Exhibit 3.11
------------
CHIPPAC LTD.
POLICY AND OPERATING GUIDELINES
ABSTRACT
These liquidity management, investment, hedging and administration policy and
operating guidelines ("Guidelines") set out the general principles pertaining to
the administration of the business of ChipPAC Ltd. (the "Company"). These
Guidelines were approved by Resolution of the Managing Director, dated the 5th
of August, 1999, and as amended from time to time by subsequent resolutions of
the Managing Director.
1.0 Definitions
"Auditor" is the statutory auditor appointed in accordance with the terms
of the appointment set out in the Deed of Foundation of the Company.
"Borrowing Participant" is a Participant making a Funding Request in
accordance with the applicable Liquidity Management Agreement entered into
between the Borrowing Participant and the Company, a. sample of which is
enclosed in Appendix A.
"Company" is ChipPAC Ltd., a Hungarian limited liability company.
"Director" is the managing director of the Company, with signing authority
in matters relating to the Company as set out in the Deed of Foundation.
"Financing Account" is the USD denominated account in the name of the
Company with ABN AMRO Bank, London, U.K.
"Member" is ChipPac Operating Limited, a company incorporated under the
laws of US Tortola, or its successor as set out in an amended Deed of
Foundation and whose rights and obligations in respect of the Company are
determined in accordance with the Deed of Foundation and resolutions of the
Member and the Company.
"Governing Legislation" is Act CLXI on Business Associations and other
applicable Hungarian law governing matters dealt with in these Guidelines.
"Participants" are those companies which have entered into a Liquidity
Management Agreement with the Company and whose rights and obligations are
defined therein.
"Operating Account" is the USD denominated bank account in the name of the
Company with ABN AMRO Bank in Budapest which is used for settling local
expenses and for paying Hungarian taxes.
"Service Provider" is TMF Hungary Ltd., pursuant to the terms of a Service
and Office Space Agreement, a sample of which is enclosed in Appendix B.
Note: Other defined terms mentioned in these Guidelines but which are riot
specifically defined in this section have the same meaning as provided for
in the applicable Liquidity Management Agreement or the applicable Loan
Agreement/Purchased Debt as those terms are defined in the Liquidity
Management Agreement.
2.0 General Policy Objectives
2.1 To provide liquidity and treasury management services to Participants
under common control in a cost-effective manner.
2.2 To realise a reasonable return on surplus fluids, if applicable, while
maintaining adequate liquidity and a low level of overall investment
risk.
2.3 To administer the Company in a way that is consistent with and adheres
to agreements in place between the Company and other parties and to
ensure that the offshore status of the Company under Hungarian law is
preserved.
3.0 Liquidity Management re; Participants
3.1 Any and all funds of the Company should be used for one of four
purposes: financing and liquidity management of Participants,
investment of surplus funds, payment of dividends or settlement of
operational expenses.
3.2 The Company should not lend funds to an entity which is not a
Participant governed by a Liquidity Management Agreement except where
fluids are advanced to the Member for the purpose of making expected
or future dividend payments.
3.3 Actual interest and principal repayments should be made both by
accounting entries in the records of the Borrowing Participant and the
Company as well as by the physical transfer of cash to the Financing
Account of the Company. Outstanding interest or principal should not
be refinanced. Payments should be made as and when required in
accordance with the terms of any applicable Loan Agreement or
Purchased Debt.
3.4 The amount and source of funds to be used for the financing and
liquidity management activities of the Company should be determined by
the Director, from time to time, and in accordance with the guidelines
pertaining to Capitalization of the Company in section 5.0, after due
consideration of the anticipated borrowing requirements of Borrowing
Participants, balance sheet funding restrictions, if applicable, and
operational requirements of the Company.
4.0 Management of Surplus Funds
4.1 Surplus funds may accumulate in the Financing Account from time to
time as interest and/or principal receipts are received and approval
in accordance with these Guidelines has not yet been given for either
subsequent lending of the funds or their advance or payment as a
dividend to the Member.
4.2 Each year the Director should, if applicable, makes decisions or set
policies with respect to the retention and investment of surplus funds
throughout the year, including matters relating to investment
policies, currencies etc.
4.3 The Company shall be responsible for the proper management of surplus
funds in accordance with the decisions of the Director.
4.4 All surplus funds available, from time to time, shall be, where
necessary, converted into and/or kept in USD unless the Company has
ascertained a specific requirement for funds in another currency in
which event the Company may, with prior authorization of the Director,
take steps in advance to acquire or maintain funds in such currency.
4.5 Any surplus funds should be placed on deposit, at the best rates
obtainable, for committed periods not exceeding two months with any
financial institution with a minimum Standard & Poor's short term
credit rating of A1. The Company may place surplus funds on deposit
for committed periods of up to 3 months or more with the express
authorization of the Director.
5.0 Capitalization of the Company
5.1 The Director shall be responsible for ensuring that the Company is
sufficiently capitalised such that it can meet its liquidity
management and financing responsibilities in respect of Participants.
5.2 The Company may be capitalized, from time to time, through equity
contributions from the Member, borrowings from financial institutions
approved by the Director or advances from Participants or other
entities approved by the Director.
5.3 The Member will usually make equity contributions to the Company
either through cash contributions to registered capital, in-kind
contributions to registered capital or cash or in-kind contributions
to capital reserve.
5.4 The Director must approve all borrowings by or credit facilities
granted to the Company.
6.0 Hedging
6.1 The Director shall be responsible for approving and providing for any
and all hedging activities of the Company.
6.2 Loans to Participants and advances from Participants and approved
entities may be made in USD or any other freely tradable currency. Any
loan or advance not denominated in USD may, at the determination of
the Director, be hedged in USD with a financial institution with a
minimum Standard & Poor's short term credit rating of Al or a minimum
Standard & Poor's long term credit rating of AA for any hedging
transaction over 12 months or as otherwise determined by the Director.
Hedging may not be necessary where the currency of the loan is matched
on the funding side.
6.3 For foreign exchange exposures, only spot and forward foreign exchange
contracts shall be entered into by the Company, upon approval by the
Director. No speculative contracts shall be entered into. Hedge
consolidation of net exposure may be undertaken.
6.4 The hedging of interest rates on loans made and borrowings received
shall be determined by the Director, on a case by case basis.
7.0 Banking and Disbursements
Banking
7.1 The Company shall set up and maintain, at a minimum, one Operating
Account in Hungary denominated in USD for the purpose of settling
local expenses and paying taxes.
7.2 The following expenses must be paid from the Operating Account and
cannot be paid from any other account in the name of the HOC:
a) All remuneration of managing Director, employees etc.;
b) All statutory filing fees and other amounts paid to government
bodies in Hungary;
c) All professional advisor's fees in Hungary for services
relating to the Company;
d) All taxes payable to a Hungarian tax authority.
7.3 The Company shall set up and maintain at least one Financing Account
denominated in USD for the purpose of lending funds to Participants
and for receiving principal and interest repayments on USD
denominated, and, if necessary, other currency denominated lendings
to Participant
7.4 No funds may be disbursed from the Financing Account for purposes
stated in sections 7.1 or 7.2 or for any other expense reasonably
related to the operation or ongoing maintenance of the Company except
as specifically set oat in section 7.3.
7.5 The Company may set up arid maintain a non-USD denominated account
for specific purposes.
7.6 The Company is responsible for ensuring, by way of funds transfer
from the Financing Account and in conjunction with the Service
Provider, that sufficient funds are available in the Operating
Account for settling anticipated local expenses. Any request for a
transfer of funds from the Financing Account to the Operating Account
must be authorized on a Financing Account Transfer Request a sample
of which is enclosed in Appendix C.
7.7 Person(s) designated in the Deed of Foundation of the Company should
have signing authority over the Operating and Financing Account
unless other arrangements are agreed to by the Director.
7.8 No funds may be disbursed as a loan to a Borrowing Participant from
the Financing Account unless a Funding Request has been submitted and
approved by the Director.
7.9 No funds may be disbursed from the Operating Account pursuant to an
approved Funding Request.
7.10 The Service Provider shall provide, to the Company, originals or
reasonable copies of all invoices or supporting documentation for
approval prior to payment of expenses out of the Operating Account.
Pre-approval of such expenditures, including pre-authorized payment
or payment by standing order may be approved by the Director.
8.0 Dividends to the Member
8.1 The Director shall declare and pay dividends to the Member at their
discretion and in accordance with the Deed of Foundation, any
applicable resolutions and pursuant to and in accordance with
applicable Hungarian law.
8.2 The Director should (where possible) declare and pay dividends no
more than once per year, after completion and approval of the annual
audited financial statements and submission of the audited financial
statements to the Hungarian authorities.
8.3 Interim dividend payments may be made, but must be supported by a
resolution of the Director and based on approved interim audited
financial statements showing sufficient profit reserves to support
the dividend.
8.4 During the course of the year, the Director may approve interim
advances to the Member. These advances must be paid from the
Financing Account pursuant to a completed Financing Account Transfer
Request. All advances to the Member outstanding at the end of the
year must be settled first through the declaration and payment of a
dividend in accordance with section 8.1 and Hungarian law.
8.5 The Company is responsible for withholding all taxes on dividends
paid to the Member and remitting these withholdings to the
appropriate Hungarian authorities.
8.6 The Company must file an authenticated document of domicile with the
Hungarian tax authorities enabling the Company to withhold at the
rate of withholding appropriate for the applicable treaty.
9.0 Accounting and Bookkeeping
9.1 The Service Provider shall be responsible for all record keeping and
accounting functions in respect of the Company in accordance with the
Service and Office Space Agreement.
9.2 The Service Provider shall be responsible for processing all invoices
and requests for payment in the normal course for settlement in
accordance with these Guidelines.
9.3 The Service Provider and/or other designated individual or company
shall be responsible for administering and maintaining the registered
office of the Company in accordance with the terms of the applicable
lease or rental agreement.
9.4 The Service Provider shall be responsible for administering and
maintaining a business office of the Company in accordance with the
terms of the Service and Office Space Agreement.
10.0 Financial Reporting
10.1 The Service Provider should be responsible for completion of internal
and external financial reporting requirements for the Company.
10.2 A report should be provided to the Company by the Service Provider
detailing management accounts on a quarterly or other basis to be
determined by the Company and in a format to be agreed upon in
consultation with the Company.
10.3 A report should be provided to the Director by the Service Provider
detailing receipts and disbursements and reconciliations in respect
of the Operating and Financing Accounts of the Company on a monthly
or other basis to be determined by the Company and in a format to be
agreed upon in consultation with the Company.
10.4 A report should be provided to the Director by the Company in
consultation with the Service Provider which sets out the status of
all requests for funding awaiting approval on an annual or other
basis to be determined by the Company and in a format to be agreed
upon in consultation with the Company.
10.5 The Service Provider in conjunction with the Company shall prepare
final year end accounts and financial statements for presentation to
the Company within a reasonable time after year end.
10.6 The Service Provider shall be responsible for providing all necessary
and requested information on a timely basis to the Auditor for
purposes of completion of the annual audit.
10.7 The Service Provider shall provide any and all information or reports
requested by the Company or the Director.
10.8 The Service Provider should provide financial statements for the pre-
Company to the Auditor on a timely basis.
ACKNOWLEDGMENT
THESE GUIDELINES including the enclosed Appendices are hereby acknowledged
as constituting the Policy and Operating Guidelines of ChipPAC Ltd. as at
the date below with retroactive effect to the date of incorporation of
ChipPAC Ltd.
Date: August 5, 1999
On behalf of ChipPAC Ltd.,
/s/ Jozsef Veress
-----------------------------
Jozsef Veress
Managing Director