10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2003.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                     .

Commission file number 000-31173

ChipPAC, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	77-0463048
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

47400 Kato Road, Fremont, California 94538

(Address of Principal Executive Offices, Zip Code)

Registrant’s Telephone Number, Including Area Code (510) 979-8000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b.2 of the Act).  Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding as of August 4, 2003
Class A common stock, $.01 par value	95,295,538
Class B common stock, $.01 par value	None

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Operations	4
	Unaudited Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 2.	Changes in Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	23
Item 6.	Exhibits and Reports on Form 8-K	23
Signatures		27
Certifications

2

ChipPAC, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	June 30, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	53,723		$	34,173
Short-term investments		57,980			10,000
Accounts receivable, less allowances for doubtful accounts of $438 and $391		43,410			38,793
Inventories		20,598			15,299
Prepaid expenses and other current assets		7,302			5,285
Total current assets		183,013			103,550
Property, plant and equipment, net		354,708			336,397
Other assets		34,488			30,257
Total assets	$	572,209		$	470,204
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	56,569		$	39,755
Accrued expenses and other current liabilities		25,988			29,400
Total current liabilities		82,557			69,155
Long-term debt		165,000			217,887
Convertible subordinated notes		200,000			50,000
Other long-term liabilities		20,516			17,618
Total liabilities		468,073			354,660
Stockholders’ equity :
Common stock, Class A—par value $0.01 per share; 250,000 shares authorized, 95,192 and 94,093 shares issued and outstanding at June 30, 2003 and December 31, 2002		952			941
Additional paid in capital		279,416			276,916
Receivables from stockholders		(273	)		(480	)
Accumulated other comprehensive income		9,169			9,169
Accumulated deficit		(185,128	)		(171,002	)
Total stockholders’ equity		104,136			115,544
Total liabilities and stockholders’ equity	$	572,209		$	470,204

The accompanying notes are an integral part of these financial statements.

3

ChipPAC, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2003			2002			2003			2002
Revenue	$	106,844		$	97,086		$	195,412		$	176,299
Cost of revenue		90,257			79,322			168,784			148,980
Gross profit		16,587			17,764			26,628			27,319
Operating expenses:
Selling, general and administrative		8,465			9,846			17,931			19,620
Research and development		3,106			2,372			5,960			4,708
Total operating expenses		11,571			12,218			23,891			24,328
Operating income		5,016			5,546			2,737			2,991
Non-operating (income) expenses:
Interest expense		7,622			8,141			14,890			16,788
Interest income		(190	)		(143	)		(309	)		(213	)
Foreign currency losses		438			1,329			216			1,407
Write-off of debt issuance cost and other related expenses		1,182			3,005			1,182			3,005
Other income, net		(74	)		(138	)		(116	)		(303	)
Total non-operating expenses		8,978			12,194			15,863			20,684
Loss before income taxes		(3,962	)		(6,648	)		(13,126	)		(17,693	)
Provision for income taxes		500			500			1,000			1,000
Net loss	$	(4,462	)	$	(7,148	)	$	(14,126	)	$	(18,693	)
Net loss per share:
Net loss per share available to common stockholders
Basic	$	(0.05	)	$	(0.08	)	$	(0.15	)	$	(0.23	)
Diluted	$	(0.05	)	$	(0.08	)	$	(0.15	)	$	(0.23	)
Weighted average shares used in per share calculation:
Basic		95,076			85,237			94,742			81,016
Diluted		95,076			85,237			94,742			81,016

The accompanying notes are an integral part of these financial statements.

4

ChipPAC, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the Six Months Ended June 30,
	2003			2002
Cash flows from operating activities:
Net loss	$	(14,126	)	$	(18,693	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		33,149			27,781
Amortization of debt issuance cost		960			1,189
Foreign currency losses		216			1,407
Write-off debt issuance cost and other related expenses		1,182			3,005
Gain on sale of equipment		(127	)		(64	)
Changes in assets and liabilities:
Accounts receivable		(4,617	)		(5,047	)
Inventories		(5,299	)		(5,022	)
Prepaid expenses and other current assets		(2,100	)		(5,265	)
Other assets		(1,510	)		(166	)
Accounts payable		16,814			6,168
Accrued expenses and other current liabilities		(3,412	)		3,761
Other long-term liabilities		1,638			1,608
Net cash provided by operating activities		22,768			10,662
Cash flows from investing activities:
Purchase of short-term investments		(55,978	)		—
Proceeds from sale of short-term investments		7,998			—
Acquisition of intangible assets		(1,815	)		(2,208	)
Acquisition of property and equipment		(44,800	)		(39,941	)
Proceeds from sale of equipment		160			85
Malaysian acquisition, net of cash and cash equivalents acquired		(3,475	)		(3,664	)
Net cash used in investing activities		(97,910	)		(45,728	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		27,354			55,596
Repayment of revolving loans and other line of credit		(27,354	)		(100,000	)
Debt issuance costs		—			(702	)
Net proceeds from long-term debt		144,861			16,700
Repayment of long-term debt		(52,887	)		(82,440	)
Repayment of notes from stockholders		207			492
Proceeds from common stock issuance		2,511			164,745
Repurchase of common stock		—			(24	)
Net cash provided by financing activities		94,692			54,367
Net increase in cash		19,550			19,301
Cash and cash equivalents at beginning of period		34,173			41,872
Cash and cash equivalents at end of period	$	53,723		$	61,173

The accompanying notes are an integral part of these financial statements.

5

ChipPAC, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended June 30, 2003

(Unaudited)

Note 1: Interim Statements

In the opinion of management of ChipPAC, Inc. (“ChipPAC” or the “Company”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information included therein. This financial data should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2002 included in ChipPAC’s 2002 Annual Report on Form 10-K. The accompanying unaudited condensed consolidated financial statement include the accounts of ChipPAC, Inc and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation. Certain prior period balances have been reclassified to conform to the current period presentation.

The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for any other period or the fiscal year that ends on December 31, 2003. The interim period ended on June 29, 2003, the Sunday nearest June 30th.

Recent Accounting Pronouncements

In May 2002, the FASB issued SFAS No. 145, “Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections.” Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishment of debt and allows extraordinary accounting treatment for early extinguishment only when the provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” are met. SFAS No. 145 provisions regarding early extinguishment of debt are generally effective for fiscal years beginning after May 15, 2002. In the second quarter of 2003, the Company has reclassified a loss on extinguishment of debt that was previously classified as an extraordinary item in prior periods but did not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item and has included it within income from continuing operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities.” SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” The scope of SFAS No. 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. The Company adopted SFAS No. 146 during the first quarter of fiscal year 2003. The effect on adoption of SFAS No. 146 changes on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, or FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity’s product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company adopted FIN 45 in the first quarter of 2003 and has met the disclosure requirements of FIN 45. The adoption of FIN 45 has no material impact on the Company’s financial statements.

In November 2002, the Emerging Issues Task Force, or EITF, reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company believes that the adoption of this standard will have no material impact on its financial statements.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure.” SFAS No. 148 provides alternative methods of

6

transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS No. 148 are effective for fiscal years ended after December 15, 2002. The interim disclosure requirements are effective for interim periods beginning after December 15, 2002. The Company adopted SFAS No. 148 in the first quarter of 2003. The adoption of SFAS No. 148 has no material impact on its financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company believes that the adoption of this standard will have no material impact on its financial statements.

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company believes that the adoption of this standard will have no material impact on its financial statements.

Stock-Based Compensation

The Company has adopted the disclosure only provisions of SFAS No. 123. Accordingly, no compensation expense has been recognized for the Company’s stock option and purchase plan activity as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. If compensation expense had been determined based on the grant date fair value for awards during the six month period ended June 30, 2003, in accordance with the provisions of SFAS No. 123, the Company’s net loss and loss per share would have been adjusted to the pro forma amounts indicated below:

	Three Months Ended June 30, (In thousands, except for per share amounts)						Six Months Ended June 30, (In thousands, except for per share amounts)
	2003			2002			2003			2002
Net loss as reported	$	(4,462	)	$	(7,148	)	$	(14,126	)	$	(18,693	)
Add: Total stock-based employee compensation included in net loss, net of related tax effects		—			—			—			—
Deduct: Total stock-based employee compensation expenses determined under fair value method for awards, net of related tax effects		537			1,065			1,117			2,094
Pro forma net loss	$	(4,999	)	$	(8,213	)	$	(15,243	)	$	(20,787	)
Net loss per share as reported:
Basic	$	(0.05	)	$	(0.08	)	$	(0.15	)	$	(0.23	)
Diluted	$	(0.05	)	$	(0.08	)	$	(0.15	)	$	(0.23	)
Pro forma net loss per share:
Basic	$	(0.05	)	$	(0.10	)	$	(0.16	)	$	(0.26	)
Diluted	$	(0.05	)	$	(0.10	)	$	(0.16	)	$	(0.26	)
Weighted average shares used in per share calculation:
Basic		95,076			85,237			94,742			81,016
Diluted		95,076			85,237			94,742			81,016

The following assumptions were used to determine the pro forma impact of accounting for stock options issued during the three and six months ended June 30, 2003 and June 30, 2002: (1) risk-free interest rate of 2.5%, (2) dividend yield of 0.0%, (3) expected life of four years, and (4) volatility of 58.4% and 53.3%, respectively.

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Basis of Presentation

The financial statements have been prepared on a consolidated basis. The condensed consolidated financial statements include the accounts of ChipPAC, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

Note 2: Selected Balance Sheet Accounts

The components of inventories were as follows (in thousands):

	June 30, 2003		December 31, 2002
Raw materials	$	16,216	$	11,198
Work in process		3,699		3,293
Finished goods		683		808
	$	20,598	$	15,299

Property, plant and equipment were comprised of the following (in thousands):

	June 30, 2003			December 31, 2002
Land use rights	$	12,651		$	12,368
Buildings and improvements		68,365			66,404
Equipment		574,887			529,710
		655,903			608,482
Less accumulated depreciation and amortization		(301,195	)		(272,085	)
	$	354,708		$	336,397

Other assets were comprised of the following (in thousands):

	June 30, 2003		December 31, 2002
Deposits	$	1,235	$	836
Long-term, non-executive, employee loans		942		802
Debt issuance costs, net of amortization of $4,076 and $5,944		13,210		10,132
Intangible assets, net of amortization of $19,770 and $17,087		16,941		17,300
Other		2,160		1,187
	$	34,488	$	30,257

Intangible assets balances are summarized as follows (in thousands):

	June 30, 2003						December 31, 2002
	Gross Assets		Accumulated Amortization		Net Assets		Gross Assets		Accumulated Amortization		Net Assets
Intellectual property	$	16,266	$	6,121	$	10,145	$	15,734	$	4,980	$	10,754
Software and software development		15,948		9,706		6,242		14,231		8,460		5,771
Licenses		4,497		3,943		554		4,422		3,647		775
	$	36,711	$	19,770	$	16,941	$	34,387	$	17,087	$	17,300

Amortization expense for intangible assets is summarized as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
Intellectual property	$	579	$	524	$	1,141	$	1,037
Software and software development		630		666		1,246		1,288
Licenses		160		73		296		108
	$	1,369	$	1,263	$	2,683	$	2,433

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Intangible assets are being amortized over estimated useful lives of three to seven years. Estimated future amortization expense is as follows (in thousands):

July 1, 2003 to December 31, 2003	$	2,848
2004		4,637
2005		4,241
2006		3,460
2007		1,450
Thereafter		305
Total	$	16,941

Accrued expenses and other liabilities were comprised of the following (in thousands):

	June 30, 2003		December 31, 2002
Payroll and related items	$	13,220	$	14,778
Interest payable		9,215		9,210
Other expenses		3,553		5,412
	$	25,988	$	29,400

Note 3: Line of Credit and Other Bank Borrowings

Line of Credit

The Company has a borrowing capacity of $50.0 million for working capital and general corporate purposes under the revolving credit line portion of its senior credit facility. The revolving credit line under the senior credit facility matures on July 31, 2005. During the three month period ended June 30, 2003, the Company borrowed and subsequently repaid $16.5 million against the revolving line of credit for general corporate purposes at an interest rate of 6.75% per annum. As of June 30, 2003, there was no outstanding balance on the revolving line of credit and the entire $50.0 million was available to the Company.

The Company has also established two separate lines of credit with Korean Exchange Bank and Cho Hung Bank, with credit limits of $4.0 million and $8.0 million, respectively. During the three month period ended June 30, 2003, no borrowings were made against either of these lines of credit. Both agreements are subject to an annual review by Korean Exchange Bank and Cho Hung Bank for the continued use of the credit line facility. The Company also has a line of credit available with Southern Bank Bhd. for $0.5 million. During the three month period ended June 30, 2003, the Company borrowed $0.3 million against this line of credit loan for general corporate purposes at the interest rate of 6.9% per annum. As of June 30, 2003, there was no outstanding balance on this credit line.

Other Borrowings

The Company established a loan with Cho Hung Bank in 2002 providing for a loan of $16.7 million utilized for general corporate purposes. The loan had a maturity date of April 22, 2004. In June 2003, the Company elected to pay down and extinguish the entire $16.7 million outstanding balance.

On May 28, 2003, the Company issued $125.0 million of 2.5% convertible subordinated notes due 2008 in a private placement and on June 5, 2003, the initial purchaser exercised the option to purchase an additional $25.0 million of 2.5% convertible subordinated notes under the same terms. The $150.0 million of 2.5% convertible subordinated notes are convertible into shares of the Company’s Class A common stock at a conversion price of $8.062 per share, subject to adjustment at any time prior to June 1, 2008 and bear an interest rate of 2.5% per annum. The Company used $63.9 million from the proceeds of these notes to pay down term loans of $36.2 million, a foreign loan of $16.7 million and revolving loans of $11.0 million.

As of June 30, 2003, the Company’s total debt consisted of $365.0 million of borrowings, which was comprised of $165.0 million of senior subordinated notes, $50.0 million of 8.0% convertible subordinated notes and $150.0 million of 2.5% convertible subordinated notes. During the three month period ended June 30, 2003, these borrowings had weighted average interest rates of 12.8%, 8.0% and 2.5%, respectively.

Note 4: Common Stock Offerings

On January 30, 2002, the Company sold 10,000,000 shares of Class A common stock in an underwritten public offering for $6.00 per share. On February 14, 2002, the Company sold an additional 1,425,600 shares of Class A common stock in

9

conjunction with the underwriter’s exercise of their over-allotment option for $6.00 per share. In connection with these sales, the Company received net proceeds of approximately $63.8 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.4 million was used for general corporate purposes.

On May 30, 2002, the Company sold 12,000,000 shares of Class A common stock in an underwritten public offering for $8.75 per share. In connection with these sales, the Company received net proceeds of approximately $99.2 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $50.0 million from this offering were used to pay down term loans and revolving loans. The remaining $49.2 million was used for general corporate purposes.

Sources and Use of Funds From Issuance of Common Stock

	January 2002 Offering			May 2002 Offering			Totals
Source of funds:
Gross proceeds from issuance of common stock	$	68,554		$	105,000		$	173,554
Less: related issuance costs		(4,768	)		(5,830	)		(10,598	)
Net proceeds from issuance of common stock	$	63,786		$	99,170		$	162,956
Use of funds:
Repayment of senior credit facilities	$	62,438		$	50,000		$	112,438
General corporate purposes		1,348			49,170			50,518
	$	63,786		$	99,170		$	162,956

Note 5: Acquisition of Malaysian Business

On June 30, 2000, the Company consummated the acquisition of Intersil’s packaging and test operations located in Kuala Lumpur, Malaysia, along with related intellectual property for approximately $71.5 million in cash and preferred stock.

The terms of the acquisition of the Malaysian business had required the Company to pay until June 30, 2003 additional contingent incentive payments to Intersil of approximately $17.9 million based on the achievement of milestones with respect to the transfer of the seller’s packaging business. The Company recorded these contingent payments as additional purchase price. During the three month period ended June 30, 2003, the Company accrued the final $1.7 million relating to the achievement of these milestones and cumulatively $17.9 million of contingent incentive payments has been paid and accrued since the acquisition. Additionally, in 2000, $2.4 million of other purchase price adjustments were recorded based on the difference between the final closing balance sheet and the estimated closing balance sheet of the Malaysian business. As of June 30, 2003, deferred tax of $5.6 million has been recorded on all of these adjustments. This resulted in a further increase in non-current assets. These payments increased the effective purchase price and were allocated to non-current assets.

There was no goodwill arising from the acquisition of the Malaysian business. The fair value of total assets and liabilities exceeded the purchase price by $56.2 million as of July 1, 2000. This amount, reduced by the additional contingent incentive payments made as of June 30, 2003, has been allocated in full to non-current assets as summarized below:

Non-current assets	Estimated Fair Value		Initial Excess of Fair Value of Acquired Net Assets Over Cost			Total Additional Purchase Price		Adjusted Fair Value
	(in millions)
Land and buildings	$	27.9	$	(11.1	)	$	4.9	$	21.7
Plant and equipment		93.9		(36.9	)		17.9		74.9
Intellectual property		20.9		(8.2	)		3.1		15.8
	$	142.7	$	(56.2	)	$	25.9	$	112.4

Note 6: Earnings Per Share

SFAS No. 128 requires a reconciliation of the numerators and denominators of the basic and diluted per share computations. Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to stockholders (numerator) by the weighted average number of shares of common stock outstanding (denominator) during the period. Diluted EPS is

10

computed using the weighted average number of shares of common stock and all potentially dilutive shares of common stock outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and the if-converted method is used for determining the number of shares assumed issued from the conversion of the convertible subordinated notes.

As of June 30, 2003, there were options outstanding to purchase 8.4 million shares of Class A common stock with a weighted average exercise price of $3.72, which could potentially dilute basic EPS in the future, but were not included in diluted EPS as their effect would have been antidilutive. The Company also has outstanding the $50.0 million convertible subordinated notes which are convertible into approximately 5.0 million shares of Class A common stock at $9.96 per share and $150.0 million convertible subordinated notes which are convertible into approximately 18.6 million shares of Class A common stock at $8.06 per share. These were not included in diluted EPS as their effect would also have been antidilutive. The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below.

	Three Months Ended June 30, 2003							Three Months Ended June 30, 2002
	Net Loss			Shares	Per-Share Amount			Net Loss			Shares	Per-Share Amount
	(In thousands, except per share amounts)
Basic EPS:
Net loss per share	$	(4,462	)	95,076	$	(0.05	)	$	(7,148	)	85,237	$	(0.08	)
Diluted EPS:
Net loss per share	$	(4,462	)	95,076	$	(0.05	)	$	(7,148	)	85,237	$	(0.08	)

	Six Months Ended June 30, 2003							Six Months Ended June 30, 2002
	Net Loss			Shares	Per-Share Amount			Net Loss			Shares	Per-Share Amount
	(In thousands, except per share amounts)
Basic EPS:
Net loss per share	$	(14,126	)	94,742	$	(0.15	)	$	(18,693	)	81,016	$	(0.23	)
Diluted EPS:
Net loss per share	$	(14,126	)	94,742	$	(0.15	)	$	(18,693	)	81,016	$	(0.23	)

Note 7: Contingent Liabilities

During the quarter ended June 30, 2002, an assessment of approximately 16.0 billion Korean Won (approximately $13.4 million U.S. Dollars at June 30, 2003) was made by the Korean National Tax Administration or NTA, relating to withholding tax not collected on the loan between the Company’s subsidiaries in Korea and Hungary. The prevailing tax treaty does not require withholding on the transactions in question. There were no further assessments made during the quarter ended June 30, 2003. The Company has appealed the assessment through the NTA’s Mutual Agreement Procedure and believes that the assessment will be overturned. As of June 30, 2003, no accrual has been made. On July 18, 2002, the Icheon tax office of the NTA approved a suspension of the proposed assessment until resolution of the disputed assessment. The NTA required a corporate guarantee of 120% of the assessment in exchange for the suspension. The Company complied with the guarantee request on August 1, 2002. No further assessments have been made.

Note 8: Subsequent Events

On June 26, 2003, the Company announced that it agreed to purchase the semiconductor test operation assets of Cirrus Logic, Inc. Pursuant to the Asset Purchase Agreement which closed on June 30, 2003, by and between the Company and Cirrus Logic, the Company has agreed to pay Cirrus Logic, Inc., $3.5 million in cash.

11

Note 9: Supplemental Financial Statements of Guarantor/Non-Guarantor Entities

In connection with the recapitalization, in August 1999, ChipPAC International Company Limited, (“CP Int’l”), issued senior subordinated debt securities which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by the parent company, ChipPAC, Inc. (“CPI”) and by ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Korea Company Limited (“CPK”), ChipPAC Malaysia Sdn. Bhd. (“CPM”), ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company (the “Guarantor Subsidiaries”). All Guarantor Subsidiaries are wholly owned direct or indirect subsidiaries of CPI. ChipPAC Shanghai Limited (“CPS”) did not provide guarantees (the “Non-Guarantor Subsidiary”). The following is consolidated financial information for CP Int’l, CPI, CPM, and CPK, CPS, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company, segregated between the Guarantor and Non-Guarantor Subsidiaries.

12

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

June 30, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	28,886		$	115		$	22,495		$	2,227		$	—		$	53,723
Short-term investments		57,980			—			—			—			—			57,980
Intercompany accounts receivable		132,238			27,458			21,829			19,416			(200,941	)		—
Accounts receivable, net		—			—			43,384			26			—			43,410
Inventories		—			—			16,418			4,180			—			20,598
Prepaid expenses and other current assets		772			—			5,655			875			—			7,302
Total current assets		219,876			27,573			109,781			26,724			(200,941	)		183,013
Property, plant and equipment, net		5,172			10,411			236,993			102,132			—			354,708
Intercompany loans receivable		—			203,380			—			—			(203,380	)		—
Investment in subsidiaries		74,770			—			91,984			—			(166,754	)		—
Other assets		8,818			5,586			19,599			485			—			34,488
Total assets	$	308,636		$	246,950		$	458,357		$	129,341		$	(571,075	)	$	572,209
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Intercompany accounts payable	$	51		$	4,481		$	172,277		$	24,132		$	(200,941		$	—
Accounts payable		1,177			25			45,544			9,823			—			56,569
Accrued expenses and other current liabilities		3,272			8,994			8,567			5,155			—			25,988
Total current liabilities		4,500			13,500			226,388			39,110			(200,941	)		82,557
Long-term debt		—			165,000			—			—			—			165,000
Convertible subordinated notes		200,000			—			—			—			—			200,000
Intercompany loans payable		—			—			203,380			—			(203,380	)		—
Other long-term liabilities		—			—			20,516			—			—			20,516
Total liabilities		204,500			178,500			450,284			39,110			(404,321	)		468,073
Stockholders’ equity (deficit):
Common stock		952			—			—			—			—			952
Additional paid in capital		279,416			81,689			174,692			149,093			(405,474	)		279,416
Receivables from stockholders		(273	)		—			—			—			—			(273	)
Accumulated other comprehensive income		9,169			—			8,705			464			(9,169	)		9,169
Accumulated deficit		(185,128	)		(13,239	)		(175,324	)		(59,326	)		247,889			(185,128	)
Total stockholders’ equity (deficit)		104,136			68,450			8,073			90,231			(166,754	)		104,136
Total liabilities and stockholders’ equity (deficit)	$	308,636		$	246,950		$	458,357		$	129,341		$	(571,075	)	$	572,209

13

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Six Months Ended June 30, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Intercompany revenue	$	12,745		$	750		$	—		$	36,152		$	(49,647	)	$	—
Customer revenue		—			—			195,368			44			—			195,412
		12,745			750			195,368			36,196			(49,647	)		195,412
Cost of revenue		283			449			184,903			32,796			(49,647	)		168,784
Gross profit		12,462			301			10,465			3,400			—			26,628
Operating expenses:
Selling, general and administrative		10,117			153			6,005			1,656			—			17,931
Research and development		1,590			—			4,208			162			—			5,960
Total operating expenses		11,707			153			10,213			1,818			—			23,891
Operating income		755			148			252			1,582			—			2,737
Non-operating (income) expenses
Inter-company interest expense		—			—			8,127			1,515			(9,642	)		—
Interest expense		2,547			12,039			304			—			—			14,890
Interest income		(213	)		—			(94	)		(2	)		—			(309	)
Inter-company interest income		—			(9,642	)		—			—			9,642			—
(Income) loss from investment in subsidiaries		12,493			—			(157	)		—			(12,336	)		—
Foreign currency loss		—			—			201			15			—			216
Write-off of debt issuance cost and other related expenses		—			1,099			83			—			—			1,182
Other (income) expenses, net		50			—			(63	)		(103	)		—			(116	)
Total non-operating (income) expense		14,877			3,496			8,401			1,425			(12,336	)		15,863
Income / (loss) before income taxes		(14,122	)		(3,348	)		(8,149	)		157			12,336			(13,126	)
Provision for income taxes		4			239			757			—			—			1,000
Net income / (loss)	$	(14,126	)	$	(3,587	)	$	(8,906	)	$	157		$	12,336		$	(14,126	)

14

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(14,126	)	$	(3,587	)	$	(8,906	)	$	157		$	12,336		$	(14,126	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		517			449			24,582			7,601			—			33,149
Amortization of debt issuance cost		248			712			—			—			—			960
Foreign currency loss		—			—			201			15			—			216
Write-off of debt issuance costs and other related expenses		—			1,099			83			—			—			1,182
Gain on sale of equipment		(5	)		—			(64	)		(58	)		—			(127	)
Equity income (loss) from investment in subsidiaries		12,493			—			(157	)		—			(12,336	)		—
Changes in assets and liabilities:
Intercompany accounts receivable		(16,063	)		41,552			1,336			(2,553	)		(24,272	)		—
Accounts receivable		17			—			(4,624	)		(10	)		—			(4,617	)
Inventories		—			—			(4,323	)		(976	)		—			(5,299	)
Prepaid expenses and other current assets		196			—			(2,886	)		590			—			(2,100	)
Other assets		(323	)		1			(1,191	)		3			—			(1,510	)
Intercompany accounts payable		(909	)		(55,740	)		32,299			78			24,272			—
Accounts payable		(196	)		(1,928	)		18,815			123			—			16,814
Accrued expenses and other current liabilities		(2,005	)		(264	)		(40	)		(1,103	)		—			(3,412	)
Other long-term liabilities		—			—			1,653			(15	)		—			1,638
Net cash provided by (used in) operating activities		(20,156	)		(17,706	)		56,778			3,852			—			22,768
Cash flows from investing activities:
Purchase of short-term investments		(55,978	)		—			—			—			—			(55,978	)
Proceeds from sale of short-term investments		7,998			—			—			—			—			7,998
Acquisition of intangible assets		(300	)		—			(1,515	)		—			—			(1,815	)
Acquisition of property and equipment		85			(5,278	)		(32,546	)		(7,061	)		—			(44,800	)
Proceeds from sale of equipment		5			—			79			76			—			160
Malaysian acquisition, net of cash and cash equivalent acquired		—			—			(3,475	)		—			—			(3,475	)
Investment in subsidiaries		(54,000	)		—			(34,000	)		—			88,000			—
Net cash used in investing activities		(102,190	)		(5,278	)		(71,457	)		(6,985	)		88,000			(97,910	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		—			26,500			854			—			—			27,354
Repayment of revolving loans and other line of credit		—			(26,500	)		(854	)		—			—			(27,354	)
Net proceeds from long-term debt		144,861			—			—			—			—			144,861
Repayment of long-term debts		—			(36,187	)		(16,700	)		—			—			(52,887	)
Intercompany loan payments		—			49,120			(15,120	)		(34,000	)		—			—
Intercompany capital contributions		—			—			54,000			34,000			(88,000	)		—
Repayment of notes from stockholders		207			—			—			—			—			207
Proceeds from common stock issuance		2,511			—			—			—			—			2,511
Net cash provided by financing activities		147,579			12,933			22,180			—			(88,000	)		94,692
Net increase in cash		25,233			(10,051	)		7,501			(3,133	)		—			19,550
Cash and cash equivalents at beginning of period		3,653			10,166			14,994			5,360			—			34,173
Cash and cash equivalents at end of period	$	28,886		$	115		$	22,495		$	2,227		$	—		$	53,723

15

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3,653		$	10,166		$	14,994		$	5,360		$	—		$	34,173
Short-term investments		10,000			—			—			—			—			10,000
Intercompany accounts receivable		116,175			69,010			23,165			16,863			(225,213	)		—
Accounts receivable, net		17			—			38,760			16			—			38,793
Inventories		—			—			12,095			3,204			—			15,299
Prepaid expenses and other current assets		968			—			2,852			1,465			—			5,285
Total current assets		130,813			79,176			91,866			26,908			(225,213	)		103,550
Property, plant and equipment, net		5,528			5,582			222,698			102,589			—			336,397
Intercompany loans receivable		—			252,500			—			—			(252,500	)		—
Investment in subsidiaries		33,263			—			57,827			—			(91,090	)		—
Other assets		3,550			7,398			18,720			589			—			30,257
Total assets	$	173,154		$	344,656		$	391,111		$	130,086		$	(568,803	)	$	470,204
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Intercompany accounts payable	$	960		$	60,221		$	139,978		$	24,054		$	(225,213	)	$	—
Accounts payable		1,373			1,953			26,729			9,700			—			39,755
Accrued expenses and other current liabilities		5,277			9,258			8,607			6,258			—			29,400
Total current liabilities		7,610			71,432			175,314			40,012			(225,213	)		69,155
Long-term debt, less current portion		—			201,187			16,700			—			—			217,887
Convertible subordinated notes		50,000			—			—			—			—			50,000
Intercompany loans payable		—			—			218,500			34,000			(252,500	)		—
Other long-term liabilities		—			—			17,618			—			—			17,618
Total liabilities		57,610			272,619			428,132			74,012			(477,713	)		354,660
Stockholders’ equity (deficit):
Common stock		941			—			—			—			—			941
Additional paid in capital		276,916			81,689			120,692			115,093			(317,474	)		276,916
Receivables from stockholders		(480	)		—			—			—			—			(480	)
Accumulated other comprehensive income		9,169			—			8,705			464			(9,169	)		9,169
Accumulated deficit		(171,002	)		(9,652	)		(166,418	)		(59,483	)		235,553			(171,002	)
Total stockholders’ equity (deficit)		115,544			72,037			(37,021	)		56,074			(91,090	)		115,544
Total liabilities and stockholders’ equity (deficit)	$	173,154		$	344,656		$	391,111		$	130,086		$	(568,803	)	$	470,204

16

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Six Months Ended June 30, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non-Guarantor China			Eliminations			Consolidated
Intercompany revenue	$	14,284		$	—		$	—		$	34,170		$	(48,454	)	$	—
Customer revenue		—			—			176,076			223			—			176,299
		14,284			—			176,076			34,393			(48,454	)		176,299
Cost of revenue		—			—			166,273			31,161			(48,454	)		148,980
Gross profit		14,284			—			9,803			3,232			—			27,319
Operating expenses:
Selling, general and administrative		12,562			250			4,997			1,811			—			19,620
Research and development		1,064			—			3,644			—			—			4,708
Total operating expenses		13,626			250			8,641			1,811			—			24,328
Operating income (loss)		658			(250	)		1,162			1,421			—			2,991
Non-operating (income) expenses
Inter-company interest expense		—			—			15,762			1,703			(17,465	)		—
Interest expense		1,829			14,397			562			—			—			16,788
Interest income		(112	)		(22	)		(63	)		(16	)		—			(213	)
Inter-company interest income		—			(17,146	)		(319	)		—			17,465			—
Loss from investment in Subsidiaries		17,640			—			416			—			(18,056	)		—
Foreign currency loss		—			—			1,364			43			—			1,407
Write-off of debt issuance cost and other related expenses		—			3,005			—			—			—			3,005
Other expenses, net		(9	)		—			(201	)		(93	)		—			(303	)
Total non-operating expenses		19,348			234			17,521			1,637			(18,056	)		20,684
Loss before income taxes		(18,690	)		(484	)		(16,359	)		(216	)		18,056			(17,693	)
Provision for income taxes		3			85			712			200			—			1,000
Net loss	$	(18,693	)	$	(569	)	$	(17,071	)	$	(416	)	$	18,056		$	(18,693	)

17

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(18,693	)	$	(569	)	$	(17,071	)	$	(416	)	$	18,056		$	(18,693	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		754			—			20,633			6,394			—			27,781
Amortization of debt issuance cost		164			1,025			—			—			—			1,189
Foreign currency (gains) loss		—			—			1,364			43			—			1,407
Write-off of debt issuance costs		—			3,005			—			—			—			3,005
(Gain) loss on sale of equipment		—			—			(77	)		13			—			(64	)
Equity income from investment in subsidiaries		17,640			—			416			—			(18,056	)		—
Changes in assets and liabilities:
Intercompany accounts receivable		(117,807	)		6,939			4,181			(7,459	)		114,146			—
Accounts receivable		12			11			(4,939	)		(131	)		—			(5,047	)
Inventories		—			—			(4,233	)		(789	)		—			(5,022	)
Prepaid expenses and other current assets		111			(295	)		(4,106	)		(975	)		—			(5,265	)
Other assets		48			92			(241	)		(65	)		—			(166	)
Intercompany accounts payable		400			112,448			4,911			(3,613	)		(114,146	)		—
Accounts payable		(973	)		296			3,937			2,908			—			6,168
Accrued expenses and other current liabilities		1,904			(1,904	)		3,000			761			—			3,761
Other long-term liabilities		—			—			1,608			—			—			1,608
Net cash provided by (used in) operating activities		(116,440	)		121,048			9,383			(3,329	)		—			10,662
Cash flows from investing activities:
Acquisition of intangible assets		(269	)		—			(1,939	)		—			—			(2,208	)
Acquisition of property, plant and equipment		(64	)		(3,754	)		(32,287	)		(3,836	)		—			(39,941	)
Proceeds from sale of equipment		—			—			85			—			—			85
Malaysian acquisition, net of cash and cash equivalents acquired		—			—			(3,664	)		—			—			(3,664	)
Investment in subsidiaries		—			—			(6,960	)		—			6,960			—
Net cash used in investing activities		(333	)		(3,754	)		(44,765	)		(3,836	)		6,960			(45,728	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		—			50,000			5,596			—			—			55,596
Repayment of revolving loans		—			(100,000	)		—			—			—			(100,000	)
Increase in debt issuance costs		—			(702	)		—			—			—			(702	)
Net proceeds from long-term debt		—			(82,440	)		16,700			—			—			(65,740	)
Repayment of notes from stockholders		492			—			—			—			—			492
Intercompany loan payments		—			—			—			6,960			(6,960	)		—
Proceeds from common stock issuance		164,745			—			—			—			—			164,745
Repurchase of common stock		(24	)		—			—			—			—			(24	)
Net cash provided by (used in) financing activities		165,213			(133,142	)		22,296			6,960			(6,960	)		54,367
Net increase (decrease) in cash		48,440			(15,848	)		(13,086	)		(205	)		—			19,301
Cash and cash equivalents at beginning of period		1,842			17,093			20,939			1,998			—			41,872
Cash and cash equivalents at end of period	$	50,282		$	1,245		$	7,853		$	1,793		$	—		$	61,173

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references are to ChipPAC’s fiscal quarters ended June 30, 2003 and June 30, 2002, unless otherwise indicated. This quarterly report on Form 10-Q contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and speak only as of their dates. These forward-looking statements are based on our current expectations and are subject to a number of risks and uncertainties, including those identified under Exhibit 99.1 filed with our annual report on Form 10-K for the year ended December 31, 2002 and other risks and uncertainties indicated from time to time in our filings with the SEC. Actual results could differ materially from these forward-looking statements. In addition, important factors to consider in evaluating these forward-looking statements include changes in external market factors, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors and various other competitive factors. Also, terrorist acts, war, political unrest or disease epidemics in the regions where we have operations could materially affect our financial condition and our results of operation. In light of these risks and uncertainties, there can be no assurance that the matters referred to in the forward-looking statements contained in this quarterly report will in fact occur.

Results of Operations

Three and six month periods ended June 30, 2003 compared to three and six month periods ended June 30, 2002

Revenue. Revenue was $106.8 million and $195.4 million for the three and six month periods ended June 30, 2003, respectively, an increase of 10.0% and 10.8% compared to revenue of $97.1 million and $176.3 million for the same periods in 2002, respectively. Several new customers were added in the latter half of 2002 and these new customers started ramping production in the three and six month periods ended June 30, 2003. This contributed to the increase of revenue over the same periods in 2002. Assembly unit volumes for the three and six month periods ended June 30, 2003, increased 9.0% and 8.5%, respectively, over the same periods in 2002. Average selling prices per assembly unit for the three and six month periods ended June 30, 2003, increased 2.9% and 3.3%, respectively, compared to the same periods in 2002.

Gross Profit. Gross profit during the three and six month periods ended June 30, 2003 was $16.6 million and $26.6 million, a decrease of 6.7% and 2.6% compared to gross profit of $17.8 million and $27.3 million for the same periods in 2002, respectively. Gross margin as a percent of revenue was 15.5% and 13.6% for the three and six month periods ended June 30, 2003, as compared to 18.3% and 15.5% in the same period in 2002, respectively. For the three and six month periods ended June 30, 2003 compared to the same period in 2002, gross profit percentage declined due to lower margin products making up a larger weighted factor in the overall product mix, rising costs in reaction to macroeconomic issues including South Korean exchange rate valuations and increased oil and gold market prices. Overall equipment utilization was approximately 68 % for the three months period ended June 30, 2003 as compared to 63 % in the same period in 2002.

Selling, General, and Administrative. Selling, general and administrative expenses were $8.5 million and $17.9 million for the three and six month periods ended June 30, 2003, which is a decrease of 13.3% and 8.7% compared to $9.8 million and $19.6 million for the same period in 2002, respectively. As a percentage of revenue, selling, general and administrative expenses were 7.9% and 9.2% for the three and six month periods ended June 30, 2003, respectively, compared to 10.1% and 11.1% for the same periods in 2002, respectively. The decrease in expenses was due to additional expenses incurred to meet the increase in unit volumes and product mix occurring in our China plant in 2002 with no comparable expenditures occurring in 2003, a reduction in global travel related expenses occurred in reaction to global health concerns caused by SARS as well as macroeconomic conditions.

Research and Development. Research and development expenses for the three and six month periods ended June 30, 2003 were $3.1 million and $6.0 million, respectively, versus $2.4 million and $4.7 million for the same periods in 2002, an increase of 29.2% and 27.7% from the three and six month periods ended June 30, 2002, respectively. Throughout 2003, we have continued to increase our research and development staffing and projects at all three of our plants. The increased staffing and increased number of projects in 2003 drove the additional spending compared to the same periods in 2002.

Interest Expense. Total outstanding interest-bearing debt increased to $365.0 million at June 30, 2003 compared to $267.9 million at June 30, 2002. The increase in debt outstanding of $97.1 million from June 30, 2002 to June 30, 2003, was due to the issuance of $150.0 million convertible debt in May 2003 offset by the pay down of $52.9 million against term loans and other lines of credits. Related interest expense was $7.6 million and $14.9 million for the three and six month periods ended June 30, 2003, a decrease of 6.2% and 11.3% as compared to $8.1 million and $16.8 million for the same periods ended June 30, 2002. Despite the increase in total outstanding debt at June 30, 2003 as compared to June 30, 2002, interest expense decreased

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primarily as the result of lower interest rates on the new convertible debt replacing debt levels with significantly higher rates. Total interest expenses paid in cash for the six months ended June 30, 2003 were $13.7 million.

Foreign Currency Losses. Net foreign currency losses were $0.4 million and $0.2 million for the three and six month periods ended June 30, 2003, respectively, as compared to a net foreign currency loss of $1.3 million and $1.4 million for the same periods in 2002, respectively. These non-cash losses were primarily due to the fluctuations between the exchange rate of the United States Dollar and the South Korean Won related to long-term severance benefits payable to our South Korean employees in Korean Won.

Write-Off of Debt Issuance Cost and Other Related Expenses. In May and June, 2003, we issued $150.0 million of 2.5% convertible subordinated notes in a private placement and used a portion of the proceeds to payoff term loans and foreign debt. As a result of the early extinguishment of these debt, associated capitalized debt issuance cost of $1.1 million along with $0.1 million of related debt expenses were written off. In May 2002, we used proceeds from our secondary public offering to pay off term loans. As the result of this early extinguishment of debt, associated capitalized debt issuance cost of $3.0 million was written off.

Income Taxes. Consolidated income tax provisions were $0.5 million and $1.0 million for both of the three and six month periods ended June 30, 2003 and 2002, respectively. We have a mix of tax rates across the various jurisdictions in which we do business, and our current estimated provision for 2003 is $2.0 million with $0.5 million recognized in the three month period ended June 30, 2003. This estimate does not take into account any future benefit from loss carryforwards, which we may realize once we again achieve profitability and begin generating taxable income.

Critical Accounting Policies

For critical accounting policies affecting us, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2002. Critical accounting policies affecting us have not changed materially since December 31, 2002.

Liquidity and Capital Resources

Our ongoing primary cash needs are for operations and equipment purchases. We spent $35.0 million and $44.8 million on capital expenditures during the three and six month periods ended June 30, 2003, respectively, as compared to $32.2 million and $39.9 million in capital expenditures during the same periods in 2002, respectively.

The terms of the acquisition of the Malaysian business require contingent incentive payments to Intersil, up to a maximum of $17.9 million through June 30, 2003. During the three month period ended June 30, 2003, we have accrued the final $1.7 million relating to contingent incentive payments. Cumulatively we have paid and accrued $17.9 million under this arrangement.

On January 30, 2002, we sold 10,000,000 shares of Class A common stock in an underwritten public offering for $6.00 per share. On February 14, 2002, we sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriter’s exercise of their over-allotment option at the public offering price for $6.00 per share. In connection with these sales, we received net proceeds of approximately $63.8 million, after deducting underwriting discounts, commissions and offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.3 million was used for general corporate purposes.

On May 30, 2002, we sold 12,000,000 shares of Class A common stock in an underwritten public offering for $8.75 per share. In connection with these sales, we received net proceeds of approximately $99.2 million, after deducting underwriting discounts, commissions and offering expenses. Net proceeds of $50.0 million from this offering were used to pay down term loans. The remaining $49.2 million was used for general corporate purposes.

On May 28, 2003, we issued $125.0 million of 2.5% convertible subordinated notes due 2008 in a private placement and on June 5, 2003, the initial purchaser exercised the option to purchase an additional $25.0 million of 2.5% convertible subordinated notes under the same terms. The $150.0 million of 2.5% convertible subordinated notes are convertible into shares of our Class A common stock at a conversion price of $8.062 per share, subject to adjustment at any time prior to June 1, 2008 and bear an interest rate of 2.5% per annum. We used $63.9 million from the proceeds of these notes to pay down $36.2 million of our term loans, $16.7 million of foreign loan and $11.0 million of revolving loans.

As of June 30, 2003, our total debt consisted of $365.0 million of borrowings, which was comprised of $165.0 million of senior subordinated notes, $50.0 million of 8.0% convertible subordinated notes and $150.0 million of 2.5% convertible subordinated notes. During the three month period ended June 30, 2003, these borrowings had weighted average interest rates of 12.8%, 8.0% and 2.5%, respectively.

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Our total potential commitments on our loans, operating leases, and other agreements as of June 30, 2003, were as follows (in thousands):

	Total		Within 1 Year		2–3 Years		4–5 Years		After 5 Years
On balance sheet commitments:
Senior subordinated notes	$	165,000	$	—	$	—	$	—	$	165,000
Convertible subordinated notes		200,000		—		—		150,000		50,000
Total on balance sheet commitments		365,000		—		—		150,000		215,000
Off balance sheet commitments:
Operating leases		62,442		4,539		13,748		12,020		32,135
Royalty/licensing agreements		558		228		238		92		—
Total off balance sheet commitments		63,000		4,767		13,986		12,112		32,135
Total commitments	$	428,000	$	4,767	$	13,986	$	162,112	$	247,135

Our senior credit facilities, as amended, contain covenants restricting our operations and requiring that we meet specified financial tests. Beginning with the quarter ended December 31, 2002, the financial covenants will consist solely of a minimum interest coverage ratio and a maximum senior leverage ratio based on a rolling 12-months calculation. There were no violations of the covenants under the senior credit facilities, as amended, through June 30, 2003.

Other than the covenants on the debt as discussed above, we have no performance guarantees or unconsolidated entities. Our off-balance sheet commitments are limited to equipment operating leases, royalty/license agreements, and leases on office and manufacturing space. Our total off-balance sheet obligations are approximately $63.0 million as of June 30, 2003.

During the quarter ended June 30, 2002, an assessment of approximately 16.0 billion Korean Won (approximately $13.4 million U.S. Dollars at June 30, 2003), was made by the Korean National Tax Administration or NTA, relating to withholding tax not collected on the loan between our subsidiaries in Korea and Hungary. The prevailing tax treaty does not require withholding on the transactions in question. There were no further assessments made during the quarter ended June 30, 2003. We have appealed the assessment through the NTA’s Mutual Agreement Procedure and believe that the assessment will be overturned. As of June 30, 2003, no accrual has been made. On July 18, 2002, the Icheon tax office of the NTA approved a tax suspension of the proposed assessment until resolution of the disputed assessment. The NTA required a corporate guarantee of 120% of the assessment in exchange for the suspension. We complied with the guarantee request on August 1, 2002. No further assessments have been made.

For the six month period ended June 30, 2003 and 2002, cash provided by operating activities was $22.8 million and $10.7 million, respectively. Cash provided by operating activities is calculated by adjusting our net loss by non-cash related items such as depreciation and amortization, debt issuance cost amortization and foreign currency loss and by changes in assets and liabilities. During the six month period ended June 30, 2003, non-cash related items included $35.2 million related to depreciation and amortization; $2.1 million from debt issuance costs and $0.2 million from foreign currency loss. Working capital uses of cash included increases in accounts receivable, inventories, prepaid assets, other assets and a decrease in accrued liabilities, primarily due to interest payments made. Working capital sources of cash primarily was due to an increase in accounts payable.

For the six month period ended June 30, 2003, cash used in investing activities was $97.9 million versus $45.7 million for same period in 2002. During the six month period ended June 30, 2003, $44.8 million was spent on capital expenditures and $3.5 million was invested in the purchase of the Malaysian business, including purchased intellectual property.

For the six month period ended June 30, 2003, cash provided by financing activities was $94.7 million as compared to $54.4 million for the same period in 2002. In May and June, 2003, $144.9 million after deducting transaction cost was provided by the issuance of subordinated convertible notes in a private placement. As of June 30, 2003, there were no outstanding borrowing on the revolving loan and the line of credit facilities. During the six month period ended June 30, 2003, $2.5 million was provided by the issuance of new common stock through the Employee Stock Purchase Plan and Employee Stock Option Plan.

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We believe that our existing cash balances, cash flows from operations and available borrowings under our senior credit facilities of $50.0 million will provide sufficient cash resources to meet our projected operating and other cash requirements for the next twelve months. 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 senior subordinated notes significantly reduce our ability to incur additional debt. Failure to obtain any such required additional financing could have a material adverse effect on our company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risks affecting us, see Item 7A “Quantitative Disclosure About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2002. Our exposure to market risks has not changed materially since December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of June 30, 2003, in timely alerting them to material information relating to our company (including its consolidated subsidiaries) required to be included in our Exchange Act filings.

There have been no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any legal proceedings the outcome of which we believe would have a material adverse effect on our business, financial condition or results of operations. From time to time, however, we are involved in claims that arise in the ordinary course of business, and we maintain insurance that we believe to be adequate to cover these claims.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) ChipPAC’s Annual Meeting was held on May 14, 2003.

(b) The following directors were elected at the meeting:

Director’s Name	Total Shares Voting to Elect.	Withheld
Dennis P. McKenna	89,417,546	509,498
Edward Conard	89,615,866	311,178
Robert Conn	89,615,866	311,178
Michael A. Delaney	89,615,866	311,178
Marshal Haines	89,615,866	311,178
Douglas Norby	89,615,866	311,178
Chong Sup Park	89,615,866	311,178
Paul C. Schorr, IV	89,615,866	311,178

There were no abstentions, and 3,942,531 broker non-votes.

(c) Our stockholders also voted to ratify the appointment of PricewaterhouseCoopers as our independent

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auditors. Of all shares outstanding, 89,190,517 were voted in favor of this proposal, 734,476 were voted against this proposal, 2,051 shares abstained from voting on this proposal and there were 3,942,531 broker non-votes.

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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.*
3.1	Amended and Restated Certificate of Incorporation of ChipPAC, Inc.**
3.2	Amended and Restated By-Laws of ChipPAC, Inc.**
4.1	Specimen certificate for ChipPAC, Inc. Common Stock.**
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.*
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 4.5 of the Company’s registration statement on Form S-3 (Registration No. 333-69704)).
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, 2002 (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 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 and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (No. 000-31173)).
10.6	Amendment No. 4 to Amended and Restated Credit Agreement, as amended, dated as of May 17, 2002 by and among ChipPAC International Company Limited, ChipPAC, Inc, the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent and Collateral Agent. (incorporated by reference to the Company’s

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	quarterly report on Form 10-Q for the period ended September 30, 2002).
10.7	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 Firstar Bank of Minnesota, N.A.*
10.7.1	Subsidiary Guaranty Agreement, dated as of October 12, 2001, by ChipPAC Malaysia Sdn. Bhd, in favor of U.S. Bank, N.A.(incorporated by reference to Exhibit 4.7 of the Company’s registration statement on Form S-3 (Registration No. 333-69704)).
10.8	Amended and Restated Registration Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc. the Hyundai Group (as defined therein), the Bain Group (as defined therein), the SXI Group (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.*
10.8.1	Amendment No. 1 to Amended and Restated Registration Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., Sapphire Worldwide Investments, Inc., the Bain Stockholders (as defined therein) and SXI Group LLC.**
10.8.2	Form of Amendment No. 2 to Amended and Restated Registration Agreement, dated as of July 13, 2000, by and among ChipPAC, Inc., Qualcomm Incorporated, SXI Group LLC and the Bain Shareholders (as defined therein).**
10.8.3	Form of Amendment No. 3 to Amended and Restated Registration Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc., Bain Capital, Inc., SXI Group LLC and the Bain Shareholders (as defined therein).**
10.9	Transition Services Agreement, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc., ChipPAC Korea Company Ltd., Hyundai Electronics Company (Shanghai) Ltd., ChipPAC Assembly and Test (Shanghai) Company Ltd., ChipPAC Barbados Limited and ChipPAC Limited.*
10.10	Lease Agreement, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.10.1	Amendment Agreement, dated September 30, 1998, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.10.2	Amendment Agreement 2, dated September 30, 1999, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.11	Agreement Concerning Supply of Utilities, Use of Welfare Facilities and Management Services for Real Estate, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.12	Service Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.+*
10.13	Sublease Agreement, dated as of May 1, 1998, by and between Hyundai Electronics America and ChipPAC, Inc.*
10.14	Employment letter agreement, dated as of January 10, 2003 between ChipPAC, Inc. and Robert Krakauer (Incorporated by Reference to the Company’s Annual Report on Form 10-K for the period December 31, 2002).
10.15	Employment letter agreement, dated as of January 13, 2003 between ChipPAC, Inc. and Patricia McCall (Incorporated by Reference to the Company’s Annual Report on Form 10-K for the period December 31, 2002).
10.16	Employment Agreement, dated as of October 1, 1999, between ChipPAC, Inc. and Dennis McKenna.*
10.17	ChipPAC, Inc. 1999 Stock Purchase and Option Plan.*
10.18	ChipPAC, Inc. 2000 Equity Incentive Plan.**
10.19	ChipPAC, Inc. 2000 Employee Stock Purchase Plan.**
10.20	Form of Key Employee Purchased Stock Agreement.*

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10.20.1	Form of Key Employee Purchased Stock Agreement (with Loan).*
10.21	Form of Employee Restricted Stock Agreement.*
10.22	Form of Directors Tranche I Stock Option Agreement.*
10.23	Form of Employees Tranche I Stock Option Agreement.*
10.24	Form of Tranche II Stock Option Agreement.*
10.25	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.*
10.26	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.*
10.27	12.75% Senior Subordinated Notes Due 2009.*
10.28	Form of Series B 12.75% Senior Subordinated Notes Due 2009.*
10.29	Intellectual Property Rights Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.**
10.30	Supply Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.**
10.31	Employment letter agreement, dated as of November 15, 1999 between ChipPAC, Inc. and Robert Krakauer (incorporated by reference to the Company’s annual report on Form 10-K for the period December 31, 2000).
10.32	Employment letter agreement, dated as of October 4, 2000 between ChipPAC, Inc. and Richard Freeman (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001).
10.33	Employment letter agreement, dated as of October 9, 2000 between ChipPAC, Inc. and Patricia McCall (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001).
10.34	Indenture, dated as of June 15, 2001, by and between ChipPAC, Inc. and Firstar Bank, N.A. as trustee (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.35	Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited and Citicorp Capital Investors Limited (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.36	Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC, Inc. and Citicorp Mezzanine III, L.P. (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.37	Patent and Technology License Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries, Co., Ltd. and ChipPAC Limited (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001). +
10.38	Amendment No. 5 to Amended and Restated Credit Agreement, as amended, dated as of May 19, 2003 by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent and Collateral Agent.
10.39	Registration Rights Agreement, dated March 28, 2003, by and between ChipPAC, Inc. and Lehman Brothers Inc.
10.40	Indenture, dated as of May 28, 2003, by and between ChipPAC, Inc. and U.S. Bank National Association, as trustee.

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21.1	Subsidiaries of ChipPAC, Inc., ChipPAC International Company Limited, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Liquidity Management Limited Liability Company, ChipPAC Luxembourg S.a.R.L. and ChipPAC Korea Company Ltd. (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended on June 30, 2002).
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Risk Factors (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2002).

* Incorporated by reference to the Company’s Form S-4 (No. 333-91641).

** Incorporated by reference to the Company’s Form S-1 (No. 333-39428).

+ Confidential treatment has been granted as to certain portions of these exhibits, which are incorporated by reference.

(b) Reports on Form 8-K.

On July 31, 2003, we furnished a Current Report on Form 8-K to the SEC, including the Company’s press release announcing financial results for the three and six month periods ended June 30, 2003.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, as of August 8, 2003.

CHIPPAC, INC.

(Registrant)

/s/    ROBERT KRAKAUER

ROBERT KRAKAUER

Senior Vice President and Chief Financial Officer

/s/    MICHAEL G. POTTER

MICHAEL G. POTTER

Vice President, Controller and Chief Accounting Officer

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EX-10.38

Exhibit 10.38

AMENDMENT NO. 5 AND AGREEMENT dated as of May 19, 2003 (this “Amendment”), to the CREDIT AGREEMENT dated as of August 5, 1999, as amended and restated as of June 30, 2000, and as amended by Amendment No. 1 dated as of March 13, 2001, Amendment No. 2 dated as of June 8, 2001, Amendment No. 3, Waiver and Agreement dated as of December 31, 2001, and Amendment No. 4, Waiver and Agreement dated as of May 17, 2002 (the “Credit Agreement”), among CHIPPAC INTERNATIONAL COMPANY LIMITED, a British Virgin Islands company (the “Company”), CHIPPAC, INC., a Delaware corporation (“ChipPAC”), the Lenders (as defined therein) and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of Switzerland, acting through its Cayman Islands branch (“CSFB”), as administrative agent (in such capacity, the “Administrative Agent”), as sole lead arranger and as collateral agent for the Administrative Agent and the Lenders.

A.    Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended, and have agreed to extend, credit to the Company.

B.    ChipPAC and the Company have requested that the Credit Agreement be amended as provided herein. The Requisite Lenders are willing to amend the Credit Agreement pursuant to the terms and subject to the conditions set forth herein.

C.    Capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement.

Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.    Amendment to Section 1.  The definition of the term “Consolidated Subordinated Notes” set forth in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

““Convertible Subordinated Notes” means (a) the 8.0% Convertible Subordinated Notes due 2011 of ChipPAC, in an aggregate outstanding principal amount as of May 16, 2003, of $50,000,000, and (b) the convertible subordinated notes due [            ], to be issued by ChipPAC on or prior to July 18, 2003, in an aggregate principal amount not less than $50,000,000 nor more than $[                ], and to have substantially the terms described in ChipPAC’s preliminary confidential offering circular dated on or about May 19, 2003 (the “2003 Convertible Subordinated Notes”).”

SECTION 2.    Agreement.  The Company and ChipPAC hereby agree that, within one Business Day of the receipt of the proceeds of the 2003 Convertible Subordinated Notes, the Company shall prepay in full the outstanding Term Loans.

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SECTION 3.    Representations and Warranties.  To induce the other parties hereto to enter into this Amendment, the Company and ChipPAC represent and warrant to each of the Lenders that, after giving effect to this Amendment, (a) the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, and (b) no Default or Event of Default has occurred and is continuing.

SECTION 4.    Effectiveness.  This Amendment shall become effective as of the date first written above on the date (the “Amendment Effective Date”) on which the Administrative Agent shall received counterparts of this Amendment that, when taken together, bear the signatures of the Company, the Guarantors, the Requisite Lenders and the Administrative Agent.

SECTION 5.    Effect of Amendment.  Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the date hereof, any reference to the Credit Agreement shall mean the Credit Agreement, as modified hereby. This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 6.    Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.

SECTION 7.    Applicable Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 8.    Headings.  The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

SECTION 9.    Acknowledgment of Guarantors.  Each of the Guarantors hereby acknowledges receipt and notice of, and consents to the terms of, this Amendment.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

CHIPPAC INTERNATIONAL COMPANY LIMITED,
by	/s/    Patricia H. McCall
	Name:  Patricia H. McCall Title:  Director
CHIPPAC, INC.,
by	/s/    Dennis McKenna
	Name:  Dennis McKenna Title:  Chairman and CEO
CHIPPAC KOREA COMPANY LTD.,
by	/s/    BK Sohn
	Name:  BK Sohn Title:  President, Managing Director
CHIPPAC LIQUIDITY MANAGEMENT HUNGARY LIMITED LIABILITY COMPANY,
by	/s/    Michael G. Potter
	Name:  Michael G. Potter Title:  Managing Director
CHIPPAC LUXEMBOURG S.A.R.L.,
by	/s/
	Name: Title:
CHIPPAC (BARBADOS) LTD.,
by	/s/    Patricia H. McCall
	Name:  Patricia H. McCall Title:  Director

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CHIPPAC LIMITED,
by	/s/    Patricia H. McCall
	Name:  Patricia H. McCall Title:  Director
CHIPPAC MALAYSIA SDN. BHD.,
by	/s/    BK Sohn
	Name:  BK Sohn Title:  Director
CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands branch, individually, and as Administrative Agent and an Issuing Bank,
by	/s/    Robert Hetu
	Name:  Robert Hetu Title:  Director
by	/s/    David J. Dodd
	Name:  David J. Dodd Title:  Associate

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SIGNATURE PAGE TO AMENDMENT NO. 5 AND AGREEMENT DATED AS OF MAY 19, 2003, TO THE CHIPPAC CREDIT AGREEMENT DATED AS OF AUGUST 5, 1999, AS AMENDED AND RESTATED AS OF JUNE 30, 2000, AS AMENDED

ARK II CLO 2001-1, LIMITED
By:	Patriarch Partners II, LLC, as Collateral Manager
by	/s/    Lynn Tilton
	Name:  Lynn Tilton Title:  Manager
BANK OF THE WEST
by	/s/    Clark Foster
	Name:  Clark Foster Title:  Vice President
CITIZENS BANK OF MASSACHUSETTS
by	/s/    Christopher G. Daniel
	Name:  Christopher G. Daniel Title:  Vice President
HELLER FINANCIAL, INC.
by	/s/    Mei Nishiwaki
	Name:  Mei Nishiwaki Title:  Duly Authorized Signatory
IBM CREDIT LLC (FORMERLY IBM CREDIT CORP.)
by	/s/    Steven A. Flanagan
	Name:  Steven A. Flanagan Title:  Manager, Global Special Handling

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STANFIELD ARBITRAGE CDO, LTD.
By:	Stanfield Capital Partners LLC, as Collateral Manager
by	/s/    Christopher A. Bondy
	Name:  Christopher A. Bondy Title:  Partner
STANFIELD CARRERA CLO, LTD.
By:	Stanfield Capital Partners LLC, as Asset Manager
by	/s/    Christopher A. Bondy
	Name:  Christopher A. Bondy Title:  Partner
STANFIELD QUATTRO CLO, LTD.
By:	Stanfield Capital Partners LLC, as Collateral Manager
by	/s/    Christopher A. Bondy
	Name:  Christopher A. Bondy Title:  Partner

EX-10.39

Exhibit 10.39

$125,000,000

CHIPPAC, INC.

2.50% Convertible Subordinated Notes Due 2008

REGISTRATION RIGHTS AGREEMENT

March 28, 2003

Lehman Brothers Inc.

155 Linfield Drive

Menlo Park, CA 94025

Dear Sirs:

ChipPAC, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to Lehman Brothers Inc. (the “Initial Purchaser”), upon the terms set forth in a purchase agreement dated May 22, 2003 (the “Purchase Agreement”), $125,000,000 aggregate principal amount (plus up to an additional $25,000,000 principal amount) of its 2.50% Convertible Subordinated Notes due 2008, (the “Initial Securities”). The Initial Securities will be convertible into shares of Class A common stock, par value $0.01 per share, of the Company (the “Common Stock”) at the conversion price set forth in the Offering Circular dated May 22, 2003. The Initial Securities will be issued pursuant to an Indenture, dated as of May 28, 2003, (the “Indenture”), among the Company and U.S. Bank National Association, as trustee (the “Trustee”). As an inducement to the Initial Purchaser to enter into the Purchase Agreement, the Company agrees with the Initial Purchaser, for the benefit of (i) the Initial Purchaser and (ii) the holders of the Initial Securities and the Common Stock issuable upon conversion of the Initial Securities (collectively, the “Securities”) from time to time until such time as such Securities have been sold pursuant to a Shelf Registration Statement (as defined below) (each of the forgoing a “Holder” and collectively the “Holders”), as follows:

1.    Shelf Registration.    (a) The Company shall, at its cost, prepare and, as promptly as practicable (but in no event more than 90 days after the First Closing Date, (as defined in the Purchase Agreement) file with the Securities and Exchange Commission (the “Commission”) and thereafter use its commercially reasonable efforts to cause to be declared effective as soon as practicable a registration statement on an appropriate form under the Securities Act within 180 days of the First Closing Date, (the “Shelf Registration Statement”) relating to the offer and sale of the Transfer Restricted Securities (as defined in Section 5 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act of 1933 (the “Securities Act”) (hereinafter, the “Shelf Registration”); provided, however, that no Holder (other than the Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

(b) The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus included therein (the “Prospectus”) to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 2(h) below) from the first date of the original issuance of the Initial Securities or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto, or have otherwise been disposed of in accordance with the Securities Act, (ii) are eligible to be sold to the public pursuant to Rule 144(k) under the Securities Act or any successor rule thereof, without limitations under clauses (c), (e), (f) and (h) of Rule 144 under the Securities Act or any successor provisions thereof, assuming for this purpose that the Holders thereof are not affiliates of the Company (in any such case, such period being called the “Shelf Registration Period”). The Company shall be deemed not to have used its commercially reasonable efforts to keep

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the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is (i) required by applicable law or (ii) taken by the Company in good faith upon the occurrence of any event contemplated by Section 2(b)(v) below, and the Company thereafter complies with the requirements of Section 2(h).

(c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

2.    Registration Procedures.    In connection with the Shelf Registration contemplated by Section 1 hereof, the following provisions shall apply:

(a) The Company shall (i) furnish to the Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the Prospectus included therein and, in the event that the Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Shelf Registration Statement, shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; and (ii) include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders; provided that the Initial Purchaser and the Holders have complied with Section 2(m).

(b) The Company shall give written notice to the Initial Purchaser and the Holders of the Securities included within the coverage of the Shelf Registration Statement (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made):

(i) when the Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus or for additional information;

(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose;

(iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v) of the happening of any event that requires the Company to make changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement or the Prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, which written notice need not provide any detail as to the nature of such event.

(c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Shelf Registration Statement.

(d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment

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thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

(e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

(f) Prior to any public offering of the Securities pursuant to the Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

(g) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to the Shelf Registration Statement.

(h) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 2(b) above during the period for which the Company is required to maintain an effective Shelf Registration Statement, the Company shall as required hereby prepare and file a post-effective amendment to the Shelf Registration Statement or an amendment or supplement to the Prospectus and any other required document so that, as thereafter delivered to Holders or purchasers of the Securities included within the coverage of such Shelf Registration Statement, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company may delay filing and distributing any such supplement or amendment (and continue the suspension of the use of the Prospectus) if the Company determines in good faith that such supplement or amendment would, in the reasonable judgment of the Company, (i) interfere with or affect the negotiation or completion of a transaction that is being contemplated by the Company or (ii) involve initial or continuing disclosure obligations that are not in the best interests of the Company’s stockholders at such time; provided, further, that neither such delay nor such suspension shall extend for a period of more than 90 consecutive days or an aggregate of 120 days in any twelve-month period. If the Company notifies the Initial Purchaser and the Holders in accordance with paragraphs (ii) through (v) of Section 2(b) above to suspend the use of the Prospectus until the requisite changes to the Prospectus have been made, then the Initial Purchaser and the Holders shall suspend use of such Prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 1(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchaser and the Holders shall have received such amended or supplemented Prospectus pursuant to this Section 2(h).

(i) Not later than the effective date of the Shelf Registration Statement, the Company will provide CUSIP numbers for the Initial Securities and the Common Stock registered under the Shelf Registration Statement, and provide the Trustee with printed certificates for the Initial Securities, in a form eligible for deposit with The Depository Trust Company.

(j) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such

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period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Shelf Registration Statement, which statement shall cover such 12-month period.

(k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, (the “Trust Indenture Act”) in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

(l) Each Holder agrees, by acquisition of the Securities, that no Holder shall be entitled to sell any such Securities pursuant to the Shelf Registration Statement or to receive a prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to and in accordance with Section 2(m) hereof and the information set forth in the next sentence. Each Holder agrees promptly to furnish the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not misleading and any other information regarding such Holder and the distribution of such Securities as the Company may from time to time reasonably request.

(m) Each Holder agrees that if such Holder wishes to sell such Holder’s Securities pursuant to the Shelf Registration Statement and related Prospectus, it will do so in accordance with this Section 2(m). Each Holder wishing to sell Securities pursuant to a Shelf Registration Statement and related prospectus agrees to deliver a properly, completely and signed Notice and Questionnaire (included in the Offering Circular, as defined in the Purchase Agreement, as Annex A and the form attached hereto) to the Company at least fifteen business days prior to any intended distribution of Securities under the Shelf Registration Statement. From and after the date the Shelf Registration Statement is declared effective, the Company shall, as promptly as is practicable after the date a Notice and Questionnaire is delivered, and in any event within 15 business days after such date, (i) if required by law, file with the Commission a post-effective amendment to the Registration Statement or prepare and, if required by applicable law, file a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named a selling securityholder in the Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Registration Statement, use all commercially reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as practical, but in any event by the date that is thirty 30 business days after the date such post-effective amendment is required by this clause to be filed; (ii) provide such Holder copies of any documents filed pursuant to this Section; and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to this Section; provided, that if such Notice and Questionnaire is delivered during a period in which the use of such Prospectus is suspended pursuant to Section 2(c) hereof, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of such suspension period. Notwithstanding anything contained herein to the contrary, the Company shall be under no obligation to name any Holder that has not supplied the requisite information as required by and in accordance with the procedures and time periods set forth in this section as a selling securityholder in the Registration Statement and related prospectus and any amendment or supplement thereto; provided, however, that any Holder that has subsequently supplied the requisite information required by this Section pursuant to the provisions of this Section (whether or not such Holder has supplied the requisite information required by this Section at the time the Registration Statement was declared effective) shall be named as a selling securityholder in the Registration Statement or related prospectus in accordance with the requirements of this Section. Notwithstanding anything contained herein to the contrary, the Company shall not be required to file more than one post-effective amendment or supplement for the purpose of naming selling security holders in any seven-day period.

(n) The Company shall enter into such customary agreements reasonably satisfactory to the Company (including, if requested, an underwriting agreement in customary form) and take all such other reasonable actions in connection therewith, if any, as any Holder shall reasonably request in order to facilitate the disposition of the Securities pursuant to the Shelf Registration; provided, however, that the Company shall not be required to facilitate an underwritten offering pursuant to a Shelf Registration Statement by any Holders unless the offering relates to at least $20,000,000 principal amount of the Initial Securities or an equivalent amount of Common Stock.

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(o) The Company shall (i) make reasonably available for inspection by the Holders, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by such Holders or any such underwriter (collectively, the “Inspectors”) at the offices where normally kept, during reasonable business hours, all relevant financial and other records, pertinent corporate documents and properties of the Company as they may reasonably request and (ii) cause the Company’s officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchaser by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 3 hereof. Records which the Company reasonably determines, in good faith, to be confidential and any records which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such records is necessary to avoid or correct a material misstatement or omission in such Registration Statement after a failure by the Company to make such disclosure for a period of 5 business days after receiving written notice from any Inspector of the need to make such disclosure, (ii) the release of such records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such records has been made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree in writing that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree in writing that it will, upon learning that disclosure of such records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the records deemed confidential.

(p) In the event of an underwritten offering, the Company, if requested by any Holder of Securities covered by the Shelf Registration Statement shall (i) seek to obtain from its counsel an opinion and updates thereof relating to the Securities in customary form, addressed to such Holders and the managing underwriters, thereof, and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement, which shall be reasonably satisfactory to such underwriters, (ii) cause its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the Securities and (iii) seek to obtain from its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

(q) The Company shall use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

3.    Registration Expenses.    (a) The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 and 2 hereof, whether or not a Shelf Registration Statement is filed or becomes effective and shall bear or reimburse the Holders of the Securities covered thereby for reasonable fees and disbursements of not more than one counsel, designated by the Holders of a majority in principal amount of the Securities covered by the Shelf Registration Statement (provided that Holders of Common Stock issued upon the conversion of the Initial Securities shall be deemed to be Holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted) to act as counsel for the Holders in connection therewith.

(b) Except as provided in Section 3(a) hereunder, each Holder shall pay all expenses of its counsel, underwriting discounts and commissions, and transfer taxes, if any, relating to the sale or disposition of such Holder’s Transfer Restricted Securities pursuant to a Shelf Registration Statement.

4.    Indemnification.     (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder, and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses,

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claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Prospectus including any document incorporated by reference therein, or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final Prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

(b) Each Holder, severally and not jointly, will indemnify and hold harmless the Company, its officers and directors and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

(c) Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense

6

thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. No indemnified party shall effect any settlement of any pending or threatened action without the prior written consent of the indemnifying party, which such consent shall not be unreasonably withheld or delayed.

(d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Securities, pursuant to the Shelf Registration, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

(e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

5. Additional Interest Under Certain Circumstances. (a) Additional interest (the “Additional Interest”) with respect to the Initial Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a “Registration Default”):

(i) the Shelf Registration Statement has not been filed with the Commission by the 90th day after the first date of original issuance of the Initial Securities;

(ii) the Shelf Registration Statement has not been declared effective by the Commission by the 180th day after the first date of original issue of the Initial Securities; or

7

(iii) the Company fails with respect to a Holder that supplies the Notice and Questionnaire described in Paragraph 2(m) to amend or supplement the Registration Statement in the manner set forth in 2(m); provided that such assessment shall be paid only to such Holder and directly to such Holder; or

(iv) the Shelf Registration Statement is declared effective, and such Shelf Registration Statement ceases to be effective or fails to be usable in connection with resales of the Initial Securities and the Transfer Restricted Securities issuable upon the conversion of the Initial Securities in accordance with and during the periods specified in this Agreement (including without limitation pursuant to Section 2(h) above) and (A) the Company does not cure the Shelf Registration Statement within five business days by a post-effective amendment or a report filed pursuant to the Exchange Act or (B) if applicable, the Company does not terminate the suspension period described above by the 90th or 120th day, as the case may be.

Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission .

Additional Interest shall accrue on the Initial Securities over and above the interest set forth in the title of the Initial Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.50% per annum (the “Additional Interest Rate”) (or an equivalent amount of any Common Stock issued upon conversion of the Initial Securities). The Company shall have no other liabilities for monetary damages with respect to its registration obligations. With respect to each Holder, the Company’s obligations to pay additional interest remain in effect only so long as the Initial Securities and the Common Stock issuable upon the conversion of the Initial Securities held by the Holder are Transfer Restricted Securities within the meaning of this Agreement.

(b) A Registration Default referred to in Section 5(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement the Shelf Registration Statement and related Prospectus to describe such events as required by paragraph 2(h) hereof; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured.

(c) Any amounts of Additional Interest due pursuant to Section 5(a) will be payable in cash on the regular interest payment dates with respect to the Initial Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the principal amount of the Initial Securities, further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

(d) “Transfer Restricted Securities” means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (ii) the date on which such Security may be sold to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything herein to the contrary, the registration rights granted hereunder shall terminate as to each Holder and with respect to such Securities upon the date that such Securities are no longer Transfer Restricted Securities.

6.    Rules 144 and 144A.    The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to

8

enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Securities identified to the Company by the Initial Purchaser upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

7.    Underwritten Registrations. If any of the Transfer Restricted Securities covered by the Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering (“Managing Underwriters”) will be selected by the holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering (provided that holders of Common Stock issued upon conversion of the Initial Securities shall not be deemed holders of Common Stock, but shall be deemed to be holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted) and such selection shall be subject to the Company’s consent, which shall not be unreasonably withheld or delayed.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

8.    Miscellaneous.

(a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations hereunder may result in material irreparable injury to the Initial Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations hereunder.

(b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company’s securities under any agreement in effect on the date hereof. Subject to the foregoing, the Company shall not be limited or in any way prevented from entering into any agreement granting any holder or prospective holder of any securities of the Company registration rights with respect to such securities.

(c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents (provided that holders of Common Stock issued upon conversion of Initial Securities shall not be deemed holders of Common Stock, but shall be deemed to be holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted).

(d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

9

(1)	if to a Holder of the Securities, at the most current address given by such Holder to the Company.
(2)	if to the Initial Purchaser;
	Syndicate Registration
	Lehman Brothers Inc.
	155 Linfield Drive
	Menlo Park, CA 94025
	Attention: Arlene Salmonson
with a copy to:
	Cravath, Swaine & Moore LLP
	Worldwide Plaza
	825 Eighth Avenue
	New York, NY 10019-7475
	Attn: Stephen L. Burns
(3)	if to the Company, at its address as follows:
	ChipPAC, Inc.
	47400 Kato Road
	Freemont, CA 94538
	Attn: Robert Krakauer
with a copy to:
	Kirkland & Ellis
	777 South Figueroa Street
	Los Angeles, CA 90017-5800
	Attn: Eva Davis, Esq.
	Charles Pak, Esq.
	(for all notices other than Selling Security Holder Notices and Questionnaires)
	Richard Tilley, Esq.
	(for all Selling Security Holder Notices and Questionnaires)

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

(f) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

10

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

(j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

11

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchaser and the Company in accordance with its terms.

Very truly yours,

ChipPAC, Inc.

by	/s/    Robert Krakauer
	Name:  Robert Krakauer
	Title:  Chief Financial Officer

12

The foregoing Registration

Rights Agreement is hereby confirmed

and accepted as of the date first

above written.

By:    Lehman Brothers Inc.

by:	/s/    Kyle Ryland
	Name: Kyle Ryland Title: Managing Director

As Initial Purchaser

13

Annex A

CHIPPAC, INC.

Form of Selling Securityholder Notice and Questionnaire

The undersigned beneficial holder of 2.50% Convertible Subordinated Notes due June 1, 2008 of ChipPAC, Inc. (the “Company”) or shares of the Class A common stock of the Company, par value $0.01 per share (such common stock, together with the notes, the “registrable securities”), understands that the Company and certain of its subsidiaries have filed or intend to file with the SEC a registration statement on an appropriate form for the registration of the resale under Rule 415 of the Securities Act, of the registrable securities in accordance with the terms of the Registration Rights Agreement, among the Company and the initial purchaser party thereto. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.

In order to sell or otherwise dispose of any registrable securities pursuant to the shelf registration statement, a beneficial owner of registrable securities generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of registrable securities and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions, as described below). The Company has agreed to pay additional interest pursuant to the Registration Rights Agreement under certain circumstances as set forth therein.

Certain legal consequences arise from being named as a selling securityholder in the shelf registration statement and the related prospectus. Accordingly, holders and beneficial owners of registrable securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the shelf registration statement and the related prospectus.

REGISTRABLE SECURITES WILL NOT BE INCLUDED IN THE SHELP REGISTRATION STATEMENT UNLESS A BENEFICIAL OWNER OF SUCH SECURITIES DELIVERS TO THE COMPANY A PROPERLY COMPLETED AND SIGNED SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE BY NO LATER THAN JUNE 16, 2003 AND PROMPTLY NOTIFIES THE COMPANY OF ANY CHANGES TO THE INFORMATION CONTAINED HEREIN.

Notice

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of registrable securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3) pursuant to the shelf registration statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement. The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete.

QUESTIONNAIRE

1. (a)    Full Legal Name of Selling Securityholder:

(b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in (3) below are held:

(c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in (3) below are held:

2. Address for Notices to Selling Securityholder:

Telephone:                                                                                                                                                                                                                                       

Fax:                                                                                                                                                                                                                                                    

Contact Person:                                                                                                                                                                                                                              

3. Beneficial Ownership of Registrable Securities:

(a) Type and Principal Amount of Registrable Securities beneficially owned:

(b) CUSIP No(s). of Registrable Securities beneficially owned:

4. Beneficial Ownership of the Company’s securities owned by the Selling Securityholder:

Except as set forth below in this Item (4), the undersigned is not the beneficial or registered owner of any “Other Securities,” defined as securities of the Company other than the Registrable Securities listed above in Item (3).

(a) Type and Amount of Other Securities beneficially owned by the Selling Securityholder:

A-2

(b) CUSIP No(s). of such Other Securities beneficially owned:

5. Relationship with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equityholders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

6. Plan of Distribution:

Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf Registration Statement only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned or alternatively, through underwriters, broker-dealers or agents. If the Registrable Securities are sold through underwriters or broker-dealers, the Selling Securityholder will be responsible for underwriting discounts or commissions or agent’s commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities.

State any exceptions here:

7. NASD Affiliates:

The undersigned acknowledges that it understands its obligation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable

A-3

Securities pursuant to the Shelf Registration Statement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

The Selling Securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as set forth therein.

Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify the Selling Securityholder against certain liabilities.

In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to items (1) through (7) above and the inclusion of such information in the Shelf Registration Statement and the related Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related prospectus.

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:	Beneficial Owner
	By:
		Name: Title:

A-4

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE

AND QUESTIONNAIRE TO:

ChipPAC, Inc.

47400 Kato Road

Fremont, California 94538

Attention: Patricia H. McCall, Esq.

with a copy to:

Kirkland & Ellis

777 South Figueroa

Los Angeles, California 90017

Attention: Richard Tilley, Esq.

A-18

EX-10.40

Exhibit 10.40

CHIPPAC, INC.

Issuer

2.50% Convertible Subordinated Notes

Due June 1, 2008

INDENTURE

Dated as of May 28, 2003

U.S. BANK NATIONAL ASSOCIATION

Trustee

CROSS-REFERENCE TABLE

TIA Section	Indenture Section
310(a)(1)	8.10
(a)(2)	8.10
(a)(3)	N.A.
(a)(4)	N.A.
(b)	8.08; 8.10
(c)	N.A.
311(a)	8.11
(b)	8.11
(c)	N.A.
312(a)	2.06
(b)	12.03
(c)	12.03
313(a)	8.06
(b)(1)	N.A.
(b)(2)	8.06
(c)	12.02
(d)	8.06
314(a)	4.02; 12.02
(b)	N.A.
(c)(1)	12.04
(c)(2)	12.04
(c)(3)	N.A.
(d)	N.A.
(e)	12.05
315(a)	8.01
(b)	8.05; 12.02
(c)	8.01
(d)	8.01
(e)	7.11
316(a)(last sentence)	12.06
(a)(1)(A)	7.05
(a)(1)(B)	7.04
(a)(2)	N.A.
(b)	7.07

i

317(a)(1)	7.08
(a)(2)	7.09
(b)	2.05
318(a)	12.01

N.A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

ii

TABLE OF CONTENTS

	Page
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01.    Definitions.	1
SECTION 1.02.    Other Definitions.	8
SECTION 1.03.    Incorporation by Reference of Trust Indenture Act	9
SECTION 1.04.    Rules of Construction	10
ARTICLE 2
The Securities
SECTION 2.01.    Form and Dating	10
SECTION 2.02.    Execution and Authentication	11
SECTION 2.03.    Registrar, Paying Agent and Conversion Agent	12
SECTION 2.04.    Maintenance of Office or Agency	12
SECTION 2.05.    Paying Agent To Hold Money in Trust	13
SECTION 2.06.    Securityholder Lists	13
SECTION 2.07.    Transfer and Exchange	13
SECTION 2.08.    Additional Transfer and Exchange Requirements.	14
SECTION 2.09.    CUSIP Numbers	20
SECTION 2.10.    Replacement Securities	21
SECTION 2.11.    Outstanding Securities	21
SECTION 2.12.    Temporary Securities	21
SECTION 2.13.    Cancellation	22
SECTION 2.14.    Defaulted Interest	22
ARTICLE 3
[Reserved]
ARTICLE 4
Covenants
SECTION 4.01.    Payment of Securities	22
SECTION 4.02.    SEC Reports	22
SECTION 4.03.    Compliance Certificates	23
SECTION 4.04.    Further Instruments and Acts	23

iii

SECTION 4.05.    Maintenance of Corporate Existence	23
SECTION 4.06.    Payment of Additional Interest	23
SECTION 4.07.    Purchase of Securities at Option of the Holder upon Change of Control	23
SECTION 4.08.    Effect of Change of Control Purchase Notice	26
SECTION 4.09.    Deposit of Change of Control Purchase Price	27
SECTION 4.10.    Securities Purchased in Part	27
SECTION 4.11.    Compliance with Securities Laws upon Purchase of Securities	27
SECTION 4.12.    Repayment to the Company	28
SECTION 4.13.    Offer to Purchase by Third Party	28
ARTICLE 5
Conversion
SECTION 5.01.    Conversion Privilege	28
SECTION 5.02.    Conversion Procedure	29
SECTION 5.03.    Fractional Shares	30
SECTION 5.04.    Taxes on Conversion	30
SECTION 5.05.    Company To Provide Stock	30
SECTION 5.06.    Adjustment of Conversion Price	31
SECTION 5.07.    No Adjustment	36
SECTION 5.08.    Adjustment for Tax Purposes	36
SECTION 5.09.    Notice of Adjustment	36
SECTION 5.10.    Notice of Certain Transactions	36
SECTION 5.11.    Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege	37
SECTION 5.12.    Trustee’s Disclaimer	38
SECTION 5.13.    Voluntary Reduction	38
ARTICLE 6
Successor Companies
SECTION 6.01.    When Company May Merge or Transfer Assets	38
ARTICLE 7
Defaults and Remedies
SECTION 7.01.    Events of Default	39
SECTION 7.02.    Acceleration	41
SECTION 7.03.    Other Remedies	41
SECTION 7.04.    Waiver of Past Defaults	41
SECTION 7.05.    Control by Majority	41
SECTION 7.06.    Limitation on Suits	42
SECTION 7.07.    Rights of Holders to Receive Payment	42

iv

SECTION 7.08. Collection Suit by Trustee	42
SECTION 7.09. Trustee May File Proofs of Claim	42
SECTION 7.10. Priorities	43
SECTION 7.11. Undertaking for Costs	43
ARTICLE 8
Trustee
SECTION 8.01. Duties of Trustee	44
SECTION 8.02. Rights of Trustee	45
SECTION 8.03. Individual Rights of Trustee	46
SECTION 8.04. Trustee’s Disclaimer	46
SECTION 8.05. Notice of Defaults	46
SECTION 8.06. Reports by Trustee to Holders	46
SECTION 8.07. Compensation and Indemnity	46
SECTION 8.08. Replacement of Trustee	47
SECTION 8.09. Successor Trustee by Merger	48
SECTION 8.10. Eligibility; Disqualification	48
SECTION 8.11. Preferential Collection of Claims Against Company	48
ARTICLE 9
Discharge of Indenture
SECTION 9.01. Satisfaction and Discharge of Indenture	49
SECTION 9.02. Application of Trust Money	49
SECTION 9.03. Repayment to Company	50
SECTION 9.04. Reinstatement	50
ARTICLE 10
Amendments
SECTION 10.01. Without Consent of Holders	50
SECTION 10.02. With Consent of Holders	51
SECTION 10.03. Compliance with Trust Indenture Act	52
SECTION 10.04. Revocation and Effect of Consents and Waivers	52
SECTION 10.05. Notation on or Exchange of Securities	53
SECTION 10.06. Trustee To Sign Amendments	53
SECTION 10.07. Payment for Consent	53
ARTICLE 11
Subordination
SECTION 11.01. Agreement To Subordinate	53
SECTION 11.02. Liquidation, Dissolution, Bankruptcy	53

v

SECTION 11.03. Default on Senior Indebtedness	54
SECTION 11.04. Acceleration of Payment of Securities	55
SECTION 11.05. When Distribution Must Be Paid Over	55
SECTION 11.06. Subrogation	55
SECTION 11.07. Relative Rights	56
SECTION 11.08. Subordination May Not Be Impaired by Company	56
SECTION 11.09. Rights of Trustee and Paying Agent	56
SECTION 11.10. Distribution or Notice to Representative	56
SECTION 11.11. Article 11 Not To Prevent Events of Default or Limit Right To Accelerate	56
SECTION 11.12. Trustee Entitled To Rely	57
SECTION 11.13. Trustee To Effectuate Subordination	57
SECTION 11.14. Trustee Not Fiduciary for Holders of Senior Indebtedness	57
SECTION 11.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions	57
ARTICLE 12
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls	58
SECTION 12.02. Notices	58
SECTION 12.03. Communication by Holders with Other Holders	58
SECTION 12.04. Certificate and Opinion as to Conditions Precedent	59
SECTION 12.05. Statements Required in Certificate or Opinion	59
SECTION 12.06. When Securities Disregarded	59
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar	59
SECTION 12.08. Legal Holidays	59
SECTION 12.09. Governing Law	60
SECTION 12.10. No Recourse Against Others	60
SECTION 12.11. Successors	60
SECTION 12.12. Multiple Originals	60
SECTION 12.13. Table of Contents; Headings	60
Exhibit A—Form of Security

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INDENTURE dated as of May 28, 2003, between ChipPAC, Inc., a Delaware corporation (the “Company”), and U.S. Bank National Association, a national banking association, as trustee hereunder (the “Trustee”).

Both parties agree as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company’s 2.50% Convertible Subordinated Notes Due June 1, 2008 (the “Securities”).

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions.

“Additional Interest” has the meaning specified in Section 5 of the Registration Rights Agreement. All references herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable as of such date as provided in the Registration Rights Agreement.

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Procedures” means, with respect to any transfer or exchange of beneficial ownership interests in a Global Security, the rules and procedures of the Depositary that are applicable to such transfer or exchange.

“Attributable Debt” in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended).

“Bank Indebtedness” means all Obligations pursuant to the Credit Agreement.

“Board of Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.

“Business Day” means each day which is not a Legal Holiday.

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“Capital Lease Obligation” means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such 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 such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Certificated Security” means a Security that is in substantially the form attached hereto as Exhibit A and that does not include the information or the schedule called for by footnotes 1, 3 and 4 thereof.

“Closing Price” on any Trading Day with respect to the per share price of common stock means the last reported sales price regular way or, in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way, in either case on The New York Stock Exchange or, if the common stock is not listed or admitted to trading on The New York Stock Exchange, on the principal national securities exchange on which the common stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the National Association of Securities Dealers Automated Quotations National Market System or, if the common stock is not listed or admitted to trading on any national securities exchange or quoted on such National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm that is selected from time to time by the Company for that purpose and is reasonably acceptable to the Trustee.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” means the Class A common stock of the Company, par value $.01 per share, as it exists on the date of this Indenture and any shares of any class or classes of capital stock of the Company resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one resulting class, the shares of each class then so issuable on conversion of Securities shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from such reclassifications.

“Company” means ChipPAC, Inc., a Delaware corporation, and its successors.

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“Corporate Trust Office” means the principal corporate trust office of the Trustee at 180 East Fifth Street, St. Paul, MN 55101, or such other office, designated by the Trustee by written notice to the Company and approved by the Company, at which at any particular time its corporate trust business shall be administered.

“Credit Agreement” means the Credit Agreement dated as of August 5, 1999, by and among the Company, certain subsidiaries of the Company, the lenders referred to therein and Credit Suisse First Boston, as administrative agent, together with the related documents thereto (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 such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders.

“Currency Agreement” means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Designated Senior Indebtedness” means (1)(A) the Bank Indebtedness (including the Guarantee by the Company of such Bank Indebtedness); provided, however, that Bank Indebtedness outstanding under any Credit Agreement that is Refinanced in part, but not in whole, shall only constitute Designated Senior Indebtedness if it meets the requirements of succeeding clause (2) and (B) the 12¾% Senior Subordinated Notes due 2009 of ChipPAC International Company Limited (including the Company’s Guarantee thereof); and (2) any other Senior Indebtedness that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $10.0 million and is specifically designated in the instrument evidencing or governing such Senior Indebtedness as “Designated Senior Indebtedness” for purposes of this Indenture.

“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 May 28, 2003 including those set forth 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, (3) such other statements by such other entity as approved by a significant segment of the accounting profession and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13

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of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

“Global Security” means a permanent Global Security that is in substantially the form attached hereto as Exhibit A and that includes the information and schedule called for by footnotes 1, 3 and 4 thereof and which is deposited with the Depositary or its custodian and registered in the name of the Depositary or its nominee.

“Guarantee” means any Obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any Obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such 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 such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any Obligation.

“Hedging Obligations” of any Person means the Obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.

“Holder” or “Securityholder” means the Person in whose name a Security is registered on the Registrar’s books.

“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 such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning.

“Indebtedness” means, with respect to any Person on any date of determination (without duplication):

(1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable including, in each case, any premium on such Indebtedness to the extent such premium has become due and payable;

(2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person;

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(3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business);

(4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);

(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Capital Stock of such Person or any Subsidiary of such Person or that are determined by the value of such Capital Stock, the principal amount of such Capital Stock to be determined in accordance with this Indenture;

(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, such 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 such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and

(8) to the extent not otherwise included in this definition, Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such 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 such date; provided, however, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Interest Rate Agreement” means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates.

“Issue Date” means May 28, 2003.

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“Lien” means any mortgage, pledge, security interest, encumbrance, lien or similar charge.

“Obligations” means with respect to any Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness.

“Officer” means the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, the Corporate Controller or the Secretary of the Company.

“Officer’s Certificate” means a certificate signed by an Officer.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

“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 such Person, over shares of Capital Stock of any other class of such Person.

“principal” of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time.

“Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.

“Registration Rights Agreement” means the Registration Rights Agreement, dated May 28, 2003 among the Company and Lehman Brothers Inc., as initial purchaser.

“Representative” means any trustee, agent or representative (if any) for an issue of Senior Indebtedness; provided, however, that if and for so long as any Senior Indebtedness lacks such a representative, then the Representative for such Senior Indebtedness shall at all times be the holders of a majority in outstanding principal amount of such Senior Indebtedness.

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“Restricted Certificated Security” means a Certificated Security which is a Transfer Restricted Security.

“Restricted Global Security” means a Global Security which is a Transfer Restricted Security.

“Sale/Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired whereby the Company transfers such property to a Person and the Company leases it from such Person.

“SEC” means the Securities and Exchange Commission.

“Securities” means the Securities issued under this Indenture.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Custodian” means the custodian with respect to a Global Security (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.

“Senior Indebtedness” of any Person means all (1) Bank Indebtedness of or Guaranteed by such Person, whether outstanding on the Issue Date or thereafter Incurred, and (2) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred, including interest thereon, in respect of (A) Indebtedness for money borrowed, (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable and (C) Hedging Obligations, unless, in the case of (1) and (2), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such Obligations are sub-ordinate in right of payment to the Obligations under the Securities; provided, however, that Senior Indebtedness shall not include (i) any Obligation of such Person to any Subsidiary of such Person, (ii) any liability for Federal, state, local or other taxes owed or owing by such Person, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), or (iv) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture (but as to any such Indebtedness under the Credit Agreement, no such violation shall be deemed to exist if the Representative of the lenders thereunder shall have received an Officers’ Certificate of the Company to the effect that the issuance of such Indebtedness does not violate such covenant and setting forth in reasonable detail the reasons therefor).

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).

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“Subsidiary” means, in respect of any Person, 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 thereof is at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of this Indenture.

“Trading Day” means each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not traded on the applicable securities exchange or in the applicable securities market.

“Trustee” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

“Trust Officer” means any officer within the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge and familiarity with the particular subject.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

“Unrestricted Certificated Security” means a Certificated Security that is not a Transfer Restricted Security.

“Unrestricted Global Security” means a Global Security that is not a Transfer Restricted Security.

“Voting Stock” means any class or classes of Capital Stock pursuant to which the holders thereof under ordinary circumstances have the power to vote in the election of the board of directors, managers or trustees of any Person, or other persons performing similar functions irrespective of whether or not the Capital Stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency.

SECTION 1.02. Other Definitions.

Term	Defined in Section
“Agent Members”	2.01(c)
“Bankruptcy Law”	7.01
“Blockage Notice”	11.03
“Change of Control”	4.07(a)

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“Change of Control Purchase Date”	4.07(a)
“Change of Control Purchase Notice”	4.07(c)
“Change of Control Purchase Price”	4.07(a)
“Closing Price”	5.06(f)
“Conversion Agent”	2.03
“Conversion Date”	5.02
“Conversion Price”	5.06
“Current Market Price Per Share”	5.06(f)
“Defaulted Interest”	2.10
“Depositary”	2.01(b)
“Determination Date”	5.06(d)
“DTC”	2.01(b)
“Expiration Date”	5.06(e)
“Expiration Time”	5.06(e)
“Event of Default”	7.01
“Legal Holiday”	12.08
“NNM”	5.06(f)
“NYSE”	5.06(f)
“Pay the Securities”	11.03
“Paying Agent”	2.03
“Payment Blockage Period”	11.03
“Payment Default”	11.03
“Purchase Agreement”	2.01(a)
“Purchased Shares”	5.06(e)
“QIB”	2.08(b)(y)(2)
“Registrar”	2.03
“Regulation S”	2.01(b)
“Rule 144A”	2.01(b)
“Successor Person”	6.01
“Transfer Certificate”	2.08(f)(1)
“Transfer Restricted Security”	2.08(f)(1)
“Triggering Distribution”	5.06(d)
“Unissued Shares”	4.07(a)

SECTION 1.03. Incorporation by Reference of Trust Indenture Act. The mandatory provisions of the TIA are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

“Commission” means the SEC;

“indenture security holder” means a Securityholder;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

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“obligor” on the indenture securities means the Company and any other obligor on the Securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) “including” means including without limitation;

(5) words in the singular include the plural and words in the plural include the singular;

(6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Indebtedness secured by a Lien merely by virtue of its nature as unsecured Indebtedness;

(7) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the Company dated such date prepared in accordance with GAAP; and

(8) all references to any amount of interest or any other amount payable on or with respect to any of the Securities shall be deemed to include payment of any Additional Interest pursuant to the Registration Rights Agreement.

ARTICLE 2

The Securities

SECTION 2.01. (a) Form and Dating. The Securities and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Securities are being offered and sold by the Company pursuant to a Purchase Agreement dated May 22, 2003 (the “Purchase Agreement”), among the Company and Lehman Brothers

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Inc. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A are part of the terms of this Indenture.

(b) Restricted Global Securities. All of the Securities are initially being offered and sold in reliance on Rule 144A (“Rule 144A”) or in reliance on Regulation S (“Regulation S”) under the Securities Act and shall be issued initially in the form of one or more Restricted Global Securities, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Corporate Trust Office, as custodian for the depositary, The Depository Trust Company (“DTC”) (such depositary, or any successor thereto, being hereinafter referred to as the “Depositary”), and registered in the name of its nominee, Cede & Co., duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Restricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Securities Custodian as hereinafter provided, subject in each case to compliance with the Applicable Procedures.

(c) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, purchases or conversions of such Securities. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Securities Custodian in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian.

Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or under any Global Security, and the Depositary (including, for this purpose, its nominee) may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (1) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (2) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

SECTION 2.02. Execution and Authentication. An Officer shall sign the Securities for the Company by manual or facsimile signature. Typographic and other minor defects in any facsimile signature shall not affect the validity or enforceability of any Security which has been authenticated and delivered by the Trustee.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

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A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

On the Issue Date, the Trustee shall authenticate and deliver up to $150.0 million of 2.50% Convertible Subordinated Notes Due June 1, 2008, which will be represented by a Restricted Global Security. To the extent less than $150.0 million of such Securities are authenticated and delivered as of the Issue Date, the Trustee shall, upon order from the Company, authenticate and deliver such remainder or portion of such remainder within 30 days following the Issue Date as may be necessary in connection with any exercise by Lehman Brothers Inc. of its over-allotment option pursuant to the Purchase Agreement dated May 22, 2003, between the Company and Lehman Brothers Inc.

The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”), an office or agency where Securities may be presented for payment (the “Paying Agent”) and one or more offices or agencies where securities may be presented for conversion (each, a “Conversion Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent.

The Company shall enter into an appropriate agency agreement with any Registrar, co-registrar, Paying Agent or Conversion Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 8.07. The Company may act as Paying Agent, Registrar, co-registrar, transfer agent or Conversion Agent.

The Company initially appoints the Trustee as Registrar, Paying Agent and Conversion Agent in connection with the Securities.

SECTION 2.04. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Securities and this

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Indenture may be served. Such office shall initially be the office of U.S. Bank National Association. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and if the Paying Agent is different than the Trustee, shall notify the Trustee of any default by the Company in making any such payment, and while any such default continues, the Trustee may require the Paying Agent to pay all money held by it to the Trustee. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

SECTION 2.07. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture are satisfied. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the

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Company shall execute and the Trustee shall authenticate Securities at the Registrar’s or co-registrar’s request. The Company or the Registrar may require payment by the Holder of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not register transfers or exchanges of any Securities for 15 days before an interest payment date.

Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and (subject to the provisions of the Securities with respect to record dates) interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

SECTION 2.08. Additional Transfer and Exchange Requirements.

(a) Transfer and Exchange of Global Securities.

(1) Certificated Securities shall be issued in exchange for interests in the Global Securities only if (x) the Depositary notifies the Company that it is unwilling or unable to continue as depositary for the Global Securities or if it at any time ceases to be a “clearing agency” registered under the Exchange Act, if so required by applicable law or regulation and a successor depositary is not appointed by the Company within 90 days, (y) an Event of Default has occurred and is continuing or (z) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Certificated Securities. In any such case, the Company shall execute, and the Trustee shall, upon receipt of an order from the Company (which the Company agrees to deliver promptly), authenticate and deliver Certificated Securities in an aggregate principal amount equal to the principal amount of such Global Securities in exchange therefor. Only Restricted Certificated Securities shall be issued in exchange for beneficial interests in Restricted Global Securities, and only Unrestricted Certificated Securities shall be issued in exchange for beneficial interests in Unrestricted Global Securities. Certificated Securities issued in exchange for beneficial interests in Global Securities shall be registered in such names and shall be in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver or cause to be delivered such Certificated Securities to the persons in whose names such Securities are so registered. Such exchange shall be effected in accordance with the Applicable Procedures.

(2) Notwithstanding any other provisions of this Indenture other than the provisions set forth in Section 2.08(a)(1), a Global Security may not be transferred as a

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whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

(b) Transfer and Exchange of Certificated Securities. In the event that Certificated Securities are issued in exchange for beneficial interests in Global Securities in accordance with Section 2.08(a)(1) of this Indenture, on or after such event when Certificated Securities are presented by a Holder to a Registrar with a request:

(x) to register the transfer of the Certificated Securities to a person who will take delivery thereof in the form of Certificated Securities only; or

(y) to exchange such Certificated Securities for an equal principal amount of Certificated Securities of other authorized denominations, such Registrar shall register the transfer or make the exchange as requested if the requirements for such transaction under this Indenture are satisfied;

provided, however, that the Certificated Securities presented or surrendered for register of transfer or exchange:

(1) shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate each in the form included in Exhibit A, and in a form satisfactory to the Registrar duly executed by the Holder thereof or its attorney duly authorized in writing; and

(2) in the case of a Restricted Certificated Security, such request shall be accompanied by the following additional information and documents, as applicable:

(i) if such Restricted Certificated Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Restricted Certificated Security is being transferred to the Company or a Subsidiary of the Company, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate);

(ii) if such Restricted Certificated Security is being transferred to a person the Holder reasonably believes is a qualified institutional buyer as defined in Rule 144A (“QIB”) in accordance with Rule 144A or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate); or

(iii) if such Restricted Certificated Security is being transferred (x) pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, (y) outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act or (z)(A) pursuant to an exemption from the registration requirements of the Securities Act (other than pursuant to Rule 144A, Rule 144 or Rule 904), and (B) as a result, such Security

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shall cease to be a “restricted security” within the meaning of Rule 144, a certification to that effect from the Holder (in substantially the form set forth in the Transfer Certificate) and, if the Company or such Registrar so requests, an Opinion of Counsel, certificates and other information reasonably acceptable to the Company and such Registrar to the effect that such transfer is in compliance with the registration requirements of the Securities Act.

(c) Transfer of a Beneficial Interest in a Restricted Global Security for a Beneficial Interest in an Unrestricted Global Security. Any person having a beneficial interest in a Restricted Global Security may upon request, subject to the Applicable Procedures, transfer such beneficial interest to a person who is required or permitted to take delivery thereof in the form of an Unrestricted Global Security. Upon receipt by the Trustee of written instructions, or such other form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any person having a beneficial interest in a Restricted Global Security and the following additional information and documents in such form as is customary for the Depositary from the Depositary or its nominee on behalf of the person having such beneficial interest in the Restricted Global Security (all of which may be submitted by facsimile or electronically):

(1) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form set forth in the Transfer Certificate); or

(2) if such beneficial interest is being transferred (i) pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, (ii) outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act or (iii) (A) pursuant to an exemption from the registration requirements of the Securities Act (other than pursuant to Rule 144A, Rule 144 or Rule 904) and (B) as a result, such Security shall cease to be a “restricted security” within the meaning of Rule 144, a certification to that effect from the transferor (in substantially the form set forth in the Transfer Certificate) and, if the Company or the Trustee so requests, an Opinion of Counsel, certificates and other information reasonably acceptable to the Company and the Trustee to the effect that such transfer is in compliance with the registration requirements of the Securities Act, the Trustee, as a Registrar and Securities Custodian, shall reduce or cause to be reduced the aggregate principal amount of the Restricted Global Security by the appropriate principal amount and shall increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security by a like principal amount. Such transfer shall otherwise be effected in accordance with the Applicable Procedures. If no Unrestricted Global Security is then outstanding, the Company shall execute and the Trustee shall, upon receipt of a Company Order (which the Company agrees to deliver promptly), authenticate and deliver an Unrestricted Global Security.

(d) Transfer of a Beneficial Interest in an Unrestricted Global Security for a Beneficial Interest in a Restricted Global Security. Any person having a beneficial

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interest in an Unrestricted Global Security may upon request, subject to the Applicable Procedures, transfer such beneficial interest to a person who is required or permitted to take delivery thereof in the form of a Restricted Global Security (it being understood that only QIBs may own beneficial interests in Restricted Global Securities). Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depositary, from the Depositary or its nominee, on behalf of any person having a beneficial interest in an Unrestricted Global Security and, in such form as is customary for the Depositary, from the Depositary or its nominee on behalf of the person having such beneficial interest in the Unrestricted Global Security (all of which may be submitted by facsimile or electronically) a certification from the transferor (in substantially the form set forth in the Transfer Certificate) to the effect that such beneficial interest is being transferred to a person that the transferor reasonably believes is a QIB in accordance with Rule 144A. The Trustee, as a Registrar and Securities Custodian, shall reduce or cause to be reduced the aggregate principal amount of the Unrestricted Global Security by the appropriate principal amount and shall increase or cause to be increased the aggregate principal amount of the Restricted Global Security by a like principal amount. Such transfer shall otherwise be effected in accordance with the Applicable Procedures. If no Restricted Global Security is then outstanding, the Company shall execute and the Trustee shall, upon receipt of a Company Order (which the Company agrees to deliver promptly), authenticate and deliver a Restricted Global Security.

(e) Transfers of Certificated Securities for Beneficial Interest in Global Securities. In the event that Certificated Securities are issued in exchange for beneficial interests in Global Securities and, thereafter, the events or conditions specified in Section 2.08(a)(1) which required such exchange shall cease to exist, the Company shall mail notice to the Trustee and to the Holders stating that Holders may exchange Certificated Securities for interests in Global Securities by complying with the procedures set forth in this Indenture and briefly describing such procedures and the events or circumstances requiring that such notice be given. Thereafter, if Certificated Securities are presented by a Holder to a Registrar with a request:

(x) to register the transfer of such Certificated Securities to a person who will take delivery thereof in the form of a beneficial interest in a Global Security, which request shall specify whether such Global Security will be a Restricted Global Security or an Unrestricted Global Security; or

(y) to exchange such Certificated Securities for an equal principal amount of beneficial interests in a Global Security, which beneficial interests will be owned by the Holder transferring such Certificated Securities (provided that in the case of such an exchange, Restricted Certificated Securities may be exchanged only for Restricted Global Securities and Unrestricted Certificated Securities may be exchanged only for Unrestricted Global Securities), the Registrar shall register the transfer or make the exchange as requested by canceling such Certificated Security and causing, or directing the Securities Custodian to cause, the aggregate principal amount of the applicable Global Security to be increased accordingly

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and, if no such Global Security is then outstanding, the Company shall issue and the Trustee shall authenticate and deliver a new Global Security;

provided, however, that the Certificated Securities presented or surrendered for registration of transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in accordance with the provisions of Section 2.08(b)(y)(1);

(2) in the case of a Restricted Certificated Security to be transferred for a beneficial interest in an Unrestricted Global Security, such request shall be accompanied by the following additional information and documents, as applicable:

(i) if such Restricted Certificated Security is being transferred pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate); or

(ii) if such Restricted Certificated Security is being transferred (x) pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, (y) outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act or (z)(A) pursuant to an exemption from the registration requirements of the Securities Act (other than pursuant to Rule 144A, Rule 144 or Rule 904) and (B) as a result, such Security shall cease to be a “restricted security” within the meaning of Rule 144, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate), and, if the Company or the Registrar so requests, an Opinion of Counsel, certificates and other information reasonably acceptable to the Company and the Trustee to the effect that such transfer is in compliance with the registration requirements of the Securities Act;

(3) in the case of a Restricted Certificated Security to be transferred or exchanged for a beneficial interest in a Restricted Global Security, such request shall be accompanied by a certification from such Holder (in substantially the form set forth in the Transfer Certificate) to the effect that such Restricted Certificated Security is being transferred to a person the Holder reasonably believes is a QIB (which, in the case of an exchange, shall be such Holder) in accordance with Rule 144A;

(4) in the case of an Unrestricted Certificated Security to be transferred or exchanged for a beneficial interest in an Unrestricted Global Security, such request need not be accompanied by any additional information or documents; and

(5) in the case of an Unrestricted Certificated Security to be transferred or exchanged for a beneficial interest in a Restricted Global Security, such request shall be accompanied by a certification from such Holder (in substantially the form set forth in the Transfer Certificate) to the effect that such Unrestricted Certificated Security is being

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transferred to a person the Holder reasonably believes is a QIB (which, in the case of an exchange, shall be such Holder) in accordance with Rule 144A.

(f) Legends.

(1) Except as permitted by the following paragraphs (2) and (3), each Global Security and Certificated Security (and all Securities issued in exchange therefor or upon registration of transfer or replacement thereof) shall bear a legend in substantially the form called for by footnote 2 to Exhibit A hereto (each a “Transfer Restricted Security” for so long as it is required by this Indenture to bear such legend). Each Transfer Restricted Security shall have attached thereto a certificate (a “Transfer Certificate”) in substantially the form called for by footnote 5 to Exhibit A hereto.

(2) Upon any sale or transfer of a Transfer Restricted Security (v) after the expiration of the holding period applicable to sales of the Securities under Rule 144(k) of the Securities Act, (w) pursuant to Rule 144, (x) outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act (y) pursuant to an effective registration statement under the Securities Act or (z)(A) pursuant to any other available exemption (other than Rule 144A, Rule 144 or Rule 904) from the registration requirements of the Securities Act and (B) as a result, such Security shall cease to be a “restricted security” within the meaning of Rule 144:

(i) in the case of any Restricted Certificated Security, any Registrar shall permit the Holder thereof to exchange such Restricted Certificated Security for an Unrestricted Certificated Security, or (under the circumstances described in Section 2.08(e) to transfer such Restricted Certificated Security to a transferee who shall take such Security in the form of a beneficial interest in an Unrestricted Global Security, and in each case shall rescind any restriction on the transfer of such Security; provided, however, that the Holder of such Restricted Certificated Security shall, in connection with such exchange or transfer, comply with the other applicable provisions of this Section 2.08; and

(ii) in the case of any beneficial interest in a Restricted Global Security, the Trustee shall permit the beneficial owner thereof to transfer such beneficial interest to a transferee who shall take such interest in the form of a beneficial interest in an Unrestricted Global Security and shall rescind any restriction on transfer of such beneficial interest; provided, however, that such Unrestricted Global Security shall continue to be subject to the provisions of Section 2.08(a)(2); and provided further, that the owner of such beneficial interest shall, in connection with such transfer, comply with the other applicable provisions of this Section 2.07.

(3) Upon the exchange, registration of transfer or replacement of Securities not bearing the legend described in paragraph (1) above, the Company shall execute, and the Trustee shall authenticate and deliver Securities that do not bear such legend and that do not have a Transfer Certificate attached thereto.

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(4) After the expiration of the holding period pursuant to Rule 144(k) of the Securities Act, the Company may with the consent of the Holder of a Restricted Global Security or Restricted Certificated Security, remove any restriction of transfer on such Security, and the Company shall execute, and the Trustee shall authenticate and deliver Securities that do not bear such legend and that do not have a Transfer Certificate attached thereto.

(g) Transfers to the Company. Nothing in this Indenture or in the Securities shall prohibit the sale or other transfer of any Securities (including beneficial interests in Global Securities) to the Company or any of its Subsidiaries.

(h) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the books or records, or the acts or omissions, of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the Applicable Procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

SECTION 2.09. CUSIP Numbers. The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP” numbers in notices of purchase as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any

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notice of a purchase and that reliance may be placed only on the other identification numbers printed on the Securities, and any such purchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the “CUSIP” numbers.

SECTION 2.10. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of this Indenture are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security.

Upon the issuance of any new Securities under this Section 2.10, the Company or the Registrar may require the payment by a Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Every replacement Security is an additional Obligation of the Company.

SECTION 2.11. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

If a Security is replaced pursuant to Section 2.10, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser, in which case the replacement Security shall cease to be outstanding, subject to the provisions of this Indenture.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities maturing and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

SECTION 2.12. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities.

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SECTION 2.13. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange, payment, replacement, conversion or cancellation. The Trustee and no one else shall cancel and destroy all Securities surrendered for registration of transfer, exchange, payment, replacement, conversion or cancellation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver cancelled Securities to the Company. The Company may not issue new Securities to replace Securities it has paid or that have been delivered to the Trustee for cancellation.

SECTION 2.14. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

ARTICLE 3

[Reserved]

ARTICLE 4

Covenants

SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture.

The Company shall pay interest on overdue principal at 1% per annum in excess of the rate specified in the Securities, and it shall pay interest on overdue installments of interest at such higher rate to the extent lawful. The conversion of any Securities pursuant to Article 5 hereof, together with the making of any cash payments required to be made in accordance with the terms of the Securities and this Indenture, shall satisfy the Company’s obligations under this Section 4.01 with respect to such Securities.

SECTION 4.02. SEC Reports. Whether or not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the

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SEC and provide the Trustee with such annual reports and such 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 subject to such Sections, at the times specified for such filings under such Sections. The Company also shall comply with the other provisions of TIA § 314(a) as may be required under the provisions of the TIA. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely on an Officer’s Certificate).

SECTION 4.03. Compliance Certificates. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company certificates of the principal executive officer, the principal financial officer or the principal accounting officer of the Company stating whether or not the signer knows of any Default that occurred during such Period. If such signer does, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA § 314(a)(4).

SECTION 4.04. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 4.05. Maintenance of Corporate Existence. Except as otherwise permitted in this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

SECTION 4.06. Payment of Additional Interest. If Additional Interest is payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Trust Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable. If the Company has paid Additional Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

SECTION 4.07. Purchase of Securities at Option of the Holder upon Change of Control. (a) If at any time that Securities remain outstanding there shall occur a Change of Control, Securities shall be purchased by the Company at the option of the Holders thereof as of the date that is no less than 30 and no more than 60 days from the date such notice is mailed or delivered as required by paragraph (b) of this Section 4.07, (the “Change of Control Purchase Date”) at a purchase price equal to the principal amount of the Securities, plus accrued and unpaid interest to, but excluding, the Change of Control Purchase Date (the “Change of Control Purchase Price”), subject to satisfaction by or on behalf of any Holder of the requirements set forth in subsection (c) of this Section 4.07.

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A “Change of Control” shall be deemed to have occurred if any of the following occurs after the date hereof:

(1) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors of the Company (for the purposes of this clause (1), such person shall be deemed to (A) beneficially own any Voting Stock of a person (the “specified person”) held by any other person (the “parent entity”) so long as such person beneficially owns (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity and (B) have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time);

(2) 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 (determined on a consolidated basis) to another Person other than a transaction following which Holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own, directly or indirectly, at least a majority of the voting power of the Voting Stock of the surviving Person; or

(3) the adoption of a plan relating to the liquidation or dissolution of the Company.

Notwithstanding anything to the contrary set forth in this Section 4.07, a Change of Control will not be deemed to have occurred if either:

(1) the Closing Price of the Company’s Common Stock for any five Trading Days during the ten Trading Days immediately preceding the Change of Control is at least equal to 105% of the Conversion Price in effect immediately preceding the Change of Control; or

(2) 100% of the consideration (excluding cash payments for fractional shares) received or to be received by the holders of shares of the Company’s Common Stock in the transaction or transactions constituting a Change of Control consists of shares of common stock, or American depositary shares representing shares of common stock, that are, or upon issuance will be, traded on a national securities exchange in the United States or through the Nasdaq National Market and as a result of such transaction or transactions the Securities become convertible solely into such common stock.

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(b) Within 10 Business Days after the occurrence of a Change of Control, the Company shall mail a written notice of the Change of Control to the Trustee (and the Paying Agent if the Trustee is not then acting as Paying Agent) and to each Holder (and to beneficial owners as required by applicable law). The notice shall include the form of a Change of Control Purchase Notice to be completed by the Holder and shall state:

(1) that a Change of Control has occurred, the date of such Change of Control and, briefly, the events causing and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization, in each case after giving effect to such Change of Control);

(2) the date by which the Change of Control Purchase Notice pursuant to this Section 4.07 must be given;

(3) the Change of Control Purchase Date;

(4) the Change of Control Purchase Price;

(5) the name and address of each Paying Agent and Conversion Agent;

(6) the Conversion Price and any adjustments thereto;

(7) that Securities as to which a Change of Control Purchase Notice has been given may be converted into Common Stock pursuant to Article 5 of this Indenture only to the extent that the Change of Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture;

(8) the procedures that the Holder must follow to exercise rights under this Section 4.07;

(9) the procedures for withdrawing a Change of Control Purchase Notice, including a form of notice of withdrawal; and

(10) that the Holder must satisfy the requirements set forth in the Securities in order to convert the Securities.

If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to the repurchase of Global Securities.

(c) A Holder may exercise its rights specified in subsection (a) of this Section 4.07 upon delivery of a written notice (which shall be in substantially the form included in Exhibit A hereto and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary’s customary procedures) of the exercise of such rights (a “Change of

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Control Purchase Notice”) to any Paying Agent at any time prior to the close of business on the Business Day next preceding the Change of Control Purchase Date.

The delivery of such Security to any Paying Agent (together with all necessary endorsements) at the office of such Paying Agent shall be a condition to the receipt by the Holder of the Change of Control Purchase Price therefor. Securities so surrendered for purchase (in whole or in part) in respect of a Change of Control Purchase Date occurring during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date shall also be accompanied by payment in funds acceptable to the Company in an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being surrendered for purchase.

The Company shall purchase from the Holder thereof, pursuant to this Section 4.07, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture that apply to the purchase of all of a Security pursuant to Sections 4.07 through 4.12 also apply to the purchase of such portion of such Security.

Notwithstanding anything herein to the contrary, any Holder delivering to a Paying Agent the Change of Control Purchase Notice contemplated by this subsection (c) shall have the right to withdraw such Change of Control Purchase Notice in whole or in a portion thereof that is a principal amount of $1,000 or in an integral multiple thereof at any time prior to the close of business on the Business Day next preceding the Change of Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 4.08.

A Paying Agent shall promptly notify the Company of the receipt by it of any Change of Control Purchase Notice or written withdrawal thereof.

Anything herein to the contrary notwithstanding, in the case of Global Securities, any Change of Control Purchase Notice may be delivered or withdrawn and such Securities may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time.

SECTION 4.08. Effect of Change of Control Purchase Notice. Upon receipt by any Paying Agent of the Change of Control Purchase Notice specified in Section 4.07(c), the Holder of the Security in respect of which such Change of Control Purchase Notice was given shall (unless such Change of Control Purchase Notice is withdrawn as specified below) thereafter be entitled to receive the Change of Control Purchase Price with respect to such Security. Such Change of Control Purchase Price shall be paid to such Holder promptly following the later of (a) the Change of Control Purchase Date with respect to such Security (provided the conditions in Section 4.07(c) have been satisfied) and (b) the time of delivery of such Security to a Paying Agent by the Holder thereof in the manner required by Section 4.07(c). Securities in respect of which a Change of Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such

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Change of Control Purchase Notice unless such Change of Control Purchase Notice has first been validly withdrawn.

A Change of Control Purchase Notice may be withdrawn by means of a written notice (which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary’s customary procedures) of withdrawal delivered by the Holder to a Paying Agent at any time prior to the close of business on the Business Day immediately preceding the Change of Control Purchase Date, specifying the principal amount of the Security or portion thereof (which must be a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof) with respect to which such notice of withdrawal is being submitted.

SECTION 4.09. Deposit of Change of Control Purchase Price. On or before 11:00 a.m. New York City time on the Change of Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (other than the Company or an Affiliate of the Company) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Change of Control Purchase Price of all the Securities or portions thereof that are to be purchased as of such Change of Control Purchase Date. The manner in which the deposit required by this Section 4.09 is made by the Company shall be at the option of the Company, provided that such deposit shall be made in a manner such that the Trustee or a Paying Agent shall have immediately available funds on the Change of Control Purchase Date.

If a Paying Agent holds, in accordance with the terms hereof, money sufficient to pay the Change of Control Purchase Price of any Security for which a Change of Control Purchase Notice has been tendered and not withdrawn in accordance with this Indenture then, on the Change of Control Purchase Date, such Security will cease to be outstanding and the rights of the Holder in respect thereof shall terminate (other than the right to receive the Change of Control Purchase Price as aforesaid). The Company shall publicly announce the principal amount of Securities purchased as a result of such Change of Control on or as soon as practicable after the Change of Control Purchase Date.

SECTION 4.10. Securities Purchased in Part. Any Security that is to be purchased only in part shall be surrendered at the office of a Paying Agent and promptly after the Change of Control Purchase Date the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of such authorized denomination or denominations as may be requested by such Holder, in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased.

SECTION 4.11. Compliance with Securities Laws upon Purchase of Securities. In connection with any offer to purchase or purchase of Securities under Section 4.07, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor to either such Rule), if applicable, under the Exchange Act, (b) file the related

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Schedule TO (or any successor or similar schedule, form or report) if required under the Exchange Act, and (c) otherwise comply with all federal and state securities laws in connection with such offer to purchase or purchase of Securities, all so as to permit the rights of the Holders and obligations of the Company under Sections 4.07 through 4.10 to be exercised in the time and in the manner specified therein. To the extent that the provisions of any securities laws or regulations conflict with this Article 4, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations hereunder by virtue of such compliance with such securities laws or regulations.

SECTION 4.12. Repayment to the Company. To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 4.09 exceeds the aggregate Change of Control Purchase Price together with interest, if any, thereon of the Securities or portions thereof that the Company is obligated to purchase, then promptly after the Change of Control Purchase Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash (including any interest thereon) to the Company.

SECTION 4.13. Offer to Purchase by Third Party. The Company shall not be required to purchase or offer to purchase Securities upon a Change of Control pursuant to this Article 4 in the event that a Person other than the Company makes such offer to purchase in the manner, at the times and otherwise in compliance with the requirements set forth in this Article 4 for such offer to purchase, and such Person purchases all Securities validly tendered and not withdrawn pursuant to such offer to purchase.

ARTICLE 5

Conversion

SECTION 5.01. Conversion Privilege. Subject to the further provisions of this Article 5, a Holder of a Security may, at the Holder’s option, convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time prior to the close of business on the Business Day immediately preceding June 1, 2008, at the Conversion Price then in effect; provided, however, that if such Security is submitted or presented for purchase pursuant to Article 4, such conversion right shall terminate at the close of business on the Business Day immediately preceding the Change of Control Purchase Date for such Security or such earlier date as the Holder presents such Security for purchase (unless the Company shall default in making the Change of Control Purchase Price payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is purchased). The number of shares of Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 6 of the Securities and is subject to adjustment as provided in this Article 5.

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Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

A Security in respect of which a Holder has delivered a Change of Control Purchase Notice pursuant to Section 4.07(c) exercising the option of such Holder to require the Company to purchase such Security may be converted only if such Change of Control Purchase Notice is withdrawn by a written notice of withdrawal delivered to a Paying Agent prior to the close of business on the Business Day immediately preceding the Change of Control Purchase Date in accordance with Section 4.08.

A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted its Securities into Common Stock, and only to the extent such Securities are deemed to have been converted into Common Stock pursuant to this Article 5.

SECTION 5.02. Conversion Procedure. To convert a Security, a Holder must (a) complete and manually sign the conversion notice on the back of the Security and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. The date on which the Holder satisfies all of those requirements is the “Conversion Date”. As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through a Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 5.03. Anything herein to the contrary notwithstanding, in the case of Global Securities, conversion notices may be delivered and such Securities may be surrendered for conversion in accordance with the Applicable Procedures as in effect from time to time.

The person in whose name the Common Stock certificate is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided further, however, that such conversion shall be at the Conversion Price in effect on the Conversion Date as if the stock transfer books of Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion of a Security.

Securities so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Securities or portions thereof which

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are subject to purchase following a Change of Control on a date during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company in an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. Except as otherwise provided in this Section 5.02, no payment or adjustment will be made for accrued interest on a converted Security. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder.

Nothing in this Section shall affect the right of a Holder in whose name any Security is registered at the close of business on a record date to receive the interest payable on such Security on the related interest payment date in accordance with the terms of this Indenture and the Securities. If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted.

Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered.

SECTION 5.03. Fractional Shares. The Company will not issue fractional shares of Common Stock upon conversion of Securities. In lieu thereof, the Company will pay an amount in cash based upon the Closing Price of the Common Stock on the Trading Day immediately prior to the Conversion Date.

SECTION 5.04. Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificate representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulation.

SECTION 5.05. Company To Provide Stock. The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock.

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All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.

The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or on The Nasdaq National Market or other over-the-counter market or such other market on which the Common Stock is then listed or quoted; provided, however, that if rules of such automated quotation system or exchange permit the Company to defer the listing of such Common Stock until the first conversion of the Securities into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Securities in accordance with the requirements of such automated quotation system or exchange at such time.

SECTION 5.06. Adjustment of Conversion Price. The conversion price as stated in paragraph 6 of the Securities (the “Conversion Price”) shall be adjusted from time to time by the Company as follows:

(a) In case the Company shall (i) pay a dividend on its Common Stock in shares of Common Stock, (ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have owned had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision or combination.

(b) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price Per Share of Common Stock on the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which (x) the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of

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Common Stock so offered (or the aggregate conversion price of the convertible securities so offered, which shall be determined by multiplying the number of shares of Common Stock issuable upon conversion of such convertible securities by the conversion price per share of Common Stock pursuant to the terms of such convertible securities) would purchase at the Current Market Price Per Share of Common Stock on such record date, and of which (y) the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights or warrants are exercisable not all rights or warrants shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued).

(c) In case the Company shall distribute to all or substantially all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock), evidences of indebtedness or other non-cash assets (including securities of any person other than the Company but excluding (1) dividends or distributions paid in cash or (2) dividends or distributions referred to in subsection (a) of this Section 5.06), or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding those rights and warrants referred to in subsection (b) of this Section 5.06 and also excluding the distribution of rights to all holders of Common Stock pursuant to the adoption of a stockholders’ rights plan), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the current Conversion Price by a fraction of which the numerator shall be the Current Market Price Per Share of the Common Stock on the record date mentioned below less the fair market value on such record date (as reasonably determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers’ Certificate delivered to the Trustee) of the portion of the capital stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the record date), and of which the denominator shall be the Current Market Price Per Share of the Common Stock on such record date. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution.

(d) In case the Company shall, by dividend or otherwise, at any time distribute (a “Triggering Distribution”) to all or substantially all holders of its Common Stock cash in an aggregate amount that, together with the aggregate amount of (i) any cash and the fair market value (as reasonably determined in

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good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers’ Certificate delivered to the Trustee) of any other consideration payable in respect of any tender offer by the Company or a Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 5.06 has been made and (ii) all other cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 5.06 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price Per Share of Common Stock on the Business Day (the “Determination Date”) immediately preceding the day on which such Triggering Distribution is declared by the Company multiplied by the number of shares of Common Stock outstanding on the Determination Date (excluding shares held in the treasury of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the Determination Date by a fraction of which the numerator shall be the Current Market Price Per Share of the Common Stock on the Determination Date less the sum of the aggregate amount of cash and the aggregate fair market value (as reasonably determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers’ Certificate delivered to the Trustee) of any such other consideration so distributed, paid or payable within such 12 months (including, without limitation, the Triggering Distribution) applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Determination Date) and the denominator shall be such Current Market Price Per Share of the Common Stock on the Determination Date, such reduction to become effective immediately prior to the opening of business on the day following the date on which the Triggering Distribution is paid.

(e) (1) In case any tender offer made by the Company for Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall involve the payment of aggregate consideration in an amount (determined as the sum of the aggregate amount of cash consideration and the aggregate fair market value (as reasonably determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers’ Certificate delivered to the Trustee) of any other consideration) that, together with the aggregate amount of (i) any cash and the fair market value (as reasonably determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers’ Certificate delivered to the Trustee) of any other consideration payable in respect of any other tender offers by the Company or any Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of the Expiration Date (as defined below) and in respect of which no Conversion Price adjustment pursuant

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to this Section 5.06 has been made and (ii) all cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the Expiration Date and in respect of which no Conversion Price adjustment pursuant to this Section 5.06 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price Per Share of Common Stock as of the last date (the “Expiration Date”) tenders could have been made pursuant to such tender offer (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the “Expiration Time”) multiplied by the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time, then, immediately prior to the opening of business on the day after the Expiration Date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Expiration Date by a fraction of which the numerator shall be the product of the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time multiplied by the Current Market Price Per Share of the Common Stock on the Trading Day next succeeding the Expiration Date and the denominator shall be the sum of (x) the aggregate consideration (determined as aforesaid) payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares and excluding any shares held in the treasury of the Company) at the Expiration Time and the Current Market Price Per Share of Common Stock on the Trading Day next succeeding the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Date. In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would have been in effect based upon the number of shares actually purchased. If the application of this Section 5.06(e) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 5.06(e).

(2) For purposes of Section 5.06(d) and 5.06(e), the term “tender offer” shall mean and include both tender offers and exchange offers (within the meaning of U.S. Federal securities laws), all references to “purchases” of shares in tender offers (and all similar references) shall mean and include both the purchase of shares in tender offers and the acquisition of shares pursuant to exchange offers, and all references to “tendered shares” (and all similar references) shall mean and include shares tendered in both tender offers and exchange offers.

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(f) For the purpose of any computation under subsections (b), (c), (d) and (e) of this Section 5.06, the current market price per share of Common Stock (the “Current Market Price Per Share”) on any date shall be deemed to be the average of the daily Closing Prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i) the Determination Date or the Expiration Date, as the case may be, with respect to distributions or tender offers under subsection (e) of this Section 5.06 or (ii) the record date with respect to distributions, issuances or other events requiring such computation under subsection (b), (c) or (d) of this Section 5.06. The Closing Price for each day (the “Closing Price”) shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on The New York Stock Exchange (the “NYSE”) or the Nasdaq National Market (the “NNM”), as applicable, or, if the Common Stock is not listed or admitted to trading on the NYSE or the NNM, the principal national securities exchange or quotation system on which the Common Stock is quoted or listed or admitted to trading or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no such prices are available, the Current Market Price Per Share shall be the fair value of a share of Common Stock (as reasonably determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers’ Certificate delivered to the Trustee).

(g) In any case in which this Section 5.06 shall require that an adjustment be made following a record date or a Determination Date or Expiration Date, as the case may be, established for purposes of this Section 5.06, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 5.09) issuing to the Holder of any Security converted after such record date or Determination Date or Expiration Date the shares of Common Stock and other capital stock of the Company issuable upon such conversion over and above the shares of Common Stock and other capital stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agent to issue due bills or other appropriate evidence prepared by the Company of the right to receive such shares. If any distribution in respect of which an adjustment to the Conversion Price is required to be made as of the record date or Determination Date or Expiration Date therefor is not thereafter made or paid by the Company for any reason, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or such effective date or Determination Date or Expiration Date had not occurred.

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SECTION 5.07. No Adjustment. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided, however, that any adjustments which by reason of this Section 5.07 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 5 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

No adjustment need be made for issuances of Common Stock pursuant to a Company plan for reinvestment of dividends or interest or for a change in the par value or a change to no par value of the Common Stock.

To the extent that the Securities become convertible into the right to receive cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

SECTION 5.08. Adjustment for Tax Purposes. The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 5.06, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable.

SECTION 5.09. Notice of Adjustment. Whenever the Conversion Price or conversion privilege is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers’ Certificate briefly stating the facts requiring the adjustment and the manner of computing it. Unless and until the Trustee shall receive an Officers’ Certificate setting forth an adjustment of the Conversion Price, the Trustee may assume without inquiry that the Conversion Price has not been adjusted and that the last Conversion Price of which it has knowledge remains in effect.

SECTION 5.10. Notice of Certain Transactions. In the event that:

(1) the Company takes any action which would require an adjustment in the Conversion Price;

(2) the Company consolidates or merges with or into, or transfers all or substantially all of its property and assets to, another corporation or another corporation merges into the Company and, in each such case, stockholders of the Company must approve the transaction; or

(3) there is a dissolution or liquidation of the Company,

the Company shall mail to Holders and file with the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least ten days before such date. Failure to mail such notice or any defect therein shall not

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affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 5.10.

SECTION 5.11. Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege. If any of the following shall occur, namely: (a) any reclassification or change of shares of Common Stock issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, or any other change for which an adjustment is provided in Section 5.06); (b) any consolidation or merger or combination to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (c) any sale, conveyance, transfer or lease of the property and assets of the Company as an entirety or substantially as an entirety, directly or indirectly, to any Person, then the Company, or such successor, purchasing, transferee or leasing Person, as the case may be, shall, as a condition precedent to such reclassification, change, combination, consolidation, merger, sale, conveyance, transfer or lease, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, combination, consolidation, merger, sale, conveyance, transfer or lease by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, combination, consolidation, merger, sale, conveyance, transfer or lease. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 5. If, in the case of any such consolidation, merger, combination, sale, conveyance, transfer or lease the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and property of a Person other than the successor, purchasing, transferee or leasing Person, as the case may be, in such consolidation, merger, combination, sale, conveyance, transfer or lease, then such supplemental indenture shall also be executed by such other Person and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 5.11 shall similarly apply to successive reclassifications, changes, combinations, consolidations, mergers, sales, conveyances, transfers or leases.

In the event the Company shall execute a supplemental indenture pursuant to this Section 5.11, the Company shall promptly file with the Trustee (x) an Officers’ Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or other securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, combination, consolidation, merger, sale, conveyance, transfer or lease, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an

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Opinion of Counsel that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Holders.

SECTION 5.12. Trustee’s Disclaimer. The Trustee shall have no duty to determine when an adjustment under this Article 5 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officers’ Certificate including the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 5.09. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company’s failure to comply with any provisions of this Article 5.

The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 5.11, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 5.11.

SECTION 5.13. Voluntary Reduction. The Company from time to time may voluntarily reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period if the Board of Directors of the Company determines that such reduction would be in the best interests of the Company, and the Company provides 15 days’ prior notice of any voluntary reduction in the Conversion Price; provided, however, that in no event may the Company reduce the Conversion Price to be less than the par value of a share of Common Stock, and provided, further, that no such decrease shall be taken into account for purposes of the determination of whether the Closing Price of the Common Stock exceeds 105% of the Conversion Price pursuant to Section 4.07.

ARTICLE 6

Successor Companies

SECTION 6.01. When Company May Merge or Transfer Assets. The Company may not consolidate, combine with or merge with or into any other Person, in a transaction in which it is not the surviving corporation, or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any successor Person unless:

(1) the successor, purchasing, transferring or leasing Person, if any, is a corporation, limited liability company, partnership, trust or other entity organized and existing under the laws of the United States, any State thereof or the District of Columbia (the “Successor Person”) and expressly assumes the obligations of the Company under this Indenture by a supplemental indenture as provided in Section 5.11;

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(2) immediately after giving effect to such transaction, and treating any Indebtedness which becomes an Obligation of the Company or any Subsidiary of the Company as a result of such transaction as having been Incurred by it at the time of the transaction, no Default or Event of Default shall have occurred and be continuing; and

(3) the Company shall have delivered to the Trustee an Officers’s Certificate and an Opinion of Counsel, each stating that such consolidation, combination, merger, conveyance, sale, transfer or lease and such supplemental indenture (if any) comply with this Indenture.

The Successor Person shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture, and the predecessor Company, except in the case of a lease, shall be automatically released from its obligations under this Indenture and the Securities.

ARTICLE 7

Defaults and Remedies

SECTION 7.01. Events of Default. An “Event of Default” occurs if:

(1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 11, and such default continues for a period of 30 days;

(2) the Company (i) defaults in the payment of the principal of or premium, if any, on any Security when the same becomes due and payable at its Stated Maturity, upon declaration of acceleration or otherwise, whether or not such payment shall be prohibited by Article 11 or (ii) fails to purchase Securities when required pursuant to this Indenture or the Securities, whether or not such purchase shall be prohibited by Article 11;

(3) the Company fails to comply for 30 days after the notice specified below with any of its obligations pursuant to Sections 4.07, 4.08, 4.09, 4.10 and 4.11 (other than its obligation to purchase Securities properly submitted for purchase);

(4) the Company fails to comply with its obligations under Section 6.01;

(5) the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clauses (1) through (4) above) and such failure continues for 60 days after the notice specified below;

(6) the Company pursuant to or within the meaning of any Bankruptcy Law:

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(A) commences a voluntary case;

(B) consents to the entry of an order for relief against it in an involuntary case;

(C) consents to the appointment of a Custodian of it or for a substantial part of its property; or

(D) makes a general assignment for the benefit of its creditors;

(7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Company in an involuntary case;

(B) appoints a Custodian of the Company or for all or substantially all of its property; or

(C) orders the winding up or liquidation of the Company;

and the order or decree remains unstayed and in effect for 60 days (together with Clause (6), the “bankruptcy provisions”); or

(8) Indebtedness of the Company is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $15.0 million (the “cross acceleration provision”).

However, a default under clauses (3) or (5) will not constitute an Event of Default until the Trustee or the holders of 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure such default within the time specified after receipt of such notice. The notice given pursuant to this Section 7.01 must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”

The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers’ Certificate of any Event of Default under clause (8) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (3) or (5), its status and what action the Company is taking or proposes to take with respect thereto.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

The term “Bankruptcy Law” means Title 11, United States Code, or any similar Federal, state or foreign law for the relief of debtors. The term “Custodian”

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means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

SECTION 7.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 7.01(6) or (7) (in either case) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 7.01(6) or (7) occurs, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration with respect to the Securities and its consequences if the rescission would not conflict with any judgment or decree, if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration and all payments due to the Trustee under Section 8.07 of this Indenture have been made. No such rescission shall affect any subsequent Default or impair any right consequent thereto. Any payment by the Company pursuant to this section is subject to Article 11.

SECTION 7.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

SECTION 7.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (1) a Default in the payment of the principal of or interest on a Security or (2) a Default in respect of a provision that under Section 10.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

SECTION 7.05. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may 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. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 8.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would

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involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification from the Holders satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

SECTION 7.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, or the right to convert the Securities, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless:

(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(2) the Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and

(5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder.

SECTION 7.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 7.08. Collection Suit by Trustee. If an Event of Default specified in Section 7.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 8.07.

SECTION 7.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute

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the same after the deduction of any amounts due the Trustee under Section 8.07, and to take any other action with respect to such claims, including participating as a member of any official committee of creditors, as it reasonably deems necessary or advisable, and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions. The Trustee shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 8.07.

SECTION 7.10. Priorities. If the Trustee collects any money pursuant to this Article 7, it shall pay out the money in the following order:

FIRST: to the Trustee for amounts due to the Trustee under Section 8.07 or any other provision of this Indenture;

SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 11;

THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and

FOURTH: to the Company.

The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid.

SECTION 7.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 7.07 or a suit by Holders of more than 10% in principal amount of the Securities.

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ARTICLE 8

Trustee

SECTION 8.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which, by any provision hereof, are required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 7.05.

(d) Every provision of this Indenture that in any way relates to the Trustee, other than paragraph (g) of this Section, is subject to paragraphs (a), (b) and (c) of this Section.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

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(g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA.

SECTION 8.02. Rights of Trustee. (a) The Trustee, may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) Subject to Section 8.01(c), the Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

(e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default or Event of Default is received by the Trustee at the Corporate Trust Office, and such notice references the Securities under this Indenture.

(g) The rights, privileges, protections, immunities and benefits given to the Trustee hereunder, including without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed by the Trustee consistent with the terms of this Indenture to act hereunder.

(h) Any permissive right or authority granted to the Trustee shall not be construed as a mandatory duty.

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SECTION 8.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 8.10 and 8.11.

SECTION 8.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company’s use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in the Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee’s certificate of authentication.

SECTION 8.05. Notice of Defaults. If a Default occurs and is continuing and if it is actually known to the Trustee, or upon written notice from the Company or any Securityholder or upon a Payment Default, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders.

SECTION 8.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with May 15, 2004, and in any event within 60 days of each May 15, the Trustee shall mail to each Securityholder a brief report dated as of May 15 of each year that complies with TIA § 313(a). The Trustee also shall comply with TIA § 313(b).

A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.

SECTION 8.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys’ fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 8.07) against the Company and defending itself against any claim (whether asserted by any Securityholder or any other Person) or liability in

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connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder unless such failure prejudices the Company. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own wilful misconduct, negligence or bad faith.

The Company need not pay for any settlement made by the Trustee without the Company’s consent, such consent not to be unreasonably withheld.

To secure the Company’s payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities.

The Company’s payment obligations, and the lien granted to the Trustee, pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses or renders services after the occurrence of a Default specified in Section 7.01(6) or (7) with respect to the Company, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under the Bankruptcy Law.

SECTION 8.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

(1) the Trustee fails to comply with Section 8.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the outstanding Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a

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notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided that the amounts owing to the Trustee hereunder have been paid and subject to the lien provided for in Section 8.07.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 8.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to this Section, the Company’s obligations under Section 8.07 shall continue for the benefit of the retiring Trustee.

SECTION 8.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee provided that such successor shall be eligible and qualified under Section 8.10.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.

SECTION 8.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

SECTION 8.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA

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§ 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE 9

Discharge of Indenture

SECTION 9.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any rights of conversion, registration of transfer or exchange of Securities herein expressly provided for and except as further provided below), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either;

(1) all Securities theretofore authorized and delivered (other than (x) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.10 and (y) Securities for whose payment money has therefore been deposited in trust and thereafter repaid to the Company as provided in Section 9.03, have been delivered to the Trustee for cancellation; or

(2) all such Securities not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable at the Stated Maturity within 90 days and the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent (other than the Company or any of its Affiliates) as trust funds in trust for the purpose cash in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity;

(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

(c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 8.07 shall survive and, if money shall have been deposited with the Trustee pursuant to clause (1) of this Section, the provisions of Sections 2.03, 2.05, 2.06, 2.07, 2.08, 2.10, 4.02, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, Article 5, Article 6, and this Article 9 shall survive until the Securities have been paid in full.

SECTION 9.02. Application of Trust Money. Subject to the provisions of Section 9.03, the Trustee or a Paying Agent shall hold in trust, for the benefit of the Holders, all money deposited with it pursuant to Section 9.01 and shall apply the

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deposited money in accordance with this Indenture and the Securities to the payment of the principal of and interest on the Securities. Money so held in trust shall not be subject to the subordination provisions of Article 11.

SECTION 9.03. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money (i) deposited with them pursuant to Section 9.01 and (ii) held by them at any time.

The Trustee and each Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.

SECTION 9.04. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 9.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 9.01 until such time as the Trustee or such Paying Agent is permitted to apply all such money in accordance with Section 9.02; provided, however, that if the Company has made any payment of the principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money held by the Trustee or such Paying Agent.

ARTICLE 10

Amendments

SECTION 10.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to provide for the assumption by a successor of the Obligations of the Company under Article 6;

(3) to provide for uncertificated Securities in addition to or in place of Certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code;

(4) to appoint a successor Trustee;

(5) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA;

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(6) to add guarantees with respect to the Securities or to secure the Securities;

(7) to add to covenants of the Company for the benefit of the Securityholders or to surrender any right or power conferred upon the Company; and

(8) to make any change that does not adversely affect the rights of any Securityholder, including providing for the sale and resale of the Securities under Regulation S of the Securities Act.

After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

SECTION 10.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the written consent of each Securityholder affected thereby, an amendment may not:

(a) reduce the rate of or extend the time for payment of interest on any Security;

(b) reduce the principal amount of, or any premium on, or extend the Stated Maturity of, any Security;

(c) reduce the amount of principal payable upon acceleration of the maturity of any Security;

(d) change the place or currency of payment of principal of, or any premium or interest on, any Security;

(e) impair the right to institute suit for the enforcement of any payment on, or with respect to, any Security;

(f) modify the subordination provisions of Article 11 in a manner that would adversely affect the Holders of Securities;

(g) make any change in the right of the Holders of Securities to convert the Securities that would adversely affect such Holders; or

(h) make any change to the adjustment of the Conversion Price that would adversely affect the Holders of Securities, except as provided in Article 5 of this Indenture;

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(i) reduce the percentage of the aggregate principal amount of the outstanding Securities whose Holders must consent to a modification or amendment of this Indenture; and

(j) modify any of the provisions of this Section or Section 7.04, except to increase any such percentage or to provide that specified additional provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby.

It shall not be necessary for the consent of the Holders under this Section 10.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 10.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. An amendment or supplement under this Section 10.02 or under Section 10.01 may not make any change that adversely affects the rights under Article 11 of any holder of an issue of Senior Indebtedness unless the holders of that issue, pursuant to its terms, consent to the change.

SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect to the extent required thereby.

SECTION 10.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

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SECTION 10.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

SECTION 10.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 10 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing any amendment the Trustee shall be entitled to receive and (subject to Section 8.01) shall be fully protected in relying upon, an Officer’s Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

SECTION 10.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

ARTICLE 11

Subordination

SECTION 11.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 11, to the prior payment in full in cash of all Obligations with respect to Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. All provisions of this Article 11 shall be subject to Section 11.12.

SECTION 11.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution or winding up of the Company or upon any assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, whether voluntary or involuntary:

(1) the holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in cash of all Obligations with respect to such Senior Indebtedness (including all interest accruing subsequent to the filing of a petition

54

in bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) before Securityholders shall be entitled to receive any payment or distribution with respect to the Securities; and

(2) until all Obligations with respect to such Senior Indebtedness are paid in full in cash, any payment or distribution to which Securityholders would be entitled but for this Article 11 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive in exchange for the Securities in any proceeding of the type described above in this Section 11.02, (x) equity securities of the Company which, in any case, do not provide any mandatory redemption or similar retirement prior to the maturity of the Securities or (y) unsecured debt securities of the Company which are subordinated to at least the same extent as the Securities to the payment of all Senior Indebtedness of the Company and which, in any case, do not mature or become subject to a mandatory redemption obligation prior to the maturity of the Securities.

SECTION 11.03. Default on Senior Indebtedness. The Company may not pay (in cash, property or other assets) the principal, premium, if any, or interest on the Securities and may not repurchase or otherwise retire any Securities (collectively, “pay the Securities”) if either of the following occurs (each, a “Payment Default”) (i) any Obligations with respect to Senior Indebtedness are not paid in full when due or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded in writing or (y) such Senior Indebtedness has been paid in full in cash; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of such Senior Indebtedness. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a “Payment Blockage Period”) commencing upon the receipt by the Company and the Trustee of written notice (a “Blockage Notice”) of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (2) because no defaults continue in existence which would permit the acceleration of the maturities of any Designated Senior Indebtedness at such time or (3) because such Designated Senior Indebtedness has been repaid in full in cash). Unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, or any Payment Default otherwise exists, the Company may resume payments on the Securities after termination of such Payment Blockage Period and may make any and all payments that were previously

55

subject to a Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period; provided, however that 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 such period, provided further, however, that 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 consecutive 360 day period, and there must be 181 days during any consecutive 360 day period during which no Payment Blockage Period is in effect. For purposes of this Section, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged and agreed that (x) any default or event of default as a result of a continued failure to meet a financial covenant or test for a period ended subsequent to the commencement of a Payment Blockage Period shall constitute a new default or event of default, as the case may be, and shall be deemed not to be a continuing default or event of default, as the case may be, for purposes of this sentence and (y) any subsequent action which would give rise to a default or an event of default pursuant to any provision under which a default or event of default previously existed or was continuing shall constitute a new default or event of default, as the case may be, for this purpose and shall be deemed not to be a continuing default or event of default, as the case may be, for purposes of this sentence).

SECTION 11.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration. If any Designated Senior Indebtedness is outstanding at the time of such acceleration, the Company may not pay the Securities until five Business Days after the Representatives of all the issues of Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if the Indenture otherwise permits payment at that time.

SECTION 11.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 11 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear.

SECTION 11.06. Subrogation. After all Senior Indebtedness of the Company is paid in full in cash and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 11 to holders of such Senior Indebtedness which otherwise would have been

56

made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness.

SECTION 11.07. Relative Rights. This Article 11 defines the relative rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall:

(1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or

(2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders.

SECTION 11.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.

SECTION 11.09. Rights of Trustee and Paying Agent. Notwithstanding Section 11.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 11. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice.

The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 11 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 8 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 11 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.07.

SECTION 11.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any).

SECTION 11.11. Article 11 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 11 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 11 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities.

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SECTION 11.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 11, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 11.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 11, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 11, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 8.01 and 8.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 11.

SECTION 11.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article 11 and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 11.14. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 11 or otherwise.

SECTION 11.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

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ARTICLE 12

Miscellaneous

SECTION 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in the Indenture by the TIA, the required provision shall control.

SECTION 12.02. Notices. Any notice or communication shall be in writing and delivered or mailed to the address set forth below:

if to the Company:

ChipPAC, Inc.

47400 Kato Road

Fremont, CA 94538

Attention: Chief Financial Officer

if to the Trustee:

U.S. Bank National Association

180 East Fifth Street

St. Paul, MN 55101

Fax: 651-244-8677

Attention: Corporate Trust Department

ChipPAC 2.50%

Convertible Subordinated Notes due 2008

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 12.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA § 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

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SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(1) an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

SECTION 12.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

SECTION 12.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions.

SECTION 12.08. Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of

60

New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

SECTION 12.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

SECTION 12.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

SECTION 12.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 12.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

SECTION 12.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

CHIPPAC, INC.,
By	/s/    Robert Krakauer
	Name  Robert Krakauer Title:  Chief Financial Officer
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By	/s/    Frank P. Leslie III
	Name  Frank P. Leslie III Title:  Vice President

EXHIBIT A

[FORM OF FACE OF SECURITY]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]¹

[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS SECURITY AND THE CLASS A COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION

¹ These paragraphs should be included only if the Security is a Global Security.

2

FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.]²

[THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF CHIPPAC, INC. THAT (A) THIS SECURITY AND THE CLASS A COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.]³

[THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]⁴

THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED TO, AND EACH PURCHASER BY ITS PURCHASE OF THIS SECURITY SHALL BE DEEMED TO HAVE REPRESENTED AND COVENANTED THAT IT IS NOT ACQUIRING THIS SECURITY FOR OR ON BEHALF OF, AND WILL NOT TRANSFER THIS SECURITY TO, ANY EMPLOYEE BENEFIT PLAN (A “PLAN”) AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), EXCEPT THAT

² These paragraphs to be included only if the Security is a Transfer Restricted Security.

3

SUCH PURCHASE FOR OR ON BEHALF OF A PLAN SHALL BE PERMITTED:

1.    TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF A BANK COLLECTIVE INVESTMENT FUND MAINTAINED BY THE PURCHASER IN WHICH NO PLAN (TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME EMPLOYER OR EMPLOYEE ORGANIZATION) HAS AN INTEREST IN EXCESS OF 10% OF THE TOTAL ASSETS IN SUCH COLLECTIVE INVESTMENT FUND, AND THE OTHER APPLICABLE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 91-38 ISSUED BY THE DEPARTMENT OF LABOR ARE SATISFIED;

2.    TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF AN INSURANCE COMPANY POOLED SEPARATE ACCOUNT MAINTAINED BY THE PURCHASER IN WHICH, AT ANY TIME WHILE THESE SECURITIES ARE OUTSTANDING, NO PLAN (TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME EMPLOYER OR EMPLOYEE ORGANIZATION) HAS AN INTEREST IN EXCESS OF 10% OF THE TOTAL OF ALL ASSETS IN SUCH POOLED SEPARATE ACCOUNT, AND THE OTHER APPLICABLE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 90-1 ISSUED BY THE DEPARTMENT OF LABOR ARE SATISFIED;

3.    TO THE EXTENT SUCH PURCHASE IS MADE BY AN INVESTMENT FUND ON BEHALF OF A PLAN BY (A) AN INVESTMENT ADVISER REGISTERED UNDER THE INVESTMENT ADVISERS ACT OF 1940, AS AMENDED (THE “1940 ACT”), THAT HAD AS OF THE LAST DAY OF ITS MOST RECENT FISCAL YEAR TOTAL ASSETS UNDER ITS MANAGEMENT AND CONTROL IN EXCESS OF $50.0 MILLION AND HAD STOCKHOLDERS’ OR PARTNERS’ EQUITY IN EXCESS OF $750,000, AS SHOWN IN ITS MOST RECENT BALANCE SHEET PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, OR (B) A BANK AS DEFINED IN SECTION 202(A)(2) OF THE 1940 ACT WITH EQUITY CAPITAL IN EXCESS OF $1.0 MILLION AS OF THE LAST DAY OF ITS MOST RECENT FISCAL YEAR, OR (C) AN INSURANCE COMPANY WHICH IS QUALIFIED UNDER THE LAWS OF MORE THAN ONE STATE TO MANAGE, ACQUIRE OR DISPOSE OF ANY ASSETS OF A PENSION OR WELFARE PLAN, WHICH INSURANCE COMPANY HAS AS OF THE LAST DAY OF ITS MOST RECENT FISCAL YEAR, NET WORTH IN EXCESS OF $1.0 MILLION AND WHICH IS SUBJECT TO SUPERVISION AND EXAMINATION BY A STATE AUTHORITY HAVING SUPERVISION OVER INSURANCE COMPANIES AND, IN ANY CASE, SUCH INVESTMENT ADVISER, BANK OR INSURANCE COMPANY IS OTHERWISE A QUALIFIED PROFESSIONAL ASSET MANAGER, AS SUCH TERM IS USED IN PROHIBITED TRANSACTION CLASS

4

EXEMPTION 84-14 ISSUED BY THE DEPARTMENT OF LABOR, AND THE ASSETS OF SUCH PLAN WHEN COMBINED WITH THE ASSETS OF OTHER PLANS ESTABLISHED OR MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATE THEREOF) OR EMPLOYEE ORGANIZATION AND MANAGED BY SUCH INVESTMENT ADVISER, BANK OR INSURANCE COMPANY, DO NOT REPRESENT MORE THAN 20% OF THE TOTAL CLIENT ASSETS MANAGED BY SUCH INVESTMENT ADVISER, BANK OR INSURANCE COMPANY AT THE TIME OF THE TRANSACTION, AND THE OTHER APPLICABLE CONDITIONS OF SUCH EXEMPTION ARE OTHERWISE SATISFIED;

4.    TO THE EXTENT SUCH PLAN IS A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA WHICH IS NOT SUBJECT TO THE PROVISIONS OF TITLE 1 OF ERISA, AND AS DEFINED IN SECTION 414(d) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”);

5.    TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT, THE RESERVES AND LIABILITIES FOR THE GENERAL ACCOUNT CONTRACTS HELD BY OR ON BEHALF OF ANY PLAN, TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME EMPLOYER (OR ITS AFFILIATES) OR EMPLOYEE ORGANIZATION, DO NOT EXCEED 10% OF THE TOTAL RESERVES AND LIABILITIES OF THE INSURANCE COMPANY GENERAL ACCOUNT (EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES), PLUS SURPLUS AS SET FORTH IN THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ANNUAL STATEMENT FILED WITH THE STATE OF DOMICILE OF THE INSURER, IN ACCORDANCE WITH PROHIBITED TRANSACTION CLASS EXEMPTION 95-60, AND THE OTHER APPLICABLE CONDITIONS OF SUCH EXEMPTION ARE OTHERWISE SATISFIED;

6.    TO THE EXTENT PURCHASE IS MADE BY AN IN-HOUSE ASSET MANAGER WITHIN THE MEANING OF PART IV(A) OF PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, SUCH MANAGER HAS MADE OR PROPERLY AUTHORIZED THE DECISION FOR SUCH PLAN TO PURCHASE THIS SECURITY, UNDER CIRCUMSTANCES SUCH THAT PROHIBITED TRANSACTION CLASS EXEMPTION 96-23 IS APPLICABLE TO THE PURCHASE AND HOLDING OF THIS SECURITY; OR

7.    TO THE EXTENT SUCH PURCHASE WILL NOT OTHERWISE GIVE RISE TO A TRANSACTION DESCRIBED IN SECTION 406 OR SECTION 4975(C)(1) OF THE CODE FOR WHICH A STATUTORY OR ADMINISTRATIVE EXEMPTION IS UNAVAILABLE.

5

CHIPPAC, INC.

CUSIP No. [·]                                                                                                                                                                                 No. 1

ISIN No. [·]

2.50% CONVERTIBLE SUBORDINATED NOTE DUE 2008

ChipPAC, Inc., a Delaware corporation (the “Company”, which term shall include any successor corporation under the Indenture referred to on the reverse hereof), promises to pay to Cede & Co., or registered assigns, the principal sum of 125,000,000 Dollars on June 1, 2008 [or such greater or lesser amount as is indicated on the Schedule of Exchanges of Securities on the other side of this Security].⁵

Interest Payment Dates: June 1 and December 1, beginning December 1, 2003

Record Dates: May 15 and November 15

This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security.

SIGNATURE PAGE FOLLOWS

⁵ This phrase should be included only if the Security is a Global Security

6

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

CHIPPAC, INC.
By:	/s/    Robert Krakauer
	Name:  Robert Krakauer
	Title:  Chief Financial Officer

Trustee’s Certificate of Authentication: This is one

of the Securities referred to in the within-mentioned

Indenture.

U.S. BANK NATIONAL ASSOCIATION,

as Trustee,

/s/    Frank P. Leslie III

Authorized Signatory

By:  Frank P. Leslie III

7

[FORM OF REVERSE SIDE OF SECURITY]

CHIPPAC, INC.

2.50% CONVERTIBLE SUBORDINATED NOTE DUE JUNE 1, 2008

1.    Interest

ChipPAC, Inc., a Delaware corporation (the “Company” which term shall include any successor corporation under the Indenture hereinafter referred to), promises to pay interest on the principal amount of this Security at the rate of 2.50% per annum. The Company shall pay interest semiannually on June 1 and December 1 of each year, commencing December 1, 2003; provided, however, that such interest may be increased by any Additional Interest accruing from time to time on the principal amount of this Security as provided in the Registration Rights Agreement. Any reference herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable on such date as provided in the Registration Rights Agreement. Interest on the Securities shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 28, 2003; provided, however, that if there is not an existing Default in the payment of interest and if this Security is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2.    Method of Payment

The Company shall pay interest on this Security (except defaulted interest) to the person who is the Holder of this Security at the close of business on May 15 or November 15, as the case may be, next preceding the related interest payment date. The Holder must surrender this Security to a Paying Agent to collect payment of principal. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest in respect of any Certificated Security by check or wire payable in such money; provided, however, that a Holder with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder. The Company may mail an interest check to the Holder’s registered address. Notwithstanding the foregoing, so long as this Security is registered in the name of a Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

3.    Paying Agent, Registrar and Conversion Agent

Initially, U.S. Bank National Association (the “Trustee”, which term shall include any successor trustee under the Indenture hereinafter referred to) will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice to the Holder. The Company or any

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of its Subsidiaries may, subject to certain limitations set forth in the Indenture, act as Paying Agent or Registrar.

4.    Indenture, Limitations

This Security is one of a duly authorized issue of Securities of the Company designated as its 2.50% Convertible Subordinated Notes Due 2008 (the “Securities”) issued under an Indenture dated as of May 28, 2003 (together with any supplemental indentures thereto, the “Indenture”), among ChipPAC, Inc. (the “Company”), and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of this Security include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. This Security is subject to all such terms, and the Holder of this Security is referred to the Indenture and said Act for a statement of them. The Securities are subordinated unsecured obligations of the Company limited to $150,000,000 aggregate principal amount. The Indenture does not limit other debt of the Company, secured or unsecured, including Senior Indebtedness.

5.    Purchase of Securities at Option of Holder Upon a Change of Control

At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Securities held by such Holder on the date that is no less than 30 days and not more than 60 days after notice of the occurrence of a Change of Control is given as provided in Section 4.07, at a purchase price equal to 100% of the principal amount thereof together with accrued interest up to, but excluding, the Change of Control Purchase Date. The Holder shall have the right to withdraw any Change of Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the Business Day next preceding the Change of Control Purchase Date by delivering a written notice of withdrawal to the Paying Agent in accordance with the terms of the Indenture.

6.    Conversion

A Holder of a Security may convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into shares of Common Stock at any time prior to the close of business on the Business Day immediately preceding June 1, 2008; provided, however, that if the Security is subject to purchase upon a Change of Control, the conversion right will terminate at the close of business on the Business Day immediately preceding the Change of Control Purchase Date for such Security or such earlier date as the Holder presents such Security for purchase (unless the Company shall default in making the Change of Control Purchase Price when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is purchased).

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The initial Conversion Price is $8.062 per share, subject to adjustment under certain circumstances. The number of shares of Common Stock issuable upon conversion of a Security is determined by dividing the principal amount of the Security or portion thereof converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the Closing Price (as defined in the Indenture) of the Common Stock on the Trading Day immediately prior to the Conversion Date. To convert a Security, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. Securities so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Securities or portions thereof which are subject to purchase following a Change of Control on a date during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder. A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. A Security in respect of which a Holder had delivered a Change of Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if the Change of Control Purchase Notice is withdrawn in accordance with the terms of the Indenture.

7.    Subordination

The indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company. Any Holder by accepting this Security agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any terms of any instrument relating to the Senior Indebtedness or any extension or renewal of the Senior Indebtedness.

8.    Denominations, Transfer, Exchange

The Securities are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of or

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exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

9.    Persons Deemed Owners

The Holder of a Security may be treated as the owner of it for all purposes.

10.    Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to money must look to the Company for payment.

11.    Amendment, Supplement and Waiver

Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Securities then outstanding, and an existing Default or Event of Default and its consequence or compliance with any provision of the Indenture or the Securities may be waived in a particular instance with the consent of the Holders of a majority in principal amount of the Securities then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder.

12.    Successor Corporation

When a successor corporation assumes all the obligations of its predecessor under the Securities and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation will (except in certain circumstances specified in the Indenture) be released from those obligations.

13.    Defaults and Remedies

Under the Indenture, an Event of Default includes:

(1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 11, and such default continues for a period of 30 days; (2) the Company (i) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon declaration of acceleration or otherwise, whether or not such payment shall be prohibited by Article 11 or (ii) fails to purchase Securities when required pursuant to this Indenture or the Securities, whether or not such purchase shall be prohibited by Article 11; (3) the Company fails to comply with its obligations with respect to a Change of Control in accordance with Sections 4.07, 4.08, 4.09, 4.10 and

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4.11 (other than its obligation to purchase securities properly submitted for purchase); (4) the Company fails to comply with its obligations under Section 6.01; (5) the Company fails to comply with any of its agreements in the Securities or the Indenture (other than those referred to in clauses (1) through (4) above) and such failure continues for 60 days after the notice specified below; or (6) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for a substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the winding up or liquidation of the Company; and the order or decree remains unstayed and in effect for 60 days (together with Clause (6), the “bankruptcy provisions”); (8) Indebtedness of the Company is not paid within 15 days of any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $15.0 million (the “cross acceleration provision”).

If an Event of Default (other than an event of default as described in clauses (6) and (7) with respect to the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities then outstanding may declare all unpaid principal to the date of acceleration on the Securities then outstanding to be due and payable immediately, all as and to the extent provided in the Indenture. If an Event of Default occurs as a result of certain events of bankruptcy, insolvency or reorganization of the Company or as described in clauses (6) and (7) herein, unpaid principal of the Securities then outstanding shall become due and payable immediately without any declaration or other act on the part of the Trustee or any Holder, all as and to the extent provided in the Indenture. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of Default.

14.    Trustee Dealings with the Company

U.S. Bank National Association, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company, and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee.

15.    No Recourse Against Others

A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the

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Indenture nor for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Security by accepting this Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Security.

16.    Authentication

This Security shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Security.

17.    Abbreviations and Definitions

Customary abbreviations may be used in the name of the Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and UGMA (= Uniform Gifts to Minors Act). All terms defined in the Indenture and used in this Security but not specifically defined herein are defined in the Indenture and are used herein as so defined.

18.    Indenture to Control; Governing Law

In the case of any conflict between the provisions of this Security and the Indenture, the provisions of the Indenture shall control. This Security shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law.

The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to: ChipPAC, Inc., 47400 Kato Road, Fremont, California 94538, Attention: Corporate Secretary.

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ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

agent to transfer this Security on the books of the Company. The agent may substitute another to act for him or her.

	Your Signature
Date:
	(Sign exactly as your name appears on the other side of this Security)

*Signature guaranteed by:

By:                                                                    

• Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.

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CONVERSION NOTICE

To convert this Security into Common Stock of ChipPAC, Inc., check the box:    ¨

To convert only part of this Security, state the principal amount to be converted (must be $1,000 or a multiple of $1,000): $                                .

If you want the stock certificate made out in another person’s name, fill in the form below:

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

	Your Signature
Date:
	(Sign exactly as your name appears on the other side of this Security)

*Signature guaranteed by:

By:                                                                   

• Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.

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OPTION TO ELECT REPURCHASE

UPON A CHANGE OF CONTROL

To:    ChipPAC, Inc.

The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from ChipPAC, Inc. (the “Company”) as to the occurrence of a Change of Control with respect to the Company, and requests and instructs the Company to redeem the entire principal amount of this Security, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security at the Change of Control Purchase Price, together with accrued interest to, but excluding, such date, to the registered Holder hereof.

Date:
	Signatures(s)
	Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
	Signature Guaranty

Principal amount to be redeemed (in an integral multiple of $1,000, if less than all):

NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the face of this Security in every particular, without alteration or any change whatsoever.

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SCHEDULE OF EXCHANGES OF SECURITIES⁶

The following exchanges, repurchases or conversions of a part of this global Security have been made:

Date of
Exchange
Principal
Amount of
this Global
Security
Following
Such Decrease
(or Increase)
Authorized
Signatory of
Securities
Custodian
Amount
of Decrease
in Principal
Amount of
this Global
Security
Amount
of Increase
in Principal
Amount of
this Global
Security

⁶ This schedule should be included only if the Security is a Global Security.

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION

OF TRANSFER OF TRANSFER RESTRICTED SECURITIES⁷

Re: 2.50% Convertible Subordinated Securities Due 2008 (the “Securities”) of ChipPAC, Inc.

This certificate relates to $             principal amount of Securities owned in

(check applicable box)

¨    book-entry or      ¨     definitive form by              (the “Transferor”).

The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Securities.

In connection with such request and in respect of each such Security, the Transferor does hereby certify that the Transferor is familiar with transfer restrictions relating to the Securities as provided in Section 2.08 of the Indenture dated as of May 28, 2003, between ChipPAC, Inc. and U.S. Bank National Association (the “Indenture”), and the transfer of such Security is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) (check applicable box) or the transfer or exchange, as the case may be, of such Security does not require registration under the Securities Act because (check applicable box):

¨ Such Security is being transferred pursuant to an effective registration statement under the Securities Act.

¨ Such Security is being transferred to the Company.

¨ Such Security is being transferred inside the United States to a person the Transferor reasonably believes is a “qualified

⁷ This certificate should only be included if this Security is a Transfer Restricted Security.

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institutional buyer” (as defined in Rule 144A or any successor provision thereto (“Rule 144A”) under the Securities Act) that is purchasing for its own account or for the account of a “qualified institutional buyer”, in each case to whom notice has been given that the transfer is being made in reliance on such Rule 144A, and in each case in reliance on Rule 144A.

¨ Such Security is being transferred outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act.

¨ Such Security is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) (“Rule 144”) under the Securities Act.

¨ Such Security is being transferred pursuant to and in compliance with an exemption from the registration requirements of the Securities Act (other than an exemption referred to above) and as a result of which such Security will, upon such transfer, cease to be a “restricted security” within the meaning of Rule 144 under the Securities Act.

The Transferor acknowledges and agrees that, if the transferee will hold any such Securities in the form of beneficial interests in a Global Security which is a “restricted security” within the meaning of Rule 144 under the Securities Act, then such

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transfer can only be made pursuant to Rule 144A under the Securities Act and such transferee must be a “qualified institutional buyer” (as defined in Rule 144A).

Date:
	(Insert Name of Transferor)

EX-31.1

Exhibit 31.1

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. McKenna, the Chief Executive Officer of ChipPAC, Inc. (the “registrant”), certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2003 of ChipPAC, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. Robert Krakauer, the registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. Robert Krakauer, the registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2003

/s/    DENNIS P. MCKENNA

Dennis P. McKenna

Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Krakauer, the Chief Financial Officer of ChipPAC, Inc. (the “registrant”), certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2003 of ChipPAC, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. Dennis McKenna, the registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. Dennis Mckenna, the registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2003

/s/    ROBERT KRAKAUER        

Robert Krakauer

Chief Financial Officer

EX-32.1

Exhibit 32.1

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. McKenna, in my capacity as Chief Executive Officer of ChipPAC, Inc., a Delaware corporation (“ChipPAC”), and in connection with the Quarterly Report on Form 10-Q filed by ChipPAC with the Securities and Exchange Commission on August 8, 2003 (the “Report”), hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ChipPAC.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ChipPAC and will be retained by ChipPAC and furnished to the Securities and Exchange Commission or its staff upon request.

IN WITNESS WHEREOF, the undersigned has executed this CEO Certification as of the 8th day of August, 2003.

/s/    DENNIS P. MCKENNA
Name:	Dennis P. McKenna
Title:	Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by ChipPAC as part of the report or as a separate disclosure document for purposes of Section 18 or any other provision of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Krakauer, in my capacity as Chief Financial Officer of ChipPAC, Inc., a Delaware corporation (“ChipPAC”), and in connection with the Quarterly Report on Form 10-Q filed by ChipPAC with the Securities and Exchange Commission on August 8, 2003 (the “Report”), hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ChipPAC.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ChipPAC and will be retained by ChipPAC and furnished to the Securities and Exchange Commission or its staff upon request.

IN WITNESS WHEREOF, the undersigned has executed this CFO Certification as of the 8th day of August, 2003.

	/s/    ROBERT KRAKAUER
Name:	Robert Krakauer
Title:	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by ChipPAC as part of the report or as a separate disclosure document for purposes of Section 18 or any other provision of the Securities Exchange Act of 1934, as amended.