaranty Agreement, dated as of October 12, 2001, by ChipPAC Malaysia Sdn. Bhd. in favor of U.S.
Bank, N.A.+
5.1 Opinion of Kirkland & Ellis.+
10.1 Credit Agreement, dated as of August 5, 1999, as amended and restated as of June 30, 2000, by and among
ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston,
as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by reference to Exhibit 10.1 to the
Company's registration statement on Form S-4 (No. 333-91641)).
10.2 Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc.,
in favor of Credit Suisse First Boston (incorporated by reference to Exhibit 10.2 to the Company's registration
statement on Form S-4 (No. 333-91641)).
10.3 Amendment No. 1 to Amended and Restated Credit Agreement, dated as of March 13, 2001 by and among
ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston,
as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by reference to Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the period ended June 30, 2001 (No. 000-31173)).
10.4 Amendment No. 2 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by
and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit
Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by
reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the period ended June 30, 2001
(No. 000-31173)).
10.5 Amendment No. 3 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by
and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit
Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by
reference to Exhibit 10.1 to the Company's current report on Form 8-K (No. 000-31173)).
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Number Description
- ------ -----------
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of Kirkland & Ellis (included in Exhibit 5.1).+
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney of Robert Bowden.+
24.2 Power of Attorney of Trevor A. Carmichael.+
24.3 Power of Attorney of Christine O'Connor.+
24.4 Power of Attorney of Johan Dejans and Gilles Jacquet.+
24.5 Power of Attorney for Richard Parsons.+
24.6 Power of Attorney of Byeong Kyuck Sohn.+
24.7 Power of Attorney for Dong Woo Lee.+
24.8 Power of Attorney for Jane Zhang.+
25.1 Statement of Eligibility on Form T-1 of U.S. Bank, N.A. as trustee, under the Indenture.+
- --------
* Incorporated by reference to the Company's registration statement on
Form S-4 (No. 333-91641).
** Incorporated by reference to the Company's registration statement on
Form S-1 (No. 333-39428).
*** Incorporated by reference to the Company's quarterly report on Form 10-Q
for the period ended June 30, 2001.
+ Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this regulation statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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(3) To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Item 8.A. of Form 20-F at the state of any delayed offering or
throughout a continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be furnished,
provided, that the registrant includes in the prospectus, by means of a
post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
(5) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC
International Company Limited certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment No. 4 to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Tortola, British
Virgin Islands, on January 17, 2002.
CHIPPAC INTERNATIONAL COMPANY LIMITED
/s/ JANE ZHANG
By: _______________________________
Jane Zhang
President, Chief Executive Officer
and Chief Financial Officer
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
/s/ JANE ZHANG President, Chief Executive Officer and Chief Financial
- ---------------------------------- Officer (Principal Executive, Financial and Accounting
Jane Zhang Officer)
/s/ RICHARD PARSONS Director
- ----------------------------------
Richard Parsons
/s/ P.J. KIM Director
- ----------------------------------
P.J. Kim
/s/ PATRICIA H. MCCALL Director
- ----------------------------------
Patricia H. McCall
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont, State of California, on
January 17, 2002.
CHIPPAC, INC.
/s/ DENNIS P. MCKENNA
By: _______________________________
Dennis P. McKenna
Chairman of the Board, President
and Chief Executive Officer
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
/s/ DENNIS P. MCKENNA Chairman of the Board, President and Chief Executive
---------------------- Officer (Principal Executive Officer)
Dennis P. McKenna
* Chief Financial Officer (Principal Financial Officer)
----------------------
Robert Krakauer
* Corporate Controller (Principal Accounting Officer)
----------------------
Michael G. Potter
* Director
----------------------
Edward Conard
* Director
----------------------
Marshall Haines
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Signatures Capacity
---------- --------
* Director
- ----------------------------------
Michael A. Delaney
* Director
- ----------------------------------
Paul C. Schorr IV
* Director
- ----------------------------------
Chong Sup Park
* The undersigned, by signing his name hereto, does hereby sign and execute this Amendment No. 4 to the
registration statement on behalf of the above named officers and directors of ChipPAC, Inc. pursuant to the
Power of Attorney executed by such officer and/or director and filed herewith.
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Attorney-in-Fact
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC
(Barbados) Ltd. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Barbados, West Indies, on January
17, 2002.
CHIPPAC (BARBADOS) LTD.
*
By: _______________________________
Jane Zhang
President, Chief Executive Officer
and Chief Financial Officer
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
* President, Chief Executive Officer and Chief Financial
- ---------------------------------- Officer (Principal Executive, Financial and Accounting
Jane Zhang Officer)
* Director
- ----------------------------------
Christine O'Connor
* Director
- ----------------------------------
Trevor Carmichael
* Director
- ----------------------------------
Robert Bowden
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
*The undersigned, by signing his name hereto, does hereby sign and execute this Amendment No. 4 to the
registration statement on behalf of the above named officers and directors of ChipPAC (Barbados) Ltd.
pursuant to the Power of Attorney executed by such officer and/or director and filed herewith.
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Attorney-in-Fact
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the ChipPAC
Korea Company Ltd. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Ichon-Shi, Kyungai-Do, Korea, on
January 17, 2002.
CHIPPAC KOREA COMPANY LTD.
*
By: _______________________________
Byeong-Kyuck Sohn
President and Managing Director
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
* Director, President and Managing Director (Principal
- ---------------------------------- Executive Officer)
Byeong-Kyuck Sohn
* Chief Financial Officer (Principal Financial and Accounting
- ---------------------------------- Officer)
Dong Woo Lee
/s/ DENNIS P. MCKENNA Director
- ----------------------------------
Dennis P. McKenna
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
*The undersigned, by signing his name hereto, does hereby sign and execute this Amendment No. 4 to the
registration statement on behalf of the above named officers and directors of ChipPAC Korea Company Ltd.
pursuant to the Power of Attorney executed by such officer and/or director and filed herewith.
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Attorney-in-Fact
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC
Luxembourg S.a.R.L. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Luxembourg, on January 17, 2002.
CHIPPAC LUXEMBOURG S.A.R.L.
*
By: _______________________________
Johan Dejans
Corporate Manager
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
* Corporate Manager (Co-Principal Executive, Financial and
- ---------------------------------- Accounting Officer and Director
Johan Dejans
* Corporate Manager (Co-Principal Executive, Financial and
- ---------------------------------- Accounting Officer and Director
Gilles Jacquet
* Corporate Manager (Co-Principal Executive, Financial and
- ---------------------------------- Accounting Officer and Director
Richard Parsons
Authorized Representative in the United States:.
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
*The undersigned, by signing his name hereto, does hereby sign and execute this Amendment No. 4 to the
registration statement on behalf of the above named officers and directors of ChipPAC Luxembourg S.a.R.L.
pursuant to the Power of Attorney executed by such officer and/or director and filed herewith.
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Attorney-in-Fact
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC
Liquidity Management Hungary Limited Liability Company certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3 and has duly caused this Amendment No. 4 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Budapest, Hungary on January 17, 2002.
CHIPPAC LIQUIDITY MANAGEMENT HUNGARY
LIMITED LIABILITY COMPANY
/s/ MICHAEL G. POTTER
By: _______________________________
Michael G. Potter
Managing Director
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
/s/ MICHAEL G. POTTER Managing Director (Principal Executive, Financial and
- ---------------------------------- Accounting Officer)
Michael G. Potter
/s/ JOZSEF VERESS Managing Director
- ----------------------------------
Jozsef Veress
/s/ LAJOS ZELKO Managing Director
- ----------------------------------
Lajos Zelko
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC Limited
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Tortola, British Virgin Islands, on January 17,
2002.
CHIPPAC LIMITED
/s/ JANE ZHANG
By: _______________________________
Jane Zhang
President, Chief Executive Officer
and Chief Financial Officer
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
/s/ JANE ZHANG President, Chief Executive Officer and Chief Financial
- ---------------------------------- Officer (Principal Executive, Financial and Accounting
Jane Zhang Officer)
/s/ P.J. KIM Director
- ----------------------------------
P.J. Kim
/s/ PATRICIA H. MCCALL Director
- ----------------------------------
Patricia H. McCall
/s/ RICHARD PARSONS Director
- ----------------------------------
Richard Parsons
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ChipPAC Malaysia
Sdn. Bhd. certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Kuala Lumpur, Malaysia, on January
17, 2002.
CHIPPAC MALAYSIA SDN. BHD.
/s/ TEH CHIN BIN
By: _______________________________
Teh Chin Bin
President and Managing Director
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the indicated capacities on January 17, 2002.
Signatures Capacity
---------- --------
/S/ TEH CHIN BIN President and Managing Director (Principal Executive
- ---------------------------------- Officer)
Teh Chin Bin
/s/ KWONG CHOONG VAI Chief Financial Officer (Principal Financial and Accounting
- ---------------------------------- Officer)
Kwong Choong Vai
/s/ LEE SOO NAM Director
- ----------------------------------
Lee Soo Nam
/s/ DENNIS P. MCKENNA Director
- ----------------------------------
Dennis P. McKenna
Authorized Representative in the United States:
/s/ DENNIS P. MCKENNA
- ----------------------------------
Dennis P. McKenna
Chairman of the Board, President and
Chief Executive Officer, ChipPAC, Inc.
II-16
EXHIBIT INDEX
Number Description
- ------ -----------
2.1 Amended and Restated Agreement and Plan of Merger of ChipPAC, Inc., a California corporation, and
ChipPAC, Inc., a Delaware corporation.**
2.2 Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999, by and among Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.3 First Amendment to Agreement and Plan of Recapitalization and Merger, dated as of June 16, 1999, by and
among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC
Merger Corp.*
2.4 Second Amendment to Agreement and Plan of Recapitalization and Merger, dated as of August 5, 1999, by and
among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC
Merger Corp.*
4.1 Purchase Agreement, dated as of June 22, 2001, by and among ChipPAC International Company Limited and
Citicorp Capital Investors, Limited.***
4.2 Indenture, dated as of July 29, 1999, by and among ChipPAC International Limited, ChipPAC Merger Corp. and
Firstar Bank of Minnesota, N.A., as trustee.*
4.3 First Supplemental Indenture, dated as of August 5, 1999, by and among ChipPAC International Company
Limited, ChipPAC, Inc. and Firstar Bank of Minnesota, N.A., as trustee.*
4.4 Form of 12- 3/4% Senior Subordinated Notes Due 2009.*
4.5 Subsidiary Guaranty Agreement, dated as of August 5, 1999, by and among ChipPAC Korea Company Ltd.,
ChipPAC Limited, ChipPAC (Barbados) Ltd., ChipPAC Luxembourg S.a.R.L., ChipPAC Liquidity
Management Hungary Limited Liability Company and ChipPAC International Company Limited, in favor of
Credit Suisse First Boston Corp. and executed October 12, 2001 by ChipPAC Malaysia Sdn. Bhd.+
4.6 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited
and Citicorp Capital Investors Limited.+
4.7 Subsidiary Guaranty Agreement, dated as of October 12, 2001, by ChipPAC Malaysia Sdn. Bhd. in favor of U.S.
Bank, N.A.+
5.1 Opinion of Kirkland & Ellis.+
10.1 Credit Agreement, dated as of August 5, 1999, as amended and restated as of June 30, 2000, by and among
ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston,
as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by reference to Exhibit 10.1 to the
Company's registration statement on Form S-4 (No. 333-91641)).
10.2 Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc.,
in favor of Credit Suisse First Boston (incorporated by reference to Exhibit 10.2 to the Company's registration
statement on Form S-4 (No. 333-91641)).
10.3 Amendment No. 1 to Amended and Restated Credit Agreement, dated as of March 13, 2001 by and among
ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston,
as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by reference to Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the period ended June 30, 2001 (No. 000-31173)).
10.4 Amendment No. 2 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by
and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit
Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by
reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the period ended June 30, 2001
(No. 000-31173)).
10.5 Amendment No. 3 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by
and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit
Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by
reference to Exhibit 10.1 to the Company's current report on Form 8-K (No. 000-31173)).
Number Description
- ------ -----------
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of Kirkland & Ellis (included in Exhibit 5.1).+
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney of Robert Bowden.+
24.2 Power of Attorney of Trevor A. Carmichael.+
24.3 Power of Attorney of Christine O'Connor.+
24.4 Power of Attorney of Johan Dejans and Gilles Jacquet.+
24.5 Power of Attorney for Richard Parsons.+
24.6 Power of Attorney of Byeong Kyuck Sohn.+
24.7 Power of Attorney for Dong Woo Lee.+
24.8 Power of Attorney for Jane Zhang.+
25.1 Statement of Eligibility on Form T-1 of Firstar Bank, N.A. as trustee, under the Indenture.+
- --------
* Incorporated by reference to the Company's registration statement on Form
S-4 (No. 333-91641).
** Incorporated by reference to the Company's registration statement on Form
S-1 (No. 333-39428).
*** Incorporated by reference to the Company's quarterly report on Form 10-Q
for the period ended June 30, 2001.
+ Previously filed.
2