Exhibit 10.18
ADVISORY AGREEMENT
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This Advisory Agreement (this "Agreement") is made and entered into as
of August 5, 1999, by and between ChipPAC, Inc., a California corporation,
ChipPAC Limited, a corporation incorporated under the laws of the Territory of
the British Virgin Islands, ChipPAC Operating Limited (name to be changed to
ChipPAC International Company Limited), a corporation incorporated under the
laws of the Territory of the British Virgin Islands (collectively, the
"Companies," and individually, the "Company"), and SXI Group LLC ("SXI").
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Agreement and Plan of Merger and Recapitalization, dated as
of March 13, 1999, as amended, by and among the ChipPAC, Inc., Hyundai
Electronics Industries Co., Ltd., Hyundai Electronics America and ChipPAC Merger
Corp.
WHEREAS, the Companies desire to retain SXI and SXI desires to perform
for the Companies and/or their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
ten (10) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless the Companies
provide or SXI provides written notice of its or their desire to terminate this
Agreement to the other party 90 days prior to the expiration of the Term or any
extension thereof.
2. Services. SXI shall perform or cause to be performed such
services for any of the Companies and/or their subsidiaries as directed by such
Company's board of directors, which may include, without limitation, the
following:
(a) executive and management services;
(b) identification, support and analysis of acquisitions and
dispositions by such Company or its subsidiaries;
(c) support and analysis of financing alternatives, including, without
limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
(e) human resource functions, including searching and hiring of
executives; and
(f) other services for such Company or its subsidiaries upon which
such Company's board of directors and SXI agree.
Notwithstanding any provision in this Agreement to the contrary, each
of the parties hereto acknowledges and agrees that there are no minimum levels
of services required to be provided to the Companies pursuant to this Agreement.
3. Advisory Fee. Payment for services rendered by SXI and/or its
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall be billed on an hourly basis for actual services rendered
(it being agreed that no minimum services levels shall be required), plus
reasonable out-of-pocket expenses incurred by SXI and/or its affiliates;
provided that, commencing with the calendar quarter ended March 31, 2000, when
and if ChipPAC, Inc. and its subsidiaries achieve LTM Period EBITDA, as defined
below, as calculated at the end of such calendar quarter or any succeeding
calendar quarter, in excess of $81.2 million, in lieu of the aforementioned fees
and expenses, SXI and/or its affiliates will be entitled to an annual advisory
fee, the amount of which shall be the greater of (i) $1,000,000 per annum and
(ii) 0.3% per annum of the annual consolidated revenue of ChipPAC, Inc. and its
subsidiaries (determined on a trailing twelve month basis), plus reasonable out-
of-pocket expenses of SXI and/or its affiliates. All fees and expenses
described in this paragraph 3 shall be payable to SXI or its designees on a
quarterly basis in advance (based on the parties' estimate of the amount of fees
and expenses which shall become due and payable for such quarter) commencing as
of the date hereof. "LTM Period EBITDA" means, for ChipPAC, Inc. and its
consolidated subsidiaries, for any trailing twelve month period ending on the
date of any measurement, operating income, plus depreciation, amortization, any
non-cash charges related to write-downs of impaired assets and, to the extent
deducted in determining operating income, any fees and expenses incurred
pursuant to this Agreement and pursuant to that certain Advisory Agreement dated
as of the date hereof between the Companies and Bain Capital, Inc. as the same
may be amended, replaced or modified from time to time.
4. Transaction Fees.
(a) The Companies hereby agree to pay to SXI or its designees on the
Closing Date a fee for services rendered in connection with the structuring
of the financing for the Recapitalization Transactions and certain other
management services. Such fees shall be payable to SXI or its designees by
wire transfer in an amount not to exceed 1% of the aggregate value of the
financing for the Recapitalization Transactions plus reasonable out-of-
pocket expenses.
(b) In addition, during the term of this Agreement, the Companies
shall pay to SXI or its designees a transaction fee in connection with the
consummation of each acquisition, divestiture or financing by any of the
Companies or their subsidiaries in an amount equal to 1% of the aggregate
value of such transaction.
5. Personnel. SXI shall provide and devote to the performance of
this Agreement such partners, employees and agents of SXI as SXI shall deem
appropriate to the furnishing of the services required.
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6. Liability. Neither SXI nor any other Indemnitee (as defined in
Section 7 below) shall be liable to any of the Companies or any of their
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of an Indemnitee acting within the scope of such person's employment or
authority. SXI makes no representations or warranties, express or implied, in
respect of the services to be provided by SXI or any of the other Indemnitees.
Except as SXI may otherwise agree in writing after the date hereof: (i) SXI
shall have the right to, and shall have no duty (contractual or otherwise) not
to, directly or indirectly: (A) engage in the same or similar business
activities or lines of business as any of the Companies or any of their
subsidiaries, including those competing with any of the Companies or any of
their subsidiaries and (B) do business with any client or customer of any of the
Companies or any of their subsidiaries; (ii) neither SXI nor any officer,
director, employee, partner, affiliate or associated entity thereof shall be
liable to any of the Companies or any of their subsidiaries or affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities
of or of such person's participation therein; and (iii) in the event that SXI
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for both any of the Companies or any of their subsidiaries, on the
one hand, and SXI, on the other hand, or any other person, SXI shall have no
duty (contractual or otherwise) to communicate or present such corporate
opportunity to any of the Companies or any of their subsidiaries and,
notwithstanding any provision of this Agreement to the contrary, shall not be
liable to any of the Companies or any of their affiliates for breach of any duty
(contractual or otherwise) by reasons of the fact that SXI directly or
indirectly pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such opportunity to any of
the Companies. In no event will any of the parties hereto be liable to any
other party hereto for any indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or in respect of any liabilities relating to any third party claims
(whether based in contract, tort or otherwise) other than the Claims (as defined
in Section 7 below) relating to the service to be provided by SXI hereunder.
7. Indemnity. Each of the Companies and their subsidiaries shall
defend, indemnify and hold harmless each of SXI, its affiliates, members,
partners, employees and agents (collectively, the "Indemnitees") from and
against any and all loss, liability, damage or expenses arising from any claim
by any person with respect to, or in any way related to, the performance of
services contemplated by this Agreement (including attorneys' fees)
(collectively, "Claims") resulting from any act or omission of any of the
Indemnitees, other than for Claims which shall be proven to be the direct result
of gross negligence, bad faith or willful misconduct by an Indemnitee. Each of
the Companies and their subsidiaries shall defend at its own cost and expense
any and all suits or actions (just or unjust) which may be brought against such
Company, any of its subsidiaries or any of the Indemnitees or in which any of
the Indemnitees may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by any of the Indemnitees, except that if such damage
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by an Indemnitee, then SXI shall reimburse the Companies and
their subsidiaries for the costs of defense and other costs incurred by the
Companies and their subsidiaries.
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8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Companies, as appropriate:
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ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
Attention: Chief Executive Officer
Facsimile: (408) 486-5914
ChipPAC Limited
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
ChipPAC Operating Limited
(Name to be changed to
ChipPAC International Company Limited)
Road Town
Tortola, British Virgin Islands
Facsimile: (284) 494-3547
To SXI:
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c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
U.S.A.
Attention: Michael A. Delaney
Paul C. Schorr IV
Facsimile: (212) 888-2940
9. Assignment. None of the Companies may assign any obligations
hereunder to any other party without the prior written consent of SXI (which
consent shall not be unreasonably withheld), and SXI may not assign any
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld); provided that
SXI may, without consent of the Companies, assign its rights and obligations
under this Agreement to any of its affiliates (but only if such affiliate is a
person or entity (excluding any SXI portfolio companies) controlled by SXI, or
in the case of an affiliate which is a partnership, only if SXI is the ultimate
general partner of such partnership) or to Citicorp Venture Capital Ltd. The
assignor shall remain liable for the performance of any assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
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11. Counterparts. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
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IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
CHIPPAC, INC.
By: /s/ Gary Breton
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Its:
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CHIPPAC LIMITED
By: /s/ P.J. Kim
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Its:
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CHIPPAC OPERATING LIMITED (NAME TO
BE CHANGED TO CHIPPAC
INTERNATIONAL COMPANY LIMITED)
By: /s/ P.J. Kim
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Its:
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SXI GROUP LLC
By: /s/ Paul C. Schorr IV
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Its:
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