-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uz7cHmBs9dMG9E2lH8axEEu+P8apw1BsDmjN3joqNfLSLrA8XRX1gVmf7g3I4QEw IeftfhRy0r0RicBIwHXz/A== 0001145549-04-000341.txt : 20040319 0001145549-04-000341.hdr.sgml : 20040319 20040319141025 ACCESSION NUMBER: 0001145549-04-000341 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ST ASSEMBLY TEST SERVICES LTD CENTRAL INDEX KEY: 0001101873 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 333-75080 FILM NUMBER: 04679673 BUSINESS ADDRESS: STREET 1: 5 YISHUN ST 23 CITY: SINGAPORE STATE: U0 ZIP: 768442 BUSINESS PHONE: 657555885 MAIL ADDRESS: STREET 1: 5 YISHUN ST 23 CITY: SINGAPORE STATE: U0 ZIP: 768442 20-F 1 u92302e20vf.txt ST ASSEMBLY TEST SERVICES LTD UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 20-F (Mark One) [ ] Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 or [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 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 000-29103 ST ASSEMBLY TEST SERVICES LTD (Exact Name of Registrant as Specified in Its Charter) REPUBLIC OF SINGAPORE 5 YISHUN STREET 23, SINGAPORE 768442 (Jurisdiction of Incorporation (Address of Principal Executive Offices) or Organization) Securities registered or to be registered pursuant to Section 12(b) of the Act: NONE Securities registered or to be registered pursuant to Section 12(g) of the Act: ORDINARY SHARES, PAR VALUE S$0.25 PER SHARE, INCLUDING ORDINARY SHARES REPRESENTED BY AMERICAN DEPOSITARY SHARES (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 1,076,620,120 ORDINARY SHARES (PAR VALUE S$0.25 PER ORDINARY SHARE) OF REGISTRANT OUTSTANDING AS OF DECEMBER 31, 2003. 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 which financial statement item the registrant has elected to follow. Item 17 [ ] Item 18 [X] TABLE OF CONTENTS
PAGE Item 1. Identity of Directors, Senior Management and Advisers................................................. 3 Item 2. Offer Statistics and Expected Timetable............................................................... 3 Item 3. Key Information....................................................................................... 3 Item 4. Information on our Company............................................................................ 23 Item 5. Operating and Financial Review and Prospects.......................................................... 41 Item 6. Directors, Senior Management and Employees............................................................ 59 Item 7. Major Shareholders and Related Party Transactions..................................................... 72 Item 8. Financial Information................................................................................. 74 Item 9. The Offer and Listing................................................................................. 75 Item 10. Additional Information................................................................................ 76 Item 11. Quantitative and Qualitative Disclosures about Market Risk............................................ 88 Item 12. Description of Securities other than Equity Securities................................................ 91 Item 13. Defaults, Dividend Arrearages and Delinquencies....................................................... 91 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.......................... 91 Item 15. Controls and Procedures............................................................................... 91 Item 16A. Audit Committee Financial Expert...................................................................... 92 Item 16B. Code of Ethics........................................................................................ 92 Item 16C. Principal Accountant Fees and Services................................................................ 92 Item 17. Financial Statements.................................................................................. 93 Item 18. Financial Statements.................................................................................. 93 Item 19. Exhibits.............................................................................................. 94 Signatures...................................................................................................... 97
When we refer to "Singapore dollars" and "S$" in this Annual Report, we are referring to Singapore dollars, the legal currency of Singapore. When we refer to "New Taiwan dollars" and "NT$" in this Annual Report, we are referring to the New Taiwan dollars, the legal currency of Taiwan. When we refer to "U.S. dollars," "dollars," "$" and "US$" in this Annual Report, we are referring to United States dollars, the legal currency of the United States. For your convenience, unless otherwise indicated, translations of certain Singapore dollar and New Taiwan dollar amounts to U.S. dollars were made at the noon buying rate in the City of New York on December 31, 2003 which was S$1.70 per $1.00 for cable transfers in Singapore dollars, and was NT$33.99 per $1.00 for cable transfers in New Taiwan dollars, as certified for customs purposes by the Federal Reserve Bank of New York. When used in this annual report, the terms "we," "our," and "us" refer to ST Assembly Test Services Ltd and its consolidated subsidiaries, unless otherwise stated. No representation is made that the Singapore dollar, New Taiwan dollars or U.S. dollar amounts shown in this Annual Report could have been or could be converted at such rate or at any other rate. Certain of the statements in this Annual Report on Form 20-F, including statements regarding industry growth, are forward-looking statements that involve a number of risks and uncertainties which could cause actual results to differ materially. Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; the impact of our proposed merger with ChipPAC, Inc.; demand for end-use applications products such as communications equipment and personal computers; reliance on a small group of principal customers; decisions by customers to discontinue outsourcing of test and assembly services; changes in customer order patterns; rescheduling or canceling of customer orders; changes in product mix; capacity utilization; level of competition; pricing pressures including declines in average selling prices; continued success in technological innovations; delays in acquiring or installing new equipment; shortages in supply of key components; availability of financing; exchange rate fluctuations; litigation and other risks described in "Item 3. Key Information -- D. Risk Factors." We do not intend, and do not assume any obligation, to update any industry information or forward-looking statements set forth in this annual report to reflect subsequent events or circumstances. We intend to file a proxy statement/prospectus in connection with the proposed merger with the U.S. Securities and Exchange Commission which will contain additional information regarding our proposed merger with ChipPAC. You should read the proxy statement/prospectus when it becomes available as it will contain important information regarding the companies and the proposed merger. ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable ITEM 3. KEY INFORMATION A. SELECTED FINANCIAL DATA You should read the following selected consolidated financial data in conjunction with our consolidated financial statements and the related notes and "Item 5. Operating and Financial Review and Prospects" included elsewhere in this Annual Report. The selected consolidated financial data as of December 31, 2002 and 2003 and for the fiscal years ended December 31, 2001, 2002 and 2003, are derived from our consolidated financial statements which have been audited by KPMG, independent auditors, and are included in "Item 18. Financial Statements." The selected consolidated financial data as of December 31, 1999, 2000 and 2001 and for the fiscal years ended December 31, 1999 and 2000 are derived from our audited consolidated financial statements, however those audited consolidated financial statements are not included in this Annual Report. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). 3
YEAR ENDED DECEMBER 31, 1999 2000 2001 2002 2003 -------- -------- --------- -------- --------- (in thousands of US$, except per ordinary share and per ADS data) INCOME STATEMENT DATA: Net revenues $ 201,098 $ 331,271 $ 145,866 $ 225,738 $ 380,691 Cost of revenues (132,889) (231,944) (217,789) (247,943) (328,014) --------- --------- --------- --------- ---------- Gross profit (loss) 68,209 99,327 (71,923) (22,205) 52,677 --------- --------- --------- --------- ---------- Operating expenses: Selling, general and administrative 28,437 40,798 36,041 36,633 36,378 Research and development 7,283 14,636 15,160 18,856 15,295 Asset impairments(1) -- -- 23,735 14,666 -- Prepaid leases written off(2) -- -- 3,145 764 -- Stock-based compensation 25,327 448 1,024 60 97 Other general expenses (income), net 37 (22) 101 548 374 --------- --------- --------- --------- ---------- Total operating expenses 61,084 55,860 79,206 71,527 52,144 --------- --------- --------- --------- ---------- Operating income (loss) 7,125 43,467 (151,129) (93,732) 533 Other income (expense): Interest income (expense), net (5,534) 8,214 5,222 (5,143) (9,209) Foreign currency exchange gain (loss) 1,385 2,018 775 (512) 1,634 Other non-operating income, net 2,379 3,525 1,990 3,419 7,570 --------- --------- --------- --------- ---------- Total other income (expense), net (1,770) 13,757 7,987 (2,236) (5) --------- --------- --------- --------- ---------- Income (loss) before income taxes 5,355 57,224 (143,142) (95,968) 528 Income tax benefit (expense) (500) (2,865) 8,810 7,163 (705) --------- --------- --------- --------- ---------- Net income (loss) before minority interest $ 4,855 $ 54,359 $(134,332) $ (88,805) $ (177) Minority interest -- -- $ 313 $ (514) $ (1,539) --------- --------- --------- --------- ---------- Net income (loss) $ 4,855 $ 54,359 $(134,019) $ (89,319) $ (1,716) --------- --------- --------- --------- ---------- Other comprehensive income: Unrealized gain (loss) on available-for-sale marketable securities -- -- $ (303) $ 1,012 $ 3,687 Realized gain on available-for-sale marketable securities included in net loss -- -- -- $ (125) $ (5,040) Foreign currency translation adjustment -- -- $ 93 $ (212) $ 698 --------- --------- --------- --------- ---------- Comprehensive income (loss) $ 4,855 $ 54,359 $(134,229) $ (88,644) $ (2,371) --------- --------- --------- --------- ---------- Net income (loss) per ordinary share: Basic $ 0.01 $ 0.06 $ (0.14) $ (0.09) $ (0.00) Diluted $ 0.01 $ 0.06 $ (0.14) $ (0.09) $ (0.00) Net income (loss) per ADS: Basic $ 0.06 $ 0.56 $ (1.36) $ (0.90) $ (0.02) Diluted $ 0.06 $ 0.56 $ (1.36) $ (0.90) $ (0.02) Ordinary shares (in thousands) used in per ordinary share calculation: Basic 770,259 962,828 989,083 991,549 1,005,374 Diluted 786,725 970,631 989,083 991,549 1,005,374 ADSs (in thousands) used in per ADS calculation: Basic 77,026 96,283 98,908 99,155 100,537 Diluted 78,672 97,063 98,908 99,155 100,537
4
YEAR ENDED DECEMBER 31, 1999 2000 2001 2002 2003 --------- -------- -------- -------- ---------- (in thousands of US$) BALANCE SHEET DATA: Cash and cash equivalents $ 16,568 $141,733 $115,214 $167,661 $ 313,163 Working capital (deficit) (74,030) 188,521 109,447 165,851 328,583 Total assets 351,965 711,758 576,578 721,968 993,852 Current installments of obligations under capital leases -- -- 2,564 6,558 5,296 Short-term debt and current installments of long-term debt 67,420 14,799 14,045 21,588 6,841 Obligation under capital leases, excluding current installments -- -- 7,689 5,520 812 Long-term debt, excluding current 46,360 29,599 14,045 218,370 358,789 installments Shareholders' equity 141,184 585,197 452,795 366,512 475,956 Share capital 129,827 159,461 159,961 160,295 172,434 Ordinary shares outstanding 785,428 986,172 989,683 992,115 1,076,620
(1) The impairment charges were recognized in 2001 in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and in 2002 in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) We recorded impairment charges of $3,145,000 in 2001 and $764,000 in 2002 to write off prepaid leases for testers for which we had no expectation of future use. B. CAPITALIZATION AND INDEBTEDNESS Not applicable C. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable D. RISK FACTORS In addition to the other information and risks described elsewhere in this Annual Report, our business is subject to the following risks: WE EXPERIENCED SUBSTANTIAL LOSSES IN RECENT YEARS WHICH CONTINUED THROUGH THE FIRST NINE MONTHS OF 2003, AND MAY CONTINUE TO DO SO IN THE FUTURE. Primarily as a result of the downturn in the semiconductor industry in recent years, we suffered operating losses and net losses since 2001 through the first nine months of 2003. For the years ended 2001 and 2002, we suffered operating losses of $151.1 million and $93.7 million, and net losses of $134.0 million and $89.3 million, respectively. We achieved operating income of $0.5 million and a net loss of $1.7 million for the full year 2003. We may incur operating losses and net losses in the future due to a variety of factors, including if the semiconductor industry does not continue to recover from the downturn as currently expected or makes only a partial recovery. 5 DOWNTURNS IN THE SEMICONDUCTOR INDUSTRY HAVE ADVERSELY AFFECTED, AND MAY CONTINUE TO ADVERSELY AFFECT, OUR OPERATING RESULTS. Our results from operations are significantly affected by conditions in the semiconductor industry. The market for semiconductors is characterized by: - rapid technological change; - evolving industry standards; - intense competition; and - fluctuations in end-user demand. In addition, the semiconductor industry is cyclical and, at various times, has experienced significant downturns because of production over-capacity and reduced unit demand causing rapid erosion of average selling prices and low capacity utilization. If demand for semiconductor capacity does not keep pace with the growth of supply, or further declines, our business would be subject to more intense competition and our results of operations may suffer as a result of the resulting downward pricing pressure and capacity underutilization. The industry began experiencing such a downturn in the fourth quarter of 2000 which continued through 2001 and 2002, with a significant recovery only occurring in 2003 with 18.3% growth, based on data released by the Semiconductor Industry Association or SIA. We cannot assure you that the current recovery or uptrend will continue. If there is any future downturn in the semiconductor industry, our business, financial condition and results of operations are likely to be materially adversely affected. IF WE ARE UNABLE TO INCREASE OUR CAPACITY UTILIZATION RATES, OUR PROFITABILITY WILL BE ADVERSELY AFFECTED. As a result of the capital intensive nature of our business, our operations are characterized by high fixed costs. Consequently, high capacity utilization allows us to maintain higher gross margins because it allows us to allocate fixed costs over a greater number of units we test and assemble. Insufficient utilization of installed capacity can have a material adverse effect on our profitability. In 2001, our capacity utilization rates declined substantially from prior levels, primarily as a result of a decrease in demand for our test and assembly services resulting from a downturn in the overall semiconductor industry, particularly for communications applications. Due to our high level of fixed costs, we suffered negative margins and substantial operating losses and net losses in 2001 and 2002. While capacity utilization rates increased in 2002 and 2003, they have not returned to their former levels and our net losses continued in 2003. Our ability to restore or increase our profitability and enhance our gross margins will continue to be dependent, in large part, upon our ability to restore high capacity utilization rates. Capacity utilization rates may be affected by a number of factors and circumstances, including: - overall industry conditions; - installation of new equipment in anticipation of future business; - the level of customer orders; - operating efficiencies; - mechanical failure; 6 - disruption of operations due to expansion of operations, introduction of new packages or relocation of equipment; - disruption in supply of raw materials; - changes in product mix; and - fire or other natural disasters. We cannot assure you that our capacity utilization rates will be able to return to their former high levels or that we will not be materially adversely affected by a continued decline or future declines in the semiconductor industry, declines in industries that purchase semiconductors or other factors. Any inability on our part to increase our capacity utilization rates could have a material adverse effect on our business, financial condition and results of operations. A DECREASE IN DEMAND FOR COMMUNICATIONS EQUIPMENT AND PERSONAL COMPUTERS WOULD SIGNIFICANTLY DECREASE THE DEMAND OF OUR SERVICES. Substantially all of our net revenues are derived from customers who use our test or assembly services for semiconductors used in communications equipment and personal computers. In 2002 and 2003, 84.6% and 88.2%, respectively, of our net revenues was derived from testing and assembly of semiconductors used in such applications. Any significant decrease in the demand for communications equipment or personal computers may decrease the demand for our services and could seriously harm our company. In addition, the declining average selling price of communications equipment and personal computers places significant pressure on the prices of the components that are used in this equipment. If the average selling prices of communications equipment and personal computers continue to decrease, the pricing pressure on services provided by us may reduce our net revenues and therefore significantly reduce our gross profit margin. OUR RESULTS FLUCTUATE FROM QUARTER TO QUARTER. Our operating results have fluctuated and may continue to fluctuate substantially from quarter to quarter due to a wide variety of factors, including: - general economic conditions in the semiconductor industry; - a shift by integrated device manufacturers, or IDMs, between internal and outsourced test and assembly services; - general economic conditions in the markets addressed by end-users of semiconductors; - the seasonality of the semiconductor industry; - the short-term nature of our customers' commitments; - the rescheduling or cancellation of large orders; - the timing and volume of orders relative to our capacity; - changes in capacity utilization; 7 - the rapid erosion of the selling prices of packages; - changes in our product mix; - the rescheduling, cancellation and timing of expenditures in anticipation of future orders; - possible disruptions caused by the installation of new equipment; - the ability to obtain adequate equipment and materials on a timely basis; - any exposure to currency and interest rate fluctuations that may not be adequately covered under our hedging policy; and - weakness in the supply of wafers. As a result of all of these factors, we believe that period-to-period comparisons of our operating results are not meaningful, and you should not rely on such comparisons to predict our future performance. Unfavorable changes in any of the above factors may adversely affect our business, financial condition and results of operations. In addition, such unfavorable changes could cause volatility in the price of our ordinary shares and American Depositary Shares, or ADSs. For example, during the second quarter of 1998 and again in the fourth quarter of 2000 and throughout 2001, the average selling prices of many of our test and assembly services decreased because of an excess of worldwide capacity relative to demand which resulted in intense competition among independent test and assembly service providers. This resulted in decreased demand for our test and assembly services which adversely impacted our financial results. If we cannot offset declines in selling prices by reducing our costs of delivering those services, increasing the number of units tested or assembled, or shifting our focus to higher margin test and assembly services, our business, financial condition and results of operations could be adversely affected. See "Item 5. Operating and Financial Review and Prospects." OUR PROFITABILITY IS AFFECTED BY AVERAGE SELLING PRICES WHICH TEND TO DECLINE. Decreases in the average selling prices of our test and assembly services can have a material adverse effect on our profitability. The average selling prices of test and assembly services have declined historically, with assembly services in particular experiencing severe pricing pressure. This pricing pressure for test and assembly services is likely to continue. Our ability to maintain or increase our profitability will continue to be dependent, in large part, upon our ability to offset decreases in average selling prices by improving production efficiency, increasing unit volumes tested or assembled, or by shifting to higher margin test and assembly services. If we are unable to do so, our business, financial condition and results of operations could be materially adversely affected. WE DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES. We are dependent on a small group of customers for substantially all of our net revenues. Our ten largest customers accounted for 85.6%, 79.8% and 78.8% of our net revenues in 2001, 2002 and 2003, respectively. In the year ended December 31, 2003, our three largest customers, Analog Devices, Broadcom and Marvell, each represented in excess of 10% of our net revenues and in the aggregate represented 57.2% of our net revenues. In 2001, 2002 and 2003, 78.4%, 80.8% and 81.4%, respectively, of our net revenues came from customers based in the United States. We anticipate that for the foreseeable future our ten largest customers will continue to account for most of our net revenues and that we will continue to be significantly dependent on net revenues from customers based in the United 8 States. Our ability to retain these customers, as well as other customers and to add new customers is important to the ongoing success of our company. The loss of one or more of our key customers, or reduced orders from any of our key customers, could have a material adverse effect on our business, financial condition and results of operations. See "Item 4. Information on Our Company - Customers." DECISIONS BY OUR INTEGRATED DEVICE MANUFACTURER, OR IDM, CUSTOMERS TO CURTAIL OUTSOURCING MAY ADVERSELY AFFECT OUR COMPANY. Historically, we have been dependent on the trend in outsourcing of test and assembly services by IDMs. Our IDM customers continually evaluate our services against their own in-house test and assembly services. As a result, at any time, IDMs may decide to shift some or all of their outsourced test and assembly services to internally sourced capacity. Any such shift or a slowdown in this trend of outsourcing test and assembly services is likely to adversely affect our business, financial condition and results of operations. In a downturn in the semiconductor industry, IDMs may respond by shifting some outsourced test and assembly services to internally serviced capacity on a short term basis. This would have a material adverse effect on our business, financial condition and results of operations, especially during a prolonged industry downturn. OUR CUSTOMERS ARE NOT CONTRACTUALLY OBLIGATED TO BUY OUR SERVICES OR PRODUCTS AND DO NOT PLACE ORDERS IN ADVANCE. WE DO NOT HAVE SIGNIFICANT BACKLOG. Almost none of our customers are obligated, pursuant to any contractual commitment or otherwise, to purchase any minimum amount of our test or assembly services or to place orders far in advance or to provide us with binding forecasts for any period. As a result, we have no significant backlog. The lack of significant backlog makes it difficult for us to forecast our net revenues for any future period. We expect that in the future, net revenues in any quarter will continue to be substantially dependent on orders placed within that quarter. Moreover, all of our customers operate in the cyclical semiconductor industry and have varied, and may continue to vary, order levels significantly from period to period. In addition, our customers are generally not responsible for any unused raw materials that result from a forecast exceeding actual orders. Accordingly, we cannot assure you that any of our customers will continue to place orders with us in the future at the same levels as they had in prior periods. WE MAY NOT BE ABLE TO DEVELOP OR ACCESS LEADING TECHNOLOGY WHICH MAY AFFECT OUR ABILITY TO COMPETE EFFECTIVELY. The semiconductor test and assembly market is characterized by rapid technological change. We must be able to offer our customers test and assembly services based upon the most advanced technology. This requirement could result in significant capital expenditures in the future. Advances in technology typically lead to rapid and significant price declines and decreased margins for older package types and may also affect demand for test services. Technology advances could also cause our test or assembly capabilities to be less competitive with new technologies and, in certain cases, to be obsolete. We periodically review our equipment for obsolescence and impairment. If we determine that, due to technology advances, reduced demand in certain end markets or otherwise, the anticipated future usage of any of our equipment has been diminished, we will write-down such equipment. In 2001 and 2002, we wrote-down $26.9 million and $15.4 million of equipment, respectively. If we fail to develop advanced test and assembly services or to access those developed by others in a timely manner, we could lose existing customers or miss potential customers demanding these advanced services. Developing new technology may result in longer sales cycles and product implementations, which may cause revenue and operating income to fluctuate or fail to meet expectations. Also, we would miss the opportunity to benefit from the higher average selling prices which are derived from newer and emerging test and assembly services. In addition, the choice of test equipment is important to us because obtaining the wrong test equipment or failing to understand market 9 requirements will make us less competitive and will lower our asset utilization. In order to remain competitive, we must be able to upgrade or migrate our test equipment to respond to changing technological requirements. THE TESTING AND ASSEMBLY PROCESS IS COMPLEX AND OUR PRODUCTION YIELDS AND CUSTOMER RELATIONSHIPS MAY SUFFER FROM DEFECTS OR MALFUNCTIONS IN OUR TESTING EQUIPMENT OR DEFECTIVE PACKAGES AND THE INTRODUCTION OF NEW PACKAGES. Semiconductor testing and assembly are complex processes that require significant technological and process expertise. Semiconductor testing involves sophisticated testing equipment and computer software. We develop computer software which is used to test our customers' semiconductors. We also develop conversion software programs which enable us to test semiconductors on different types of testers. Similar to most software programs, these software programs are complex and may contain programming errors or "bugs." In addition, the testing process is subject to operator error by our employees who operate our testing equipment and related software. Any significant defect in our testing or conversion software, malfunction in our testing equipment or operator error could reduce our production yields, damage our customer relationships and materially harm our business. The assembly process is complex and involves a number of precise steps. Defective packages primarily result from: - contaminants in the manufacturing environment; - human error; - equipment malfunction; - defective raw materials; or - defective plating services. These and other factors have, from time to time, contributed to lower production yields. They may do so in the future, particularly as we expand our capacity or change our processing steps. In addition, to be competitive, we must continue to expand our offering of packages. Our production yields on new packages typically are significantly lower than our production yields on our more established packages. Our failure to maintain high standards or acceptable production yields, if significant and prolonged, could result in lost customers, increased costs of production, delays, substantial amounts of returned goods and claims by customers relating thereto. Any of these problems could have a material adverse effect on our business, financial condition and results of operations. WE MAY BE UNABLE TO OBTAIN TESTING OR ASSEMBLY EQUIPMENT WHEN WE REQUIRE IT. The semiconductor test and assembly business is capital intensive and requires investment in expensive capital equipment manufactured by a limited number of suppliers, which are located principally in the United States, Singapore, Europe, Korea, and Japan. The market for capital equipment used in semiconductor testing is characterized, from time to time, by intense demand, limited supply and long delivery cycles. Our operations and expansion plans are highly dependent upon our ability to obtain a significant amount of such capital equipment from a limited number of suppliers. If we are unable to obtain certain equipment, including testers and wire bonders, in a timely manner, we may be unable to fulfill our customers' orders which would negatively impact our business, financial condition and results of operations. 10 Generally, we have no binding supply agreements with any of our suppliers and we acquire our equipment on a purchase order basis, which exposes us to substantial risks. For example, increased levels of demand for the type of capital equipment required in our business may cause an increase in the price of such equipment and may lengthen delivery cycles, which could have a material adverse effect on our business, financial condition and results of operations. In addition, adverse fluctuations in foreign currency exchange rates, particularly the Japanese yen, could result in increased prices for certain equipment purchased by us, which could have a material adverse effect on our business, financial condition and results of operations. WE EXPECT TO INCUR SIGNIFICANT CAPITAL EXPENDITURES IN THE FUTURE AND THEREFORE MAY REQUIRE ADDITIONAL FINANCING IN THE FUTURE. Our capital expenditures are largely driven by the demand for our services. Accordingly, we cannot accurately estimate our capital expenditure beyond the next quarter which may result in additional capital expenditures beyond previously anticipated. Our capital expenditures increased from $134.7 million in 2002 to $231.9 million in 2003 primarily as a result of an increase in demand for our services. In 2004, we currently expect that our capital expenditures will be between $200 million and $250 million. To grow our business, we will need to increase our test and assembly capacity as well as replace existing equipment from time to time. This will require substantial capital expenditures for additional equipment and further expenditure to recruit and train new employees. These expenditures will likely be made in advance of increased sales. We cannot assure you that our net revenues will increase after these expenditures. Our failure to increase our net revenues after these expenditures could have a material adverse effect on our business, financial condition and results of operations. We may need to obtain additional debt or equity financing to fund our capital expenditures. Additional equity financing may result in dilution to the holders of ADSs and ordinary shares. Additional debt financing may be required which, if obtained, may: - limit our ability to pay dividends or require us to seek consents for the payment of dividends; - increase our vulnerability to general adverse economic and industry conditions; - limit our ability to pursue our growth plan; - require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and - limit our flexibility in planning for, or reacting to, changes in our business and our industry. We cannot assure you that we will be able to obtain the additional financing on terms that are acceptable to us or at all. WE HAVE ENTERED INTO A NUMBER OF FINANCING ARRANGEMENTS THAT IMPOSE LIMITATIONS ON OUR ACTIONS. Under our convertible notes due 2007 and 2008, there are certain restrictions on our ability to undertake a consolidation or merger with another entity and to create security interests upon the whole or any part of our property or assets and the property and assets of our material subsidiaries. Our medium term note program, or MTN Program, limits our ability to pay dividends while the interest on the notes is unpaid and to create security interests to secure our indebtedness. 11 As a result of these limitations, we may encounter difficulties obtaining the required consents from our existing lenders to conduct our business, in particular, to obtain the necessary financing to maintain or grow our business, on a timely basis or at all. This could have a material adverse effect on our business, financial condition and results of operations. WE ARE DEPENDENT ON RAW MATERIALS SUPPLIERS AND GENERALLY DO NOT HAVE ANY LONG-TERM SUPPLY CONTRACTS WITH THEM. We obtain the materials we need for our assembly services from outside suppliers. We purchase all of our materials on a purchase order basis. We generally do not enter into long-term contracts with any of our suppliers. If we cannot obtain sufficient quantities of materials at reasonable prices or if we are not able to pass on higher materials costs to our customers, this could have a material adverse effect on our business, financial condition and results of operations. WE MAY NOT BE SUCCESSFUL IN OUR ACQUISITIONS AND INVESTMENTS IN OTHER COMPANIES AND BUSINESSES. As part of our growth strategy, from time to time, we may make acquisitions and investments in companies or businesses. For example, on February 10, 2004, we signed an Agreement and Plan of Merger and Reorganization with ChipPAC, Inc., or ChipPAC, pursuant to which a newly formed, wholly owned subsidiary of ours will merge with ChipPAC and ChipPAC will become our wholly owned subsidiary. In 2003, we set up a new manufacturing facility in Shanghai, China as a first step of our strategic plan to establish a significant manufacturing presence in China to service our existing international customers as well as engage the indigenous Chinese foundries and design houses. In 2001, we acquired a majority interest in Winstek Semiconductor Corporation, or Winstek, to enhance our position in the Taiwanese market. The success of our acquisitions and investments depends on a number of factors, including: - our ability to identify suitable opportunities for investment or acquisition; - whether we are able to reach an acquisition or investment agreement on terms that are satisfactory to us or at all; - the extent to which we are able to exercise control over the acquired company; - the economic, business or other strategic objectives and goals of the acquired company compared to those of our company; and - our ability to successfully integrate the acquired company or business with our company. If we are unsuccessful in our acquisitions and investments, our financial condition may be materially adversely affected. WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY. The independent semiconductor test and assembly service industry is very competitive and diverse and requires us to be capable of testing increasingly complex semiconductors as well as bringing the most technologically advanced packages to market as quickly as our competitors. The industry comprises both large multi-national companies and small niche market competitors. We face substantial competition from a number of competitors that are much larger in size than us. These competitors include Advanced Semiconductor Engineering, Inc., Amkor Technology, Inc., ASE Test Limited, ASAT Holdings Limited and Siliconware Precision Industries Co., Ltd. Their facilities are primarily located in Asia. 12 Each of these companies has significant manufacturing capacity, financial resources, research and development operations, marketing and other capabilities and has been in operation for some time. Such companies have also established relationships with many of our current or potential customers. Some of our competitors have established testing facilities in North America and may commence independent testing operations in Asia. These activities would compete directly with our activities. We also face competition from the internal capabilities and capacity of many of our current and potential IDM customers. Many IDMs have greater financial and other resources than we do and may rely on internal sources for test and assembly services for a number of reasons including due to: - their desire to realize higher utilization of their existing test and assembly capacity; - their unwillingness to disclose proprietary technology; - their possession of more advanced testing or assembly technologies; and - the guaranteed availability of their own test and assembly capacity. We cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our customers will not rely on internal sources for test and assembly services, or that our business, financial condition and results of operations will not be adversely affected by such increased competition. OUR INTELLECTUAL PROPERTY IS IMPORTANT TO OUR ABILITY TO SUCCEED IN OUR BUSINESS BUT MAY BE DIFFICULT TO PROTECT. Our ability to compete successfully and achieve future growth in net revenues will depend, in part, on our ability to develop and to protect our intellectual property and the intellectual property of our customers. We seek to protect proprietary information and know-how through patents, the use of confidentiality and non-disclosure agreements and limited access to and distribution of proprietary information. As of February 15, 2004, we held a total of 43 patents in Singapore and the United States. We have also filed 56 patent applications in various countries as appropriate. We cannot assure you that any of our filed applications for patents will be granted, or, if granted, will not be challenged, invalidated or circumvented or will offer us any meaningful protection. Further, we cannot assure you that the Asian countries in which we market our products will protect our intellectual property rights to the same extent as the United States. Additionally, we cannot assure you that our competitors will not develop, patent or gain access to similar know-how and technology, or reverse engineer our assembly services, or that any confidentiality and non-disclosure agreements upon which we rely to protect our trade secrets and other proprietary information will be adequate protection. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations. We have licenses to use third party patents, patent applications and other technology rights, as well as trademark rights, in the operation of our business. To the extent these licenses are not perpetual and irrevocable, we believe that these licenses will be renewable under normal commercial terms upon their expiration. However, we may be unable to utilize the technologies under these licenses if they are not extended or otherwise renewed or if any of these licenses are terminated by the licensor due to our uncured breach, if any, or in the event of our bankruptcy, as the case may be, which could cause us to incur substantial liabilities and to suspend the packaging services and processes that utilized these technologies. Even if we are able to renew these arrangements, no assurances can be made that they will be on the same terms as currently exist. 13 WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES. Our ability to compete successfully will depend, in part, on our ability to operate without infringing the proprietary rights of others. When we become aware of the valid intellectual property of others that may pertain to or affect our business, we will attempt to either design around such intellectual property license or cross-license, or otherwise obtain rights that we feel are required. However, we have no means of ascertaining what patent applications have been filed in the United States until they are granted or, for certain patent applications, until they are published. In addition, we may not be aware of the intellectual property rights of others or be familiar with the laws governing such rights in certain countries in which our products are or may be sold. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights increases, we believe that companies in our industry will face more frequent patent infringement claims and other intellectual property claims brought by third parties. In the event that any valid claim is made against us, we could be required to: - stop using certain processes; - cease manufacturing, using, importing or selling infringing packages; - pay substantial damages; - develop non-infringing technologies; or - attempt to acquire licenses to use the infringed technology. It is the nature of the semiconductor industry that, from time to time, we may receive communications alleging that we have infringed intellectual property rights of others. We may also, from time to time, receive from customers, requests for indemnification against pending or threatened infringement claims brought against such customers. We do not currently have any material third party allegations of or claims for indemnification against intellectual property infringement. However, we cannot assure you that any future allegations or requests for indemnification will not have a material adverse effect on our business or financial condition. Although, in the above instances and in the future we may seek licenses from or enter into agreements with third parties covering the intellectual property that we are allegedly infringing, we cannot guarantee that any such licenses could be obtained on acceptable terms, if at all. We may also have to commence lawsuits against companies who infringe our intellectual property rights. Such claims could result in substantial costs and diversion of our resources. Should any of the disputes described above occur, our business, financial condition and results of operations could be materially adversely affected. SINGAPORE TECHNOLOGIES SEMICONDUCTORS PTE LTD CONTROLS OUR COMPANY AND THEREBY MAY DELAY, DETER OR PREVENT ACTS THAT WOULD RESULT IN A CHANGE OF CONTROL. On December 29, 2003, Singapore Technologies Pte Ltd transferred the ownership of all our ordinary shares held by Singapore Technologies Pte Ltd to its wholly owned subsidiary, Singapore Technologies Semiconductors Pte Ltd. As of February 15, 2004, Singapore Technologies Semiconductors Pte Ltd beneficially owned approximately 66.15% of our ordinary shares (including 5.27% of shares lent to Deutsche Bank AG and Morgan Stanley & Co. International Limited pursuant to a Global Master Securities Lending Agreement in connection with the issue of convertible notes due 2008 by ST Assembly Test Services Ltd dated October 29, 2003 executed by each of Deutsche Bank AG and Morgan Stanley & Co. International Limited). As of February 15, 2004, Temasek Holdings (Private) Limited, or Temasek Holdings, the principal holding company through which the corporate investments of the Government of 14 Singapore are held, directly owned approximately 81.3% of the ordinary shares of Singapore Technologies Pte Ltd. The remaining 18.7% of the ordinary shares of Singapore Technologies Pte Ltd is owned by Singapore Technologies Holdings Pte Ltd which is in turn 100% owned by Temasek Holdings. Singapore Technologies Holdings Pte Ltd also owns all of the 50,000 issued preference shares in Singapore Technologies Pte Ltd. As a result, Singapore Technologies Pte Ltd and Temasek Holdings are able to exercise direct or indirect control over matters requiring shareholder approval. Matters that typically require shareholder approval include, among other things: - the election of directors; - our merger or consolidation with any other entity; - any sale of all or substantially all of our assets; and - the timing and payment of dividends. This concentration of ownership may delay, deter or prevent acts that would result in a change of control, which may be against the interests of holders of our ADSs and ordinary shares. In the event that the merger with ChipPAC is completed, we anticipate that Singapore Technologies Semiconductors Pte Ltd's beneficial ownership of our ordinary shares would be reduced to approximately 36%. We further anticipate that Singapore Technologies Semiconductors Pte Ltd will remain our largest shareholder and will have significant influence over matters requiring the approval of our shareholders. A CHANGE IN CONTROL OR REORGANIZATION OF OUR COMPANY COULD RESULT IN A BREACH OF CERTAIN OF OUR AGREEMENTS. Our convertible notes due 2007 and 2008 and MTN Program provide that noteholders may require us to redeem the notes if any person other than Singapore Technologies Pte Ltd or its affiliates holds, directly or indirectly, more than 50% of our issued share capital. From time to time, we may agree to similar terms in our material financing contracts or other arrangements. Under our lease agreement with the Housing and Development Board, or HDB, relating to the lease of facilities at 5 Yishun Street 23, Singapore 768422, we require the consent of the HDB to effect any form of reorganization of our company, including a merger with another company such as our proposed merger with ChipPAC. We cannot assure you that Singapore Technologies Pte Ltd will not directly or indirectly reduce its shareholding in our company and no other person will acquire more than 50% of our issued share capital or that we will be able to obtain HDB's consent upon such reorganization of our company. If this were to occur, we may be in breach of these agreements and our financial condition may be materially adversely affected. WE MAY HAVE CONFLICTS OF INTEREST WITH OUR AFFILIATES. In the past, a substantial portion of our financing, as well as our net revenues, have come from our affiliates, and we have paid a management fee to Singapore Technologies Pte Ltd for certain services. We will continue to have certain contractual and other business relationships and may engage in material transactions with the Government of Singapore and companies within the Singapore Technologies Group (including Chartered Semiconductor Manufacturing Ltd, or Chartered, which is a major customer). Although all new material related party transactions generally require the approval of the Audit Committee and in certain circumstances may also require separate approval of a majority of our Board of Directors, circumstances may arise in which the interests of our affiliates may conflict with the interests of our other shareholders. In addition, both EDB Investments Pte Ltd, or EDBI (one of our principal shareholders), Singapore Technologies Pte Ltd and each of their affiliates make investments in various companies. They have invested in the past, and may invest in the future, in entities that compete with us. For 15 example, affiliates of Singapore Technologies Pte Ltd have investments in United Test & Assembly Center Ltd, a Singapore-based provider of semiconductor assembly and testing services for semiconductor logic/ASIC and memory products. In the context of negotiating commercial arrangements with affiliates, conflicts of interest have arisen in the past and may arise, in this or other contexts, in the future. We cannot assure you that any conflicts of interest will be resolved in our favor. See "Item 7. Major Shareholders and Related Party Transactions." OUR OUTSTANDING INDEBTEDNESS INCREASED SUBSTANTIALLY WITH THE ISSUANCE OF OUR CONVERTIBLE NOTES DUE 2007 AND 2008 AND WE MAY REQUIRE FINANCING TO FULFILL OUR OBLIGATIONS UNDER OUR CONVERTIBLE NOTES. As of December 31, 2003 we had $358.8 million of long-term debt outstanding, excluding current installments, of which $327.4 million was comprised of our convertible notes due 2007 and 2008, compared to $218.4 million of long-term debt outstanding as of December 31, 2002. As a result, our interest expense and related debt service costs significantly increased from a net interest expense of $5.1 million in 2002 to a net interest expense of $9.2 million in 2003. This increased indebtedness may impact us by: - - making it more difficult for us to obtain additional financing and limiting our financial flexibility as a result of our higher debt to equity ratio; - - increasing our vulnerability to general adverse economic and industry conditions by limiting our flexibility in planning for, or reacting to, changes in the business and the industry in which we operate; - - requiring us to dedicate a substantial portion of our cash flow from operations to payments on this indebtedness, thus reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; - - placing us at a competitive disadvantage relative to our competitors that have less debt; and - - limiting, along with the financial and other restrictive covenants in the indebtedness, our ability to borrow additional funds. In addition, the holders of our convertible notes due 2007 and 2008, may in certain circumstances, including a change in control, or on March 18, 2005 in respect of the convertible notes due 2007 and on November 7, 2007 in respect of the convertible notes due 2008, require us to redeem all or a portion of the holders' convertible notes. If such an event were to occur, or at maturity of our convertible notes, we cannot assure you that we will have sufficient funds or would be able to arrange financing to make the required purchase or redemption. We may be required to refinance our debt in order to make such payments. We may not be able to obtain such financing on terms that are acceptable to us or at all. If we are unable to obtain adequate financing to repurchase or redeem the convertible notes, we will be in default under the terms of the convertible notes. WE DEPEND ON CERTAIN KEY EMPLOYEES AND THE LOSS OF CERTAIN OF THEM COULD ADVERSELY AFFECT OUR BUSINESS. Our future performance will largely depend on our ability to attract and retain key technical, customer support, sales and management personnel. The loss of certain of such persons could have a material adverse effect on our business, financial condition and results of operations. We do not maintain "key man" life insurance. WE NEED A CLEAN ROOM ENVIRONMENT FOR OUR OPERATIONS. Our testing and assembly operations take place in areas where air purity, temperature and humidity are controlled. If we are unable to control our testing or assembly environment, our test or assembly equipment may become nonfunctional or the semiconductors we test and assemble may be defective. See "Item 4. Information on Our 16 Company-B. Business Overview-Quality Control." If we experience prolonged interruption in our operations due to problems in the clean room environment, this could have a material adverse effect on our business, financial condition and results of operations. OUR FAILURE TO COMPLY WITH CERTAIN ENVIRONMENTAL REGULATIONS COULD REQUIRE US TO SPEND ADDITIONAL FUNDS AND COULD SERIOUSLY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATION. We are subject to a variety of laws and regulations in the countries in which we have operations, relating to the use, storage, discharge and disposals of chemical by-products of, and water used in, our packaging process. While we believe that we are currently in compliance with such laws and regulations, failure to comply with such laws and regulations in the future could subject us to liabilities that may have an adverse effect on our financial condition and results of operations. A FIRE OR OTHER CALAMITY AT ONE OF OUR FACILITIES COULD ADVERSELY AFFECT OUR COMPANY. We conduct our testing and assembly operations at a limited number of facilities. A fire or other calamity resulting in significant damage at any of these facilities would have a material adverse effect on our business, financial conditions and results of operations. While we maintain insurance policies covering losses, including losses due to fire, which we consider to be adequate, we cannot assure you that it would be sufficient to cover all of our potential losses. Our insurance policies cover our buildings, machinery and equipment. OUR RESEARCH AND DEVELOPMENT INVESTMENTS MAY NOT YIELD PROFITABLE AND COMMERCIALLY VIABLE PACKAGES OR TEST SERVICES AND THUS WILL NOT NECESSARILY RESULT IN INCREASES IN REVENUES FOR OUR COMPANY. We invest significant resources in research and development. Our research and development expenses were approximately $15.2 million in 2001, $18.9 million in 2002 and $15.3 million in 2003. However, our research and development efforts may not yield commercially viable packages or test services. The qualification process for new packages and test services is conducted in various stages which may take one or more years to complete, and during each stage there is a substantial risk that we will have to abandon a potential package or test service which is no longer marketable and in which we have invested significant resources. In the event we are able to qualify new packages or test services, a significant amount of time will have elapsed between our investment in new packages or test services and the receipt of any related revenues. WE MAY BE AFFECTED BY SIGNIFICANT FLUCTUATIONS IN EXCHANGE RATES. Our financial statements are prepared in U.S. dollars. Our net revenues are generally denominated in U.S. dollars and our operating expenses are generally incurred in U.S. dollars and Singapore dollars. Our capital expenditures are generally denominated in U.S. dollars, Japanese yen, Singapore dollars and other currencies. As a result, we are affected by fluctuations in foreign currency exchange rates among the U.S. dollar, the Japanese yen, the Singapore dollar and other currencies. For example, substantially all of our revenues and the majority of our cost of revenues are denominated in U.S. dollars. In 2003, if the Singapore dollar had strengthened against the U.S. dollar by 2.0%, our cost of revenues would have increased by approximately 0.6%. Likewise, if the Singapore dollar had weakened against the U.S. dollar by 2.0%, our cost of revenues would have decreased by approximately 0.6%. We are particularly affected by fluctuations in the exchange rate between the U.S. dollar and the Singapore dollar. Any significant fluctuation in currency exchange rates may harm our company. OUR ABILITY TO MAKE FURTHER INVESTMENTS IN OUR SUBSIDIARIES MAY BE DEPENDENT ON REGULATORY APPROVALS. Our subsidiaries may be dependent on us for future equity-related financing, and any capital contribution by us to our subsidiaries may require the approval of the relevant authorities in the jurisdiction in which the subsidiary is incorporated. We may not be able to obtain any such approval in the future in a timely manner or at all. 17 BECAUSE A SIGNIFICANT PORTION OF WINSTEK'S BUSINESS AND OPERATIONS ARE LOCATED IN TAIWAN, A SEVERE EARTHQUAKE COULD SEVERELY DISRUPT THE NORMAL OPERATION OF WINSTEK'S BUSINESS AND ADVERSELY AFFECT OUR EARNINGS. Taiwan is susceptible to earthquakes. For example, on March 31, 2002, Taiwan experienced a severe earthquake that caused significant property damage and loss of life, particularly in central Taiwan. This earthquake damaged production facilities and adversely affected the operations of many companies involved in the semiconductor and other industries. Our 55%-owned subsidiary, Winstek, experienced no structural damage to its facilities and no damage to its machinery and equipment as a result of this earthquake. There were, however, interruptions to our production schedule primarily as a result of power outage caused by the earthquake. The production facilities of many of our suppliers and customers and providers of complementary semiconductor manufacturing services, including foundries, are located in Taiwan. If our customers are affected, it could result in a decline in the demand for our testing and packaging services. If our suppliers and providers of complementary semiconductor manufacturing services are affected, our production schedule could be interrupted or delayed. As a result, a major earthquake in Taiwan could severely disrupt the normal operation of business, in particular Winstek's business, and may have a material adverse effect on our financial condition and results of operations. TERRORIST ATTACKS AND OTHER ACTS OF VIOLENCE OR WAR MAY AFFECT THE MARKETS ON WHICH OUR SECURITIES TRADE, THE MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR PROFITABILITY. Terrorist attacks or war may negatively affect our operations. These attacks or armed conflicts may directly impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks or war may make travel and the transportation of our supplies and products more difficult and expensive. Political and economic instability in some regions of the world may also result and could negatively impact our business. The consequences of any of these armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business. RISK FACTORS RELATING TO OUR PROPOSED MERGER WITH CHIPPAC OUR PROPOSED MERGER WITH CHIPPAC MAY NOT BE SUCCESSFUL. On February 10, 2004, we signed an Agreement and Plan of Merger and Reorganization with ChipPAC pursuant to which a newly-formed wholly owned subsidiary of ours will merge with ChipPAC and ChipPAC will become our wholly owned subsidiary. Consummation of the proposed merger is subject to certain conditions, including approval of our shareholders and the shareholders of ChipPAC, expiration of the Hart-Scott-Rodino antitrust waiting period in the United States, receipt of a private letter ruling from the U.S. tax authorities or opinions from nationally recognized law firms relating to the tax treatment of the merger for ChipPAC stockholders and other customary conditions, which we cannot assure you will be satisfied or waived soon or at all. If we are delayed or unable to satisfy the conditions to closing, the proposed merger may be delayed or may not close. We cannot assure you that the combined company will be successful in its integration efforts and/or will be able to generate the results of operations or maintain or improve its financial condition as we currently anticipate. In particular, we cannot assure you that: - the increase in scale from the combined operations will benefit our business as currently anticipated; - we will be able to provide the combined range of services that are currently provided by us and ChipPAC; - we will be able to maintain or strengthen our position in the respective end markets we or ChipPAC currently serve; 18 - we will be able to maintain or grow our customer, supplier or strategic partner bases; - our operations will be successful in the future; - we will be able to maintain or strengthen our balance sheet; - the merger will be accretive to our financial results or that we will achieve any synergies, including revenue and cost synergies, from the merger; and - we will be able to successfully integrate our employees and operations with those of ChipPAC. If the merger is unsuccessful or we do not achieve the results of operations as currently planned, our business, results of operations and financial condition will likely be materially adversely affected. FAILURE TO RECEIVE THE PRIVATE LETTER RULING FROM THE IRS MAY DELAY OR PREVENT THE MERGER. A condition to closing the merger is receipt by us and ChipPAC of the private letter ruling from the IRS or opinions from nationally recognized law firms that the exchange of ChipPAC Class A common stock for our ADSs in the merger will not result in the recognition of gain under Section 367 of the Internal Revenue Code. We and ChipPAC have submitted our request to the IRS for the private letter ruling. In the event that neither the private letter ruling nor the opinions can be obtained, the merger agreement may be terminated. There can be no assurance that the IRS will issue the private letter ruling prior to our extraordinary general meeting and the ChipPAC special meeting to approve the merger, if at all. If the IRS does not issue the private letter ruling in a timely manner, or advises us and ChipPAC that it will not issue the private letter ruling, it is unlikely that nationally recognized law firms would be able to give us and ChipPAC opinions in a timely manner, if at all. Consequently, assuming all other conditions to closing have been satisfied or waived, including the requisite approvals of our shareholders and ChipPAC stockholder approvals, consummation of the merger may be materially delayed and/or the merger agreement may be terminated. Any delay of the consummation of the merger could prevent the combined company from realizing the expected benefits of the merger and could materially harm its business, financial results and prospects. In the event that neither the private letter ruling nor the opinion can be obtained, the merger agreement may be terminated. THE COMBINED COMPANY MAY FACE CHALLENGES IN INTEGRATING CHIPPAC WITH US AND, AS A RESULT, MAY NOT REALIZE THE EXPECTED BENEFITS OF THE MERGER. The combined company may not be successful in integrating our business and with that of ChipPAC's. Integrating the two companies' operations and personnel will be a complex process. The integration may not be completed rapidly and may not achieve the anticipated benefits of the merger. The successful integration of the two companies' businesses will require, among other things, the following: - integration of the two companies' products and services, sales and marketing, information and software systems and other operations; - retention and integration of management and other employees; - achievement of the expected cost savings; - coordination of ongoing and future research and development efforts and marketing activities; 19 - retention of existing customers of both companies and attraction of additional customers; - retention of strategic partners of each company and attraction of new strategic partners; - developing and maintaining uniform standards, controls, procedures and policies; - minimization of disruption of the combined company's ongoing business and distraction of its management; and - limiting expenses related to integration. The successful integration of the two companies will involve considerable risks and may not be successful. These risks include: - the impairment of relationships with employees, customers and business partners; - the potential disruption of the combined company's ongoing business and distraction of its management; - the difficulty of incorporating acquired technology and rights into the products and service offerings of the combined company; and - unanticipated expenses and potential delays related to the integration of us and ChipPAC. The combined company may not succeed in addressing these risks or any other problems encountered in connection with the merger. The diversion of the attention of management and any difficulties encountered in the process of combining us and ChipPAC could cause the disruption of, or a loss of momentum in, the activities of the combined company's business. Further, the process of combining ChipPAC's business with our business could negatively affect employee morale and our ability to retain some key employees of either company after the merger. If the anticipated benefits of the merger are not realized or the combined company is unsuccessful in addressing the risks related to the integration, the combined company's business, financial condition and results of operations may be negatively impacted. In addition, we intend, after the merger, to develop new products and services that combine our assets with those of ChipPAC. This may result in longer sales cycles and product implementations, which may cause revenue and operating income to fluctuate and fail to meet expectations. WHETHER OR NOT THE MERGER IS COMPLETED, THE ANNOUNCEMENT OF THE PROPOSED MERGER MAY CAUSE DISRUPTIONS IN OUR BUSINESS WHICH COULD HAVE MATERIAL ADVERSE EFFECTS ON OUR BUSINESS AND OPERATIONS. Whether or not the merger is completed, our and ChipPAC's customers, suppliers or other strategic partners in response to the announcement of the merger, may terminate or cancel their existing relationships with us or ChipPAC, or delay or defer decisions to enter into or to renew those arrangements, which could have a material adverse effect on the business of either company and, if the merger is completed, the business of the combined company. Similarly, current and prospective employees of ours or ChipPAC's may experience uncertainty about their future roles with the combined company which may adversely affect the ability of the combined company to attract and retain key management, sales, marketing and technical personnel. 20 WE EXPECT TO INCUR SIGNIFICANT TRANSACTION COSTS IN CONNECTION WITH THE MERGER WHICH COULD ADVERSELY AFFECT THE FINANCIAL RESULTS OF THE COMBINED COMPANY. We expect to incur transaction costs of approximately $10.0 million (excluding ChipPAC's costs) in connection with the merger. If the benefits of the merger do not exceed the associated costs, including costs associated with integrating the two companies and the dilution to our shareholders resulting from the issuance of our ADSs in connection with the merger, the combined company's financial results, including earnings per ordinary share and per ADS, could be materially harmed. WE MAY NOT BE ABLE TO ENTER INTO A MERGER OR BUSINESS COMBINATION WITH ANOTHER PARTY AT A FAVORABLE PRICE BECAUSE OF RESTRICTIONS IN THE MERGER AGREEMENT. Provisions in the merger agreement prohibit each of us and ChipPAC, subject to certain exceptions, from soliciting, initiating, encouraging or entering into certain other transactions such as a merger, sale of assets or other business combination outside the ordinary course of business with any other third parties. These provisions may discourage other companies from proposing transactions that may be favorable to us and our shareholders. As a result, if the merger is not consummated, we may be at a disadvantage to our competitors. WE MAY RECOGNIZE CHARGES TO EARNINGS RESULTING FROM THE APPLICATION OF THE PURCHASE METHOD OF ACCOUNTING. In accordance with United States generally accepted accounting principles, the combined company will account for the merger using the purchase method of accounting, which will result in charges to earnings. Under purchase accounting, we will record the market value of our ADSs issued in connection with the merger, the fair market value of the options to purchase ChipPAC Class A common stock that will be substituted with options to purchase our ordinary shares and the amount of direct transaction costs, as the cost of acquiring the business of ChipPAC. The combined company will allocate these total costs to ChipPAC's net tangible assets, amortizable intangible assets, intangible assets with indefinite lives and in-process research and development based on their fair values as of the date of completion of the merger, and record the excess of the purchase price over those fair values as goodwill. The portion of the estimated purchase price allocated to in-process research and development will be expensed by the combined company in the quarter in which the merger is completed. The combined company will incur additional depreciation and amortization expense over the useful lives of certain of the net tangible and intangible assets acquired in connection with the merger. In addition, to the extent the value of these assets, including goodwill or intangible assets with indefinite lives, becomes impaired, the combined company may be required to incur material charges relating to the impairment of those assets. These depreciation, amortization, in-process research and development and potential impairment charges will decrease the net income of the combined company in the foreseeable future, which could materially impact the combined company's business and results of operations. IF THE COMBINED COMPANY IS UNABLE TO TAKE ADVANTAGE OF OPPORTUNITIES TO MARKET AND SELL OUR AND CHIPPAC'S PRODUCTS AND SERVICES TO THE OTHER'S TRADITIONAL CUSTOMERS, THE COMBINED COMPANY MAY NOT REALIZE SOME OF THE EXPECTED BENEFITS OF THE MERGER. Prior to the merger, we and ChipPAC have each maintained separate and distinct customer bases and business partners specific to their respective businesses. Following the merger, the combined company expects to take advantage of the customer bases of the formerly separate businesses in order to promote and sell the products and services of one company to the traditional customers and business partners of the other company. In the event that the traditional customers and business partners of either ours or ChipPAC are not receptive to the products and services of the other, the combined company may not realize some of the expected benefits of the merger, and the business of the combined company may be harmed. 21 FAILURE TO COMPLETE THE MERGER COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS. Our obligation to consummate the proposed merger is subject to the satisfaction or waiver of a number of closing conditions, including receipt of the private letter ruling from the IRS relating to the U.S. federal income, governmental approvals and shareholder approvals. If the merger is not completed for any reason, we will be subject to a number of material risks, including: - we may be obligated to pay a termination fee of $40 million to the other party if the merger agreement is terminated in certain circumstances; - costs related to the merger, such as legal and accounting fees and a portion of the investment banking fees, must be paid even if the merger is not completed; - benefits that we expect to realize from the merger would not be realized; and - the diversion of our management attention from our day-to-day business and the unavoidable disruption to our respective employees and relationships with customers and suppliers during the period before consummation of the merger may make it difficult for us to regain our financial and market position if the merger does not occur. If we are unsuccessful in addressing these risks, our respective business, financial condition and results of operations may be negatively impacted. NEED FOR GOVERNMENTAL CONSENTS AND APPROVALS MAY PREVENT OR DELAY CONSUMMATION OF THE MERGER. Our and ChipPAC's obligations to consummate the proposed merger are subject to the satisfaction or waiver of a number of closing conditions including, among other things, receipt of all necessary governmental consents and approvals. In particular, the merger is subject to review by the Antitrust Division of the United States Department of Justice and the Federal Trade Commission under the HSR Act. Under this statute, we and ChipPAC are required to make pre-merger notification filings and to await the expiration or early termination of statutory waiting periods and clearance prior to completing the merger. We and ChipPAC are seeking to obtain all such required regulatory clearances prior to the scheduled completion of these transactions. The reviewing authorities may not permit the merger at all or may impose restrictions or conditions on the merger that may seriously harm the combined company if the merger is completed. These conditions could include a complete or partial license, divestiture, spin-off or the holding of separate assets or businesses. While the merger agreement provides that we and ChipPAC must use their reasonable best efforts to obtain all regulatory clearances necessary for the consummation of the merger, either we or ChipPAC may refuse to complete the merger if restrictions or conditions are required by governmental authorities that would require us or ChipPAC to divest any assets or license any technology that, individually or in the aggregate, would have a fair value in excess of $10,000,000 in any manner that would not be commercially reasonable. Any delay in the completion of the merger could diminish the anticipated benefits of the merger or result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the transaction. We and ChipPAC also may agree to restrictions or conditions imposed by antitrust authorities in order to obtain regulatory approval, and these restrictions or conditions could harm the combined company's operations. In addition, during or after the statutory waiting periods, and even after the completion of the merger, governmental authorities could seek to block or challenge the merger as they deem necessary or desirable in the public interest. In addition, in some jurisdictions, a competitor, customer or other third party could initiate a private action under the antitrust laws challenging or seeking to enjoin the merger, before 22 \ or after it is completed. We, ChipPAC or the combined company may not prevail, or may incur significant costs, in defending or settling any action under such antitrust laws. ITEM 4. INFORMATION ON OUR COMPANY A. HISTORY AND DEVELOPMENT OF OUR COMPANY ST Assembly Test Services Ltd was incorporated in Singapore as a limited liability company on October 31, 1994 and began operations in January 1995. In February 2000, we completed our initial public offering. Our ordinary shares are listed on the Singapore Exchange Securities Trading Limited or SGX-ST (SGX-ST: ST Assembly) and our ADSs are quoted on the Nasdaq National Market or Nasdaq (NASDAQ: STTS). Our registered office is at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore, Telephone: (65) 6824 7888, Facsimile: (65) 6822 7822, website: www.stts.com and our agent for service in the United States is the current Company Secretary of ST Assembly Test Services, Inc., 1768 McCandless Drive, Milpitas, CA. 95035, United States of America, Telephone: (1 408) 586-0600 Fax: (1 408) 586-0601. Our principal place of operations is in Singapore and our global operations are mainly carried out in the United States, United Kingdom, Japan, Germany, Taiwan and China. For information concerning the proposed merger of our company with ChipPAC, see "Item 10. Material Contracts." For information on our principal capital expenditures and divestitures, see "Item 5. Operating and Financial Review and Prospects." B. BUSINESS OVERVIEW We are a leading independent provider of a full range of semiconductor test and assembly services, including: - TEST SERVICES: including final testing and wafer probe, on a diverse selection of test platforms, as well as test-related services such as burn-in process support, reliability testing, thermal and electrical characterization, dry pack and tape and reel; - ASSEMBLY SERVICES: for leaded and array packages, as well as assembly related services such as package design and leadframe and substrate design; and - PRE-PRODUCTION AND POST-PRODUCTION SERVICES: such as package, test software and related hardware development and drop shipment services. We are a leader in testing mixed-signal semiconductors, while offering our customers a full range of test and assembly services for most types of semiconductors, including high performance digital semiconductors. We provide these test and assembly services to semiconductor companies which do not have their own manufacturing facilities (fabless companies), vertically integrated device manufacturers (IDMs), and independent semiconductor wafer foundries (foundries). In the year ended December 31, 2003, 52.5% of our net revenues were from test services and 47.5% of our net revenues were from assembly services. Most of our test and assembly services are provided at our main facility in Singapore. We believe that our Singapore location provides us with an ideal stable base. However, we have built, and will continue to consider building or developing, additional facilities in other locations in order to provide our customers with more access to our services. Through our 55%-owned subsidiary, Winstek, we provide test services in Taiwan. Our new Shanghai facility, which 23 became operationally ready in the fourth quarter of 2003, offers wafer probe and final test for mixed signal and high-end digital applications. Our two wholly owned subsidiaries in the United States, ST Assembly Test Services, Inc., or STATS Inc., and STATS FastRamp Test Services, Inc. (formerly FastRamp Test Services, Inc.), or STATS FastRamp, provide sales and marketing, design support, research and development, high-end engineering and pre-production test services and tester rental services to customers in the United States. We also have two package design centers in Arizona and California, in the United States of America. SEMICONDUCTOR INDUSTRY BACKGROUND Semiconductors are critical components used in an increasingly wide variety of applications such as computer systems, communications equipment and systems, automobiles, consumer products and industrial automation and control systems. As performance has increased and size and cost have decreased, the use of semiconductors in these applications has grown significantly. The semiconductor industry is cyclical and, at various times, has experienced significant downturns because of production over-capacity and reduced unit demand causing rapid erosion of average selling prices and low capacity utilization. If demand for semiconductor capacity does not keep pace with the growth of supply, or further declines, our business would be subject to more intense competition and our results of operations may suffer as a result of the resulting downward pricing pressure and capacity underutilization. The industry began experiencing such a downturn in the fourth quarter of 2000 which continued through 2001 and 2002, with a significant recovery only occurring in 2003 with 18.3% growth, based on data released by the Semiconductor Industry Association or SIA. If there is any future downturn in the semiconductor industry, our business, financial condition and results of operations are likely to be materially adversely affected. SEMICONDUCTOR MANUFACTURING PROCESS The production of a semiconductor is a complex process that requires increasingly sophisticated engineering and manufacturing expertise. The production process can be broadly divided into three primary stages: - wafer fabrication, including wafer probe; - assembly of bare semiconductors, or die, into finished semiconductors (referred to as "assembly" or "packaging;" and - final testing of assembled semiconductors. Wafer Fabrication. The wafer fabrication process begins with the generation of a mask defining the circuit patterns for the transistors and interconnect layers that will be formed on the raw silicon wafer. The transistors and other circuit elements are formed by repeating a series of process steps where photosensitive material is deposited onto the wafer. The material is then exposed to light through the mask in a photolithography process and the unwanted material is removed through an etching process, leaving only the desired circuit pattern on the wafer. Wafer Probe. Wafer probe is a process whereby each individual die on the wafer is electrically tested in order to identify the operable semiconductors for assembly. Assembly. Assembly protects the semiconductor, facilitates its integration into electronic systems and enables the dissipation of heat. In the assembly process, the wafer is diced into individual dies that are then attached to a substrate with an epoxy adhesive. Leads on the substrate typically are then connected by extremely fine gold wires to the input/output, or I/O, terminals on the die through the use of automated equipment known as "wire bonders." Each die is then encapsulated in a molding compound, thus forming the package. 24 Final Testing. Final testing is conducted to ensure that the packaged semiconductor meets performance specifications. Final testing involves using complex processes that require the use of sophisticated testing equipment and customized software programs to electrically test a number of attributes of assembled semiconductors, including functionality, speed, predicted endurance, power consumption and electrical characteristics. TRENDS TOWARD OUTSOURCING Historically, IDMs conducted most of the manufacturing process in their own facilities, outsourcing only the lower-technology aspects of the process and keeping advanced or proprietary technology in-house. Fabless semiconductor companies, which concentrated their efforts and resources on the design, marketing and sale of semiconductors, emerged in the mid-1980s. Fabless companies outsource virtually every step of the production process - -fabrication, packaging and testing - to independent companies, allowing them to utilize the latest test and assembly technology without committing significant amounts of capital and other resources to manufacturing. In response to competition from fabless companies, IDMs began utilizing outsourcing as a means of cost-effective access to state-of-the-art technology, faster time to market and lower unit costs. This has enabled IDMs to streamline their operations and consider divestment of existing facilities. Given the IDMs' significant market share in the semiconductor market and increasing comfort with outsourcing advanced technology, this trend presents a significant opportunity for independent test and assembly providers. Several benefits of outsourced test and assembly services continue to drive growth in the industry: Technological sophistication and complexity. The increasing technological complexity of semiconductors, including systems-level semiconductors which integrate multiple functions onto a single semiconductor, has driven the need for increasingly complex test and assembly services able to support these devices. More sophisticated semiconductors require an increasing number of I/Os, higher operating speed, higher thermal dissipation and smaller form-factors. As a result, testing and assembly is increasingly being seen as an enabling technology critical to the overall advancement of semiconductor designs. Independent providers of test and assembly services have now developed extensive and advanced expertise in the area and have dedicated substantial resources toward technological innovation. They are able to spread the cost of development efforts over a broad range of customers and products and offer leading technologies below the internal costs of IDMs. As IDMs have found it difficult to keep pace with test and assembly technology while maintaining a leading position in the general semiconductor industry, they are increasingly relying on independent test and assembly service providers. Time to market. As the semiconductor market becomes increasingly competitive and product life cycles decrease, semiconductor companies are seeking to shorten their time to market. Semiconductor companies frequently do not have the time to optimally develop the necessary in-house test and assembly capabilities to implement these solutions for rapid product rollouts in volume. Instead, semiconductor companies are turning to independent test and assembly service providers to quickly deliver new products to the market. To further accelerate the process, semiconductor companies are also increasingly requiring that test and assembly functions be performed at the same location. Asset utilization. The testing and assembly of semiconductors is a complex process that requires substantial capital investment in specialized equipment and facilities. Faced with shorter product life cycles and more frequent new product introductions, it is becoming more difficult for IDMs to sustain high levels of capacity utilization of their test equipment. Therefore, to maximize allocation of limited resources, reduce capital expenditures and control research and development costs, IDMs are increasingly turning to the outsourcing of test and assembly services. By comparison, independent test and assembly companies can allocate their fixed cost investments across a wider 25 portfolio of customers and products to maximize capacity utilization and extend the useful life of equipment. Additionally, independent providers are able to reduce costs through the realization of economies of scale in their purchasing activities. OUR SERVICES We are in the semiconductor backend outsource business. We offer full backend turnkey services from wafer probe to final test and drop ship. The services we offer are customized to the needs of our individual customers. In 2003, 52.5% of our net revenues were from test services and 47.5% of our net revenues were from assembly services. TEST SERVICES We offer wafer probe and final testing on many different platforms, covering the major test platforms in the industry. Final testing involves using sophisticated test equipment and customized software programs to electronically test a number of attributes of packaged semiconductors for functionality. Wafer probe is the step immediately prior to the assembly of semiconductors and involves electrical testing of the processed wafer for defects. Wafer probe services require similar expertise and testing equipment to that used in final testing, and several of our testers (with the substitution of different handlers or probers are used for wafer probe services). We have invested in state-of-the-art testing equipment that allows us to test a broad variety of semiconductors, especially mixed-signal and high performance digital devices. Mixed-signal Testing. We test a variety of mixed-signal semiconductors, including those used in communications applications such as network routers, switches and interface cards; broadband products such as cable modem set-top boxes; and for wireless telecommunications products such as cellular phones, base stations, WLAN and Bluetooth(TM) devices, personal computer and consumer applications. Bluetooth(TM) is a technology that enables short range wireless communication between different electronic appliances. We are a member of the Bluetooth(TM) Special Interest Group (SIG). We also test mixed-signal semiconductors for computer and consumer components including audio devices, CD-ROM, hard disk drive controllers, DVD players and game consoles. Digital Testing. We test a variety of digital semiconductors, including high performance semiconductors used in PCs, disk drives, modems and networking systems. Specific digital semiconductors tested include digital signal processors, or DSPs, field programmable gate arrays, or FPGAs, microcontrollers, central processing units, bus interfaces, and digital application specific integrated circuits, or ASICs, and application specific standard products, or ASSPs. Memory Testing. We provide wafer probe services covering a limited type of memory devices including static and non-volatile memories. The following table sets forth, for the periods indicated, the percentage of our net revenues from testing services by type of semiconductor.
YEAR ENDED DECEMBER 31 2001 2002 2003 - -------------------------------------- Mixed signal 84.3% 75.9% 82.4% Digital 15.1 23.9 17.5 Memory 0.6 0.2 0.1 - -------------------------------------- Total 100.0% 100.0% 100.0% ======================================
26 Test-Related Services. We offer a variety of additional test-related services, including: - "Burn-in process support." Burn-in is the process of electrically stressing semiconductors, usually at high temperature and voltage, for a period of time long enough to cause the failure of marginal semiconductors. During burn-in process support, we perform an analysis of burn-in rejects in order to determine the cause of failure. - "Reliability testing." Reliability testing is the process of testing a semiconductor to evaluate its life span. It is performed on a sample of devices that have passed final testing. - "Thermal and electrical characterization." Thermal and electrical characterization is the process of testing a semiconductor for performance consistency under thermal and electrical stress. - "Dry pack." Dry pack is the process of baking the semiconductors in order to remove moisture before packing and shipment to customers. - "Tape and reel." Tape and reel is the process of transferring semiconductors from tray or tube into a tape-like carrier on reel format for shipment to customers. Tape and reel is desired for high throughput pick and placement of components. ASSEMBLY SERVICES We offer a broad range of array and leaded packages designed to provide customers with a full range of packaging solutions and full backend turnkey services. Packaging serves to protect the die and facilitate electrical connection and heat dissipation. As part of customer support on assembly services, we also offer complete package design, electrical and thermal simulation, measurement and design of leadframes and substrates. Our current and ongoing investment is in line with our packaging development focus which has primarily been on high-pin count packages system in package modules for surface mount technology, or SMT packages. SMT packages typically incorporate leads or interconnects which are soldered to the surface of the printed circuit board rather than inserted into holes, as is the case in older plated-through-hole, or PTH, technology packages. SMT is typically the preferred technology for most advanced semiconductors. Our SMT packages are divided into three families: standard leadframe, enhanced leadframe and array. The differentiating characteristics of our packages include the size of the package, the number of electrical connections or interconnects the package can support, the means of connection to the printed circuit board and the thermal and electrical characteristics of the package. Standard Leadframe Packages. Standard leadframe packages, which are the most widely recognized package types, are characterized by a semiconductor die encapsulated in a plastic mold compound with metal leads surrounding the perimeter of the package. The semiconductor die is connected to the metal leads by extremely fine gold wires in a process known as wire bonding. We focus on high performance, thin profile and near chip scale leadframe packages. Our standard leadframe packages are used in a variety of applications, including mobile phones, notebook computers and networking systems. 27 The following table summarizes our standard leadframe packages.
NUMBER PACKAGE FORMAT OF LEADS DESCRIPTION TYPICAL APPLICATIONS - -------------------------------------------------------------------------------------------------------- Thin Shrink Small 14-38 Traditional leadframe package with Mobile phone, mass storage, Outline Package or thickness below 1.0mm designed for multimedia and PDA TSSOP logic, analog and mixed signal devices such as Flash, SRAM, EPROM, EEPROM and DRAM Thin Quad Flat Package 32-128 Advanced QFP with thickness of Mobile phone, mass storage or TQFP 1.0mm for use in low profile, space and multimedia constrained applications Low Quad Flat Package 32-208 Advanced QFP with thickness of Mobile phone, mass storage or LQFP 1.4mm for use in low profile, space and multimedia constrained applications Metric Quad Flat 44-240 Traditional QFP designed for ASICs, Access/LAN equipment, Package or MQFP FPGAs and DSPs multimedia and mass storage Plastic Leaded Chip 44-84 Traditional leadframe package PC, access equipment and Carrier or PLCC designed for applications that do not multimedia have space constraints and do not require a high number of interconnects
Enhanced Leadframe Packages. Our enhanced leadframe packages are similar in design to our standard leadframe packages but are generally thinner and smaller and have advanced thermal and electrical characteristics which are necessary for many of the leading-edge semiconductors designed for communications applications. The following table summarizes our enhanced leadframe packages.
NUMBER PACKAGE FORMAT OF LEADS DESCRIPTION TYPICAL APPLICATIONS - ----------------------------------------------------------------------------------------------- Quad Leadless Package 8-68 Lead frame based near chip Mobile phone, PDA, GPS or QLP and multimedia Exposed Pad Quad Flat 48-216 Thermally enhanced QFP with Access/WAN/LAN equipment Package or EPQFP 30% greater thermal dissipation and PC/graphics, than MQFP HDD Exposed Drop-in Heat 48-208 Thermally enhanced QFP with Access/WAN/LAN Sink Quad Flat Package 60% greater thermal dissipation equipment and PC/graphics or EDQFP than MQFP
28
NUMBER PACKAGE FORMAT OF LEADS DESCRIPTION TYPICAL APPLICATIONS - ------------------------------------------------------------------------------------------------------ Drop-in Heat Sink Quad 64-208 Thermally enhanced QFP with Access/WAN/LAN equipment and Flat Package or DQFP 30% greater thermal dissipation PC/graphics than MQFP Exposed Pad Thin Shrink 14-38 Thermally enhanced TSSOP with Mobile Phone, mass storage Small Outline Package or 30% greater thermal dissipation multimedia and PDA EPTSSOP than TSSOP Stacked Die Quad Flat 64-176 Compact multiple die designed for Mobile phone, PDA, GPS, Disk Package or SDQFP space constrained applications drive and multimedia
Array Packages. Our array packages include Ball Grid Array or BGA packages which employ leads, also known as interconnects, on the bottom of the package in the form of small bumps, or balls, in a matrix or array pattern. These BGA packages utilize a plastic laminate or film tape based substrate rather than a leadframe substrate. The BGA format enables a higher density of interconnects within a smaller surface area. BGA packaging was designed to address the need for higher lead counts and smaller package size required by advanced semiconductors used in applications such as portable computers and wireless telecommunications. As the required number of leads on the peripheral sides of the package increased, the lead pitch (which is the distance between leads) decreased. The nearness of one lead to another at very fine pitches resulted in potential electrical shorting problems during the SMT process. This necessitated the development of sophisticated and expensive techniques for producing circuit boards to accommodate the high number of leads at fine pitches. The BGA format solved this problem by employing lead terminals on the bottom of the package in the form of small bumps or balls. These balls can be evenly distributed across the entire bottom surface of the package, allowing greater distance between the individual leads. For the highest lead count devices, the BGA format can be manufactured less expensively and requires less delicate handling. Our BGA packages are typically used in semiconductors that require enhanced performance, including digital signal processors or DSPs, microprocessors and microcontrollers, application-specific integrated circuits or ASICs, FPGAs, memory and PC chip sets. Our BGA packages typically have between 16 and 900 balls. Several of these packages have been developed as Chip Scale Packages or CSPs. The emphasis of these packages is on low profile, small footprint and lightweight characteristics. These are ideal for medium pin- count applications which require dense arrays in very small package sizes such as hand-held wireless equipment, mobile base stations and digital photography. 29 Our BGA packages (including CSPs) are described below:
NUMBER PACKAGE FORMAT OF BALLS DESCRIPTION TYPICAL APPLICATIONS - ----------------------------------------------------------------------------------------------------------- Flip Chip Small Thin PBGA 49-144 CSP BGA with Flip Chip/bump Mobile phone, WAN/LAN FC- stPBGA interconnect, instead of wire equipment bonding Flip Chip BGA 225-1152 BGA with Flip Chip/bump DSP, ASIC, FPGA FC - BGA interconnect instead of wire bonding Tape Chip Scale Package or 81-169 CSP BGA characterized by flex-tape Mobile phone, PDA and TCSP substrate for high density circuits multimedia Stacked Die BGA or 72-144 Compact multiple die designed for Mobile phone, PDA and SDBGA space constrained applications multimedia Tape Enhanced Plastic 208-256 BGA characterized by a flex-tape WAN/LAN equipment and base BGA or TBGA substrate replacing the laminate station substrate Enhanced BGA or EBGA 159-1140 High pin count, thermally enhanced WAN/LAN equipment and base BGA package suitable for high station power applications which utilize heat sinks for thermal dissipation Small Thin Plastic BGA 16-319 Smaller and thinner BGA designed Mobile phone, PDA, GPS and Or stPBGA for applications which are space multimedia constrained and require electrical performance Plastic Ball Grid Array or 169-1152 Electrically enhanced BGA package Access/ LAN equipment, PBGA designed for high I/O replacement PC/graphics and base station Matrix Tape Chip Scale 81-169 Thin (<1.0mm) and highly dense Mobile phone, PDA and Package BGA or TCSP-M CSP BGA using a flexible tape multimedia substrate Low Profile Small Thin 41-280 CSP BGA characterized by a thin Mobile phone, PDA and Plastic BGA or stPBGA-L core laminate substrate multimedia Exposed Drop-in Heat 208-841 Thermally Enhanced PBGA with Access/LAN/PC/graphics and Spreader Plastic BGA or 20% greater thermal dissipation than base station equipment XDPBGA PBGA Multi Chip Module Plastic 80-600 BGA integrated with two or more Access/LAN/PC graphics and BGA or MCMBGA multiple die within a PBGA or base station equipment stPBGA
30 In response to certain governmental and industry trends toward environmentally friendly products, our assembly operations introduced a green molding compound and set up a dedicated lead-free line. This line processes lead-free packaging for our leaded packages using a pure tin solder alternative. We introduced lead-free array packaging in 2001. We have improved our fine pitch wire bonding capability to handle up to 45 micron in-line bond pad pitch and 60/30 micron staggered bond pitch in response to industry trends toward fine line and space wafer fabrication technology. We have also established complete handling and packaging processes for GaAs semiconductors. Wafer Process Services. In 2003, we introduced Flex-On-Cap (FOC) wafer bumping services, with and without redistribution layers (RDL) for 6 inch and 8 inch wafers as part of our efforts to be a total turnkey assembly and test solutions provider for high-end products, including products requiring wafer bumping, probe and flipchip assembly and test solutions. PRE-PRODUCTION AND POST-PRODUCTION SERVICES We have developed and enhanced our pre-production and post-production services to provide a total solution for our customers. Our pre-production services for assembly include package development, and for testing include software and hardware development. In 2001, we established STATS FastRamp, which provides an extended range of pre-production volume testing services. We also provide post-production drop shipment services for our customers. Package Development. Our package development group interacts with customers early in the design process to optimize package design and manufacturability. For each project, our engineers create a design strategy in consultation with each customer to address the customer's requirements, package attributes, design guidelines and previous experience with similar products. After a design is finished, we provide quick-turn prototype services. By offering package design and prototype services, we can reduce our customer's development costs, accelerate time-to-volume production and ensure that new designs can be properly packaged at a reasonable cost. We offer these services at our facilities in Singapore, Arizona and California. Test Software and Hardware Development. We work closely with our customers to provide sophisticated software engineering services, including test program development, conversion and optimization. Generally, testing requires customized software to be developed for each particular semiconductor device. Software is typically provided by the customer and may be converted by us for use on one or more of our tester platforms. Once a conversion test program has been developed, we correlate the test software through "test program verification." During this test program verification process, which typically takes from two days to two weeks, the customer provides us with sample semiconductors to be tested and either provides us with the test program or requests that we develop a conversion program. Customer feedback on the test results enables us to adjust the conversion test programs accordingly prior to actual production testing. We then assist our customers in collecting and analyzing the test results and develop engineering solutions to improve their design and production process. We also provide customers with test development services where we will create a test plan based on their specifications. Once the test plan is approved by the customer, we design the test fixtures, or parameters, and develop the test program. Once the test programs are developed, we perform the device characterization to enable our customer to determine the optimum conditions for their device performance. We offer these services at our facility in Singapore. STATS FastRamp. In October 2001, we established our wholly owned subsidiary, STATS FastRamp in Silicon Valley, to deliver an extended range of high-end pre-production test services to new and existing customers. STATS FastRamp commenced operations in January 2002, providing test hardware and software development, pre-production volume testing services, tester rentals and a unique customer-to-lab-to-factory relay for fast production offloads and capacity coordination. At our customers' request, certain finished and piloted test programs are then transferred to our facility in Singapore for full production. As STATS FastRamp offers a similarly configured and substantial range of tester platforms, handlers, probers, interface hardware and manufacturing processes as our 31 Singapore facility, this transfer is relatively seamless. In December 2002, STATS FastRamp acquired the San Diego test facility from Conexant Systems Inc. for cash. STATS FastRamp began operations immediately in the San Diego facility and offers the same range of high-end preproduction test services that are offered in its facilities in Silicon Valley. Drop Shipment Services. We provide full drop shipment services including the delivery of final tested semiconductors to our customers' end-customers in any part of the world. We either directly bill our customers for the cost of drop shipment or incorporate this into the price of our services. RESEARCH AND DEVELOPMENT Our research and development efforts are focused on developing test and assembly services required by our existing customers and that are necessary to attract new customers. We spent approximately $15.2 million in 2001, $18.9 million in 2002 and $15.3 million in 2003 on research and development. As of February 15, 2004, we employed 129 dedicated professionals for packaging and test development. We consider this as a core element of our total service offering and expect to continue to invest significant resources in research and development. Test Services. We focus on developing new technologies, software and processes to enhance efficiency and reliability and to shorten test times. These include multi-site testing, strip testing, test program optimization and hardware improvements designed to permit improved utilization of existing test equipment. When necessary we also design and build specialized equipment that is not available from outside vendors. Our test development center is an important part of our research and development efforts and is utilized to develop and debug test software prior to production, complete test software conversions and offer our customers continuous access to our development capabilities. Our test development center is located in Singapore. Assembly Services. We have established a dedicated group of engineers whose primary focus is the development and improvement of materials and process technology as well as development of new and advanced packages. Because we typically offer our assembly services to our existing test customers, we are in a position to better understand their packaging needs. As a result, we focus our assembly research and development efforts in part on developing packages tailored to their individual requirements. These efforts take place at our package design development centers located in Singapore, California and Arizona. We have a number of advanced packages under development to support our customers' need for high performance packages. Our development roadmap includes flip -chip technology and comprises build-up substrate, wafer bumping and passive integration technology components. Flip -chip technology can be used in both low pin count as well as high pin count packages. It is a particularly ideal solution for devices that require more than 1,000 interconnects in a relatively small package. Build-up substrates deliver even higher interconnect density without compromising thermal and electrical performance. We believe flip-chip packages will find increasing application in high-end communications equipment such as switches and routers as well as high-end PCs. Furthermore, we are building capabilities to provide system-in-package solutions for the radio frequency, wireless and cellular markets. We also have next generation CSPs both under development and in qualification which incorporate lead-frame, laminate and tape technologies. The emphasis in the development of such packages is on low-profile, small footprint and light weight characteristics. These packages are used particularly in hand-held wireless communications equipment. These products are extremely useful for all hand-held devices including mobile station modems, base-band circuits and memories. We recently developed a total System-in-Package (SiP) solution to meet market demand for next generation devices with higher levels of integration, increased functionality and compact sizes. In addition, we continue to increase our support functions for thermal, electrical, stress and package to board level reliability characterization. We offer a full range of thermal simulation and actual testing for all of our existing packages and packages under development. We have a full service reliability laboratory that can stress test 32 assembled semiconductors. In conjunction with local institutes and laboratories, we can also perform board level reliability testing of surface mount assembled packages. In 2003, we developed and introduced a number of new packages, including: - Land Grid Array or LGA - System in Package stPBGA or SiP-stPBGA - System in Package LGA or SiP-LGA - Flip Chip BGA with Buildup Substrate and Heat Sink or FCBGA-HB - Flip Chip Land Grid Array or FC-LGA - Same Size Die Stacked, small, thin PBGA or SS-stPBGA - Wafer Level CSP or WLCSP - Thin Quad Leadless Package or QLP-T - Chip Scale Module Package or CSMP - Redistributed wafer bumping or RDL - Dual Row Quad Leadless Package (QLP-DR) We will continue to develop and introduce advanced packaging that meets the requirements of our customers. SALES AND MARKETING We believe we are industry leaders in the testing of mixed-signal semiconductors. The goal of our marketing strategy is to expand our customer base by extending our mixed-signal expertise into new customer and product segments. In particular, as mixed-signal devices become more prevalent, we intend to increase our share of high-end digital consumer end-markets. We also aim to provide our customers with a total solution built around our mixed-signal testing core competency. This involves a full backend turnkey offering including wafer sort, assembly and test. We have been, and continue to be, active in developing an advanced range of packages to match our advanced testing capability. Our close working relationship with multiple foundries means we can also provide full turnkey services from wafer fabrication to drop shipment. We believe the Singapore government's long term plan of making Singapore a foundries hub is an added advantage to our full turnkey strategy. We market our services through direct sales forces strategically located in Singapore, Taiwan, Japan, the United Kingdom and the United States. Pricing Policy. We price our test services principally on the length of tester CPU time used, typically referred to as test time on per-second basis. The price of test time is a function of tester platform and hardware configuration, which are usually determined by our customers based on the function and complexity of a particular semiconductor 33 device. In general, the test time for a complex semiconductor device will be longer than a less complex semiconductor device. Wafer probe pricing is determined by similar factors. Any reduction in test time by optimization of test program or optimum hardware configuration will mean savings for our customers. Assembly services are priced competitively against the market and vary depending on such factors as package complexity and material cost. Design costs are not material but when incurred may be charged to a customer separately or built into the unit price. CUSTOMERS We provide test and assembly services to a growing number of customers worldwide consisting primarily of fabless companies, IDMs and foundries. Our ten largest customers accounted for 85.6%, 79.8% and 78.8% of our net revenues in 2001, 2002 and 2003. In 2003, our three largest customers, Analog Devices, Broadcom and Marvell, each represented in excess of 10% of our net revenues and in the aggregate represented 57.2% of our net revenues. We anticipate that our ten largest customers will continue to account for a high percentage of our net revenues. If our proposed merger with ChipPAC is completed as planned and we are able to maintain or develop our existing customer base and that of ChipPAC's, we expect that the customer base of the combined company will be broadened and more diversified. The following table sets forth for the periods indicated the percentage of our net revenues derived from testing and assembly of semiconductors used in communications, personal computers and other applications.
YEAR ENDED DECEMBER 31 2001 2002 2003 - ------------------------------------------- Communications 61.3% 53.4% 58.3% Personal Computers 34.9 31.2 29.9 Others 3.8 15.4 11.8 - ------------------------------------------- Total 100.0% 100.0% 100.0% ===========================================
We characterize a sale geographically based on the country in which the customer is headquartered. The following table sets forth the geographical distribution, by percentage, of our net revenues for the periods indicated.
YEAR ENDED DECEMBER 31 GEOGRAPHICAL AREA 2001 2002 2003 - ----------------------------------------- United States 78.4% 80.8% 81.3% Europe 13.0 6.2 4.7 Singapore 5.6 4.9 3.7 Rest of Asia 3.0 8.1 10.3 - ----------------------------------------- Total 100.0% 100.0% 100.0% =========================================
34 CUSTOMER SERVICE We place strong emphasis on quality customer service. Our broad service offerings, dedicated customer account teams and commitment to finding solutions to our customers' needs and problems have enabled us to develop important relationships with many of our customers. We have received high ratings and recognition in the area of customer service from many of our customers. For 2003, we have been named the Supplier of the Year by two of our top customers, Broadcom and Analog Devices. This is the third consecutive year that we have received this award from Analog Devices. We have implemented an IT architecture that seeks to achieve our objective of creating a virtual manufacturing environment for our customers. Our system includes links to some of our customers' systems and an Internet portal, the mySTATS portal, which may be directly accessed by our customers. These features enable our customers to obtain real time information on our works-in-progress, inventory and shipment status, as well as other information relating to our operations. QUALITY CONTROL We maintain a team of quality control staff comprising engineers, technicians, inspection specialist and other employees whose responsibilities are to monitor our test and assembly processes to ensure high quality. Our quality assurance systems impose strict process controls, statistical in-line monitors, supplier control, data review and management, quality controls and corrective action systems. Our in-house laboratory is equipped with advanced analytical tools and provides the necessary equipment and resources for our research and development and engineering staff to continuously enhance product quality and process improvement. Our test and assembly operations are undertaken in clean rooms where air purity, temperature and humidity are controlled. To ensure stability and integrity of our operations, we maintain clean rooms at our facilities that meet U.S. Federal 209E class 1,000, 10,000 and 100,000 standards. Our test and assembly operations in Singapore are ISO 9000, QS 9000, SAC level 1, ISO 14001 and ISO 18001 certified. ISO 9000 is an international standard on the requirements for production of quality products and services. It also sets forth quality management systems for product design, product development, installation and servicing. We are also QS 9000 and SAC Level 1 certified. QS 9000 is a quality management system that addresses the specific production needs of automotive customers. Semiconductor Assembly Council or SAC certification is one of the most prestigious certifications in the semiconductor manufacturing industry. In addition, we have also achieved certification for ISO 14001 as well as ISO 18001. ISO 14001 is an international standard on environmental management systems to ensure environmental protection and prevention of pollution in balance with socio-economic needs while ISO 18001 is the standard for implementation of an occupational health and safety management system (OHSMS). Customers require that our facilities and procedures undergo a stringent vendor qualification process. The qualification process typically takes from two to eight weeks but can take longer depending on the requirements of the customer. COMPETITION The independent semiconductor test and assembly service industry is very competitive and diverse. In order to compete, we must offer state-of-the-art testing services and bring the most technologically advanced packages to market as quickly as our competitors and at comparable prices. Test and assembly services are provided by both large multi-national companies and small niche market competitors. We face substantial competition from a number of competitors, some of whom are much larger in size. These competitors' facilities are primarily located in Asia. 35 These companies include Advanced Semiconductor Engineering, Inc., Amkor Technology, Inc., ASE Test Limited, ASAT Holdings Limited and Siliconware Precision Industries Co., Ltd. These companies have significant manufacturing capacity, financial resources, research and development, operations, marketing and other capabilities and have been in operation for some time. Such companies have also established relationships with many of our current or potential customers. We also face competition from the internal capabilities and capacity of many of our current and potential IDM customers. Many IDMs have greater financial and other resources than we do and may rely on internal sources for test and assembly services including due to: - their desire to realize higher utilization of their existing test or assembly capacity; - their unwillingness to disclose proprietary technology; - their possession of more advanced testing or assembly technologies; and - the guaranteed availability of their own test or assembly capacity. The principal elements of competition in the independent semiconductor assembly industry include variety of packages offered, price, location, available capacity, cycle time, engineering capability, technical competence, customer service and flexibility. If our competitors are able to bring their new packages to market faster or at lower prices than we can, our net revenues may be affected. In the area of test services, we compete on the basis of quality, cycle time, pricing, location, available capacity, software development, engineering capability, technical competence, customer service and flexibility. Our competitors in the independent testing market are both those listed above as well as smaller niche companies, offering limited services, which compete principally on the basis of engineering capability, location and available capacity. While we believe that we compete favorably with our principal competitors, we cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our operating results will not be adversely affected by increased price competition. See "Item 3. Key Information - D. Risk Factors -- We may not be able to compete successfully in our industry." INTELLECTUAL PROPERTY Our operational success will depend in part on the ability to develop and protect our intellectual property. As of February 15, 2004, we held a total of 43 patents in Singapore and the United States. We have also filed 56 patent applications in various countries as appropriate. If the patents are granted, we may seek to cross-license or share our intellectual property portfolio at a future time if it is advantageous for us to do so. We have licensed patent rights from Motorola, Inc. to use technology in manufacturing BGA packages under an agreement which expires in December 31, 2010. Under this agreement, we are required to pay Motorola a royalty based upon a percentage of net revenues. We cannot assure you that we will be able to renew this agreement when it expires on terms that are favorable to us or at all. In February 2001, we entered into a seven-year license agreement with SyChip, Inc. to license the patent rights to use technologies and know-how relating to wafer redistribution and wafer bumping in the manufacture of flip chip integrated circuits known as the MSIT Portfolio. Under this agreement we are required to pay SyChip both a fixed 36 fee, as well as royalties based on unit production. In addition, we have also reserved a portion of our production capacity using MSIT Portfolio to SyChip. We will retain a paid-up, perpetual and royalty-free license of the MSIT Portfolio technology at the end of the license period. In August 2001, we entered into a 10-year technology license agreement with Flip Chip Technologies LLC. to license the right to use their proprietary Flex-On-Cap (FOC) wafer bumping process and Redistribution (RDL) technologies to facilitate the manufacture of advanced flip -chip integrated circuits. Under this agreement, we are required to pay Flip Chip fixed fees and royalties based on number of wafers produced. We will retain a paid-up, perpetual and royalty-free license to practice the FOC process at the end of the license period. When we are aware of intellectual property of others that may pertain to or affect our business, we attempt to either avoid processes protected by existing patents, cross-license or otherwise obtain certain process or package technologies. In addition, we execute confidentiality and non-disclosure agreements with our customers and consultants and limit access to and distribution of our proprietary information. Our continued success will rely in part on the technological skills and innovation of our personnel and our ability to develop and maintain proprietary technologies. The departure of any of our management or technical personnel and the breach of their confidentiality and non-disclosure obligations or our failure to achieve our intellectual property objectives could have a material adverse effect on our business, financial condition and results of operations. Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technology and the proprietary technology of our customers entrusted to us by our customers. We cannot assure you that patents will be issued for pending or future applications or that, if patents are issued, they will not be challenged, invalidated or avoided, or that rights granted thereunder will provide adequate protection or other commercial value to us. The laws of certain countries in which our services are or may be sold may not protect our packages and our intellectual property rights to the same extent as the laws of the United States or other countries where our intellectual property may be filed or registered. In addition, certain countries in which our services are or may be sold could have rights or laws governing intellectual property about which we are unaware. RAW MATERIALS Our assembly operations depend on obtaining an adequate supply of raw materials on a timely basis. The principal raw materials used in assembly are leadframe or laminate substrates, gold wire and molding compound. We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. We work closely with our primary suppliers, providing them with a six-month rolling forecast and weekly requirement schedules. Accordingly, our suppliers are better able to supply us with raw materials. On June 20, 2003, we executed a Strategic Assistance Loan Agreement with Simmtech Co. Ltd or Simmtech, pursuant to which Simmtech undertook to supply such quantities of substrates to enable us to produce at least a specified number of PBGA and stPBGA packages up to June 2007. On December 26, 2003, we signed a Base Capacity and Continuing Support Agreement with Simmtech pursuant to which Simmtech undertook to supply to us at least a specified minimum quantity of substrates up to December 2008. We also manage inventory with automated materials management processes using integrated Oracle software systems. The unavailability of an adequate supply of raw materials could materially and adversely affect our business, financial condition and results of operations. See "Item 3. Key Information -- D. Risk Factors - We are dependent on raw material suppliers and do not have any long-term supply contracts with them." ENVIRONMENTAL MATTERS AND COMPLIANCE Our test and assembly operations do not generate significant pollutants. Our operations are subject to regulatory requirements and potential liabilities arising under local laws and regulations governing among other things, air, 37 emissions, waste water discharge, waste storage, treatment and disposal, and remediation of releases of hazardous materials. We have implemented an environmental monitoring system. We send samples of our air emissions, treated water and sludge to third party accredited laboratories for testing to ensure our compliance with the environmental laws and regulations that apply to us. We believe that we are in compliance with all applicable environmental laws and regulations. Expenditures on environmental compliance currently represent an insignificant portion of our operating expenses. We are certified ISO 14001 by the Productivity and Standards Board (Singapore) and the Japan Audit Compliance Organization. INSURANCE We maintain insurance policies covering losses, including losses due to business interruption and losses due to fire, which we consider to be adequate. Our insurance policies cover our buildings, machinery and equipment. Significant damage to our production facilities, whether as a result of fire or other causes, would have a material adverse effect on our business, financial condition and results of operations. We are not insured against the loss of any of our key personnel. C. ORGANIZATIONAL STRUCTURE We are part of the Singapore Technologies Group. The Singapore Technologies Group is a leading technology-based multi-national conglomerate based in Singapore. The Singapore Technologies Group provides a full array of multi-disciplinary capabilities, ranging from research and development, design and engineering, precision and high value-added manufacturing, major infrastructure development to management services in the following five core business groups: Engineering, Technology, Infrastructure & Logistics, Property and Financial Services. Other companies in the Singapore Technologies Group include Chartered, one of our major customers. Temasek Holdings is the principal holding company through which the corporate investments of the Government of Singapore are held. As of February 15, 2004, Temasek Holdings directly owned 81.3% of Singapore Technologies Pte Ltd. The remaining 18.7% is owned by Singapore Technologies Holdings Pte Ltd, which is in turn 100% owned by Temasek Holdings. On December 29, 2003, Singapore Technologies Pte Ltd transferred the ownership of all our ordinary shares held by them to its wholly owned subsidiary, Singapore Technologies Semiconductors Pte Ltd. As of February 15, 2004, Singapore Technologies Semiconductors Pte Ltd beneficially owned approximately 66.15% of our ordinary shares (including 5.27% of shares lent to Deutsche Bank AG and Morgan Stanley & Co. International Limited pursuant to a Global Master Securities Lending Agreement in connection with the issue of convertible notes due 2008 by ST Assembly Test Services Ltd dated October 29, 2003 executed by each of Deutsche Bank AG and Morgan Stanley & Co. International Limited). Our wholly owned subsidiaries, STATS Inc. and STATS FastRamp, were both incorporated in the United States in the State of Delaware. STATS Inc. undertakes sales and marketing, design support and research and development through its various facilities in the United States. STATS FastRamp provides high-end engineering and pre-production test services and tester services to customers in the United States. In December 2002, STATS FastRamp acquired San Diego Test Equipment, LLC, a limited liability company, to provide test engineering and pre-production services in the San Diego region. In March 2003, the assets of San Diego Test Equipment, LLC were merged with STATS FastRamp and the limited liability company cancelled. Our subsidiary, Winstek, is a Taiwanese test house. In October 2003, we increased our shareholding in Winstek from 51% to 55%. Winstek tests optical, mixed-signal, digital and radio frequency devices and provides an integrated range of services, including wafer probe, final test, turnkey and drop shipment services in Taiwan. In June 2003, we incorporated STATS Shanghai Ltd for the purposes of commencing manufacturing operations in Shanghai, China. STATS Shanghai Ltd is a wholly owned subsidiary of STATS Holdings Limited, incorporated in the British Virgin Islands, which is a wholly owned subsidiary of ours. We recently formed a wholly-owned subsidiary, Camelot Merger, Inc., which is incorporated in the United States in the State of Delaware to merge with ChipPAC pursuant to our proposed merger with ChipPAC. 38 D. PROPERTY, PLANT AND EQUIPMENT Our facilities in Asia and the United States are used to offer a range of package design, packaging and testing services. Our primary facility providing large scale turnkey packaging and testing services are located in Singapore. All our facilities are held under various leases except for the Taiwan facility. The Taiwan facility is owned and operated by Winstek, subject to mortgages and other security interests granted to secure indebtedness to certain financial institutions. The following chart summarizes the information about our key facilities as of February 15, 2004.
AREA LOCATION (SQUARE FEET) USE - --------------------------------------------------------------------------------------------------------------- Yishun, Singapore(1) 580,000 Primary facility providing turnkey packaging, and testing services, including wafer sort and probe and drop shipment services Ang Mo Kio, Singapore 29,000 Corporate executive, administrative, sales and marketing and finance office Phoenix, Arizona, United States 6,300 Package design and sales office Milpitas, California, United 34,000 Package design, test facility and sales office States San Diego, California, United 20,000 Test facility States(2) Chiung Lin, Hsin-Chu Hsien, 220,000 Test development, turnkey and drop shipment facility Taiwan Zhangjiang High Tech Park, 25,000 Test facility Shanghai, China
(1) Our primary facility was opened in November 1997. We constructed this facility on land leased from the Housing & Development Board, a statutory board of the Government of Singapore, for a 30-year term expiring March 2026 with an option for renewal. (2) Situated within the campus of Conexant Systems Inc. We are seeking to lease additional building space in Singapore of approximately 52,000 square feet to enable us to meet the anticipated increase in production capacity requirements. Discussions on the terms of the lease are ongoing. We are planning for this new facility to be operationally ready around the second quarter of 2004. If our proposed merger with ChipPAC is completed as planned, we will acquire the business and operations of ChipPAC. As disclosed in its Form 10-K, ChipPAC's corporate headquarters are located in Fremont, California, and ChipPAC provides all packaging, test and distribution services through facilities in Ichon, South Korea, Shanghai, China and Kuala Lumpur, Malaysia. The Ichon facility was founded in 1985 and the Shanghai facility was founded in 1994. As disclosed in ChipPAC's Form 10-K, both the Ichon and Shanghai facilities are ISO-14001 certified and QS-9000 certified and the Kuala Lumpur facility is ISO-9002, QS-9000 and ISO-14001 certified. 39 As disclosed in its Form 10-K, the following chart summarizes information about ChipPAC's key facilities as of February 15, 2004.
FACILITY AND LOCATION LEASED/OWNED SQ. FT. FUNCTIONS/SERVICES PRINCIPAL PACKAGING OR SERVICES PROVIDED - ---------------------------------------------------------------------------------------------------- Fremont, California Leased 56,320 Executive offices, Sales, marketing, research and administration and development, sales, design review services marketing and administration Chandler, Arizona Leased 5,357 Research and Design and development, sales and characterization services marketing Shanghai, China Owned(1) 442,000 Packaging and test Leaded IC, Chip-Scale, services, research and BGA, packaging and test development, warehousing services, distribution services Ichon, South Korea Leased 474,000 Packaging and test Advanced leaded, services, research and BGA,Chip-Scale, development, Flip-Chip packaging warehousing services, and test distribution services Kuala Lumpur, Malaysia Owned(1) 483,328 Packaging and test Discrete power, leaded services, research and IC, test and development, distribution services warehousing services
(1) Building and improvements are owned by ChipPAC but, upon the termination of the existing long-term land lease, revert to the lessor in the years 2044 and 2086 for our facilities in Shanghai, China and Kuala Lumpur, Malaysia, respectively. EQUIPMENT Our operations and expansion plans depend on us being able to obtain an adequate supply of test and assembly equipment on a timely basis. We work closely with our major equipment suppliers to ensure that equipment is delivered on time and such equipment meets our performance specifications. With the exception of a few key suppliers that provide reserved equipment delivery slots and price discount structures, we have no binding supply agreements with any of our suppliers. A reserved equipment delivery slot is one which allows us to obtain an accelerated delivery of the equipment over and above the delivery schedule previously committed to by the supplier. Typically, price discounts are offered for volume purchases. We acquire our test and assembly equipment on a purchase order basis, which exposes us to substantial risks. A small portion of our equipment is held under capital lease. The unavailability of new test or assembly equipment, the failure of such equipment or other equipment acquired by us to operate in accordance with our specifications or requirements or delays in the delivery of such equipment, could delay implementation of our expansion plans and could materially and adversely affect our results of operations or financial condition. See "Item 3. Key Information -- D. Risk Factors -- We may be unable to obtain testing and assembly equipment when we require it." 40 Testing Equipment. Testing equipment is one of the most critical components of the testing process. We generally seek to maintain testers from different vendors with similar functionality and the ability to test a variety of different semiconductors. In general, certain semiconductors can only be tested on a limited number of specially configured testers. We purchase testing equipment from major international manufacturers, including Agilent Technologies, Advantest Corporation, Credence Systems Corporation, LTX Corporation and Teradyne Inc. As of February 15, 2004, we had 397 testers, comprising 315 mixed-signal testers, 76 digital testers and 6 memory testers. In certain cases where a customer has specified testing equipment that is not widely applicable to other products that we test, we have required that the customer provide the equipment on a consignment basis. Of the 397 testers, 30 are on consignment from customers. In addition to testing equipment, we maintain a variety of other types of equipment, such as automated handlers and probers (with special handlers for wafer probing), scanners, reformers and PC workstations for use in software development. Assembly Equipment. The primary equipment used in assembly includes wire bonders and mold systems. As of February 15, 2004, we owned and operated 1,137 wire bonders and 73 mold systems. Certain of our wire bonders allow for interchangeability between lead frame and array packages. We purchase wire bonders from major international manufacturers, including Kulicke & Soffa Industries, Inc. and ESEC S.A. We purchase mold systems from major international manufacturers, including Apic Yamada Corporation, Asahi Engineering Co Ltd and Dai-Ichi Seiko Co Ltd. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion of our business, financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under "Item 3. Key Information -- D. Risk Factors" and elsewhere in this Annual Report. Our consolidated financial statements are reported in U.S. dollars and have been prepared in accordance with U.S. GAAP. Certain items in the comparative figures have been reclassified to conform to the current year's presentation. OVERVIEW We provide a broad range of test and assembly services and we believe we are a leader in testing mixed-signal and high performance digital semiconductors. We intend to continue to expand our test and assembly operations in order to position ourselves to meet the increased demand for outsourced test and assembly services. FACTORS AFFECTING OUR RESULTS OF OPERATIONS CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY Our results of operations are influenced by the state of the global semiconductor industry which is highly cyclical. According to various reports by SIA, the semiconductor device market revenue grew 37.0% from 1999 to $204.4 billion in 2000, subsequently fell 32.0% to $138.9 billion in 2001, recovered by 1.3% in 2002 to $140.8 billion and grew by 18.3% to $166.4 billion in 2003. Our net revenues decreased 56.0% to $145.9 million in 2001 due to this severe downturn in the semiconductor industry and increased by 54.8% to $225.7 million in 2002. In 2003, our net revenues grew 68.6% over 2002 to $380.7 million. This improvement was across each of the principal end user segments for the products which we packaged and tested - communications, personal computers and consumer electronics. Our net revenues in 2002 and 2003 grew at a higher rate than the recovery of the semiconductor industry in general due primarily to our investments in equipment and capacity at an appropriate level to meet customer 41 demands, our financial resources to make such investments and our ability to offer a turnkey solution with our comprehensive mixed signal test platform. However, we cannot assure you that this growth rate can be maintained. We continue to expect that the cyclicality of the semiconductor industry will impact our results of operations. DECLINING PRICES The semiconductor industry is characterized by price erosion which can have a material adverse effect on our revenues and gross margins, particularly when coupled with declining capacity utilization. Prices of our products at a given level of technology decline over the product life cycle, commanding a premium in the earlier stages and declining towards the end of the cycle. To maintain our profitability, we offset decreases in average selling prices by improving our capacity utilization rates and production efficiency, or by shifting to higher margin test and assembly services. In addition, we continue to develop and offer test and assembly services which command higher margins. In the past we have been able to successfully develop and market new higher margin products to meet the requirements of our customers. However, we cannot assure you that we can continue to do this in future nor can we assure you that we will be successful at offsetting any price declines in the future. We expect average selling prices to fluctuate depending on our product mix in any given period. COST OF REVENUES Our results of operations are generally affected by the capital-intensive nature of our business. Our cost of revenues include depreciation expense, attributed overhead such as facility rental, operating costs and property taxes and insurance, cost of labor and materials and cost of leasing equipment. A large portion of our cost of revenues is fixed in nature, with variable costs limited to the costs of materials, payroll and operating supplies. The major component of our fixed costs relates to test and assembly equipment. Testers typically cost between $1.5 million and $3.0 million each, compared with wire bonders which typically cost $80,000 each. Depreciation of our equipment and machinery is provided on a straight-line basis over their estimated useful lives of 5 to 7 years. We routinely review the remaining estimated useful lives of our equipment and machinery to determine if such lives should be adjusted due to changes in technology, production techniques and our customer base. However, due to the nature of our testing operations, which may include sudden changes in demand in the end markets, and due to the fact that certain equipment are dedicated to specific customers, we may not be able to anticipate declines in the utility of our machinery and equipment. Consequently, additional impairment charges may be necessary in the future. We also review property, plant and equipment for impairment whenever events or changes in conditions indicate that the carrying amount may not be recoverable. CAPACITY UTILIZATION RATES Increases or decreases in capacity utilization rates can have a significant effect on gross profit margins since the unit cost of test and assembly services generally decreases as fixed charges, such as depreciation expense and equipment leasing costs, are allocated over a larger number of units. We expanded our test and assembly capabilities between 1999 and 2000 and significantly increased the number of testers and wire bonders. The expansion of our test and assembly capabilities by the end of 2000 allowed a significant increase in our net revenues. However, the capacity utilization of our facilities decreased significantly in 2001 as a result of the downturn in the semiconductor industry. The semiconductor industry is still recovering from the worst downturn in its history and our utilization has improved year over year from 2001 to 2003. In 2003, we increased the number of our testers from 297 to 394 and the number of wire bonders from 620 to 952 and our net revenues by 68.6% over 2002. Depreciation expense and cost of leasing production equipment as a percentage of revenues were 80.7% in 2001, 51.8% in 2002 and 34.8% in 2003. 42 OPERATING EXPENSES Our operating expenses consist principally of selling, general and administrative expenses which include payroll-related expenses for selling, marketing and administrative staff, facilities-related expenses and depreciation of non-production equipment, marketing expenses, management fees paid to our parent, Singapore Technologies Pte Ltd, provisions for bad debts on accounts receivable and professional fees. Our operating expenses also include research and development expenditures which mainly consist of salaries and benefits of research and development personnel, depreciation of research and development equipment and related supplies and are focused in the following two areas: - development of new software and processes to enhance efficiency and reliability and to shorten test time of semiconductors; and - development of new, advanced packages to meet the customized needs of our customers. CAPACITY EXPANSION In August 2001, we acquired a 51% equity interest in Winstek by subscribing for new shares for cash consideration of $28.0 million. We accounted for this acquisition using the purchase method. We began to consolidate Winstek's financial and operating results into our financial and operating results from the date of acquisition. In October 2003, we invested an additional $12.9 million in Winstek, of which $9.6 million was to maintain our 51% shareholding through taking up our share of an equity placement and $3.3 million was for an additional 4% equity interest. The purchase price has been allocated to the assets acquired and liabilities assumed according to estimated fair values at the date of acquisition. The allocation resulted in the recognition of goodwill of approximately $1.3 million and $0.9 million for 2001 and 2003, respectively. In accordance with Statement No. 142, "Goodwill and Other Intangible Assets," we will not amortize the goodwill but test it for impairment at least annually. In 2002, Winstek contributed $17.6 million or 7.8% of our net revenues of $225.7 million compared to $31.0 million or 8.1% of our net revenues of $380.7 million in 2003. In December 2002, STATS FastRamp acquired 100% of the membership interests in San Diego Test Equipment LLC from Conexant Systems Inc. in exchange for cash. Under a Test Services Agreement between Conexant Systems Inc. and STATS FastRamp executed in December 2002, Conexant Systems Inc. committed to provide STATS FastRamp with orders for test and sort services in specified minimum amounts for a limited period of time. The cash paid and the anticipated sales for these services are not significant in relation to our overall assets and revenue, respectively. We accounted for this acquisition using the purchase method. The purchase price has been allocated to the assets acquired and liabilities assumed according to estimated fair values at the date of acquisition. The allocation did not result in any goodwill. We began to consolidate San Diego Test Equipment LLC financial and operating results into our financial and operating results from the date of acquisition. In March 2003, San Diego Test Equipment LLC was merged with STATS FastRamp, our wholly owned subsidiary. On February 10, 2004, we signed an Agreement and Plan of Merger and Reorganization with ChipPAC pursuant to which a newly formed, wholly owned subsidiary of ours will merge with ChipPAC and ChipPAC will become our wholly owned subsidiary. Consummation of the proposed merger is subject to certain conditions, including approval of our shareholders and the shareholders of ChipPAC, expiration of the Hart-Scott-Rodino antitrust waiting period in the United States, receipt of a private letter ruling from the U.S. tax authorities or opinions from nationally recognized law firms relating to the tax treatment of the merger for ChipPAC stockholders and other customary conditions, which we cannot assure you will be satisfied or waived. 43 CRITICAL ACCOUNTING POLICIES We believe the following accounting policies are critical to our business operations and the understanding of our results of operations. Our preparation of this annual report on Form 20-F requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. REVENUE RECOGNITION, ALLOWANCE FOR DOUBTFUL DEBTS AND SALES RETURNS We derive revenue primarily from wafer probe, assembly and testing of semiconductor integrated circuits. Net revenues represent the invoiced value of services rendered, net of returns, trade discounts and allowances, and excluding goods and services tax. Our sales arrangements include probe, assembly or test services sold on a standalone basis, where no other services are provided and our customers arrange for the remaining services to be provided by themselves or others, as well as multiple-element arrangements where probe, assembly and test and, in some cases, pre-production and post-production services are provided together. A typical multiple-element arrangement includes wafer probe, assembly and testing of the individual integrated circuits. Where arrangements provide for multiple elements, we either combine the elements into a single unit of accounting or treat them as separate units of accounting depending on whether they meet certain specified criteria. Effective July 1, 2003, the criteria applied follows the methodology set out in FASB Emerging Issues Task Force, (EITF) Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Under the methodology a delivered item is considered a separate unit of accounting if the delivered item has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered item and performance of the undelivered service is considered probable and substantially under our control. The total arrangement consideration is allocated to each unit of accounting based on fair value which we determine using the price of the service when we sell it on a standalone basis. Revenue for each unit of accounting is recognized when there is evidence of an arrangement, fees are fixed or determinable, collectibility is reasonably assured, the service has been rendered, the revenue to be recognized is billable under the terms of the arrangement and not contingent upon completion of undelivered services, and, where applicable, delivery has occurred and risk of loss has passed to the customer. Our package development, test software and hardware development services are provided in advance of our test and assembly services, and are not treated as separate units of accounting. The determination of accounting units and allocation of consideration between the elements are critical judgements and estimates. We make estimates of potential sales returns and discounts. We provide for such returns and discounts based upon historical experience as a deduction from gross revenue. Additionally, we accrue for specific items at the time their existence is known and the amounts are estimable. Significant management judgements and estimates must be made and used in connection with establishing the sales returns and discounts allowances in any accounting period. Material differences between our estimates and actual returns may impact the amount and timing of our revenue for any particular period. Our actual returns and discounts have not historically been significantly different from our estimates. Similarly, we make estimates of the collectibility of our accounts receivable. We review the accounts receivable on a periodic basis and make specific allowance when there is doubt as to the collectibility of individual accounts. In evaluating the collectibility of individual receivable balances, we consider the age of the balance, the customer's historical payment history, its current credit-worthiness and current economic trends. We believe that we adequately manage our credit risk through our credit evaluation process, credit policies and credit control and collection procedures. Additional allowances may be required in the future if the financial condition of our customers or general 44 economic conditions deteriorate. Our actual uncollectible accounts have not historically been significantly different from our estimates. VALUATION OF INVENTORY The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The determination of obsolete or excess inventory requires us to estimate the future demand from our customers within specific time horizons, generally six months or less. The estimates of future demand that we use in the valuation of inventories are the forecasts provided by our customers. If our inventory for specific customer forecast is greater than actual demand, we could be required to record additional inventory reserves, which would have a negative impact on our gross margin. Our inventories are stated at the lower of cost, determined on the weighted average basis, or net realizable value. Cost is generally computed on a standard cost basis, based on normal capacity utilization, with unrecovered costs arising from underutilization of capacity expensed when incurred. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make a sale. DEPRECIATION & AMORTIZATION Our operations are capital intensive and we have significant investment in testing and packaging equipment. We depreciate our property, plant and equipment based on our estimate of the period that we expect to derive economic benefits from their use. Management estimates of economic useful lives are set based on historical experience, future expectations and the likelihood of technological obsolescence arising from changes in production techniques or in market demand for the use of our equipment and machinery. However, business conditions, underlying technology and customers' requirements may change in the future which could cause a change in the useful lives. Any change in useful lives could have a significant effect on our future operating results. In the third quarter of 2003, we completed a review of the estimated useful lives of our assembly equipment. As a result, effective from July 1, 2003, the lives used to depreciate certain assembly equipment were changed prospectively from 5 years to 7 years. The change reflects longer actual service periods being achieved and expected to be achieved from similar new equipment. The impact of this change was a reduction to depreciation expense of $6.8 million for the year ended December 31, 2003. ASSET IMPAIRMENT We review property, plant and equipment for impairment whenever events or changes in market conditions indicate that the carrying amounts may not be recoverable. Management judgment is critical in assessing the following criteria for asset impairment: - a significant decrease in the asset's market prices; - a significant adverse change in the extent or manner in which assets are being used or in their physical condition; - a significant adverse change in legal factors or in business climate that could affect the asset's value or an adverse action or assessment by a regulator; 45 - an accumulation of costs significantly in excess of the amount originally expected for an asset's acquisition or construction; - a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with an asset's use; and - a current expectation that it is more-likely-than-not (or greater than 50% likelihood) that the asset will be sold or otherwise disposed off significantly before the end of its previously estimated useful life. Generally, we consider the above criteria to be met when the utilization rate of machinery or equipment falls below 35% for four consecutive quarters and the actual or projected utilization has deteriorated more than 50% from last impairment review. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future undiscounted net cash flows expected to be generated from the asset. If the carrying amount of the asset exceeds the future undiscounted net cash flows, such assets are considered to be impaired and an impairment charge is recognized for the amount that the carrying value of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In determining the fair value of machinery and equipment, we consider offers to purchase such equipment and expected future discounted cash flows. Due to the nature of our business, which may include sudden changes in demand in the end markets and due to the fact that certain equipment is dedicated to specific customers, we may not be able to anticipate declines in the utility of our machinery and equipment. Consequently, additional impairment charges may be necessary in the future and this could have a significant negative impact on our future operating results. We recorded asset impairment charges of $23.7 million and $14.7 million in 2001 and 2002, respectively. Similar assessments were performed in respect of operating lease prepayments resulting in the write-offs of prepaid leases of $3.1 million and $0.8 million in 2001 and 2002, respectively. DEFERRED TAX ASSET We record a deferred tax asset when we believe that it is more likely than not that the deferred tax assets will be realized. The deferred tax effects of the tax losses, unutilized capital allowances carried forward and temporary differences arising primarily from property, plant and equipment are recognized because they are expected to be offset against future taxable income. Tax losses and unutilized capital allowances are available for offset against future taxable income provided that the company's shareholding composition remains substantially (at least 50%) the same as at certain relevant dates. An additional requirement for the utilization of unutilized capital allowances for offset against future taxable profits arising after the incentive period is that the company continues to carry on the same trade which gave rise to the capital allowances. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize benefits of these deductible differences. The amount of the deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward period differ materially from current estimates. In the event that we are not able to realize the deferred tax assets, an adjustment to the deferred tax asset would be charged to income in the period such determination was made which would result in a reduction of our net income. 46 For a discussion of significant items in deferred tax asset, see "Note 13. Income Taxes" in the Notes to the Consolidated Financial Statements. RESULTS OF OPERATIONS The following table sets forth certain operating data as a percentage of net revenues for the periods indicated:
YEAR ENDED DECEMBER 31, 2001 2002 2003 - --------------------------------------------------------------------------------------- Net revenues 100.0% 100.0% 100.0% Cost of revenues 149.3 109.8 86.2 - --------------------------------------------------------------------------------------- Gross profit (loss) (49.3) (9.8) 13.8 - --------------------------------------------------------------------------------------- Operating expenses: Selling, general and administrative 24.7 16.3 9.6 Research and development 10.4 8.4 4.0 Asset impairments 16.3 6.5 0.0 Prepaid leases written off 2.1 0.3 0.0 Stock-based compensation 0.7 0.0 0.0 Others, net 0.1 0.2 0.1 - --------------------------------------------------------------------------------------- Total operating expenses 54.3 31.7 13.7 - --------------------------------------------------------------------------------------- Operating income (loss) (103.6) (41.5) 0.1 Other income (expenses): Interest income (expenses), net 3.6 (2.3) (2.4) Foreign currency exchange gain (loss) 0.5 (0.2) 0.4 Other non-operating income, net 1.4 1.5 2.0 - --------------------------------------------------------------------------------------- Total other income (expenses) 5.5 (1.0) (0.0) - --------------------------------------------------------------------------------------- Income (loss) before income taxes (98.1) (42.5) 0.1 Income tax benefit (expense) 6.0 3.2 (0.2) - --------------------------------------------------------------------------------------- Net loss before minority interest (92.1) (39.3) (0.1) Minority interest 0.2 (0.3) (0.4) - --------------------------------------------------------------------------------------- Net loss (91.9)% (39.6)% (0.5)% - --------------------------------------------------------------------------------------- Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale marketable (0.2) 0.4 1.0 securities Realized gain on available-for-sale marketable securities included in net loss (0.0) (0.0) (1.3) Translation adjustment 0.1 (0.1) 0.2 - --------------------------------------------------------------------------------------- Comprehensive loss (92.0)% (39.3)% (0.6)% - ---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2003 Net revenues. We derive revenues from test and assembly of array and leaded packages. Net revenues increased 68.6% from $225.7 million in 2002 to $380.7 million in 2003. The increase in net revenues was due primarily to an increase in unit shipments in both test and assembly as a result of an increase in demand for test services and assembly packages, partially offset by the decrease in average selling prices ("ASPs") for assembly business, principally resulting from changes in product mix. Unit shipments for test and assembly businesses increased 60.0% and 67.0%, respectively, from 2002. Compared to 2002, ASPs for the test business increased 5% and ASPs for the assembly business decreased 3% due principally to changes in product mix to lower ASP products. Net revenues 47 from test services increased 73.2% from $115.4 million in 2002 to $199.9 million in 2003. Net revenues from assembly services increased 63.9% from $110.3 million in 2002 to $180.8 million in 2003. Contribution from Winstek also increased from $17.6 million in 2002 to $31.0 million in 2003. STATS FastRamp, which commenced operations in January 2002 and contributes primarily to test revenues, contributed $11.7 million to net revenues. The communications segment grew the most and contributed 58.3% of our net revenues, followed by the personal computers segment at 29.9% of our net revenues. The increase in the communications segment is largely due to shipments to the mobile phone and infrastructure markets. We derived 80.8% and 81.3% of our net revenues for 2002 and 2003, respectively, from customers headquartered in the United States. Cost of revenues and gross profit margin. Cost of revenues include depreciation expense, leasing expense, facilities costs, direct and indirect labor and materials cost. Cost of revenues increased 32.3% from $247.9 million in 2002 to $328.0 million in 2003. Depreciation expense and cost of leasing testers (included in cost of revenues) increased from $116.8 million, or 51.8% of net revenues in 2002 to $132.4 million, or 34.8% of net revenues in 2003. Direct and indirect labor and materials costs increased from $71.7 million or 31.8% of net revenues in 2002 to $104.1 million or 27.3% of net revenues in 2003 principally due to our increased production and testing services in 2003. Cost of revenues as a percentage of revenue decreased from 109.8% in 2002 to 86.2% in 2003, resulting in a gross profit in 2003. Gross profit in 2003 was $52.7 million, or a gross margin of 13.8%, as compared to gross loss of $22.2 million, or gross margin of negative 9.8%, in 2002. The improvement in gross margin was principally due to higher capacity utilization and cost control. Selling, general and administrative expenses. Selling, general and administrative expenses mainly consist of salaries and benefits for sales, marketing, general and administrative employees, depreciation of non-production equipment and professional fees. Selling, general and administrative expenses decreased marginally by 0.7% from $36.6 million in 2002 to $36.4 million in 2003 and decreased as a percentage of net revenues from 16.3% in 2002 to 9.6% in 2003. We lowered our discretionary spending and other expenses in 2003. This decrease in expenses was offset by higher bonus provisions in 2003 and higher insurance premiums in 2003. The 2002 selling, general and administrative expenses included a one-time payment of $1.0 million to our former Chairman in 2002 in recognition of his past services. Research and development expenses. Research and development expenses mainly consist of salaries and benefits of research and development personnel, depreciation of research and development equipment and related supplies. Research and development expenses decreased 18.9% from $18.9 million in 2002, or 8.4% of net revenues in 2002, to $15.3 million in 2003, or 4.0% of net revenues in 2003. The decrease in 2003 was mainly due to lower headcount as we transferred the personnel to production upon completion of a wafer process project. Asset impairment and prepaid leases written-down. We recognized asset impairment charges of $14.7 million for 2002, of which $11.1 million was for tester equipment held for use and $3.6 million was for equipment held for sale. The carrying values of these assets were written down to the estimated fair value and will continue to be depreciated over their remaining useful lives. There were no asset impairment charges recognized in 2003. We wrote-down prepaid leases of tester equipment of $0.8 million in 2002. The impairments and write-downs were taken because continued softness in demand in the end-markets to which certain of our equipment was dedicated had reduced the anticipated future usage of such equipment. There were no write-downs of prepaid leases of tester equipment in 2003. Net interest income (expense). Net interest expense was $5.1 million in 2002 compared to $9.2 million in 2003. Net interest expense consisted of interest income of $5.3 million and interest expense of $10.4 million in 2002 and interest income of $4.8 million and interest expense of $14.0 million in 2003. The interest income was earned on our marketable debt securities and fixed-term time deposits with various financial institutions. The lower interest income earned in 2003 was due primarily to the general decline in interest rates. Interest expense primarily comprised 48 interest accrued and paid on our convertible notes and bank borrowings by Winstek. The increase in interest expense in 2003 was primarily due to our fixed-interest convertible notes issued in October 2003 as well as an increase in bank borrowings drawn by Winstek of $23.2 million. Foreign currency exchange gain (loss). We recognized an exchange gain of $1.6 million in 2003 compared to an exchange loss of $0.5 million in 2002, due primarily to currency fluctuations of the U.S. dollar against the Singapore dollar, the Japanese yen and the New Taiwan dollar. Other non-operating income. Other non-operating income was $3.4 million in 2002 and $7.6 million in 2003. The increase was due to gains from sales of marketable securities and amortization for the deferred grant for development activities from the Economic Development Board, or EDB, under its Research and Incentive Scheme for Companies. Taxation. Income tax benefit was $7.2 million in 2002 and income tax expense was $0.7 million in 2003. The income tax benefit of $7.2 million in 2002 comprised income tax expense of $1.0 million and deferred tax benefit of $8.2 million. The income tax expense of $0.7 million in 2003 comprised income tax expense of $1.9 million and a deferred tax benefit of $1.2 million. The income tax expense for both years was principally due to Singapore tax on interest income generated principally from the investment of excess cash in fixed-term time deposits and marketable debt securities. The deferred tax benefit of $8.2 million in 2002 and $1.2 million in 2003 resulted principally from recognizing the deferred tax benefit associated with tax losses, unutilized capital allowances carried forward and temporary differences arising primarily from property, plant and equipment. YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2002 Net revenues. Net revenues increased 54.8% from $145.9 million in 2001 to $225.7 million in 2002. The increase in net revenues was due primarily to an increase in unit shipments in both test and assembly, partially offset by the decrease in average selling prices in the first half of 2002 for both test and assembly businesses principally resulting from changes in product mix. In the second half of 2002, average selling prices for both test and assembly business increased marginally resulting principally from changes in product mix. Contribution from Winstek also increased from $1.7 million in 2001 to $17.6 million in 2002. STATS FastRamp, which commenced operations in January 2002, contributed $3.4 million to net revenues. Net revenues from test services increased 71.4% from $67.4 million in 2001 to $115.4 million in 2002. Net revenues from assembly services increased 40.5% from $78.5 million in 2001 to $110.3 million in 2002. Cost of revenues and gross profit margin. Cost of revenues increased 13.8% from $217.8 million in 2001 to $247.9 million in 2002. However, depreciation expense and cost of leasing testers (included in cost of revenues) decreased from $117.8 million, or 80.7% of net revenues in 2001 to $116.8 million, or 51.8% of net revenues in 2002. Cost of revenues as a percentage of sales decreased from 149.3% in 2001 to 109.8% in 2002, resulting in a smaller gross loss in 2002. Gross loss in 2002 was $22.2 million, or a gross margin of negative 9.8%, as compared to gross loss of $71.9 million, or gross margin of negative 49.3%, in 2001. The improvement in gross margin was primarily due to the increase in net revenues resulting in higher capacity utilization and lower payroll and materials costs. Selling, general and administrative expenses. Selling, general and administrative expenses increased marginally by 1.6% from $36.0 million in 2001 to $36.6 million in 2002 but as a percentage of net revenues decreased from 24.7% of net revenues in 2001 to 16.3% of net revenues in 2002. This was a result of our on-going efforts to control costs and manage discretionary spending in a very difficult operating environment, partially offset by a payment of $1.0 million in third quarter 2002 by our controlling shareholder, Singapore Technologies Pte Ltd, to our former Chairman and Chief Executive Officer, Tan Bock Seng. The payment did not involve any cash outlay from us and was charged to our income statement as compensation expense and credited to shareholders' equity as "Additional Paid-in Capital." 49 Research and development expenses. Research and development expenses increased 24.4% from $15.2 million in 2001, or 10.4% of net revenues in 2001, to $18.9 million in 2002, or 8.4% of net revenues in 2002. These expenses were for additional equipment, supplies and research and development personnel to further strengthen our testing and advanced packaging capabilities. Stock-based compensation expense. Stock-based compensation expense was $1.0 million in 2001 and $0.1 million in 2002. Asset impairment and prepaid leases written-down. We recognized asset impairment charges of $23.7 million for 2001 and $14.7 million for 2002 and wrote-down prepaid leases of tester equipment of $3.1 million for 2001 and $0.8 million for 2002. The impairments and write-downs were taken because continued softness in demand in the end-markets to which certain of our equipment was dedicated had reduced the anticipated future usage of such equipment. We recognized impairment charges of $19.4 million in 2001 and $11.1 million in 2002 in respect of tester equipment held for use. The carrying values of these assets were written down to the estimated fair market value and will continue to be depreciated over their remaining useful lives. We recognized asset impairment charges of $4.3 million in 2001 and $3.6 million in 2002 in respect of equipment held for sale. Net interest income (expense). Net interest income was $5.2 million in 2001 compared to net interest expense of $5.1 million in 2002. Net interest income consisted of interest income of $6.5 million and interest expense of $1.3 million in 2001 and interest income of $5.3 million and interest expense of $10.4 million in 2002. The interest income was earned on our marketable debt securities and fixed-term time deposits with various financial institutions. The lower interest income earned in 2002 was due primarily to the general decline in interest rates. The increased interest expense in 2002 was primarily due to our fixed-interest convertible notes issued in March 2002. Foreign currency exchange gain (loss). We recognized an exchange gain of $0.8 million in 2001 compared to an exchange loss of $0.5 million in 2002, due primarily to currency fluctuations of the U.S. dollar against the Singapore dollar, the Japanese yen and the New Taiwan dollar. Other non-operating income. Other non-operating income was $2.0 million in 2001 and $3.4 million in 2002. The increase was due to a gain arising from an interest-rate swap transaction in respect of a marketable debt security, gains from sale or maturity of marketable securities and a lower amount of grants recorded in 2001 for research and development activities from EDB under its Research and Incentive Scheme for Companies. Taxation. Income tax benefit was $8.8 million in 2001 and $7.2 million in 2002. The income tax benefit of $8.8 million in 2001 comprised income tax expense of $1.4 million and deferred tax benefit of $10.2 million. The income tax benefit of $7.2 million in 2002 comprised income tax expense of $1.0 million and a deferred tax benefit of $8.2 million. The income tax expense for both years was principally due to Singapore tax on interest income generated principally from the investment of excess cash in fixed-term time deposits and marketable debt securities. The deferred tax benefit of $10.2 million in 2001 and $8.2 million in 2002 resulted principally from recognizing the deferred tax benefit associated with tax losses, unutilized capital allowances carried forward and temporary differences arising primarily from property, plant and equipment. QUARTERLY RESULTS The following table sets forth our unaudited results of operations, including as a percentage of net revenue, for the eight fiscal quarters ended December 31, 2003. We believe that all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the selected quarterly information when read in conjunction with our consolidated financial statements and the related notes included 50 elsewhere in this Annual Report. Our results of operations have varied and may continue to vary significantly from quarter to quarter and are not necessarily indicative of the results of any future periods.
QUARTER ENDED MAR-02 JUN-02 SEP-02 DEC-02 MAR-03 JUN-03 SEP-03 DEC-03 - -------------------------------------------------------------------------------------------------------------------------- (in thousands of U.S.$) Net revenues 39,404 51,259 63,143 71,932 75,531 87,602 97,922 119,636 Cost of revenues 53,228 60,031 65,102 69,582 72,015 77,680 81,517 96,802 - -------------------------------------------------------------------------------------------------------------------------- Gross profit (loss) (13,824) (8,772) (1,959) 2,350 3,516 9,922 16,405 22,834 ================================================================================= Operating expenses: Selling, general and administrative 8,794 9,023 9,227 9,589 8,652 8,288 9,267 10,171 Research and development 4,158 4,530 4,983 5,185 4,492 4,033 3,550 3,220 Asset impairments -- -- -- 14,666 -- -- -- -- Prepaid leases written off -- -- -- 764 -- -- -- -- Stock-based compensation 230 (197) 9 18 52 (15) 21 39 Others, net 130 19 402 (3) (387) 281 77 403 - -------------------------------------------------------------------------------------------------------------------------- Total operating expenses 13,312 13,375 14,621 30,219 12,809 12,587 12,915 13,833 ================================================================================= Operating income (loss) (27,136) (22,147) (16,580) (27,869) (9,293) (2,665) 3,490 9,001 Other income (expenses): Interest income (expenses), net (9) (1,775) (1,842) (1,517) (1,666) (1,911) (2,467) (3,165) Foreign currency exchange gain (loss) 199 423 (1,260) 126 (236) 389 (132) 1,613 Other non-operating income (expenses), net 461 1,771 525 662 990 5,176 1,022 383 - -------------------------------------------------------------------------------------------------------------------------- Total other income (loss) 651 419 (2,577) (729) (912) 3,654 (1,577) (1,169) ================================================================================= Income (loss) before income taxes (26,485) (21,728) (19,157) (28,598) (10,205) 989 1,913 7,832 Income tax benefit (expense) (141) 441 1,619 5,244 1,111 (1,273) (565) 22 - -------------------------------------------------------------------------------------------------------------------------- Net income (loss) before minority interest (26,626) (21,287) (17,538) (23,354) (9,094) (284) 1,348 7,854 Minority interest 73 (278) (90) (219) (533) (418) (572) (16) - -------------------------------------------------------------------------------------------------------------------------- Net income (loss) (26,553) (21,565) (17,628) (23,573) (9,627) (702) 776 7,838 ================================================================================= Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale marketable securities 326 160 210 316 314 4,186 (383) (430) Realized (gain) loss on available-for-sale marketable securities included in net loss 2 -- (78) (49) 17 (4,854) (193) (10) Translation adjustment (391) 1,152 (1,102) 129 3 113 720 (138) - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) (26,616) (20,253) (18,598) (23,177) (9,293) (1,257) 920 7,260 =================================================================================
51
AS A PERCENTAGE OF NET REVENUES MAR-02 JUN-02 SEP-02 DEC-02 MAR-03 JUN-03 SEP-03 DEC-03 - -------------------------------------------------------------------------------------------------------------------------- Net revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues 135.1% 117.1% 103.1% 96.7% 95.3% 88.7% 83.2% 80.9% - ------------------------------------------------------------------------------------------------------------------------- Gross profit (loss) (35.1)% (17.1)% (3.1)% 3.3% 4.7% 11.3% 16.8% 19.1% ================================================================================ Operating expenses: Selling, general and administrative 22.3% 17.6% 14.6% 13.3% 11.4% 9.4% 9.5% 8.5% Research and development 10.6% 8.8% 7.9% 7.2% 5.9% 4.6% 3.6% 2.7% Asset impairments 0.0% 0.0% 0.0% 20.4% 0.0% 0.0% 0.0% 0.0% Prepaid leases written off 0.0% 0.0% 0.0% 1.1% 0.0% 0.0% 0.0% 0.0% Stock-based compensation 0.6% (0.3)% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% Others, net 0.3% 0.0% 0.7% 0.0% (0.4)% 0.3% 0.2% 0.4% - ------------------------------------------------------------------------------------------------------------------------- Total operating expenses 33.8% 26.1% 23.2% 42.0% 17.0% 14.3% 13.3% 11.6% ================================================================================ Operating income (loss) (68.9)% (43.2)% (26.3)% (38.7)% (12.3)% (3.0)% 3.5% 7.5% Other income (expenses): Interest income (expenses), net 0.0% (3.5)% (2.9)% (2.1)% (2.2)% (2.2)% (2.5)% (2.6)% Foreign currency exchange gain (loss) 0.5% 0.8% (2.0)% 0.2% (0.3)% 0.4% (0.1)% 1.3% Other non-operating income (expenses), net 1.2% 3.5% 0.9% 0.8% 1.3% 5.9% 1.1% 0.3% - ------------------------------------------------------------------------------------------------------------------------- Total other income (expenses) 1.7% 0.8% (4.0)% (1.1)% (1.2)% 4.1% (1.5)% (1.0)% ================================================================================ Income (loss) before income taxes (67.2)% (42.4)% (30.3)% (39.8)% (13.5)% 1.1% 2.0% 6.5% Income tax benefit (expense) (0.4)% 0.9% 2.5% 7.3% 1.5% (1.4)% (0.6)% 0.1% - ------------------------------------------------------------------------------------------------------------------------- Net income (loss) before minority interest (67.6)% (41.5)% (27.8)% (32.5)% (12.0)% (0.3)% 1.4% 6.6% Minority interest 0.2% (0.5)% (0.1)% (0.3)% (0.7)% (0.5)% (0.6)% 0.0% - ------------------------------------------------------------------------------------------------------------------------- Net income (loss) (67.4)% (42.0)% (27.9)% (32.8)% (12.7)% (0.8)% 0.8% 6.6% ================================================================================ Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale marketable securities 0.8% 0.3% 0.3 0.4% 0.4% 4.8% (0.4) (0.4)% Realized (gain) loss on available-on-sale marketable securities included in net loss 0.0% 0.0% (0.1)% 0.0% 0.0% (5.5)% (0.2)% 0.0% Translation adjustment (1.0)% 2.2% (1.8)% 0.2% 0.0% 0.1% 0.7% (0.1)% - ------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) (67.6)% (39.5)% (29.5)% (32.2)% (12.3)% (1.4)% 0.9% 6.1% ================================================================================
52 LIQUIDITY AND CAPITAL RESOURCES CURRENT AND EXPECTED LIQUIDITY As of December 31, 2003, our principal sources of liquidity included $313.2 million in cash and cash equivalents and $34.4 million in marketable securities. We also have $20.0 million of banking and credit facilities consisting of short to medium-term advances and bank guarantees of which we have utilized $1.1 million in the form of bank guarantees as of December 31, 2003. Interest on any future borrowings under the unutilized facilities will be charged at the bank's prevailing rate. We also have a $294.1 million (S$500 million) Multicurrency Medium-term Note Program ("MTN Program") under which we may, from time to time, issue in series or tranches in Singapore dollars or any other currency as may be agreed upon between us and the dealers of the MTN Program. We have not issued any notes under the MTN Program. Additionally, our subsidiary Winstek has approximately $4.2 million (NT$ 144.0 million) of unutilized bank and credit facilities from various banks and financial institutions. We expect our capital expenditures for 2004 to be between $200 million and $250 million. The majority of the capital expenditures are expected to be for investments in next generation testers; fine pitch wirebonders; new capabilities, such as Chip Scale Module Packaging, which is a wafer level packaging technology that could potentially offer the most cost effective integration solution for certain applications; and expansion of production facilities in Singapore, Taiwan and China. We believe that our cash on hand, existing credit facilities and anticipated cash flows from operations will be sufficient to meet our currently anticipated capital requirements and debt service obligations for 2004. If our capital requirements exceed our expectations as a result of higher than anticipated growth in the semiconductor industry, acquisition or investment opportunities, the expansion of our business or otherwise, or if our cash flows from operations are lower than anticipated, including as a result of an unexpected decrease in demand for our services due to a downturn in the semiconductor industry or otherwise, we may be required to obtain additional debt or equity financing. We consider opportunities to obtain additional debt or equity financing from time to time depending on prevailing market conditions. In such events, there can be no assurance that additional financing will be available or, if available, that such financing will be obtained on terms favorable to us or that any additional financing will not be dilutive to our shareholders. CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities totaled $28.5 million in 2002 and $82.5 million in 2003. Net cash was mainly provided by net losses adjusted for non-cash related items. Working capital uses of cash included increases in accounts receivable and inventories. Accounts receivable increased in December 2003 over December 2002, primarily due to higher revenue. Overall inventory levels were higher by 104 % at December 31, 2003 compared to December 31, 2002 as we increased raw materials inventory to meet forecast demand. CASH FLOWS FROM INVESTING ACTIVITIES Net cash used in investing activities totaled $156.7 million in 2002 and $174.3 million in 2003. The net cash used in investing activities consisted of capital expenditures of $113.2 million in 2002 and $209.3 million in 2003, purchases of marketable debt securities of $158.0 million in 2002 and $43.9 million in 2003, an advance to a vendor to secure supplies of $5.0 million in 2003 and purchases of additional shares totaling $0.5 million in our subsidiary, Winstek, in 2003. The net cash used in investing activities in 2002 was reduced by receipts of $113.8 million from the sale or maturity of marketable debt securities and $0.8 million from the disposal of equipment. The net cash used in investing activities in 2003 was reduced by receipts of $83.3 million from the sale or maturity of marketable debt securities and $1.1 million from the disposal of equipment. The increase in cash used for investing activities in 2002 compared to 2001 was mainly due to increased capital expenditures and purchases of marketable securities in 2002. 53 The nature of our industry is such that, in the short-term, we may reduce our capital expenditures by delaying planned capital expenditures in response to a difficult business environment, such as the one that existed in 2001. However, the semiconductor test and assembly market is characterized by rapid technological changes which we expect to result in significant capital expenditure requirements within our longer-term horizon. Factors which may affect our level of future capital expenditures include the degree and the timing of technological changes within our industry, changes in demand for the use of our equipment and machinery as a result of changes to our customer base, the level of growth within our industry, and the amount and cost of capital available to us for capital expenditures. CASH FLOWS FROM FINANCING ACTIVITIES AND RESEARCH AND DEVELOPMENT GRANTS Net cash provided by financing activities was $180.6 million in 2002 and net cash provided by financing activities was $234.7 million in 2003. In 2002, net cash provided by financing activities of $180.6 million consisted of net proceeds from the issuance of convertible notes in March 2002 of $195.0 million, bank borrowings of $20.6 million, receipt of government grants of $1.2 million and proceeds from issuance of shares of $1.3 million. These were reduced by the repayment of installments due on the long-term EDB loan of $14.3 million, cash pledged against borrowings of $13.0 million and payment for capital leases of $10.1 million. In 2003, net cash provided by financing activities of $234.7 million consisted of net proceeds from the issuance of our ordinary shares of $117.5 million and net proceeds from the issuance of our convertible notes due 2008 of $112.3 million in November 2003 (the offerings were intended to provide us with financing for general corporate purposes, including capital expenditures and acquisitions and investments, if any), bank borrowings of $49.8 million, decrease in cash pledged against borrowings of $8.2 million and receipt of government grants of $6.8 million. These were reduced by the repayment of installments due on the long-term EDB loan of $14.8 million, repayment of long-term and short-term bank borrowings of $32.3 million and payment for capital leases of $12.9 million. OFF-BALANCE SHEET TRANSACTIONS We do not have any "off-balance sheet transactions," as defined in Item 5.E. of Form 20-F. CONTRACTUAL OBLIGATIONS The following table sets forth our contractual obligations and commitments to make future payments as of December 31, 2003. The following excludes our accounts payable, accrued operating expenses and other current liabilities which are payable in the normal course of operations and which are included in current liabilities at December 31, 2003.
YEAR ENDED DECEMBER 31, 2003, PAYMENTS DUE ----------------------------------------------------------------- MORE WITHIN 1 THAN 5 YEAR 1-3 YEARS 4-5 YEARS YEARS TOTAL ---- --------- --------- ----- ----- (in thousands of US$) Long term debt........................... $ 6,841 $23,368 $ 7,715 $ 327 $ 38,251 Convertible notes........................ - -(1) 327,379(2) - 327,379 Capital lease obligations................ 5,296 812 - - 6,108 Operating leases......................... 42,507 7,228 1,753 13,365 64,853 Unconditional purchase obligations: - Capital commitments.............. 49,310 - - - 49,310 - Inventory purchase commitments...................... 8,413 - - - 8,413 ----------------------------------------------------------------- Total contractual cash obligations $ 112,367 $31,408 $ 336,847 $13,692 $ 494,314 -----------------------------------------------------------------
54 (1) Holders of our convertible notes due 2007 have the right to require us to purchase all or some of their notes on March 18, 2005. (2) Holders of our convertible notes due 2008 have the right to require us to purchase all or some of their notes on November 7, 2007. FINANCING ARRANGEMENTS As of December 31, 2003, we had borrowings totaling $371.8 million comprising primarily $327.4 million due to our convertible note holders, obligations under capital leases amounting to $6.1 million and bank borrowings of $38.3 million taken up by our subsidiary, Winstek. In March 2002, we issued $200.0 million of senior unsecured and unsubordinated convertible notes due March 18, 2007, with net proceeds of $195.0 million. The convertible notes due 2007 bear interest at the rate of 1.75% per annum and have a yield to maturity of 4.91%. At the maturity date of the convertible notes due 2007, we will pay to the note holders of the convertible notes 117.665% of the principal amounts. The notes can be converted into our ordinary shares or, subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at a conversion price of S$3.408 per ordinary share (at a fixed exchange rate of US$1.00 = S$1.8215) for the convertible notes due 2007. The conversion price may be subject to adjustments for certain events. We may elect to satisfy our obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after March 18, 2004 at a price to yield of 4.91% per year to the redemption date if our shares or ADSs trade at or above 125% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of the notes on March 18, 2005 at a price equal to 110.081% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to March 18, 2007, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.91% per year to the redemption date. In November 2003, we issued $115.0 million of senior unsecured and unsubordinated convertible notes due November 7, 2008, with net proceeds of $112.3 million. The convertible notes have a yield to maturity of 4.25%. At the maturity date, we will pay to the note holders 123.4% of the principal amount of the notes, comprising principal and redemption interest. The notes can be converted into our ordinary shares or, subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at an initial conversion price of S$3.05 per ordinary share (equivalent to an initial number of 570.5902 ordinary shares per $1,000 principal amount of convertible notes, based on a fixed exchange rate of US$1.00 = S$1.7403). The conversion price may be subject to adjustments for certain events. We may elect to satisfy our obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after November 7, 2006 at a price to yield of 4.25% per annum to the redemption date if our shares or ADSs trade at or above 130% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of their notes on November 7, 2007 at a price equal to 118.32% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to November 7, 2008, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.25% per year to the redemption date. We have recorded the convertible notes due 2007 and 2008 as debt instruments pursuant to U.S. GAAP. Our convertible notes are classified as long-term liabilities and, accordingly, the accrued yields on the convertible notes due 2007 and 2008 during any period (at 4.91% and 4.25% per year, respectively) are classified as interest expense for that period. Concurrently with the issuance of the convertible notes due 2008, we placed and issued 83,389,375 of our ordinary shares at a placing price of S$2.40 for each ordinary share placed and issued in November 2003. 55 The long-term loan agreement with EDB dated June 5, 1998 for a sum of $52.9 million (S$90.0 million) of which $14.8 million was outstanding as of December 31, 2002 was fully paid in September 2003. In connection with a working capital loan facility of US$19.0 million granted by United Overseas Bank Ltd Taipei Branch ("UOB Taipei") to our subsidiary, Winstek, in November 2002, we executed a letter of charge and set-off in favor of UOB Taipei. The agreement provides for interest at the rate of 7.93% per annum payable every quarter. The principal was repayable in 13 equal installments commencing November 6, 2004. US$3.5 million was drawn down under this facility. Under the terms of the letter of charge and set-off, we were required to make deposits as cash collateral for the loan to Winstek in an amount equal to the amount drawn down with UOB Taipei and its branches. We may not withdraw or otherwise transfer or encumber these deposits without the consent of UOB Taipei as long as the loan is outstanding. As at December 31, 2002, the amount deposited was US$3.5 million under this agreement. This loan has been fully paid by the end of 2003. In 2003, Winstek entered into five floating rate Taiwan dollar loans of $2.9 million, $17.7 million, $1.7 million, $4.4 million and $2.9 million with China Development Industrial Bank, Taishin International Bank, First Commercial Bank, Chiaotung Bank and Hsinchu International Bank, respectively. The interest rates on the loans are revised from time to time by the Banks. As of December 31, 2003, the interest rates on the loans were 3.8%, 3.367%, 3.65%, 4% and 2.178% per annum, respectively. Interest on all five loans is payable on a monthly basis in Taiwan dollars. The principal on the $2.9 million loan is repayable in 15 equal quarterly installments commencing June 24, 2005, and the principal on the $17.7 million loan is repayable in 16 equal installments every two months commencing September 26, 2004. The principal on the $1.7 million loan is repayable in 16 equal quarterly installments commencing July 25, 2004, the principal on the $4.4 million loan is repayable in 13 equal quarterly installments commencing November 10, 2004, and the principal on the $2.9 million loan is repayable in 48 unequal monthly installments commencing January 10, 2004. The loans are secured by fixed deposits amounting to $0.5 million and property pledged to the bank, comprising land and building and plant and machinery, of $56.6 million. In 2003, Winstek also entered into one fixed rate Taiwan dollar loan of $2.7 million with Taiwan Life Insurance Co., Ltd. As of December 31, 2003, the interest rate on the loan was 3.94%. Interest is payable on a quarterly basis in Taiwan dollars and the principal is repayable in 12 unequal monthly installments commencing December 26, 2003. The loan is secured by plant and machinery pledged to the bank amounting to $4.1 million. We also had United States dollar and Taiwan dollar short-term loan facilities with a number of Taiwan banks. The loans were all repaid by the end 2003. As of December 31, 2003, Winstek had deposits of $4.5 million pledged as security for bank credit and facility lines available to Winstek. As of December 31, 2002, Winstek had deposits of $3.2 million pledged as security for bank credit and facility lines available to Winstek. The capital leases and bank borrowings by Winstek were taken up to finance the purchase of new testers. We have an existing agreement with Citibank, N.A. for a working capital facility of $20.0 million. As of December 31, 2003, we had utilized $1.1 million in the form of bank guarantees under this facility. Interest on any future borrowings under the unutilized facilities will be charged at the bank's prevailing rate. Our subsidiary, Winstek, has approximately $4.2 million (NT$144.0 million) of unutilized working capital facilities from various banks and financial institutions. In January 2002, we established a $294.1 million (S$500.0 million) MTN Program. Under the MTN Program, we may, from time to time, issue notes in series or tranches in Singapore dollars or any other currencies as may be agreed upon between us and the dealers of the MTN Program. Each series of notes may be issued in various amounts and terms, and may bear fixed or floating rates of interest. The notes constitute unsecured obligations. The MTN 56 Program limits our ability to pay dividends while the interest on the notes is unpaid, to create security interests to secure our indebtedness and to undertake any form of reconstruction, amalgamation, merger or consolidation with another company if such arrangement would affect our ability to make payments on the notes, among other things. We intend to use the proceeds from the MTN Program for our general corporate purposes including capital expenditure, working capital and investments. We have not issued any notes under the MTN Program. Our ability to issue notes under the MTN Program will depend on market and other conditions (including our financial condition) prevailing at the time we intend to issue notes. As a result, we may not be able to issue notes under the MTN Program. SPECIAL TAX STATUS We have been granted pioneer status under The Economic Expansion Incentives (Relief from Income Tax) Act, Chapter 86 of Singapore, for "Subcontract Assembly And Testing Of Integrated Circuits Including Wafer Probing Services" from January 1, 1996 to December 31, 2003. Under the pioneer incentive, income from qualifying activities is exempt from Singapore income tax. The tax exempt profits from the pioneer trade may be distributed as tax-exempt dividends and no further Singapore income tax will be levied on such dividends. The tax exemption under the pioneer incentive does not apply to non-qualifying income such as interest and rental income earned during the incentive period. Such non-qualifying income is subject to tax at the applicable income tax rate (22% for income earned in 2002 and 2003). Tax losses and unutilized tax depreciation ("capital allowances") arising during the incentive period are available to be carried forward for offset against future taxable profits arising after the incentive period. This is provided that our shareholding composition remains substantially (at least 50%) the same as at certain relevant dates. An additional requirement for the utilization of unutilized capital allowances for offset against future taxable profits arising after the incentive period is we continue to carry on the same trade which gave rise to the capital allowances. Without the pioneer incentive, our profits would be subject to income tax at the applicable corporate income tax rate. In December 2003, an application was submitted to the EDB to revoke our pioneer status granted from January 1, 1996 to December 31, 2003. Our pioneer trade is in a tax loss position due to the substantial amount of capital allowances claimed arising from capital expenditure on our plant and machinery and trade losses in certain years. As a result, we have not enjoyed any tax exemption in respect of our income arising from the pioneer activities. On the other hand, we have paid taxes in respect of our interest and rental income, as losses arising from the pioneer trade cannot be set-off against the non-qualifying income during the pioneer incentive period due to the application of the law in respect of the pioneer incentive. EDB has recommended our application for revocation of the pioneer status to the Minister of Finance for approval. If the revocation is approved, we would receive a refund of taxes paid previously on interest and rental income as the unutilized tax losses and capital allowances arising from the trading activities would then be allowed to set-off against the income derived in the previous years. We are also in the process of working with the EDB to apply for a new tax incentive in the future. DERIVATIVE FINANCIAL INSTRUMENTS From time to time, we have used derivative instruments such as forward foreign currency swaps, foreign forward contracts and options and interest rate swaps to mitigate the financial risks associated with certain assets and liabilities. We entered into foreign currency contracts to mitigate financial risks associated with payroll costs, materials costs and other costs denominated in Singapore dollars and New Taiwan dollars and to benefit from our expectations of 57 future exchange rate fluctuations. Hedge accounting has not been applied as the contracts entered into to date do not qualify as hedges under generally accepted accounting principles in the United States. Gains and losses on these contracts have been recorded as foreign currency gains or losses. As of December 31, 2003, we had no foreign currency forward contracts outstanding or any other derivative financial instruments, except for a premium deposit of $10.0 million denominated in Singapore dollars. The premium deposit is entered with Citibank, whereby interest earned on the deposit is at an enhanced rate of 3.95%. Upon its maturity on January 26, 2004, Citibank redeemed the principal and interest in U.S. dollars at the pre-determined strike price. FOREIGN CURRENCY RISK A portion of our costs is denominated in foreign currencies, like the Singapore dollar, the New Taiwan dollar and the Japanese yen. As a result, changes in the exchange rates of these currencies or any other applicable currencies to the U.S. dollar will affect our cost of goods sold and operating margins and could result in exchange losses. We cannot fully predict the impact of future exchange rate fluctuations on our profitability. From time to time, we may have engaged in, and may continue to engage in, exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. However, we cannot assure you that any hedging technique we implement will be effective. If it is not effective, we may experience reduced net income. RESEARCH AND DEVELOPMENT See "Item 4. Information on our Company - B. Business Overview - Research & Development." RECENT ACCOUNTING PRONOUNCEMENTS In November 2002, a consensus was reached on Financial Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") 00-21 "Revenue Arrangements with Multiple Deliverables." The EITF addresses certain aspects of accounting by a vendor for arrangements relating to performance of multiple revenue-generating activities. EITF 00-21 requires revenue arrangements with multiple deliverables to be divided into separate units of accounting if the deliverables in the arrangement meet certain specified criteria, allocation of the arrangement consideration among the separate units of accounting based on their relative fair values, and separate revenue recognition for separate units of accounting. The guidance in EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material impact on the Company's financial condition and results of operations on the date of adoption. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("VIE") - an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" ("FIN No. 46"). The effective date of FIN No. 46 was subsequently deferred by FASB staff Position 46-6. A VIE is an entity in which equity investors do not have 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 investors. Among other things, FIN No. 46 requires the consolidation of the assets, liabilities and results of operations of VIEs by the primary beneficiary. FIN No. 46 also requires the disclosure of information concerning VIEs by entities that hold significant variable interest but may not be the primary beneficiary. FIN No. 46 applied immediately to VIEs created after January 31, 2003 and is effective for interim periods beginning after December 15, 2003 for interests in VIEs that were acquired before February 1, 2003. FIN No. 46 also requires the disclosure of the nature, purpose, size and activities of VIEs, as well as the maximum exposure to loss in connection with VIEs for any financial statements issued after January 31, 2003, if it is reasonably possible that an entity will consolidate or disclose information about a VIE. The adoption of FIN No. 46 did not have any impact on the Company's financial condition and results of operations. 58 In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." Among other things, SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and all of its provisions should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact the Company's financial condition and results of operations. In May 2003, the FASB issued SFAS 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 financial instruments with characteristics of both liabilities and equity and 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 also revises the definition of a liability to encompass obligations that a reporting entity can or must settle by issuing its own equity shares, depending on the nature of the relationship established between the holder and the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have any impact on the Company's financial condition and results of operations on the date of adoption. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The following table sets forth the name, age (as at February 15, 2004) and position of each director and member of senior management:
NAME AGE POSITION - -------------------------------------------------------------------------------------------------- BOARD OF DIRECTORS Charles Richard Wofford (1)(2)(3) 70 Chairman of the Board of Directors Lim Ming Seong (2)(3)(4) 56 Deputy Chairman of the Board of Directors Tan Lay Koon 45 Director, President & Chief Executive Officer Peter Seah Lim Huat (5)(6) 57 Director Tay Siew Choon (7)(8) 56 Director Quek Swee Kuan (9) 39 Director Koh Beng Seng (10) 53 Director Steven Hugh Hamblin (8)(10) 55 Director Teng Cheong Kwee (11) 50 Director William J. Meder (7) 63 Director Richard John Agnich (10) 60 Director Eleana Tan Ai Ching(12) 41 Alternate Director to Tay Siew Choon SENIOR MANAGEMENT Suh Tae Suk 56 Chief Operating Officer Wang Pearlyne 49 Acting Chief Financial Officer Han Byung Joon 44 Chief Technology Officer Jeff Osmun 40 Vice President, Worldwide Sales Ng Tiong Gee 41 Chief Information Officer
(1) Chairman of the Executive Committee. (2) Member of the Executive Resource & Compensation Committee. 59 (3) Member of the Nominating Committee. (4) Chairman of the Budget Committee. (5) Chairman of the Executive Resource & Compensation Committee. (6) Chairman of the Nominating Committee. (7) Member of the Budget Committee. (8) Member of the Executive Committee. (9) Appointed on July 29, 2003 to replace Tan Choon Shian, who resigned on the same date. (10) Member of the Audit Committee. (11) Chairman of the Audit Committee. (12) Eleana Tan Ai Ching was appointed as alternate director to Tay Siew Choon on January 2, 2004, to replace Gan Chee Yen, who resigned on December 31, 2003. Lai Yeow Hin, alternate director to Tan Choon Shian, resigned on July 29, 2003. Under Singapore companies law, a director appointed by a company may, if permitted by the Articles of Association of such company, appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director of such company for a period of time. The Board of Directors held three meetings in person and one meeting by videoconference/teleconference in 2003. The average attendance by directors at Board meetings they were scheduled to attend was 95%. There are no family relationships among any of our directors, senior management or substantial shareholders, and there are no arrangements or understandings with any person pursuant to which any of our directors or members of senior management were selected. The following directors hold or held positions in 2003 in Singapore Technologies Pte Ltd: Lim Ming Seong was Corporate Advisor until January 31, 2004, Peter Seah Lim Huat is President & Chief Executive Officer, Tay Siew Choon is Managing Director/Chief Operating Officer and Eleana Tan Ai Ching is Director, Finance. The following directors hold or held positions in 2003 in Singapore Technologies Semiconductors Pte Ltd: Peter Seah Lim Huat is Chairman, Lim Ming Seong is a director and Tay Siew Choon is a director. BOARD OF DIRECTORS CHARLES RICHARD WOFFORD Charles Richard Wofford has been a member of our Board of Directors since February 1998. He was appointed Chairman of the Board of Directors in August 2002 and re-elected to the Board of Directors in 2003. He is presently a director of FSI International. Mr. Wofford was with Texas Instruments, Inc. for 33 years before leaving as Senior Vice-President to join Farr Company in 1991. He was the Chairman, CEO and President of Farr Company from 1992 to 1995. He received his Bachelor of Arts degree from Texas Western College. LIM MING SEONG Lim Ming Seong became our Deputy Chairman in June 1998 and was re-elected to our Board of Directors in 2001. Mr. Lim was the Corporate Advisor of Singapore Technologies Pte Ltd until January 31, 2004. He is the Deputy Chairman of the Board of Directors of Chartered Semiconductor Manufacturing Ltd and Chairman of CSE Global Ltd, formerly known as CSE Systems & Engineering Ltd. Since joining Singapore Technologies Pte Ltd in December 1986, he has held various senior positions in the Singapore Technologies Group. Mr. Lim is presently a director of Singapore Technologies Semiconductors Pte Ltd and STATS Inc. Prior to joining Singapore Technologies Pte Ltd, he was with the Ministry of Defence of Singapore. Mr. Lim received his Bachelor of Applied Science (Honors) in Mechanical Engineering from the University of Toronto and his Diploma in Business Administration from the University of Singapore. He also participated in the Advanced Management Programs at INSEAD and Harvard University. 60 TAN LAY KOON Tan Lay Koon was appointed our President and Chief Executive Officer on June 26, 2002. He was appointed to the Board of Directors on the same date. Mr. Tan joined us in May 2000 as our Chief Financial Officer. Prior to joining us, he was an investment banker with Salomon Smith Barney, the global investment banking unit of Citigroup Inc. Before that, he held various positions with the Government of Singapore, Times Publishing Limited and United Overseas Bank Limited in Singapore. Mr. Tan graduated with a Bachelor of Engineering (First Class Honors) from the University of Adelaide, Australia as a Colombo Plan Scholar. He also has a Master of Business Administration (Distinction) from the Wharton School, University of Pennsylvania where he was elected a Palmer scholar. PETER SEAH LIM HUAT Peter Seah Lim Huat was appointed to our Board of Directors in July 2002. Mr. Seah was appointed as a Director of Singapore Technologies Pte Ltd in May 1997 and is currently the President and Chief Executive Officer of Singapore Technologies Pte Ltd, a position he has held since December 1, 2001. He was with the former Overseas Union Bank Limited from 1977 to 2001. He held several senior positions during that time, becoming its President and Chief Executive Officer in 1991. He retired as Vice Chairman and Chief Executive Officer of the former Overseas Union Bank Limited on September 30, 2001. Mr. Seah received his Bachelor of Business Administration (Honors) from the former University of Singapore in 1968. Mr. Seah is a director or chairman of numerous companies including, in particular, Singapore Technologies Pte Ltd, Singapore Technologies Semiconductors Pte Ltd, Chartered, EDBI and Singapore Technologies Holdings. TAY SIEW CHOON Tay Siew Choon was appointed to our Board of Directors in July 2002. He is currently the Managing Director and Chief Operating Officer of Singapore Technologies Pte Ltd and Deputy Chairman and CEO of Green Dot Capital Pte Ltd, a wholly owned subsidiary of Singapore Technologies Pte Ltd. He is also the Chairman of Singapore Computer Systems Ltd, SNP Corporation Ltd and Co-Chairman of NexGen Financial Holdings Ltd. He is also a board member of Singapore Technologies Pte Ltd, Singapore Technologies Semiconductors Pte Ltd, SembCorp Industries Ltd, Chartered Semiconductor Manufacturing, ST Telemedia Pte Ltd and SNP-Leefung Holdings Ltd. Mr. Tay graduated from Auckland University in 1970 with a Bachelor of Engineering in Electrical Engineering under the Colombo Plan Scholarship and a Master of Science in System Engineering from the former University of Singapore in 1974. QUEK SWEE KUAN Quek Swee Kuan was appointed to our Board of Directors in July 2003. Mr. Quek is currently Director, InfoComms & Media, EDB. He is also the Chief Information Officer and Director for EDB's North American operations. Mr. Quek joined EDB as a Senior Industry Officer in the Electronics Systems Group in 1994. Prior to joining the EDB, he was a Systems Engineer at Tandem Computers. He was Head of the Electronics Systems Group in 1995 before being posted to EDB's Silicon Valley office. From 1998, Mr. Quek was Regional Director for the Western Region, based in Silicon Valley. In January 2001, he returned to Singapore to be a Deputy Director, Services Development Division before assuming his current appointment in April 2002. He holds a Bachelor's degree in Computer Science from the National University of Singapore in 1988 and a Masters in Business Administration (Higher Honours) from Oklahoma City University in 1992. KOH BENG SENG Koh Beng Seng was appointed to our Board of Directors in February 1999 and was re-elected to our Board of Directors in 2002. He is currently the Deputy President and a Director of United Overseas Bank Limited and Far Eastern Bank Limited. Mr. Koh is on the Board of Directors of Singapore Technologies Engineering Ltd. He is active in the financial services sector and was with the Monetary Authority of Singapore from 1973 to 1998, where he served as Deputy Managing Director from 1988 to 1998. He received his Bachelor of Commerce (First Class Honors) from the former Nanyang University and his Master of Business Administration from Columbia University. Mr. Koh was awarded an Overseas Postgraduate Scholarship by the Monetary Authority of Singapore in 1978. In 1987, the President of the Republic of Singapore awarded him a Meritorious Service Medal. 61 STEVEN HUGH HAMBLIN Steven Hugh Hamblin was appointed to our Board of Directors in June 1998 and was re-elected to our Board of Directors in 2002. Mr. Hamblin was with Compaq Computer Corporation from 1984 to 1996 and held various positions including, Managing Director of Compaq Asia Manufacturing, Vice President Asia/Pacific Division, Vice President and Financial Controller for Corporate Operations and Vice President of Systems Division Operations. He was with Texas Instruments for ten years before leaving as its Division Controller, Semiconductor Group, to join General Instrument, Microelectronics Division, New York in 1983 as its Group Financial Executive. Mr. Hamblin received his Bachelor of Science in Civil Engineering from the University of Missouri, Columbia and his Master of Science in Industrial Administration from Carnegie-Mellon University. TENG CHEONG KWEE Teng Cheong Kwee was appointed to our Board of Directors in January 2001 and was re-elected to our Board of Directors in May of that year. Prior to this appointment, he was the Head of Risk Management & Regulatory Division of the Singapore Exchange Limited. Mr. Teng has more than 20 years of experience in the finance industry. He is an Executive Director of Pheim Asset Management (Asia) Private Limited, a licensed fund management company in Singapore. Mr. Teng received his Bachelor of Engineering (Industrial), First Class Honors and Bachelor of Commerce from the University of Newcastle, Australia. WILLIAM J. MEDER William J. Meder was appointed to our Board of Directors in June 2001 and was re-elected to our Board of Directors in 2002. He has 38 years of experience in electronics manufacturing, technology and business management, 33 of which were with Motorola. He runs a consulting firm, Firebird Consulting Group L.L.C. and currently consults for Motorola Inc., on semiconductor issues and several other multinational companies in the area of business and manufacturing management. Mr. Meder is Chairman of the Board for Leshan Phoenix, a China-U.S. joint venture, and a member of the Board for PSI Technologies. He also teaches Business and Manufacturing Strategy for the Chinese Government. He received his Bachelor of Science (Metallurgical Engineering) from Oklahoma University and Master (Materials Science) from Washington University in St. Louis. RICHARD JOHN AGNICH Richard John Agnich was appointed to our Board of Directors in October 2001 and was re-elected to our Board of Directors in 2002. He has 27 years of experience in the semiconductor industry. Mr. Agnich joined Texas Instruments in 1973 and held various positions, including that of Senior Vice President, Secretary and General Counsel. He is a past president of the Association of General Counsel, and has written on corporate governance. He is also a co-founder and is currently the Chair of Entrepreneurs Foundation of North Texas, and serves on the Board of Trustees of Austin College. Mr. Agnich received his BA in Economics from Stanford University and a Juris Doctor from the University of Texas School of Law. ELEANA TAN AI CHING Eleana Tan Ai Ching was appointed Alternate Director to Tay Siew Choon on January 2004. Ms. Tan has been in the finance accounting field for more than 16 years and is currently the Director, Finance of Singapore Technologies Pte Ltd. Prior to this appointment, she was Group Financial Controller of Singapore Technologies Engineering Ltd. Ms. Tan is presently a director of Chartered Silicon Partners Pte Ltd. Ms. Tan received her Bachelor of Accountancy (Honors) from the National University of Singapore. 62 SENIOR MANAGEMENT SUH TAE SUK Suh Tae Suk joined us in September 2002 as our Chief Operating Officer. Mr. Suh has 29 years of experience in the semiconductor industry. Prior to joining us, he served as Managing Director of Philips Semiconductor Thailand from 1996 to September 2002 and as General Manager of Philips Semiconductor Philippines from 1995 to 1996. From 1973 to 1992, Mr. Suh was with Philips Korea where he last served as Staffing Director of Assembly Operations. He received his Bachelor of Business Administration from Kyung Hee University in 1974. PEARLYNE WANG Pearlyne Wang joined us in April 2000. Ms. Wang is acting Chief Financial Officer, a position she has held since June 2002, except during the tenure of our former Chief Financial Officer, Dov Oshri from August 2003 to January 2004 when she was Vice President, Finance. Before assuming the post of Acting Chief Financial Officer in June 2002, she had held the position of Vice President, Finance and, prior to that, was our Financial Controller. From 1980 to 2000, she was with McDermott South East Asia Pte. Ltd and served as its Regional Head of Finance (Far East Operations) from 1996 to early 2000. From 1973 to 1980, Ms. Wang held various accounting positions at Esso Singapore Pte. Ltd. She received her CPA from the Association of Certified Chartered Accountants, UK and is a member of the Institute of Certified Public Accountants Singapore (ICPAS). HAN BYUNG JOON Han Byung Joon joined us as our Chief Technology Officer in December 1999. Prior to joining our company, Dr. Han was Director of Product Development at Anam Semiconductor, Inc. and, before that, held various engineering positions with IBM and AT&T Bell Labs in Murray Hill, New Jersey. He is credited with the invention of several wafer and chip scale semiconductor packaging technologies patented today. Dr. Han received his Doctorate in Chemical Engineering from Columbia University, New York, in 1988. JEFFREY R. OSMUN Jeffrey R. Osmun was appointed Vice President, Worldwide Sales & Marketing and President, U.S. Operations in September 2002. Mr. Osmun joined us in September 1999 as Director of Sales, U.S. Central Region and was later appointed Vice President, North American Sales. Prior to that, he served as National Sales Manager of Kyocera America Inc. and, before that, held the post of Director of Development - College of Engineering and Applied Sciences for Lehigh University. Mr. Osmun received his Bachelor of Science in Mechanical Engineering from Lehigh University in 1985. NG TIONG GEE Ng Tiong Gee was appointed Chief Information Officer in May 2001. Mr. Ng was previously the Chief Information Officer of Gateway Singapore, heading the technology multinational's IT activities in Asia Pacific. Prior to that, he spent over six years with Siemens Components (now known as Infineon Technologies Asia Pacific) where he last served as Director of Information Systems and Services. Between 1988 and 1992, he held various key engineering positions at Digital Equipment Singapore, now part of Compaq. Mr. Ng graduated with a Bachelor of Mechanical Engineering with honors from the National University of Singapore in 1987. He also holds a Master's Degree in Science (computer integrated manufacturing) and Business Administration from the Nanyang Technological University in Singapore. 63 B. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT In 2003, the aggregate amount of compensation and bonuses paid and accrued for all our directors and senior management was approximately $2.2 million broken down as follows:
EXECUTIVE NON EXECUTIVE DIRECTORS DIRECTORS(1) TOTAL(2) - ----------------------------------------------------------------------------------------------------------------- Charles Richard Wofford $ 102,420 $ 102,420 Lim Ming Seong 50,000 50,000 Tan Lay Koon $ 397,602(5) 397,602 Peter Seah Lim Huat 30,000 30,000 Tay Siew Choon 30,000 30,000 Quek Swee Kuan(3) 2,393 2,393 Tan Choon Shian(4) 3,346 3,346 Koh Beng Seng 29,000 29,000 Steven Hugh Hamblin 67,410 67,410 Teng Cheong Kwee 33,590 33,590 William J. Meder 49,000 49,000 Richard John Agnich 41,000 41,000 Senior Management (excluding Executive Directors) as a group 1,338,443 ---------- --------- ---------- $ 397,602 $ 438,159 $2,174,204 ========== ========= ==========
(1) We will seek approval at our annual general meeting in 2004 for the payment of directors' fees for the financial year ended December 31, 2003. (2) No compensation was given in the form of stock options. (3) Appointed on July 29, 2003. (4) Resigned on July 29, 2003. (5) Includes bonus payment of $22,958 for the financial year ended December 31, 2003. As of February 15, 2004, we had twelve directors (including one alternate director) on the Board. Our executive director does not receive any directors' fees. Our non-executive directors are paid directors' fees, except that for the directors employed by Singapore Technologies Pte Ltd and EDBI, their directors' fees are paid to Singapore Technologies Pte Ltd and EDBI, respectively. Our non-executive directors are also reimbursed for reasonable expenses they incur in attending meetings of the Board and its committees. They may receive compensation for performing additional or special duties at the request of the Board. Alternate Directors do not receive any directors' fees including for serving or attending meetings of the Board. For the financial year ended December 31, 2002, we paid our non-executive directors fees totaling $380,000. We will seek approval at our annual general meeting in 2004 for the payment of directors' fees of approximately $440,000. The increase was due principally to attendance fees paid to Mr. Charles Richard Wofford and Mr. Steven Hugh Hamblin for attendance at Executive Committee meetings. We have provided to our directors and officers customary director or officer insurance, as appropriate. We have an established incentive plan to reward our senior executives for their performance and contributions. The incentive pool is derived from the annual wage increments of the participants and a sharing of the positive Economic Value Added, or EVA, and the change in EVA over the preceding year (which can result in a negative incentive pool if the change in EVA is significantly negative). The amount allocated to the individuals from this pool would be based on the collective achievement of the corporate goals, achievement of individual performance targets as well as 64 his or her scoring on corporate values. Each senior executive will have his or her own notional EVA bank account. The bonus earned each year will be added to his or her notional EVA bank account, and only one third of the aggregate EVA bank amount will be paid for the year. Payment is made only when there is a positive EVA bank balance in the notional EVA bank account. In the case of Tan Lay Koon, his incentive plan comprises a Performance Target Bonus component as well as an EVA-based incentive plan. The Performance Target Bonus is paid in relation to the extent to which he achieves his yearly individual targets which are set to focus on what needs to be achieved for the year in support of long term strategic business goals subject to a maximum payout of 2.5 months' base salary. His EVA-based incentive plan is also based on a sharing of the positive EVA and the change in EVA over the preceding year. Each year, the EVA bonus earned will be added to (or subtracted from, in the case of negative EVA change) his notional EVA bank account, and only one third of the aggregate EVA bank amount will be the payout for the year. The balance is accrued to the following year as a provision for future years' payout and the payout is subject to the future performance of the company. We do not have any pension, retirement or other similar post-retirement benefits, other than the plans required or permitted by local regulations and described below. Under Singapore law, we make monthly contributions based on the statutory funding requirement into a Central Provident Fund for substantially all of our Singapore employees who are Singapore citizens and Singapore permanent residents. Our total expenses under this plan were $2.7 million for 2001, $3.0 million for 2002 and $4.0 million for 2003. Winstek operates a defined benefit retirement plan for a substantial portion of its employees in Taiwan in accordance with the Labor Standards Law in Taiwan. Pension benefits are generally based on years of service and average salary for the six months prior to the approved retirement date. Winstek contributes its pension obligations to Central Trust of China, as required by the Labor Standards Law. The funding of the pension plan is determined in accordance with statutory funding requirements. Winstek is obligated to make up any shortfall in the plan's assets in meeting the benefits accrued to the participating staff. Our total pension plan expenses for the period from August 21, 2001 (the date we acquired Winstek) to December 31, 2001 were approximately $39,000, for the year ended December 31, 2002 were approximately $24,000 and for the year ended December 31, 2003 were approximately $46,000. STATS Inc and STATS FastRamp have a 401(k) savings plan covering substantially all of our U.S. employees. We contribute up to 6% of eligible employee compensation at the rate of 50% of employee contributions deferred to the 401 (k) plan. Our company's matching contributions under the 401(k) plan were $131,000 in 2001, $186,000 in 2002 and $258,000 in 2003. C. BOARD PRACTICES BOARD OF DIRECTORS Our Articles of Association set the minimum number of directors at two. We currently have twelve directors including an alternate director. A number of our directors are re-elected at each annual general meeting of shareholders. The number of directors retiring and eligible to stand for re-election each year varies, but generally it is equal to one-third of the board, with the directors who have been in office longest since their re-election or appointment standing for re-election. Accordingly, the appointments of Steven Hugh Hamblin, William J. Meder and Richard John Agnich will expire and we will seek shareholders' approval for their re-appointment at the next annual general meeting of shareholders in 2004. Our Articles of Association also provide that the Board of Directors has the power to appoint any person to be a director to fill a casual vacancy or as an additional director. These persons may only be directors until the next annual general meeting of shareholders but are eligible for re-election. Accordingly, 65 the appointment of Quek Swee Kuan will expire and we will seek shareholders' approval for his re-appointment at the next annual general meeting of shareholders in 2004. Under the Companies Act, the term of any director shall expire on the date of the annual general meeting of shareholders immediately following the date that director turns 70 years of age, although he or she will be eligible for re-election. Directors who are aged 70 or older are eligible for re-election upon the approval of the shareholders of the company by way of an ordinary resolution passed at an annual general meeting and, if re-elected, will hold office until the next annual general meeting of the shareholders. Accordingly, the appointment of Charles Richard Wofford, will expire and we will seek shareholders' approval for his re-appointment at the next annual general meeting of shareholders to be held in 2004. As of February 15, 2004, Singapore Technologies Pte Ltd through its wholly owned subsidiary Singapore Technologies Semiconductors Pte Ltd beneficially owned approximately 66.15% of our outstanding ordinary shares (including 5.27% of shares lent to Deutsche Bank AG and Morgan Stanley & Co. International Limited pursuant to a Global Master Securities Lending Agreement in connection with the issue of convertible notes due 2008 by ST Assembly Test Services Ltd dated October 29, 2003 executed by each of Deutsche Bank AG and Morgan Stanley & Co. International Limited) and is able to control actions over many matters requiring approval by our shareholders, including the election of directors. Our Articles of Association permit a director to appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director for a period of time. Under Singapore law, the alternate director is not merely an agent of the director but is also held accountable to the company for his or her actions as director during the period for which he or she acts as alternate director. Our directors do not have service contracts with us. We do not have any service contracts with any of our non executive directors. The services contract of our executive director does not provide for benefits upon termination of employment. COMMITTEES OF THE BOARD OF DIRECTORS (i) Audit Committee The Audit Committee currently consists of four members, all of whom are non-executive directors. They are Teng Cheong Kwee (Chairman), Steven Hugh Hamblin, Koh Beng Seng and Richard John Agnich. Mr. Hamblin stepped down as Chairman of the Audit Committee on January 28, 2003 but remains a member. He was appointed to the Executive Committee which was established on January 28, 2003. Mr. Wofford was a member of the Audit Committee until January 28, 2003 when he was appointed Chairman of the Executive Committee. The Audit Committee reviews the scope and results of the audits provided by our internal and independent auditors, reviews and evaluates the adequacy of our administrative, operating and internal accounting controls, reviews material related party transactions, and reviews the integrity of the financial information presented to our shareholders. Under Singapore law, only board members of a company may serve on its Audit Committee. The Audit Committee held four meetings in 2003. (ii) Executive Resource & Compensation Committee The Executive Resource & Compensation Committee currently consists of Peter Seah Lim Huat (Chairman), Charles Richard Wofford and Lim Ming Seong. The Executive Resource & Compensation Committee oversees executive compensation and development in our company with the goal of building capable and committed management teams through competitive compensation, focused management and progressive policies that attract, motivate and retain talented executives to meet our current and future growth plans. Specifically, the Executive Resource & Compensation Committee establishes and approves 66 the compensation policies and incentive programs for key management executives. The compensation of the Chief Executive Officer is further required to be approved by the Board. The Executive Resource and Compensation Committee also approves share incentives, including share options and share ownership for executives, approves key appointments and reviews succession plans for key positions, and oversees the development of key executives and younger talented executives. We are a "controlled company" as defined in Rule 4350(c)(5) of the Nasdaq Marketplace Rules (i.e. more than 50% of the voting power of our company is held by an individual, group or another company) and hence, we are exempt from compliance with Rule 4350(c) of the Nasdaq Marketplace Rules relating to independence of directors serving on compensation and nomination committees. The Executive Resource & Compensation Committee held three meetings in 2003. (iii) Budget Committee The Budget Committee currently consists of Lim Ming Seong (Chairman), Tay Siew Choon and William J. Meder. The Budget Committee meets with our senior management to review our annual budget and to review our quarterly financial performance in relation to our budget. The Budget Committee held five meetings in 2003. (iv) Executive Committee The Executive Committee, which was formed on January 28, 2003, currently consists of Charles Richard Wofford (Chairman), Tay Siew Choon and Steven Hugh Hamblin. The main objective of the Executive Committee is to enable the Board to delegate some of its powers and functions regarding the governing of the affairs of our company and our subsidiaries to the Executive Committee in order to facilitate timely decision-making processes within the limits of authority as determined by the Board. The Executive Committee held six meetings in 2003. (v) Nominating Committee The Nominating Committee which was established on January 28, 2004, comprises the same members as the Executive Resource & Compensation Committee. The Committee identifies suitable candidates for appointment to our Board of Directors, with a view to ensuring that the individuals comprising our Board can contribute in the relevant strategic areas of our business and are able to discharge their responsibilities as directors having regard to the law and high standards of governance. We are a "controlled company" as defined in Rule 4350(c)(5) of the Nasdaq Marketplace Rules (i.e. more than 50% of the voting power of our company is held by an individual, group or another company) and hence, we are exempt from compliance with Rule 4350(c) of the Nasdaq Marketplace Rules relating to independence of directors serving on compensation and nomination committees. D. EMPLOYEES As of December 31, 2003, we had 4,004 full time employees and 29 temporary employees or contract employees. Our employees are not members of any labor union or organization in Singapore or any other country in which we operate. We cannot assure you that our employees will not become members of labor unions or similar organizations, particularly if such membership is required under the laws of the countries in which we operate our business. We 67 believe that our employees should be equity owners of our company and we seek to provide opportunities for them to build careers with us. We believe we have a good relationship with our employees. The following table sets forth numbers of our employees by function and location for the dates indicated.
AS OF DECEMBER 31, 2001 2002 2003 - ------------------------------------------------------------------------------------------------------- FUNCTION Direct and Indirect Labor (Manufacturing) 1,778 1,950 3,140(1) Indirect Labor (Administration) 627 653 735 Research and Development 154 164 129 TOTAL 2,559 2,767 4,004 LOCATION Singapore 2,370 2,419 3,461 USA 83 112 145 Taiwan 94 224 376 China - - 16 Others 12 12 6 TOTAL 2,559 2,767 4,004
(1) The approximately 61% increase in headcount was the result of additional hires in 2003 to support the increase in the volume of our operations. E. SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT Based on an aggregate of 1,076,731,410 ordinary shares outstanding as of February 15, 2004, each of our directors and senior management officers has a beneficial ownership of less than 1% of our outstanding ordinary shares, including ordinary shares held directly or in the form of ADSs and share options granted as of such date. Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power or receives the economic benefit of ownership of such securities. Ordinary shares subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. All our ordinary shares have identical rights in all respects and rank equally with one another. 68 SHARE OPTIONS FOR DIRECTORS The following table contains information pertaining to share options held by directors as of February 15, 2004:
NUMBER OF ORDINARY SHARES ISSUABLE ON EXERCISE OF PER SHARE EXERCISE PRICE EXERCISABLE OPTION S$ PERIOD - ------------------------------------------------------------------------------------------------------------------------ Charles Richard Wofford 25,000 0.42 02/09/2000 to 12/09/2004 20,000 0.25 02/09/2000 to 06/11/2004 20,000 3.554 02/09/2000 to 11/21/2004 40,000 6.93 04/20/2001 to 04/19/2005 50,000 1.592 04/24/2002 to 04/23/2006 70,000 2.885 04/29/2003 to 04/28/2007 100,000 1.99 08/06/2004 to 08/05/2008 Lim Ming Seong 200,000 1.592 04/24/2002 to 04/23/2011 70,000 2.885 04/29/2003 to 04/28/2007 70,000 1.99 08/06/2004 to 08/05/2008 Tan Lay Koon 500,000 6.93 04/20/2001 to 04/19/2010 700,000 2.826 10/19/2001 to 10/18/2010 449,000 1.592 04/24/2002 to 04/23/2011 325,000 2.885 04/29/2003 to 04/28/2012 2,000,000 2.2 06/26/2003 to 06/25/2012 700,000 1.99 08/06/2004 to 08/05/2013 Koh Beng Seng 10,000 0.25 02/09/2000 to 12/09/2004 50,000 3.554 02/09/2000 to 11/21/2004 40,000 6.93 04/20/2001 to 04/19/2005 50,000 1.592 04/24/2002 to 04/23/2006 50,000 2.885 04/29/2003 to 04/28/2007 50,000 1.99 08/06/2004 to 08/05/2008 Peter Seah Lim Huat 70,000 1.99 08/06/2004 to 08/05/2013 Tay Siew Choon 70,000 1.99 08/06/2004 to 08/05/2013 Steven Hugh Hamblin 10,000 0.25 02/09/2000 to 12/09/2004 20,000 0.25 02/09/2000 to 06/11/2004 30,000 3.554 02/09/2000 to 11/21/2004 40,000 6.93 04/20/2001 to 04/19/2005 50,000 1.592 04/24/2002 to 04/23/2006 70,000 2.885 04/29/2003 to 04/28/2007 70,000 1.99 08/06/2004 to 08/05/2008 Teng Cheong Kwee 50,000 1.592 04/24/2002 to 04/23/2006 50,000 2.885 04/29/2003 to 04/28/2007 70,000 1.99 08/06/2004 to 08/05/2008 William J Meder 20,000 1.624 07/23/2002 to 07/22/2006
69
NUMBER OF ORDINARY SHARES ISSUABLE ON EXERCISE OF PER SHARE EXERCISE PRICE EXERCISABLE OPTION S$ PERIOD - ------------------------------------------------------------------------------------------------------------------------ 50,000 2.885 04/29/2003 to 04/28/2007 50,000 1.99 08/06/2004 to 08/05/2008 Richard John Agnich 20,000 1.298 10/23/2002 to 10/22/2006 50,000 2.885 04/29/2003 to 04/28/2007 50,000 1.99 08/06/2004 to 08/05/2008 Quek Swee Kuan 0 - - Eleana Tan Ai Ching 0 - -
EMPLOYEES' SHARE OWNERSHIP SCHEME We had an Employees' Share Ownership Scheme for employees and directors of our company, our subsidiary and the related companies within the Singapore Technologies Group which was terminated prior to the initial public offering of our shares on the Nasdaq National Market and Singapore Exchange in February 2000. SHARE OPTION PLAN Effective as of May 28, 1999, we adopted the ST Assembly Test Services Ltd Share Option Plan 1999, or the Share Option Plan. The purpose of the plan is to offer selected individuals an opportunity to acquire or increase their proprietary interest in our company through the grant of options to purchase ordinary shares of our company. Options granted under the Share Option Plan may be non-statutory options or incentive stock options intended to qualify under Section 422 of the United States Internal Revenue Code. The aggregate number of shares that may be issued under the Share Option Plan and under all of our other share incentive and options schemes or agreements may not exceed 150 million shares (subject to anti-dilution adjustment pursuant to the Share Option Plan). If an outstanding option expires for any reason or is cancelled or otherwise terminated, the shares allocable to the unexercised portion of such option will again be available for future grants of options under the Share Option Plan and all other share incentive and option schemes approved by our Board of Directors. The Share Option Plan is administered by the Executive Resource & Compensation Committee. Employees, outside directors and consultants of our company and any of our affiliates (including our parent and any of our subsidiaries) are eligible to be granted options except that: (i) employees of our affiliates, and any participant who is an outside director or consultant is not eligible to be granted incentive stock options; and (ii) employees, outside directors and consultants of our affiliates other than our parent or any of our subsidiaries who are residents of the United States are not eligible to participate in our Share Option Plan. An individual who owns more than 10% of the total combined voting power of all classes of our outstanding shares or of the shares of our parent or subsidiary is not eligible to be granted incentive stock options unless the exercise price of the option is at least 110% of the fair market value of the underlying shares on the date of grant and the option by its terms is not exercisable after five years from the date of grant. 70 The exercise price of an incentive stock option may not be less than 100% of the fair market value of the underlying shares on the date of grant. In no event may the exercise price of an option be less than the par value of the underlying shares. Options granted to persons other than officers, outside directors and consultants become exercisable at least as rapidly as 20% per year over the five-year period commencing on the date of grant. No option that has an exercise price equal to or greater than the fair market value of the underlying shares on the date of grant may be exercisable prior to the first anniversary of the date of grant. No option that has an exercise price that is less than the fair market value of the underlying shares on the date of grant may be exercisable prior to the second anniversary of the date of grant. The exercisability of options outstanding under the Share Option Plan may be fully or partially accelerated under certain circumstances such as a change in control of our company, as defined in the Share Option Plan. Each option granted under the Share Option Plan is evidenced by a share option agreement and the term of options may not exceed ten years from the date of grant. If the optionee's service with us is terminated, the optionee may exercise all or part of the optionee's options at any time before expiration of such options but only to the extent that such options had become exercisable before the termination of service (or become exercisable as a result of the termination), unless otherwise determined by the Executive Resource & Compensation Committee in its sole discretion. The balance of such options shall lapse when the optionee's service terminates. The Executive Resource & Compensation Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price. No modification of an outstanding option shall, without the consent of the optionee, impair the optionee's rights or increase the optionee's obligations under such option. Options are generally not transferable under the Share Option Plan. In the event of certain changes in our capitalization, the Executive Resource & Compensation Committee is required to make appropriate adjustments in one or more of the number of the following: (i) shares available for future grants under the Share Option Plan, (ii) the number of shares covered by each outstanding option and (iii) the exercise price of each outstanding option. If we are a party to a merger or consolidation, outstanding options will be subject to the agreement of merger or consolidation. Unless terminated earlier by the Executive Resource & Compensation Committee, the Share Option Plan will terminate automatically in accordance with its terms on May 28, 2009. The Executive Resource & Compensation Committee may amend, suspend or terminate the Share Option Plan at any time and for any reason, provided that any amendment which increases the number of shares available for issuance under the Share Option Plan, or which materially changes the class of persons who are eligible for the grant of incentive stock options, will be subject to the approval of our shareholders. As of February 15, 2004, options to purchase an aggregate of 60,711,595 ordinary shares were accepted and outstanding, out of which 13,902,000 were held by all directors and senior management as a group. The exercise prices of these options range from S$0.25 to S$6.93. The expiration dates of the options range from June 2004 to August 2013. In 2004, we expect to grant to our directors, officers and employees additional options under the Share Option Plan. The exercise price of such options will be equal to the fair market value of the underlying ordinary shares on the date of the grant. 71 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS On December 29, 2003, Singapore Technologies Pte Ltd transferred the ownership of all our ordinary shares held by Singapore Technologies Pte Ltd of 511,532,398 ordinary shares or 47.51% of our issued shares as of such date to its wholly owned subsidiary, Singapore Technologies Semiconductors Pte Ltd. As of February 15, 2004, Singapore Technologies Semiconductors Pte Ltd beneficially owned approximately 66.15% of our ordinary shares (including 5.27% of shares lent to Deutsche Bank AG and Morgan Stanley & Co. International Limited pursuant to a Global Master Securities Lending Agreement in connection with the issue of convertible notes due 2008 by ST Assembly Test Services Ltd dated October 29, 2003 executed by each of Deutsche Bank AG and Morgan Stanley & Co. International Limited). As of February 15, 2004, Temasek Holdings, the principal holding company through which the corporate investments of the Government of Singapore are held, directly owned 81.3% of the ordinary shares of Singapore Technologies Pte Ltd. The remaining 18.7% of the ordinary shares of Singapore Technologies Pte Ltd is owned by Singapore Technologies Holdings Pte Ltd, which is in turn 100% owned by Temasek Holdings. Singapore Technologies Holdings Pte Ltd also owns all of the 50,000 issued preference shares in Singapore Technologies Pte Ltd. As a result, Singapore Technologies Pte Ltd and Temasek Holdings are able to exercise direct or indirect control over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. Matters that typically require shareholder approval include, among other things: - the election of directors; - our merger or consolidation with any other entity; - any sale of all or substantially all of our assets; and - the timing and payment of dividends. The following table sets forth certain information regarding the ownership of our ordinary shares as of February 15, 2004 by each person who is known by us to own beneficially more than 5% of our outstanding ordinary shares. Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power or receives the economic benefit of ownership of such securities. Ordinary shares subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person.
NUMBER OF SHARES PERCENTAGE(2) NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED - ------------------------------------------------------------------------------------------------------------------ Singapore Technologies Semiconductors Pte Ltd(1) 712,228,050 66.15 %
(1) Includes 5.27% of shares lent to Deutsche Bank AG and Morgan Stanley & Co. International Limited pursuant to a Global Master Securities Lending Agreement in connection with the issue of convertible notes due 2008 by ST Assembly Test Services Ltd dated October 29, 2003 executed by each of Deutsche Bank AG and Morgan Stanley & Co. International Limited. Temasek Holdings, the principal holding company through which the corporate investments of the Government of Singapore are held, owns 81.3% of the ordinary shares of Singapore Technologies Pte Ltd, and owns 100% of Singapore Technologies Holdings Pte Ltd, which owns the remaining 18.7% of the ordinary shares of Singapore Technologies Pte Ltd and all of the 50,000 issued preference shares of Singapore Technologies Pte Ltd which, in turn, owns 100% of Singapore Technologies Semiconductors Pte Ltd. 72 Temasek Holdings may therefore be deemed to beneficially own the shares directly owned by Singapore Technologies Semiconductors Pte Ltd. (2) Based on an aggregate 1,076,731,410 ordinary shares outstanding as of February 15, 2004. All our ordinary shares have identical rights in all respects and rank equally with one another. Our ordinary shares have been traded on the Singapore Exchange Securities Trading Limited or SGX-ST since January 31, 2000 and our ADSs have been traded on the Nasdaq National Market or Nasdaq since January 28, 2000. As of February 15, 2004, 201,240 of our ordinary shares, representing 0.02% of our outstanding shares, were held by a total of 35 holders of record with addresses in the United States. As of February 15, 2004, 812,318 of our ADSs (representing 8,123,180 ordinary shares), representing 0.75% of our outstanding shares, were held by a total of 5 registered holders of record with addresses in the United States. Because many of our ordinary shares and ADSs were held by brokers and other institutions on behalf of shareholders in street name, we believe that the number of beneficial holders of our ordinary shares and ADSs could be higher. On February 15, 2004, the closing price of our ordinary shares on the SGX-ST was S$1.94 per ordinary share and the closing price of our ADSs on Nasdaq was $11.58 per ADS. B. RELATED PARTY TRANSACTIONS We engage in transactions with companies in the Singapore Technologies Group in the ordinary course of business. Such transactions are generally entered into on normal commercial terms. We entered into a turnkey contract with Chartered for its wafer, sort assembly and test services in March 2000. The term of this agreement, which was due to expire in March 2003, was extended to March 2005 by an amendment agreement dated October 30, 2002. This agreement governs the conduct of business between the parties, relating, among other things, to the sort, assembly and test services which were previously governed solely by purchase orders executed by Chartered. The agreement does not contain any firm commitment from Chartered to purchase or from us to supply services covered thereunder. In October 2001, we gave a guarantee on behalf of our subsidiary, STATS Inc., for the lease by STATS Inc. of its office in California in the United States. The guarantee covers the full performance of each term, covenant and condition of the lease, including payment of all rent and other sums that may be required to be paid under the lease. The largest amount that we guaranteed in 2002 under this agreement was $4.6 million. As of December 31, 2003, the amount outstanding under this guarantee was approximately $3.2 million. We entered into a long-term loan agreement with EDB on June 5, 1998 for a sum of $52.9 million (S$90.0 million). The loan was denominated in Singapore dollars and bore interest at 1% over the prevailing annual interest rate declared by the Central Provident Fund Board, a statutory board of the Government of Singapore. The principal amount was repayable over seven equal semi-annual installments commencing from September 2000 and ending on September 1, 2003. The loan was guaranteed by Singapore Technologies Pte Ltd. The loan agreement restricted us, without prior consent from EDB, from paying dividends, from incurring further indebtedness and from undertaking any form of reconstruction, including amalgamation with another company, which would result in a change in the control of our company, in each case without prior lender consent. We fully repaid this loan on September 1, 2003. We lease the land on which our Singapore facility is situated pursuant to a long-term operating lease from the Housing and Development Board, a statutory board of the Government of Singapore. The lease is for a 30-year period commencing March 1, 1996, and is renewable for a further 30 years subject to the fulfillment of certain conditions. The rent is $63,647 (S$110,745) per month subject to revision to market rate in March of each year, with the increase capped at 4% per annum. 73 In the years ended December 31, 2001, 2002 and 2003, we paid management fees of $1.0 million, $1.1 million and $1.1 million, respectively, to Singapore Technologies Pte Ltd for various management and corporate services provided pursuant to the Singapore Technologies Management and Support Services Agreement entered into on December 1999. Prior to this agreement, these services were subject to a management fee computed based on certain percentages of capital employed, revenue, manpower and payroll. We believe that our arrangement with Singapore Technologies Pte Ltd approximates the cost of providing these services. Mr. Tan Bock Seng served as our Chief Executive Officer from May 18, 1998 to January 7, 2002. Effective January 8, 2002, we appointed Mr. Tan Bock Seng as advisor to our Board of Directors. In August 2002, Mr. Tan Bock Seng terminated the advisory agreement between him and us. In recognition of his past services, Singapore Technologies Pte Ltd made a payment of $1.0 million to Mr. Tan Bock Seng. We accounted for the payment as compensation expenses in the income statement and as additional paid-in capital within shareholders' equity as the payment did not involve any cash outlay by us. In November 2002, we executed a letter of charge and set-off in favor of United Overseas Bank Ltd Taipei Branch, or "UOB Taipei," in connection with a working capital loan facility of $19.0 million granted by UOB Taipei to our subsidiary, Winstek, of which $3.5 million had been drawn down. as of February 15, 2004. The loan facility provides for interest at the rate of 7.93% per annum payable every quarter. Under the terms of the letter of charge and set-off, we are required to make deposits as cash collateral for the loan to Winstek in an amount equal to the amount drawn down with UOB Taipei and its branches. We may not withdraw or otherwise transfer or encumber these deposits without the consent of UOB Taipei as long as the loan is outstanding. As at December 31, 2002, the amount deposited was US$3.5 million under this agreement. This loan was fully repaid in November 2003. We participate in a ST cash management program managed by a bank. Under this program, cash balances are pooled with other companies in the Singapore Technologies Group. The daily cash surpluses or shortfalls of the companies within the pool earn or bear interest at prevailing interest rates. From time to time, we deposit excess funds with ST Treasury Services Ltd, a wholly owned subsidiary of Singapore Technologies. Our insurance coverage is held under various insurance policies which are negotiated and maintained by Singapore Technologies but billed directly to us. This enables us to benefit from the group rates negotiated by Singapore Technologies. In accordance with the requirements of the Nasdaq Marketplace Rules, all new related party transactions (as defined in Item 404 of Regulation S-K under the Securities Act) require approval by the Audit Committee of our Board of Directors. In addition, more significant related party transactions must be separately approved by a majority of the Board of Directors. C. INTEREST OF EXPERTS AND COUNSEL Not applicable ITEM 8. FINANCIAL INFORMATION A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION Please see Item 18 for a list of the financial statements filed as part of this Annual Report. LEGAL PROCEEDINGS We are not a party to any legal proceedings which we believe would, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations. 74 DIVIDEND POLICY We have never declared or paid any cash dividends on our ordinary shares. We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, our loan agreement with EDB and our MTN Program restrict the payment of dividends without the consent of the lender. B. SIGNIFICANT CHANGES There has been no significant subsequent events following the close of the last financial year up to the date of this Annual Report that are known to us and require disclosure in this Annual Report for which disclosure was not made in this Annual Report. ITEM 9. THE OFFER AND LISTING A. OFFER AND LISTING DETAILS PRICE RANGE OF OUR ORDINARY SHARES AND ADSs The historical `high' and `low' prices of our ordinary shares and ADSs for the periods stated are as shown below.
PRICE PER ORDINARY SHARE ON THE PRICE PER ADS ON NASDAQ SGX (IN S$) (IN US$) HIGH LOW HIGH LOW - -------------------------------------------------------------------------------------------------------------------- Annual for 2000 10.90 2.22 63.63 13.13 Annual for 2001 2.84 0.99 16.00 5.60 Annual for 2002 3.16 0.87 17.25 4.89 Annual for 2003 2.73 1.05 15.75 6.16 Quarterly highs and lows : - - quarter ending March 31, 2002 3.12 2.17 17.25 11.95 - - quarter ending June 30, 2002 3.16 2.13 17.09 11.67 - - quarter ending September 30, 2002 2.54 0.90 13.87 4.95 - - quarter ending December 31, 2002 1.61 0.87 9.10 4.89 - - quarter ending March 31, 2003 1.44 1.05 8.00 6.16 - - quarter ending June 30, 2003 1.83 1.15 10.30 6.65 - - quarter ending September 30, 2003 2.59 1.72 14.89 9.55 - - quarter ending December 31, 2003 2.73 1.93 15.75 11.40 Monthly highs and lows : September 2003 2.59 2.22 14.89 12.41 October 2003 2.73 2.25 15.75 12.80 November 2003 2.46 1.93 13.90 11.40 December 2003 2.19 1.98 13.45 11.45 January 2004 2.45 2.12 14.74 12.60 February 2004 2.32 1.76 13.78 10.34
75 B. PLAN OF DISTRIBUTION Not applicable C. MARKETS Our ordinary shares are listed on the Singapore Exchange Securities Trading Limited or SGX-ST (SGX-ST: ST Assembly) and our ADSs are quoted on the Nasdaq National Market or Nasdaq (NASDAQ: STTS). D. SELLING SHAREHOLDERS Not applicable E. DILUTION Not applicable F. EXPENSES OF THE ISSUE Not applicable ITEM 10. ADDITIONAL INFORMATION A. SHARE CAPITAL Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATION We are a company limited by shares incorporated under the laws of the Republic of Singapore. Our company registration number with the Registry of Companies and Businesses in Singapore is 199407932D. OBJECTS We were established mainly to manufacture, assemble, test and provide services relating to electrical and electronic components. We also carry out research and development work in relation to the electrical and electronic industry. A detailed list of all the other objects and purposes of our company can be found in Article 3 of our Memorandum of Association which was filed as an Exhibit to our registration statement on Form F-1 (Registration Number: 333-93661) in connection with our initial public offering in 2000 and is available for examination at our principal and registered office at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore. BOARD OF DIRECTORS Our Articles of Association state that a director must declare at a meeting of the Board of Directors if there are matters which may conflict with his duties or interests as a director. He is not allowed to vote in respect of any contract or arrangement or other proposal whatsoever in which he has any interest, directly or indirectly and shall not be counted in the quorum in relation to any resolution with respect to which he is not entitled to vote. If an independent quorum is not achieved, the remaining directors may convene a general meeting. 76 Our directors may exercise all the borrowing powers of our company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures and other securities. No shares are required to be held by a director for director's qualification. Under Singapore law, no person of or over the age of 70 years shall be appointed to act as a director of a public company or of a subsidiary of a public company unless the shareholders at an annual general meeting vote by an ordinary resolution in favor of his appointment to hold office until the next annual general meeting of the company. Our Articles of Association set the minimum number of directors at two. The number of directors retiring and eligible to stand for re-election each year varies, but generally it is equal to one-third of the board, with the directors who have been in office longest since their re-election or appointment standing for re-election. Our Articles of Association permit a director to appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director for a period of time. There is currently one alternate director. Under Singapore law, the alternate director is not merely an agent of the director but is accountable to the company for his or her actions as director during the period for which he or she acts as alternate director. ORDINARY SHARES Our authorized capital is S$800,000,000 consisting of 3,200,000,000 ordinary shares of par value S$0.25 each. We have only one class of shares, namely, ordinary shares, which have identical rights in all respects and rank equally with one another. Our Articles of Association provide that we may issue shares of a different class with preferential, deferred, qualified or other special rights, privileges or conditions as our Board of Directors think fit and may issue preference shares which are, or at the option of our company are, redeemable, subject to certain limitations. Our directors may issue shares at a premium. If shares are issued at a premium, a sum equal to the aggregate amount or value of the premium on those shares will, subject to certain exceptions, be transferred to a share premium account. All of our ordinary shares are in registered form. All issued ordinary shares are entitled to voting rights. We may, subject to and in accordance with the Companies Act, Chapter 50 of Singapore or "Companies Act," purchase our own ordinary shares. We may not, except as provided in the Companies Act, grant any financial assistance for the acquisition or proposed acquisition of our ordinary shares. NEW ORDINARY SHARES New ordinary shares may only be issued with the prior approval of the shareholders in a general meeting of the shareholders. The approval, if granted, will lapse at the conclusion of the annual general meeting following the date on which the approval was granted or the date by which such annual general meeting is required to be held, whichever is earlier. Our shareholders have given the general authority to allot and issue any remaining approved but unissued ordinary shares in the capital of our company prior to the next annual general meeting. Subject to the foregoing, the provisions of the Companies Act and any special rights attached to any class of shares currently issued, all new ordinary shares are under the control of our Board of Directors who may allot and issue the same with such rights and restrictions as it may think fit, provided that, amongst others, new ordinary shares may not be issued to transfer a controlling interest in our company without the prior approval in general meeting of our shareholders. Our shareholders are not entitled to pre-emptive rights under our Articles of Association or Singapore law. SHAREHOLDERS Only persons who are registered in the register of members and, in cases in which the person so registered is The Central Depository (Pte) Limited, or CDP, the persons named as depositors in the depository register maintained by CDP for our ordinary shares, are recognized as shareholders. We will not, except as required by law, recognize any equitable, contingent, future or partial interest in any ordinary share or other rights in respect of any ordinary share 77 other than an absolute right to the entirety thereof of the registered holder of the ordinary share or of the person whose name is entered in the depository register for that ordinary share. We may close the register of members for any time or times if we provide the Registrar of Companies and Businesses of Singapore at least 14 days' notice. However, the register may not be closed for more than 30 days in aggregate in any calendar year. We typically close the register to determine shareholders' entitlement to receive dividends and other distributions for no more than ten days a year. TRANSFER OF ORDINARY SHARES There is no restriction on the transfer of fully paid ordinary shares except where required by law. Our directors may decline to register any transfer of ordinary shares which are not fully paid shares or ordinary shares on which we have a lien. Ordinary shares may be transferred by a duly signed instrument of transfer in a form acceptable to our directors. Our directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certificate and such other evidence of title as they may require. We will replace lost or destroyed certificates for ordinary shares if we are properly notified and if the applicant pays a fee which will not exceed S$2 and furnishes any evidence and indemnity that our directors may require. GENERAL MEETINGS OF SHAREHOLDERS We are required to hold an annual general meeting every year. Our Board of Directors may convene an extraordinary general meeting whenever it thinks fit and must do so if shareholders representing not less than 10% of the total voting rights of all shareholders request in writing that such a meeting be held. In addition, two or more shareholders holding not less than 10% of our issued share capital may call a meeting. Unless otherwise required by Singapore law or by our Articles of Association, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of the votes cast at that meeting. An ordinary resolution suffices, for example, for the appointment of directors. A special resolution, requiring the affirmative vote of at least 75% of the votes cast at the meeting, is necessary for certain matters under Singapore law, including the voluntary winding up of our company, amendments to our Memorandum and Articles of Association, a change of our corporate name and a reduction in our share capital, share premium account or capital redemption reserve fund. We must give at least 21 days' notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days' notice in writing. The notice must be given to every shareholder who has supplied us with an address in Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business and a statement regarding the effect of any proposed resolution on our company in respect of such special business. VOTING RIGHTS A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. A proxy need not be a shareholder. A person who holds ordinary shares through the CDP book-entry clearance system will only be entitled to vote at a general meeting if his or her or its name appears on the depository register maintained by CDP as at 48 hours before the time of the general meeting. Except as otherwise provided in our Articles of Association, two or more shareholders holding at least 33 1/3% of our total issued and fully-paid ordinary shares must be present in person or by proxy to constitute a quorum at any general meeting. Under our Articles of Association, on a show of hands, every shareholder present in person and each proxy shall have one vote, and on a poll, every shareholder present in person or by proxy shall have one vote for each ordinary share held or represented. A poll may be demanded in certain circumstances, including by the chairman of the meeting, by not less than five shareholders present in person or by proxy and entitled to vote or by a shareholder present in person or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the meeting. 78 DIVIDENDS We may, by ordinary resolution of our shareholders, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our directors. We must pay all dividends out of our profits. However, we may capitalize our share premium account and apply it to pay dividends, if such dividends are satisfied by the issue of shares to the shareholders. Our directors may also declare an interim dividend without the approval of the shareholders. All dividends are paid pro rata among the shareholders in proportion to the amount paid up on each shareholder's ordinary shares, unless the rights attaching to an issue of any ordinary share provide otherwise. Unless otherwise directed, dividends are paid by check or warrant sent through the post to each shareholder at his or her registered address. Notwithstanding the foregoing, the payment to CDP of any dividend payable to a shareholder who holds his ordinary shares through the CDP book-entry clearance system shall, to the extent of payment made to CDP, discharge us from any liability to that shareholder in respect of that payment. BONUS AND RIGHTS ISSUE Our directors may, with approval by our shareholders at a general meeting, capitalize any reserves or profits (including profit or monies carried and standing to any reserve or to the share premium account) and distribute the same as bonus shares credited as paid-up to our shareholders in proportion to their shareholdings. Our directors may also issue rights to take up additional ordinary shares to shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue. TAKE-OVERS The Singapore Code on Take-Overs and Mergers, or "Take-Over Code," regulates the acquisition of, among others, ordinary shares of public companies and contains certain provisions that may delay, deter or prevent a future takeover or change in control of our company. Any person acquiring an interest, either on his or her own or together with parties acting in concert with him or her, in 30% or more of our voting shares, or, if such person holds, either on his or her own or together with parties acting in concert with him or her, between 30% and 50% (both inclusive) of our voting shares, and acquires additional voting shares representing more than 1% of our voting shares in any six-month period, must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Take-Over Code. "Parties acting in concert" comprise individuals or companies who, pursuant to an arrangement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They are as follows: a company and its related and associated companies and companies whose associated companies include any of these companies, a company and its directors (including their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts), a company and its pension funds and employee share schemes, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, a financial or other professional adviser and its client in respect of shares held by the adviser and persons controlling, controlled by or under the same control as the adviser and all the funds managed by the adviser on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total 10% or more of the client's equity share capital, directors of a company (including their close relatives, related trusts and companies controlled by any of such directors, their close relatives and related trusts) that is subject to an offer or where the directors have reason to believe a bona fide offer for the company may be imminent, partners, and an individual and his or her close relatives, related trusts, any person who is accustomed to act in accordance with his or her instructions and companies controlled by the individual, his or her close relatives, his or her related trusts or any person who is accustomed to act in accordance with his or her instructions. 79 An offer for consideration other than cash must, subject to certain exceptions, be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding six months. Under the Take-Over Code, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offeror must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the takeover offer must be given sufficient information, advice and time to consider and decide on the offer. LIQUIDATION OR OTHER RETURN OF CAPITAL If our company liquidates or in the event of any other return of capital, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares. INDEMNITY As permitted by Singapore law, our Articles of Association provide that, subject to the Companies Act, we will indemnify our directors and officers against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by them as officers or employees of our company and in which judgment is given in their favor or in which they are acquitted or in connection with any application under any statute for relief from liability in respect thereof in which relief is granted by the court. We may not indemnify directors and officers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to our company. LIMITATIONS ON RIGHTS TO HOLD OR VOTE SHARES Except as described herein, there are no limitations imposed by Singapore law or by our Articles of Association on the rights of non-resident shareholders to hold or vote ordinary shares. SUBSTANTIAL SHAREHOLDINGS The Companies Act and the Securities and Futures Act, Chapter 289 of Singapore require the substantial shareholders of our company to give notice to our company and the SGX-ST including particulars of their interest and the circumstances by reason of which they have such interest, within two business days of their becoming substantial shareholders of our company and of any change in the percentage level of their interest. Under the Companies Act, a person has a substantial shareholding in a company if he or she has an interest (or interests) in one or more voting shares in our company and the nominal amount of that share (or the aggregate of the nominal amounts of those shares) is not less than 5% of the aggregate of the nominal amount of all voting shares in our company. MINORITY RIGHTS The rights of minority shareholders of Singapore-incorporated companies are protected under section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any shareholder of the company, as they think fit to remedy situations where: (1) the affairs of the company are being conducted or the powers of the board of directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of the shareholders; or (2) the company takes an action, or threatens to take an action, or the 80 shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the shareholders, including the applicant. Singapore courts have wide discretion as to the reliefs they may grant and those reliefs are in no way limited to those listed in the Companies Act itself. Without prejudice to the foregoing, Singapore courts may direct or prohibit any act or cancel or vary any transaction or resolution, regulate the conduct of our company's affairs in the future, authorize civil proceedings to be brought in the name of, or on behalf of, our company by a person or persons and on such terms as the court may direct. The Singapore courts may also direct that our company or some of our shareholders purchase minority shareholder's shares and, in the case of a purchase of shares by us, a corresponding reduction of the share capital, and direct that our Memorandum or Articles of Association be amended or that our company be wound up. C. MATERIAL CONTRACTS In January 2002, we established a $294.1 million (S$500.0 million) MTN Program. Under the MTN Program, we may, from time to time, issue notes in series or tranches in Singapore dollars or any other currencies as may be agreed upon between us and the dealers of the MTN Program. Each series of notes may be issued in various amounts and terms, and may bear fixed or floating rates of interest. The notes constitute unsecured obligations. The MTN Program limits our ability to pay dividends while the interest on the notes is unpaid, to create security interests to secure our indebtedness and to undertake any form of reconstruction, amalgamation, merger or consolidation with another company if such arrangement would affect our ability to make payments on the notes, among other things. We intend to use the proceeds from the MTN Program for our general corporate purposes including capital expenditure, working capital and investments. We have not issued any notes under the MTN Program. Our ability to issue notes under the MTN Program will depend on market and other conditions (including our financial condition) prevailing at the time we intend to issue notes. As a result, we may not be able to issue notes under the MTN Program. In March, 2002, we issued $200.0 million of senior unsecured and unsubordinated convertible notes due March 18, 2007. The convertible notes bear interest at the rate of 1.75% per annum and have a yield to maturity of 4.91%. At the maturity date, we will pay to the note holders 117.665% of the principal amount. The notes can be converted into our ordinary shares or, subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at a conversion price of S$3.408 per ordinary share (at a fixed exchange rate of US$1.00 = S$1.8215). The conversion price may be subject to adjustments for certain events. We may elect to satisfy our obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after March 18, 2004 at a price to yield of 4.91% per year to the redemption date if our shares or ADSs trade at or above 125% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of the notes on March 18, 2005 at a price equal to 110.081% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to March 18, 2007, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.91% per year to the redemption date. We have licensed patent rights from Motorola, Inc. to use technology in manufacturing BGA packages under an agreement which expires on December 31, 2010. Under this agreement, we are required to pay Motorola a royalty based upon a percentage of net revenues. We cannot assure you that we will be able to renew this agreement when it expires on terms that are favorable to us or at all. In June 2003, we executed a Strategic Assistance Loan Agreement with Simmtech, pursuant to which we granted an interest-free loan of $5 million to Simmtech and Simmtech undertook to supply such quantities of materials, substrates and other supplies to enable us to produce a specified number of PBGA and stPBGA packages up to mid 2007. The loan is repayable in installments of $450,000, with the first installment of the repayment amount due on 81 June 23, 2004 and thereafter on the first day of each subsequent three month period, except that the last repayment amount is due no later than July 1, 2007. In order to secure Simmtech's obligations under the Strategic Assistance Loan Agreement to us, Simmtech deposited and pledged 700,000 shares of common stock of Simmtech under a Pledge Agreement dated June 20, 2003 as well as transferred to us pursuant to a Yangdo Tambo Agreement dated June 20, 2003, all its rights and interests in certain movable property to be released and re-transferred upon the repayment of the loan. In November, 2003, we issued $115.0 million of senior unsecured and unsubordinated convertible notes due November 7, 2008. The convertible notes have a yield to maturity of 4.25%. At the maturity date, we will pay to the note holders 123.4% of the principal amount, comprising principal and redemption interest. The notes can be converted into our ordinary shares, or subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at an initial conversion price of $3.05 per ordinary share (equivalent to an initial number of 570.5902 ordinary shares per $1,000 principal amount of convertible notes, based on a fixed exchange rate of UD$1.00 =S$1.7403). The conversion price may be subject to adjustments for certain events. We may elect to satisfy our obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after November 7, 2006 at a price to yield of 4.25% per annum to the redemption date if our shares or ADSs trade at or above 130% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of their notes on November 7, 2007 at a price equal to 118.32% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to November 7, 2008, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.25% per year to the redemption date. On December 26, 2003, we signed a Base Capacity and Continuing Support Agreement with Simmtech and a Loan Agreement pursuant to which we granted an interest-free loan of $15 million to Simmtech. Under the Base Capacity and Continuing Support Agreement which took effect from January 1, 2004, Simmtech further committed and undertook to supply certain quantities of substrates and other supplies to enable us to produce certain specified quantities of PBGA and stPBGA packages. In connection with this, we executed a Strategic Assistance Loan Agreement under which we granted a loan of $15 million to Simmtech. The loan is repayable in installments of $882,353, with the first installment due on January 2, 2005 and thereafter on the first day of each subsequent three month period, except that the last installment is due no later than January 2, 2009. Under the Loan Agreement, in the event that Simmtech spins off its substrate manufacturing operations and forms a new company, to run such operations, we are entitled to make an equity investment of up to 30% in the new company. Further, for as long as the loan is outstanding from Simmtech, we have the right to nominate for election one non-standing member of the board of directors of Simmtech. In order to secure Simmtech's obligations under the Strategic Assistance Loan Agreement to us, Simmtech deposited and pledged 2,400,000 shares of common stock of Simmtech under a Share Pledge Agreement dated December 26, 2003. Simmtech also transferred to us pursuant to a Yangdo Tambo Agreement dated December 26, 2003, all its rights and interests in the equipment to be purchased using the loan sums. These rights and interests will be released and re-transferred upon repayment of the loan. In addition, we were granted a fourth priority maximum amount factory mortgage over certain property owned by Simmtech. In January 2004, in order to enhance our yields on our cash deposits, we entered into a bond transaction and an asset swap transaction with Deutsche Bank AG, London Branch. In exchange for the purchase of certain bonds from the Bank at a bond purchase price of $96,116,000, the Bank agreed to make four payments of $25,000,000 each spread out over the years 2004 to 2007, to us in respect of the bonds. In consideration for such payments, we agreed to pledge the Bonds in favor of the Bank and enter into an International Swaps and Derivatives Association ("ISDA") Agreement with the Bank. On February 10, 2004, we signed an Agreement and Plan of Merger and Reorganization with ChipPAC, pursuant to which a newly formed, wholly owned subsidiary of ours will merge with ChipPAC and ChipPAC will become our wholly owned subsidiary. Pursuant to the merger, each share of Class A common stock, par value US$0.01 per share, 82 of ChipPAC will be converted into the right to receive 0.87 of our ADSs. Consummation of the merger is subject to certain conditions, including approval of our shareholders and the stockholders of ChipPAC, expiration of the Hart-Scott-Rodino antitrust waiting period in the United States, receipt of a private letter ruling from U.S. tax authorities relating to the tax treatment of the merger for ChipPAC stockholders and other customary conditions, which we cannot assure you will be satisfied or waived. Singapore Technologies Semiconductors Pte Ltd has entered into a voting agreement pursuant to which it has agreed to vote approximately 59% of our outstanding capital stock beneficially owned by Singapore Technologies Semiconductors Pte Ltd in favor of the issuance of our ADSs in connection with the merger and certain other related matters. In addition, certain of ChipPAC's stockholders who own approximately 18% of ChipPAC's Class A common stock have entered into a voting agreement pursuant to which they have agreed to vote in favor of the merger. D. EXCHANGE CONTROLS Currently, there are no exchange control restrictions in Singapore. EXCHANGE RATES Fluctuations in the exchange rate between the Singapore dollar and the U.S dollar will affect the U.S. dollar equivalent of the Singapore dollar price of the ordinary shares on the Singapore Exchange and, as a result, may affect the market price of our convertible notes. Currently, there are no restrictions in Singapore on the conversion of Singapore dollars into U.S. dollars and vice versa. The following table sets forth, for the fiscal years indicated, information concerning the exchange rates between Singapore dollars and U.S. dollars based on the average of the noon buying rate in the City of New York on the last business day of each month during the period for cable transfers in Singapore dollars as certified for customs purposes by the Federal Reserve Bank of New York. The table illustrates how many Singapore dollars it would take to buy one U.S. dollar. These transactions should not be construed as a representation that those Singapore dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate, the rate stated below, or at all.
SINGAPORE DOLLARS PER US$1.00 NOON BUYING RATE AVERAGE(1) LOW HIGH PERIOD END ---------- --- ---- ---------- Year Ended December 31, 1999 1.70 1.66 1.74 1.67 2000 1.72 1.65 1.76 1.73 2001 1.80 1.74 1.85 1.85 2002 1.79 1.74 1.84 1.74 2003 1.74 1.69 1.78 1.70 Month September 2003 1.73 1.76 1.73 October 2003 1.72 1.75 1.74 November 2003 1.71 1.75 1.72 December 2003 1.70 1.72 1.70 January 2004 1.69 1.71 1.69 February 2004 1.67 1.69 1.68
(1) The average of the daily Noon Buying Rates on the last business day of each month during the year. 83 E. TAXATION SINGAPORE TAXATION The statements made herein regarding taxation are general in nature and based on certain aspects of the tax laws of Singapore and administrative guidelines issued by the relevant authorities in force as of the date hereof and are subject to any changes in such laws or administrative guidelines, or in the interpretation of these laws or guidelines, occurring after such date, which changes could be made on a retroactive basis. The following is a summary of the material Singapore tax, stamp duty and estate duty consequences of the purchase, ownership and disposal of the ordinary shares or ADSs, (collectively, the "Securities") to a holder of the Securities who is not tax resident in Singapore. The statements below are not to be regarded as advice on the tax position of any holder of the Securities or of any person acquiring, selling or otherwise dealing with the Securities or on any tax implications arising from the acquisition, sale or other dealings in respect of the Securities. The statements made herein do not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of the Securities and does not purport to deal with the tax consequences applicable to all categories of investors some of which (such as dealers in securities) may be subject to special rules. Prospective holders of the Securities are advised to consult their own tax advisors as to the Singapore or other tax consequences of the acquisition, ownership or disposition of the Securities, including, in particular, the effect of any foreign, state or local tax laws to which they are subject. INCOME TAX GENERAL Non-resident corporate taxpayers are subject to income tax on income that is accruing in or derived from Singapore, and on foreign income received or deemed received in Singapore, subject to certain exceptions. A non-resident individual is subject to income tax on the income accruing in or derived from Singapore. Subject to the provisions of any applicable double taxation treaty, non-resident taxpayers who derive certain types of income from Singapore are subject to a withholding tax on that income at a current rate of 22% for the years of assessment 2003 and 2004, or 15% in the case of interest, royalty and rental of moveable equipment, subject to certain exceptions. We are obligated by law to withhold tax at the source. A corporation will be regarded as being tax resident in Singapore if the control and management of its business is exercised in Singapore (for example, if the corporation's board of directors meets and conducts the business of the corporation in Singapore). An individual is tax resident in Singapore in a year of assessment if, in the preceding year, he or she was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more, or if he or she resides in Singapore. DIVIDEND DISTRIBUTIONS Dividends received in respect of our ordinary shares or ADSs by either a resident or non-resident of Singapore are not subject to Singapore withholding tax. No Comprehensive tax treaty currently exist between Singapore and the United States. DIVIDENDS PAID OUT OF TAX-EXEMPT INCOME OR INCOME SUBJECT TO CONCESSIONARY TAX RATE If we pay dividends on the ordinary shares or ADSs out of income received that is exempt from tax because of our pioneer status or out of our income received that is subject to tax at a concessionary rate, if any, such dividends will 84 be free from Singapore tax in the hands of the holders of the ordinary shares and ADSs. See "Item 5. Operating and Financial Review and Prospects -- Special Tax Status" for a discussion of our pioneer status. DIVIDENDS PAID OUT OF INCOME SUBJECT TO NORMAL CORPORATE TAXATION IMPUTATION SYSTEM Prior to January 1, 2004, Singapore was on the imputation system of corporate taxation. Under this system, the tax we paid on income subject to tax at the prevailing corporate income tax rate (currently 22% for the years of assessment 2003 and 2004) would be imputed to, and deemed to be paid on behalf of, our shareholders. Upon distribution of such income as dividends, our shareholders would have received dividends "Franked Dividends" net of such tax. The gross amount of dividends (that is, on the amount of net dividends plus an amount equal to the amount of gross dividends multiplied by the prevailing corporate tax rate) would be subject to Singapore tax. At the same time, the tax we paid would be available to our shareholders as a tax credit to offset their tax liability on their overall income subject to Singapore income tax (including the gross amount of dividends). A non-resident shareholder is effectively taxed on Franked Dividends at the corporate income tax rate. Thus, because tax deducted from the dividend and paid by us at the corporate income tax rate is in effect imputed to, and deemed paid on behalf of, our shareholders (as discussed in the preceding paragraph), no further Singapore income tax will be imposed on net dividends received by a non-resident holder of ordinary shares or ADSs. Further, the non-resident shareholder which does not have a permanent establishment in Singapore and deductible expenses attributed to such dividend income would normally not receive any tax refund from the Inland Revenue Authority of Singapore. NEW ONE-TIER CORPORATE TAX SYSTEM A new one-tier corporate tax system became effective from January 1, 2003 (subject to certain transitional rules). Under this new system, the tax on corporate profits is final and dividends paid by a Singapore resident company will be tax exempt in the hands of the shareholder, regardless of whether the shareholder is a company or an individual and whether or not the shareholder is a Singapore tax resident. Accordingly, under the one-tier corporate tax system, no further Singapore income tax will be imposed on the net dividends received by a non-resident holder of the ordinary shares or ADSs. However, to enable companies to make use of their unutilized dividend franking credits as at December 31, 2002, there will be a five-year transitional period from January 1, 2003 to December 31, 2007, during which a company may remain on the imputation system for the purposes of paying franked dividends out of its unutilized dividend franking credits as at December 31, 2002. Accordingly, as long as we remain on the imputation system, shareholders may continue to receive dividends with credits attached as described above under "Imputation System." For the transitional period from January 1, 2003 up to December 31, 2007, when the imputation system will co-exist with the one-tier corporate tax system, if we have not moved to the one-tier system, tax vouchers issued by us will distinguish between franked dividends and normal tax exempt dividends not being exempt dividends under the one-tier system, such as dividends paid out of tax exempt income, approved deduction or further deduction of expenses or foreign tax credit allowed. If we have fully utilized our dividend franking credits (that is. we are required to move to the one-tier system) or if we elect to move to the one-tier system at an earlier date, tax vouchers issued by us will distinguish between normal tax exempt dividends and exempt dividends under the one-tier system. We do not presently intend to migrate to the new one-tier corporate tax system until our dividend franking credits as at December 31, 2002 are fully utilized or until the transition period comes to an end on December 31, 2007, whichever is earlier. 85 CAPITAL GAINS ON DISPOSAL OF ORDINARY SHARES AND ADSs Singapore does not impose tax on capital gains. However, there are currently no specific laws or regulations which address the characterization of capital gains; hence gains or profits may be construed to be of an income nature and subject to tax, especially if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore. Thus, any gains or profits from the disposal of the ordinary shares or ADSs are not taxable in Singapore unless the seller is regarded as carrying on a trade or business (for example, one of dealing in securities) in Singapore, in which case the disposal profits would be taxable as such profits would be considered revenue in nature. STAMP DUTY There is no stamp duty payable in respect of the issuance and holding of ordinary shares or ADSs. Where ordinary shares or ADSs evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the ordinary shares or ADSs at the rate of S$0.20 for every S$100 or part thereof of the consideration for, or market value of, the ordinary shares or ADSs, whichever is higher. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of ordinary shares or ADSs. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and received in Singapore. ESTATE DUTY In the case of an individual who is not domiciled in Singapore, Singapore estate duty is imposed on the value of immovable properties of the individual situated in Singapore. Estate duty is not imposed on the movable properties in Singapore owned by a non-domiciled person. Thus, an individual holder of the ordinary shares or ADSs who is not domiciled in Singapore at the time of his or her death will not be subject to Singapore estate duty on the value of the ordinary shares or ADSs held by the individual upon the individual's death. Prospective purchasers of ordinary shares or ADSs who are individuals, whether or not domiciled in Singapore, should consult their own tax advisers regarding the Singapore estate duty consequences of their investment and ownership of such ordinary shares and/or ADS. UNITED STATES FEDERAL INCOME TAXATION The following is a general summary of the material United States federal income tax consequences of the ownership and disposition of ordinary shares (including ordinary shares represented by ADSs). This summary applies only to U.S. Holders that are beneficial owners of ordinary shares or ADSs and that hold ordinary shares or ADSs as "capital assets." This discussion does not address tax considerations applicable to a U.S. Holder's special circumstances or to U.S. Holders that may be subject to special tax rules. U.S. Holders are urged to consult their own tax advisors with respect to the United States federal income tax consequences of the ownership and disposition of ordinary shares and ADSs in light of their own particular circumstances, as well as the effect of any state, local or non-United States tax laws. DISTRIBUTIONS ON ORDINARY SHARES OR ADSS Subject to the passive foreign investment company, or PFIC, rules discussed below, distributions, if any, made with respect to the ordinary shares or ADSs will be included in the income of a U.S. Holder as dividend income to the extent of our current and accumulated earnings and profits, calculated pursuant to United States federal income tax principles. U.S. Holders must include such distributions in income on the date they are actually or constructively received by the U.S. Holder, in the case of ordinary shares, or by the depositary, in the case of the ADSs. Subject to certain limitations, dividends paid to non-corporate U.S. Holders, including individuals, may be eligible for reduced 86 rate of taxation if we are a "qualified foreign corporation" for United States federal income tax purposes. A qualified foreign corporation includes (i) a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program, and (ii) a foreign corporation if its stock with respect to which a dividend is paid or its ADSs backed by such stock are readily tradable on an established securities market within the United States, but does not include an otherwise qualified corporation that is a PFIC. We believe that we will be a qualified foreign corporation for so long as we are not a PFIC and the ordinary shares or the ADSs are considered to be readily tradable on an established securities market within the United States. No assurance can be made that our status as a qualified foreign corporation will not change. A corporate U.S. Holder will not be entitled to a dividends received deduction generally available upon the receipt of dividends distributed by United States corporations. Distributions in excess of our current and accumulated earnings and profits will be treated as a return of capital to the extent of the U.S. Holder's basis in the ordinary shares or ADSs and thereafter as capital gain. Such capital gain will be long-term capital gain if the U.S. Holder's holding period of the ordinary shares or ADSs is more than one year at the time of sale or exchange. If a taxable dividend is paid in a currency other than the U.S. dollar, the amount includible in gross income will be the U.S. dollar value of such dividend, calculated by reference to the exchange rate in effect on the date of actual or constructive receipt of the dividend by the U.S. Holder, in the case of ordinary shares, or by the depositary, in the case of ADS, regardless of whether the payment is actually converted into U.S. dollars. U.S. Holders should consult their own tax advisors concerning the possibility of foreign currency gain or loss if any such currency is not converted into U.S. dollars on the date of receipt. Dividends received with respect to the ordinary shares or ADSs will be treated as income from outside the United States, but generally will be treated as "passive income" or "financial services income" for United States foreign tax credit purposes. Under Section 904(g) of the United States Internal Revenue Code of 1986, as amended, dividends paid by a foreign corporation 50% or more of which is owned by United States persons may be treated as income from sources within the United States to the extent that the foreign corporation has more than a small amount of income from sources within the United States. The Singapore taxes are paid by our company and deemed to have been distributed to and paid by our shareholders. A U.S. Holder will not be subject to United States federal income tax on such amounts, and the holder will not be eligible for foreign tax credits for such amounts against its United States federal income tax liability. SALE OR EXCHANGE OF THE ORDINARY SHARES OR ADSs Subject to the PFIC rules discussed below, upon the sale or exchange of an ordinary share or an ADS, a U.S. Holder will generally recognize capital gain or loss equal to the difference between (i) the amount of cash proceeds and the fair market value of any property received on the sale or exchange and (ii) such holder's adjusted tax basis in the ordinary share, or ADS. Such capital gain or loss will be long-term capital gain or loss if the U.S. Holder's holding period in the ordinary share or ADS is more than one year at the time of sale or exchange. Long-term capital gains recognized by certain non-corporate U.S. Holders, including individuals, will generally be subject to a maximum rate of tax of 15%. The deductibility of capital losses is subject to limitations. Such gain or loss generally will be treated as income or loss from within the United States for United States foreign tax credit purposes. PASSIVE FOREIGN INVESTMENT COMPANY Special United States federal income tax rules apply to U.S. persons owning shares of a PFIC. We do not believe that we are currently a PFIC, nor do we anticipate becoming a PFIC in the foreseeable future. However, there can be no assurance that we will not become a PFIC at some future time as a result of changes in our assets, income or business operations. 87 If we were classified as a PFIC for any taxable year during which a U.S. Holder held ordinary shares, ADSs, such U.S. Holder generally would be taxed at ordinary income tax rates on any gain realized on the sale or exchange of the ordinary share or ADSs and on any "excess distribution" received. Such U.S. Holder would also be subject to a special interest charge with respect to any such gain or "excess distribution." Rather than being subject to this tax regime, a U.S. Holder of ordinary shares or ADSs may make a "qualified electing fund" or "mark-to-market" election. A "qualified electing fund" election generally should be made for the first taxable year in which a company is a PFIC. F. DIVIDENDS AND PAYING AGENTS Not applicable G. STATEMENTS BY EXPERTS Not applicable H. DOCUMENTS ON DISPLAY All documents relating to our company, which are referred to in this Annual Report are available at our principal executive and registered office at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore. I. SUBSIDIARY INFORMATION Not applicable ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in currency exchange rates and interest rates. To mitigate the currency exchange risks, a substantial majority of our revenue, material and equipment supplies are transacted in U.S. Dollars. We may employ derivative instruments such as forward foreign currency swaps, foreign currency contracts and options and interest rate swaps to manage our foreign exchange and interest rate exposures. These instruments are generally used to reduce or eliminate the financial risks associated with our assets and liabilities and not for trading purposes. Investment and Interest Rates. Our exposure to market risk associated with changes in interest rates primarily relates to our investment portfolio and debt obligations. We place our investments in time deposits and marketable securities. We mitigate default risk by investing in marketable securities that are of at least an "A" rating, as assigned by an internationally recognized credit rating organization, and major Singapore banks and government-linked companies. We have no material cash flow exposure due to rate changes for cash equivalents and short-term investments. As of December 31, 2003, our long-term debt obligations for the $200.0 million and $115.0 million senior unsecured and subordinated convertible notes due March 18, 2007 and November 7, 2008, bear a fixed interest rate. The convertible notes due March 18, 2007 bear interest at a rate of 1.75% per annum and have a yield to maturity of 4.91%. The convertible notes due November 7, 2008 have a yield to maturity of 4.25%. Currency Exchange Rates. Based on our overall currency rate exposure, we have adopted a foreign currency hedging policy for committed or forecasted currency exposures. We may utilize foreign currency swaps as well as foreign exchange forward contracts and options. These programs reduce, but do not always entirely eliminate the impact of currency exchange movements. The goal of the hedging policy is to effectively manage risk associated with fluctuations in the value of the foreign currency, thereby making financial results more stable and predictable. 88 However, we cannot assure you that any hedging policy we implement will be effective and we may experience reduced operating margins if any such policies are unsuccessful. Our currency, maturity and interest rate information relating to our marketable securities and, short-term and long-term debt are disclosed in Notes 4, 13, and 15 to the consolidated financial statements, respectively. The tables below provide information about our financial instruments that are sensitive to changes in interest rates and foreign currencies as of the dates shown. Weighted average variable rates were based on average interest rates applicable to the loans. The information is presented in U.S. dollar equivalents, which is our reporting currency. Actual cash flows are denominated in Singapore dollars.
EXPECTED MATURITY DATE AS OF DECEMBER 31, 2003 AS OF DECEMBER 31, 2006 AND FAIR 2002 2004 2005 BEYOND TOTAL VALUE TOTAL FAIR VALUE ----- ------ --------- ------- ------- ------- ---------- (in thousands of US$, except interest and settlement rate) Debt: Variable rate Singapore dollar long-term debt: - - - - - 14,754 14,754 Average interest rate 3.5% Variable rate NT dollar long-term debt: 5,889 11,256 18,395 35,540 35,540 11,511 11,511 Average interest rate 3.4% 5.3% Fixed rate NT dollar long-term debt: 952 990 769 2,711 2,559 - - Average interest rate 3.9% Fixed rate NT dollar short-term debt: - - - - - 2,992 2,992 Average interest rate 4.0% Fixed rate U.S. dollar long-term debt: - - - - - 3,506 4,013 Average interest rate 7.9% Fixed rate U.S. dollar short-term debt: - - - - - 2,182 2,182 Average interest rate 3.9% Fixed rate U.S. dollar convertible notes: - - 327,379 327,379 339,138 205,013 194,250 Average interest rate 4.7% 4.9% Assets: Singapore dollar marketable debt securities 5,273 - 5,248 10,521 10,521 15,569 15,569 Average interest rate 2.8% 4.2% US dollar marketable debt securities - - 17,913 17,913 17,913 51,995 51,995 Average interest rate 5.0% 7.3% US dollar long-term fixed deposits pledged - - 450 450 450 3,500 3,776 Average interest rate 1.0% 7.0% US dollar short-term
89 fixed deposits pledged 412 - - 412 412 3,761 3,761 Average interest rate 1.1% 1.1% NT dollar marketable debt securities 5,872 - 151 6,023 6,023 2,279 2,279 Average interest rate 1.9% 2.7% NT dollar long-term fixed deposits pledged 920 460 1,902 3,282 3,282 4,049 4,049 Average interest rate 1.1% 2.4% NT dollar short-term fixed deposits pledged 368 - - 368 368 1,267 1,267 Average interest rate 0.9% 2.0%
The variable rate Singapore dollar long-term debt is repayable in seven equal semi-annual installments commencing September 1, 2000. The variable rate New Taiwan dollar loans and the fixed rate United States dollar loan have quarterly repayment terms commencing 1 to 2 years from the date of draw-down of the loans. In March, 2002, the Company issued $200.0 million of senior unsecured and unsubordinated convertible notes due March 18, 2007 for net proceeds of $195.0 million. The convertible notes bear interest at the rate of 1.75% per annum and have a yield to maturity of 4.91%. At the maturity date, we will pay to the note holders 117.665% of the principal amount. The notes can be converted into our ordinary shares or, subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at a conversion price of S$3.408 per ordinary share (at a fixed exchange rate of US$1.00 = S$1.8215). The conversion price may be subject to adjustments for certain events. We may elect to satisfy its obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after March 18, 2004 at a price to yield of 4.91% per year to the redemption date if our shares or ADSs trade at or above 125% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of their notes on March 18, 2005 at a price equal to 110.081% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to March 18, 2007, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.91% per year to the redemption date. On November 7, 2003, we issued $115.0 million of senior unsecured and unsubordinated convertible notes due November 7, 2008, for net proceeds of $112.3 million. The convertible notes have a yield to maturity of 4.25%. At the maturity date, we will pay to the note holders 123.4% of the principal amount, comprising principal and redemption interest. The notes can be converted into our ordinary shares, or subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at an initial conversion price of $3.05 per ordinary share (equivalent to an initial number of 570.5902 ordinary shares per $1,000 principal amount of convertible notes, based on a fixed exchange rate of UD$1.00 =S$1.7403). The conversion price may be subject to adjustments for certain events. We may elect to satisfy our obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. We may redeem all or a portion of the convertible notes at any time on or after November 7, 2006 at a price to yield of 4.25% per annum to the redemption date if our shares or ADSs trade at or above 130% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require us to repurchase all or a portion of their notes on November 7, 2007 at a price equal to 118.32% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to November 7, 2008, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.25% per year to the redemption date. The interest rate for the marketable debt securities represents the contractual interest rate. 90 LIMITATIONS Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS See "Item 10. Additional Information" for a description of the rights of securities holders, which remain unchanged. We completed our initial public offering of 175,950,000 ordinary shares, directly or in the form of ADSs, at S$3.554 per ordinary share or $21.00 per ADS in February 2000, after our ordinary shares and American Depositary Receipts, or ADRs, were registered under the Securities Act. The aggregate price of the offering amount registered and sold was $369,495,000. We also completed a separate offering of 19,550,000 ordinary shares at S$3.554 per ordinary share in Singapore on the same date. The effective date of our registration statement on Form F-1 (File number: 333-93661) was January 27, 2000. Salomon Smith Barney Inc. was the global coordinator and sole book running manager for the global offering of our ordinary shares and ADSs. The net proceeds from our initial public offering was used to repay loans of $25.0 million from ST Treasury Services Ltd, a related party, $35.0 million from Den Danske Bank and $22.2 million due on the EDB loan on the respective repayment due dates, and for general corporate purposes, including for capital expenditure and general working capital. Except as set forth in the previous sentence, none of the proceeds were paid, directly or indirectly to our directors, officers or their associates or to any person owning ten percent or more of our ordinary shares or to our affiliates. As of December 31, 2003, our cash resources amounted to $347.6 million, comprising $313.2 million in cash and cash equivalents and $34.4 million in marketable securities. ITEM 15. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Based on our chief executive officer's and chief financial officer's evaluation of our company's disclosure controls and procedures (as defined in Rules 13a-14 (c) and 15d - 14 (c) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Form 20-F, they have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. 91 CHANGES TO INTERNAL CONTROLS There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation. ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Our Board of Directors has determined that Mr. Steven Hugh Hamblin qualifies as an "audit committee financial expert" as defined in Item 16A of Form 20-F. Mr. Hamblin and each of the other members of the Audit Committee is an "independent director" as defined in Rule 4200(15) of the Nasdaq Marketplace Rules. In connection with the proposed merger with ChipPAC and assuming their election to the Board of Directors, we agreed to use our reasonable best efforts to cause to be appointed to the Audit Committee of the combined company effective as of the closing of the merger, any of Mr. Robert W. Conn, Mr. R. Douglas Norby or Mr. Chong Sup Park who are current members of the Board of Directors of ChipPAC. Mr. Norby has been identified by ChipPAC's Board of Directors as an "audit committee financial expert" as defined in Item 16A of Form 20-F. ITEM 16B. CODE OF ETHICS We have adopted a code of ethics that applies to all of our officers, directors and employees and to all officers, directors and employees of our subsidiaries. The text of our Code of Business Conduct and Ethics is posted on our internet website at http://www.stts.com. 1. From our main web page, first click on "Investor Relations" 2. Next, click on "Code of Ethics" ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES KPMG have served as our independent public accountants for each of the financial years in the three-year period ended December 31, 2003, for which audited financial statements appear in this annual report on Form 20-F. The following table shows the fees we paid or accrued for the audit and other services provided by KPMG for 2002 and 2003.
DECEMBER 31, ------------------------------- 2002 2003 ----------- ------------ (in thousands of US$) Audit Fees............................................................. $ 259 $ 374 Audit-Related Fees..................................................... 33 7 Tax Fees............................................................... 47 71 All Other Fees......................................................... - - ----------- ------------ Total $ 339 $ 452 =========== ============
Audit Fees. This category consists of fees billed for the annual audit services engagement and other audit services, which are normally provided by the independent auditors in connection with statutory and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements and include the group audit; 92 statutory audits required by non-U.S. jurisdictions; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC. Audit-Related Fees. This category consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards; internal control reviews of new systems, programmes and projects; review of security controls and operational effectiveness of systems; review of plans and controls for shared service centres; due diligence related to acquisitions; accounting assistance; audits for MTN Program, offering of convertible notes and submissions to EDB and Infocomm Development Authority for grants and audits in connection with proposed or completed acquisitions; and employee benefit plan audits. Tax Fees. This category includes fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance and representation in connection with tax audits and appeals, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authorities and tax planning services. All Other Fees. No fees were paid or billed by KPMG with respect to any other services which have not been described above, in 2002 and 2003. AUDIT COMMITTEE PRE-APPROVAL PROCESS Our Audit Committee reviews and pre-approves the scope and the cost of all audit and permissible non-audit services performed by the independent auditors, other than those for de minimus services which are approved by the Audit Committee prior to the completion of the audit. All of the services provided by KPMG during the last two fiscal years have been approved by the Audit Committee. ITEM 17. FINANCIAL STATEMENTS See Item 18 for a list of the Financial Statements filed as part of this Annual Report. ITEM 18. FINANCIAL STATEMENTS The following financial statements are filed as part of this Annual Report, together with the report of the independent auditors: Independent Auditors' Report Consolidated Balance Sheets as at December 31, 2002 and 2003 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2001, 2002 and 2003 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2002 and 2003 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003 Notes to the Consolidated Financial Statements 93 ITEM 19. EXHIBITS The following exhibits are filed as part of this Annual Report 1.1 Memorandum and Articles of Association of ST Assembly Test Services Ltd 2.1 Form of specimen certificate representing ST Assembly Test Services Ltd's ordinary shares - incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000 2.2 Deposit Agreement among ST Assembly Test Services Ltd, Citibank, N.A., as depositary, and the holders from time to time of ADRs issued thereunder (including the form of ADR) - incorporated by reference to Exhibit 2.2 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 30, 2001 4.1 ST Group Management & Support Services Agreement dated December 27, 1999 by and between Singapore Technologies Pte Ltd and ST Assembly Test Services Ltd - incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000 4.2 Lease Agreement dated November 18, 1996 by and between the Housing and Development Board and ST Assembly Test Services Ltd - incorporated by reference to Exhibit 10.4 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000 4.3 Agreement for the period January 1, 2003 to March 31, 2003, for the extension of the BGA Immunity Agreement entered into on October 18, 1996 between Motorola Inc and ST Assembly Test Services Ltd - incorporated by reference to Exhibit 4.6 of Form 20-F of ST Assembly Test Services filed with the Securities and Exchange Commission on March 31, 2003 4.4 Program Agreement dated January 10, 2002 by and between Citicorp Investment Bank (Singapore) Limited and ST Assembly Test Services Ltd establishing a S$500,000,000 Multicurrency Medium Term Note Program - incorporated by reference to Exhibit 4.6 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on February 28, 2002 4.5 Trust Deed dated January 10, 2002 by and between British and Malayan Trustees Limited and ST Assembly Test Services Ltd establishing a S$500,000,000 Multicurrency Medium Term Note Program- incorporated by reference to Exhibit 4.7 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on February 28, 2002 4.6 Agency Agreement dated January 10, 2002 by and between British and Malayan Trustees Limited, Citicorp Investment Bank (Singapore) Limited and ST Assembly Test Services Ltd establishing a S$500,000,000 Multicurrency Medium Term Note Program- incorporated by reference to Exhibit 4.8 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on February 28, 2002 94 4.7 Indenture dated March 18, 2002 by and between ST Assembly Test Services Ltd and the Bank of New York relating to the 1.75% Convertible Notes Due 2007 - incorporated by reference to Exhibit 4.10 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 31, 2003 4.8 US$168 Million Reg S Global Note issued by ST Assembly Test Services Ltd in relation to the 1.75% Convertible Notes Due 2007 - incorporated by reference to Exhibit 4.11 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 31, 2003 4.9 US$25 Million Reg S Global Note issued by ST Assembly Test Services Ltd in relation to the 1.75% Convertible Notes Due 2007 - incorporated by reference to Exhibit 4.12 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 31, 2003 4.10 US$7 Million Restricted Global Note issued by ST Assembly Test Services Ltd in relation to the 1.75% Convertible Notes Due 2007 - incorporated by reference to Exhibit 4.13 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 31, 2003 4.11 Terms and Conditions of Appointment of Tan Lay Koon as President and Chief Executive Officer of ST Assembly Test Services Ltd dated March 24, 2003 by and between Tan Lay Koon and ST Assembly Test Services Ltd - incorporated by reference to Exhibit 4.16 of Form 20-F of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 31, 2003 4.12 Amendment Agreement dated April 22, 2003 renewing the Immunity Agreement dated October 18, 1996 by and between Motorola Inc. and ST Assembly Test Services Ltd* 4.13 Securities Pledge Agreement dated January 16, 2004 by and between ST Assembly Test Services Ltd as Pledgor and Deutsche Bank AG, London Branch as Pledgee 4.14 Confirmation Letter Agreement dated January 8, 2004 by and between ST Assembly Test Services Ltd and Deutsche Bank AG, London Branch 4.15 Agreement and Plan of Merger and Reorganization dated February 10, 2004 by and between ST Assembly Test Services Ltd, ChipPAC, Inc. and Camelot Merger, Inc. 4.16 Strategic Assistance Loan Agreement dated June 20, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co Ltd 4.17 The Yangdo Tambo Agreement dated June 20, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd 4.18 Pledge Agreement dated June 20, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd 4.19 Loan Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd and Se-Ho Chun 4.20 Yangdo Tambo Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd 4.21 Share Pledge Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and Se-Ho Chun 95 4.22 Factory Kun Mortgage Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd 4.23 Base Capacity and Continuing Support Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and Simmtech Co. Ltd 4.24 Indenture dated November 7, 2003 by and between ST Assembly Test Services Ltd and the Bank of New York relating to the Convertible Notes Due 2008 4.25 US$115 Million Reg S Global Note issued by ST Assembly Test Services Ltd under the Indenture relating to the Convertible Notes Due 2008 8.1 List of subsidiaries 12.1 Certification by the Chief Executive Officer pursuant to 17 CFR 240. 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 12.2 Certification by the Chief Financial Officer pursuant to 17 CFR 240. 15D-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 13.1 Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * Confidential treatment has been requested. Confidential material has been redacted and has been separately filed with the Securities and Exchange Commission. 96 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. ST ASSEMBLY TEST SERVICES LTD Date: March 19, 2004 By /s/ Tan Lay Koon ----------------- Tan Lay Koon President and Chief Executive Officer 97 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES INDEX TO ANNUAL REPORT
FINANCIAL STATEMENTS PAGE NUMBER Independent Auditors' Report...................................................... F-2 Consolidated Balance Sheets....................................................... F-3 Consolidated Statements of Operations and Comprehensive Income (Loss)............. F-5 Consolidated Statements of Shareholders' Equity................................... F-7 Consolidated Statements of Cash Flows............................................. F-8 Notes to the Consolidated Financial Statements.................................... F-10
INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders ST Assembly Test Services Ltd: We have audited the accompanying consolidated balance sheets of ST Assembly Test Services Ltd and subsidiaries as of December 31, 2002 and 2003, and the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for the years ended December 31, 2001, 2002 and 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ST Assembly Test Services Ltd and subsidiaries as of December 31, 2002 and 2003, and the consolidated results of their operations and their cash flows for the years ended December 31, 2001, 2002 and 2003, in conformity with accounting principles generally accepted in the United States of America. KPMG Singapore February 6, 2004 F-2 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA)
NOTE 2002 2003 ----------- ----------- ASSETS Current assets: Cash and cash equivalents..................................... 3 $ 167,661 $ 313,163 Marketable securities......................................... 4 11,960 11,144 Accounts receivable, net...................................... 5 49,461 79,899 Amounts due from ST and ST affiliates......................... 2 3,727 7,050 Other receivables ............................................ 6 8,913 2,773 Inventories................................................... 7 9,744 19,839 Prepaid expenses and other assets............................. 8 15,631 14,863 ----------- ----------- Total current assets...................................... 267,097 448,731 Marketable securities.............................................. 4 57,883 23,313 Prepaid expenses................................................... 8 4,351 6,283 Property, plant and equipment, net................................. 9 357,456 476,073 Goodwill and other assets.......................................... 10 35,181 39,452 ----------- ----------- Total Assets.............................................. $ 721,968 $ 993,852 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.............................................. $ 15,336 $ 8,042 Payables related to property, plant and equipment purchases................................................. 32,065 54,089 Accrued operating expenses.................................... 11 22,578 40,661 Income taxes payable.......................................... 12 1,263 3,383 Amounts due to ST and ST affiliates........................... 2 1,858 1,836 Short term borrowings......................................... 13 5,174 - Current obligations under capital leases...................... 14 6,558 5,296 Current installments of long-term debt........................ 15 16,414 6,841 ----------- ----------- Total current liabilities................................. 101,246 120,148 Obligations under capital leases, excluding current installments... 14 5,520 812 Long-term debt, excluding current installments..................... 15 218,370 358,789 Other non-current liabilities...................................... 17 4,494 4,463 ----------- ----------- Total liabilities......................................... 329,630 484,212 Minority interest.................................................. 25,826 33,684
See accompanying notes to consolidated financial statements. F-3 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA)
NOTE 2002 2003 ----------- ----------- Share capital: Ordinary shares - par value S$0.25, Authorized 3,200,000,000 shares Issued ordinary shares - 992,115,275 in 2002 and 1,076,620,120 in 2003...................................... 18 160,295 172,434 Additional paid-in capital..................................... 19 389,679 489,355 Accumulated other comprehensive loss........................... 21 (9,266) (9,921) Accumulated deficit............................................ 20 (174,196) (175,912) ----------- ----------- Total shareholders' equity............................ 366,512 475,956 ----------- ----------- Commitments and contingencies......................... 23 ----------- ----------- Total Liabilities and Shareholders' Equity ........... $ 721,968 $ 993,852 ----------- -----------
See accompanying notes to consolidated financial statements. F-4 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS
NOTE 2001 2002 2003 ----------- --------- ---------- Net revenues............................................. $ 145,866 $ 225,738 $ 380,691 Cost of revenues......................................... (217,789) (247,943) (328,014) ----------- --------- ---------- Gross profit (loss) ..................................... (71,923) (22,205) 52,677 ----------- --------- ---------- Operating expenses: Selling, general and administrative................. 36,041 36,633 36,378 Research and development............................ 15,160 18,856 15,295 Asset impairments................................... 9 23,735 14,666 - Prepaid leases written off.......................... 3,145 764 - Stock-based compensation............................ 1,024 60 97 Other general expenses, net......................... 101 548 374 ----------- --------- ---------- Total operating expenses........................ 79,206 71,527 52,144 ----------- --------- ---------- Operating income (loss).................................. (151,129) (93,732) 533 ----------- --------- ---------- Other income (expense), net: Interest income..................................... 6,497 5,271 4,785 Interest expense.................................... (1,275) (10,414) (13,994) Foreign currency exchange gain (loss)............... 775 (512) 1,634 Other non-operating income, net..................... 24 1,990 3,419 7,570 ----------- --------- ---------- Total other income (expense), net............... 7,987 (2,236) (5) ----------- --------- ---------- Income (loss) before income taxes........................ (143,142) (95,968) 528 Income tax benefit (expense)............................. 12 8,810 7,163 (705) ----------- --------- ---------- Loss before minority interest............................ (134,332) (88,805) (177) Minority interest........................................ 313 (514) (1,539) ----------- --------- ---------- Net loss................................................. $ (134,019) $ (89,319) $ (1,716) =========== ========= ========== Basic and diluted net loss per ordinary share............ $ (0.14) $ (0.09) $ (0.00) Basic and diluted net loss per ADS....................... $ (1.36) $ (0.90) $ (0.02) =========== ========= ========== Ordinary shares (in thousands) used in per ordinary share calculation: - basic and diluted 989,083 991,549 1,005,374 =========== ========= ========== ADS (in thousands) used in per ADS calculation: - basic and diluted 98,908 99,155 100,537 =========== ========= ==========
See accompanying notes to consolidated financial statements. F-5 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS
NOTE 2001 2002 2003 ----------- --------- --------- Net loss................................................. $ (134,019) $ (89,319) $ (1,716) Other comprehensive loss: Unrealized gain (loss) on available-for-sale marketable securities........................ (303) 1,012 3,687 Realized gain on available-for-sale marketable securities included in net loss.............. - (125) (5,040) Foreign currency translation adjustment........... 93 (212) 698 ----------- --------- --------- Comprehensive loss....................................... $ (134,229) $ (88,644) $ (2,371) =========== ========= =========
See accompanying notes to consolidated financial statements. F-6 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY IN THOUSANDS OF U.S. DOLLARS
ACCUMULATED TOTAL ADDITIONAL OTHER ACCUMULATED SHARE- PAID-IN COMPREHENSIVE EARNINGS HOLDERS' ORDINARY SHARES CAPITAL LOSS (DEFICIT) EQUITY --------------- ----------- ----- --------- ------ NO. $ $ $ $ $ (IN THOUSANDS) Balances at January 1, 2001 986,172 159,461 386,325 (9,731) 49,142 585,197 Share issuances 3,511 500 303 - - 803 Stock compensation - - 1,024 - - 1,024 Net loss - - - - (134,019) (134,019) Other comprehensive loss - - - (210) - (210) --------- -------- ----------- ----------- --------- -------- Balances at December 31, 2001 989,683 159,961 387,652 (9,941) (84,877) 452,795 Share issuances 2,432 334 944 - - 1,278 Non-cash compensation - - 1,023 - - 1,023 Stock compensation - - 60 - - 60 Net loss - - - - (89,319) (89,319) Other comprehensive income - - - 675 - 675 --------- -------- ----------- ----------- --------- -------- Balances at December 31, 2002 992,115 160,295 389,679 (9,266) (174,196) 366,512 Share issuances 84,505 12,139 99,579 - - 111,718 Stock compensation - - 97 - - 97 Net loss - - - - (1,716) (1,716) Other comprehensive loss - - - (655) - (655) --------- -------- ----------- ----------- --------- -------- Balances at December 31, 2003 1,076,620 172,434 489,355 (9,921) (175,912) 475,956 ========= ======== =========== =========== ========= ========
See accompanying notes to consolidated financial statements. F-7 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS
2001 2002 2003 ---------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss............................................................ $ (134,019) $ (89,319) $ (1,716) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.................................. 100,342 106,348 121,765 Asset impairments and prepaid leases written off............... 26,880 15,430 - Amortization of leasing prepayments............................ 24,618 19,222 11,732 Loss on sale of property, plant and equipment.................. 120 702 100 Accretion of discount on convertible notes..................... - 5,013 7,366 Foreign currency exchange loss (gain).......................... (775) 367 (3,367) Deferred income taxes.......................................... (10,161) (8,189) (1,246) Non-cash compensation.......................................... - 1,023 - Minority interest in income (loss) of subsidiary............... (313) 514 1,539 Gain on sale and maturity of marketable securities............. - (125) (5,040) Others......................................................... 78 (3) (54) Changes in operating working capital: Accounts receivable............................................ 27,222 (23,633) (30,277) Amounts due from ST and ST affiliates.......................... 6,935 (2,030) (2,932) Inventories.................................................... 7,530 (2,482) (10,095) Other receivables, prepaid expenses and other assets........... 13,693 (893) (16,783) Accounts payable, accrued operating expenses and other Payables................................................. (21,225) 7,163 11,769 Amounts due to ST and ST affiliates............................ 407 (611) (213) ---------- ---------- --------- Net cash provided by operating activities........................... 41,332 28,497 82,548 ---------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of marketable securities........................ 8,281 110,962 77,566 Proceeds from maturity of marketable securities..................... 11,900 2,844 5,753 Proceeds from maturity of short-term deposits....................... 10,000 - - Purchases of marketable securities.................................. (22,499) (157,976) (43,850) Acquisition of subsidiary, net of cash acquired..................... 1,835 - (467) Purchases of property, plant and equipment.......................... (55,980) (113,234) (209,326) Others, net......................................................... 2,195 751 (3,946) ---------- ---------- --------- Net cash used in investing activities............................... (44,268) (156,653) (174,270) ---------- ---------- ---------
See accompanying notes to consolidated financial statements. F-8 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 IN THOUSANDS OF U.S. DOLLARS
2001 2002 2003 ---------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of short-term debt........................................ (8,824) - (27,419) Repayment of long-term debt......................................... (14,711) (14,321) (19,713) Proceeds from issuance of shares, net of expenses................... 803 1,278 117,477 Proceeds from issuance of convertible notes, net of expenses........ - 195,032 112,345 Proceeds from bank borrowings....................................... - 20,592 49,839 Decrease (increase) in restricted cash.............................. - (13,026) 8,223 Grants received..................................................... - 1,150 6,784 Capital lease payments.............................................. - (10,082) (12,862) ---------- ---------- --------- Net cash provided by (used in) financing activities................. (22,732) 180,623 234,674 ---------- ---------- --------- Net increase (decrease) in cash and cash equivalents................ (25,668) 52,467 142,952 Effect of exchange rate changes on cash and cash equivalents........ (851) (20) 2,550 Cash and cash equivalents at beginning of the year.................. 141,733 115,214 167,661 ---------- ---------- --------- Cash and cash equivalents at end of the year........................ $ 115,214 $ 167,661 $ 313,163 ========== ========== ========= SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (net of amount capitalized)........................... $ 1,472 $ 3,312 $ 5,580 Income taxes paid................................................... $ 2,995 $ 1,333 $ 669 Non-cash items Equipment acquired under capital leases........................ $ 10,253 $ 11,576 $ 2,663 Compensation paid by Singapore Technologies Pte Ltd............ $ - $ 1,023 $ - ========== ========== =========
See accompanying notes to consolidated financial statements. F-9 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BUSINESS AND ORGANIZATION ST Assembly Test Services Ltd (the "Company") is an independent provider of a full range of semiconductor test and assembly services. The Company has operations in Singapore, Taiwan, China, the United Kingdom, Japan and in the United States of America, its principal market. The Company is a majority-owned subsidiary of Singapore Technologies Pte Ltd ("ST"), through its wholly owned subsidiary, Singapore Technologies Semiconductors Pte Ltd ("STS") (collectively the "Singapore Technologies Group"), which is itself ultimately wholly owned by Temasek Holdings (Private) Limited ("Temasek"). Temasek is a holding company through which corporate investments of the Government of Singapore are held. In January 2003, the Company established a wholly owned subsidiary, STATS Holdings Limited, in the British Virgin Islands. In June 2003, STATS Holdings Limited established a wholly owned subsidiary, STATS Shanghai Ltd, incorporated in Shanghai, People's Republic of China. STATS Shanghai Ltd, a 25,000 square feet manufacturing facility, started operations in December 2003. During the year the Company increased its equity interest in Winstek from 51% to 55% with the purchase of 1,056,000 shares at NT$15 per share from the minority shareholders as well as the purchase of 28,144,000 new shares issued by Winstek at NT$15 per share. (b) ACCOUNTING PRINCIPLES The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") consistently applied for all periods. (c) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the consolidated accounts of ST Assembly Test Services Ltd and its majority-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. (d) USE OF ESTIMATES The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from these estimates. (e) RECLASSIFICATIONS Certain reclassifications have been made in prior years' financial statements to conform to classifications used in the current year. F-10 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (f) FOREIGN CURRENCY TRANSACTIONS The Company utilizes the U.S. dollar as its functional currency. Assets and liabilities which are denominated in foreign currencies are converted into the functional currency at the rates of exchange prevailing at the balance sheet date. Income and expenses are converted at the average rates of exchange prevailing during the period. Foreign currency transaction gains or losses are included in results of operations. The financial statements of foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of the subsidiaries are translated from their respective functional currencies into reporting currency of United States dollars at exchange rates prevailing at the balance sheet date. Income and expense items are translated at average exchange rates for the period. The resulting translation adjustments are included in other comprehensive income (loss). (g) CONCENTRATION OF RISK The Company's customers are comprised of companies in the semiconductor industry located primarily in the United States of America, as well as in Europe and Asia. This industry is highly cyclical and experiences significant fluctuations in customer demand, competitive pricing pressure that leads to steady declines in average selling prices, and rapid technological changes. The Company's largest customer accounted for approximately 29%, 30% and 32% of revenues for the years ended December 31, 2001, 2002, and 2003, respectively. The Company's five largest customers collectively accounted for approximately 67%, 64% and 66% of revenues for the years ended December 31, 2001, 2002 and 2003, respectively. The Company mitigates the concentration of credit risk in trade receivables through the Company's credit evaluation process, credit policies, credit control and collection procedures. Cash and cash equivalents are deposited with banks primarily in Singapore, Taiwan, and the United States of America. Deposits in these banks may exceed the amount of insurance provided on such deposits, if any. The Company also participates in a pooled cash management arrangement and places short-term advances with affiliates of ST. (h) CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid investments that are readily convertible into cash and have original maturities of three months or less. (i) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company recognizes all derivatives as either assets or liabilities in the statement of financial position and measures those instruments at fair value. Changes in the fair value of those instruments will be reported in earnings or other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. The accounting for gains and losses associated with changes in the fair value of derivatives and the effect on the consolidated financial statements will depend on the derivatives' hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair values of cash flows of the asset or liability hedged. F-11 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (j) MARKETABLE SECURITIES Foreign currency contracts are used to protect the Company from fluctuations in exchange rates. The Company enters into foreign currency contracts, which are not designated as hedges, and the change in fair value is included in income currently. Other contracts entered into to date by the Company also do not qualify as hedges under generally accepted accounting principles in the United States. Marketable securities at December 31, 2002 and 2003 consist of corporate debt securities denominated principally in U.S. dollars and classified as available-for-sale. The Company classifies its securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive loss until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of individual available-for-sale or held-to-maturity securities below cost that is deemed to be other than temporary results in a reduction in its carrying amount to fair value, with the impairment charged to earnings and a new cost basis for the security being established. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity or available-for-sale security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. (k) INVENTORIES Inventories are stated at the lower of standard cost, which approximates actual cost determined on the weighted average basis, or market (net realizable value). The Company does not take ownership of customer supplied semiconductors, and accordingly does not include them as part of the Company's inventories. (l) GOODWILL The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002. Under SFAS No. 142, goodwill is not amortized, but is tested for impairment. The Company tests goodwill for impairment on at least an annual basis by first comparing the fair value of the applicable reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to determine the amount of impairment loss, if any. The second step of the test involves the comparison of the implied fair value of the goodwill to its carrying value. If the carrying value of reporting unit goodwill exceeds its implied fair value, an impairment loss is recognized for an amount equal to the excess. The implied fair value of reporting unit goodwill is determined in the same manner as the amount of goodwill recognized in a purchase business combination is determined. The Company has four reporting units. F-12 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (m) PATENT RIGHTS AND TECHNOLOGY LICENSES The Company acquires patent rights and technology licenses from other companies for use in its processes. Cost of the technology licenses is amortized over the shorter of the useful life or license period. At December 31, 2003, unamortized costs for technology licenses amounted to $1,548. (n) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the following periods: Building, mechanical and electrical installation.... - 3 to 20 years Plant and machinery................................. - 5 to 7 years Toolings............................................ - 5 years Office furniture and equipment...................... - 5 years Computer equipment.................................. - 2 to 3 years Motor vehicles...................................... - 5 years
No depreciation is provided on property, plant and equipment under installation or construction and freehold land. Repairs and replacements of a routine nature are expensed, while those that extend the life of an asset are capitalized. Plant and equipment under capital leases are stated at the present value of minimum lease payments and are amortized straight-line over the estimated useful life of the assets. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated asset retirement costs. This statement applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal use of the asset. The adoption of SFAS No. 143 on January 1, 2003 did not have a material effect on our financial position or results of operations. (o) IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. A review for impairment is conducted when the utilization rate of machinery or equipment falls below 35% for four consecutive quarters and the actual or projected utilization has deteriorated more than 50% from last impairment review. Recoverability of a long-lived asset is measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If such asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. For long-lived assets held for sale, the carrying value is measured at the lower of its carrying amount or fair value less cost to sell and depreciation is ceased. Long-lived assets to be abandoned will be considered held and used until it is disposed of. F-13 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (p) COMPREHENSIVE LOSS The Company applies SFAS No. 130, "Reporting Comprehensive Income" with respect to reporting and presentation of comprehensive loss and its components in a full set of financial statements. Comprehensive loss consists of net loss, foreign currency translation adjustments and unrealized gain (loss) on available-for-sale marketable securities, and is presented in the consolidated statements of comprehensive loss. (q) REVENUE RECOGNITION Revenue is derived primarily from wafer probe, assembly and testing of semiconductor integrated circuits. Net revenues represent the invoiced value of services rendered net of returns, trade discounts and allowances, and excluding goods and services tax. Sales arrangements include probe, assembly or test services sold on a standalone basis where no other services are provided and customers arrange for remaining services to be provided by themselves or others as well as multiple-element arrangements where probe, assembly and test, and, in some cases, pre-production and post-production services, are provided together. A typical multiple-element arrangement includes wafer probe, assembly and testing of the individual integrated circuits. Where arrangements provide for multiple elements, elements are either combined into one single unit of accounting or treated as separate units of accounting depending on whether they meet certain specified criteria. Effective July 1, 2003, the criteria applied follows the methodology set out in FASB Emerging Issues Task Force (EITF) Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Under this methodology a delivered item is considered a separate unit of accounting if the delivered item has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered item, and performance of the undelivered services is considered probable and substantially under the Company's control. The total arrangement consideration is allocated to each unit of accounting based on fair value which is determined using the price of the service when sold on a standalone basis. Revenue for each unit of accounting is recognized when there is evidence of an arrangement, fees are fixed or determinable, collectibility is reasonably assured, the service has been rendered, the revenue to be recognized is billable under the terms of the arrangement and not contingent upon completion of undelivered services, and, where applicable, delivery has occurred and risk of loss has passed to the customer. Package development, test software and hardware development services are provided in advance of test and assembly services, and are not treated as separate units of accounting. F-14 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (q) REVENUE RECOGNITION (CONTINUED) Material type of products and services as a percentage of net revenues are as follows
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------- 2001 2002 2003 -------- --------- --------- % % % -------- --------- --------- Revenue - - assembly - array ...... 12.1 14.8 20.6 - - assembly - leaded ..... 41.7 34.0 26.9 - - test .................. 46.2 51.2 52.5 -------- --------- --------- Total 100.0 100.0 100.0 ======== ========= =========
Provisions are made for estimates of potential sales returns and discounts based upon historical experience as a deduction from gross revenue. Specific items are provided for at the time their existence is known and the amounts are estimable. Provisions are made for collectibility of accounts receivable when there is doubt as to the collectibility of individual accounts. Collectibility is assessed based on the age of the balance, the customer's historical payment history, its current credit-worthiness and current economic trends. (r) GRANTS Asset-related government grants consist of grants for the purchase of equipment used for research and development activities. Asset-related grants are presented in the consolidated balance sheet as deferred grants and are credited to other income on the straight-line basis over the estimated useful lives of the relevant assets. Income-related government grants are subsidies of training and research and development expenses. Income-related grants are credited to other income when it becomes probable that expenditures already incurred will constitute qualifying expenditures for purposes of reimbursement under the grants, which is typically substantially concurrent with the expenditures. (s) STOCK-BASED EMPLOYEE COMPENSATION The Company measures stock-based employee compensation cost for financial statement purposes in accordance with the intrinsic method of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and its related interpretations and includes pro forma information in Note 23 in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." Compensation cost is measured as the excess of fair market value of the stock subject to the option at measurement date over the exercise price of the option. F-15 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (s) STOCK-BASED EMPLOYEE COMPENSATION (CONTINUED) Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net loss would have been increased to the pro forma amounts indicated below:
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------- 2001 2002 2003 ---------- ---------- ---------- Stock-based compensation cost: As reported (intrinsic method)............ $ 1,024 $ 60 $ 97 Pro forma (fair value method)............. $ 18,591 $ 9,390 $ 10,496 Net loss: As reported............................... $ (134,019) $ (89,319) $ (1,716) Pro forma................................. $ (151,586) $ (98,649) $ (12,115) Basic and diluted net loss per share: As reported............................... $ (0.14) $ (0.09) $ (0.00) Pro forma................................. $ (0.15) $ (0.10) $ (0.01) Basic and diluted net loss per ADS: As reported............................... $ (1.36) $ (0.90) $ (0.02) Pro forma................................. $ (1.53) $ (0.99) $ (0.12)
The fair value of options granted under the Share Option Plan for the years ended December 31, 2001, 2002 and 2003 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------- 2001 2002 2003 ------------ ------------ ------------ Expected lives................... 5 - 10 years 5 years 5 - 10 years Dividend yield................... 0.0% 0.0% 0.0% Risk free interest rate.......... 2.7% - 3.9% 1.8% - 3.0% 2.5% - 3.6% Expected volatility.............. 57.6% - 64.2% 52.1% - 59.1% 59.7% - 67.4%
F-16 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (t) PENSION PLANS Winstek operates a defined benefit retirement plan for a substantial portion of its employees in Taiwan in accordance with the Labor Standards Law in Taiwan. Pension benefits are generally based on years of service and average salary for the six months prior to the approved retirement date. Winstek contributes 2% of eligible wages and salaries, on a monthly basis, to a pension fund maintained with the Central Trust of China, as required by the Labor Standards Law. At each year end, Winstek actuarially determines pension benefit costs and obligations using the projected unit credit method, and the amounts calculated depend on a variety of assumptions. These assumptions include discount rates, rates for expected returns on plan assets, mortality rates and retirement rates. The funding of the pension plan is determined in accordance with statutory funding requirements. Winstek is obligated to make up any shortfall in the plan's assets in meeting the benefits accrued to the participating staff. As at December 31, 2003, shortfall in the plan's assets amounts to $72. Total pension plan expenses for the period from August 21, 2001 (acquisition date) to December 31, 2001 and for the year ended December 31, 2002 and 2003 were approximately $39, $24 and $46, respectively. Additional disclosures regarding this pension plan pursuant to SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" are not considered necessary due to the insignificance of the amounts involved. STATS Inc and STATS FastRamp have a 401(k) savings plan covering substantially all US employees. The Company contributes up to 6% of eligible employee compensation at the rate of 50% of employee contributions deferred to the 401 (k) plan. The Company's matching contributions under the 401 (k) plan were $131, $186, and $258 for the year ended December 31, 2001, 2002 and 2003, respectively. The matching contributions are accrued monthly and adjusted when the actuals are calculated. The expenses relating to the plan are $15 per person per quarter and are accrued on a monthly basis. Returns of the 401(k) plan from investments in mutual funds are calculated daily by an external administrator who administers the plan. (u) OPERATING LEASES Rental payments under operating leases are expensed on a straight-line basis over the periods of the respective leases. (v) PRODUCT WARRANTIES The Company guarantees that work performed will be free from any defects in workmanship, materials and manufacture for a period ranging from three to twelve months to meet the stated functionality as agreed to in each sales arrangement. Products are tested against specified functionality requirements prior to delivery, but the Company nevertheless from time to time experiences claims under its warranty guarantees. The Company accrues for estimated warranty costs under those guarantees based upon historical experience, and for specific items at the time their existence is known and the amounts are determinable. Warranty costs incurred in 2001, 2002 and 2003 were insignificant. (w) RESEARCH AND DEVELOPMENT Research and development expenses are expensed as incurred. F-17 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (x) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such loss carryforwards and deferred tax assets will not be realized. (y) NET LOSS PER SHARE Basic net loss per share is computed using the weighted average number of common shares outstanding. Diluted net loss per share is computed using the weighted average number of common shares outstanding and dilutive potential common shares from the assumed exercise of options outstanding during the period, if any, using the treasury stock method plus other potentially dilutive securities outstanding, such as convertible notes. The Company excluded potentially dilutive securities for each period presented from its diluted net loss per share computation because either the exercise price of the securities exceeded the average fair value of the Company's common stock or the Company had net losses, and therefore these securities were anti-dilutive. A summary of the excluded potentially dilutive securities and the range of related exercise prices follows:
YEAR ENDED DECEMBER 31, ----------------------------------- 2001 2002 2003 --------- --------- --------- Convertible debt........................... - 106,895 172,513 Stock options.............................. 51,770 54,275 61,022
The conversion price of convertible debt outstanding was S$3.050 to S$3.408 per share (equivalent to approximately US$15.33 to US$18.71 per ADS) as of December 31, 2003. The weighted average exercise prices of options outstanding were $1.70, $1.65, and $1.58 (equivalent to $17.00, $16.50, and $15.80 per ADS) as of December 31, 2001, 2002 and 2003, respectively. The excluded stock options have per share exercise prices ranging from $0.14 to $3.99 (equivalent to $1.40 and $39.90 per ADS) for the years ended December 31, 2001, 2002 and 2003. F-18 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (z) NEW ACCOUNTING PRONOUNCEMENTS In November 2002, a consensus was reached on Financial Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") 00-21 "Revenue Arrangements with Multiple Deliverables." The EITF addresses certain aspects of accounting by a vendor for arrangements relating to performance of multiple revenue-generating activities. EITF 00-21 requires revenue arrangements with multiple deliverables to be divided into separate units of accounting if the deliverables in the arrangement meet certain specified criteria, allocation of the arrangement consideration among the separate units of accounting based on their relative fair values, and separate revenue recognition for separate units of accounting. The guidance in EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material impact on the Company's financial condition and results of operations on the date of adoption. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("VIE") - an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" ("FIN No. 46"). The effective date of FIN No. 46 was subsequently deferred by FASB staff Position 46-6. A VIE is an entity in which equity investors do not have 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 investors. Among other things, FIN No. 46 requires the consolidation of the assets, liabilities and results of operations of VIEs by the primary beneficiary. FIN No. 46 also requires the disclosure of information concerning VIEs by entities that hold significant variable interest but may not be the primary beneficiary. FIN No. 46 applied immediately to VIEs created after January 31, 2003 and is effective for interim periods beginning after December 15, 2003 for interests in VIEs that were acquired before February 1, 2003. FIN No. 46 also requires the disclosure of the nature, purpose, size and activities of VIEs, as well as the maximum exposure to loss in connection with VIEs for any financial statements issued after January 31, 2003, if it is reasonably possible that an entity will consolidate or disclose information about a VIE. The adoption of FIN No. 46 did not have any impact on the Company's financial condition and results of operations. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." Among other things, SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and all of its provisions should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact the Company's financial condition and results of operations. F-19 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) (z) NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED) In May 2003, the FASB issued SFAS 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 financial instruments with characteristics of both liabilities and equity and 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 also revises the definition of a liability to encompass obligations that a reporting entity can or must settle by issuing its own equity shares, depending on the nature of the relationship established between the holder and the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have any impact on the Company's financial condition and results of operations on the date of adoption. 2. RELATED PARTY TRANSACTIONS The Singapore Technologies Group ("ST Group") is a leading technology-based multi-national conglomerate based in Singapore. The ST Group provides a full array of multi-disciplinary capabilities, ranging from research and development, design and engineering, precision and high value-added manufacturing, major infrastructure development to management services in the following five core business groups: Engineering, Technology, Infrastructure and Logistics, Property and Financial Services. As of December 31, 2003, Temasek Holdings (Private) Limited ("Temasek") directly owns 81.3% of the ST Group. The remaining 18.7% is owned by Singapore Technologies Holdings Pte Ltd, which is in turn 100% owned by Temasek. Temasek is a holding company through which corporate investments of the Government of Singapore are held. The Company is in the semiconductor division of the ST Group which specializes in design, manufacture, assembly and testing of semiconductors. Companies within the ST Group, including Chartered, engage in transactions with the Company in the normal course of their respective businesses. The Company's primary operations are conducted in a building constructed on land held on a long-term operating lease from a statutory board of the Government of Singapore. The lease is for a 30-year period commencing March 1, 1996 and renewable for a further 30 years subject to the fulfillment of certain conditions. The rent is subject to annual revision, with the increase capped at 4% per annum. The Company had the following significant transactions with the ST Group:
FOR THE YEAR ENDED DECEMBER 31, ----------------------------------- 2001 2002 2003 --------- --------- --------- ST - Management fees expense ...................... $ 1,019 $ 1,084 $ 1,086 ST affiliates - Net revenues ................................. 8,188 10,982 13,940 Interest income .............................. 4,596 2,170 1,286 General and administrative expenses .......... $ 513 $ 124 $ - ========= ========= =========
F-20 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 2. RELATED PARTY TRANSACTIONS (CONTINUED) ST provides management and corporate services to the Company. Under a service agreement effective January 1, 2000, annual management fees are payable for the provision of specified services on mutually agreed terms which the Company believes approximates the cost of providing those services. The fees are subject to review by the parties every three years. Mr.Tan Bock Seng served as Chief Executive Officer of the Company from May 18, 1998 to January 7, 2002. Effective January 8, 2002, the Company appointed Mr.Tan Bock Seng as advisor to their Board of Directors. In August 2002, Mr.Tan Bock Seng terminated the advisory agreement between him and the Company. In recognition of his past services, ST made a payment of $1,023 to Mr.Tan Bock Seng. The Company accounted for the payment as compensation expense in the income statement and as additional paid-in capital within shareholders' equity as the payment did not involve any cash outlay by the Company. The Company participates in a ST cash management program managed by a bank. Under the program, cash balances are pooled and daily cash surpluses or shortfalls of the Company within the pool earn or bear interest at prevailing interest rates. The Company also places surplus cash as short-term deposits with ST Treasury unit. Certain general and administrative expenses of ST Assembly Test Services, Inc., a subsidiary, are borne by and recharged to the Company by Chartered Semiconductor Manufacturing Inc., a United States incorporated affiliate of ST. These expenses amounted to $513 and $124 for 2001 and 2002 respectively. There were no such expenses in 2003. As of December 31, 2002 and 2003, there were the following amounts owing by (to) affiliates:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Amounts due from ST and ST affiliates Accounts receivable, net of allowance for sales returns....... $ 3,727 $ 7,050 ========== ========== Amounts due to ST Other payables................................................ $ (1,320) $ (1,122) Amounts due to ST affiliates Accounts payable.............................................. (538) (714) ---------- ---------- $ (1,858) $ (1,836) ========== ==========
F-21 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following:
DECEMBER 31, ------------------------------ 2002 2003 ------------ ------------ Cash at banks and on hand......................... $ 1,896 $ 2,140 Cash equivalents Bank fixed deposits.......................... 39,125 176,737 ST pooled cash............................... 2,141 3,201 ST treasury deposits......................... 124,499 80,202 Premium deposit.............................. - 5,858 Investment fund.............................. - 45,025 ------------ ------------ $ 167,661 $ 313,163 ============ ============
The Company participates in a ST cash management program managed by a bank. Under the program, cash balances are pooled and daily cash surpluses or shortfalls of the Company within the pool earn or bear interest at prevailing interest rates. The Company also places surplus cash as short-term deposits with the ST treasury unit. The premium deposit is a bank fixed deposit which gives enhanced yield. Upon its maturity, the Company redeems the principal and interest either in S$ or US$ depending on the position of the US$ to S$ rate against a pre-determined strike price on a future calculation time and date. 4. MARKETABLE SECURITIES Marketable securities consist of the following:
DECEMBER 31, ---------------------------------------------------------------------------------------------------------- 2002 2003 --------------------------------------------------- --------------------------------------------------- GROSS GROSS GROSS GROSS AMORTIZED UNREALIZED UNREALIZED AMORTIZED UNREALIZED UNREALIZED COST GAINS LOSSES FAIR VALUE COST GAINS LOSSES FAIR VALUE --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Available-for-sale corporate debt securities $ 69,566 $ 597 $ (320) $ 69,843 $ 35,389 $ 69 $ (1,001) $ 34,457 ========= ========== ========== ========== ========= ========== ========== ==========
Maturities of available-for-sale debt securities are as follows (at fair value):
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Corporate debt securities: Due in one year or less........................... $ 11,960 $ 11,144 Due after one year through five years............. 57,883 23,313 ---------- ---------- $ 69,843 $ 34,457 ========== ==========
Gross realized gains and losses were insignificant in 2001. Gross realized gains and losses in 2002 were $149 and $24, respectively. Gross realized gains and losses in 2003 were $5,062 and $22, respectively. Proceeds from the sales or maturities of available-for-sale marketable securities during 2001, 2002 and 2003 were $20,181, $113,806 and $83,319, respectively. F-22 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 5. ACCOUNTS RECEIVABLE Accounts receivable consists of the following:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Accounts receivable - third parties............... $ 51,086 $ 81,261 Allowance for sales returns....................... (1,625) (1,362) ---------- ---------- $ 49,461 $ 79,899 ========== ==========
Movements in the allowance for sales returns are as follows:
2001 2002 2003 ---------- ---------- --------- Beginning......................................... $ 1,093 $ 784 $ 1,625 Utilized during the year.......................... (682) (36) (1,102) Charged during the year........................... 373 877 839 ---------- ---------- --------- Ending............................................ $ 784 $ 1,625 $ 1,362 ========== ========== =========
6. OTHER RECEIVABLES Other receivables consist of the following:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Deposits and staff advances....................... $ 386 $ 405 Grants receivable................................. 5,896 722 Other receivables................................. 2,631 1,646 ---------- ---------- $ 8,913 $ 2,773 ========== ==========
7. INVENTORIES Inventories consist of the following:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Factory supplies.................................. $ 1,071 $ 1,595 Raw materials..................................... 6,135 13,109 Work-in-progress and finished goods............... 2,538 5,135 ---------- ---------- $ 9,744 $ 19,839 ========== ==========
F-23 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 8. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets consist of the following:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Leasing prepayments............................... $ 14,103 $ 17,233 Other prepayments................................. 813 1,053 Deferred income tax assets (note 12).............. 21 1,203 Fixed deposits pledged for bank loans............. 5,028 780 Others............................................ 17 877 ---------- ---------- $ 19,982 $ 21,146 ========== ==========
Leasing prepayments represent prepayments of lease rental obligations for certain plant and machinery leased under sale and lease-back arrangements. In the years ended December 31, 2001 and 2002, the Company recorded impairment charges of $3,145 and $764, respectively. The impairment charge resulted from the related testers no longer being used. As the tester platforms had no expected future use, the prepaid leases for these testers were written-off. 9. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:
DECEMBER 31, ------------------------ 2002 2003 ---------- ---------- Cost: Freehold land .......................................... $ 5,631 $ 5,760 Buildings, mechanical and electrical installation ...... 68,044 70,661 Plant and machinery .................................... 461,580 641,103 Toolings ............................................... 32,512 45,587 Office furniture and equipment and motor vehicles ...... 35,247 40,235 Assets under installation and construction in progress.. 10,280 24,153 ---------- ---------- Total cost ......................................... $ 613,294 $ 827,499 ========== ========== Accumulated depreciation: Buildings, mechanical and electrical installation ...... $ 21,672 $ 27,561 Plant and machinery .................................... 195,245 271,457 Toolings ............................................... 19,797 25,700 Office furniture and equipment and motor vehicles ...... 19,124 26,708 ---------- ---------- Total accumulated depreciation ..................... $ 255,838 $ 351,426 ========== ========== Property, plant and equipment, net .......................... $ 357,456 $ 476,073 ========== ==========
F-24 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Depreciation includes assets under capital leases and was charged to results of operations amounting to $99,318 (excluding asset impairment charges of $23,735), $105,712 (excluding asset impairment charges of $14,666) and $119,938 for the years ended December 31, 2001, 2002 and 2003, respectively. In the third quarter of 2003 the Company completed a review of the estimated useful lives of its assembly equipment. As a result, effective from July 1, 2003, the lives used to depreciate certain assembly equipment were changed prospectively from 5 years to 7 years. The change reflects longer actual service periods being achieved and expected to be achieved from similar new equipment. There is no change to test equipment and machinery lives which continue to be depreciated over their estimated useful lives of 3 to 5 years. The impact of this change is a reduction to depreciation expense by $6,800 for the year ended December 31, 2003. Due to the continuing softness in the demand for test services, the company recorded asset impairment charges in operating expenses totaling $14,666 in 2002. These charges included a write down of machinery and equipment held for sale of $3,568 and a write down of machinery and equipment held for use of $11,098 to reflect their estimated fair value. In determining the fair value of machinery and equipment held for sale and held for use, the Company considered recent offers and expected future cash flows. The carrying amount of the machinery and equipment held for sale was $nil. The machinery and equipment held for sale were not used in operations and the Company has disposed of them in 2003. The Company routinely reviews the remaining estimated useful lives of their equipment and machinery to determine if such lives should be adjusted due to the likelihood of technological obsolescence arising from changes in production techniques or in market demand for the use of its equipment and machinery. However, due to the nature of the testing operations, which may include sudden changes in demand in the end markets, and due to the fact that certain equipment is dedicated to specific customers, the Company may not be able to accurately anticipate declines in the utility of its machinery and equipment. The Company's primary operations are conducted in a building constructed on land held on a 30-year operating lease renewable for a further 30-year period subject to the fulfillment of certain conditions. The other significant building is on freehold land. Included in property, plant and equipment are assets acquired under capital lease as follows:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Plant and machinery........................... $ 14,852 $ 16,718 Computer equipment............................ 333 333 ---------- ---------- 15,185 17,051 Accumulated depreciation...................... (2,545) (6,408) ---------- ---------- $ 12,640 $ 10,643 ========== ==========
F-25 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 10. GOODWILL AND OTHER ASSETS Goodwill and other assets consist of the following:
DECEMBER 31, ------------------------- 2002 2003 ---------- ---------- Goodwill...................................... $ 1,321 $ 2,209 Deferred income tax assets (note 12).......... 21,733 22,471 Fixed deposits pledged for bank loans......... 7,549 3,732 Others........................................ 4,578 11,040 ---------- ---------- $ 35,181 $ 39,452 ========== ==========
Goodwill of $1,321 in 2002 was due to the Company's initial acquisition of a 51% equity interest in Winstek made in 2001. The additional goodwill of $888 in 2003 was due to the Company's additional investment of $3,268 in Winstek in October 2003. This investment increased our equity interest in Winstek from 51% to 55%. The fair value of the identifiable net assets acquired in this step acquisition is based on the percentage of the additional 4% ownership interest acquired. In accordance with SFAS No. 142, goodwill is not amortized but will be reviewed annually for impairment. The Company has chosen every August to perform an annual impairment test for goodwill and concluded that an impairment charge from the adoption of SFAS No. 142 was not required. 11. ACCRUED OPERATING EXPENSES Accrued operating expenses consist of the following:
DECEMBER 31, -------------------- 2002 2003 -------- -------- Staff costs ...................................... $ 3,736 $ 5,384 Purchase of raw materials ........................ 6,032 18,293 Maintenance fees, license fees and royalties ..... 2,407 1,237 Interest expense ................................. 1,173 1,001 Provision for vacation liability ................. 1,559 2,610 Others ........................................... 7,671 12,136 -------- -------- $ 22,578 $ 40,661 ======== ========
12. INCOME TAXES Income (loss) before income taxes consists of the following:
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------- 2001 2002 2003 ---------- ---------- ---------- Singapore ..... $ (142,493) $ (91,852) $ (122) Foreign ....... (649) (4,116) 650 ---------- ---------- ---------- $ (143,142) $ (95,968) $ 528 ========== ========== ==========
F-26 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 12. INCOME TAXES (CONTINUED) Income tax benefit (expense) consists of the following:
FOR THE YEAR ENDED DECEMBER 31, -------------------------------- 2001 2002 2003 -------- -------- -------- Current: Singapore ...... $ (1,107) $ (850) $ (1,706) Foreign ........ (244) (176) (225) -------- -------- -------- $ (1,351) $ (1,026) $ (1,931) ======== ======== ======== Deferred: Singapore ...... $ 9,661 $ 8,661 $ 741 Foreign ........ 500 (472) 485 -------- -------- -------- $ 10,161 $ 8,189 $ 1,226 ======== ======== ======== $ 8,810 $ 7,163 $ (705) ======== ======== ========
The Company has been granted pioneer status under the Singapore Economic Expansion Incentives (Relief from Income Tax) Act, Chapter 86 (the "Act"), for "Subcontract Assembly And Testing Of Integrated Circuits Including Wafer Probing Services" from January 1, 1996 to December 31, 2003, subject to compliance with certain conditions. During the pioneer status period, Singapore-resident income from pioneer trade is exempt from income tax, subject to compliance with the conditions stated in the pioneer certificate and the Act. Income derived from non-pioneer activities during the pioneer period, however, is subject to income tax at the prevailing enacted rate of tax. The tax-exempt profits arising from the pioneer trade can be distributed as tax-exempt dividends that are not subject to Singapore income tax in the hands of the shareholders. Losses and unutilized capital allowances arising in the pioneer status period are available for carryforward to be offset against profits arising in subsequent periods, including profits arising after the pioneer status period. Pioneer loss and unutilized capital allowance carryforwards are available indefinitely, subject to more than 50% of the Company's equity staying with the same shareholders from the incurrence of the tax loss or allowance to its utilization. As of December 31, 2003, the Company had pioneer loss and unutilized capital allowance carryforwards of $23,908 and $240,612 respectively. In December 2003, an application was submitted to the Economic Development Board (EDB) to revoke the Company's pioneer status granted from January 1, 1996 to December 31, 2003. STATS' pioneer trade is in a tax loss position due to the substantial amount of capital allowances claimed arising from capital expenditure on its plant and machinery and trade losses in certain years. As a result, STATS has not enjoyed any tax exemption in respect of its income arising from the pioneer activities. On the other hand, STATS has paid taxes in respect of its interest and rental income as losses arising from the pioneer trade cannot be set-off against the non-qualifying income during the pioneer incentive period due to the application of the law in respect of the pioneer incentive. If the revocation is approved, the company will receive a refund of taxes paid previously on interest and rental income as the unutilized tax losses and capital allowances arising from the trading activities would then be allowed to set-off against this income derived in the previous years. STATS is also in the process of working with the EDB to apply for a new tax incentive in the future. F-27 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 12. INCOME TAXES (CONTINUED) Current tax expense for the years ended December 31, 2001, 2002 and 2003 in relation to the Singapore operation represents income tax payable on non-pioneer trade income, principally interest and rental income. A reconciliation of the expected tax expense (benefit) at the statutory rate of tax to actual tax expense (benefit) is as follows:
FOR THE YEAR ENDED DECEMBER 31, -------------------------------- 2001 2002 2003 -------- -------- -------- Income tax expense (benefit) computed at Singapore statutory rate of 22.0% (2002: 22.0%, 2001: 24.5%) ..................... $(35,069) $(21,113) $ 116 Non-deductible expenses ............................. 243 318 175 Non-taxable income (grant income) ................... (235) (308) (253) Effect of pioneer status ............................ 6,972 - - Effect of recognizing deferred tax assets at post-pioneer concessionary tax rate ............ 19,433 10,393 (5,781) Change in valuation allowance ....................... - 2,292 6,383 All other items, net ................................ (154) 1,255 65 -------- -------- -------- Income tax expense (benefit) ........................ $ (8,810) $ (7,163) $ 705 ======== ======== ========
The pioneer status relief had the effect of increasing diluted net loss per ordinary share by $0.03 and $0.01 and diluted net loss per ADS by $0.27 and $0.10 for the years ended December 31, 2001 and 2002, but decreasing diluted net loss per ordinary share by $0.01 and diluted net loss per ADS by $0.06 for the year ended December 31, 2003. The Company also has foreign investment tax credit carryforwards of approximately $531, $2,044, $3,631 and $2,927, which expire on December 31, 2004, 2005, 2006 and 2007, respectively. The foreign investment tax credit carryforwards can be used to offset income tax payable in future years. The offsetting amount is limited to 50% of the offsetting year's income tax payable. The last year of expiry for the tax credit carryforwards is, however, not subject to the 50% limitation. F-28 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 12. INCOME TAXES (CONTINUED) Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss, unutilized capital allowance and investment tax credit carryforwards. The tax effect of significant items comprising the Company's deferred income tax assets at December 31, 2002 and 2003 are as follows:
DECEMBER 31, -------------------- 2002 2003 -------- -------- Deferred income tax assets: Operating loss carryforwards ...... $ 4,100 $ 4,574 Investment tax credits ............ 3,510 9,133 Property, plant and equipment ..... 18,632 25,708 Other ............................. - 592 -------- -------- 26,242 40,007 Valuation allowance: (2,292) (8,675) -------- -------- $ 23,950 $ 31,332 ======== ======== Deferred income tax liabilities: Unrealized tax credits ............ $ 2,605 $ 3,250 Property, plant and equipment ..... 2,120 7,658 Other ............................. 78 - -------- -------- 4,803 10,908 -------- -------- Net deferred income tax assets $ 19,147 $ 20,424 ======== ========
The deferred tax assets as of December 31, 2003 arose principally as a result of the deferred tax benefit associated with tax losses and unutilized capital allowances. The company recorded a valuation allowance of $2,292 and $8,675 as of December 31, 2002 and 2003, respectively, which represents an increase of $2,292 and $6,383 in 2002 and 2003, respectively, relating to a subsidiary's operating loss carryforwards and temporary differences arising from property, plant and equipment where it is more likely than not that the deferred tax asset will not be realized. The deferred tax effects of the remaining operating loss and unutilized capital allowance carryforwards are recognized because they are expected to be carried forward to offset taxable income arising during the post-pioneer period at the expected post-pioneer period tax rate of 10%. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. F-29 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 13. SHORT TERM BORROWINGS The loan facility was for an amount of $7,616 of which $5,174 was outstanding as of December 31, 2002. The United States and Taiwan dollar short-term bank loans bore fixed interest at rates ranging from 3.9% to 4.1% during the year 2002. The loans were secured by a fixed deposit pledged to the bank amounting to $2,997 as of December 31, 2002 and were repaid between January and March 2003. The Company has $nil short term borrowings as of December 31, 2003. 14. CAPITAL LEASES Future minimum lease payments under capital leases for equipment and machinery are as follows:
2003 ----------- Payable in year ending December 31, 2004............................................................................... $ 5,425 2005............................................................................... 823 2006............................................................................... - 2007............................................................................... - ----------- Total minimum obligations............................................................. 6,248 Less amounts representing interest at rates ranging from 6.6% to 7.1% per annum....... (140) ----------- Present value of minimum obligations.................................................. 6,108 Current installments of obligations under capital leases.............................. (5,296) ----------- Obligations under capital leases, excluding current installments...................... $ 812 ===========
All leasing arrangements are for testers with 1 or 4-year terms. At the end of the lease term, the Company may choose to terminate, renew the lease or purchase the equipment at fair market value. 15. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, ------------------------ 2002 2003 ---------- ---------- 1.75% coupon senior fixed-rate convertible notes ...... $ 200,000 $ 200,000 0% coupon senior fixed-rate convertible notes ......... - 115,000 Taiwan dollar loans at floating rates ................. 11,511 35,540 Taiwan dollar loans at fixed rate of 3.94% ............ - 2,711 Singapore dollar loan at floating rate ................ 14,754 - United States dollar loan at fixed rate of 7.93% ...... 3,506 - Accrued yield-to-maturity interest on notes ........... 5,013 12,379 ---------- ---------- 234,784 365,630 Less current installments ............................. (16,414) (6,841) ---------- ---------- $ 218,370 $ 358,789 ========== ==========
F-30 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 15. LONG-TERM DEBT (CONTINUED) In March, 2002, the Company issued $200,000 of senior unsecured and unsubordinated convertible notes due March 18, 2007 for net proceeds of $195,032. The convertible notes bear interest at the rate of 1.75% per annum and have a yield to maturity of 4.91%. At the maturity date, the Company will pay to the note holders 117.665% of the principal amount. The notes can be converted into the Company's ordinary shares or, subject to certain limitations, ADSs, each of which currently represents ten ordinary shares, at a conversion price of S$3.408 per ordinary share (at a fixed exchange rate of US$1.00 = S$1.8215). The conversion price may be subject to adjustments for certain events. The Company may elect to satisfy its obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. The Company may redeem all or a portion of the convertible notes at any time on or after March 18, 2004 at a price to yield of 4.91% per annum to the redemption date if the Company's shares or ADSs trade at or above 125% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require the Company to repurchase all or a portion of their notes on March 18, 2005 at a price equal to 110.081% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to March 18, 2007, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield 4.91% per year to the redemption date. On November 7, 2003, the Company issued $115,000 of senior unsecured and unsubordinated convertible notes due November 7, 2008, for net proceeds of $112,345. The convertible notes have a yield to maturity of 4.25%. At the maturity date, the Company will pay to the note holders 123.4% of the principal amount, comprising principal and redemption interest. The notes can be converted into the Company's ordinary shares or, subject to certain limitations, American Depositary Shares (ADSs), each of which currently represents ten ordinary shares, at an initial conversion price of S$3.05 per ordinary share (equivalent to an initial number of 570.5902 ordinary shares per $1,000 principal amount of convertible notes, based on a fixed exchange rate of US$1.00 = S$1.7403). The conversion price may be subject to adjustments for certain events. The Company may elect to satisfy its obligations to deliver ordinary shares or ADSs through delivery of cash in accordance with the terms of the notes. The Company may redeem all or a portion of the convertible notes at any time on or after November 7, 2006 at a price to yield of 4. 25% per annum to the redemption date if the Company's shares or ADSs trade at or above 130% of the conversion price for a period of 20 trading days in any 30 consecutive trading day period. The note holders may require the Company to repurchase all or a portion of their notes on November 7, 2007 at a price equal to 118.32% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest accrued to the date of redemption. In addition, upon the occurrence of certain repayment events, including a change in control, on or prior to November 7, 2008, each note holder may require us to repurchase all or a portion of such holder's notes at a price to yield of 4.25% per year to the redemption date. F-31 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 15. LONG-TERM DEBT (CONTINUED) The floating rate Taiwan dollar loans comprise eight loans from a bank of $1,766, $2,649, $7,359, $1,737, $17,663, $4,416, $2,944 and $2,944. The loans were put in place on March 26, 2002, May 15, 2002, June 27, 2002, June 9, 2003, September 26, 2003, November 10, 2003, December 24, 2003 and December 29, 2003, respectively. As of December 31, 2003, the loans bear an interest at 4.774%, 4.774%, 4%, 3.65%, 3.367%, 4%, 3.8% and 2.178% per annum, respectively. Interest is payable on a monthly basis for these loans. For the first loan of $1,766, the principal is repayable in 21 equal quarterly installments commencing March 29, 2004. The loan is secured by a fixed deposit and land pledged to the bank amounting to $442 and $2,792 as of December 31, 2003, respectively. For the second loan of $2,649, the principal is repayable in 21 equal quarterly installments commencing May 15, 2004. The loan is secured by a fixed deposit and building pledged to the bank amounting to $662 and $4,198 as of December 31, 2003, respectively. For the third loan of $7,359, of which $5,662 was outstanding as of December 31, 2003, and the sixth loan of $4,416, the principal is repayable in 10 and 13 equal quarterly installments commencing June 27, 2003 and November 10, 2004, respectively. Both loans are secured by a fixed deposit and plant and machinery pledged to the bank amounting to $1,840 and $18,456 as of December 31, 2003. For the fourth loan of $1,737, the principal is repayable in 16 equal quarterly installments commencing July 25, 2004. The loan is secured by land and plant and machinery pledged to the bank amounting to $2,946 and $1,967 as of December 31, 2003, respectively. For the fifth loan of $17,663, of which $13,540 was outstanding as of December 31, 2003, the principal is repayable in 16 equal installments every 2 months commencing September 26, 2004. The loan is secured by plant and machinery pledged to the bank amounting to $24,925 as of December 31, 2003. For the seventh loan of $2,944, of which $2,826 was outstanding as of December 31, 2003, the principal is repayable in 15 equal quarterly installments commencing June 24, 2005. The loan is secured by plant and machinery pledged to the bank amounting to $5,316 as of December 31, 2003. For the last loan of $2,944, the principal is repayable in 48 unequal monthly installments commencing January 10, 2004. The loan is secured by a fixed deposit and plant and machinery pledged to the bank amounting to $450 and $3,018 as of December 31, 2003, respectively. The Taiwan dollar fixed rate loan was placed with an Insurance Company on December 29, 2003 and bears interest at the rate of 3.94% per annum. Interest is payable on a quarterly basis and the principal is repayable in 12 unequal monthly installments commencing December 26, 2003. The loan is secured by plant and machinery pledged to the insurance company amounting to $4,114 as of December 31, 2003. F-32 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 15. LONG-TERM DEBT (CONTINUED) The Singapore dollar loan is from the Singapore Economic Development Board and bears interest at 1% over the prevailing rate declared by the Central Provident Fund ("CPF") Board, a statutory board of Singapore, for contributions made to the CPF under the CPF Act. Interest is payable semi-annually. Principal is denominated in Singapore dollars and is repayable in 7 equal semi-annual installments commencing September 1, 2000. The loan agreement restricts the Company without prior approval from paying dividends, from incurring further indebtedness and from undertaking any form of reconstruction, including amalgamation with another company, which would result in a change in the control of the Company. The loan is unsecured, but is supported by a corporate guarantee given by ST. The loan at December 31, 2002 bore interest at 3.5% per annum. The loan was fully repaid in 2003. The United States dollar loan is from a bank and was put in place on November 6, 2002 and bears interest at the rate of 7.93% per annum. Interest is payable on a quarterly basis. Principal is denominated in United States dollars and is repayable in 13 equal quarterly installments commencing November 6, 2004. The loan is secured by a fixed deposit pledged to the bank amounting to $3,500 as of December 31, 2002. The Company repaid the loan in full during 2003. In addition to amounts disclosed above and in note 14, the Company has deposits of $4,512 pledged as security for bank credit and facility lines available to the Company as of December 31, 2003. As of December 31, 2002, $3,202 deposits were pledged as security. Annual maturities of long-term debt as of December 31, 2003 are as follows: Payable in year ending December 31, 2004 $ 6,841 2005 12,246 2006 11,122 2007 217,528 2008 117,566 Thereafter............................. 327 ----------- $ 365,630 ===========
16. UNUTILIZED CREDIT FACILITIES In January 2002, the Company established a $294,100 (S$500,000,000) Multicurrency Medium Term Note Program ("MTN Program"). Under the MTN Program, the Company may from time to time issue notes in series or tranches ("Notes") in Singapore dollars or any other currencies as may be agreed between the dealers of the MTN Program and the Company. Each series or tranche of the Notes may be issued in various amounts and terms, and may bear fixed or floating rates of interest. The Notes will constitute direct, unconditional, unsecured and unsubordinated obligations of the Company, ranking pari passu, without any preference or priority among themselves, and pari passu, with all other unsecured obligations (other than subordinated obligations and priorities created by law) of the Company. F-33 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 16. UNUTILIZED CREDIT FACILITIES (CONTINUED) Proceeds from the MTN Program will be used for general corporate purposes, including capital expenditure and working capital. The Company has not issued any Notes under the MTN Program as of December 31, 2003. At December 31, 2003, the Company has undrawn banking and credit facilities consisting of long-term loans and bank guarantees (excluding the MTN Program) of $23,135 with financial institutions. 17. OTHER NON-CURRENT LIABILITIES Other non-current liabilities consist of the following:
DECEMBER 31, --------------- 2002 2003 ------ ------ Deferred grant ..... $1,890 $1,211 Others ............. 2,604 3,252 ------ ------ $4,494 $4,463 ====== ======
The deferred grant refers to a 5-year grant of $13,878 obtained by the Company from the Economic Development Board ("EDB") under its Research Incentive Scheme for Companies in 1997 to acquire equipment to be used in certain research and development projects. The grant, which is a reimbursement of specified costs, has no requirement for repayment. Amounts received for asset-related grant are deferred and recognized in other income over the life of the related asset. 18. SHARE CAPITAL On November 5, 2003, the Company issued 83,389,375 new ordinary shares of par value S$0.25 each with proceeds of $115 million (net proceeds of $111 million). The 83,389,375 new shares were admitted to the Official List of the Singapore Exchange Securities Trading Limited on 6 November 2003. As a result of the employees exercising their share options during the years 2001, 2002 and 2003, 3,511,570, 2,431,790 and 1,115,470 ordinary shares were issued, respectively. Under Singapore law, all increases in share capital (including rights issues) require prior shareholders' approval. Singapore law does not provide for the issue of shares of no par value and, except with court approval, prohibits the issue of shares at a discount to par value. F-34 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 19. ADDITIONAL PAID-IN CAPITAL Additional paid-in capital represents principally the excess of proceeds received from issues of share capital (net of the costs of issue) over the par value of shares issued, which under Singapore law must be credited to the share premium account. The share premium may only be applied in paying up unissued shares to be issued to shareholders, paying up in whole or in part the balance unpaid on shares in issue, in payment of dividends, if such dividends are satisfied by the issue of shares to members of the Company, in writing off preliminary expenses and share and debenture issue expenses and by provision for premiums payable on the redemption of redeemable preferred shares. The Company has not utilized any amounts in the share premium account for the above mentioned purposes. As of December 31, 2002 and 2003, the Company's share premium account amounted to $361,316 and $460,895, respectively. 20. ACCUMULATED DEFICITS Under the new one-tier system with effect from January 1, 2003, tax payable by the Company on its non-pioneer chargeable income would constitute a final tax. Companies that have moved to the one-tier system can henceforth pay dividends that are exempt from tax in the hands of its shareholders. During the transitional period, the Company has up to December 31, 2007 to utilize any available balance under the old imputation system to pay a franked dividend to its shareholders. 21. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss are as follows:
DECEMBER 31, -------------------- 2002 2003 -------- -------- Currency translation loss ............................................ $ 9,850 $ 9,152 Unrealized loss (gain) on available-for-sale marketable securities ... (584) 769 -------- -------- $ 9,266 $ 9,921 ======== ========
22. SHARE OPTIONS AND INCENTIVE PLANS Effective May 1999, the Company adopted the Share Option Plan which provides for a maximum of 150 million shares (subject to adjustment under the plan) to be reserved for option plans. Options granted under the plan may include non-statutory options as well as incentive stock options intended to qualify under Section 422 of the United States Internal Revenue Code. Option periods may not exceed 10 years from the date of grant. Upon leaving the employment of the Company, outstanding options remain exercisable for a specified period. F-35 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 22. SHARE OPTIONS AND INCENTIVE PLANS (CONTINUED) The plan is administered by a committee appointed by the directors. Employees, outside directors and consultants are eligible for the grant of options except for (i) employees of affiliates, and outside directors and consultants, who are not eligible for the grant of incentive stock options; and (ii) employees, outside directors and consultants of affiliates resident in the United States, who are not eligible for the grant of options. The exercise price of an incentive stock option is the fair market value of the shares at the date of the grant. In certain circumstances, the exercise price may be higher than the fair market value but in no event will the exercise price be below the par value of the share. Prior to 2000, Share options granted prior to May 1999 under the previous Employees' Share Ownership Scheme were converted using the higher of par value or net tangible asset value. In April 2002, share options were granted with exercise prices determined by the average of the last 5-day closing prices prior to grant date. These two bases gave rise to exercise prices of the share options being lower than their fair market values at grant date and hence, the related stock compensation charges. The following table summarizes stock option activity under the Share Option Plan for the years ended December 31, 2001, 2002 and 2003:
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE -------------- -------------- (IN THOUSANDS) Options outstanding at January 1, 2001 ........... 36,039 2.21 Granted during the year .......................... 26,823 0.94 Lapsed during the year ........................... (7,581) 2.13 Exercised during the year ........................ (3,511) 0.21 ------ ---------- Options outstanding at December 31, 2001 ......... 51,770 1.70 Granted during the year .......................... 19,653 1.36 Lapsed during the year ........................... (14,716) 1.64 Exercised during the year ........................ (2,432) 0.53 ------ ---------- Options outstanding at December 31, 2002 ......... 54,275 1.65 Granted during the year .......................... 10,956 1.17 Lapsed during the year ........................... (3,094) 1.69 Exercised during the year ........................ (1,115) 0.62 ------ ---------- Options outstanding at December 31, 2003 ......... 61,022 $ 1.58 ====== ========== Exercisable at December 31, 2001 ................. 8,122 $ 1.98 ====== ========== Exercisable at December 31, 2002 ................. 13,636 $ 2.01 ====== ========== Exercisable at December 31, 2003 ................. 33,728 $ 1.66 ====== ==========
F-36 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 22. SHARE OPTIONS AND INCENTIVE PLANS (CONTINUED) Weighted-average grant-date fair value of options granted in 2001, 2002 and 2003 were $0.74, $0.81 and $0.60, respectively. The following table summarizes information about fixed stock options outstanding at December 31, 2003:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------ ------------------------------ WEIGHTED NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED RANGE OF EXERCISE OUTSTANDING REMAINING AVERAGE EXERCISABLE AT AVERAGE PRICES AT 12/31/2003 CONTRACTUAL LIFE EXERCISE PRICE 12/31/2003 EXERCISE PRICE - ----------------- ------------- ---------------- -------------- -------------- -------------- (IN THOUSANDS) (IN THOUSANDS) $0.14 283 5.7 years $ 0.14 283 $ 0.14 $0.24 80 5.9 years $ 0.24 80 $ 0.24 $0.63 to $0.89 16,722 7.7 years $ 0.83 5,594 $ 0.84 $1.17 to $1.64 32,820 8.3 years $ 1.40 19,550 $ 1.33 $2.00 to $2.61 4,086 6.0 years $ 2.05 3,955 $ 2.05 $3.99 7,031 6.3 years $ 3.99 4,266 $ 3.99 ------ ------ 61,022 33,728 ====== ======
Total compensation expense recognized for stock-based compensation under the Share Option Plan for the years ended December 31, 2001, 2002 and 2003 were $1,024, $60 and $97, respectively. 23. COMMITMENTS AND CONTINGENCIES (a) COMMITMENTS As of December 31, 2002 and 2003, capital commitments consist of the following:
DECEMBER 31, ------------------ 2002 2003 -------- -------- CAPITAL COMMITMENTS Building, mechanical and electrical installation ...... $ 20 $ 6,341 Plant and machinery ................................... 42,458 42,969 ======== ======== OTHER COMMITMENTS Inventories ........................................... $ 10,800 $ 8,413 ======== ========
F-37 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 23. COMMITMENTS AND CONTINGENCIES (CONTINUED) (b) OPERATING LEASES The Company has leased land for a 30-year period commencing March 1, 1996 and renewable for a further 30 years subject to the fulfillment of certain conditions. The annual rent (excluding rebates) is currently fixed at $779. The rent is subject to annual revision with the increase capped at 4% per annum. Operating lease rental expense for the years ended December 31, 2001, 2002 and 2003 was $544, $474 and $489, respectively. The Company has leased certain plant and equipment under operating leases and under sale and lease-back arrangements. These leases extend through 2004. Operating lease rental expenses in respect of these leases for the years ended December 31, 2001, 2002 and 2003 were $24,516, $20,965 and $18,118, respectively. Future minimum lease payments under non-cancelable operating leases of factory land and plant and equipment as of December 31, 2003 were: Payable in year ending December 31, 2004........................ $42,507 2005........................ 4,248 2006........................ 2,980 2007........................ 974 2008........................ 779 Thereafter .................... 13,365 ------- $64,853 =======
(c) CONTINGENCIES The Company is a party to claims that arise in the normal course of business. These claims may include allegations of infringement of intellectual property rights of others as well as other claims of liability. In addition, the company is subject to various taxes in the different jurisdictions in which it operates. These include taxes on income, property, goods and services, and other taxes. The Company submits tax returns and claims with the respective government taxing authorities, which are subject to agreement by those taxing authorities. The Company accrues costs associated with these matters when they are probable and reasonably estimable. The Company does not believe that it is probable that losses associated with these matters beyond those already recognized will be incurred in amounts that would be material to its financial position, results of operations, or cash flows. 24. OTHER NON-OPERATING INCOME, NET
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 2001 2002 2003 ------ ------ ------ Government grant income ............................... $1,293 $1,830 $2,347 Gain on sale and maturity of marketable securities .... - 125 5,040 Other income, net ..................................... 697 1,464 183 ------ ------ ------ $1,990 $3,419 $7,570 ====== ====== ======
F-38 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 25. FAIR VALUE OF FINANCIAL INSTRUMENTS
DECEMBER 31, --------------------------------------------- 2002 2003 --------------------- --------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE $ $ $ $ -------- ---------- -------- ---------- FINANCIAL ASSETS: Cash and cash equivalents ........ 167,661 167,661 313,163 313,163 Marketable securities ............ 69,843 69,843 34,457 34,457 Fixed deposits pledged ........... 12,577 12,853 4,512 4,512 FINANCIAL LIABILITIES: Long-term debt, excluding Senior convertible notes ... 29,771 30,278 38,251 38,099 Senior convertible notes ......... 205,013 194,250 327,379 339,138
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates for fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is continually reviewed, and full performance is anticipated. The methods and assumptions used to estimate the fair value of significant classes of financial instruments is set forth below: CASH AND CASH EQUIVALENTS Cash and cash equivalents are due on demand or carry a maturity date of less than three months when purchased. The carrying amount of these financial instruments is a reasonable estimate of fair value. MARKETABLE SECURITIES The fair value is estimated based upon the quoted market price on the last business day of the fiscal year. For securities where there are no quoted market prices, the carrying amount is assumed to be its fair value. As of December 31, 2002 and 2003, such securities amounted to $22. FIXED DEPOSITS The fair value is based on current interest rates available to the Company for fixed deposits of similar terms and remaining maturities. F-39 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 25. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) LONG-TERM DEBT The fair value is based on current interest rates available to the Company for issuance of debts of similar terms and remaining maturities. SENIOR CONVERTIBLE NOTES The fair value is estimated by obtaining quotes from brokers. LIMITATIONS Fair value estimates are made at a specific point in time, and are based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. F-40 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 26. BUSINESS SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER DATA Operating segments, as defined under SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates in a single reportable segment. Revenues by major service line and by geographical areas (identified by location of customer headquarters) were:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------ 2001 2002 2003 -------- -------- -------- Singapore - - assembly - array ...... $ 92 $ 11 $ 1 - - assembly - leaded ..... 1,998 811 638 - - test .................. 6,097 10,160 13,301 -------- -------- -------- 8,187 10,982 13,940 -------- -------- -------- United States - - assembly - array ...... 16,392 32,469 76,485 - - assembly - leaded ..... 54,633 71,574 93,841 - - test .................. 43,287 78,272 139,388 -------- -------- -------- 114,312 182,315 309,714 -------- -------- -------- Rest of Asia - - assembly - array ...... 241 341 998 - - assembly - leaded ..... 2,077 1,647 3,895 - - test .................. 2,066 16,569 34,200 -------- -------- -------- 4,384 18,557 39,093 -------- -------- -------- Europe - - assembly - array ...... 988 672 932 - - assembly - leaded ..... 2,062 2,740 4,015 - - test .................. 15,933 10,472 12,997 -------- -------- -------- 18,983 13,884 17,944 -------- -------- -------- Total - - assembly - array ...... 17,713 33,493 78,416 - - assembly - leaded ..... 60,770 76,772 102,389 - - test .................. 67,383 115,473 199,886 -------- -------- -------- $145,866 $225,738 $380,691 ======== ======== ========
F-41 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 26. BUSINESS SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER DATA (CONTINUED) Long-lived assets by geographical area were:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 2002 2003 -------- -------- Singapore .......... $274,071 $365,794 United States ...... 20,574 12,536 Rest of Asia ....... 62,811 97,743 -------- -------- Total .............. $357,456 $476,073 ======== ========
Net assets by geographical area were:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 2002 2003 --------- --------- Singapore .......... $ 370,993 $ 480,451 United States ...... (4,698) (6,214) Rest of Asia ....... 216 1,719 --------- --------- Total .............. $ 366,511 $ 475,956 ========= =========
Revenues from major customers, as a percentage of net revenues, were as follows:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 2001 2002 2003 % % % ------ ------ ------ Customer A .... 29.2 29.8 31.6 Customer B .... 12.3 13.3 12.0 Customer C .... 10.4 12.6 13.6 Others ........ 48.1 44.3 42.8 ----- ------ ------ 100.0 100.0 100.0 ===== ====== ======
F-42 ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS OF U.S. DOLLARS (EXCEPT PER SHARE DATA) 27. SUBSEQUENT EVENTS PROPOSED MERGER WITH CHIPPAC, INC. On February 10, 2004, the Company signed an Agreement and Plan of Merger and Reorganization with ChipPAC, Inc., or ChipPAC, pursuant to which a newly formed, wholly owned subsidiary of STATS will merge with ChipPAC and ChipPAC will become a wholly owned subsidiary of STATS. Pursuant to the merger, each share of Class A common stock, par value US$0.01 per share, of ChipPAC will be converted into the right to receive 0.87 of STATS' American Depositary Shares. Consummation of the merger is subject to certain conditions, including approval of STATS' shareholders and the stockholders of ChipPAC, expiration of the Hart-Scott-Rodino antitrust waiting period in the United States, receipt of a private letter ruling from U.S. tax authorities relating to the tax treatment of the merger for ChipPAC stockholders and other customary conditions. Singapore Technologies Semiconductors Pte Ltd, or STS, has entered into a voting agreement pursuant to which it has agreed to vote approximately 59% of STATS' outstanding capital stock beneficially owned by STS in favor of the issuance of STATS' American Depositary Shares in connection with the merger and certain other related matters. In addition, certain of ChipPAC's stockholders who own approximately 18% of the outstanding ChipPAC Class A common stock have entered into a voting agreement pursuant to which they have agreed to vote in favor of the merger. The transaction is expected to close by the end of the second quarter of 2004. ChipPAC is a full portfolio provider of semiconductor packaging, design, assembly, test and distribution services in Korea, China, Malaysia and the United States. The total number of our ordinary shares to be issued pursuant to the merger is approximately 85 million. Under our convertible notes due 2007 and 2008 and our MTN Program, our noteholders may require us to redeem the notes if any person other than Singapore Technologies Pte Ltd holds, directly or indirectly, more than 50% of our issued share capital. The proposed merger does not result in any person holding, directly or indirectly, more than 50% of our issued share capital. The aggregate acquisition costs will be determined by factors such as the market prices of STATS's ADSs, number of ADSs to be issued, fair value of the options to purchase ChipPAC's Class A common stock that are substituted with options to purchase shares of STATS's ordinary shares or ADSs and the amount of direct transaction costs. F-43 EX-1.1 3 u92302exv1w1.txt EX-1.1 MEMO & ARTICLES OF ASSOCIATION OF STATS EXHIBIT 1.1 THE COMPANIES ACT, CAP. 50 ---------------- PRIVATE COMPANY LIMITED BY SHARES ---------------- MEMORANDUM OF ASSOCIATION OF **ST ASSEMBLY TEST SERVICES LTD *(formerly known as ANAM/AMKOR ST PTE LTD) 1. The name of the Company is ** ST Assembly Test Services Ltd * ST Assembly Test Services Pte Ltd 2. The Registered Office of the Company will be situated in the Republic of Singapore. 3. The objects for which the Company is established are:- (1) To carry on the business of manufacturing, installing, buying, selling, maintaining, assembling, importing, exporting, distributing, handling, testing, servicing, repairing and otherwise dealing in electrical and electronic components, parts, fittings, accessories, equipment and materials of every kind and description, including but not limited to semiconductor components, parts, fittings, accessories, equipment and materials. (2) To carry out research and development work (including but not limited to investigations and experimental work) of every description in relation to, but not limited to, the electrical and electronic industry and the application and use thereof and to collect, collate, prepare and distribute (by way of sale, licence, concession or otherwise) the technology thereof and information and statistics relating thereto. (3) To carry out modification, repairs, overhaul and testing of electronics, components, parts, fittings and accessories including but not limited to semiconductor components, parts, fittings and accessories. (4) To train personnel including but not limited to personnel for the electrical and electronic industry and to advance the skills of such persons. (5) To carry on all or any of the businesses of electrical, mechanical, motor and general engineers, manufacturers and merchants of, agents for and dealers in engineering specialities of every description. (6) To manufacture, buy, sell, maintain, repair, provide technical services, alter and otherwise deal in apparatus, plant, machinery, fittings, furnishings, tools, materials, products and things of all kinds capable of being used for the purposes of the abovementioned businesses or any of them or likely to be required in relation thereto. (7) To carry on any other business which may seem to the Company capable of being conveniently carried on in connection with its business or calculated directly or indirectly to enhance the value of or render profitable any of the Company's properties or rights. * The Name of the Company was changed to "ST Assembly Test Services Pte Ltd" with effect from 20 January 1995. ** The Name of the Company was changed to "ST Assembly Test Services Ltd" with effect from 30 April 1998. 1 (8) To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company carrying on any business which the Company is authorized to carry on, or possessed of property suitable for the purposes of the Company. (9) To apply for, purchase, or otherwise acquire any patents, patent rights, copyrights, trade marks, formulae, licences, concessions, and the like, conferring any exclusive or non-exclusive or limited right to use, or any secret or other information as to any invention which may seem capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit the Company; and to use, exercise, develop, or grant licences in respect of, or otherwise turn to account, the property, rights, or information so acquired. (10) To amalgamate or enter into partnership or into any arrangement for sharing of profits, union of interest, co-operation, joint adventure, reciprocal concession, or otherwise, with any person or company carrying on or engaged in or about to carry on or engage in any business or transaction which the Company is authorized to carry on or engage in, or any business or transaction capable of being conducted so as directly or indirectly to benefit the Company. (11) To take, or otherwise acquire, and hold shares, debentures, or other securities of any other company. (12) To enter into any arrangements with any government or authority, supreme, municipal, local, or otherwise, that may seem conducive to the Company's objects, or any of them; and to obtain from any such government or authority any rights, privileges, and concessions which the Company may think it desirable to obtain; and to carry out, exercise, and comply with any such arrangements, rights, privileges, and concessions. (13) To establish and support or aid in the establishment and support of associations, institutions, funds, trusts, and conveniences calculated to benefit employees or directors or past employees or directors of the Company or its predecessors in business, or the dependants or connections of any such persons; and to grant pensions and allowances, and to make payments towards insurance; and to subscribe or guarantee money for charitable or benevolent objects, or for any exhibition, or for any public, general, or useful object. (14) To promote any other company or companies for the purpose of acquiring or taking over all or any of the property, rights, or liabilities of the company or companies, or for any other purpose which may seem directly or indirectly calculated to benefit the Company. (15) To purchase, take on lease or in exchange, hire, or otherwise acquire any movable or immovable properties and any rights or privileges which the Company may think necessary or convenient for the purposes of its business, and in particular any land, buildings, easements, machinery, plant, and stock-in-trade. - 2 - (16) To construct, improve, maintain, develop, work, manage, carry out, or control any buildings, works, factories, mills, roads, ways, tramways, railways, branches or sidings, bridges, reservoirs, water-courses, wharves warehouses, electric works, shops, stores, and other works, and conveniences which may seem calculated directly or indirectly to advance the Company's interests; and to contribute to, subsidize, or otherwise assist or take part in the construction, improvement, maintenance, development, working, management, carrying out, or control thereof. (17) To guarantee and give guarantees or indemnities for the payment of money or the performance of contracts or obligations by any person or company. (18) To lend and advance money or give credit to any person or company and on such terms as may be considered expedient, and either with or without security; to secure or undertake in any way the repayment of moneys lent or advanced to or the liabilities incurred by any person or company, and otherwise to assist any person or company. (19) To borrow or raise or secure the payment of money in such manner as the Company may think fit and to secure the same or the repayment or performance of any debt, liability, contract, guarantee or other engagement already incurred by or to be entered into by the Company in any way and in particular by the issue of debentures perpetual or otherwise, charged upon all or any of the Company's property (both present and future), including its uncalled capital; and to purchase, redeem, or pay off any such securities. (20) To invest and deal with the money of the Company not immediately required in such manner as may from time to time be thought fit. (21) To remunerate any person or company for services rendered, or to be rendered, in placing or assisting to place or guaranteeing the placing of any of the shares in the Company's capital or any debentures, or other securities of the Company, or in or about the organization, formation, or promotion of the Company or the conduct of its business. (22) To draw, make, accept, endorse, discount, execute, and issue promissory notes, bills of exchange, bills of lading, and other negotiable or transferable instruments. (23) To sell or dispose of the undertaking of the Company or any part thereof for such consideration as the Company may think fit, and in particular for shares, debentures, or securities of any other company having objects altogether or in part similar to those of the Company. (24) To adopt such means of making known and advertising the business and products of the Company as may seem expedient. - 3 - (25) To apply for, secure, acquire by grant, legislative enactment, assignment, transfer, purchase, or otherwise, and to exercise, carry out, and enjoy any charter, licence, power, authority, franchise, concession, right, or privilege, which any Government or authority or any corporation or other public body may be empowered to grant; and to pay for, aid in, and contribute towards carrying the same into effect; and to appropriate any of the Company's shares, debentures, or other securities and assets to defray the necessary costs, charges, and expenses thereof. (26) To apply for, promote, and obtain any statute, order, regulation, or other authorization or enactment which may seem calculated directly or indirectly to benefit the Company; and to oppose any bills, proceedings, or applications which may seem calculated directly or indirectly to prejudice the Company's interests. (27) To procure the Company to be registered or recognized in any country or place outside the Republic of Singapore. (28) To sell, improve, manage, develop, exchange, lease, dispose of, turn to account, or otherwise deal with all or any part of the property and rights of the Company. (29) To issue and allot fully or partly paid shares in the capital of the Company in payment or part payment of any movable or immovable property purchased or otherwise acquired by the Company or any services rendered to the Company. (30) To distribute any of the property of the Company among the members in kind or otherwise but so that no distribution amounting to a reduction of capital shall be made without the sanction required by law. (31) To take or hold mortgages, liens, and charges to secure payment of the purchase price, or any unpaid balance of the purchase price, of any part of the Company's property of whatsoever kind sold by the Company, or any money due to the Company from purchasers and others. (32) To undertake and transact all kinds of agency or secretarial business and also to undertake and execute any trusts, the undertaking whereof may seem desirable, and either gratuitously or otherwise. (33) To transact any lawful business in aid of the Republic of Singapore in the prosecution of any war or hostilities in which the Republic of Singapore is engaged. (34) To carry out all or any of the objects of the Company and do all or any of the above things in any part of the world and either as principal, agent, contractor, or trustee, or otherwise, and by or through trustees or agents or otherwise, and either alone or in conjunction with others. (35) To do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the Company. AND IT IS HEREBY DECLARED that the word "company" in this Memorandum when not referring to this Company shall be deemed to include any corporation partnership association club or other body of persons whether incorporated or not and wherever incorporated or domiciled and whether now - 4 - existing or hereafter to be formed AND further that unless the context or subject matter is inconsistent therewith words signifying the singular number shall be deemed and taken to include the plural and vice versa AND further that the objects specified in each of the paragraphs in this Memorandum shall be regarded as independent objects, and accordingly, shall be in no wise limited or restricted (except when otherwise expressed in such paragraph), by reference to the objects indicated in any other paragraph or the name of the Company, but may be carried out in as full and ample a manner and construed in as wide a sense as if each of the said paragraphs defined the objects of a separate, distinct and independent company. 4. The liability of the members is limited. 5. The original capital of the Company is $300,000,000* divided into 300,000,000* shares of $1/- each, and the Company shall have power to increase or reduce the capital to consolidate or subdivide the shares into shares of larger or smaller amounts, and to issue all or any part of the original or any additional capital as fully paid or partly paid shares and with any special or preferential rights or privileges or subject to any special terms or conditions, and either with or without any special designation, and also from time to time to alter, modify, commute, abrogate or deal with any such rights, privileges, terms, conditions or designations in accordance with the regulations for the time being of the Company. ----------------------------------- * Pursuant to an ordinary resolution passed at:- (i) an Extraordinary General Meeting held on 30 April 1998, 300,000,000 shares of $1/- each was sub-divided into 1,200,000,000 shares of $0.25 each. (ii) the Seventh Annual General Meeting held on 31 May 2001, the authorised share capital of the Company was increased to $800,000,000 divided into 3,200,000,000 ordinary shares of $0.25 each, by the creation of 2,000,000,000 ordinary shares of $0.25 each. - 5 - WE, the several persons whose names, addresses and descriptions are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association and respectively agree to take the number of shares in the capital of the Company set opposite our respective names:-
======================================================================= Number of Shares taken by each Names, Addresses and Descriptions of Subscribers Subscriber - ----------------------------------------------------------------------- /s/ ANTHONY LEE HWEE KHIAM -------------------------- ANTHONY LEE HWEE KHIAM 27 Jalan Jambu Mawar One (1) Singapore 2158 Advocate & Solicitor /s/ LOH WAI MOOI MICHELLE ------------------------- LOH WAI MOOI MICHELLE 15 Jalan Tempua One (1) Singapore 1129 Advocate & Solicitor - ----------------------------------------------------------------------- Total number of shares taken Two (2) =======================================================================
Dated this 29th day of October 1994. Witness to the above signatures:- /s/ JUNE LOW FUI SIAN ---------------------- JUNE LOW FUI SIAN Advocate and Solicitor c/o Bih Li & Lee Advocates & Solicitors 79 Robinson Road #24-01 CPF Building Singapore 0106 - 6 - ---------------------------------------------- NEW ARTICLES OF ASSOCIATION OF ST ASSEMBLY TEST SERVICES LTD (ADOPTED BY SPECIAL RESOLUTION PASSED ON 19 January 2000) ---------------------------------------------- ALLEN & GLEDHILL 36, ROBINSON ROAD, #18-01, CITY HOUSE, SINGAPORE 068877. CONTENTS --------
PAGE ---- ARTICLES OF ASSOCIATION:- Preliminary 1 Share Capital 3 Issue of Shares 3 Variation of Rights 3 Alteration of Share Capital 4 Shares 5 Share Certificates 6 Calls on Shares 8 Forfeiture and Lien 9 Transfer of Shares 11 Transmission of Shares 13 Stock 13 General Meetings 14 Notice of General Meetings 14 Proceedings at General Meetings 16 Votes of Members 18 Corporations Acting by Representatives 20 Directors 20 Managing Director or Chief Executive Officer or President 22 Appointment and Retirement of Directors 23 Alternate Directors 24
CONTENTS --------
PAGE ---- Meetings and Proceedings of Directors 25 Borrowing Powers 27 General Powers of Directors 27 Secretary 28 The Seal 28 Authentication of Documents 29 Reserves 29 Dividends 30 Capitalisation of Profits and Reserves 31 Accounts 32 Auditors 33 Notices 33 Winding Up 34 Indemnity 35 Secrecy 35
- ii - THE COMPANIES ACT, CHAPTER 50 --------------------------- PUBLIC COMPANY LIMITED BY SHARES --------------------------- ARTICLES OF ASSOCIATION of ST ASSEMBLY TEST SERVICES LTD (Adopted by Special Resolution passed on 19 January 2000) ------------------------------------------------------------ PRELIMINARY 1. The regulations in Table A in the Fourth Schedule Table "A" not to to the Companies Act, Chapter 50 (as amended) shall not apply. apply to the Company. 2. In these presents (if not inconsistent with the Interpretation. subject or context) the words and expressions set out in the first column below shall bear the meanings set opposite to them respectively. "The Act" The Companies Act, Chapter 50. "The Company" ST Assembly Test Services Ltd. "In writing" Written or produced by any substitute for writing or partly one and partly another. "Month" Calendar month. "Office" The registered office of the Company for the time being. "Ordinary Shares" The ordinary shares of $0.25 each in the capital of the Company. "Paid" Paid or credited as paid. "Seal" The Common Seal of the Company. "The Statutes" The Act and every other Act for the time being in force concerning companies and affecting the Company. "These presents" These Articles of Association as from time to time altered. "Year" Calendar year. The expressions "Depositor", "Depository", "Depository Agent" and "Depository Register" shall have the meanings ascribed to them respectively in the Act. References in these presents to "holders" of shares or a class of shares shall:- (a) exclude the Depository except where otherwise expressly provided in these presents or where the term "registered holders" or "registered holder" is used in these presents; and (b) where the context so requires, be deemed to include references to Depositors whose names are entered in the Depository Register in respect of those shares. and "holding" and "held" shall be construed accordingly. The expression "Director" shall have the meaning ascribed to it in the Act and shall, where the context so requires, be deemed to include a reference to an Alternate Director. The expression "Secretary" shall include any person appointed by the Directors to perform any of the duties of the Secretary and where two or more persons are appointed to act as Joint Secretaries shall include any one of those persons. All such of the provisions of these presents as are applicable to paid-up shares shall apply to stock, and the words "share" and "shareholder" shall be construed accordingly. Words denoting the singular shall include the plural and vice versa. Words denoting the masculine shall include the feminine. Words denoting persons shall include corporations. Subject as aforesaid any words or expression defined in the Act shall (if not inconsistent with the subject or context) bear the same meanings in these presents. A Special Resolution shall be effective for any purpose for which an Ordinary Resolution is expressed to be required under any provision of these presents. - 2 - SHARE CAPITAL 3. The authorised share capital of the Company Authorised share is $300,000,000* divided into 1,200,000,000* ordinary capital. shares of $0.25 each. ISSUE OF SHARES 4. Subject to the Statutes and to these presents, Issue of Shares. no shares may be issued by the Directors without the prior approval of the Company in General Meeting but subject thereto and to Article 8, and to any special rights attached to any shares for the time being issued, the Directors may allot or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and subject or not to the payment of any part of the amount thereof in cash as the Directors may think fit, and any shares may be issued with such preferential, deferred, qualified or special rights, privileges or conditions as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors, Provided always that:- (a) no shares shall be issued to transfer a controlling interest in the Company without the prior approval of the members in a General Meeting; and (b) no shares shall be issued at a discount except in accordance with the Statutes. 5. (A) In the event of preference shares being issued Rights of the total nominal value of issued preference shares preference shall not at any time exceed the total nominal value of shareholders. the issued ordinary shares and preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending General Meetings of the Company, and preference shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the undertaking or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrears. (B) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued. VARIATION OF RIGHTS 6. (A) Whenever the share capital of the Company is Variation of divided into different classes of shares, the special rights. rights attached to any class may, subject to the provisions of the Statutes, be varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class or with the sanction of a Special Resolution passed at a separate General Meeting of * Pursuant to an ordinary resolution passed at the Seventh Annual General Meeting held on 31 May 2001, the authorised share capital of the Company was increased to $800,000,000 divided into 3,200,000,000 ordinary shares of $0.25 each, by the creation of 2,000,000,000 ordinary shares of $0.25 each. - 3 - the holders of the shares of the class (but not otherwise) and may be so varied or abrogated either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting all the provisions of these presents relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two persons at least holding or representing by proxy at least one-third in nominal value of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll and that every such holder shall on a poll have one vote for every share of the class held by him. Provided always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, consent in writing if obtained from the holders of three-quarters in nominal value of the issued shares of the class concerned within two months of such General Meeting shall be as valid and effectual as a Special Resolution carried at such General Meeting. The foregoing provisions of this Article shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class the special rights whereof are to be varied. (B) The special rights attached to any class of Creation or issue of shares having preferential rights shall not unless further shares with otherwise expressly provided by the terms of issue special rights. thereof be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto. ALTERATION OF SHARE CAPITAL 7. The Company may from time to time by Ordinary Power to increase Resolution increase its share capital by such sum to be share capital. divided into shares of such amounts as the resolution shall prescribe. 8. (A) The Company may by Ordinary Resolution in Authority to issue General Meeting give to the Directors a general shares. authority, either unconditionally or subject to such conditions as may be specified in the Ordinary Resolution, to issue shares (whether by way of rights, bonus or otherwise) where, unless previously revoked or varied by the Company in General Meeting, such authority to issue shares does not continue beyond the conclusion of the Annual General Meeting of the Company next following the passing of the Ordinary Resolution or the date by which such Annual General Meeting is required to be held, or the expiration of such other period as may be prescribed by the Statutes (whichever is the earliest). (B) Except so far as otherwise provided by the conditions of issue or by these presents, all new shares shall be subject to the provisions of the Statutes and of these presents with reference to allotment, payment of calls, lien, transfer, transmission, forfeiture and otherwise. - 4 - 9. The Company may by Ordinary Resolution:- Power to consolidate, cancel (a) consolidate and divide all or any of its and sub-divide share capital into shares of larger amount shares. than its existing shares; (b) cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken by any person and diminish the amount of its capital by the amount of the shares so cancelled; (c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum of Association (subject, nevertheless, to the provisions of the Statutes), and so that the resolution whereby any share is sub- divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares; (d) subject to the provisions of the Statutes, convert any class of shares into any other class of shares. 10. (A) The Company may reduce its share capital or Power to reduce any capital redemption reserve fund, share premium share capital. account or other undistributable reserve in any manner and with and subject to any incident authorised and consent required by law. Without prejudice to the generality of the foregoing, upon cancellation of any share purchased or otherwise acquired by the Company pursuant to these presents, the nominal amount of the issued share capital of the Company shall be diminished by the nominal amount of the share so cancelled. (B) The Company may, subject to and in accordance Company may with the Statutes, purchase or otherwise acquire shares acquire its own in the issued share capital of the Company on such terms issued ordinary and in such manner as the Company may from time to time shares. think fit. If required by the Statutes, any share which is so purchased or acquired by the Company shall be deemed to be cancelled immediately on purchase or acquisition by the Company. On the cancellation of any share as aforesaid, the rights and privileges attached to that share shall expire. In any other instance, the Company may deal with any such share which is so purchased or acquired by it in such manner as may be permitted by, and in accordance with, the Statutes. SHARES 11. Except as required by law, no person shall be Exclusion of recognised by the Company as holding any share upon equities. any trust, and the Company shall not be bound by or compelled in any way to recognise any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these presents or by law otherwise provided) any other right in - 5 - respect of any share, except an absolute right to the entirety thereof in the person (other than the Depository) entered in the Register of Members as the registered holder thereof or (as the case may be) person whose name is entered in the Depository Register in respect of that share. 12. Without prejudice to any special rights Redeemable previously conferred on the holders of any shares or preference shares. class of shares for the time being issued, any share in the Company may be issued with such preferred, deferred or other special rights, or subject to such restrictions, whether as regards dividend, return of capital, voting or otherwise, as the Company may from time to time by Ordinary Resolution determine (or, in the absence of any such determination, as the Directors may determine) and subject to the provisions of the Statutes the Company may issue preference shares which are, or at the option of the Company are, liable to be redeemed. 13. Subject to the provisions of these presents Unissued shares. and of the Statutes relating to authority and of any resolution of the Company in General Meeting passed pursuant thereto, all unissued shares shall be at the disposal of the Directors and they may allot (with or without conferring a right of renunciation), grant options over or otherwise dispose of them to such persons, at such times and on such terms as they think proper. 14. The Company may exercise the powers of paying Power to pay commissions conferred by the Statutes to the full commission and extent thereby permitted provided that the rate brokerage. or amount of the commissions paid or agreed to be paid shall be disclosed in the manner required by the Statutes. Such commissions may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The Company may also on any issue of shares pay such brokerage as may be lawful. 15. Subject to the terms and conditions of any Renunciation of application for shares, the Directors shall allot allotment. shares applied for within thirty days of the closing date of any such application. The Directors may, at any time after the allotment of any share but before any person has been entered in the Register of Members as the holder or (as the case may be) before that share is entered against the name of a Depositor in the Depository Register, recognise a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms and conditions as the Directors may think fit to impose. SHARE CERTIFICATES 16. Every share certificate shall be issued under Form of share the Seal and shall specify the number and class of shares certificate. to which it relates and the amount paid up thereon and shall bear the autographic or facsimile signatures of one Director and the Secretary or a second Director or some other person appointed by the Directors. The facsimile signatures may be reproduced by mechanical, electronic or other method approved by the Directors. No certificate shall be issued representing shares of more than one class. - 6 - 17. (A) The Company shall not be bound to register Rights and more than three persons as the registered holder of a liabilities of share except in the case of executors or administrators joint holders. of the estate of a deceased member. (B) In the case of a share registered jointly in the names of several persons the Company shall not be bound to issue more than one certificate therefor and delivery of a certificate to any one of the registered joint holders shall be sufficient delivery to all. 18. Subject to the payment of all or any part of Entitlement to the stamp duty payable (if any) on each share certificate. certificate prior to the delivery thereof which the Directors in their absolute discretion may require, every person whose name is entered as a member in the Register of Members shall be entitled to receive within thirty days of the closing date of any application for shares or after the date of lodgement of a registrable transfer one certificate for all his shares of any one class or several certificates in reasonable denomina- tions each for a part of the shares so allotted or transferred. Where such a member transfers part only of the shares comprised in a certificate or where such a member requires the Company to cancel any certificate or certificates and issue new certificates for the purpose of subdividing his holding in a different manner the old certificate or certificates shall be cancelled and a new certificate or certificates for the balance of such shares issued in lieu thereof and such member shall pay all or any part of the stamp duty payable (if any) on each share certificate prior to the delivery thereof which the Directors in their absolute discretion may require and a maximum fee of $2 for each new certificate or such other fee as the Directors may from time to time determine. 19. Where some only of the shares comprised in a Shares comprised share certificate are transferred the old certificate in certificate. shall be cancelled and a new certificate for the balance of such shares issued in lieu without charge. 20. (A) Any two or more certificates representing Surrender for shares of any one class held by any person whose name cancellation of is entered in the Register of Members may at his request certificate. be cancelled and a single new certificate for such shares issued in lieu without charge. (B) If any person whose name is entered in the Register of Members shall surrender for cancellation a share certificate representing shares held by him and request the Company to issue in lieu two or more share certificates representing such shares in such proportions as he may specify, the Directors may, if they think fit, comply with such request. Such person shall (unless such fee is waived by the Directors) pay a maximum fee of $2 for each share certificate issued in lieu of a share certificate surrendered for cancellation or such other fee as the Directors may from time to time determine. (C) Subject to the provisions of the Statutes, Replacement of if any share certificate shall be defaced, worn out, certificate. destroyed, lost or stolen, it may be renewed on such evidence being produced and a letter of indemnity (if required) being given by the shareholder, transferee, person entitled, purchaser, member firm or member company of any Stock Exchange upon which the shares in the Company may be listed or on behalf of its or their client or clients as the Directors of the Company - 7 - shall require, and (in case of defacement or wearing out) on delivery up of the old certificate and in any case on payment of such sum not exceeding $2 as the Directors may from time to time require together with the amount of the proper duty with which such share certificate is chargeable under any law for the time being in force relating to stamps. In the case of destruction, loss or theft, a shareholder or person entitled to whom such renewed certificate is given shall also bear the loss and pay to the Company all expenses incidental to the investigations by the Company of the evidence of such destruction or loss. (D) In the case of shares registered jointly in the names of several persons any such request may be made by any one of the registered joint holders. CALLS ON SHARES 21. The Directors may from time to time make Calls on shares and calls upon the members in respect of any moneys time when made. unpaid on their shares (whether on account of the nominal value of the shares or, when permitted, by way of premium) but subject always to the terms of issue of such shares. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed and may be made payable by instalments. 22. Each member shall (subject to receiving at Calls on shares and least fourteen days' notice specifying the time or when payable. times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. A call may be revoked or postponed as the Directors may determine. 23. If a sum called in respect of a share is not Interest on calls. paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate (not exceeding ten per cent. per annum) as the Directors determine but the Directors shall be at liberty in any case or cases to waive payment of such interest wholly or in part. 24. Any sum (whether on account of the nominal Sum due on value of the share or by way of premium) which by the allotment. terms of issue of a share becomes payable upon allotment or at any fixed date shall for all the purposes of these presents be deemed to be a call duly made and payable on the date on which by the terms of issue the same becomes payable. In case of non-payment all the relevant provi- sions of these presents as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 25. No member shall be entitled to receive any Rights of member dividend or vote at any meeting or upon a poll, until suspended until calls he shall have paid all calls for the time being due and are duly paid. payable on every share held by him, whether alone or jointly with any other person, together with interest and expenses (if any). - 8 - 26. The Directors may on the issue of shares Power to differentiate between the holders as to the amount differentiate. of calls to be paid and the times of payment. 27. The Directors may if they think fit receive Payment in advance from any member willing to advance the same all or any of calls. part of the moneys (whether on account of the nominal value of the shares or by way of premium) uncalled and unpaid upon the shares held by him and such payment in advance of calls shall extinguish pro tanto the liability upon the shares in respect of which it is made and upon the money so received (until and to the extent that the same would but for such advance become payable) the Company may pay interest at such rate (not exceeding eight per cent. per annum) as the member paying such sum and the Directors may agree. Capital paid on shares in advance of calls shall not while carrying interest confer a right to participate in profits. FORFEITURE AND LIEN 28. If a member fails to pay in full any call or Notice requiring instalment of a call on the due date for payment payment of calls. thereof, the Directors may at any time thereafter serve a notice on him requiring payment of so much of the call or instalment as is unpaid together with any interest which may have accrued thereon and any expenses incurred by the Company by reason of such non-payment. 29. The notice shall name a further day (not being Notice to state time less than fourteen days from the date of service of the and place. notice) on or before which and the place where the payment required by the notice is to be made, and shall state that in the event of non-payment in accordance therewith the shares on which the call has been made will be liable to be forfeited. 30. If the requirements of any such notice as Forfeiture on non- aforesaid are not complied with, any share in respect compliance with of which such notice has been given may at any time notice. thereafter, before payment of all calls and interest and expenses due in respect thereof has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before forfeiture. The Directors may accept a surrender of any share liable to be forfeited hereunder. 31. A share so forfeited or surrendered shall Sale or disposition of become the property of the Company and may be sold, forfeited or re-allotted or otherwise disposed of either to the surrendered shares. person who was before such forfeiture or surrender the holder thereof or entitled thereto or to any other person upon such terms and in such manner as the Directors shall think fit and at any time before a sale, re-allotment or disposition the forfeiture or surrender may be cancelled on such terms as the Directors think fit. The Directors may, if necessary, authorise some person to transfer or effect the transfer of a forfeited or surrendered share to any such other person as aforesaid. 32. A member whose shares have been forfeited or Rights and liabilities surrendered shall cease to be a member in respect of members whose of the shares but shall notwithstanding the shares have been forfeiture or surrender remain liable to pay to the forfeited or Company all moneys which at the date of forfeiture surrendered. or surrender were presently payable by him to the Company in - 9 - respect of the shares with interest thereon at eight per cent. per annum (or such lower rate as the Directors may determine) from the date of forfeiture or surrender until payment and the Directors may at their absolute discretion enforce payment without any allowance for the value of the shares at that time of forfeiture or surrender or waive payment in whole or in part. 33. The Company shall have a first and paramount Company's lien. lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such share and for all moneys as the Company may be called upon by law to pay in respect of the shares of the member or deceased member. The Directors may waive any lien which has arisen and may resolve that any share shall for some limited period be exempt wholly or partially from the provisions of this Article. 34. The Company may sell in such manner as the Sale of shares Directors think fit any share on which the Company has subject to lien. a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of intention to sell in default shall have been given to the holder for the time being of the share or the person entitled thereto by reason of his death or bankruptcy. 35. The net proceeds of such sale after payment of Application of the cost of such sale shall be applied in or towards proceeds of payment or satisfaction of the debts or liabilities and such sale. any residue shall be paid to the person entitled to the shares at the time of the sale or to his executors, administrators or assigns, as he may direct. For the purpose of giving effect to any such sale the Directors may authorise some person to transfer or effect the transfer of the shares sold to the purchaser. 36. A statutory declaration in writing that the Title to shares declarant is a Director or the Secretary of the Company forfeited and and that a share has been duly forfeited or surrendered right of or sold to satisfy a lien of the Company on a date purchaser of stated in the declaration shall be conclusive evidence such share. of the facts therein stated as against all persons claiming to be entitled to the share. Such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof together (where the same be required) with the share certificate delivered to a purchaser (or where the purchaser is a Depositor, to the Depository) or allottee thereof shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the share shall be registered in the name of the person to whom the share is sold, re-allotted or disposed of or, where such person is a Depositor, the Company shall procure that his name be entered in the Depository Register in respect of the share so sold, re-allotted or disposed of. Such person shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, surrender, sale, re-allotment or disposal of the share. - 10 - TRANSFER OF SHARES 37. All transfers of the legal title in shares Form of transfer. may be effected by the registered holders thereof by transfer in writing in any form acceptable to the Directors. The instrument of transfer of any share shall be signed by or on behalf of both the transferor and the transferee and be witnessed, provided that an instrument of transfer in respect of which the transferee is the Depository shall be effective although not signed or witnessed by or on behalf of the Depository. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect thereof. 38. The Register of Members may be closed at Closing of Register such times and for such period as the Directors may of Members. from time to time determine, provided always that such Register shall not be closed for more than thirty days in any year. 39. There shall be no restriction on the transfer Directors' right to of fully paid up shares (except where required by law) refuse to register a but the Directors may, in their sole discretion, decline transfer. to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up may refuse to register a transfer to a transferee of whom they do not approve. Provided always that in the event of the Directors refusing to register a transfer of shares, they shall within thirty days beginning with the date on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes. 40. The Directors may in their sole discretion When Directors may refuse to register any instrument of transfer of shares refuse to register a unless:- transfer. (a) all or any part of the stamp duty (if any) payable on each share certificate and such fee not exceeding $2 as the Directors may from time to time require, is paid to the Company in respect thereof; (b) the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by the certificates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; (c) the instrument of transfer is in respect of only one class of shares; and (d) the amount of the proper duty with which each share certificate to be issued in consequence of the registration of such transfer is chargeable under any law for the time being in force relating to stamps is tendered. - 11 - 41. If the Directors refuse to register a transfer Notice on refusal to of any shares, they shall within thirty days after the register a transfer. date on which the application for transfer was lodged with the Company send to the transferor and the transferee a notice in writing stating the reasons justifying the refusal to transfer and a notice of refusal as required by the Statutes. 42. All instruments of transfer which are Retention of registered may be retained by the Company. transfers. 43. There shall be paid to the Company in respect Fee for registration of the registration of any instrument of transfer of probate etc. or probate or letters of administration or certificate of marriage or death or stop notice or power of attorney or other document relating to or affecting the title to any shares or otherwise for making any entry in the Register of Members affecting the title to any shares such fee not exceeding $2 as the Directors may from time to time require or prescribe. 44. The Company shall be entitled to destroy all Destruction of instruments of transfer which have been registered at instrument of any time after the expiration of six years from the date transfer. of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of six years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the Register of Members purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certificate so destroyed was a valid and effective certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company; Provided always that:- (a) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant; (b) nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Article; and (c) references herein to the destruction of any document include references to the disposal thereof in any manner. - 12 - TRANSMISSION OF SHARES 45. (A) In the case of the death of a member whose Transmission. name is entered in the Register of Members, the survivors or survivor where the deceased was a joint holder, and the executors or administrators of the deceased where he was a sole or only surviving holder, shall be the only person(s) recognised by the Company as having any title to his interest in the shares. (B) In the case of the death of a member who is a Depositor, the survivors or survivor where the deceased is a joint holder, and the executors or administrators of the deceased where he was a sole or only surviving holder and where such executors or administrators are entered in the Depository Register in respect of any shares of the deceased member, shall be the only person(s) recognised by the Company as having any title to his interest in the shares. (C) Nothing in this Article shall release the estate of a deceased holder (whether sole or joint) from any liability in respect of any share held by him. 46. Any person becoming entitled to the legal Persons becoming title in a share in consequence of the death or entitled to shares bankruptcy of a person whose name is entered in the on death or Register of Members may (subject as hereinafter bankruptcy of provided) upon supplying to the Company such evidence member. as the Directors may reasonably require to show his legal title to the share either be registered himself as holder of the share upon giving to the Company notice in writing of such desire or transfer such share to some other person. All the limitations, restrictions and provisions of these presents relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the person whose name is entered in the Register of Members had not occurred and the notice or transfer were a transfer executed by such person. 47. Save as otherwise provided by or in accordance Rights of with these presents, a person becoming entitled to a persons entitled share pursuant to Article 45(A) or (B) or Article 46 to shares on (upon supplying to the Company such evidence as the transmission. Directors may reasonably require to show his title to the share) shall be entitled to the same dividends and other advantages as those to which he would be entitled if he were the member in respect of the share except that he shall not be entitled in respect thereof (except with the authority of the Directors) to exercise any right conferred by membership in relation to meetings of the Company until he shall have been registered as a member in the Register of Members or his name shall have been entered in the Depository Register in respect of the share. STOCK 48. The Company may from time to time by Ordinary Power to convert Resolution convert any paid-up shares into stock and into stock. may from time to time by like resolution reconvert any stock into paid-up shares of any denomination. - 13 - 49. The holders of stock may transfer the same or Transfer of stock. any part thereof in the same manner and subject to the same Articles as and subject to which the shares from which the stock arose might previously to conversion have been transferred (or as near thereto as circumstances admit) but no stock shall be transferable except in such units (not being greater than the nominal amount of the shares from which the stock arose) as the Directors may from time to time determine. 50. The holders of stock shall, according to the Rights of amount of stock held by them, have the same rights, stockholders. privileges and advantages as regards dividend, return of capital, voting and other matters, as if they held the shares from which the stock arose; but no such privilege or advantage (except as regards participation in the profits or assets of the Company) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such privilege or advantage; and no such conversion shall affect or prejudice any preference or other special privileges attached to the shares so converted. GENERAL MEETINGS 51. An Annual General Meeting shall be held once Annual General in every year, at such time (within a period of not Meeting. more than fifteen months after the holding of the last preceding Annual General Meeting) and place as may be determined by the Directors. All other General Meetings shall be called Extraordinary General Meetings. 52. The Directors may whenever they think fit, Extraordinary and shall on requisition in accordance with the General Meeting. Statutes, proceed with proper expedition to convene an Extraordinary General Meeting. NOTICE OF GENERAL MEETINGS 53. Any General Meeting at which it is proposed Notice of Meetings. to pass a Special Resolution or (save as provided by the Statutes) a resolution of which special notice has been given to the Company, shall be called by twenty-one days' notice in writing at the least and an Annual General Meeting and any other Extraordinary General Meeting by fourteen days' notice in writing at the least. The period of notice shall in each case be exclusive of the day on which it is served or deemed to be served and of the day on which the meeting is to be held and shall be given in the manner hereinafter mentioned to all members other than such as are not under the provisions of these presents entitled to receive such notices from the Company; Provided that a General Meeting notwithstanding that it has been called by a shorter notice than that specified above shall be deemed to have been duly called if it is so agreed:- (a) in the case of an Annual General Meeting, by all the members entitled to attend and vote thereat; and - 14 - (b) in the case of an Extraordinary General Meeting, by a majority in number of the members having a right to attend and vote thereat, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right; Provided also that the accidental omission to give notice to or the non-receipt of notice by any person entitled thereto shall not invalidate the proceedings at any General Meeting. At least 14 days' notice of any General Meeting shall be given by advertisement in the daily press. 54. (A) Every notice calling a General Meeting shall Contents of notice. specify the place and the day and hour of the meeting, and there shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him and that a proxy need not be a member of the Company. (B) In the case of an Annual General Meeting, the notice shall also specify the meeting as such. (C) In the case of any General Meeting at which business other than routine business is to be transacted, the notice shall specify the general nature of such business; and if any resolution is to be proposed as a Special Resolution, the notice shall contain a statement to that effect. 55. Routine business shall mean and include only Routine business. business transacted at an Annual General Meeting of the following classes, that is to say:- (a) declaring dividends; (b) receiving and adopting the accounts, the reports of the Directors and Auditors and other documents required to be attached or annexed to the accounts; (c) appointing or re-appointing Directors to fill vacancies arising at the meeting on retirement whether by rotation or otherwise; (d) re-appointing the retiring Auditors (unless they were last appointed otherwise than by the Company in General Meeting); (e) fixing the remuneration of the Auditors or determining the manner in which such remuneration is to be fixed; and (f) fixing the remuneration of the Directors proposed to be paid under Article 81. - 15 - 56. Any notice of a General Meeting to consider Notice to state special business shall be accompanied by a statement effect of special regarding the effect of any proposed resolution on the business. Company in respect of such special business. PROCEEDINGS AT GENERAL MEETINGS 57. The Chairman of the Board of Directors, Chairman. failing whom the Deputy Chairman, shall preside as chairman at a General Meeting. If there be no such Chairman or Deputy Chairman, or if at any meeting n either be present within 15 minutes after the time appointed for holding the meeting and willing to act, the Directors present shall choose one of their number (or, if no Director be present or if all the Directors present decline to take the chair, the members present shall choose one of their number) to be chairman of the meeting. 58. No business other than the appointment of a Quorum. chairman shall be transacted at any General Meeting unless a quorum is present at the time when the meeting proceeds to business. Save as herein otherwise provided, the quorum at any General Meeting shall be two or more members holding or representing in aggregate not less than 33 1/3 per cent. of the total issued and fully paid up shares in the capital of the Company, present in person or by proxy. 59. If within 30 minutes from the time appointed If quorum not for a General Meeting (or such longer interval as the present, chairman of the meeting may think fit to allow) a quorum adjournment or is not present, the meeting, if convened on the dissolution of requisition of members, shall be dissolved. In any other meeting. case it shall stand adjourned to the same day in the next week (or if that day is a public holiday then to the next business day following that public holiday) at the same time and place or such other day, time or place as the Directors may by not less than ten days' notice appoint. At the adjourned meeting any one or more members present in person or by proxy shall be a quorum. 60. The chairman of any General Meeting at which a Adjournment. quorum is present may with the consent of the meeting (and shall if so directed by the meeting) adjourn the meeting from time to time (or sine die) and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. Where a meeting is adjourned sine die, the time and place for the adjourned meeting shall be fixed by the Directors. When a meeting is adjourned for 30 days or more or sine die, not less than seven days' notice of the adjourned meeting shall be given in like manner as in the case of the original meeting. 61. Save as hereinbefore expressly provided, it Notice of shall not be necessary to give any notice of an adjournment. adjournment or of the business to be transacted at an adjourned meeting. 62. If an amendment shall be proposed to any Amendment to resolution under consideration but shall in good faith resolution. be ruled out of order by the chairman of the meeting, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling. In the case of a resolution duly proposed as a Special - 16 - Resolution, no amendment thereto (other than a mere clerical amendment to correct a patent error) may in any event be considered or voted upon. *63. At any General Meeting a resolution put to Method of voting. the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by: (a) the chairman of the meeting; or (b) not less than five members present in person or by proxy and entitled to vote; or (c) a member present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) a member present in person or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid on all the shares conferring that right; Provided always that no poll shall be demanded on the choice of a chairman or on a question of adjournment. 64. A demand for a poll may be withdrawn only with Taking a poll. the approval of the meeting. Unless a poll is required a declaration by the chairman of the meeting that a resolution has been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the minute book, shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded for or against such resolution. If a poll is required, it shall be taken in such manner (including the use of ballot or voting papers or tickets) as the chairman of the meeting may direct, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The chairman of the meeting may (and if so directed by the meeting shall) appoint scrutineers and may adjourn the meeting to some place and time fixed by him for the purpose of declaring the result of the poll. 65. In the case of an equality of votes, whether Casting vote on a show of hands or on a poll, the chairman of the of Chairman. meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a casting vote. 66. A poll demanded on any question shall be Polls and taken either immediately or at such subsequent time continuance of (not being more than 30 days from the date of the business after meeting) and place as the chairman may direct. No demand for a poll. notice need be given of a poll not taken immediately. The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the question on which the poll has been demanded. - ------------ * Deleted and substituted by Special Resolution passed at the Eighth Annual General Meeting held on 30 May 2002. - 17 - VOTES OF MEMBERS 67. Subject and without prejudice to any special Voting rights of privileges or restrictions as to voting for the time members. being attached to any special class of shares for the time being forming part of the capital of the Company each member entitled to vote may vote in person or by proxy. On a show of hands every member who is present in person and each proxy shall have one vote and on a poll, every member who is present in person or by proxy shall have one vote for every share which he holds or represents. For the purpose of determining the number of votes which a member, being a Depositor, or his proxy may cast at any General Meeting on a poll, the reference to shares held or represented shall, in relation to shares of that Depositor, be the number of shares entered against his name in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by the Depository to the Company. 68. In the case of joint holders of a share the Voting rights of joint vote of the senior who tenders a vote, whether in holders. person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members or (as the case may be) the Depository Register in respect of the share. 69. Where in Singapore or elsewhere a receiver or Voting rights of other person (by whatever name called) has been receiver or court appointed by any court claiming jurisdiction in that appointed persons. behalf to exercise powers with respect to the property or affairs of any member on the ground (however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such member to vote in person or by proxy at any General Meeting or to exercise any other right conferred by membership in relation to meetings of the Company. 70. No member shall, unless the Directors Rights to be present otherwise determine, be entitled in respect of shares and to vote. held by him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred by membership in relation to meetings of the Company if any call or other sum presently payable by him to the Company in respect of such shares remains unpaid. 71. No objection shall be raised as to the When objection to admissibility of any vote except at the meeting or admissibility of votes adjourned meeting at which the vote objected to is or may be made. may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman of the meeting whose decision shall be final and conclusive. 72. On a poll, votes may be given either Voting. personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. 73. (A) A member may appoint not more than two Appointment of proxies to attend and vote at the same General Meeting proxies. provided that if the member is a Depositor, the Company shall be entitled and bound:- - 18 - (a) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares entered against his name in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by the Depository to the Company; and (b) to accept as the maximum number of votes which in aggregate the proxy or proxies appointed by the Depositor is or are able to cast on a poll a number which is the number of shares entered against the name of that Depositor in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by the Depository to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor. (B) The Company shall be entitled and bound, in Notes and determining rights to vote and other matters in respect instructions. of a completed instrument of proxy submitted to it, to have regard to the instructions (if any) given by and the notes (if any) set out in the instrument or proxy. (C) In any case where a form of proxy appoints Proportion in more than one proxy, the proportion of the shareholding shareholding to be concerned to be represented by each proxy shall be represented by specified in the form of proxy. proxies. (D) A proxy need not be a member of the Company. Proxy need not be a member. 74. (A) An instrument appointing a proxy shall be in Instrument writing in any usual or common form or in any other appointing proxies. form which the Directors may approve and:- (a) in the case of an individual, shall be signed by the appointor or his attorney; and (b) in the case of a corporation, shall be either given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation. (B) The signature on such instrument need not be witnessed. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy pursuant to the next following Article, failing which the instrument may be treated as invalid. 75. An instrument appointing a proxy must be left Deposit of at such place or one of such places (if any) as may be instrument of proxy. specified for that purpose in or by way of note to or in any document accompanying the notice convening the meeting (or, if no place is so specified, at the Office) not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting or (in the case of a poll taken - 19 - otherwise than at or on the same day as the meeting or adjourned meeting) for the taking of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall, unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the meeting to which it relates; Provided that an instrument of proxy relating to more than one meeting (including any adjournment thereof) having once been so delivered for the purposes of any meeting shall not be required again to be delivered for the purposes of any subsequent meeting to which it relates. 76. An instrument appointing a proxy shall be Rights of deemed to include the right to demand or join in proxies. demanding a poll, to move any resolution or amendment thereto and to speak at the meeting. 77. A vote cast by proxy shall not be invalidated Intervening death by the previous death or insanity of the principal or or insanity of by the revocation of the appointment of the proxy or principal not to of the authority under which the appointment was made revoke proxy. provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Office at least one hour before the commencement of the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast. CORPORATIONS ACTING BY REPRESENTATIVES 78. Any corporation which is a member of the Corporation acting Company may be resolution of its directors or other by representatives. governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company. The person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the Company and such corporation shall for the purposes of these presents be deemed to be present in person at any such meeting if a person so authorised is present thereat. DIRECTORS 79. The number of Directors shall not be less Number and than two. All Directors of the Company shall be natural characteristics persons. of Director. 80. A Director shall not be required to hold any No shares shares of the Company by way of qualification. A qualification for Director who is not a member of the Company shall Directors. nevertheless be entitled to attend and speak at General Meetings. 81. The ordinary remuneration of the Directors Remuneration of shall from time to time be determined by an Ordinary Directors. Resolution of the Company, shall not be increased except pursuant to an Ordinary Resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting and shall (unless such resolution otherwise provides) be divisible - 20 - among the Directors as they may agree, or failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of remuneration related to the period during which he has held office. 82. Any Director who holds any executive office, Extra remuneration. or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, may be paid such extra remunera- tion by way of salary, commission or otherwise as the Directors may determine. 83. The Directors may repay to any Director all Expenses. such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in or about the business of the Company. 84. The Directors shall have power to pay and Pensions etc. agree to pay pensions or other retirement, super- annuation, death or disability benefits to (or to any person in respect of) any Director for the time being holding any executive office and for the purpose of providing any such pensions or other benefits, to contribute to any scheme or fund or to pay premiums. 85. A Director may be party to or in any way Holding of office of interested in any contract or arrangement or transaction profit and to which the Company is a party or in which the Company contracting with is in any way interested and he may hold and be company. remunerated in respect of any office or place of profit (other than the office of Auditor of the Company or any subsidiary thereof) under the Company or any other company in which the Company is in any way interested and he (or any firm of which he is a member) may act in a professional capacity for the Company or any such other company and be remunerated therefor and in any such case as aforesaid (save as otherwise agreed) he may retain for his own absolute use and benefit all profits and advantages accruing to him thereunder or in consequence thereof. 86. A Director who holds any office or possesses Declaration of any property whereby whether directly or indirectly Director's conflict of duties or interests might be created in conflict with interest. his duties or interests as Director shall declare the fact and the nature, character and extent of the conflict at a meeting of the Directors of the Company in accordance with the Statutes. *87. (A) The Directors may from time to time appoint Appointment to be one or more of their body to be the holder of any holder of executive executive office (including, where considered office. appropriate, the office of Chairman or Deputy Chairman) on such terms and for such period as they may (subject to the provisions of the Statutes) determine and, without prejudice to the terms of any contract entered into in any particular case, may at any time revoke any such appointment. (B) The appointment of any Director to the office of Chairman or Deputy Chairman shall automatically determine if he ceases to be a Director but without prejudice to any claim for damages for breach of any contract of service between him and the Company. - ------------ * Deleted and substituted by Special Resolution passed at the Eighth Annual General Meeting held on 30 May 2002. - 21 - (C) The appointment of any Director to any other executive office shall not automatically determine if he ceases from any cause to be a Director, unless the contract or resolution under which he holds office shall expressly state otherwise, in which event such determination shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company. 88. The Directors may entrust to and confer upon Powers of executive any Directors holding any executive office any of the office holders. powers exercisable by them as Directors upon such terms and conditions and with such restrictions as they think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHIEF EXECUTIVE OFFICER OR PRESIDENT *89. The Directors may from time to time appoint Appointment of Chief one or more of their body to be Chief Executive Officer Executive Officer or or President of the Company and may from time to time President. (subject to the provisions of any contract between him or them and the Company) remove or dismiss him or them from office and appoint another or others in his or their place or places. *90. A Chief Executive Officer or President who is Retirement removal and a Director shall, subject to the provisions of any resignation of Chief contract between him and the Company, be subject to the Executive Officer or same provisions as to retirement by rotation, President. resignation and removal as the other Directors of the Company. *91. The remuneration of a Chief Executive Officer Remuneration of Chief or President shall from time to time be fixed by the Executive Officer or Directors and may subject to these presents be by way President. of salary or commission or participation in profits or by any or all these modes. *92. A Chief Executive Officer or President shall Powers of Chief at all times be subject to the control of the Directors Executive Officer or but subject thereto the Directors may from time to time President. entrust to and confer upon a Chief Executive Officer or President for the time being such of the powers exercisable under these presents by the Directors as they may think fit and may confer such powers for such time and to be exercised on such terms and conditions and with such restrictions as they think expedient and they may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the Directors in that behalf and may from time to time revoke, withdraw, alter or vary all or any of such powers. - ------------ * Deleted and substituted by Special Resolution passed at the Eighth Annual General Meeting held on 30 May 2002. - 22 - APPOINTMENT AND RETIREMENT OF DIRECTORS 93. The office of a Director shall be vacated in Vacation of office any of the following events, namely:- of Director. (a) if he shall become prohibited by law from acting as a Director; or (b) if (not being a Director holding any executive office for a fixed term) he shall resign by writing under his hand left at the Office or if he shall in writing offer to resign and the Directors shall resolve to accept such offer; or (c) if he shall have a receiving order made against him or shall compound with his creditors generally; or (d) if he becomes of unsound mind or if in Singapore or elsewhere an order shall be made by any court claiming jurisdiction in that behalf on the ground (however formulated) of mental disorder for his detention or for the appointment of a guardian or for the appointment of a receiver or other person (by whatever name called) to exercise powers with respect to his property or affairs; or (e) if he is removed by the Company in General Meeting pursuant to Article 98. *94. At each Annual General Meeting one-third of Retirement of the Directors for the time being (or, if their number Directors by is not a multiple of three, the number nearest to but rotation. not less than one-third) shall retire from office by rotation. 95. The Directors to retire in every year shall Selection of be those subject to retirement by rotation who have been Directors to retire longest in office since their last re-election or of rotation. appointment and so that as between persons who became or were last re-elected Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-election. 96. The Company at the meeting at which a Director Filling vacated retires under any provision of these presents may by office. Ordinary Resolution fill the office being vacated by electing thereto the retiring Director or some other person eligible for appointment. In default the retiring Director shall be deemed to have been re-elected except in any of the following cases:- (a) where at such meeting it is expressly resolved not to fill such office or a resolution for the re-election of such Director is put to the meeting and lost; - ------------ * Deleted and substituted by Special Resolution passed at the Eighth Annual General Meeting held on 30 May 2002. - 23 - (b) where such Director has given notice in writing to the Company that he is unwilling to be re-elected; (c) where the default is due to the moving of a resolution in contravention of the next following Article; or (d) where such Director has attained any retiring age applicable to him as Director. The retirement shall not have effect until the conclusion of the meeting except where a resolution is passed to elect some other person in the place of the retiring Director or a resolution for his re-election is put to the meeting and lost and accordingly a retiring Director who is re-elected or deemed to have been re-elected will continue in office without a break. 97. A resolution for the appointment of two or Appointment of more persons as Directors by a single resolution shall Directors. not be moved at any General Meeting unless a resolution that it shall be so moved has first been agreed to by the meeting without any vote being given against it; and any resolution moved in contravention of this provision shall be void. 98. The Company may in accordance with and subject Removal of Director. to the provisions of the Statutes by Ordinary Resolution of which special notice has been given remove any Director from office (notwithstanding any provision of these presents or of any agreement between the Company and such Director, but without prejudice to any claim he may have for damages for breach of any such agreement) and appoint another person in place of a Director so removed from office and any person so appointed shall be treated for the purpose of determining the time at which he or any other Director is to retire by rotation as if he had become a Director on the day on which the Director in whose place he is appointed was last elected a Director. In default of such appointment the vacancy arising upon the removal of a Director from office may be filled as a casual vacancy. 99. The Company may by Ordinary Resolution appoint Directors' power to any person to be a Director either to fill a casual fill casual vacancies vacancy or as an additional Director. Without prejudice and appoint thereto the Directors shall have power at any time so to additional Directors. do, but any person so appointed by the Directors shall hold office only until the next Annual General Meeting. He shall then be eligible for re-election, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting. ALTERNATE DIRECTORS 100. (A) Any Director may at any time by writing under Appointment of his hand and deposited at the Office, or delivered at a Alternate Director. meeting of the Directors, appoint any person (other than another Director) to be his alternate Director and may in like manner at any time terminate such appointment. Such appointment, unless previously approved by the Directors, shall have effect only upon and subject to being so approved. - 24 - (B) The appointment of an alternate Director shall determine on the happening of any event which if he were a Director would cause him to vacate such office or if the Director concerned (below called "his principal") ceases to be a Director. (C) An Alternate Director shall (except when absent from Singapore) be entitled to receive notices of meetings of the Directors and shall be entitled to attend and vote as a Director at any such meeting at which is principal is not personally present and generally at such meeting to perform all functions of his principal as a Director and for the purposes of the proceedings at such meeting the provisions of these presents shall apply as if he (instead of his principal) were a Director. If his principal is for the time being absent from Singapore or temporarily unable to act through ill health or disability, his signature to any resolution in writing of the Directors shall be as effective as the signature of his principal. To such extent as the Directors may from time to time determine in relation to any committee of the Directors, the foregoing provisions of this paragraph shall also apply mutatis mutandis to any ---------------- meeting of any such committee of which his principal is a member. An Alternate Director shall not (save as aforesaid) have power to act as a Director nor shall he be deemed to be a Director for the purposes of these presents. (D) An Alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified to the same extent mutatis mutandis ---------------- as if he were a Director but he shall not be entitled to receive from the Company in respect of his appointment as Alternate Director any remuneration except only such part (if any) of the remuneration otherwise payable to his principal as such principal may by notice in writing to the Company from time to time direct. MEETINGS AND PROCEEDINGS OF DIRECTORS 101. (A) Subject to the provisions of these presents Meetings of the Directors may meet together for the despatch of Directors. business, adjourn and otherwise regulate their meetings as they think fit. At any time any Director may, and the Secretary on the requisition of a Director shall, summon a meeting of the Directors. It shall not be necessary to give notice of a meeting of Directors to any Director for the time being absent from Singapore. Any Director may waive notice of any meeting and any such waiver may be retroactive. (B) Directors may participate in a meeting of the Directors by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, without a Director being in the physical presence of another Director or Directors, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. 102. The quorum necessary for the transaction of Quorum. the business of the Directors may be fixed from time to time by the Directors and unless so fixed at any other number shall be two. A meeting of the Directors at which a quorum is - 25 - present shall be competent to exercise all powers and discretions for the time being exercisable by the Directors. 103. Questions arising at any meeting of the Casting vote of Directors shall be determined by a majority of votes. chairman. In case of an equality of votes (except where only two Directors are present and form the quorum or when only two Directors are competent to vote on the question in issue) the chairman of the meeting shall have a second or casting vote. 104. A Director shall not vote in respect of any Prohibition against contract or arrangement or any other proposal voting. whatsoever in which he has any interest, directly or indirectly. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting. 105. The continuing Directors may act Proceeding in case notwithstanding any vacancies, but if and so long as of vacancy. the number of Directors is reduced below the minimum number fixed by or in accordance with these presents the continuing Directors or Director may act for the purpose of filling up such vacancies or of summoning General Meetings, but not for any other purpose. If there be no Directors or Director able or willing to act, then any two members may summon a General Meeting for the purpose of appointing Directors. 106. (A) The Directors may elect from their number a Chairman of Chairman and a Deputy Chairman (or two or more Deputy Directors. Chairmen) and determine the period for which each is to hold office. If no Chairman or Deputy Chairman shall have been appointed or if at any meeting of the Directors no Chairman or Deputy Chairman shall be present within five minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be chairman of the meeting. (B) If at any time there is more than one Deputy Chairman the right in the absence of the Chairman to preside at a meeting of the Directors or of the Company shall be determined as between the Deputy Chairmen present (if more than one) by seniority in length of appointment or otherwise as resolved by the Directors. *107. A resolution in writing signed by a majority Resolution in writing. in number of the Directors shall be as effective as a resolution duly passed at a meeting of the Directors and may consist of several documents in the like form, each signed by one or more Directors. The expressions "in writing" and "signed" include approval by any such Director by telefax, telex, cable or telegram or any form of electronic communication approved by the Directors for such purpose from time to time incorporating, if the Directors deem necessary, the use of security and/or identification procedures and devices approved by the Directors. 108. The Directors may delegate any of their powers Committee of or discretion to committees consisting of one or more Directors. members of their body and (if thought fit) one or more other persons co-opted as hereinafter provided. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations which may from time to time be imposed by the Directors. Any such regulations may provide for or authorise the co-option to the committee of persons other than Directors and for such co-opted members to have voting rights as members of the committee. - ------------ * Deleted and substituted by Special Resolution passed at the Seventh Annual General Meeting held on 31 May 2001. - 26 - 109. The meetings and proceedings of any such Meetings of committee consisting of two or more members shall be committee. governed mutatis mutandis by the provisions of these ---------------- presents regulating the meetings and proceedings of the Directors, so far as the same are not superseded by any regulations made by the Directors under the last preceding Article. 110. All acts done by any meeting of Directors, or Validity of act of of any such committee, or by any person acting as a Directors in spite Director or as a member of any such committee, shall as of formal defect. regards all persons dealing in good faith with the Company, notwithstanding that there was defect in the appointment of any of the persons acting as aforesaid, or that any such persons were disqualified or had vacated office, or were not entitled to vote, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director or member of the committee and had been entitled to vote. BORROWING POWERS 111. Subject as hereinafter provided and to the Borrowing powers. provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. GENERAL POWERS OF DIRECTORS 112. The business and affairs of the Company shall General power of be managed by the Directors, who may exercise all such Directors to manage powers of the Company as are not by the Statutes or by Company's business. these presents required to be exercised by the Company in General Meeting, subject nevertheless to any regulations of these presents, to the provisions of the Statutes and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by Special Resolution of the Company, but no regulation so made by the Company shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made; Provided that the Directors shall not carry into effect any proposals for selling or disposing of the whole or substantially the whole of the Company's undertaking unless such proposals have been approved by the Company in General Meeting. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article. 113. The Directors may establish any local boards Power to establish or agencies for managing any of the affairs of the local boards etc. Company, either in Singapore or elsewhere, and may appoint any persons to be members of such local boards, or any managers or agents, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the members of any local boards, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment or delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors - 27 - may remove any person so appointed, and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. 114. The Directors may from time to time and at Power to appoint any time by power of attorney or otherwise appoint any attorney. company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, autho- rities and discretions (not exceeding those vested in or exercisable by the Directors under these presents) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. 115. The Company or the Directors on behalf of the Power to keep Company may in exercise of the powers in that behalf Branch Register. conferred by the Statutes cause to be kept a Branch Register or Register of Members and the Directors may (subject to the provisions of the Statutes) make and vary such regulations as they may think fit in respect of the keeping of any such Register. 116. All cheques, promissory notes, drafts, bills Execution of of exchange, and other negotiable or transferable negotiable instruments, and all receipts for moneys paid to the instruments and Company, shall be signed, drawn, accepted, endorsed, or receipts for money otherwise executed, as the case may be, in such manner paid. as the Directors shall from time to time by resolution determine. SECRETARY 117. The Secretary shall be appointed by the Appointment and Directors on such terms and for such period as they may removal of think fit. Any Secretary so appointed may at any time Secretary. be removed from office by the Directors, but without prejudice to any claim for damages for breach of any contract of service between him and the Company. If thought fit two or more persons may be appointed as Joint Secretaries. The Directors may also appoint from time to time on such terms as they may think fit one or more Assistant Secretaries. The appointment and duties of the Secretary or Joint Secretaries shall not conflict with the Statutes and in particular Section 171 of the Act. THE SEAL 118. The Directors shall provide for the safe Usage of Seal. custody of the Seal which shall not be used without the authority of the Directors or of a committee authorised by the Directors in that behalf. 119. Every instrument to which the Seal shall be Seal. affixed shall be signed autographically by one Director and the Secretary or by a second Director or some another person appointed by the Directors save that as regards any certificates for - 28 - shares or debentures or other securities of the Company the Directors may by resolution determine that such signatures or either of them shall be dispensed with or affixed by some method or system of mechanical signature or other method approved by the Directors. 120. (A) The Company may exercise the powers conferred Official Seal. by the Statutes with regard to having an official seal for use abroad and such powers shall be vested in the Directors. (B) The Company may exercise the powers conferred Share Seal. by the Statutes with regard to having a duplicate Seal as referred to in Section 124 of the Act which shall be a facsimile of the Seal with the addition on its face of the words "Share Seal". AUTHENTICATION OF DOCUMENTS *121. Any Director or the Secretary or any person Power to appointed by the Directors for the purpose shall have authenticate power to authenticate any documents affecting the documents and constitution of the Company and any resolutions passed certified copies of by the Company or the Directors or any committee, and resolutions of the any books, records, documents and accounts relating to Company or the the business of the Company, and to certify copies Directors. thereof or extracts therefrom as true copies or extracts; and where any books, records, documents or accounts are elsewhere than at the Office, the local manager or other officer of the Company having the custody thereof shall be deemed to be a person appointed by the Directors as aforesaid. A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company or of the Directors or any committee which is certified as aforesaid shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed, or as the case may be, that any minute so extracted is a true and accurate record of proceedings at a duly constituted meeting. Any authentication or certification made pursuant to this Article may be made by any electronic means approved by the Directors from time to time for such purpose incorporating, if the Directors deem necessary, the use of security procedures or devices approved by the Directors. RESERVES 122. The Directors may from time to time set aside Power to carry out of the profits of the Company and carry to reserve profits to reserve. such sums as they think proper which, at the discretion of the Directors, shall be applicable for any purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested. The Directors may divide the reserve into such special funds as they think fit and may consolidate into one fund any special funds or any parts of any special funds into which the reserve may have been divided. The Directors may also, without placing the same to reserve, carry forward any profits. In carrying sums to reserve and in applying the same the Directors shall comply with the provisions of the Statutes. - ------------ * Deleted and substituted by Special Resolution passed at the Seventh Annual General Meeting held on 31 May 2001. - 29 - DIVIDENDS 123. The Company may by Ordinary Resolution Dividends. declare dividends but no such dividend shall exceed the amount recommended by the Directors. 124. If and so far as in the opinion of the Interim dividend. Directors the profits of the Company justify such payments, the Directors may declare and pay the fixed dividends on any class of shares carrying a fixed dividend expressed to be payable on fixed dates on the half-yearly or other dates prescribed for the payment thereof and may also from time to time declare and pay interim dividends on shares of any class of such amounts and on such dates and in respect of such periods as they think fit. 125. Unless and to the extent that the rights Apportionment of attached to any shares or the terms of issue thereof dividends. otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid on the shares - -------- during any portion or portions of the period in respect of which the dividend is paid. For the purposes of this Article no amount paid on a share in advance of calls shall be treated as paid on the share. 126. No dividend shall be paid otherwise than out Dividend payable of profits available for distribution under the only out of profits. provisions of the Statutes. 127. No dividend or other moneys payable on or in Dividend not to bear respect of a share shall bear interest as against the interest. Company. 128. (A) The Directors may retain any dividend or other Retention of moneys payable on or in respect of a share on which the dividend. Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. (B) The Directors may retain the dividends payable upon shares in respect of which any person is under the provisions as to the transmission of shares hereinbefore contained entitled to become a member, or which any person is under those provisions entitled to transfer, until such person shall become a member in respect of such shares or shall transfer the same. 129. The waiver in whole or in part of any dividend Waiver of dividend. on any share by any document (whether or not under seal) shall be effective only if such document is signed by the shareholder (or the person entitled to the share in consequence of the death or bankruptcy of the holder) and delivered to the Company and if or to the extent that the same is accepted as such or acted upon by the Company. 130. The Company may upon the recommendation of the Payment of dividend Directors by Ordinary Resolution direct payment of a in specie. dividend in whole or in part by the distribution of specific assets (and in particular of paid-up shares or debentures of any other company) and the Directors shall give effect to such resolution. Where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates, - 30 - may fix the value for distribution of such specific assets or any part thereof, may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. 131. Any dividend or other moneys payable in cash Dividends payable on or in respect of a share may be paid by cheque or by cheque or warrant sent through the post to the registered address warrant. appearing in the Register of Members or (as the case may be) the Depository Register of a member or person entitled thereto (or, if two or more persons are registered in the Register of Members or (as the case may be) entered in the Depository Register as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder, to any one of such persons) or to such person at such address as such member or person or persons may be writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and payment of the cheque or warrant by the banker upon whom it is drawn shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby. Notwithstanding the foregoing provisions of this Article and the provisions of Article 133, the payment by the Company to the Depository of any dividend payable to a Depositor shall, to the extent of the payment made to the Depository, discharge the Company from any liability to the Depositor in respect of that payment. 132. If two or more persons are registered in the Payment of dividend Register of Members or (as the case may be) the to joint holders. Depository Register as joint holders of any share, or are entitled jointly to a share in consequence of the death or bankruptcy of the holder, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable on or in respect of the share. 133. Any resolution declaring a dividend on shares Resolution declaring of any class, whether a resolution of the Company in dividends. General Meeting or a resolution of the Directors, may specify that the same shall be payable to the persons registered as the holders of such shares in the Register of Members or (as the case may be) the Depository Register at the close of business on a particular date and thereupon the dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect -------- of such dividend of transferors and transferees of any such shares. CAPITALISATION OF PROFITS AND RESERVES 134. The Directors may, with the sanction of an Power to capitalise Ordinary Resolution of the Company, capitalise any sum profits and standing to the credit of any of the Company's reserve implementation of accounts (including Share Premium Account, Capital resolution to Redemption Reserve Fund or other undistributable capitalise profits. reserve) or any sum standing to the credit of profit and loss account by appropriating such sum to the persons registered as holders of shares in the Register of Members or (as the case may be) in the Depository Register at the close of business on the date of the Resolution (or such other date - 31 - as may be specified therein or determined as therein provided) or such other date as may be determined by the Directors in proportion to their then holdings of shares and applying such sum on their behalf in paying up in full unissued shares (or, subject to any special rights previously conferred on any shares or class of shares for the time being issued, unissued shares of any other class not being redeemable shares) for allotment and distribution credited as fully paid up to and amongst them as bonus shares in the proportion aforesaid. The Directors may do all acts and things considered necessary or expedient to give effect to any such capitalisation, with full power to the Directors to make such provisions as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby fractional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the members concerned). The Directors may authorise any person to enter on behalf of all the members interested into an agreement with the Company providing for any such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned. 135. In addition and without prejudice to the power Power to capitalise to capitalise profits and other moneys provided for by profits for paying up Article 134, the Directors shall have power to shares to be issued capitalise any undivided profits or other moneys of the under share option Company not required for the payment or provision of scheme. the fixed dividend on any shares entitled to fixed cumulative or non-cumulative preferential dividends (including profits or moneys carried and standing to any reserve or reserves) and to apply such profits or moneys in paying up in full at par unissued shares on terms that such shares shall, upon issue, be held by or for the benefit of participants of any share incentive or option scheme or plan implemented by the Company and approved by shareholders in General Meeting in such manner and on such terms as the Directors shall think fit. ACCOUNTS 136. Accounting records sufficient to show and Accounting records. explain the Company's transactions and otherwise complying with the Statutes shall be kept at the Office, or at such other place as the Directors think fit. No member of the Company or other person shall have any right of inspecting any account or book or document of the Company except as conferred by statute or ordered by a court of competent jurisdiction or authorised by the Directors. *137. In accordance with the Statutes, the Directors Presentation of shall cause to be prepared and to be laid before the accounts. Company in General Meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as may be necessary. The interval between the close of a financial year of the Company and the issue of accounts relating thereto shall not exceed four months (or such period as may be permitted by the Companies Act). 138. A copy of every balance sheet and profit and Copies of accounts. loss account which is to be laid before a General Meeting of the Company (including every document required by law to be comprised therein or attached or annexed thereto) shall not less than 14 days before the date of the meeting be sent to every member of, and every holder of debentures of, the Company and to every other person who is - ------------ * Deleted and substituted by Special Resolution passed at Ninth Annual General Meeting held on 28 May 2003. - 32 - entitled to receive notices of meetings from the Company under the provisions of the Statutes or of these presents; Provided that this Article shall not require a copy of these documents to be sent to more than one or any joint holders or to any person of whose address the Company is not aware, but any member or holder of debentures to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office. AUDITORS 139. Subject to the provisions of the Statutes, Validity of acts of all acts done by any person acting as an Auditor shall, Auditor despite as regards all persons dealing in good faith with the formal defects. Company, be valid, notwithstanding that there was some defect in his appointment or that he was at the time of his appointment not qualified for appointment or subsequently became disqualified. 140. An Auditor shall be entitled to attend any Notices to Auditors. General Meeting and to receive all notices of and other communications relating to any General Meeting which any member is entitled to receive and to be heard at any General Meeting on any part of the business of the meeting which concerns him as Auditor. NOTICES 141. Any notice or document (including a share Service of notice or certificate) may be served on or delivered to any document. member by the Company either personally or by sending it through the post in a prepaid cover addressed to such member at his registered address appearing in the Register of Members or (as the case may be) the Depository Register, or (if he has no registered address within Singapore) to the address, if any, within Singapore supplied by him to the Company or (as the case may be) supplied by him to the Depository as his address for the service of notices, or by delivering it to such address as aforesaid. Where a notice or other document is served or sent by post, service or delivery shall be deemed to be effected at the time when the cover containing the same is posted and in proving such service or delivery it shall be sufficient to prove that such cover was properly addressed, stamped and posted. 142. Any notice given to that one of the joint Service of notice to holders of a share whose name stands first in the joint holders. Register of Members or (as the case may be) the Depository Register in respect of the share shall be sufficient notice to all the joint holders in their capacity as such. For such purpose a joint holder having no registered address in Singapore and not having supplied an address within Singapore for the service of notices shall be disregarded. 143. A person entitled to a share in consequence Service of notices of the death or bankruptcy of a member upon supplying after death, to the Company such evidence as the Directors may bankruptcy etc. reasonably require to show his title to the share, and upon supplying also to the Company or (as the case may be) the Depository an address within Singapore for the service of notices, shall be entitled to have served upon or delivered to him at such address any notice or document to which the member but - 33 - for his death or bankruptcy would have been entitled, and such service or delivery shall for all purposes be deemed a sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. Save as aforesaid any notice or document delivered or sent by post to or left at the address of any member in pursuance of these presents shall, notwithstanding that such member be then dead or bankrupt or in liquidation, and whether or not the Company shall have notice of his death or bankruptcy or liquidation, be deemed to have been duly served or delivered in respect of any share registered in the name of such member in the Register of Members or, where such member is a Depositor, entered against his name in the Depository Register as sole or first-named joint holder. 144. A member who (having no registered address No notice to member within Singapore) has not supplied to the Company or with no registered (as the case may be) the Depository an address within address in Singapore for the service of notices shall not be Singapore. entitled to receive notices from the Company. WINDING UP 145. The Directors shall have power in the name Voluntary winding and on behalf of the Company to present a petition to up. the court for the Company to be wound up. 146. If the Company shall be wound up (whether Distribution of the liquidation is voluntary, under supervision, or by assets in specie. the court) the Liquidator may, with the authority of a Special Resolution, divide among the members in specie --------- or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property and may determine how such division shall be carried out as between the members of different classes of members. The Liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the Liquidator with the like authority shall think fit, and the liquidation of the Company may be closed and the Company dissolved, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability. 147. On a voluntary winding up of the Company, no Liquidators' commission or fee shall be paid to a Liquidator without commission. the prior approval of the members in General Meeting. The amount of such commission or fee shall be notified to all members not less than seven days prior to the General Meeting at which it is to be considered. 148. In the event of a winding up of the Company Service of notice every member of the Company who is not for the time after winding up. being in the Republic of Singapore shall be bound, within fourteen days after the passing of an effective resolution to wind up the Company voluntarily, or within the like period after the making of an order for the winding up of the Company, to serve notice in writing on the Company appointing some householder in the Republic of Singapore upon whom all summonses, notices, processes, orders and judgments in relation to or under the - 34 - winding up of the Company may be served, and in default of such nomination the liquidator of the Company shall be at liberty on behalf of such member to appoint some such person, and service upon any such appointee shall be deemed to be a good personal service on such member for all purposes, and where the liquidator makes any such appointment he shall, with all convenient speed, give notice thereof to such member by advertisement in any leading daily newspaper in the English language in circulation in Singapore or by a registered letter sent through the post and addressed to such member at his address as appearing in the Register of Members or (as the case may be) the Depository Register, and such notice shall be deemed to be served on the day following that on which the advertisement appears or the letter is posted. INDEMNITY 149. Subject to the provisions of and so far as Indemnity of may be permitted by the Statutes, every Director, Directors and Auditor, Secretary or other officer of the Company office. shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities incurred by him in the execution and discharge of his duties or in relation thereto including any liability incurred by him in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by him as an officer or employee of the Company. Without prejudice to the generality of the foregoing, no Director, Manager, Secretary or other officer of the Company shall be liable for the acts, receipts, neglects or defaults of any other Director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same shall happen through his own negligence, wilful default, breach of duty or breach of trust. SECRECY 150. No member shall be entitled to require Secrecy. discovery of or any information respecting any detail of the Company's trade or any matter which may be in the nature of a trade secret, mystery of trade or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interest of the members of the Company to communicate to the public save as may be authorised by law. - 35 - EX-4.12 4 u92302exv4w12.txt EX-4.12 AMENDMENT AGREEMENT DATED APR 22, 2003 EXHIBIT 4.12 PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED 'CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION' AND THE CONFIDENTIAL SECTION HAS BEEN MARKED IN THE MARGIN WITH A STAR (*) Amendment renewing the IMMUNITY AGREEMENT entered into October 18, 1996 between Motorola, Inc. and ST Assembly Test Services Pte. Ltd. Motorola, Inc. and ST Assembly Test Services Ltd. agree to amend the above-identified IMMUNITY AGREEMENT as follows: 1. In Section 1, after Section 1.7 add new Section 1.8 below: 1.8 ASSEMBLY HOUSE SALES shall mean the total consolidated gross sales revenues of ST ASSEMBLY TEST SERVICES PTE. LTD., and any of its subsidiaries as reported by ST ASSEMBLY TEST SERVICES PTE. LTD., or its parent company, if any, to the relevant Singapore government authorities or to the public, as the case may be. 2. In Section 1.4, line 6, replace "integrated circuit device" with "INTEGRATED CIRCUIT STRUCTURE or STRUCTURES". 3. In Section 1.7, replace "the date of the last signature hereto." with "January 1, 2003." 4. Replace Old Section 4.1 with New Section 4.1 below: 4.1 In partial consideration of the rights granted by MOTOROLA under Section 3 for the period beginning on the EFFECTIVE DATE and extending to December 31, 2010, ASSEMBLY HOUSE agrees to pay MOTOROLA royalty payments amounting to XXXXXXXXXX of ASSEMBLY * HOUSE SALES. * 5. Delete Section 4.1.1. 6. Delete Section 4.1.2. 7. Delete Section 4.2. 8. Delete Section 4.5. 9. Delete Section 4.6. 10. In Section 5.1, line 2, replace "2002" with "2010". 11. In Section 5.6, lines 3-7, remove ", except to a successor in ownership of all or substantially all of the assets of the assigning party. Such successor, before such assignment or transfer is effective, shall expressly assume in writing to the other party the performance of all of the terms and conditions of this Agreement to be performed by the assigning party". 12. Renumber Section "6.9" to "6.10". CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION Amendment renewing the IMMUNITY AGREEMENT entered into October 18 1996 between Motorola, Inc. and ST Assembly Test Services Pte. Ltd. 13. Renumber Section "6.9.1" to "6.10.1". 14. Renumber Section "6.9.2" to "6.10.2". 15. Renumber Section "6.9.3" to "6.10.3". 16. After Section 6.8, add new Sections 6.9 and 6.9.1-6.9.6 as indicated below: 6.9 The parties shall have the right to disclose the existence of this Agreement. The parties hereto, however, shall keep the terms of the Agreement confidential and shall not now or hereafter divulge any part thereof to any third party except: 6.9.1 with the prior written consent of the other party; or 6.9.2 to any governmental body having jurisdiction to request and to read the same; or 6.9.3 as otherwise may be required by law or legal processes; or 6.9.4 to legal counsel representing either party. 6.9.5 Notwithstanding the above, no disclosure of this Agreement shall be made pursuant to Section 6.9.2 or 6.9.3 without the disclosing party first giving the other party reasonable prior notice of such intended disclosure so as to allow the other party sufficient time to seek a protective order or otherwise assure the confidentiality of this Agreement as that other party shall deem appropriate. 6.9.6 Notwithstanding anything to the contrary herein, the provisions of this Section 6.9 shall survive termination of this Agreement and continue in perpetuity. All other terms and conditions of the above-identified IMMUNITY AGREEMENT remain the same. Indicating their agreement to the foregoing, the parties have hereto executed this Agreement in duplicate. Motorola, Inc. ST Assembly Test Services Ltd. By: /s/ Paul Reidy By: /s/ Han Byung Joon ------------------------- ------------------------ Title: Director, IP Licensing Title: CTO ---------------------- --------------------- Date: 4/18/03 Date: 4/22/03 ----------------------- ---------------------- IMMUNITY AGREEMENT THIS AGREEMENT is effective as of the 18th day of OCTOBER, 1996, by and between MOTOROLA, INC., a Delaware corporation having an office at 3102 North 56th Street, Phoenix, Arizona 85018, (hereinafter called "MOTOROLA"), and ST ASSEMBLY TEST SERVICES PTE. LTD., having its principal office at 33 Marsiling Industrial Estate Road 3, #03-01, Singapore 739256, (hereinafter called "ASSEMBLY HOUSE"). WHEREAS, MOTOROLA owns and has, or may have patents issued, and applications for patents pending, in various countries of the world which relate to ball grid array (BGA) PACKAGEs (as hereinafter defined), and WHEREAS, ASSEMBLY HOUSE owns and has, or may have, rights in various patents issued, and applications for patents pending, in various countries of the world which may relate to BGA PACKAGEs and WHEREAS, ASSEMBLY HOUSE and MOTOROLA are engaged in continuing research, development and engineering in regard to BGA PACKAGES and have programs for the patenting of inventions resulting therefrom; and WHEREAS, MOTOROLA is interested in proliferating BGA PACKAGEs as a standard in semiconductor industry; and WHEREAS, ASSEMBLY HOUSE is interested in providing the service of making BGA PACKAGEs for semiconductor manufacturers including those who are competitors of MOTOROLA; NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, it is agreed as follows: Section 1 -- DEFINITIONS 1.1 SUBSIDIARY(IES) means a corporation, company, or other entity more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly by a party hereto, but such corporation, company, or other entity shall be deemed to be a SUBSIDIARY only so long as such ownership or control exists. 1.2 SEMICONDUCTIVE MATERIAL means any material whose conductivity is intermediate to that of metals and insulators at room temperature and whose conductivity, over some temperature range, increases with increases in temperature. Such material shall include but not be limited to refined products, reaction products, reduced products, mixtures and compounds. 1.3 INTEGRATED CIRCUIT STRUCTURE means an integral unit consisting primarily of a plurality of active and/or passive circuit elements associated on, or in, a unitary body of SEMICONDUCTIVE MATERIAL for performing electrical or electronic functions. Page 1 1.4 BGA PACKAGE means a housing for an INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs in which the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs are mounted on one side of a substrate of printed circuit board material or the like and are wire bonded to the substrate, plastic overlies the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs, and pads for receiving solder balls or the like and providing electrical contacts to the integrated circuit device are mounted on the substrate on the side opposite to that on which the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs are mounted. Some BGA packages may have some pads which are not electrically connected to the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs. 1.5 MOTOROLA PATENTS means all classes or types of patents, utility models, design patents and applications for the aforementioned of all countries of the world relating to BGA PACKAGEs and enhancements thereto which, prior to the date of expiration or termination of this Agreement, are: (i) issued, published or filed, and which arises out of inventions made solely by one or more employees of MOTOROLA or a SUBSIDIARY thereof, or (ii) acquired by MOTOROLA or a SUBSIDIARY thereof. and under which and to the extent to which and subject to the conditions under which MOTOROLA or a SUBSIDIARY thereof may have, as of the EFFECTIVE DATE of this Agreement, or may thereafter during the term of this Agreement acquire, the right to grant licenses or rights of the scope granted herein without the payment of royalties or other consideration to third persons, except for payments to third persons (a) for inventions made by said third persons while engaged by MOTOROLA or a SUBSIDIARY thereof, and (b) as consideration for the acquisition of such patents, utility models, design patents and applications. 1.6 ASSEMBLY HOUSE PATENTS means all classes or types of patents, utility models, design patents and applications for the aforementioned of all countries of the world relating to BGA PACKAGEs and enhancements thereto which, prior to the date of expiration or termination of this Agreement, are: (i) issued, published or filed, and which arise out of inventions made solely by one or more employees of ASSEMBLY HOUSE or a SUBSIDIARY thereof, or (ii) acquired by ASSEMBLY HOUSE or a SUBSIDIARY thereof, and under which and to the extent to which and subject to the conditions under which ASSEMBLY HOUSE or a SUBSIDIARY thereof may have, as of the EFFECTIVE DATE of this Agreement, or may thereafter during the term of this Agreement acquire, the right to grant licenses or rights of the scope granted herein without the payment of royalties or other consideration to third persons, except for payments to third persons (a) for inventions made by said third persons while engaged by ASSEMBLY HOUSE or a SUBSIDIARY thereof and (b) as consideration for the acquisition of such patents, utility models, design patents and applications. Page 2 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 1.7 EFFECTIVE DATE means the date of the last signature hereto. Section 2 - MUTUAL RELEASES 2.1 MOTOROLA hereby releases, acquits and forever discharges ASSEMBLY HOUSE and its SUBSIDIARIES for any time prior to the EFFECTIVE DATE, from any and all claims or liability for infringement or alleged infringement of any MOTOROLA PATENTS for which immunity from suit is herein granted by MOTOROLA. 2.2 ASSEMBLY HOUSE and its SUBSIDIARIES hereby releases, acquits and forever discharges MOTOROLA and its SUBSIDIARIES for any time prior to the EFFECTIVE DATE, from any and all claims or liability for infringement or alleged infringement of any ASSEMBLY HOUSE PATENTS for which immunity from suit is herein granted by ASSEMBLY HOUSE to MOTOROLA. Section 3 - IMMUNITY FROM SUIT 3.1 MOTOROLA hereby grants to ASSEMBLY HOUSE and its SUBSIDIARIES, for the term of this Agreement, immunity from suit under MOTOROLA PATENTS for making BGA PACKAGES, with or without solder balls or the like, for another and for ASSEMBLY HOUSE internal use. In no event shall the immunity from suit apply to MOTOROLA PATENTS which are infringed by the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs independent of being packaged in BGA PACKAGES. 3.2 ASSEMBLY HOUSE and its SUBSIDIARIES hereby grant to MOTOROLA and its SUBSIDIARIES, for the term of this Agreement, immunity from suit under ASSEMBLY HOUSE PATENTS for making and/or having made BGA PACKAGES, with or without solder balls or the like, and for the subsequent sale and use thereof. In no event shall the immunity from suit apply to ASSEMBLY HOUSE PATENTS which are infringed by the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs independent of being packaged in BGA PACKAGEs. 3.3 No licenses under any copyrights or mask work rights of either MOTOROLA or ASSEMBLY HOUSE or a SUBSIDIARY thereof, are granted under this Agreement. Section 4 - PAYMENTS 4.1 In partial consideration of the rights granted by MOTOROLA under Section 3, for the period beginning on the EFFECTIVE DATE and extending to December 31, 2002. ASSEMBLY HOUSE agrees to pay MOTOROLA a royalty based on the total number of pads on BGA PACKAGEs made by ASSEMBLY HOUSE and its SUBSIDIARIES, and shipped and invoiced to customers of ASSEMBLY HOUSE or its SUBSIDIARIES, excluding those made for MOTOROLA and excluding returns. 4.1.1 The royalty shall be XXXXXX per X until a royalty of XXXXXX has * been accrued. * Page 3 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION * 4.12 After a royalty of XXXXX has been accrued, the royalty shall be * XXXXX per pad. * 4.2. Royalty payments shall be determined by the total number of pads on BGA PACKAGEs subject to the immunity from suit of section 3.1 shipped during a payment period to customers of ASSEMBLY HOUSE or its SUBSIDIARIES excluding those shipped to MOTOROLA and excluding returns. 4.3 Payment periods shall be on a quarterly basis. Within forty-five (45) days after each calender quarter ending March 31, June 30, September 30, and December 31. ASSEMBLY HOUSE shall pay to MOTOROLA the royalties payable hereunder for the respective calender quarter ending on such date as determined above. 4.4 Any payment hereunder which shall be delayed for more than thirty (30) days beyond the due date shall be subject to an interest charge of one (1) percent per month on the unpaid balance payable in United States currency until paid. The foregoing payment of interest shall not affect MOTOROLA's right to terminate in accordance with Section 5. 4.5 ASSEMBLY HOUSE shall keep full, clear and accurate records with respect to BGA PACKAGEs. MOTOROLA shall have the right through a mutually agreed upon independent auditor to examine and audit no more than once a year at a mutually agreeable time all such records and such other records and accounts as may under recognized accounting practices contain information bearing upon the amount of royalty payable to MOTOROLA under this Agreement. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such examination or audit. Neither such right to examine and audit nor the right to receive such adjustment shall be affected by any statement to the contrary appearing on a check or otherwise, MOTOROLA shall be responsible for the compensation of the auditor. 4.6 Within forty-five (45) days after each calender quarter ending March 31, June 30, September 30, December 31 and continuing thereafter until all royalties payable hereunder shall have been reported and paid, ASSEMBLY HOUSE shall furnish to MOTOROLA a detailed and complete written statement, certified by a responsible officer of ASSEMBLY HOUSE as showing all BGA PACKAGEs which were either manufactured, sold, leased, put into use, or otherwise disposed of during such periods, and the amount payable thereon. If no such BGA PACKAGEs have been manufactured, sold, leased, put into use, or otherwise disposed of, that fact shall be shown on such statement. 4.7 Payments hereunder are to be made to MOTOROLA's New York City account at CITIBANK 38491386, 1 Citicorp Center, 399 Park Avenue, New York, New York 10043. Notice of payments shall be sent by ASSEMBLY HOUSE to MOTOROLA's address in Section 6.9. Section 5 - TERM AND TERMINATION AND ASSIGNABILITY 5.1 The term of this Agreement shall be from the EFFECTIVE DATE until December 31, 2002 unless earlier terminated as elsewhere provided in this Agreement. Page 4 5.2 In the event of any breach of this Agreement by either party hereto (including ASSEMBLY HOUSE's obligation to make payments under Section 4), if such breach is not corrected within forty-five (45) days after written notice describing such breach, this Agreement may be terminated forthwith by further written notice to that effect from the party noticing the breach. 5.3 Either party hereto shall also have the right to terminate this Agreement forthwith by giving written notice of termination to the other party at any time, upon or after: 5.3.1 the filing by such other party of a petition in bankruptcy or insolvency; or 5.3.2 any adjudication that such other party is bankrupt or insolvent; or 5.3.3 the filing by such other party of any legal action or document seeking reorganization, readjustment or arrangement of its business under any law relating to bankruptcy or insolvency; or 5.3.4 the appointment of a receiver for all or substantially all of the property of such other party; or 5.3.5 the making by such other party of any assignment for the benefit of creditors; or 5.3.6 the institution of any proceedings for the liquidation or winding up of such other party's business or for the termination of its corporate charter. 5.4 In the event of termination of this Agreement by one party pursuant to Section 5.2, the immunity and rights granted to or for the benefit of that one party hereto and its SUBSIDIARIES under MOTOROLA PATENTS or ASSEMBLY HOUSE PATENTS, as the case may be, depending upon who is the party doing the terminating, shall survive such termination and shall extend for the full term of this Agreement, but the immunity and rights granted to or for the benefit of the other party shall terminate as of the date termination takes effect. 5.5 At such time as is mutually agreeable, at the written request of either party hereto to the other party hereto, but in no event less than six (6) months prior to the expiration of this Agreement, the parties hereto shall discuss the possible extension of or the renewal of the term of this Agreement, including the possible amendment of the provisions thereof. 5.6 The rights or privileges provided for in this Agreement may be assigned or transferred by either party only with the prior written consent of the other party and with the authorization or approval of any governmental authority as then may be required, except to a successor in ownership of all or substantially all of the assets of the assigning party. Such successor, before such assignment or transfer is effective, shall expressly assume in writing to the other party the performance of all of the terms and conditions of this Agreement to be performed by the assigning party. Page 5 Section 6 - MISCELLANEOUS PROVISIONS 6.1 Each of the parties hereto represents and warrants that it has the right to grant to or for the benefit of the other the immunity and rights granted hereunder in Sections 2 and 3. 6.2 Nothing contained in this Agreement shall be construed as: 6.2.1 restricting the right of MOTOROLA or any of its SUBSIDIARIES to make, use, sell, lease or otherwise dispose of any particular product or products not herein licensed; 6.2.2 restricting the right of ASSEMBLY HOUSE or any of its SUBSIDIARIES to make, use, sell, lease or otherwise dispose of any particular product or products not herein licensed; 6.2.3 an admission by ASSEMBLY HOUSE of, or a warranty or representation by MOTOROLA as to, the validity and/or scope of the MOTOROLA PATENTS, or a limitation on ASSEMBLY HOUSE to contest, in any proceeding, the validity and/or scope thereof; 6.2.4 an admission by MOTOROLA of, or a warranty or representation by ASSEMBLY HOUSE as to, the validity and/or scope of the ASSEMBLY HOUSE PATENTS, or a limitation on MOTOROLA to contest, in any proceeding, the validity and/or scope thereof; 6.2.5 conferring any license or other right, by implication, estoppel or otherwise, under any patent application, patent or patent right, except as herein expressly granted under the MOTOROLA PATENTS, and the ASSEMBLY HOUSE PATENTS; 6.2.6 conferring any license or right with respect to any trademark, trade or brand name, a corporate name of either party or any of their respective SUBSIDIARIES, or any other name or mark or contraction, abbreviation or simulation thereof; 6.2.7 imposing on MOTOROLA any obligation to institute any suit or action for infringement of any MOTOROLA PATENTS, or to defend any suit or action brought by a third party which challenges or concerns the validity of any MOTOROLA PATENTS; 6.2.8 imposing upon ASSEMBLY HOUSE any obligation to institute any suit or action for infringement of any ASSEMBLY HOUSE PATENTS, or to defend any suit or action brought by a third party which challenges or concerns the validity of any ASSEMBLY HOUSE PATENTS; 6.2.9 imposing on either party any obligation to the file any patent application or to secure any patent or maintain any patent in force; or Page 6 6.2.10 an obligation on either party to furnish any manufacturing or technical information under this Agreement except as the same is specifically provided for herein. 6.3 No express or implied waiver by either of the parties to this Agreement of any breach of any term, condition or obligation of this Agreement by the other party shall be construed as a waiver of any subsequent breach of that term, condition or obligation or of any other term, condition or obligation of this Agreement of the same or of a different nature. 6.4 Anything contained in this Agreement to the contrary notwithstanding, the obligations of the parties hereto shall be subject to all laws, both present and future, of any Government having jurisdiction over either party hereto, and to orders or regulations of any such Government, or any department, agency, or court thereof, and acts of war, acts of public enemies, strikes, or other labor disturbances, fires, floods, acts of God, or any causes of like or different kind beyond the control of the parties, and the parties hereto shall be excused from any failure to perform any obligation hereunder to the extent such failure is caused by any such law, order, regulation, or contingency but only so long as said law, order, regulation or contingency continues. 6.5 The captions used in this Agreement are for convenience only, and are not to be used in interpreting the obligations of the parties under this Agreement. 6.6 This Agreement and the performance of the parties hereunder shall be construed in accordance with and governed by the laws of the State of Illinois. 6.7 If any term, clause, or provision of this Agreement shall be judged to be invalid, the validity of any other term, clause or provision shall not be affected; and such invalid term, clause, or provision shall be deemed deleted from this Agreement. 6.8 This Agreement sets forth the entire Agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them, and neither of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the party to be bound thereby. 6.9 All notices required or permitted to be given hereunder shall be in writing and shall be valid and sufficient if dispatched by registered airmail, postage prepaid, in any post office in the United States, addressed as follows: Page 7 6.9.1 If to MOTOROLA: Motorola Inc. 1303 East Algonquin Road Schaumburg, Illinois 60196 Attention: Vice President for Patents, Trademarks & Licensing 6.9.2 If to ASSEMBLY HOUSE: ST Assembly Test Services Pte. Ltd. 33 Marsiling Industrial Estate Road 3 #03-01 Singapore 739256 Attention: Mr. Lee Joon Chung, General Manager 6.9.3 The date of receipt of such a notice shall be the date for the commencement of the running of the period provided for in such notice, or the date at which such notice takes effect, as the case may be. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate. MOTOROLA, INC. ST ASSEMBLY TEST SERVICES PTE. LTD. /s/ George Turner /s/ Lee Joon Chung - ----------------------------------- --------------------------------- George Turner Mr. Lee Joon Chung Vice President & General Manager General Manager Logic and Analog Technologies Group ST Assembly Test Services Pte. Ltd. Semiconductor Products Sector Motorola, Inc. Date: 9/30/96 Date: 9/11/96 ----------------------------- --------------------------- /s/ James W. Gillman /s/ Tan Bock Seng - ----------------------------------- --------------------------------- James W. Gillman Mr. Tan Bock Seng Corporate Vice President, Patents, Board Director Trademarks, and Licensing ST Assembly Test Services Pte. Ltd. Motorola, Inc. Date: 10/18/96 Date: 9/11/96 ----------------------------- --------------------------- Page 8 EX-4.13 5 u92302exv4w13.txt EX-4.13 SECURITIES PLEDGE AGRMT DD JAN 16, 2004 EXHIBIT 4.13 16 JANUARY 2004 SECURITIES PLEDGE AGREEMENT BETWEEN ST ASSEMBLY TEST SERVICES LTD, SINGAPORE AS PLEDGOR AND DEUTSCHE BANK AG, LONDON BRANCH AS PLEDGEE 1 of 11 SECURITIES PLEDGE AGREEMENT BETWEEN ST ASSEMBLY TEST SERVICES LTD, as Pledgor (the "PLEDGOR"); AND, DEUTSCHE BANK AG, LONDON BRANCH, as Pledgee hereunder (the "Pledgee"); WHEREAS (A) The Pledgor and the Pledgee have entered into an Asset Swap Transaction (the "Transaction") documented pursuant to a letter agreement ("Confirmation") in the form attached hereto as Schedule 2, as amended and supplemented from time to time. (B) The Confirmation supplements, forms a part of, and is subject to, an ISDA Master Agreement, between the Pledgor and the Pledgee (the "Master Agreement") as amended, supplemented and substituted from time to time; (C) In order to secure the obligations of the Pledgor to the Pledgee under the Master Agreement in relation to the Transaction, the parties wish to create a first priority pledge in respect of the Euroclear Entitlements (as defined below); (D) The Pledgee shall hold the Euroclear Entitlements in special pledged accounts in its name, as further set out herein. THE PARTIES HAVE AGREED AS FOLLOWS: 1. DEFINITIONS In the Agreement, the following terms shall have the meanings set out below. Capitalised terms which are not defined in the Agreement shall have the meanings given to them in either of the Master Agreement or the Confirmation, as the case may be. "AGREEMENT" means this securities pledge agreement, together with its schedules; "BONDS" means the bonds listed in Schedule 1 to the Agreement, which shall be subject to adjustment in accordance with Clause 5. "EUROCLEAR BANK" means Euroclear Bank NV/SA, as operator of the Euroclear System; 2 of 11 "EUROCLEAR DISTRIBUTIONS" means any and all amounts received by the Pledgor in respect of Euroclear Entitlements, whether by way of dividend, interest, return of capital or otherwise; "EUROCLEAR ENTITLEMENTS" means the entitlements, whether to cash or securities, and all related rights of any kind, related to the Bonds and standing from time to time to the credit of the Pledged Accounts, including any Euroclear Distributions; "EUROCLEAR SYSTEM" means the clearance and settlement system for internationally traded securities operated under contract by Euroclear Bank, including all services offered by Euroclear Bank in respect of securities held or recorded in any account as set forth in the Terms and Conditions Governing Use of Euroclear or in the Operating Procedures of the Euroclear System; "PLEDGED ACCOUNT TERMS AND CONDITIONS" means the Single Pledgor Pledged Account Terms and Conditions (2001 Edition) entered into by the Pledgor, Pledgee, and Euroclear Bank in connection with the pledge of the Euroclear Entitlements contemplated in the Agreement, and any variations of those terms and conditions made from time to time by Euroclear Bank, which Single Pledgor Pledged Account Terms and Conditions shall be read in conjunction with the terms and conditions of the Agreement; "PLEDGED ACCOUNTS" means the Pledged Securities Account and the Pledged Cash Account; "PLEDGED SECURITIES ACCOUNT" means the Securities Clearance Account (as defined in the Operating Procedures of the Euroclear System, as amended from time to time) in the Euroclear System in the name of the Pledgee opened pursuant to the Pledged Account Terms and Conditions; "PLEDGED CASH ACCOUNT" means the Cash Account (as defined in the Operating Procedures of the Euroclear System, as amended from time to time) in the Euroclear System in the name of the Pledgee associated with the Pledged Securities Account (including any credit or debit balance which now appears or may at any time in the future appear in any currency or composite currency unit sub-account of such cash account); "ROYAL DECREE NO. 62" means Belgian Royal Decree No. 62 of 10 November 1967 promoting the circulation of securities, as amended from time to time; "SECURED LIABILITIES" means all present and future obligations and liabilities, whether actual or contingent, of the Pledgor, or its successor in rights under any title whatsoever, to the Pledgee under the Master Agreement and/or the Agreement, including any amendments or extensions thereof in relation to the Transaction; 3 of 11 "SECURITY PERIOD" means the period beginning on the date hereof and ending on the date upon which all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full pursuant to Clause 5 2. 2. PLEDGE 2.1 The Pledgor hereby pledges to the Pledgee all right, title and interest of the Pledgor in and to the Euroclear Entitlements, as security for the discharge and payment of the Secured Liabilities. 2.2 Clause 2.1 shall be construed as creating a first ranking commercial pledge (gage commercial/handelspand) under the Belgian Law of 5 May 1872 and under Article 5 of Royal Decree N degrees 62. 3. PERFECTION OF THE PLEDGE 3.1 On the Effective Date (as defined in the Confirmation), the Bonds shall be transferred into the Pledged Securities Account, and the Pledgor, the Pledgee and Euroclear Bank shall enter into the Pledged Account Terms and Conditions, under which each of the Pledgor and the Pledgee appoints Euroclear Bank, and Euroclear Bank has agreed to act, as the pledgeholder ("tiers detenteur du gage/ derde pandhouder"). For the avoidance of doubt, the parties agree that the Pledged Account Terms and Conditions entered into pursuant to the Securities Pledge Agreement dated as of the date hereof between the Pledgor and the Pledgee, shall remain in full force and effect for the purposes of the Agreement 3.2 This Agreement, together with the Pledged Account Terms and Conditions, represents the entire agreement between the parties with respect to the obligations of the Pledgor and the Pledgee with respect to the Pledged Accounts and/or Euroclear Entitlements. In case of conflict between the Pledged Account Terms and Conditions and this Agreement, the latter will prevail as between the parties to the Agreement. 4. DEPOSITS IN THE EUROCLEAR PLEDGED ACCOUNT 4.1 All Euroclear Entitlements shall be credited to the respective Pledged Accounts. (a) The parties shall treat the Pledged Accounts for all purposes as special accounts specifically opened for the purpose of holding pledged assets. 5. RELEASE AND SUBSTITUTION 5.1 Except as expressly provided below the pledge created and perfected in accordance with the Agreement shall continue and remain in effect until expressly released by the Pledgee. Nothwithstanding the insolvency or liquidation or any incapacity or change in the constitution or status of the Pledgor or any intermediate settlement or account or any matter whatsoever, such pledge and the obligations of the Pledgor thereunder shall not in any way be discharged by reason of any matter (other than due performance of the obligations which the Pledgor is stated to have assumed hereunder) which might, but for the provisions of this sections 5.1, discharge the Pledgor from its obligations hereunder. 4 of 11 5.2 Subject to and in accordance with the provisions set out in the Master Agreement and/or the Confirmation, as the case may be, the Pledgee shall grant an express release of this pledge, without unreasonable delay upon demand of the Pledgor, upon the expiry of the Security Period. Following the irrevocable and unconditional payment or discharge by the Pledgor of all of the Secured Liabilities to the complete satisfaction of the Pledgee, the Pledgee shall give instructions to Euroclear Bank in relation to the Pledged Accounts as the Pledgor may reasonably request and will do so in accordance with Clause 12 (Termination) thereof. 5.3 All distributions and redemption proceeds in respect of the Bonds shall be dealt with by the Pledgee as provided in the Confirmation, and the Pledgee agrees that the pledge shall be released in respect of such distributions and redemption proceeds then held in the Pledged Accounts as necessary to this effect, and the Pledgee shall be, and hereby is, authorised to so dispose of distributions and redemption proceeds as provided in the Confirmation. For the avoidance of doubt, such payment or deliveries will be used to effectuate the payment or delivery obligations of Party B to Party A as per the terms of the Transaction as provided in the Confirmation. 5.4 If, with respect to the Transaction, the Bond Portfolio is amended pursuant to acceptance by Party A, either of Substitute Bond Collateral or Top up Bond Collateral (as such terms are defined in the Confirmation), the pledge shall be released with respect to the Bonds/ Euroclear Entitlements to be sold or transferred pursuant to such provisions. Where applicable, any bonds added or substituted therefor shall be deposited into the Pledged Securities Account, and shall be deemed to substitute the Bonds sold or transferred or shall be deemed added to the Bond Portfolio and in either case, shall constitute an integral part of the Bond Portfolio. Such substitution or addition shall not affect the continuity of the pledge. 5.5 The Pledgor confirms its agreement that all securities pledged pursuant to the Agreement shall be treated as fungible with all securities of the same issue on deposit with Euroclear subject to Belgian Royal Decree No. 62. 5.6 The Pledgee shall exercise its right to give instructions to Euroclear Bank in relation to the Pledged Accounts pursuant to Clause 6(i) and unilaterally terminate the Pledged Account Terms and Conditions pursuant to Clause 12 of the Pledged Account Terms and Conditions only in furtherance to the terms of this Agreement, Confirmation and Master Agreement (the "Transaction Documents"). For the avoidance of doubt, in the event of any conflict between the terms of the Clause 6(i) and Clause 12 of the Pledged Account Terms and Conditions, and the terms of the Transaction Documents, the terms of the Transaction Documents will prevail. 6. ENFORCEMENT Upon the designation or occurrence of an Early Termination Date under Section 6(a) of the Master Agreement where the Pledgor is the Defaulting Party, the Pledgee shall be entitled to enforce the security and to realise any securities or cash standing to the credit of the Pledged Accounts, as permitted by Belgian law. In that event: (i) by way of security and solely for the purpose of enabling the Pledgee to enforce the security and to realise any securities or cash standing to the credit of the Pledged Accounts, as permitted by Belgian law, the Pledgor irrevocably appoints the Pledgee as the attorney of the Pledgor, on its behalf and in the name of the Pledgor (as the attorney may decide) to do all acts, and execute all documents which the Pledgor could itself execute, in relation to any of the Secured Liabilities and/or Pledged Accounts, or in connection with any of the matters provided for in the Agreement. 5 of 11 7. REPRESENTATIONS AND WARRANTIES The Pledgor represents and warrants to the Pledgee that: (i) the Pledgor is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation and not in liquidation, with power to enter into the Agreement and to exercise its rights and perform its obligations hereunder and all corporate and other action or consent required to authorise its execution and performance of the Agreement has been duly taken; (ii) the Agreement constitutes legal, valid and binding obligations of the Pledgor enforceable in accordance with its terms under the laws of its jurisdiction of incorporation; (iii) the Agreement does not violate the constitutional documents or articles of association of the Pledgor; (iv) the Agreement does not violate any contractual or other obligation binding upon the Pledgor in a manner which materially and adversely affects the Pledgor's financial condition or its ability to perform its obligations under the Agreement, the Confirmation or the Master Agreement (v) the Pledgor is the sole owner of the Bonds and of the Euroclear Entitlements and the Bonds and Euroclear Entitlements are free and clear of any encumbrances and the Pledgor's ability to procure disposal of the Bonds is unfettered; (vi) to the belief or knowledge of the Pledgor, no litigation, arbitration or administrative proceeding is currently taking place or is pending or is threatening against the Pledgor or its assets or revenues which, if otherwise, would materially and adversely affect the Pledgor's financial condition or its ability to perform its obligations under the Agreement. The Pledgor also represents and warrants to and undertakes with the Pledgee that the foregoing representations and warranties will be true, accurate and complete throughout the continuance of the Agreement and that each representation and warranty so made shall continue and remain in force with reference to the facts and circumstances existing at the time such representation or warranty was made or repeated and that it shall not be superseded, replaced or extinguished by a representation made subsequently with regard to the same subject matter but with reference to facts and circumstances existing at a later date. 8. SCOPE OF THE PLEDGE 8.1 This pledge shall be a continuing security, shall remain in force until expressly released in accordance with Clause 5. 8.2 Except to the extent provided for in Clause 5 above or otherwise agreed between the Pledgor and the Pledgee, this pledge shall not be discharged by the entry of any Secured Liabilities into any current account, in which case this pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Liabilities were entered therein. 8.3 The Pledgee may in its sole discretion at any time without discharging or in any way affecting this pledge (a) grant the Pledgor any time or indulgence, (b) concur in any moratorium of the 6 of 11 Secured Liabilities, (c) amend the terms and conditions of the Secured Liabilities, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Pledgor or for its account towards obligations of the Pledgor other than the Secured Liabilities. 8.4 Nothing in the Agreement is intended to limit the scope of the security interests created or to be created in the future pursuant to the Master Agreement or any other agreement and nothing in the Agreement will be construed as restricting the rights of the Pledgee under the Master Agreement or any other agreement. 9. NOTICES Any notice, demand or consent given pursuant to the Agreement may be delivered in person by letter or sent by registered mail or facsimile transmission. When delivered in person and when transmitted by registered mail or facsimile transmission the notice, demand or consent shall be deemed to be delivered on receipt. Any such notice, demand or consent shall be made or given to the following address or to such other address as may from time to time be notified (in accordance with this Clause 10) by the relevant party to the other: If to the Pledgor: ST Assembly Test Services Ltd 10 Ang Mo Kio Street 65 #05-17/20 Techpoint Singapore 569059 Attention: Pearlyne Wang/Woo Yok Yuen/Joyce Ng Facsimile: 65 6720 7826 If to the Pledgee: Deutsche Bank AG 5 Temasek Boulevard #04-04 Suntec Tower Five Singapore 038985 Tel: 65 6423 5221 Fax: 65 6423 5263 Attention: Global Margin Management
7 of 11 With a copy to: Deutsche Bank AG, Tokyo Branch Sanno Park Tower 11-1, Nagatacho 2-chome Chiyoda-ku, Tokyo 100-6170 Japan Tel: 813 5156 4577 Fax: 813 5156 4034 Attention : Global Margin Management 10. EXPENSES Each party will bear its own costs and expenses and duties (including, for the avoidance of doubt, legal fees) properly incurred in connection with the Agreement. 11. SEVERABILITY The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of the Agreement or of any other provision hereof. If at any time any provision of the Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity and enforceability of such provision under the law of any other jurisdiction, and of the remaining provision of the Agreement, shall not be affected or impaired hereby. 12. PROTECTIVE CLAUSES Except as specifically set out in Clause 5 above, the validity or enforceability of this Agreement shall not be prejudiced, affected or discharged by: (i) The Transaction, the Master Agreement, the Confirmation or any guarantee or other security or right or remedy being or becoming held by or available to the Pledgee, becoming wholly or partly void, voidable, unenforceable or impaired or by the Pledgee at any time releasing, refraining from enforcing, varying or in any other way dealing with any of the same or any power, right or remedy the Pledgee may now or hereafter have from or against the Pledgor or any other person or the granting of any time or indulgence to the Pledgor or any other person; (ii) Any variation or modification or extension or novation of the Transaction, the Master Agreement or the confirmation or any other document referred to therein; (iii) The invalidity or unenforceability of any obligation or liability of the Pledgor under the Master Agreement or the Confirmation; (iv) Any invalidity or irregularity in the execution of this Agreement, the Master Agreement or the Confirmation, or any deficiency in the powers of the Pledgor to enter into or perform any of its obligations under this Agreement, the Transaction, the Master Agreement or the Confirmation; 8 of 11 (v) The insolvency or liquidation or any incapacity, disability or limitation or any change in the constitution or status of the Pledgor; (vi) Any waiver, exercise, omission to exercise, compromise, renewal or release of any rights against the Pledgor or any other person or any compromise, arrangement or settlement with any of the same; or (vii) Any act, omission, event or circumstance other than as provided under this Agreement which would or may, but for the provisions of this paragraph, operate to prejudice, affect or discharge this Agreement or the liability of the Pledgor hereunder. 13. UNRESTRICTED RIGHT OF ENFORCEMENT This Agreement may be enforced in accordance with the provisions of Clause 6 without the Pledgee first having recourse to any other security or rights or taking any other steps or proceedings against the Pledgor or any other person or may be enforced for any balance due after resorting to any one or more other means of obtaining payment or discharge of the monies, obligations and liabilities hereby secured. 14. WAIVER No failure on the part of any party to exercise, or delay on its part in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise by that party of any right preclude any further or other exercise of such right or the exercise by that party of any other right. 15. TRANSFERABILITY Neither Party may assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under the Agreement without the prior written consent of the other parties. 16. COUNTERPARTS This Agreement may be executed by each party on separate originals, and this has the same effect as if the signatures were on a single copy of the document. 17. ELECTION OF DOMICILE The Pledgor hereby irrevocably elects domicile in Belgium for all service of process in connection with any proceedings, suit or action brought or to be brought before any Belgian court and shall appoint a process agent in Belgium for the purpose of receiving service of process in such proceedings, suit or action, and shall provide confirmation of the same to the Pledgee prior to the Effective Date of the Transaction. All costs in relation to the appointment of the process agent shall be borne by the Pledgee.. 18. APPLICABLE LAW AND JURISDICTION This Agreement shall be governed by Belgian law. Any dispute in connection with the Agreement shall be subject to the exclusive jurisdiction of the courts of Brussels, without prejudice to the rights of the parties to take legal action before any other court of competent jurisdiction. 9 of 11 Made in 2 originals on DATE: ST ASSEMBLY TEST SERVICES LTD, as Pledgor By: /s/ Tan Lay Koon By: /s/ Pearlyne Wang ----------------------------- ------------------------------- Name: Tan Lay Koon Name: Pearlyne Wang --------------------------- ----------------------------- Title: Chief Executive Officer Title: Vice President - Finance ------------------------- ----------------------------
DEUTSCHE BANK AG, LONDON BRANCH, as Pledgee By: /s/ Christine Cooke By: /s/ Alistair Clevely ----------------------------- ------------------------------- Name: Christine Cooke Name: Alistair Clevely --------------------------- ----------------------------- Title: Legal Counsel Title: Legal Counsel ------------------------- ----------------------------
Schedule 1 Bonds Schedule 2 Form of Confirmation 10 of 11 SCHEDULE 1 LIST OF BONDS:
- --------------------------------------------------------------------------------------------------------------- TICKER ISSUER COUPON MATURITY CCY FACE (SIN % DATE AMOUNT - --------------------------------------------------------------------------------------------------------------- TXU Eastern Energy Ltd 6.75 1-Dec-06 USD 8,000,000 US27636PAE97 - --------------------------------------------------------------------------------------------------------------- CAT Caterpillar Financial 2.59 15-Jul-06 USD 9,000,000 US14912LX637 Services Corp - --------------------------------------------------------------------------------------------------------------- SBC Pacific Bell 6.875 15-Aug-06 USD 10,000,000 US694032AZ68 - --------------------------------------------------------------------------------------------------------------- DRSDNR Dresdner Finance 4 19-Jan-07 EUR 3,920,000 DEOO02798204 BV - --------------------------------------------------------------------------------------------------------------- HSBC Household Finance 4.375 17-Jan-06 EUR 6,270,000 XS0161020754 COrD - --------------------------------------------------------------------------------------------------------------- Portugal Telecom PORTEL International Finance 5.75 21-Feb-06 EUR 11,760,000 XS0124721027 BV - --------------------------------------------------------------------------------------------------------------- CFC Countrywide Home 6.51 11-Feb-05 USD 8,000,000 US22237LEY48 Loans Inc - --------------------------------------------------------------------------------------------------------------- Landesbank Baden- LBW Wuerttemberg 4.25 7-Mar-05 EUR 21,180,000 XS0143885241 Girozentrale - --------------------------------------------------------------------------------------------------------------- BAC Bank of America 5.25 27-Jun-06 EUR 7,840,000 XS0131695198 - ---------------------------------------------------------------------------------------------------------------
11 of 11 EX-4.14 6 u92302exv4w14.txt EX-4.14 ASSET SWAP & BOND SALE TRANSACTION (DEUTSCHE BANK AKTIENGESELLSCHAFT LOGO) Exhibit 4.14 Date: January 8, 2004 To: ST Assembly Test Services Ltd From: Deutsche Bank AG, London Branch Our reference: 830928L Re: Asset Swap and Bond Sale Transaction Ladies and Gentlemen: The purpose of this letter agreement is to set forth the terms and conditions of the "Bond Transaction" and "Asset Swap Transaction" entered into between Deutsche Bank AG, ("PARTY A") acting through it's London Branch and and ST Assembly Test Services Ltd.("PARTY B") on the Trade Date specified below (together the "TRANSACTION"). This constitutes a "CONFIRMATION" as referred to in the Agreement specified below. The definitions and provisions contained in the 2000 ISDA Definitions (the "DEFINITIONS") as published by the International Swaps and Derivatives Association, Inc. are incorporated by reference herein. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. For the purposes of this Confirmation, all references in the Definitions and the Agreement (as defined below) to a "SWAP TRANSACTION" shall be deemed to apply to the Transaction referred to herein. 1. This Confirmation evidences a complete binding agreement between you and us as to the terms of the Transaction. In addition, you and we agree to use all reasonable efforts promptly to negotiate, execute and deliver an agreement (the "Agreement") in the form of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"), with such modifications as you and we will in good faith agree. Upon the execution by you and us of such an agreement, this Confirmation will supplement, form a part of, and be subject to that agreement. All provisions contained or incorporated by reference in that agreement upon its execution will govern this Confirmation except as expressly modified below, save that the "Modifications to the ISDA Form" provisions detailed below and the terms set out below in (i) to (iii) of this paragraph shall, upon the execution and delivery of that agreement, be superseded by the provisions of the agreement. Until we execute and deliver that agreement, this Confirmation, together with all other documents referring to the ISDA Form (each a "Confirmation") confirming transactions (each a "Transaction") entered into between us (notwithstanding anything to the contrary in a Confirmation) shall supplement, form a part of, and be subject to an agreement in the form of the ISDA Form as if we had executed an agreement on the Trade Date of the first such Transaction between us in such form with the Schedule thereto (i) specifying that (a) the governing law is English law and (b) the Termination Currency is US Dollars, (ii) incorporating the addition to the definition of "Indemnifiable Tax" contained in (page 48 of) the ISDA "Users Guide to the 1992 ISDA Master Agreements" and (iii) incorporating any other modifications to the ISDA Form specified herein." 2. The terms of the particular Transaction to which this Confirmation relates are as follows: A. Bond Transaction: Buyer: Party B Seller: Party A Trade Date: 06 Jan 04 Value Date: 20 Jan 2004 Business Days: London, New York and Target Business Day Convention: Modified Following Notional Amount: As set out below. "Bond Portfolio", with each bond constituting the Bond Portfolio being a "Bond" 2
- --------------------------------------------------------------------------------------------------------------- TICKER ISSUER COUPON % MATURITY DATE CCY FACE AMOUNT ISIN - --------------------------------------------------------------------------------------------------------------- TXU Eastern Energy Ltd 6.75 1-Dec-06 USD 8,000,000 US27636PAE97 - --------------------------------------------------------------------------------------------------------------- CAT Caterpillar Financial 2.59 15-Jul-06 USD 9,000,000 US14912LX637 Services Corp - --------------------------------------------------------------------------------------------------------------- SBC Pacific Bell 6.875 15-Aug-06 USD 10,000,000 US694032AZ68 - --------------------------------------------------------------------------------------------------------------- DRSDNR Dresdner Finance BV 4 19-Jan-07 EUR 3,920,000 DE0002798204 - --------------------------------------------------------------------------------------------------------------- HSBC Household Finance 4.375 17-Jan-06 EUR 6,270,000 XS0161020754 Corp - --------------------------------------------------------------------------------------------------------------- Portugal Telecom PORTEL International 5.75 21-Feb-06 EUR 11,760,000 XS0124721027 Finance BV - --------------------------------------------------------------------------------------------------------------- CFC Countrywide Home 6.51 11-Feb-05 USD 8,000,000 US22237LEY48 Loans Inc - --------------------------------------------------------------------------------------------------------------- Landesbank LBW Baden-Wuerttemberg 4.25 7-Mar-05 EUR 21,180,000 XS0143885241 Girozentrale - --------------------------------------------------------------------------------------------------------------- BAC Bank of America 5.25 27-Jun-06 EUR 7,840,000 XS0131695198 - ---------------------------------------------------------------------------------------------------------------
Security Reference: Reference numbers as set out above. Bond Purchase Price: USD 96,116,000.00 On the Value Date Party B shall pay the Bond Purchase Price to Party A and Party A shall deliver the Bond Portfolio to Party B. For the avoidance of doubt, the delivery obligation of Party A shall be netted and discharged against Party B's obligation to deliver the Bond Portfolio to Party A as per the Securities Pledge Agreement dated [**] between Party A as Pledgee and Party B as Pledgor. Party B acknowledges and agrees that the Bond Portfolio has been purchased by it on its own assessment of the investment merits thereof and that its obligations in respect of the Asset Swap Transaction detailed below are independent of its purchase of the Bonds; and, for the avoidance of doubt, that its obligations shall not be relieved or affected in the event that the issuer of the Bonds fails to make any payment due under the Bonds or there is a modification to any of the terms thereof. B. Asset Swap Transaction Trade Date: 06 January 2004 Effective Date: 20 Jan 2004 3 Termination Date: 01 February 2007 Business Days: London, New York and Target Business Day Convention: Modified Following FIXED AMOUNT A: Fixed Rate Payer A: Party A. Fixed Amount A: USD 25,000,000.00 Fixed Rate Payer A 01 Oct 2004, 01 July 2005, 01 April 2006, and Payment Dates: 01 February 2007, subject to adjustment in each case in accordance with the Modified Following Business Day Convention. On each Fixed Rate Payer A Payment Date, Party A shall pay to Party B the Fixed Amount A. FIXED AMOUNT B: Fixed Rate Payer B: Party B. Fixed Amount B: An amount equal to all and any distributions, coupons (whether in cash or in the form of securities), and redemption proceeds in respect of the Bond Portfolio (each a "Distribution"), Fixed Rate Payer B Each date on which a Distribution is paid Payment Dates: or issued by the Issuer of any Bond constituting the Bond Portfolio. On each Fixed Rate Payer B Payment Date, Party B shall pay or deliver to Party A the Fixed Amount B. Account Details Account Details for Party A: To be determined Account Details for Party B: To be determined and/or, in each case, such other accounts as may from time to time be advised by one Party to the other. 4 3. MODIFICATIONS TO THE ISDA FORM (a) Section 5(a)(vi); Cross Default will apply to both parties. If applicable to Party A "Threshold Amount" means 1% of its shareholders' equity (i.e. the sum of its capital and reserves). With regard to Party B "Threshold Amount" means 1% of its shareholders' equity (as calculated in accordance with generally accepted accountancy principles applicable to Party B). Section 5(a)(vi) shall be amended by adding the following words at the end thereof: "provided, however, that, notwithstanding the foregoing, an Event of Default shall not occur under either (1) or (2) above if (A) (I) the default, or other similar event or condition referred to in (1) or the failure to pay referred to in (2) is a failure to pay or deliver caused by an error or omission of an administrative or operational nature, and (II) funds or the asset to be delivered were available to such party to enable it to make the relevant payment or delivery when due and (III) such payment or delivery is made within three (3) Local Business Days following receipt of written notice from an interested party of such failure to pay, or (B) such party was precluded from paying, or was unable to pay, using reasonable means, through the office of the party through which it was acting for purposes of the relevant Specified Indebtedness, by reason of force majeure, act of State, illegality or impossibility." (b) The definition of "Specified Transaction" in Section 14 of this Agreement is hereby amended by: (A) deleting in the second through the fourth lines thereof the words "between one party...which is a" and replacing them with the words "(i) in the case of Party A, between Party A (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and Party B (or any Credit Support Provider of such party or any applicable Specified Entity of such party), and (ii) in the case of Party B, between Party B (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and any other person or entity, including without limitation Party A (or any Credit Support Provider of such party or any applicable Specified Entity of such party), including without limitation any"; and (B) adding the text "commodity transaction, credit derivative transaction, repurchase or reverse repurchase transaction, securities lending transaction" after the text "foreign exchange transaction" appearing in the sixth line thereof. (c) Credit Support Document: The Securities Pledge Agreement between Party B as pledgor and Party A as pledgee dated as of 16 January 2004 shall be a Credit Support Document for purposes of this Transaction. 4. OFFICES The Office of Party A for this Transaction is London. The Office of Party B for this Transaction is Singapore. 5 5. CALCULATION AGENT Party A acting reasonably and in good faith according to its customary practices and procedures, provided, however, that absent manifest error, the Calculation Agent's computations hereunder shall be binding for all purposes. 6. ADDITIONAL REPRESENTATIONS Each party represents to the other party (except for 6(C) where Party B represents to Party A) on the date hereof that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for this Transaction): (A) NON-RELIANCE It has made its own independent decision to enter into this Transaction, is acting at arm's length for its own account, and is not relying on any communication (written or oral) of the other party as a recommendation or investment advice regarding this Transaction. (B) EVALUATION AND UNDERSTANDING It has the capability to evaluate and understand (on its own behalf or through independent professional advice), and does understand, the terms, conditions and risks of this Transaction and is willing to accept those terms and conditions and to assume (financially and otherwise) those risks. (C) TRANSACTIONS IN THE COLLATERAL It understands that the other party and its affiliates may engage in proprietary trading for its own account in the Collateral or similar instruments and that such trading may affect the value of the Collateral. (D) CONCERNING THE CALCULATION AGENT The Calculation Agent is not acting as a fiduciary for or as an advisor to either party in respect of its duties as Calculation Agent in respect of this Transaction and any determination by the Calculation Agent in the course of such duties shall be conclusive and binding on each party (in the absence of manifest error) and no liability shall attach to the Calculation Agent in respect thereof. 7. OTHER TERMS For the purposes of this Transaction the parties agree that the ISDA Form shall be amended as follows: 6 (a) Section 2(b) shall be amended by adding the words "(or place for receipt of delivery as the case may be)" after the word "account" in line 1. (b) Section 2(e) shall be amended by adding the words "for any costs losses or expenses reasonably incurred by the other party in connection with such delivery default (including but not limited to any costs of funding)" after the word "party" in line 9 and by the deletion of the rest of such section from the word "if" after the word "demand" in the same line. (c) In addition to the representations made pursuant to Section 3, each party represents that where it is required to make a delivery of Bonds it will have the right to transfer such Bonds and it will convey the full legal and beneficial title of the Bonds to be delivered free and clear of any lien, charge, claim, encumbrance or security interest whatsoever. (d) Section 4(e) shall be amended by adding the following words at the end thereof: "except in the case of any Stamp Tax payable in connection with the delivery of the Bonds to be Delivered where payment of the Stamp Tax shall be for the account of the party who would bear such cost in respect of such Transaction in accordance with the normal practice on the Clearance System". (e) Section 5(a)(i) shall be amended by adding the words "(and in the case of delivery, each being a Local Business Day on which a Settlement Disruption Event has not occurred)" after the word "Day" in line 3. (f) The definition of Local Business Day in Section 14 shall be amended by adding the words "and, in respect of those Transactions which settle by physical delivery, the clearance system or exchange specified in the relevant Confirmation" after the word "banks" in line 1 of the definition. (g) Additional Termination Event. The following shall constitute an Additional Termination Event with respect to Party B only, whereby Party B shall be the sole Affected Party and the Asset Swap Transaction herein shall be the Affected Transaction: (i) If the parties are not able to negotiate, execute and deliver an agreement in the form of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form") with such modifications as acceptable to Party A within 90 calendar days of the Trade Date of this Transaction; or (ii) If there is a default under the terms of any of the Bond(s) constituting the Bond Portfolio such Bond(s) being the "Defaulted Bond"; or (iii) If the Mark to Market Value of the outstanding Bond Portfolio held as collateral by Party A declines to less than 70% of the Mark to Market Value of the Asset Swap Transaction herein, where 7 "Mark to Market Value of the outstanding Bond Portfolio" is the market value of the outstanding Bond Portfolio held as collateral by Party A, as determined by the Calculation Agent; and "Mark to Market Value of the Asset Swap" shall be an amount in USD determined by us to be our total aggregate gain or, expressed as a negative number, losses and costs in connection with termination of the Asset Swap Transaction on the relevant date, including any loss of bargain, cost of funding or, at our election but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or re-establishing any hedge or related trading position (or any gain resulting from any of them). Party A may (but shall not be obliged to) agree, at its sole discretion, in the case of occurrence of sub clause (ii) above, to accept substitute bonds acceptable to Party A as collateral ("Substitute Bond Collateral"), and return the Defaulted Bond to Party B in lieu thereof so as to maintain the Mark to Market Value of the outstanding Bond Portfolio at a value greater than or equal to the Mark to Market Value of the Asset Swap Transaction. Party A may (but shall not be obliged to) agree, at its sole discretion, in the case of occurrence of sub clause (iii) above, to accept bonds acceptable to Party A as collateral ("Top up Bond Collateral") which shall therefrom form part of the Bond Portfolio, so as to maintain the Mark to Market Value of the outstanding Bond Portfolio at a value greater than or equal to the Mark to Market Value of the Asset Swap Transaction. 8 Please confirm that the foregoing correctly sets forth the terms of our agreement by having an authorised officer sign this fax copy and return it by fax to: Deutsche Bank AG London Attention: ICT Documentation Phone: (020) 7545 9220/ 7547 1952 Fax: (020) 7545 1913 This message will be the only form of Confirmation dispatched by us. If you wish to exchange hard copy forms of this Confirmation, please contact us. Yours sincerely, Deutsche Bank AG By: /s/ Jamie Hunt Name: Jamie Hunt Authorized Signatory By: /s/ Bianca Mueller Name: Bianca Mueller Authorized Signatory Confirmed as of the date first written above: ST Assembly Test Services Ltd By: /s/ Tan Lay Koon / /s/ Pearlyne Wang ------------------------------------ Name: Tan Lay Koon/Pearlyne Wang Title: Chief Executive Officer/Vice President, Finance 9 EX-4.15 7 u92302exv4w15.txt EX-4.15 AGRMT & PLAN OF MERGER & REORGANIZATION Exhibit 4.15 EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER AND REORGANIZATION among ST ASSEMBLY TEST SERVICES LTD, CAMELOT MERGER, INC. and CHIPPAC, INC. Dated as of February 10, 2004 ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I THE MERGER SECTION 1.01. The Merger......................................................... 2 SECTION 1.02. Effective Time; Closing............................................ 2 SECTION 1.03. Effect of the Merger............................................... 3 SECTION 1.04. Certificate of Incorporation; By-laws.............................. 3 SECTION 1.05. Directors and Officers............................................. 3 ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES SECTION 2.01. Conversion of Securities........................................... 3 SECTION 2.02. Exchange of Certificates........................................... 4 SECTION 2.03. Stock Transfer Books............................................... 7 SECTION 2.04. Company Stock Options.............................................. 7 SECTION 2.05. Employee Stock Purchase Plan....................................... 9 SECTION 2.06. No Appraisal Rights................................................ 9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01. Corporate Organization............................................. 9 SECTION 3.02. Certificate of Incorporation and By-laws........................... 10 SECTION 3.03. Capitalization..................................................... 10 SECTION 3.04. Authority Relative to This Agreement............................... 12 SECTION 3.05. No Conflict; Required Filings and Consents......................... 12 SECTION 3.06. Permits; Compliance................................................ 13 SECTION 3.07. SEC Filings; Financial Statements.................................. 14 SECTION 3.08. Absence of Certain Changes or Events............................... 16 SECTION 3.09. Absence of Litigation.............................................. 16 SECTION 3.10. Employee Benefit Plans............................................. 16 SECTION 3.11. Labor and Employment Matters....................................... 19 SECTION 3.12. Real Property; Title to Assets..................................... 20 SECTION 3.13. Intellectual Property.............................................. 21 SECTION 3.14. Taxes.............................................................. 23 SECTION 3.15. Environmental Matters.............................................. 24 SECTION 3.16. Material Contracts................................................. 25 SECTION 3.17. Insurance.......................................................... 27 SECTION 3.18. Customers and Suppliers............................................ 27 SECTION 3.19. Board Approval; Vote Required...................................... 27 SECTION 3.20. Certain Business Practices......................................... 28 SECTION 3.21. Interested Party Transactions...................................... 28 SECTION 3.22. Ownership of Parent Ordinary Shares................................ 28 SECTION 3.23. Opinion of Financial Advisor....................................... 28 SECTION 3.24. Brokers............................................................ 28
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PAGE ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT SECTION 4.01. Corporate Organization............................................. 29 SECTION 4.02. Certificate of Incorporation and By-Laws........................... 29 SECTION 4.03. Capitalization..................................................... 30 SECTION 4.04. Authority Relative to This Agreement............................... 31 SECTION 4.05. No Conflict; Required Filings and Consents......................... 32 SECTION 4.06. Permits; Compliance................................................ 33 SECTION 4.07. SEC Filings; Financial Statements.................................. 33 SECTION 4.08. Absence of Certain Changes or Events............................... 35 SECTION 4.09. Absence of Litigation.............................................. 36 SECTION 4.10. Employee Benefit Plans............................................. 36 SECTION 4.11. Labor and Employment Matters....................................... 39 SECTION 4.12. Real Property; Title to Assets..................................... 40 SECTION 4.13. Intellectual Property.............................................. 41 SECTION 4.14. Taxes.............................................................. 43 SECTION 4.15. Environmental Matters.............................................. 43 SECTION 4.16. Material Contracts................................................. 44 SECTION 4.17. Insurance.......................................................... 46 SECTION 4.18. Customers and Suppliers............................................ 46 SECTION 4.19. Board Approval; Vote Required...................................... 46 SECTION 4.20. Certain Business Practices......................................... 47 SECTION 4.21. Interested Party Transactions...................................... 47 SECTION 4.22. Operations of Merger Sub........................................... 48 SECTION 4.23. Ownership of Company Capital Stock................................. 48 SECTION 4.24. Opinion of Financial Advisor....................................... 48 SECTION 4.25. Brokers............................................................ 48 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Conduct of Business by the Company Pending the Merger.............. 48 SECTION 5.02. Conduct of Business by Parent Pending the Merger................... 51 SECTION 5.03. Control of Other Party's Business.................................. 54 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Disclosure Documents............................................... 54 SECTION 6.02. Stockholders' Meetings............................................. 57 SECTION 6.03. Access to Information; Confidentiality............................. 58 SECTION 6.04. No Solicitation of Transactions.................................... 58 SECTION 6.05. Employee Benefits Matters.......................................... 61 SECTION 6.06. Directors' and Officers' Indemnification and Insurance............. 62 SECTION 6.07. Notification of Certain Matters.................................... 63 SECTION 6.08. Company Affiliates................................................. 63 SECTION 6.09. Further Action; Reasonable Best Efforts............................ 63 SECTION 6.10. Plan of Reorganization............................................. 64
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PAGE SECTION 6.11. Obligations of Merger Sub.......................................... 65 SECTION 6.12. Stock Exchange Listing/Quotation................................... 65 SECTION 6.13. Public Announcements............................................... 66 SECTION 6.14. Board of Directors; Corporate Headquarters; Corporate Name......... 66 SECTION 6.15. Accounting Matters................................................. 66 SECTION 6.16. Stock Transfer Taxes............................................... 67 SECTION 6.17. Supplemental Indentures............................................ 67 SECTION 6.18. SGX-ST Waiver...................................................... 67 ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. Conditions to the Obligations of Each Party........................ 67 SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub............. 68 SECTION 7.03. Conditions to the Obligations of the Company....................... 70 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination........................................................ 71 SECTION 8.02. Effect of Termination.............................................. 73 SECTION 8.03. Fees and Expenses.................................................. 73 SECTION 8.04. Amendment.......................................................... 75 SECTION 8.05. Waiver............................................................. 76 ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and Agreements......... 76 SECTION 9.02. Notices............................................................ 76 SECTION 9.03. Certain Definitions................................................ 77 SECTION 9.04. Severability....................................................... 84 SECTION 9.05. Entire Agreement; Assignment....................................... 84 SECTION 9.06. Parties in Interest; Third Parties................................. 85 SECTION 9.07. Specific Performance............................................... 85 SECTION 9.08. Governing Law...................................................... 85 SECTION 9.09. Headings........................................................... 85 SECTION 9.10. Counterparts....................................................... 85 SECTION 9.11. Waiver of Jury Trial............................................... 85
iii AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of February 10, 2004 (this "Agreement"), among ST ASSEMBLY TEST SERVICES LTD, a Singapore public company limited by shares ("Parent"), CAMELOT MERGER, INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and CHIPPAC, INC., a Delaware corporation (the "Company"). WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the "Merger"); WHEREAS, the Board of Directors of the Company (the "Company Board") (i) has determined that the Merger is consistent with and in furtherance of the long-term business strategy of the Company and fair to, and in the best interests of, the Company and its stockholders and has approved and adopted this Agreement and declared its advisability and approved the Merger and the other transactions contemplated by this Agreement and (ii) has resolved to recommend the approval and adoption of this Agreement by the stockholders of the Company; WHEREAS, the Board of Directors of Parent (the "Parent Board") (i) has determined that the Merger is consistent with and in furtherance of the long-term business strategy of Parent and fair to, and in the best interests of, Parent and its shareholders and has approved and adopted this Agreement, the Merger and the other transactions contemplated by this Agreement and (ii) has resolved to recommend that the shareholders of Parent vote to approve (A) the issuance of ordinary shares, par value S$0.25 per share, of Parent ("Parent Ordinary Shares") underlying the Parent ADSs (as defined in Section 9.03(a)) that will be issued to the stockholders of the Company pursuant to the terms of the Merger, (B) the issuance of the Substitute Options (as defined in Section 2.04) as set forth in Section 2.04 and the issuance of Parent Ordinary Shares underlying the Parent ADSs to be issued upon exercise of the Substitute Options, (C) the assumption of certain obligations under the Company Convertible Subordinated Notes (as defined below), the entry into any agreements in connection with such assumption and the issuance of Parent Ordinary Shares underlying the Parent ADSs to be issued upon conversion of the Company Convertible Subordinated Notes (the matters in clauses (A), (B) and (C) being referred together as the "Share Issuance"), (D) the change of the corporate name of Parent as provided in Section 6.14(c) (the "Parent Name Change"), (E) the adoption of the New Stock Option Plans (as defined in Section 2.04 (a)) (the "New Stock Option Plans Adoption"), and (F) the appointment of the Company Designated Directors (as defined in Section 6.14) as set forth in Section 6.14(a)(iii) (the "Parent Board Appointments"); WHEREAS, as a condition and inducement to Parent entering into this Agreement, concurrently with the execution and delivery of this Agreement, Parent, the members of the Bain Group (as defined in Section 9.03(a)), the members of the CVC Group (as defined in Section 9.03(a)) and certain other stockholders of the Company have entered into Voting Agreements, dated as of the date hereof (the "Company Stockholder Voting Agreements"), providing that, among other things, such stockholders will vote their shares of capital stock of the Company, in favor of this Agreement, the Merger and the other transactions contemplated by this Agreement; WHEREAS, as a condition and inducement to the Company entering into this Agreement, concurrently with the execution and delivery of this Agreement, the Company, Singapore Technologies Semiconductors Pte Ltd and certain other shareholders of Parent have entered into Voting Agreements, dated as of the date hereof (the "Parent Shareholder Voting Agreements", and together with the Company Stockholder Voting Agreements, the "Voting Agreements"), providing that, among other things, such shareholders will vote their Parent Ordinary Shares in favor of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments; WHEREAS, as a condition and inducement to Parent entering into this Agreement, concurrently with the execution and delivery of this Agreement, Parent is entering into employment agreements with certain executives of the Company (the "Employment Agreements"); and WHEREAS, for United States federal income tax purposes, the Merger is intended to qualify as a reorganization under the provisions of Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and it is intended that Eligible Company Stockholders (as defined in Section 9.03(a)) will not recognize gain with respect to the Merger under the provisions of Section 367(a) of the Code (except with respect to any cash received in lieu of fractional interests). NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows: ARTICLE I THE MERGER SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time (as defined in Section 1.02), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 1.02. Effective Time; Closing. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VII, the parties hereto shall cause the Merger to be consummated by filing this Agreement or a certificate of merger or certificate of ownership and merger (in any case, the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger (or such later time as may be agreed by each of the parties hereto and specified in the Certificate of Merger) being the "Effective Time"). Immediately prior to such filing of the Certificate of Merger, a closing (the "Closing") shall be held at the offices of Shearman & Sterling LLP, 6 Battery Road, #25-03, Singapore 04 9909, with a meeting to be held simultaneously at the offices of Shearman & Sterling LLP, 555 California Street, Suite 2000, San Francisco, California 94104, or such other place as the parties shall agree, for the purpose of 2 confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 1.04. Certificate of Incorporation; By-laws. (a) At the Effective Time, the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation; provided, however, that, at the Effective Time, Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended to read as follows: "The name of the corporation is STATS ChipPAC, Inc." (b) At the Effective Time, the By-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such By-laws. SECTION 1.05. Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal. ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of any party: (a) each share of class A common stock, par value $0.01 per share, of the Company ("Company Class A Common Stock") (all shares of Company Class A Common Stock issued and outstanding immediately prior to the Effective Time being hereinafter collectively referred to as the "Company Shares") issued and outstanding immediately prior to the Effective Time (other than any Company Shares to be canceled pursuant to Section 2.01(b)) shall be canceled and shall be converted automatically, subject to Section 2.02, into the right to receive 0.87 (the "Exchange Ratio") Parent ADSs. The Parent ADSs may be evidenced by one or more Parent ADRs (as defined in 3 Section 9.03(a)) issued in accordance with the Parent Deposit Agreement (as defined in Section 9.03(a)). The Parent ADSs to be issued upon conversion of Company Shares pursuant to this Section 2.01(a) and any cash to be paid in lieu of fractional Parent ADSs as contemplated in Section 2.02(e) are referred to collectively as "Merger Consideration". Such Parent ADSs and the underlying Parent Ordinary Shares shall be in the same class and of the same ranking as currently outstanding Parent ADSs and Parent Ordinary Shares; (b) each Company Share held in the treasury of the Company and each Company Share owned by Merger Sub, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time (collectively, the "Excluded Company Shares") shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation ("Surviving Corporation Common Stock"). SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. (i) Prior to the Effective Time, Parent shall appoint a bank or trust company reasonably acceptable to the Company as exchange agent (the "Exchange Agent") for the purpose of accepting Certificates (as defined below) to be surrendered by holders of Company Shares in exchange for the Merger Consideration. Promptly after the Effective Time, the Surviving Corporation will mail, or shall cause the Exchange Agent to mail, to each person who was, at the Effective Time, a holder of record of Company Shares entitled to receive the Merger Consideration pursuant to Section 2.01(a): (A) a letter of transmittal, which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Company Shares (the "Certificates") shall pass, only upon proper delivery of the Certificates to the Exchange Agent and (B) instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. (ii) At the Effective Time, Parent shall issue to and deposit with the Depositary, for the benefit of the holders of Company Shares converted into the right to receive Parent ADSs in accordance with Section 2.01(a), Parent Ordinary Shares in an amount sufficient to permit the Depositary to issue Parent ADRs representing the number of Parent ADSs issuable pursuant to Section 2.01(a). Parent shall cause the Depositary to issue, upon the instructions of the Exchange Agent, for the benefit of the holders of Company Shares converted into the right to receive Parent ADSs in accordance with Section 2.01(a), through the Exchange Agent, Parent ADRs representing the number of Parent ADSs issuable pursuant to Section 2.01(a). (b) Exchange Procedures. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto and covering the Company Shares represented by such Certificate, and such other documents as may be required pursuant to the 4 instructions to the letter of transmittal, the holder of such Certificate shall be entitled to receive in exchange therefor (i) the number of whole Parent ADSs (excluding any fractional interest in Parent ADSs) to which such holder is entitled in respect of such Company Shares pursuant to Section 2.01(a), and (ii) a check in the amount (after giving effect to any required Tax withholdings) equal to (A) any cash in lieu of fractional interests in Parent ADSs to which such holder is entitled pursuant to Section 2.02(e) and (B) any dividends or other distributions to which such holder is entitled pursuant to Section 2.02(c), and the Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Company Shares that is not registered in the transfer records of the Company, certificates representing, in the aggregate, the proper number of Parent ADSs and a check in the amount equal to any cash in lieu of any fractional interest in Parent ADSs to which such holder is entitled pursuant to Section 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.02(c) may be issued to a transferee if the Certificate representing such Company Shares is presented to the Exchange Agent, properly endorsed and otherwise in proper form for transfer, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the Parent ADSs, cash in lieu of any fractional interest in Parent ADSs to which such holder is entitled pursuant to Section 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.02(c). (c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made after the Effective Time with respect to the Parent Ordinary Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the Parent ADSs represented thereby, and no cash payment in lieu of any fractional interest in Parent ADSs shall be paid to any such holder pursuant to Section 2.02(e), until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, tax or other applicable Laws (as defined in Section 3.05(a)), following surrender of any such Certificate, there shall be paid to the holder of whole Parent ADSs issued in exchange therefor, without interest, (i) promptly, the amount of any cash payable with respect to a fractional interest in Parent ADSs to which such holder is entitled pursuant to Section 2.02(e) and the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to such whole Parent ADSs, and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole Parent ADSs. (d) No Further Rights in Company Shares. All Parent ADSs issued upon conversion of the Company Shares in accordance with the terms hereof (including any cash paid pursuant to Section 2.02(c) or (e)) shall be deemed to have been issued in full satisfaction of all rights pertaining to such Company Shares. (e) No Fractional ADSs. (i) No certificates or scrip representing fractional interests in Parent ADSs shall be issued upon the surrender for exchange of Certificates, and such fractional interests will not entitle the owner thereof to vote or to any other rights of a shareholder of Parent or a holder of Parent ADRs or Parent ADSs. 5 (ii) As promptly as practicable following the Effective Time, the Exchange Agent shall determine the excess of (A) the number of whole Parent Ordinary Shares delivered to the Depositary by Parent pursuant to Section 2.02(a)(ii) over (B) the aggregate number of whole Parent Ordinary Shares represented by the Parent ADSs to be distributed to holders of Company Shares pursuant to Section 2.02(b) (such excess, as issued as Parent ADSs by the Depositary to the Exchange Agent, the "Excess ADSs"). As soon after the Effective Time as practicable, the Exchange Agent, as agent for the holders of Company Shares, who, but for the provisions of the Section 2.03(e), would be entitled to fractional interests in Parent ADSs, shall sell the Excess ADSs on the Nasdaq National Market ("Nasdaq"), all in the manner provided in clause (iii) of this Section 2.02(e). (iii) The sale of the Excess ADSs by the Exchange Agent shall be executed on Nasdaq through one or more member firms of the National Association of Securities Dealers, Inc. (the "NASD"). Until the gross proceeds of such sale or sales have been distributed to the holders of Company Shares who are entitled to receive such proceeds, the Exchange Agent will hold such proceeds in trust for the holders of Company Shares (the "Company Shares Trust"). Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation of the Exchange Agent incurred in connection with such sale of the Excess ADSs. The Exchange Agent shall determine the portion of the Company Shares Trust to which each holder of Company Shares shall be entitled, if any, by multiplying the amount of the aggregate gross proceeds comprising the Company Shares Trust by a fraction, the numerator of which is the amount of the fractional share interest to which such holder of Company Shares is entitled and the denominator of which is the aggregate amount of fractional share interests to which all holders of Company Shares are entitled. (iv) As soon as practicable after the determination of the amount of cash, if any, to be paid to the holders of Company Shares in lieu of any fractional interest in Parent ADSs and subject to Section 2.02(i), the Exchange Agent shall make available such amounts to such holders of Company Shares. (f) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Parent Ordinary Shares, Parent ADSs or Company Class A Common Stock), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Parent ADSs, Parent Ordinary Shares or Company Class A Common Stock occurring on or after the date hereof and prior to the Effective Time. (g) Termination of Exchanges. Any Parent ADSs issuable or deliverable in respect of Certificates pursuant to this Article II and any cash in lieu of fractional interests in Parent ADSs payable pursuant to Section 2.02(e), plus any cash dividends or other distributions that such holder has the right to receive pursuant to Section 2.02(c), that remains unclaimed by any holders of Certificates six months after the Effective Time shall be held by or on behalf of the Depositary, subject to the instruction of Parent, in an account or accounts in Singapore designated for such purpose and on behalf of such holders of Certificates. Any cash remaining unclaimed by holders of Certificates or Company Shares three years after the Effective Time (or such earlier date immediately prior to such time as such cash would otherwise escheat to or 6 become property of any Governmental Authority or as is otherwise provided by applicable Law) shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation or Parent, as Parent may determine, free and clear of any claims or interest of any person previously entitled thereto. (h) No Liability. None of the Exchange Agent, Parent or the Surviving Corporation shall be liable to any holder of Company Shares for any such Company Shares (or dividends or distributions with respect thereto), or cash delivered to a public official pursuant to any abandoned property, escheat or similar Law. (i) Withholding Rights. Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law. To the extent that amounts are so deducted or withheld by the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Shares in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be. (j) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Parent ADSs, any cash in lieu of fractional interests in Parent ADSs to which the holders thereof are entitled pursuant to Section 2.02(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.02(c). SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Company Shares thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates representing Company Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Company Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent for any reason shall be converted into Parent Ordinary Shares or Parent ADSs, any cash in lieu of fractional interests in Parent Ordinary Shares or Parent ADSs to which the holders thereof are entitled pursuant to Section 2.02(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.02(c). SECTION 2.04. Company Stock Options. (a) At the Effective Time, Parent shall issue Substitute Options (as defined below) in accordance with this Section 2.04 to all holders of options to purchase shares of Company Class A Common Stock (the "Company Stock Options") outstanding, whether or not exercisable and whether or not vested, immediately prior to the Effective Time under the Company 1999 Stock Purchase and Option Plan and the 7 Company 2000 Equity Incentive Plan (collectively, the "Company Stock Option Plans"). Parent shall issue the Substitute Options under the terms of the new stock option plans to be adopted by Parent at the Parent Shareholders' Meeting (the "New Stock Option Plans") to replace each of the Company Stock Option Plans. The terms and conditions of the New Stock Option Plans shall be substantially similar in all material respects with the terms and conditions of each of the Company Stock Option Plans, provided that the New Stock Option Plans shall differ from the terms and conditions of the Company Stock Option Plans to the extent necessary to comply with Singapore Law. The Company shall use reasonable efforts to take all necessary action, including obtaining the consent of any holder of Company Stock Options, to implement the substitution of the Company Stock Options with Substitute Options pursuant to the terms of the New Stock Option Plans and in accordance with this Section 2.04; provided, however, that any Company Stock Option that is not substituted with a Substitute Option because the Company Stock Option holder rejects the Substitute Option shall terminate as of the Effective Time. At the Effective Time, (a) each Company Stock Option shall be substituted by Parent with Substitute Options in such manner that Parent (A) is a corporation "issuing a stock option in a transaction to which Section 424(a) applies" within the meaning of Section 424 of the Code and the regulations thereunder or (B), to the extent that Section 424 of the Code does not apply to any such Company Stock Option, would be such a corporation were Section 424 of the Code to apply to such Company Stock Option, and (b) each Substitute Option shall entitle its holder to acquire, on substantially the same terms and conditions as were applicable to the Company Stock Option for which the Substitute Option was substituted, (A) a number of Parent Ordinary Shares equal to the product (rounded down to the nearest whole Parent Ordinary Share) of (1) the number of shares of Company Class A Common Stock that were issuable upon exercise of the related Company Stock Option immediately prior to the Effective Time multiplied by (2) the Option Exchange Ratio (which shall be the number equal to the product of the Exchange Ratio multiplied by 10), and (B) the per share exercise price of each Substitute Option shall be equal to the quotient (rounded up to the nearest cent) arrived at by dividing (1) the per share exercise price of each related Company Stock Option by (2) the Option Exchange Ratio (each, a "Substitute Option"); provided, however, that, upon exercise of a Substitute Option, the holder thereof shall have the right to elect to receive Parent ADSs rather than Parent Ordinary Shares and, upon such election, the holder shall receive a number of Parent ADSs equal to the number of Parent Ordinary Shares subject to the Substitute Option divided by ten (rounded down to the nearest whole Parent ADS). (b) Subject to the approval of the shareholders of Parent, Parent shall take all corporate action necessary to make available for issuance a sufficient number of Parent Ordinary Shares to be issued upon exercise of the Substitute Options granted in accordance with this Section 2.04. (c) As soon as practicable after the Effective Time, Parent shall deliver, or cause to be delivered, to each holder of a Substitute Option an appropriate notice setting forth such holder's rights pursuant thereto. Parent shall ensure, to the extent required by, and subject to the provisions of, the Company Stock Option Plans, that Company Stock Options that qualified as incentive stock options under Section 422 of the Code prior to the Effective Time shall be substituted by Substitute Options that qualify as incentive stock options under Section 422 of the Code after the Effective Time. As soon as practicable after the Effective Time, the Parent Ordinary Shares subject to Substitute Options shall be covered by an effective registration 8 statement on Form S-8 and Form F-6 (or any successor form) or another appropriate form, and Parent shall use its reasonable best efforts to maintain the effectiveness of such registration statement or registration statements for so long as Substitute Options remain outstanding. In addition, Parent shall use reasonable best efforts to cause the Parent Ordinary Shares subject to the Substitute Options or underlying any Parent ADSs to be issued upon exercise of the Substitute Options to be listed on the Singapore Exchange Securities Trading Limited (the "SGX-ST"), and to cause any Parent ADSs to be issued upon exercise of the Substitute Options to be quoted on Nasdaq. (d) On or after the date of this Agreement and prior to the Effective Time, each of Parent and the Company shall take all necessary action such that, with respect to each member of the Company Board and each employee of the Company that is subject to Section 16 of the Exchange Act, the acquisition by such person of Parent Ordinary Shares, Parent ADSs or Substitute Options in the Merger and the disposition by any such person of Parent Ordinary Shares, Parent ADSs or Company Stock Options pursuant to the transactions contemplated by this Agreement shall be exempt from the short-swing profit liability rules of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder. SECTION 2.05. Employee Stock Purchase Plan. With respect to the Company's Employee Stock Purchase Plan (the "Purchase Plan"), the purchase period currently in progress shall be shortened by setting a new purchase date in accordance with paragraph 2 of Section 18 of the Purchase Plan (the "New Purchase Date"). The Purchase Plan shall terminate immediately following the purchase of shares of Company Class A Common Stock on the New Purchase Date. SECTION 2.06. No Appraisal Rights. In accordance with Section 262 of the DGCL, no appraisal rights shall be available to holders of Company Class A Common Stock in connection with the Merger. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the Company Disclosure Schedule that has been prepared by the Company and delivered by the Company to Parent in connection with the execution and delivery of this Agreement (the "Company Disclosure Schedule") (which Company Disclosure Schedule shall be arranged in sections corresponding to the sections of this Article III, and any information disclosed in any such section of the Company Disclosure Schedule shall be deemed to be disclosed only for purposes of the corresponding section of this Article III, unless it is reasonably apparent that the disclosure contained in such section of the Company Disclosure Schedule applies to other representations and warranties contained in this Article III), the Company hereby represents and warrants to Parent that: SECTION 3.01. Corporate Organization. (a) Each of the Company and each subsidiary of the Company (each a "Company Subsidiary") is a corporation or other organization duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power and 9 authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of the Merger or any of the transactions contemplated by this Agreement or the Voting Agreements (collectively, the "Transactions") or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect (as defined in Section 9.03(a)). The Company and each Company Subsidiary is duly qualified or licensed to do business, and, where applicable, is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (b) A true and complete list of all the Company Subsidiaries, together with the jurisdiction of incorporation or organization of each Company Subsidiary and the percentage of the outstanding capital stock of each Company Subsidiary owned by the Company and each other Company Subsidiary, is set forth in Section 3.01(b) of the Company Disclosure Schedule. Except as set forth in Section 3.01(b) of the Company Disclosure Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. SECTION 3.02. Certificate of Incorporation and By-laws. The Company has made available to Parent or its counsel a complete and correct copy of the Certificate of Incorporation and the By-laws or equivalent organizational documents, each as amended to date, of the Company and each Company Subsidiary. Such Certificates of Incorporation, By-laws or equivalent organizational documents are in full force and effect. Neither the Company nor any Company Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, By-laws or equivalent organizational documents, except where such violations could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. SECTION 3.03. Capitalization. (a) The authorized capital stock of the Company consists of (i) 250,000,000 shares of Company Class A Common Stock, (ii) 250,000,000 shares of class B common stock, par value $0.01 per share, of the Company ("Company Class B Common Stock", and together with the Company Class A Common Stock, the "Company Common Stock"), and (iii) 10,000,000 shares of preferred stock, par value $0.01 per share ("Company Preferred Stock"), of which 10,000 shares have been designated Class A Convertible Preferred Stock, 105,000 shares have been designated Class B Preferred Stock, 8,750 shares have been designated Class C-1 Preferred Stock and 8,750 shares have been designated Class 10 C-2 Preferred Stock. As of January 30, 2004, (i) 97,303,421 shares of Company Class A Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable, (ii) no shares of Company Class A Common Stock were held in the treasury of the Company, (iii) no shares of Company Class A Common Stock were held by subsidiaries of the Company, (iv) 14,978,196 shares of Company Class A Common Stock were reserved for future issuance pursuant to outstanding Company Stock Options and other purchase rights (the "Company Stock Awards") granted pursuant to the Company Stock Option Plans and the Purchase Plan, (v) 5,020,080 shares of Company Class A Common Stock were reserved for future issuance upon conversion of the 8% Convertible Subordinated Notes due June 15, 2011 of the Company (the "8% Convertible Notes") and (vi) 18,605,805 shares of Company Class A Common Stock were reserved for future issuance upon conversion of the 2.50% Convertible Subordinated Notes due June 1, 2008 of the Company (the "2.50% Convertible Notes", and together with the 8% Convertible Notes, the "Company Convertible Subordinated Notes"). As of the date of this Agreement, no shares of Company Class B Common Stock or Company Preferred Stock are issued and outstanding. Except as set forth in this Section 3.03 or the Company Voting Agreements, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Company Subsidiary or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary. The Company has not adopted, approved or entered into, or proposed to adopt, approve or enter into, any stockholder "rights plan", "poison pill" plan or comparable plan or arrangement. Except for the Company Convertible Subordinated Notes, there are no bonds, debentures, notes or other indebtedness of the Company having the right (or convertible into, or exchangeable for, securities having the right) to vote on any matter on which holders of shares of Company Common Stock may vote. Section 3.03(a) of the Company Disclosure Schedule sets forth the following information with respect to each Company Stock Award outstanding as of the date of this Agreement: (i) the name of the Company Stock Award recipient; (ii) the particular plan pursuant to which such Company Stock Award was granted; (iii) the number of shares of Company Class A Common Stock subject to such Company Stock Award; (iv) the exercise or purchase price of such Company Stock Award; (v) the date on which such Company Stock Award was granted; (vi) the applicable vesting schedule; (vii) the date on which such Company Stock Award expires; and (viii) whether the exercisability of or right to repurchase of such Company Stock Award will be accelerated in any way by the Transactions, and indicates the extent of acceleration. The Company has made available to Parent or its counsel accurate and complete copies of all Company Plans pursuant to which the Company has granted the Company Stock Awards that are currently outstanding and the form of all stock award agreements evidencing such Company Stock Awards. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any capital stock of any Company Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Company Subsidiary or any other person. There are no shares of Company Class A Common Stock outstanding that are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement or other agreement with the 11 Company. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Award as a result of the Merger. All outstanding shares of Company Class A Common Stock, all outstanding Company Stock Awards, and all outstanding shares of capital stock of each Company Subsidiary have been issued and granted in compliance with (i) all applicable securities laws and other applicable Laws, rules and regulations and (ii) all requirements set forth in applicable contracts. (b) Each outstanding share of capital stock of each Company Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and, except for directors' qualifying shares required under applicable Law, each such share is owned by the Company or another Company Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or any Company Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. SECTION 3.04. Authority Relative to This Agreement. Subject to the approval and adoption of this Agreement by the Company's stockholders, the Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding shares of Company Class A Common Stock, if and to the extent required by applicable law, and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors' rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity). The Company Board has approved this Agreement, the Voting Agreements and the Transactions and such approvals are sufficient so that the restrictions on business combinations set forth in Section 203(a) of the DGCL shall not apply to the Merger or any of the Transactions. To the knowledge of the Company, no other state takeover statute is applicable to the Merger or the other Transactions. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or By-laws or any equivalent organizational documents of the Company or any Company Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in Sections 3.04 and 3.05(b) have been obtained and all filings and obligations described in Section 3.05(b) have been made, conflict with or violate any United States or non-United States statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order ("Law") applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (iii) result in any 12 breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any of their assets or properties is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require the Company to obtain any consent, approval, authorization or permit of, or to file with or to notify, any United States federal, state, county or local or non-United States government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a "Governmental Authority"), except (i) applicable requirements, if any, of the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and state securities or "blue sky" laws ("Blue Sky Laws"), (ii) the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing and recordation of appropriate merger documents as required by the DGCL and the relevant authorities of other jurisdictions in which the Company is qualified to do business, (iv) the filing of appropriate documents with the IRS in connection with the Private Letter Ruling (as defined below) contemplated by Section 6.10(d), and (v) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. SECTION 3.06. Permits; Compliance. Each of the Company and the Company Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each of the Company or the Company Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Company Permits"), except where the failure to have, or the suspension or cancellation of, any of the Company Permits could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or 13 otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Company Permits could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is in conflict with, or in default, breach or violation of, (a) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license, Company Permit, franchise or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any property or asset of the Company or any Company Subsidiary is bound, except for any such conflicts, defaults, breaches or violations that could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has filed all forms, reports and documents required to be filed by it with the Securities and Exchange Commission (the "SEC") since August 8, 2000 (as such documents have been amended prior to the date hereof, collectively, the "Company SEC Reports"). As of their respective dates, the Company SEC Reports (i) complied in all material respects in accordance with either the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations promulgated thereunder, and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, 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 made therein, in the light of the circumstances under which they were made, not misleading. No Company Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports was prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q, Form 8-K or any similar or successor form) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except that the unaudited interim financial statements may not contain footnotes and as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments). (c) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as at September 30, 2003, including the notes thereto, neither the Company nor any Company Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet prepared in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business and in a manner consistent with past practice since September 30, 2003 which, individually or in the aggregate, could not reasonably be expected to have a Company Material Adverse Effect. 14 (d) The Company has made available to Parent or its counsel all comment letters received by the Company from the SEC or the staff thereof since January 1, 2000 and all responses to such comment letters filed by or on behalf of the Company. (e) The Company has timely filed all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any Company SEC Report. The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures are designed to ensure that material information concerning the Company and the Company Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of the Company's SEC filings and other public disclosure documents. (f) The Company maintains a standard system of accounting established and administered in accordance with GAAP. The Company and the Company Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (g) Since January 1, 2000, neither the Company nor any Company Subsidiary nor, to the Company's knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any Company Subsidiary, has received or otherwise had or obtained knowledge of any written or formal complaint, allegation or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices. No attorney representing the Company or any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or officer of the Company. Since January 1, 2000, there have been no formal internal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Company Board or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act of 2002. (h) To the knowledge of the Company, no employee of the Company or any Company Subsidiary has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law. Neither the Company nor any Company Subsidiary nor any officer, employee, contractor, subcontractor or agent of the Company or any such Company Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner 15 discriminated against an employee of the Company or any Company Subsidiary in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. Section 1514A(a). SECTION 3.08. Absence of Certain Changes or Events. Since September 30, 2003, except as contemplated by this Agreement, (a) the Company and the Company Subsidiaries have conducted their businesses only in the ordinary course of business and in a manner consistent with past practice, (b) there has not been any event, circumstance, change or effect that, individually or in the aggregate, has had, constitutes or could reasonably be expected to have, a Company Material Adverse Effect, and (c) none of the Company or any Company Subsidiary has taken any action that, if taken after the date of this Agreement, would constitute a material breach of any of the covenants set forth in Section 5.01. SECTION 3.09. Absence of Litigation. There is no litigation, suit, claim, action, proceeding or investigation (an "Action") pending or, to the knowledge of the Company, threatened in writing against the Company or any Company Subsidiary, or any property or asset of the Company or any Company Subsidiary, before any Governmental Authority that (a) individually or in the aggregate, has had, or could reasonably be expected to have, a Company Material Adverse Effect or (b) seeks to materially delay or prevent the consummation of any of the Transactions. Neither the Company nor any Company Subsidiary nor any material property or asset of the Company or any Company Subsidiary is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, that could reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement or could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. SECTION 3.10. Employee Benefit Plans. (a) Section 3.10(a) of the Company Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and whether or not subject to the requirements of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance and other material benefit plans, programs or arrangements, and all employment, termination, severance and other material similar contracts or agreements (including, without limitation, any such contracts or agreements relating to a sale of the Company or any Company Subsidiary or the consummation of any Transaction) to which the Company or any Company Subsidiary is a party, with respect to which the Company or any Company Subsidiary has any material obligation or liability or that are maintained, contributed to or sponsored by the Company or any Company Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Company Subsidiary, (ii) each employee benefit plan for which the Company or any Company Subsidiary could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated and (iii) any employee benefit plan in respect of which the Company or any Company Subsidiary could incur liability under Section 4212(c) of ERISA (collectively, the "Company Plans"). 16 (b) With respect to each Company Plan that is subject to United States Law (a "U.S. Company Plan"), the Company has made available to Parent or its counsel a true and complete copy of (i) each U.S. Company Plan document, (ii) the most recently filed Internal Revenue Service ("IRS") Form 5500, if any, relating to such U.S. Company Plan, (iii) the most recent summary plan description for each U.S. Company Plan for which a summary plan description is required by applicable Law, (iv) the most recently received determination letter, if any, issued by the IRS with respect to any U.S. Company Plan that is intended to qualify under Section 401(a) of the Code, and (v) the most recently prepared actuarial report or financial statement, if any, relating to a U.S. Company Plan. With respect to each Company Plan that is not subject to United States Law (a "Non-U.S. Company Plan"), the Company has made available to Parent or its counsel a true and complete copy of each Non-U.S. Company Plan document and each material document, if any, prepared in connection with each Non-U.S. Company Plan. (c) None of the Company, any Company Subsidiary or any Company ERISA Affiliate maintains, contributes to or has any liability with respect to a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which liability under Section 4063 or 4064 of ERISA could be incurred (a "Multiple Employer Plan"). Except as set forth in Section 3.10(c) of the Company Disclosure Schedule, none of the U.S. Company Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any person, (ii) obligates the Company or any Company Subsidiary to pay separation, severance, termination or similar-type benefits solely or partially as a result of any Transaction or (iii) obligates the Company or any Company Subsidiary to make any payment or provide any benefit as a result of a "change in control", within the meaning of such term under Section 280G of the Code. None of the U.S. Company Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Company Subsidiary, except as required by applicable Law. The Company, each Company Subsidiary and each Company ERISA Affiliate have complied in all material respects with the requirements of Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state Law ("COBRA"). (d) Each U.S. Company Plan has been maintained, funded and administered in accordance with its terms and the requirements of all applicable Laws, including, without limitation, ERISA and the Code, except where such non-compliance could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. The Company and the Company Subsidiaries have performed all material obligations required to be performed by them under, are not in any material respect in default under or in violation of, and have no knowledge of any material default or violation by any party to, any U.S. Company Plan. No Action is pending or, to the knowledge of the Company, threatened with respect to any U.S. Company Plan (other than claims for benefits in the ordinary course) that could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and, to the knowledge of the Company, no fact or event exists that could reasonably be expected to give rise to any such Action. (e) Each U.S. Company Plan that is intended to be qualified under Section 401(a) of the Code has timely applied for or received a favorable determination letter from the 17 IRS covering all of the provisions applicable to the U.S. Company Plan for which determination letters are currently available that the U.S. Company Plan is so qualified or may rely on an opinion or advisory letter issued to a master or prototype or volume submitter provider with respect to the tax-qualified status of such U.S. Company Plan. (f) Except for matters that, individually or in the aggregate, have not had and could not reasonably be expected to have a Company Material Adverse Effect, there has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any U.S. Company Plan. None of the Company, any Company Subsidiary or any Company ERISA Affiliate has incurred any liability under, arising out of or by operation of Title IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the termination or reorganization of any employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists that would give rise to any such liability. (g) With respect to each Non-U.S. Company Plan: (i) each Non-U.S. Company Plan has been maintained and administered in compliance with all applicable Laws, except where such non-compliance could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (ii) all employer and employee contributions to each Non-U.S. Company Plan required by Law or by the terms of such Non-U.S. Company Plan have been made, or, if applicable, accrued in accordance with the standard accounting practices applicable in the local jurisdiction, and a pro rata contribution for the period prior to and including the date of this Agreement has been made or accrued; (iii) the fair market value of the assets of each funded Non-U.S. Company Plan, the liability of each insurer for any Non-U.S. Company Plan funded through insurance or the book reserve established for any Non-U.S. Company Plan, together with any accrued contributions, is sufficient to procure or provide for the benefits determined on an ongoing basis (actual or contingent) accrued to the date of this Agreement with respect to all current and former participants under such Non-U.S. Company Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Non-U.S. Company Plan, and no Transaction shall cause such assets or insurance obligations to be less than such benefit obligations; provided that a Non-U.S. Company Plan that is maintained solely pursuant to applicable foreign Law and sponsored by a Governmental Authority shall not be subject to this paragraph; (iv) each Non-U.S. Company Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities and, except as could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, each Non-U.S. Company Plan is now and always has been operated in compliance with all applicable non-United States Laws; 18 (v) none of the grants, subsidies, concessions and/or allowances that have been received by the Company or any Company Subsidiary from any Governmental Authority are liable to be repaid or revoked in whole or in part as a result of the entry into or the completion of this Agreement or the Transactions; (vi) all deductions and payments required to be made by the Company or any Company Subsidiary in respect of Central Provident Fund or Central Provident Scheme contributions (including employer's contributions) in relation to the remuneration of its employees to any relevant competent authority have been so made; and (vii) except as set forth in Section 3.10(g)(vii) of the Company Disclosure Schedule, none of the Non-U.S. Company Plans (A) provides for the payment of material separation, severance, termination or similar-type benefits to any person, (B) obligates the Company or any Company Subsidiary to pay material separation, severance, termination or similar-type benefits solely or partially as a result of any Transaction, or (C) obligates the Company or any Company Subsidiary to make any material payment or provide any material benefit as a result of a change in control under applicable Law. None of the Non-U.S. Company Plans provides for or promises material retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Company Subsidiary, except as required by applicable Law. SECTION 3.11. Labor and Employment Matters. (a) Except as set forth in Section 3.11 of the Company Disclosure Schedule or as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (i) there are no controversies pending or, to the knowledge of the Company, threatened between the Company or any Company Subsidiary and any of their respective employees; (ii) neither the Company nor any Company Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any Company Subsidiary, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (iii) there are no unfair labor practice complaints pending against the Company or any Company Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of the Company or any Company Subsidiary; and (iv) there is no strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Company Subsidiary. 19 The consent of the labor unions that are a party to the collective bargaining agreements listed in Section 3.11 of the Company Disclosure Schedule is not required to consummate the Transactions. (b) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (i) the Company and the Company Subsidiaries are in compliance with all applicable laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company or any Company Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing; (ii) the Company and the Company Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any Company Subsidiary; (iii) neither the Company nor any Company Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices; (iv) there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or threatened with respect to the Company; and (v) there is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Company Subsidiary has employed or employ any person. SECTION 3.12. Real Property; Title to Assets. (a) Section 3.12(a) of the Company Disclosure Schedule lists each parcel of real property currently owned by the Company or any Company Subsidiary or owned by the Company and any Company Subsidiary after January 1, 1999. Each parcel of real property owned by the Company or any Company Subsidiary (i) is owned free and clear of all mortgages, pledges, liens, security interests, 20 conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind, including, without limitation, any easement, right of way or other encumbrance to title, or any option, right of first refusal, or right of first offer (collectively, "Liens"), other than Permitted Liens (as defined in Section 9.03(a)), and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (b) Section 3.12(b) of the Company Disclosure Schedule lists each parcel of real property currently leased or subleased by the Company or any Company Subsidiary, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable by the Company or any Company Subsidiary in connection therewith and each amendment to any of the foregoing (collectively, the "Company Lease Documents"). True, correct and complete copies of all Company Lease Documents have been made available to Parent or its counsel. All such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by the Company or any Company Subsidiary or, to the Company's knowledge, by the other party to such lease or sublease. (c) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (i) there are no contractual or legal restrictions that preclude or restrict the ability to use any real property owned or leased by the Company or any Company Subsidiary for the purposes for which it is currently being used; and (ii) there are no material latent defects or material adverse physical conditions affecting the real property, and improvements thereon, owned or leased by the Company or any Company Subsidiary. (d) Each of the Company and the Company Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except for Permitted Liens. SECTION 3.13. Intellectual Property. (a) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (i) to the knowledge of the Company, the Company and the Company Subsidiaries own or are licensed to use all Intellectual Property used in or necessary for the conduct of their respective businesses as currently conducted; 21 (ii) to the knowledge of the Company, the conduct of the business of the Company and the Company Subsidiaries as currently conducted does not infringe upon or misappropriate the Intellectual Property rights of any third party; (iii) there are no claims or suits pending or, to the knowledge of the Company and except as set forth in Section 3.13(a)(iii) of the Company Disclosure Schedule, threatened against the Company or any Company Subsidiary (A) alleging that the conduct of the business of the Company or any Company Subsidiary as currently conducted infringes upon or misappropriates the Intellectual Property rights of any third party or (B) challenging the ownership, use, validity or enforceability of any item of Intellectual Property owned by the Company or a Company Subsidiary ("Company Owned Intellectual Property"); (iv) with respect to the Company Owned Intellectual Property, the Company or a Company Subsidiary is the owner of the entire right, title and interest in and to such Company Owned Intellectual Property, free and clear of all liens, encumbrances and other restrictions, and is entitled to use such Company Owned Intellectual Property in the continued operation of its respective business; (v) there are no settlements, forbearances to sue, consents, judgments, orders or similar obligations which (A) restrict the business of the Company or any Company Subsidiary in or under any Intellectual Property rights of any third party; or (B) permit any third party to use any Company Owned Intellectual Property; (vi) Section 3.13(a)(vi) of the Company Disclosure Schedule sets forth each item of material Intellectual Property licensed to the Company or a Company Subsidiary ("Company Licensed Intellectual Property"), and the Company or a Company Subsidiary has the right to use such Company Licensed Intellectual Property in the continued operation of its respective business in accordance with the terms of the license agreement governing such Company Licensed Intellectual Property and the Company and the Company Subsidiaries have used such Company Licensed Intellectual Property in accordance with the terms of such license agreement; (vii) to the knowledge of the Company, the Company Owned Intellectual Property is valid and enforceable, and has not been adjudged invalid or unenforceable in whole or in part; (viii) to the knowledge of the Company, no person is engaging in any activity that infringes upon or misappropriates the Company Owned Intellectual Property; (ix) to the knowledge of the Company, each license of the Company Licensed Intellectual Property is valid and enforceable, is binding on all parties to such license, and is in full force and effect; (x) to the knowledge of the Company, no party to any license of the Company Licensed Intellectual Property is in breach thereof or default thereunder; and 22 (xi) neither the execution of this Agreement nor the consummation of any Transaction will adversely affect any of the Company's or Company Subsidiaries' rights with respect to the Company Owned Intellectual Property or the Company Licensed Intellectual Property. (b) Except as could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company and Company Subsidiaries have taken commercially reasonable actions to protect each item of Company Owned Intellectual Property. The Company and Company Subsidiaries have policies of (i) obtaining assignments from all technical employees and consultants, who are involved in any way in the research, development or invention of technology, of all of their rights in the technology created by them within the scope of their employment during such employment and (ii) requiring all directors who are involved in an executive capacity with the Company or a Company Subsidiary, officers, management employees, and technical and professional employees of the Company and Company Subsidiaries to enter into written agreements with the Company or Company Subsidiaries to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment. The Company and Company Subsidiaries enforce the foregoing policies in a manner consistent with industry standard practices and neither the Company nor the Company Subsidiaries are aware of any violations of the foregoing policies. (c) The Company or any Company Subsidiary has not agreed to indemnify any third party for or against any infringement or misappropriation with respect to any third party Intellectual Property other than in the ordinary course of business. (d) The consummation of the Transactions will not result in the Company or any Company Subsidiary being bound by any non-compete or other restriction on the operation of any business of the Company or any Company Subsidiary, or in the grant by the Company or any Company Subsidiary of any rights or licenses to any Company Owned Intellectual Property. (e) The Company or any Company Subsidiary has not licensed any Company Owned Intellectual Property to any third party other than in the ordinary course of business. SECTION 3.14. Taxes. The Company and the Company Subsidiaries have filed all material Tax Returns (as defined in Section 9.03(a)) required to be filed by them and have paid and discharged all material Taxes required to be paid or discharged, other than such payments as are being contested in good faith by appropriate proceedings. All Tax Returns are true, accurate and complete in all material respects. Neither the IRS nor any other United States or non-United States taxing authority or agency is now asserting or, to the knowledge of the Company, threatening to assert, against the Company or any Company Subsidiary any material deficiency or claim for any Taxes or interest thereon or penalties in connection therewith. Neither the Company nor any Company Subsidiary has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax. The accruals and reserves for Taxes reflected in the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as at September 30, 2003 are adequate to cover all Taxes accruable through such date (including interest and penalties, if any, thereon) in accordance with GAAP. There are no Tax liens upon any property or assets of the Company or any of the Company Subsidiaries except liens for current Taxes not yet due. Neither the Company nor any 23 Company Subsidiary has been a "distributing corporation" or a "controlled corporation" in a distribution intended to qualify under Section 355(e) of the Code within the past five years. To the knowledge of the Company, neither the Company nor any of its affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code (determined without the application of Section 367 of the Code) or the exchange by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Income Tax Regulations (the "Regulations") other than subsection (3)(C) thereof. The Company is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code (determined without the application of Section 367 of the Code) or the by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Regulations other than subsection (3)(C) thereof. SECTION 3.15. Environmental Matters. Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (a) neither the Company nor any Company Subsidiary has violated or is in violation of any Environmental Law (as defined in Section 9.03(a)) and neither the Company nor any Company Subsidiary has received any written communication from a Governmental Agency or person alleging any actual or potential liability of, or any actual or potential violation by, the Company or any Company Subsidiary arising under any Environmental Law; (b) none of the properties currently owned, leased or operated by the Company or any Company Subsidiary or formerly owned, leased or operated by the Company or any Company Subsidiary (including, without limitation, soils and surface and groundwaters) is or has been contaminated with any Hazardous Substance (as defined in Section 9.03(a)), which contamination requires investigation or remediation under any Environmental Law, or has given rise to or would reasonably be expected to give rise to liability or obligations (including any investigatory, reporting or remedial obligation) under any Environmental Law; (c) neither the Company nor any Company Subsidiary has stored, handled, treated, disposed of, arranged for the disposal of, transported or released any Hazardous Substance at any property or facility, including, without limitation, any offsite location, and neither the Company nor any Company Subsidiary has or has allegedly exposed any person to any Hazardous Substance, so as to give rise to a requirement for investigation or remediation under any Environmental Law or so as to give rise to any current or reasonably expected future liability or obligation (including any investigatory, reporting or remedial obligation) under any Environmental Law; (d) the Company and the Company Subsidiaries have all permits, licenses and other authorizations required under any Environmental Law and the 24 Company and the Company Subsidiaries are in compliance with, and have no current or pending liability or obligation associated with any past non-compliance with, such permits, licenses and authorizations; (e) neither the execution of this Agreement nor the consummation of the Transactions will require any investigation, remediation or other action with respect to Hazardous Substances, or any notice to or consent of Governmental Authorities or third parties, pursuant to any applicable Environmental Law; (f) neither the Company nor any Company Subsidiary has designed, manufactured, installed, marketed, sold, handled or distributed asbestos or any asbestos-containing product or asbestos-containing material, and no basis in fact or Law, or under contract or lease agreement, exists upon which any claim of liability could be asserted against the Company or any Company Subsidiary relating to asbestos, asbestos-containing products or asbestos-containing materials located at any property or facility; and (g) the Company has made available to Parent or its counsel all environmental reports and other material environmental documents relating to its business or to the Company or the Company Subsidiaries, or to their respective affiliates' or predecessors' properties, facilities or operations. SECTION 3.16. Material Contracts. (a) Subsections (i) through (xi) of Section 3.16(a) of the Company Disclosure Schedule list the following types of contracts and agreements to which the Company or any Company Subsidiary is a party (such contracts and agreements as are required to be set forth in Section 3.16(a) of the Company Disclosure Schedule being the "Material Company Contracts"): (i) each "material contract" (as such term is defined in Item 610(b)(10) of Regulation S-K of the SEC) with respect to the Company and its Company Subsidiaries; (ii) each contract and agreement that is likely to involve consideration of more than $500,000, in the aggregate, over the remaining term of such contract or agreement, than purchase orders entered into in the ordinary course of business and in a manner consistent with past practice; (iii) each contract and agreement evidencing outstanding indebtedness in a principal amount of $500,000 or more; (iv) all leases of real property leased for the use or benefit of the Company or any Company Subsidiary; (v) all material contracts and agreements with any Governmental Authority to which the Company or any Company Subsidiary is a party; (vi) all contracts and agreements that limit, or purport to limit, the ability of the Company or any Company Subsidiary to compete in any line of business or with any person or entity or in any geographic area or during any period of time; 25 (vii) all contracts and agreements providing for benefits under any Company Plan; (viii) all contracts for employment required to be listed in Section 3.10 of the Company Disclosure Schedule; (ix) each joint venture, partnership, strategic alliance and similar agreement to which the Company or any Company Subsidiary is a party, which is material to the Company or any Company Subsidiary or which provides for the ownership of any equity interest in any person or entity; (x) all material broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts, and agreements to which the Company or any Company Subsidiary is a party; (xi) all management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company or any Company Subsidiary or income or revenues related to any product or service of the Company or any Company Subsidiary to which the Company or any Company Subsidiary is a party; (xii) all licenses or sublicenses of Intellectual Property to which the Company or any Company Subsidiary is a party and that are material to the business of the Company or any Company Subsidiary; and (xiii) all other contracts and agreements that are material to the Company and the Company Subsidiaries, taken as a whole, or the absence of which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (b) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay the Company from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect: (i) each Material Company Contract is a legal, valid and binding agreement; (ii) neither the Company nor any Company Subsidiary has received any claim of default under any Material Company Contract and neither the Company nor any Company Subsidiary is in breach or violation of, or default under, any Material Company Contract; (iii) to the Company's knowledge, no other party is in breach or violation of, or default under, any Material Company Contract; and 26 (iv) neither the execution of this Agreement nor the consummation of any Transaction shall constitute a default under, give rise to cancellation rights under or otherwise adversely affect any of the material rights of the Company or any Company Subsidiary under any Material Company Contract. The Company has made available to Parent or its counsel true and complete copies of all Material Company Contracts, including any amendments thereto. SECTION 3.17. Insurance. The Company and the Company Subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of the Company and the Company Subsidiaries (taking into account the cost and availability of such insurance). SECTION 3.18. Customers and Suppliers. Section 3.18 of the Company Disclosure Schedule sets forth a true and complete list of the Company's top 20 customers for 2003 (based on the revenue from such customers during the 12-month period ended December 31, 2003) and top 20 suppliers for 2003 (based on payments to such suppliers during the 12-month period ended December 31, 2003). Except as set forth in Section 3.18 of the Company Disclosure Schedule, no customer that accounted for more than two percent of the Company's consolidated revenues during the 12-month period ended December 31, 2003 and no material supplier of the Company and the Company Subsidiaries during that period (a) has cancelled or otherwise terminated any agreement with the Company or any Company Subsidiary prior to the expiration of the agreement term, (b) has returned, or threatened to return, a substantial amount of any of the products, equipment, goods and services purchased from the Company or any Company Subsidiary, or (c) to the Company's knowledge, has threatened, or indicated its intention, to cancel or otherwise terminate its relationship with the Company or the Company Subsidiaries or to reduce substantially its purchases from or sales to the Company or any Company Subsidiary of any products, equipment, goods or services. Neither the Company nor any Company Subsidiary has (y) breached any material agreement with or (z) engaged in any fraudulent conduct with respect to, any such customer or supplier of the Company or any Company Subsidiary. SECTION 3.19. Board Approval; Vote Required. (a) The Company Board, by resolutions duly adopted by unanimous vote of those members of the Company Board voting at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement, the Voting Agreements and the Merger are fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement, the Voting Agreements and the Merger and declared their advisability, (iii) recommended that the stockholders of the Company approve and adopt this Agreement and approve the Merger and directed that this Agreement and the Merger be submitted for consideration by the holders of Company Class A Common Stock at the Company Stockholders' Meeting (as defined below), and (iv) confirmed that the Company Stock Options will not accelerate as a result of the Merger. Pursuant to Article Twelve of the Company's Certificate of Incorporation, the limitations on business combinations contained in Section 203 of the DGCL do not apply to the Company. 27 (b) The only vote of the holders of any class or series of capital stock or other securities of the Company necessary to approve this Agreement, the Voting Agreements, the Merger and the other Transactions is the affirmative vote of the holders of a majority of the outstanding shares of Company Class A Common Stock in favor of the approval and adoption of this Agreement. SECTION 3.20. Certain Business Practices. None of the Company, any Company Subsidiary or, to the Company's knowledge, any directors or officers, agents or employees of the Company or any Company Subsidiary, has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (b) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (c) made any payment in the nature of criminal bribery. SECTION 3.21. Interested Party Transactions. Except for any agreement or arrangement that is likely to involve consideration of less than $50,000 during any calendar year, no director, officer or other affiliate of the Company or any Company Subsidiary (a) purchases from or sells or furnishes to, the Company or any Company Subsidiary, any goods or services, (b) is a party to any contract or agreement disclosed in Section 3.16 of the Company Disclosure Schedule, or (c) has any contractual or other arrangement with the Company or any Company Subsidiary. The Company and the Company Subsidiaries have not, since January 1, 2002, (i) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Company, or (ii) materially modified any term of any such extension or maintenance of credit. SECTION 3.22. Ownership of Parent Ordinary Shares. As of the date of this Agreement, neither the Company nor any Company Subsidiary is the beneficial owner of any shares of capital stock of Parent. SECTION 3.23. Opinion of Financial Advisor. The Company Board has received the opinion of Credit Suisse First Boston LLC, dated the date of this Agreement, to the effect that, as of the date of this Agreement, the Exchange Ratio is fair, from a financial point of view, to the holders of Company Class A Common Stock, a written copy of which opinion will be delivered to Parent, solely for informational purposes, promptly after receipt thereof by the Company Board. SECTION 3.24. Brokers. No broker, finder or investment banker (other than Credit Suisse First Boston LLC) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has made available to Parent or its counsel a complete and correct copy of all agreements between the Company and Credit Suisse First Boston LLC pursuant to which such firm would be entitled to any payment relating to the Transactions. 28 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Except as set forth in the Parent Disclosure Schedule that has been prepared by Parent and delivered by Parent to the Company in connection with the execution and delivery of this Agreement (the "Parent Disclosure Schedule") (which Parent Disclosure Schedule shall be arranged in sections corresponding to the sections of this Article IV, and any information disclosed in any such section of the Parent Disclosure Schedule shall be deemed to be disclosed only for purposes of the corresponding section of this Article IV, unless it is reasonably apparent that the disclosure contained in such section of the Parent Disclosure Schedule applies to other representations and warranties contained in this Article IV), Parent hereby represents and warrants to the Company that: SECTION 4.01. Corporate Organization. (a) Each of Parent and each subsidiary of Parent (each a "Parent Subsidiary") is a corporation or other organization duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect (as defined in Section 9.03(a)). Parent and each Parent Subsidiary is duly qualified or licensed to do business, and, where applicable, is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. (b) A true and complete list of all the Parent Subsidiaries, together with the jurisdiction of incorporation or organization of each Parent Subsidiary and the percentage of the outstanding capital stock of each Parent Subsidiary owned by Parent and each other Parent Subsidiary, is set forth in Section 4.01(b) of the Parent Disclosure Schedule. Except as set forth in Section 4.01(b) of the Parent Disclosure Schedule, Parent does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. SECTION 4.02. Certificate of Incorporation and By-Laws. Parent has made available to the Company or its counsel a complete and correct copy of the Memorandum and Articles of Association or equivalent organizational documents, each as amended to date, of 29 Parent and each Parent Subsidiary. Such Memorandum and Articles of Association or equivalent organizational documents are in full force and effect. Neither Parent nor any Parent Subsidiary is in violation of any of the provisions of its Memorandum and Articles of Association or equivalent organizational documents, except where such violations could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. SECTION 4.03. Capitalization. (a) The authorized capital stock of Parent consists of 3,200,000,000 Parent Ordinary Shares. As of January 30, 2004, (i) 1,076,675,760 Parent Ordinary Shares were issued and outstanding, all of which were validly issued, fully paid and non-assessable, (ii) no Parent Ordinary Shares were held by subsidiaries of Parent, (iii) 60,965,705 Parent Ordinary Shares were reserved for future issuance pursuant to outstanding employee stock options ("Parent Stock Options") and other purchase rights (together with Parent Stock Options, the "Parent Stock Awards") granted pursuant to the Parent Share Option Plan 1999 (the "Parent Stock Option Plan") and (iv) 172,512,573 Parent Ordinary Shares were reserved for future issuance upon conversion of the 1.75% Convertible Notes due 2007 of Parent and the 4.25% Convertible Notes due 2008 of Parent (collectively, the "Parent Convertible Notes"). Except as set forth in this Section 4.03 or the Parent Shareholder Voting Agreements, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of Parent or any Parent Subsidiary or obligating Parent or any Parent Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, Parent or any Parent Subsidiary. Parent has not adopted, approved or entered into, or proposed to adopt, approve or enter into, any stockholder "rights plan", "poison pill" plan or comparable plan or arrangement. Except for the Parent Convertible Notes, there are no bonds, debentures, notes or other indebtedness of Parent having the right (or convertible into, or exchangeable for, securities having the right) to vote on any matter on which holders of Parent Ordinary Shares may vote. Section 4.03(a) of the Parent Disclosure Schedule sets forth the following information with respect to each Parent Stock Award outstanding as of the date of this Agreement: (i) the name of the Parent Stock Award recipient; (ii) the particular plan pursuant to which such Parent Stock Award was granted; (iii) the number of Parent Ordinary Shares subject to such Parent Stock Award; (iv) the exercise or purchase price of such Parent Stock Award; (v) the date on which such Parent Stock Award was granted; (vi) the applicable vesting schedule; (vii) the date on which such Parent Stock Award expires; and (viii) whether the exercisability of or right of repurchase of such Parent Stock Award will be accelerated in any way by the Transactions, and indicates the extent of acceleration. Parent has made available to the Company or its counsel accurate and complete copies of all Parent Plans pursuant to which Parent has granted the Parent Stock Awards that are currently outstanding and the form of all stock award agreements evidencing such Parent Stock Awards. All Parent Ordinary Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable. There are no outstanding contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any Parent Ordinary Shares or any capital stock of Parent Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Parent Subsidiary or any other person. There are no Parent Ordinary Shares or Parent ADSs outstanding that are unvested or are subject to a repurchase 30 option, risk of forfeiture or other condition under the Parent Stock Plan or any applicable restricted stock purchase agreement or other agreement with Parent. There are no commitments or agreements of any character to which Parent is bound obligating Parent to accelerate the vesting of any Parent Stock Option as a result of the Merger. All outstanding Parent Ordinary Shares, all outstanding Parent Stock Options, and all outstanding shares of capital stock of each Parent Subsidiary have been issued and granted in compliance with (i) all applicable securities laws and other applicable Laws, rules and regulations (including, without limitation, any applicable Singapore Laws, rules and regulations) and (ii) all requirements set forth in applicable contracts. (b) Each outstanding share of capital stock of each Parent Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and, except for directors' qualifying shares required under applicable Law, each such share is owned by Parent or another Parent Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on Parent's or any Parent Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. (c) The Parent Ordinary Shares underlying the Parent ADSs to be issued pursuant to the Merger in accordance with Section 2.01 (i) will be duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Parent's Memorandum and Articles of Association or any agreement to which the Parent is a party or is bound and (ii) will, when issued, be registered under the Securities Act and the Exchange Act and registered or exempt from registration under applicable Blue Sky Laws. SECTION 4.04. Authority Relative to This Agreement. Subject to the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments by Parent's shareholders, each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the Transactions have been duly and validly authorized by all necessary corporate action on the part of Parent and Merger Sub, and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Share Issuance, the New Stock Option Plans Adoption and the Parent Board Appointments, the approval of the Share Issuance, the New Stock Option Plans Adoption and the Parent Board Changes by a majority of the votes cast with respect to the Share Issuance, the New Stock Option Plans Adoption and the Parent Board Appointments at the Parent Shareholders' Meeting (as defined below), with respect to the Parent Name Change, the approval of the Parent Name Change by 75% of the votes cast with respect to the Parent Name Change at the Parent Shareholders' Meeting, and with respect to the Merger, the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors' rights generally and subject to the effect of general principles of equity 31 (regardless of whether considered in a proceeding at law or in equity). To the knowledge of Parent, as of the date hereof, no Singapore takeover statute, rule or regulation is applicable to the Merger or the other Transactions. To the knowledge of Parent, no Singapore takeover statute, rule or regulation will be applicable to the Merger or the other Transactions as of the Effective Time, assuming that (i) no person acquires Parent Ordinary Shares or Parent ADSs (taken together with Parent Ordinary Shares and/or Parent ADSs acquired by persons acting in concert with him) that carry 30% or more of the voting rights of Parent; and (ii) no person who, together with parties acting in concert with him, holds not less than 30% but not more than 50% of the voting rights of Parent, and such person or any person acting in concert with him, acquires in any period of six months additional Parent Ordinary Shares and/or Parent ADSs carrying more than 1% of the voting rights of Parent, in each case as a result of or pursuant to the Merger or the other Transactions. SECTION 4.05. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, (i) conflict with or violate the Memorandum and Articles of Association or other organizational documents of Parent or any Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in Sections 4.04 and 4.05(b) have been obtained and all filings and obligations described in Section 4.05(b) have been made, conflict with or violate any Law applicable to Parent or any Parent Subsidiary or by which any property or asset of Parent or any Parent Subsidiary is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or any Parent Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or any of their properties or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. (b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, require Parent or Merger Sub to obtain any consent, approval, authorization or permit of, or to file with or to notify any Governmental Authority, except (i) applicable requirements, if any, of the Securities Act, Exchange Act and Blue Sky Laws, (ii) the pre-merger notification requirements of the HSR Act, (iii) the filing and recordation of appropriate merger documents as required by the DGCL and the relevant authorities of other jurisdictions in which Parent is qualified to do business, (iv) appropriate applications, filings and notices to, and approval of, Nasdaq and the SGX-ST as may be required in connection with the listing of the Parent ADSs to be issued in connection with the Merger or pursuant to the Substitute Options, (v) the filing of appropriate documents with the IRS in connection with the Private Letter Ruling (as defined below) contemplated by Section 6.10(d), and (vi) where the failure to obtain such consents, approvals, authorizations or 32 permits, or to make such filings or notifications, could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. SECTION 4.06. Permits; Compliance. Each of Parent and the Parent Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each of Parent or the Parent Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Parent Permits"), except where the failure to have, or the suspension or cancellation of, any of the Parent Permits could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. No suspension or cancellation of any of the Parent Permits is pending or, to the knowledge of Parent, threatened, except where the failure to have, or the suspension or cancellation of, any of the Parent Permits could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is in conflict with, or in default, breach or violation of, (a) any Law applicable to Parent or any Parent Subsidiary or by which any property or asset of Parent or any Parent Subsidiary is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license, Parent Permit, franchise or other instrument or obligation to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or any property or asset of Parent or any Parent Subsidiary is bound, except for any such conflicts, defaults, breaches or violations that could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. SECTION 4.07. SEC Filings; Financial Statements. (a) Parent has filed all forms, reports and documents required to be filed by it with the SEC since January 28, 2000 (as such documents have been amended prior to the date hereof, collectively, the "Parent SEC Reports"). As of their respective dates, the Parent SEC Reports (i) complied in all material respects in accordance with either the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations promulgated thereunder, and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, 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 made therein, in the light of the circumstances under which they were made, not misleading. No Parent Subsidiary is required to file any form, report or other document with the SEC. 33 (b) Parent has filed all forms, reports and documents required to be filed by it with the Registry of Companies and Businesses of Singapore since January 1, 2000 (collectively, the "Parent Singapore Filings"). The Parent Singapore Filings complied in all material respects in accordance with the requirements of the Companies Act (Chapter 50) of Singapore, as amended from time to time (the "Singapore Companies Act") and, if applicable, the Securities and Futures Act (Chapter 289) of Singapore, as amended from time to time (the "Singapore Securities Act"). Since January 28, 2000, Parent has filed all forms, reports and documents required to be filed by it with the SGX-ST. Parent has made available to the Company or its counsel the letter from the SGX-ST, dated as of September 30, 1999, (the "SGX-ST Letter"), and since January 28, 2000, Parent has complied with the conditions to the waiver set forth in paragraph 4(ii) thereof and there have not been any amendments or modifications as to the waiver contained in paragraph 4(ii) thereof, and the waiver set forth in paragraph 4(ii) thereof has not been revoked by SGX-ST. As of the date hereof, Parent has not received any notice (written or otherwise) from SGX-ST that SGX-ST has imposed any additional conditions or has revoked any of the conditions in relation to its waiver from the requirements of having to comply with the continuing listing requirements of SGX-ST (the "SGX-ST Waiver"). Parent has complied with and is not in breach of any other conditions, requirements or other obligations imposed by the SGX-ST which are not the subject of the SGX-ST Waiver. (c) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Parent SEC Reports was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q, Form 8-K or any similar or successor form) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of Parent and its consolidated subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except that the unaudited interim financial statements may not contain footnotes and as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments). (d) Except as and to the extent set forth on the consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as at September 30, 2003, including the notes thereto, neither Parent nor any Parent Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet prepared in accordance with GAAP, except for liabilities and obligations, incurred in the ordinary course of business and in a manner consistent with past practice since September 30, 2003, which, individually or in the aggregate, could not reasonably be expected to have a Parent Material Adverse Effect. (e) Parent has made available to the Company or its counsel all comment letters received by Parent from the SEC or the staff thereof since January 1, 2000 and all responses to such comment letters filed by or on behalf of Parent. (f) Parent has timely filed all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any Parent SEC Report. Parent maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange 34 Act; such controls and procedures are designed to ensure that material information concerning Parent and the Parent Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Parent's SEC filings and other public disclosure documents. (g) Parent maintains a standard system of accounting established and administered in accordance with GAAP. Parent and the Parent Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (h) Since January 1, 2000, neither Parent nor any Parent Subsidiary nor, to Parent's knowledge, any director, officer, employee, auditor, accountant or representative of Parent or any Parent Subsidiary, has received or otherwise had or obtained knowledge of any written or formal complaint, allegation or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Parent or any Parent Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that Parent or any Parent Subsidiary has engaged in questionable accounting or auditing practices. No attorney representing Parent or any Parent Subsidiary, whether or not employed by Parent or any Parent Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Parent or any of its officers, directors, employees or agents to the Parent Board or any committee thereof or to any director or officer of Parent. Since January 1, 2000, there have been no formal internal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Parent Board or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act of 2002. (i) To the knowledge of Parent, no employee of Parent or any Parent Subsidiary has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law. Neither Parent nor any Parent Subsidiary nor any officer, employee, contractor, subcontractor or agent of Parent or any such Parent Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of Parent or any Parent Subsidiary in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. Section 1514A(a). SECTION 4.08. Absence of Certain Changes or Events. Since September 30, 2003, except as contemplated by this Agreement, (a) Parent and the Parent Subsidiaries have conducted their businesses only in the ordinary course of business and in a manner consistent with past practice, (b) there has not been any event, circumstance, change or effect that, individually or in the aggregate, has had, constitutes or could reasonably be expected to have, a Parent Material Adverse Effect, and (c) none of Parent or any Parent Subsidiary has taken any 35 action that, if taken after the date of this Agreement, would constitute a material breach of any of the covenants set forth in Section 5.02. SECTION 4.09. Absence of Litigation. There is no Action pending or, to the knowledge of Parent, threatened in writing against Parent or any Parent Subsidiary, or any property or asset of Parent or any Parent Subsidiary, before any Governmental Authority that (a) individually or in the aggregate, has had, or could reasonably be expected to have, a Parent Material Adverse Effect or (b) seeks to materially delay or prevent the consummation of any of the Transactions. Neither Parent nor any Parent Subsidiary nor any material property or asset of Parent or any Parent Subsidiary is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of Parent, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, that could reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent from performing its obligations under this Agreement or could reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. SECTION 4.10. Employee Benefit Plans. (a) Section 4.10(a) of the Parent Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of ERISA, and whether or not subject to the requirements of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance and other material benefit plans, programs or arrangements, and all employment, termination, severance and other material similar contracts or agreements (including, without limitation, any such contracts or agreements relating to a sale of Parent or any Parent Subsidiary or the consummation of any Transaction) to which Parent or any Parent Subsidiary is a party, with respect to which Parent or any Parent Subsidiary has any material obligation or liability or that are maintained, contributed to or sponsored by Parent or any Parent Subsidiary for the benefit of any current or former employee, officer or director of Parent or any Parent Subsidiary, (ii) each employee benefit plan for which Parent or any Parent Subsidiary could incur liability under Section 4069 of ERISA in the event such employee benefit plan has been or were to be terminated and (iii) any employee benefit plan in respect of which Parent or any Parent Subsidiary could incur liability under Section 4212(c) of ERISA (collectively, the "Parent Plans"). (b) With respect to each Parent Plan that is subject to United States Law (a "U.S. Parent Plan"), Parent has made available to the Company a true and complete copy of (i) each U.S. Parent Plan document, (ii) the most recently filed IRS Form 5500, if any, relating to such U.S. Parent Plan, (iii) the most recent summary plan description for each U.S. Parent Plan for which a summary plan description is required by applicable Law, (iv) the most recently received determination letter, if any, issued by the IRS with respect to any U.S. Parent Plan that is intended to qualify under Section 401(a) of the Code, and (v) the most recently prepared actuarial report or financial statement, if any, relating to a U.S. Parent Plan. With respect to each Parent Plan that is not subject to United States Law (a "Non-U.S. Parent Plan"), Parent has made available to the Company or its counsel a true and complete copy of each Non-U.S. Parent Plan document and each material document, if any, prepared in connection with each Non-U.S. Parent Plan. 36 (c) None of the Parent, any Parent Subsidiary or any Parent ERISA Affiliate maintains, contributes or has any liability under or with respect to a Multiemployer Plan or a Multiple Employer Plan. Except as set forth in Section 4.10(c) of the Parent Disclosure Schedule, none of the U.S. Parent Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any person, (ii) obligates Parent or any Parent Subsidiary to pay separation, severance, termination or similar-type benefits solely or partially as a result of any Transaction or (iii) obligates Parent or any Parent Subsidiary to make any payment or provide any benefit as a result of a "change in control", within the meaning of such term under Section 280G of the Code. None of the U.S. Parent Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of Parent or any Parent Subsidiary, except as required by applicable Law. Parent, each Parent Subsidiary and each Parent ERISA Affiliate have complied in all material respects with the requirements of COBRA. (d) Each U.S. Parent Plan has been maintained, funded and administered in accordance with its terms and the requirements of all applicable Laws, including, without limitation, ERISA and the Code, except where such non-compliance could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. Parent and the Parent Subsidiaries have performed all material obligations required to be performed by them under, are not in any material respect in default under or in violation of, and have no knowledge of any material default or violation by any party to, any U.S. Parent Plan. No Action is pending or, to the knowledge of Parent, threatened with respect to any U.S. Parent Plan (other than claims for benefits in the ordinary course) that could reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect and, to the knowledge of Parent, no fact or event exists that could reasonably be expected to give rise to any such Action. (e) Each U.S. Parent Plan that is intended to be qualified under Section 401(a) of the Code has timely applied for or received a favorable determination letter from the IRS covering all of the provisions applicable to the U.S. Parent Plan for which determination letters are currently available that the U.S. Parent Plan is so qualified or may rely on an opinion or advisory letter issued to a master or prototype or volume submitter provider with respect to the tax-qualified status of such U.S. Parent Plan. (f) Except for matters that, individually or in the aggregate, have not had and could not reasonably be expected to have a Parent Material Adverse Effect, there has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any U.S. Parent Plan. None of Parent, any Parent Subsidiary or any Parent ERISA Affiliate has incurred any liability under, arising out of or by operation of Title IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the termination or reorganization of any employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists that would give rise to any such liability. (g) With respect to each Non-U.S. Parent Plan: 37 (i) each Non-U.S. Parent Plan has been maintained, funded and administered in compliance with all applicable Laws, except where such non-compliance could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect; (ii) all employer and employee contributions to each Non-U.S. Parent Plan required by Law or by the terms of such Non-U.S. Parent Plan have been made, or, if applicable, accrued in accordance with the standard accounting practices applicable in the local jurisdiction, and a pro rata contribution for the period prior to and including the date of this Agreement has been made or accrued; (iii) the fair market value of the assets of each funded Non-U.S. Parent Plan, the liability of each insurer for any Non-U.S. Parent Plan funded through insurance or the book reserve established for any Non-U.S. Parent Plan, together with any accrued contributions, is sufficient to procure or provide for the benefits determined on an ongoing basis (actual or contingent) accrued to the date of this Agreement with respect to all current and former participants under such Non-U.S. Parent Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Non-U.S. Parent Plan, and no Transaction shall cause such assets or insurance obligations to be less than such benefit obligations; provided that a Non-U.S. Parent Plan that is maintained solely pursuant to applicable foreign Law and sponsored by a Governmental Authority shall not be subject to this paragraph; (iv) none of the grants, subsidies, concessions and/or allowances that have been received by Parent or any Parent Subsidiary from any Governmental Authority are liable to be repaid or revoked in whole or in part as a result of the entry into or the completion of this Agreement or the Transactions; (v) each Non-U.S. Parent Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities, and except as could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, each Non-U.S. Parent Plan is now and always has been operated in compliance with all applicable non-United States Laws; (vi) all deductions and payments required to be made by Parent or any Parent Subsidiary in respect of Central Provident Fund or Central Provident Scheme contributions (including employer's contributions) in relation to the remuneration of its employees to any relevant competent authority have been so made; and (vii) except as set forth in Section 4.10(g)(vii) of the Parent Disclosure Schedule, none of the Non-U.S. Parent Plans (A) provides for the payment of material separation, severance, termination or similar-type benefits to any person, (B) obligates Parent or any Parent Subsidiary to pay material separation, severance, termination or similar-type benefits solely or partially as a result of any Transaction, or (C) obligates Parent or any Parent Subsidiary to make any material payment or provide any material benefit as a result of a change in control under applicable Law. None of the Non-U.S. Parent Plans provides for or promises material retiree medical, disability or life insurance 38 benefits to any current or former employee, officer or director of Parent or any Parent Subsidiary, except as required by applicable Law. SECTION 4.11. Labor and Employment Matters. (a) Except as set forth in Section 4.11 of the Parent Disclosure Schedule or as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (i) there are no controversies pending or, to the knowledge of Parent, threatened between Parent or any Parent Subsidiary and any of their respective employees; (ii) neither Parent nor any Parent Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by Parent or any Parent Subsidiary, nor, to the knowledge of Parent, are there any activities or proceedings of any labor union to organize any such employees; (iii) there are no unfair labor practice complaints pending against Parent or any Parent Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of Parent or any Parent Subsidiary; and (iv) there is no strike, slowdown, work stoppage or lockout, or, to the knowledge of Parent, threat thereof, by or with respect to any employees of Parent or any Parent Subsidiary. The consent of the labor unions that are a party to the collective bargaining agreements listed in Section 4.11 of the Parent Disclosure Schedule is not required to consummate the Transactions. (b) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (i) Parent and the Parent Subsidiaries are in compliance with all applicable laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of Parent or any Parent Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing; (ii) Parent and the Parent Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such 39 employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect to any persons currently or formerly employed by Parent or any Parent Subsidiary; (iii) neither Parent nor any Parent Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices; (iv) there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or threatened with respect to Parent; and (v) there is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which Parent or any Parent Subsidiary has employed or employs any person. SECTION 4.12. Real Property; Title to Assets. (a) Section 4.12(a) of the Parent Disclosure Schedule lists each parcel of real property currently owned by Parent or any Parent Subsidiary or owned by Parent or any Parent Subsidiary after January 1, 1999. Each parcel of real property owned by Parent or any Parent Subsidiary (i) is owned free and clear of all Liens, other than Permitted Liens, and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of Parent, has any such condemnation, expropriation or taking been proposed. (b) Section 4.12(b) of the Parent Disclosure Schedule lists each parcel of real property currently leased or subleased by Parent or any Parent Subsidiary, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable by Parent or any Parent Subsidiary in connection therewith and each amendment to any of the foregoing (collectively, the "Parent Lease Documents"). True, correct and complete copies of all Parent Lease Documents have been made available to the Company or its counsel. All such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by Parent or any Parent Subsidiary or, to Parent's knowledge, by the other party to such lease or sublease. (c) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (i) there are no contractual or legal restrictions that preclude or restrict the ability to use any real property owned or leased by Parent or any Parent Subsidiary for the 40 purposes for which it is currently being used; and (ii) there are no material latent defects or material adverse physical conditions affecting the real property, and improvements thereon, owned or leased by Parent or any Parent Subsidiary. (d) Each of Parent and the Parent Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except for Permitted Liens. SECTION 4.13. Intellectual Property. (a) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (i) to the knowledge of Parent, Parent and the Parent Subsidiaries own or are licensed to use all Intellectual Property used in or necessary for the conduct of their respective businesses as currently conducted; (ii) to the knowledge of Parent, the conduct of the business of Parent and the Parent Subsidiaries as currently conducted does not infringe upon or misappropriate the Intellectual Property rights of any third party; (iii) there are no claims or suits pending or, to the knowledge of the Parent and except as set forth in Section 4.13(a)(iii) of the Parent Disclosure Schedule, threatened against Parent or any Parent Subsidiary (A) alleging that the conduct of the business of Parent or any Parent Subsidiary as currently conducted infringes upon or misappropriates the Intellectual Property rights of any third party or (B) challenging the ownership, use, validity or enforceability of any item of Intellectual Property owned by Parent or a Parent Subsidiary ("Parent Owned Intellectual Property"); (iv) with respect to Parent Owned Intellectual Property, Parent or a Parent Subsidiary is the owner of the entire right, title and interest in and to such Parent Owned Intellectual Property, free and clear of all liens, encumbrances and other restrictions, and is entitled to use such Parent Owned Intellectual Property in the continued operation of its respective business; (v) there are no settlements, forbearances to sue, consents, judgments, orders or similar obligations which (A) restrict the business of Parent or any Parent Subsidiary in or under any Intellectual Property rights of any third party; or (B) permit any third party to use any Parent Owned Intellectual Property; (vi) Section 4.13(a)(vi) of the Parent Disclosure Schedule sets forth each item of material Intellectual Property licensed to Parent or a Parent Subsidiary ("Parent Licensed Intellectual Property"), and Parent or a Parent Subsidiary has the right to use such Parent Licensed Intellectual Property in the continued operation of its respective business in accordance with the terms of the license agreement governing such Parent Licensed Intellectual Property and Parent and the Parent Subsidiaries have used such 41 Parent Licensed Intellectual Property in accordance with the terms of such license agreement; (vii) to the knowledge of Parent, the Parent Owned Intellectual Property is valid and enforceable, and has not been adjudged invalid or unenforceable in whole or in part; (viii) to the knowledge of Parent, no person is engaging in any activity that infringes upon or misappropriates the Parent Owned Intellectual Property; (ix) to the knowledge of Parent, each license of the Parent Licensed Intellectual Property is valid and enforceable, is binding on all parties to such license, and is in full force and effect; (x) to the knowledge of Parent, no party to any license of the Parent Licensed Intellectual Property is in breach thereof or default thereunder; and (xi) neither the execution of this Agreement nor the consummation of any Transaction will adversely affect any of Parent's or Parent Subsidiaries' rights with respect to the Parent Owned Intellectual Property or the Parent Licensed Intellectual Property. (b) Except as could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, Parent and the Parent Subsidiaries have taken commercially reasonable actions to protect each item of Parent Owned Intellectual Property. Parent and the Parent Subsidiaries have policies of (i) obtaining assignments from all technical employees and consultants, who are involved in any way in the research, development or invention of technology, of all of their rights in the technology created by them within the scope of their employment during such employment and (ii) requiring all directors who are involved in an executive capacity with Parent or a Parent Subsidiary, officers, management employees, and technical and professional employees of Parent and the Parent Subsidiaries to enter into written agreements with Parent or the Parent Subsidiaries to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment. Parent and the Parent Subsidiaries enforce the foregoing policies in a manner consistent with industry standard practices and neither Parent nor the Parent Subsidiaries are aware of any violations of the foregoing policies. (c) Parent or any Parent Subsidiary has not agreed to indemnify any third party for or against any infringement or misappropriation with respect to any third party Intellectual Property other than in the ordinary course of business. (d) The consummation of the Transactions will not result in Parent or any Parent Subsidiary being bound by any non-compete or other restriction on the operation of any business of Parent or any Parent Subsidiary, or in the grant by Parent or any Parent Subsidiary of any rights or licenses to any Parent Owned Intellectual Property. (e) Parent or any Parent Subsidiary has not licensed any Parent Owned Intellectual Property to any third party other than in the ordinary course of business. 42 SECTION 4.14. Taxes. Parent and the Parent Subsidiaries have filed all material Tax Returns required to be filed by them and have paid and discharged all material Taxes required to be paid or discharged, other than such payments as are being contested in good faith by appropriate proceedings. All Tax Returns are true, accurate and complete in all material respects. No taxing authority or agency is now asserting or, to the knowledge of Parent, threatening to assert, against Parent or any Parent Subsidiary any material deficiency or claim for any Taxes or interest thereon or penalties in connection therewith. Neither Parent nor any Parent Subsidiary has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax. The accruals and reserves for Taxes reflected in the consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as at September 30, 2003 are adequate to cover all Taxes accruable through such date (including interest and penalties, if any, thereon) in accordance with GAAP. There are no Tax liens upon any property or assets of Parent or any of the Parent Subsidiaries except liens for current Taxes not yet due. To the knowledge of Parent, neither Parent nor any of its affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code (determined without the application of Section 367 of the Code) or the exchange by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Regulations other than subsection (3)(C) thereof. Parent is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code (determined without the application of Section 367 of the Code) or the exchange by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Regulations other than subsection (3)(C) thereof. SECTION 4.15. Environmental Matters. Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (a) neither Parent nor any Parent Subsidiary has violated or is in violation of any Environmental Law and neither Parent nor any Parent Subsidiary has received any written communication from a Governmental Agency or person alleging any actual or potential liability of, or any actual or potential violation by, Parent or any Parent Subsidiary arising under any Environmental Law; (b) none of the properties currently owned, leased or operated by Parent or any Parent Subsidiary or formerly owned, leased or operated by Parent or any Parent Subsidiary (including, without limitation, soils and surface and groundwaters) are or have been contaminated with any Hazardous Substance, which contamination requires investigation or remediation under any Environmental Law, or has given rise to or would reasonably be expected to give rise to liability or obligations (including any investigatory, reporting or remedial obligation) under any Environmental Law; (c) neither Parent nor any Parent Subsidiary has stored, handled, treated, disposed of, arranged for the disposal of, transported or released any Hazardous 43 Substance at any property or facility, including, without limitation, any offsite location, and neither Parent nor any Company Subsidiary has or has allegedly exposed any person to any Hazardous Substance, so as to give rise to a requirement for investigation or remediation under any Environmental Law or so as to give rise to any current or reasonably expected future liability or obligation (including any investigatory, reporting or remedial obligation) under any Environmental Law; (d) Parent and the Parent Subsidiaries have all permits, licenses and other authorizations required under any Environmental Law and Parent and the Parent Subsidiaries are in compliance with, and have no current or pending liability or obligation associated with any past non-compliance with, such permits, licenses and other authorizations; (e) neither the execution of this Agreement nor the consummation of the Transactions will require any investigation, remediation or other action with respect to Hazardous Substances, or any notice to or consent of Governmental Authorities or third parties, pursuant to any applicable Environmental Law; (f) neither Parent nor any Parent Subsidiary has designed, manufactured, installed, marketed, sold, handled or distributed asbestos or any asbestos-containing product or asbestos-containing material, and no basis in fact or Law, or under contract or lease agreement, exists upon which any claim of liability could be asserted against Parent or any Parent Subsidiary relating to asbestos, asbestos-containing products or asbestos-containing materials located at any property or facility; and (g) Parent has made available to the Company or its counsel all environmental reports and other material environmental documents relating to its business or to Parent or the Parent Subsidiaries, or to their respective affiliates' or predecessors' properties, facilities or operations. SECTION 4.16. Material Contracts. (a) Subsections (i) through (xi) of Section 4.16(a) of the Parent Disclosure Schedule list the following types of contracts and agreements to which Parent or any Parent Subsidiary is a party (such contracts and agreements as are required to be set forth in Section 4.16(a) of the Parent Disclosure Schedule being the "Material Parent Contracts"): (i) each "material contract" (as such term is defined in Item 610(b)(10) of Regulation S-K of the SEC) with respect to Parent and its Parent Subsidiaries; (ii) each contract and agreement that is likely to involve consideration of more than $500,000, in the aggregate, over the remaining term of such contract or agreement, other than purchase orders entered into in the ordinary course of business and in a manner consistent with past practice; (iii) each contract and agreement evidencing outstanding indebtedness in a principal amount of $500,000 or more; 44 (iv) all leases of real property leased for the use or benefit of Parent or any Parent Subsidiary; (v) all material contracts and agreements with any Governmental Authority to which Parent or any Parent Subsidiary is a party; (vi) all contracts and agreements that limit, or purport to limit, the ability of Parent or any Parent Subsidiary to compete in any line of business or with any person or entity or in any geographic area or during any period of time; (vii) all contracts and agreements providing for benefits under any Parent Plan; (viii) all contracts for employment required to be listed in Section 4.10 of the Parent Disclosure Schedule; (ix) each joint venture, partnership, strategic alliance and similar agreement to which Parent or any Parent Subsidiary is a party, which is material to Parent or any Parent Subsidiary or which provides for the ownership of any equity interest in any person or entity; (x) all material broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts and agreements to which Parent or any Parent Subsidiary is a party; (xi) all management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of Parent or any Parent Subsidiary or income or revenues related to any product or service of Parent or any Parent Subsidiary to which Parent or any Parent Subsidiary is a party; (xii) all licenses or sublicenses of Intellectual Property to which Parent or any Parent Subsidiary is a party and that are material to the business of Parent or any Parent Subsidiary; and (xiii) all other contracts and agreements that are material to Parent and the Parent Subsidiaries, taken as a whole, or the absence of which could reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. (b) Except as could not reasonably be expected, individually or in the aggregate, to prevent or materially delay consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its obligations under this Agreement and could not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect: (i) each Material Parent Contract is a legal, valid and binding agreement; 45 (ii) neither Parent nor any Parent Subsidiary has received any claim of default under any Material Parent Contract and neither Parent nor any Parent Subsidiary is in breach or violation of, or default under, any Material Parent Contract; (iii) to Parent's knowledge, no other party is in breach or violation of, or default under, any Material Parent Contract; and (iv) neither the execution of this Agreement nor the consummation of any Transaction shall constitute a default under, give rise to cancellation rights under or otherwise adversely affect any of the material rights of Parent or any Parent Subsidiary under any Material Parent Contract. Parent has made available to the Company or its counsel true and complete copies of all Material Parent Contracts, including any amendments thereto. SECTION 4.17. Insurance. Parent and the Parent Subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of Parent and the Parent Subsidiaries (taking into account the cost and availability of such insurance). SECTION 4.18. Customers and Suppliers. Section 4.18 of the Parent Disclosure Schedule sets forth a true and complete list of Parent's top 20 customers for 2003 (based on the revenue from such customers during the 12-month period ended December 31, 2003) and top 20 suppliers for 2003 (based on payments to such suppliers during the 12-month period ended December 31, 2003). Except as set forth in Section 4.18 of the Parent Disclosure Schedule, no customer that accounted for more than two percent of Parent's consolidated revenues during the 12-month period ended December 31, 2003 and no material supplier of Parent and the Parent Subsidiaries during that period (a) has cancelled or otherwise terminated any agreement with Parent or any Parent Subsidiary prior to the expiration of the agreement term, (b) has returned, or threatened to return, a substantial amount of any of the products, equipment, goods and services purchased from Parent or any Parent Subsidiary, or (c) to Parent's knowledge, has threatened, or indicated its intention, to cancel or otherwise terminate its relationship with Parent or the Parent Subsidiaries or to reduce substantially its purchases from or sales to Parent or any Parent Subsidiary of any products, equipment, goods or services. Neither Parent nor any Parent Subsidiary has (y) breached any material agreement with or (z) engaged in any fraudulent conduct with respect to, any such customer or supplier of Parent or any Parent Subsidiary. SECTION 4.19. Board Approval; Vote Required. (a) The Parent Board, by resolutions duly adopted by unanimous vote of those members of the Parent Board voting at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement, the Voting Agreements, the Merger, the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments are fair to and in the best interests of Parent and its shareholders, (ii) approved this Agreement, the Voting Agreements, the Merger, the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments and (iii) recommended that the shareholders of Parent Ordinary Shares approve the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments and directed that the Share Issuance, the Parent Name Change, 46 the New Stock Option Plans Adoption and the Parent Board Appointments be submitted for consideration by the holders of Parent Ordinary Shares at the Parent Shareholders' Meeting. (b) The only vote of the holders of any class or series of shares or other securities of Parent necessary to approve this Agreement, the Voting Agreements, the Merger, the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments and the other Transactions is the affirmative vote of a majority of the votes cast with respect to the Share Issuance, the New Stock Option Plans Adoption and the Parent Board Appointments and the affirmative vote of 75% of the votes cast with respect to the Parent Name Change, each at the Parent Shareholders' Meeting, in favor of the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments, respectively. SECTION 4.20. Certain Business Practices. (a) None of Parent, any Parent Subsidiary or, to Parent's knowledge, any directors or officers, agents or employees of Parent or any Parent Subsidiary has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii) made any payment in the nature of criminal bribery. (b) None of Parent, any Parent Subsidiary or, to Parent's knowledge, any officers, agents or employees of Parent or any Parent Subsidiary has, for the purpose of securing any contract for Parent or any Parent Subsidiary, given or offered any bribe or any corrupt, unlawful or immoral payment. (c) To Parent's knowledge, none of the directors, officers, agents, employees or other persons acting on behalf of Parent or any Parent Subsidiary has been party to: (i) the use of any assets of Parent or any Parent Subsidiary for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity or to the making of any direct or indirect unlawful payment to government officials or employees or to any candidate for political office or any political party from such assets; (ii) the establishment or maintenance of any unlawful or unrecorded fund of group moneys or other assets; (iii) the making of any false or fictitious entries on the books or records of Parent or any Parent Subsidiary; or (iv) the making of any unlawful payment. SECTION 4.21. Interested Party Transactions. Except for any agreement or arrangement that is likely to involve consideration of less than $50,000 during any calendar year, no director, officer or other affiliate of Parent or any Parent Subsidiary (a) purchases from, or sells or furnishes to, Parent or any Parent Subsidiary any goods or services, (b) is a party to any contract or agreement disclosed in Section 4.16 of the Parent Disclosure Schedule, or (c) has any contractual or other arrangement with Parent or any Parent Subsidiary. Parent and the Parent Subsidiaries have not, since January 1, 2002, (i) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any 47 director or executive officer (or equivalent thereof) of Parent, or (ii) materially modified any term of any such extension or maintenance of credit. SECTION 4.22. Operations of Merger Sub. Merger Sub is a wholly owned subsidiary of Parent, was formed solely for the purpose of engaging in the Transactions, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. SECTION 4.23. Ownership of Company Capital Stock. As of the date of this Agreement, neither Parent nor any Parent Subsidiary is the beneficial owner of any shares of capital stock of the Company. SECTION 4.24. Opinion of Financial Advisor. The Parent Board has received the opinion of Morgan Stanley Dean Witter Asia (Singapore) Pte, dated the date of this Agreement, to the effect that, as of the date of this Agreement, the Exchange Ratio is fair, from a financial point of view, to Parent, a written copy of which opinion will be delivered to the Company, solely for informational purposes, promptly after receipt thereof by the Parent Board. SECTION 4.25. Brokers. No broker, finder or investment banker (other than Morgan Stanley & Co. Incorporated) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or Merger Sub. Parent has made available to the Company or its counsel a complete and correct copy of all agreements between Parent and Morgan Stanley & Co. Incorporated pursuant to which such firm would be entitled to any payment relating to the Transactions. ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Conduct of Business by the Company Pending the Merger. (a) The Company agrees that, between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII, except as set forth in Section 5.01 of the Company Disclosure Schedule or as expressly contemplated by any other provision of this Agreement, unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed): (i) the Company shall, and shall cause each Company Subsidiary to, use its reasonable best efforts to conduct the business of the Company and the Company Subsidiaries, in all respects material to the Company and the Company Subsidiaries, taken as a whole, in the ordinary course of business and in a manner consistent with past practice; and (ii) the Company shall, and shall cause each Company Subsidiary to, use its reasonable best efforts to preserve substantially intact the business organization of the Company and the Company Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Company Subsidiaries and to preserve the current relationships of the Company and the Company Subsidiaries with 48 customers, suppliers and other persons with which the Company or any Company Subsidiary has significant business relations. (b) By way of amplification and not limitation of Section 5.01(a), except as contemplated by any other provision of this Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary shall, between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII, directly or indirectly, do, or propose to do, any of the following without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed): (i) amend or otherwise change its Certificate of Incorporation or By-laws or equivalent organizational documents; (ii) issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of any class of capital stock of the Company or any Company Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Company Subsidiary (except for the issuance of up to a maximum of 6,715,239 shares of Company Class A Common Stock issuable pursuant to employee stock options or up to a maximum of 23,625,885 shares of Company Class A Common Stock issuable pursuant to the terms of the Company Convertible Subordinated Notes outstanding on the date hereof, in the ordinary course of business and in a manner consistent with past practice in accordance with the terms of the Company Stock Option Plans or such notes as in effect as of the date hereof) or (B) any assets of the Company or any Company Subsidiary, except in the ordinary course of business and in a manner consistent with past practice; (iii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, except for dividends by any direct or indirect wholly owned Company Subsidiary to the Company or any other Company Subsidiary; (iv) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock; (v) (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any material amount of assets; (B) except for borrowings under existing credit facilities in the ordinary course of business and in a manner consistent with past practice, incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or grant any security interest in any of its assets; (C) enter into any contract or agreement other than in the ordinary course of business and in a manner consistent with past practice that, if in effect on the date hereof, would qualify as a Company Material 49 Contract; (D) make, authorize or make any commitment with respect to any capital expenditure, except for capital expenditures that, in the aggregate for each quarter, do not exceed 125% of the budgeted amounts set forth in the Company's capital expenditure budget attached as Section 5.01(b)(v) of the Company Disclosure Schedule; or (E) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.01(b)(v); (vi) make any investment in any entity (other than a subsidiary) in excess of $25 million; (vii) increase the compensation payable or to become payable or the benefits provided to its directors, officers or employees, except for increases in the ordinary course of business and in a manner consistent with past practice or as required by applicable Law in salaries or wages of employees of the Company or any Company Subsidiary who are not directors or officers of the Company, or grant any severance or termination pay to (other than pursuant to existing contractual obligations disclosed in Section 3.10(a) of the Company Disclosure Schedule or in the ordinary course of business and in a manner consistent with past practice), or enter into any employment or severance agreement with any director, officer or other employee of the Company or of any Company Subsidiary, or, except as required by Law, establish, adopt, enter into or amend any collective bargaining, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; provided that the Company and Parent hereby agree that, notwithstanding the foregoing, award grants may be made to employees of the Company and the Company Subsidiaries pursuant to the ChipPAC, Inc. Employee Retention Plan and the ChipPAC, Inc. Special Bonus Plan as contemplated in Section 6.05(c); (viii) (A) exercise its discretion with respect to or otherwise voluntarily accelerate the vesting of any Company Stock Award as a result of the Merger, any other change of control of the Company (as defined in the Company Stock Option Plans) or otherwise; or (B) exercise its discretion with respect to or otherwise amend, modify or supplement the Purchase Plan; (ix) make any change in any material method of accounting, method of accounting principles or practice, except for such change required by reason of a concurrent change in GAAP or compliance with the applicable requirements of the rules and regulations promulgated by the SEC; (x) make any tax election inconsistent with past custom and practice or settle or compromise any material United States federal, state, local or non-United States income tax liability inconsistent with any accrual or reserve therefor on the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of September 30, 2003; 50 (xi) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and in a manner consistent with past practice, of liabilities reflected or reserved against in the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as at September 30, 2003 or subsequently incurred in the ordinary course of business and in a manner consistent with past practice; (xii) amend, modify or consent to the termination of any Material Company Contract, or amend, waive, modify or consent to the termination of the Company's or any Company Subsidiary's material rights thereunder; (xiii) commence any Action (except in the ordinary course of business against third parties) or settle any Action (except in the ordinary course of business, it being understood that any settlement involving the payment by the Company or any Company Subsidiary of more than $500,000 is not in the ordinary course of business); (xiv) permit any item of Company Owned Intellectual Property to lapse or to be abandoned, dedicated or disclaimed, by failing to perform or make any applicable filings, recordings or other similar actions or filings, or by failing to pay all required fees and taxes required or advisable to maintain and protect its interest in each and every item of Company Owned Intellectual Property, except where the failure to make such filings and payments results from the exercise of reasonable business judgment; (xv) sell, assign or license any of the Company Owned Intellectual Property, except for licensing of Company Owned Intellectual Property in the ordinary course of business consistent with past practice; (xvi) fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder; or (xvii) announce an intention, enter into any formal or informal agreement or otherwise make a commitment to do any of the foregoing. SECTION 5.02. Conduct of Business by Parent Pending the Merger. (a) Parent agrees that, between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement pursuant to Article III, except as set forth in Section 5.02 of the Parent Disclosure Schedule or as expressly contemplated by any other provision of this Agreement, unless the Company shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed): (i) Parent shall, and shall cause each Parent Subsidiary to, use its reasonable best efforts to conduct the business of Parent and the Parent Subsidiaries, in all respects material to Parent and the Parent Subsidiaries, taken as a whole, in the ordinary course of business and in a manner consistent with past practice; and 51 (ii) Parent shall, and shall cause each Parent Subsidiary to, use its reasonable best efforts to preserve substantially intact the business organization of Parent and the Parent Subsidiaries, to keep available the services of the current officers, employees and consultants of Parent and the Parent Subsidiaries and to preserve the current relationships of Parent and the Parent Subsidiaries with customers, suppliers and other persons with which Parent or any Subsidiary has significant business relations. (b) By way of amplification and not limitation of Section 5.01(a), except as contemplated by any other provision of this Agreement or as set forth in Section 5.02 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary shall, between the date of this Agreement and the earlier of the Effective Time and the termination of the Agreement pursuant to Article VIII, directly or indirectly, do, or propose to do, any of the following without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed): (i) amend or otherwise change its Memorandum and Articles of Association or equivalent organizational documents; (ii) issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of any class of capital stock of Parent or any Parent Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of Parent or any Parent Subsidiary (except for the issuance of up to a maximum of 60,965,705 Parent Ordinary Shares (whether in the form of Parent Ordinary Shares or Parent ADSs) issuable pursuant to employee stock options or up to a maximum of 172,512,573 Parent Ordinary Shares (whether in the form of Parent Ordinary Shares or Parent ADSs) issuable pursuant to the terms of the Parent Convertible Notes outstanding on the date hereof, in the ordinary course of business and in a manner consistent with past practice in accordance with the terms of the Parent Stock Option Plans or such notes as in effect as of the date hereof) or (B) any assets of Parent or any Parent Subsidiary, except in the ordinary course of business and in a manner consistent with past practice; (iii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, except for dividends by any direct or indirect wholly owned Parent Subsidiary to Parent or any other Parent Subsidiary; (iv) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock; (v) (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any material amount of assets; (B) except for borrowings under existing credit facilities in the ordinary course of business and in a manner consistent with past practice, incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or 52 otherwise become responsible for, the obligations of any person, or make any loans or advances, or grant any security interest in any of its assets; (C) enter into any contract or agreement other than in the ordinary course of business and in a manner consistent with past practice that, if in effect on the date hereof, would qualify as a Parent Material Contract; (D) make, authorize or make any commitment with respect to any capital expenditure, except for capital expenditures that, in the aggregate for each quarter, do not exceed 125% of the budgeted amounts set forth in Parent's capital expenditure budget attached as Section 5.02(b)(v) of the Parent Disclosure Schedule; or (E) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.02(b)(v); (vi) make any investment in any entity (other than a subsidiary) in excess of $25 million; (vii) increase the compensation payable or to become payable or the benefits provided to its directors, officers or employees, except for increases in the ordinary course of business and in a manner consistent with past practice in salaries or wages of employees of Parent or any Parent Subsidiary who are not directors or officers of Parent, or grant any severance or termination pay to (other than pursuant to existing contractual obligations disclosed in Section 4.10(a) of the Parent Disclosure Schedule or in the ordinary course of business and in a manner consistent with past practice), or enter into any employment or severance agreement with any director, officer or other employee of Parent or of any Parent Subsidiary, or, except as required by Law, establish, adopt, enter into or amend any collective bargaining, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (viii) exercise its discretion with respect to or otherwise voluntarily accelerate the vesting of any Parent Stock Award as a result of the Merger, any other change of control of Parent (as defined in the Parent Stock Option Plans) or otherwise; (ix) make any change in any material method of accounting, method of accounting principles or practice, except for such change required by reason of a concurrent change in GAAP or compliance with the applicable requirements of the Securities Act, the Exchange Act, the SGX-ST, the SGX-ST Listing Manual, the Singapore Companies Act or the Singapore Securities Act, as the case may be, or the rules and regulations promulgated thereunder; (x) make any tax election inconsistent with past custom and practice or settle or compromise any material United States federal, state, local or non-United States income tax liability inconsistent with any accrual or reserve therefor on the consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as of September 30, 2003; (xi) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, 53 discharge or satisfaction, in the ordinary course of business and in a manner consistent with past practice, of liabilities reflected or reserved against in the consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as at September 30, 2003 or subsequently incurred in the ordinary course of business and in a manner consistent with past practice; (xii) amend, modify or consent to the termination of any Material Parent Contract, or amend, waive, modify or consent to the termination of Parent's or any Parent Subsidiary's material rights thereunder; (xiii) commence any Action (except in the ordinary course of business against third parties) or settle any Action (except in the ordinary course of business, it being understood that any settlement involving the payment by Parent or any Parent Subsidiary of more than $500,000 is not in the ordinary course of business); (xiv) permit any item of Parent Owned Intellectual Property to lapse or to be abandoned, dedicated or disclaimed, by failing to perform or make any applicable filings, recordings or other similar actions or filings, or by failing to pay all required fees and taxes required or advisable to maintain and protect its interest in each and every item of Parent Owned Intellectual Property, except where the failure to make such filings and payments results from the exercise of reasonable business judgment; (xv) sell, assign or license any of the Parent Owned Intellectual Property, except for licensing of Parent Owned Intellectual Property in the ordinary course of business consistent with past practice; (xvi) fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder or filings required with any authorities or regulatory bodies in Singapore in accordance with applicable Singapore Laws, rules and regulations; or (xvii) announce an intention, enter into any formal or informal agreement or otherwise make a commitment, to do any of the foregoing. SECTION 5.03. Control of Other Party's Business. Nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct Parent's operations prior to the Effective Time. Nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the Company's operations prior to the Effective Time. Prior to the Effective Time, each of Parent and the Company shall exercise, consistent with the terms and conditions of this Agreement, control and supervision over their respective operations. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Disclosure Documents. (a) U.S. Filings. As promptly as practicable after the execution of this Agreement, (i) Parent and the Company shall prepare and 54 file the proxy statement to be sent to the stockholders of the Company relating to the meeting of the Company's stockholders (the "Company Stockholders' Meeting") to be held to consider approval and adoption of this Agreement, or any information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the "Proxy Statement"), (ii) Parent shall prepare and file with the SEC a registration statement on Form F-4 (together with all amendments thereto, the "Registration Statement"), in which the Proxy Statement shall be included as a prospectus, in connection with the registration under the Securities Act of the Parent ADSs to be issued to the stockholders of the Company pursuant to the Merger and the underlying Parent Ordinary Shares thereof, and (iii) Parent shall use all reasonable best efforts to cause the Depositary to file with the SEC a registration statement on Form F-6 (the "Form F-6 Registration Statement") in connection with the registration under the Securities Act of the Parent ADRs to be issued in connection with the Merger. Each of Parent and the Company shall furnish to the other party all information concerning it and its business as the other party may reasonably request in connection with such actions and the preparation of the Registration Statement, the Proxy Statement and the Form F-6 Registration Statement. Each of Parent and the Company shall use its reasonable best efforts to respond as promptly as practicable to any comments of the SEC with respect to such documents and to cause the Registration Statement and the Form F-6 Registration Statement to be declared effective by the SEC as promptly as practicable and to keep the Registration Statement effective as long as necessary to consummate the Transactions. As promptly as practicable after the Registration Statement shall have been declared effective by the SEC, the Company shall mail the Proxy Statement to its stockholders and, if necessary, after the Proxy Statement shall have been so mailed, promptly circulate amended, supplemental or supplemented proxy materials, and, if required in connection therewith, resolicit proxies. (b) Singapore Filings. As promptly as practicable after the execution of this Agreement, Parent shall prepare the shareholders circular to be sent to the shareholders of Parent relating to the meeting of Parent's shareholders (the "Parent Shareholders' Meeting" and, together with the Company Stockholders' Meeting, the "Stockholders' Meetings") to be held to consider the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments (the "Parent Shareholders Circular"). The Company shall furnish to Parent all information concerning it and its business as Parent may reasonably request in connection with such actions and the preparation of the Parent Shareholders Circular. Each of Parent and the Company shall use its reasonable best efforts to respond as promptly as practicable to any comments of the SGX-ST with respect to the Parent Shareholders Circular and to receive the approval of the SGX-ST as promptly as practicable. As promptly as practicable after the Parent Shareholders Circular shall have been filed with the SGX-ST (or, if approval of the SGX-ST is required, as promptly as practicable after the Parent Shareholders Circular shall have been approved by the SGX-ST), Parent shall mail the Parent Shareholders Circular to its shareholders and, if necessary, after the Parent Shareholders Circular shall have been so mailed, promptly circulate amended, supplemental or supplemented circular materials. (c) Except as provided in Section 6.04(c), the Company covenants that none of the Company Board or any committee thereof shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval or recommendation by the Company Board or any committee thereof of this Agreement, the Voting 55 Agreements, the Merger or any other Transaction (the "Company Board Recommendation") and that the Proxy Statement shall include the recommendation of the Company Board to the stockholders of the Company in favor of approval and adoption of this Agreement and approval of the Merger. (d) Except as provided in Section 6.04(d), Parent covenants that none of the Parent Board or any committee thereof shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to the Company, the approval or recommendation by the Parent Board or any committee thereof of this Agreement, the Voting Agreements, the Merger, the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments or any other Transaction (the "Parent Board Recommendation") and that the Parent Shareholders Circular shall include the recommendation of the Parent Board to the shareholders of Parent in favor of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments. (e) No amendment or supplement to the Proxy Statement, the Registration Statement, the Form F-6 Registration Statement or the Parent Shareholders Circular will be made by Parent or the Company without the approval of the other party (such approval not to be unreasonably withheld or delayed) and after having provided the other party with the opportunity to review and comment thereon (such review not to be unreasonably delayed). Parent and the Company each will advise the other, promptly after they receive notice thereof, of the time when the Registration Statement or Form F-6 Registration Statement has been declared effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of the Parent ADSs or Parent Ordinary Shares issuable in connection with the Merger for offering or sale in any jurisdiction, or of any request by the SEC or SGX-ST for amendment of the Proxy Statement, the Registration Statement, the Form F-6 Registration Statement or the Parent Shareholders Circular or comments thereon and responses thereto or requests by the SEC or SGX-ST for additional information. (f) Parent represents and warrants to the Company that the information supplied by Parent for inclusion in the Registration Statement, the Form F-6 Registration Statement, the Proxy Statement or the Parent Shareholders Circular shall not, at (i) the time the Parent Shareholders Circular is filed with the SGX-ST, (ii) the time the Registration Statement or Form F-6 Registration Statement is declared effective, (iii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, (iv) the time the Parent Shareholders Circular (or any amendment thereof or supplement thereto) is first mailed to the shareholders of Parent, (v) the time of each of the Stockholders' Meetings (as defined below) and (vi) the Effective Time, contain any untrue statement of a material fact or fail to state any 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. If, at any time prior to the Effective Time, any event or circumstance relating to Parent, any Parent Subsidiary or any of their respective officers or directors should be discovered by Parent which should be set forth in an amendment or a supplement to the Registration Statement, Form F-6 Registration Statement, Proxy Statement or Parent Shareholders Circular, Parent shall promptly inform the Company. Parent represents and warrants to the Company that all documents that Parent is responsible for filing with the SEC or the SGX-ST, as the case may be, in connection with the Merger or the other Transactions will comply as to form and substance in all material 56 aspects with the applicable requirements of the Securities Act, the Exchange Act, the SGX-ST, the SGX-ST Listing Manual, the Singapore Companies Act and the Singapore Securities Act, as the case may be, and the rules and regulations thereunder. (g) The Company represents and warrants to Parent that the information supplied by the Company for inclusion in the Registration Statement, the Form F-6 Registration Statement, the Proxy Statement or the Parent Shareholders Circular shall not, at (i) the time the Parent Shareholders Circular is filed with the SGX-ST, (ii) the time the Registration Statement or Form F-6 Registration Statement is declared effective, (iii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, (iv) the time the Parent Shareholders Circular (or any amendment thereof or supplement thereto) is first mailed to the shareholders of Parent, (v) the time of each of the Stockholders' Meetings and (vi) the Effective Time, contain any untrue statement of a material fact or fail to state any 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. If, at any time prior to the Effective Time, any event or circumstance relating to the Company or any Company Subsidiary, or their respective officers or directors, should be discovered by the Company which should be set forth in an amendment or a supplement to the Registration Statement, Form F-6 Registration Statement, Proxy Statement or Parent Shareholders Circular, the Company shall promptly inform Parent. The Company represents and warrants to Parent that all documents that the Company is responsible for filing with the SEC in connection with the Merger or the other Transactions will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. SECTION 6.02. Stockholders' Meetings. (a) The Company shall call and hold the Company Stockholders' Meeting as promptly as practicable for the purpose of voting upon the approval and adoption of this Agreement. (b) Parent shall call and hold the Parent's Shareholders' Meeting as promptly as practicable for the purpose of voting upon the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments. (c) Each of the Company and Parent shall use its reasonable best efforts to hold the Stockholders' Meetings on the same day as soon as practicable after the date on which the Registration Statement becomes effective. Each of the Company and Parent shall use its reasonable best efforts to solicit from its shareholders proxies in favor of the approval and adoption of this Agreement or in favor of the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments, as the case may be, and shall take all other action necessary or advisable to secure the required vote or consent of its shareholders, except in the event and to the extent that the Company Board or the Parent Board, as the case may be, in accordance with Section 6.04(c) or Section 6.04(d), withdraws or modifies its recommendation to its shareholders in favor of the approval and adoption of this Agreement or in favor of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments, as the case may be. 57 SECTION 6.03. Access to Information; Confidentiality. (a) Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which the Company or Parent or any of their respective subsidiaries is a party or pursuant to applicable Law, from the date of this Agreement until the Effective Time, the Company and Parent shall (and shall cause their respective subsidiaries to): (i) provide to the other party (and the other party's officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives, collectively, "Representatives") reasonable access during normal business hours upon prior notice to the officers, employees, agents, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof, including access to enter any real property owned, leased, subleased or occupied by such party or such party's Subsidiary in order to conduct an environmental assessment of such property (provided that no subsurface investigation work of the sort commonly referred to as "Phase II" investigatory work shall be conducted absent the prior written consent of the other party, which consent shall not be unreasonably withheld); and (ii) furnish promptly to the other party such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as the other party or its Representatives may reasonably request; provided, however, that (A) no pricing or other competitively sensitive information retrieved from the Company will be made available to persons who are involved in any pricing or sales activity at Parent or any Parent Subsidiary, (B) no pricing or other competitively sensitive information retrieved from Parent will be made available to persons who are involved in any pricing or sales activity at the Company or any Company Subsidiary and (C) neither Parent nor the Company shall use any information obtained from the other party for any purpose other than evaluation of such other party in connection with this Agreement. (b) All information obtained by the parties pursuant to this Section 6.03 shall be kept confidential in accordance with the confidentiality agreement, dated January 6, 2004 (the "Confidentiality Agreement"), between Parent and the Company. (c) No investigation pursuant to this Section 6.03 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. SECTION 6.04. No Solicitation of Transactions. (a) Each party to this Agreement agrees that, from and after the date hereof until the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII, it shall not, and shall not permit any of its Subsidiaries or any of its or its Subsidiaries' directors, officers or employees to, and shall use its best efforts to cause its investment bankers, attorneys, accountants and other representatives retained by it or any of its Subsidiaries not to, directly or indirectly: (i) solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information), or take any other action knowingly to facilitate, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) that constitutes a Competing Transaction (as defined below); (ii) enter into or maintain or continue discussions or negotiations with any person or entity in furtherance of such inquiries or to obtain a Competing Transaction; (iii) agree to, approve, endorse or recommend any Competing Transaction or enter into any letter of intent or other contract, agreement or commitment contemplating or otherwise relating to any Competing Transaction; or (iv) authorize or permit any of the officers, directors or employees of such party or any of its Subsidiaries, or any investment banker, financial 58 advisor, attorney, accountant or other representative retained by such party, to take any such action. Each party to this Agreement shall notify the other party as promptly as practicable (and in any event within one day after such party attains knowledge thereof) if any proposal or offer, or any inquiry or contact with any person with respect thereto, regarding a Competing Transaction is made, specifying the material terms and conditions thereof and the identity of the party making such proposal or offer or inquiry or contact (including material amendments or proposed material amendments). Each party to this Agreement immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to a Competing Transaction. Each party to this Agreement shall not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party. (b) Notwithstanding anything to the contrary in this Section 6.04, the Board of Directors of Parent or the Company, as the case may be, may furnish, prior to approval of this Agreement, the Merger, the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments at the Company Stockholders' Meeting or the Parent Shareholders' Meeting, as the case may be, information to, and enter into discussions with, a person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction or otherwise facilitate any effort or attempt to make or implement a proposal or offer for a Competing Transaction, if such Board of Directors has (i) determined, in its good faith judgment (after having consulted with a financial advisor of internationally recognized reputation) that such proposal or offer is reasonably likely to lead to a Superior Proposal (as defined below), (ii) determined, in its good faith judgment after consultation with independent legal counsel (who may be such party's regularly engaged independent legal counsel), that, in light of such proposal or offer regarding a Competing Transaction, the furnishing of such information or entering into discussions is required to comply with its fiduciary obligations to Parent and its shareholders or the Company and its stockholders, respectively, under applicable Law, (iii) provided written notice to the other party of its intent to furnish information or enter into discussions with such person at least 24 hours prior to taking any such action, and (iv) obtained from such person an executed confidentiality agreement on terms no less favorable to the other party than those contained in the Confidentiality Agreement (it being understood that such confidentiality agreement and any related agreements shall not include any provision calling for any exclusive right to negotiate with such party or having the effect of prohibiting such party from satisfying its obligations under this Agreement). (c) Except as set forth in this Section 6.04(c), the Company Board shall not make a change in the Company Board Recommendation (a "Change in the Company Board Recommendation") in a manner adverse to Parent or Merger Sub or approve or recommend, or cause or permit the Company to enter into any letter of intent, agreement or obligation with respect to, any Competing Transaction. Notwithstanding the foregoing, if, prior to the approval of this Agreement and the Merger at the Company Stockholders' Meeting, the Company Board determines, in its good faith judgment prior to the Effective Time and after consultation with independent legal counsel (who may be the Company's regularly engaged independent legal counsel), that it is required to make a Change in the Company Board Recommendation to comply with its fiduciary obligations to the Company and its stockholders under applicable Law, the Company Board may recommend a Superior Proposal, but only (i) after providing written notice to Parent (a "Notice of Company Superior Proposal") advising Parent that the Company 59 Board has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal and indicating that the Company Board intends to effect a Change in the Company Board Recommendation and the manner in which it intends (or may intend) to do so, and (ii) if Parent does not, within 48 hours of Parent's receipt of the Notice of Company Superior Proposal, deliver to the Company a binding, written offer that the Company Board determines, in its good faith judgment (after having consulted with independent legal counsel and a financial advisor of internationally recognized reputation) to be at least as favorable to the Company's stockholders as such Superior Proposal. Any disclosure that the Company Board may be compelled to make with respect to the receipt of a proposal or offer for a Competing Transaction under applicable Law or Rule 14d-9 or 14e-2 or that the Company Board determines to comply with its fiduciary duties to the Company and its stockholders will not constitute a violation of this Agreement, provided that such disclosure states that no action will be taken by the Company Board in violation of this Section 6.04(c). The obligation of the Company to call, give notice of, convene and hold the Company Stockholders' Meeting shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to it of any Competing Transaction, or by any Change in the Company Board Recommendation, except in the event that this Agreement is terminated in accordance with Section 8.01(j). The Company shall not submit to the vote of its stockholders any Competing Transaction, or propose to do so, except in the event that this Agreement is terminated in accordance with Section 8.01(j). (d) Except as set forth in this Section 6.04(d), the Parent Board shall not make a change in the Parent Board Recommendation (a "Change in the Parent Board Recommendation") in a manner adverse to the Company or approve or recommend, or cause or permit Parent to enter into any letter of intent, agreement or obligation with respect to, any Competing Transaction. Notwithstanding the foregoing, if, prior to the approval of the Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments at the Parent Shareholders' Meeting, the Parent Board determines, in its good faith judgment prior to the Effective Time and after consultation with independent legal counsel (who may be Parent's regularly engaged independent legal counsel), that to make a Change in the Parent Board Recommendation is required to comply with its fiduciary obligations to Parent and its shareholders under applicable Law, the Parent Board may recommend a Superior Proposal, but only (i) after providing written notice to the Company (a "Notice of Parent Superior Proposal") advising the Company that the Parent Board has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal and indicating that the Parent Board intends to effect a Change in the Parent Board Recommendation and the manner in which it intends (or may intend) to do so, and (ii) if the Company does not, within 48 hours of the Company's receipt of the Notice of Parent Superior Proposal, deliver to Parent a binding written offer that the Parent Board determines, in its good faith judgment (after having consulted with independent legal counsel and a financial advisor of internationally recognized reputation) to be at least as favorable to Parent's shareholders as such Superior Proposal. Any disclosure that the Parent Board may be compelled to make with respect to the receipt of a proposal or offer for a Competing Transaction under applicable Law (including, without limitation, the Singapore Code of Take-overs and Mergers) or Rule 14d-9 or 14e-2 or the requirements of the Securities Industry Counsel or that the Parent Board determines to comply with its fiduciary duties to Parent and its shareholders will not constitute a violation of this Agreement, provided that such disclosure 60 states that no action will be taken by the Parent Board in violation of this Section 6.04(d). The obligation of Parent to call, give notice of, convene and hold the Parent Shareholders' Meeting shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to it of any Competing Transaction, or by any Change in the Parent Board Recommendation, except in the event that this Agreement is terminated in accordance with Section 8.01(k). Parent shall not submit to the vote of its shareholders any Competing Transaction, or propose to do so, except in the event that this Agreement is terminated in accordance with Section 8.01(k). (e) A "Competing Transaction" means with respect to the Company or Parent, as the case may be, any of the following (other than the Transactions): (i) a transaction, whether a merger, purchase of assets, tender offer or otherwise, which, if consummated, would result in a third party's acquiring (A) more than 20% of the equity securities of the Company or of Parent, as the case may be, (B) all or substantially all of the assets of the Company and the Company Subsidiaries, taken as a whole, or of Parent and the Parent Subsidiaries, taken as a whole, or (C) is conditioned upon the non-consummation of the Transactions; (ii) in the case of the Company, any solicitation in opposition to approval and adoption of this Agreement by the Company's stockholders; and (iii) in the case of Parent, any solicitation in opposition to approval of the Share Issuance, Parent Name Change, the New Stock Option Plans Adoption or the Parent Board Appointments by Parent's shareholders. (f) A "Superior Proposal" means with respect to the Company or Parent, as the case may be, an unsolicited bona fide offer made by a third party which (i) is for a transaction, whether a merger, purchase of assets, tender offer or otherwise, other than the Transactions, which, if consummated, would result in (A) the stockholders of such party immediately preceding such transaction holding less than 50% of the equity interest in the surviving or resulting entity of such transaction or (B) a third party's acquiring all or substantially all of the assets of the Company and the Company Subsidiaries, taken as a whole, or Parent and the Parent Subsidiaries, taken as a whole, as the case may be, and (ii) is on terms that the Board of Directors of such party determines, in its good faith judgment (after having consulted with independent legal counsel and a financial advisor of internationally recognized reputation), taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal and the person making the proposal, (A) if consummated pursuant to its terms, is reasonably likely to result in a transaction that is more favorable to the stockholders of such party (in their capacities as stockholders), from a financial point of view, than the Merger and (B) is reasonably capable of being completed on the terms proposed. SECTION 6.05. Employee Benefits Matters. (a) For one year following the Effective Time, or such longer period as may be required by applicable Law or contract, Parent shall or shall cause the Surviving Corporation to provide or cause to be provided to employees of the Surviving Corporation or any other affiliate of Parent who were employees of the Company or any Company Subsidiary immediately prior to the Effective Time and, in each case, to the extent an employee continues employment with the Surviving Corporation or any other affiliate of Parent (the "Continuing Employees") compensation and employee benefit plans, programs and policies and fringe benefits (other than equity based compensation arrangements) that, in the aggregate, are substantially similar to those that were provided to the Continuing Employees by the Company or any Company Subsidiary immediately prior to the execution of this Agreement. 61 (b) Following the Effective Time, Parent shall or shall cause the Surviving Corporation to recognize (or cause to be recognized) the service of each Continuing Employee with the Company or any Company Subsidiary determined as of the Effective Time for purposes of eligibility and vesting under any employee benefit plans, programs or arrangements maintained by Parent, the Surviving Corporation, or any of their affiliates that employs any Continuing Employee; provided, however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit. Each such employee benefit plan, program or arrangement that provides health benefits to Continuing Employees shall waive pre-existing condition limitations with respect to the Continuing Employees to the same extent waived under the applicable group health plan of the Company or any Company Subsidiary maintained prior to the Effective Time, and each Continuing Employee shall be given credit for amounts paid under the corresponding group health plan of the Company or any Company Subsidiary during the plan year in which the Effective Time occurs for purposes of applying deductibles, co-payments and out-of-pocket maximums for such plan year. (c) As of the Effective Time, Parent shall cause the Surviving Corporation to honor for the one-year period following the Effective Time all employment and severance agreements existing as of the date hereof and set forth in Schedule 3.10(a) of the Company Disclosure Schedule between the Company or any Company Subsidiary and any current or former director, officer or employee of the Company or any Company Subsidiary. In addition, Parent shall, after the Effective Time, cause the Surviving Corporation to perform the Company's obligations under the ChipPAC, Inc. Employee Retention Plan and the ChipPAC, Inc. Special Bonus Plan, which will provide for payments at specified times of severance, bonuses and retention payments to employees of the Company and the Company Subsidiaries contingent upon the occurrence of the Effective Time in an aggregate cash amount of US$5.0 million, and the individual award agreements to be entered into thereunder with participating employees of the Company and the Company Subsidiaries. (d) Parent shall use its reasonable best efforts to procure consents from non-U.S. Continuing Employees that are required by applicable Law or collective bargaining agreement as a result of Parent's modifications of any material terms and conditions of employment for such employees in such employees' respective jurisdictions. SECTION 6.06. Directors' and Officers' Indemnification and Insurance. (a) The Certificate of Incorporation and By-laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in Article Eight of the Certificate of Incorporation or Article V of the By-laws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such modification shall be required by law. (b) The Surviving Corporation shall use its reasonable best efforts to maintain in effect, for six years from the Effective Time, the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions that are no less advantageous) with respect to matters occurring prior to the Effective Time; provided, 62 however, that in no event shall the Surviving Corporation be required to expend pursuant to this Section 6.06(b) more than an amount per year equal to 200% of current annual premiums paid by the Company for such insurance (which premiums the Company represents and warrants to be $842,575 in the aggregate), it being understood that, if the premium required to be paid by Parent for such policy would exceed such 200% amount, then the coverage of such policy shall be reduced to the maximum amount that may be obtained for a per annum premium in such 200% amount. (c) In the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Company or the Surviving Corporation, as the case may be, or at Parent's option, Parent, shall assume the obligations set forth in this Section 6.06. SECTION 6.07. Notification of Certain Matters. The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which could reasonably be expected to cause any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect and (b) any failure of the Company, Parent or Merger Sub, as the case may be, to comply with or satisfy any covenant or agreement to be complied with or satisfied by it hereunder, in the case of (a) or (b), such that the conditions under Section 7.02(a) or Section 7.02(b), in the case of the Company, or under Section 7.03(a) or Section 7.03(b), in the case of Parent, would not be satisfied; provided, however, that the delivery of any notice pursuant to this Section 6.07 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.08. Company Affiliates. No later than 30 days after the date of this Agreement, the Company shall deliver to Parent a list of names and addresses of those persons who were, in the Company's reasonable judgment, on such date, affiliates (within the meaning of Rule 145 of the rules and regulations promulgated under the Securities Act (each such person being a "Company Affiliate")) of the Company. The Company shall provide Parent with such information and documents that the Company has in its possession as Parent shall reasonably request for purposes of reviewing such list. The Company shall use its reasonable best efforts to deliver or cause to be delivered to Parent, prior to the Effective time, an affiliate letter substantially in the form attached hereto as Exhibit 6.08, executed by each of the Company Affiliates identified in the foregoing list and any person who shall, to the knowledge of the Company, have become a Company Affiliate subsequent to the delivery of such list. SECTION 6.09. Further Action; Reasonable Best Efforts. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall (a) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act or other applicable foreign, federal or state antitrust, competition or fair trade Laws with respect to the Transactions and (b) use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective the Transactions, including, 63 without limitation, using its reasonable best efforts to obtain all permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with the Company or Parent or their subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Merger; provided that nothing contained in this Section 6.09 shall require Parent or the Company to divest any asset or assets or license any technology which individually or in the aggregate have a fair value in excess of $10,000,000 in any manner that would not be commercially reasonable. In case, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such action. SECTION 6.10. Plan of Reorganization. (a) This Agreement is intended to constitute a "plan of reorganization" within the meaning of Section 1.368-2(g) of the income tax regulations promulgated under the Code. From and after the date of this Agreement and until the Effective Time, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could reasonably be expected to prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the Code (including the receipt and continued effectiveness of the Private Letter Ruling) or the exchange by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Regulations other than subsection (3)(C) thereof. Following the Effective Time, neither the Surviving Corporation, Parent nor any of their affiliates shall knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could reasonably be expected to cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code (including the failure to receive and maintain the continued effectiveness of the Private Letter Ruling) or the exchange by Eligible Company Stockholders of Company Shares for Parent ADSs pursuant to the Merger from satisfying the requirements of Section 1.367(a)-3(c) of the Regulations other than subsection (3)(C) thereof. (b) As of the date hereof, the Company, after consultation with counsel, does not know of any reason (i) why it would not be able to deliver to counsel to the Company and Parent, at the date of the legal opinions referred to below, certificates, with customary exceptions and modifications thereto, to enable such firms to deliver legal opinions that (assuming receipt of the Private Letter Ruling) the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, and the Company hereby agrees to use its reasonable best efforts to deliver such certificates effective as of the date of such opinions or (ii) why counsel to the Company and Parent would not be able to deliver legal opinions that (assuming receipt of the Private Letter Ruling) the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code. (c) As of the date hereof, Parent, after consultation with counsel, does not know of any reason (i) why it and Merger Sub would not be able to deliver to counsel to the Company and Parent, at the date of the legal opinions referred to below, certificates, with customary exceptions and modifications thereto, to enable such firms to deliver legal opinions that (assuming receipt of the Private Letter Ruling) the Merger qualifies as a reorganization 64 within the meaning of Section 368(a) of the Code, and Parent hereby agrees to use its reasonable best efforts to deliver such certificates on behalf of both Parent and Merger Sub effective as of the date of such opinions, or (ii) why counsel to the Company and Parent would not be able to deliver legal opinions that (assuming receipt of the Private Letter Ruling) the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code. (d) Parent and the Company shall cooperate and use their respective reasonable best efforts to obtain a private letter ruling from the IRS with respect to the transactions contemplated by this Agreement, as provided for under Section 1.367(a)-3(c)(9) of the Regulations, to qualify for an exception to the general rule under Section 367(a)(1) of the Code (the "Private Letter Ruling"). Such reasonable best efforts shall include, without limitation, Parent and Company's making (or causing their respective affiliates to make) such representations or covenants as the IRS may reasonably request in connection with the Private Letter Ruling. Any written or substantive oral communications with the IRS to the extent possible shall be conducted jointly by the Company and Parent or Kirkland & Ellis LLP and Shearman & Sterling LLP, respectively. If the IRS does not issue the Private Letter Ruling, but there has been a change in law, clear guidance from the IRS or a change in facts that would nevertheless indicate that the opinion described below could be given, Parent and the Company shall use their reasonable best efforts each to obtain an opinion of a nationally recognized law firm that for federal income tax purposes the exchange by Eligible Company Stockholders of Company Shares solely for Parent ADSs pursuant to the Merger will not result in the recognition of gain under the provisions of Section 367(a) of the Code (a "Section 367 Opinion"). Parent and the Company agree to timely satisfy, or cause to be timely satisfied, all applicable tax reporting and filing requirements contained in the Code and the United States Income Tax Regulations with respect to the transactions contemplated hereby, including, without limitation, the reporting requirements contained in Section 1.367(a)-3(c)(6) of the Regulations. SECTION 6.11. Obligations of Merger Sub. Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement. SECTION 6.12. Stock Exchange Listing/Quotation. (a) Parent shall promptly prepare and submit to the SGX-ST a listing application covering the Parent Ordinary Shares underlying the Parent ADSs to be issued in the Merger, pursuant to the Substitute Options and upon conversion of the Company Convertible Subordinated Notes, and shall use its reasonable best efforts to obtain, prior to the Effective Time, approval for such listing on the SGX-ST, subject to official notice of issuance to the SGX-ST and customary conditions, and the Company shall cooperate with Parent with respect to such listing. (b) Parent shall promptly prepare and submit to the Nasdaq a listing application covering the Parent ADSs to be issued in the Merger, pursuant to Substitute Options and upon conversion of the Company Convertible Subordinated Notes, and shall use its reasonable best efforts to obtain, prior to the Effective Time, approval for the quotation of such Parent ADSs, subject to official notice of issuance to Nasdaq, and the Company shall cooperate with Parent with respect to such quotation. 65 SECTION 6.13. Public Announcements. The initial press release relating to this Agreement shall be a joint press release the text of which has been agreed to by each of Parent and the Company. Thereafter, unless otherwise required by applicable Law or the requirements of the SGX-ST or Nasdaq, no statement or other disclosure regarding the Transactions will be made by any party to this Agreement without the prior approval of the Company and Parent, which approval shall not be unreasonably withheld or delayed, provided, however, that nothing in this Section 6.13 shall be deemed to limit the rights of the Company or Parent under Section 6.04. SECTION 6.14. Board of Directors; Corporate Headquarters; Corporate Name. (a) Parent shall use its reasonable best efforts to, subject to the fiduciary duties of the Parent Board, (i) not increase the number of directors who are nominees of Singapore Technologies Semiconductors Pte Ltd prior to the Effective Time and cause the number of directors comprising the Parent Board as of immediately after the Effective Time to be 11, (ii) cause four of the current members of the Parent Board to resign effective as of immediately after the Effective Time, (iii) cause each of Mr. Robert Conn, Mr. Douglas Norby, Mr. Chong Sup Park and Mr. Dennis McKenna (the "Company Designated Directors"), assuming that each such person is willing to serve as a director, to be nominated for election as a director of Parent, effective as of the Effective Time, at the Parent Shareholders' Meeting, (iv) cause Mr. Dennis McKenna to be appointed as Vice Chairman of the Parent Board as of the Effective Time, to serve as Vice Chairman and director until December 31, 2004, (v) cause one of Mr. Robert Conn, Mr. Douglas Norby or Mr. Chong Sup Park to be appointed to the Audit Committee of the Parent Board as of the Effective Time, and (vi) cause the Audit Committee Terms of Reference to be amended as of the Effective Time to provide, in accordance with NASD Rule 4350(h), that Parent shall conduct an appropriate review of all "related party transactions" (defined as transactions required to be disclosed pursuant to Rule 404 of Regulation S-K under the Securities Act or any successor provision thereto) for potential conflict of interest situations and that all such transactions must be approved by the Audit Committee of the Parent Board. If any Company Designated Director shall, prior to the Effective Time, die or determine not to serve as a director of Parent, the Company shall have the right to appoint another person who would qualify as an "independent" director under the rules of Nasdaq to become a Company Designated Director, subject to the approval of such person by the Parent Board (which approval shall not be unreasonably withheld). (b) The corporate headquarters of Parent following completion of the Merger will remain in Singapore. (c) Parent shall take all such action as may be necessary to cause the corporate name of Parent to be renamed, effective as of the Effective Time, "STATS ChipPAC Ltd", or such other name to be agreed upon between Parent and the Company prior to the mailing of the Proxy Statement and the Parent Shareholders Circular (which name shall include the names "STATS" and "ChipPAC"), subject to receipt of the requisite approval of the shareholders of Parent. SECTION 6.15. Accounting Matters. Each of Parent and the Company agree to each use reasonable best efforts to cause to be delivered to each other consents and comfort letters from their respective independent auditors, in form reasonably satisfactory to the recipient 66 and customary in scope and substance for consents and comfort letters delivered by independent public accountants in connection with registration statements on Form F-4 under the Securities Act. SECTION 6.16. Stock Transfer Taxes. All stock transfer, real estate transfer, documentary, stamp, recording and other similar Taxes (including interest, penalties and additions to any such Taxes) incurred in connection with this Agreement and the Transactions shall be paid by the Surviving Corporation, and the Company shall cooperate with Parent and Merger Sub in preparing, executing and filing any Tax Returns with respect to such Taxes. SECTION 6.17. Supplemental Indentures. As of the Effective Time, the Surviving Corporation and Parent shall (i) execute and deliver to Firstar Bank, N.A., as trustee under the Indenture dated as of June 15, 2001 between the Company and Firstar Bank, N.A. (the "8% Convertible Notes Indenture"), a supplemental indenture in accordance with Section 4.11 of the 8% Convertible Notes Indenture and (ii) execute and deliver to U.S. Bank National Association, as trustee under the Indenture dated as of May 28, 2003 between the Company and U.S. Bank National Association (the "2.50% Convertible Notes Indenture"), a supplemental indenture in accordance with Section 5.11 of the 2.50% Convertible Notes Indenture. Prior to the Effective Time, the Company shall, and after the Effective Time, the Surviving Corporation shall, deliver such notices to security holders, certificates, opinions, agreements and other instruments as Parent or the trustees under the indentures specified above and under the Indenture dated as of July 29, 1999, among ChipPAC International Limited, ChipPAC Merger Corp. and Firstar Bank of Minnesota, N.A. as trustee (the "12.75% Notes Indenture"), may reasonably request in connection with the Merger and such indentures and supplemental indentures. SECTION 6.18. SGX-ST Waiver. Parent shall give written notice to the Company as soon as reasonably practicable after Parent receives notice (written or otherwise) from the SGX-ST that the SGX-ST has imposed any additional condition or revoked any of the conditions in relation to SGX-ST Waiver from the requirements of having to comply with the continuing listing requirements of the SGX-ST. ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. Conditions to the Obligations of Each Party. The obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following conditions: (a) Registration Statements. The Registration Statement and Form F-6 Registration Statement shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Registration Statement or Form F-6 Registration Statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated by the SEC. 67 (b) SGX-ST Filings. The Parent Shareholders Circular shall have been filed with the SGX-ST and Parent shall have received all approvals and confirmations from the SGX-ST necessary to mail the Parent Shareholders Circular to the shareholders of Parent in connection with the Parent Shareholders' Meeting. (c) Company Stockholder Approval. This Agreement shall have been approved and adopted by the requisite affirmative vote of the stockholders of the Company in accordance with the DGCL and the Company's Certificate of Incorporation, and such approval shall not have been rescinded, revoked or otherwise withdrawn. (d) Parent Shareholder Approval. The Share Issuance, the Parent Name Change, the New Stock Option Plans Adoption and the Parent Board Appointments shall have been approved by the requisite affirmative vote of the shareholders of Parent in accordance with the rules and regulations of the SGX-ST, Nasdaq, the Singapore Companies Act and Parent's Memorandum and Articles of Association, and such approval shall not have been rescinded, revoked or otherwise withdrawn. (e) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (f) U.S. Antitrust Approvals and Waiting Periods. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (g) Stock Exchange Listing/Quotation. The Parent ADSs to be issued in the Merger, pursuant to the Substitute Options or pursuant to the conversion of the Company Convertible Subordinated Notes shall have been authorized for quotation on Nasdaq and the Parent Ordinary Shares underlying such Parent ADSs shall have been authorized for listing on the SGX-ST, in each case, subject to official notice of issuance and other customary conditions. SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver, where permissible, by Parent or Merger Sub, as the case may be, of the following additional conditions: (a) Representations and Warranties. (i) The representations and warranties of the Company contained in Section 3.03(a) of this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects as of the Effective Time, as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), and (ii) the representations and warranties of the Company otherwise contained in this Agreement shall have been true and correct as of the date of this Agreement (without giving effect to any qualification or limitation as to materiality or Company Material Adverse Effect set forth therein) and shall be true and correct as of 68 the Effective Time (without giving effect to any qualification or limitation as to materiality or Company Material Adverse Effect set forth therein), as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case of as such earlier date), except in this clause (ii) where the failure of such other representations of the Company to be so true and correct (without giving effect to any qualification or limitation as to materiality or Company Material Adverse Effect set forth therein) would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (b) Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time. (c) Officer Certificate. The Company shall have delivered to Parent a certificate, dated the date of the Closing, signed by the President or any Senior Vice President of the Company, certifying as to the satisfaction of the conditions specified in Sections 7.02(a) and 7.02(b). (d) Consents. The consents, approvals or authorizations listed on Section 7.02(d) of the Company Disclosure Schedule shall have been obtained. (e) Material Adverse Effect. No Company Material Adverse Effect shall have occurred since the date of this Agreement and be continuing. (f) Tax Opinion; Private Letter Ruling. Parent shall (i) have received the opinion of Shearman & Sterling LLP, counsel to Parent, based upon representations of Parent, Merger Sub and the Company, and normal assumptions, to the effect that, for federal income tax purposes (and determined without the application of Section 367 of the Code), the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, that each of Parent, Merger Sub and the Company will be a party to the reorganization within the meaning of Section 368(b) of the Code and (ii) have received the Private Letter Ruling or a Section 367 Opinion, which opinions or Private Letter Ruling shall not have been withdrawn or modified in any material respect. The issuance of the opinion in clause (i) above shall be conditioned on receipt by Shearman & Sterling LLP of representation letters from each of Parent, Merger Sub and the Company as contemplated in Section 6.10 of this Agreement. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect as of the Effective Time. (g) No Defaults. No Default or Event or Default (as defined in the relevant indenture) shall have occurred and be continuing under the 8% Convertible Notes Indenture, the 2.50% Convertible Notes Indenture or the 12.75% Notes Indenture and no Default or Event of Default (as defined in the relevant indenture) shall occur and be continuing immediately after giving effect to the Merger. 69 SECTION 7.03. Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are subject to the satisfaction or waiver, where permissible, by the Company of the following additional conditions: (a) Representations and Warranties. (i) The representations and warranties of Parent contained in Section 4.03(a) of this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects as of the Effective Time, as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), and (ii) the representations and warranties of Parent otherwise contained in this Agreement shall have been true and correct as of the date of this Agreement (without giving effect to any qualification or limitation as to materiality or Parent Material Adverse Effect set forth therein) and shall be true and correct as of the Effective Time (without giving effect to any qualification or limitation as to materiality or Parent Material Adverse Effect set forth therein), as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case of as such earlier date), except in this clause (ii) where the failure of such other representations of Parent to be so true and correct (without giving effect to any qualification or limitation as to materiality or Parent Material Adverse Effect set forth therein) would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. (b) Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time. (c) Officer Certificate. Parent shall have delivered to the Company a certificate, dated the date of the Closing, signed by the President or any Senior Vice President of Parent, certifying as to the satisfaction of the conditions specified in Sections 7.03(a) and 7.03(b). (d) Consents. The consents, approvals or authorizations listed on Section 7.03(d) of the Parent Disclosure Schedule shall have been obtained. (e) Material Adverse Effect. No Parent Material Adverse Effect shall have occurred since the date of this Agreement and be continuing. (f) Tax Opinion; Private Letter Ruling. The Company shall (i) have received the opinion of Kirkland & Ellis LLP, counsel to the Company, based upon representations of Parent, Merger Sub and the Company, and normal assumptions, to the effect that, for federal income tax purposes (and determined without the application of Section 367 of the Code), the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and that each of Parent, Merger Sub and the Company will be a party to the reorganization within the meaning of Section 368(b) of the Code and (ii) have received the Private Letter Ruling or a Section 367 Opinion, which opinions or Private Letter Ruling shall not have been withdrawn or modified in any material respect. The issuance of the opinion in (i) above shall be conditioned on receipt by Kirkland & Ellis LLP of representation letters from each of Parent, Merger Sub and the Company as 70 contemplated in Section 6.10 of this Agreement. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect as of the Effective Time. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination. This Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the Transactions by the stockholders of the Company, by action taken or authorized by the respective party's Board of Directors, as follows: (a) by mutual written consent of Parent and the Company; or (b) by either Parent or the Company if the Effective Time shall not have occurred on or before September 30, 2004 (which date shall be extended, at the written request of either Parent or the Company, to a date not later than the earliest of (i) 30 days after receipt of the Private Letter Ruling (or such longer period after receipt of the Private Letter Ruling as may be necessary to satisfy the conditions set forth in Section 7.01(e) and 7.01(f) after receipt of the Private Letter Ruling), (ii) the date on which the IRS advises the parties that it will not issue the Private Letter Ruling and (iii) December 31, 2004, to the extent necessary to satisfy the conditions set forth in Sections 7.02(f) and 7.03(f) and so long as all other conditions have been satisfied or shall be capable of being satisfied) (the "End Date"); provided, however, that the right to terminate this Agreement under this Section 8.01(b) or to extend the End Date shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or (c) by either Parent or the Company if any Governmental Authority in the United States or Singapore shall have enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling which has become final and nonappealable and has the effect of making consummation of the Merger illegal or otherwise preventing or prohibiting consummation of the Merger; or (d) by Parent (at any time prior to the adoption and approval of this Agreement and the Merger by the required vote of the stockholders of the Company) if a Triggering Event (as defined below) with respect to the Company shall have occurred; or (e) by the Company (at any time prior to the approval of the Share Issuance, the New Stock Option Plans Adoption and the Parent Board Appointments by the required vote of the shareholders of Parent) if a Triggering Event with respect to Parent shall have occurred; or (f) by either Parent or the Company if this Agreement shall fail to receive the requisite vote for approval at the Company Stockholders' Meeting; or 71 (g) by either Parent or the Company if the Share Issuance or Parent Name Change shall fail to receive the requisite vote for approval at the Parent Shareholders' Meeting; or (h) by Parent upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Section 7.02(a) and Section 7.02(b) would not be satisfied ("Terminating Company Breach"); provided, however, that, if such Terminating Company Breach is curable by the Company, Parent may not terminate this Agreement under this Section 8.01(h) for so long as the Company continues to exercise its reasonable best efforts to cure such breach, unless such breach is not cured within 20 days after notice of such breach is provided by Parent to the Company; provided further that Parent shall not itself be in breach such that the conditions set forth in Section 7.03(a) or (b) would not be satisfied; or (i) by the Company upon a breach of any representation, warranty, covenant or agreement on the part of Parent and Merger Sub set forth in this Agreement, or if any representation or warranty of Parent and Merger Sub shall have become untrue, in either case such that the conditions set forth in Section 7.03(a) and Section 7.03(b) would not be satisfied ("Terminating Parent Breach"); provided, however, that if such Terminating Parent Breach is curable by Parent, the Company may not terminate this Agreement under this Section 8.01(i) for so long as Parent continues to exercise its reasonable best efforts to cure such breach, unless such breach is not cured within 20 days after notice of such breach is provided by the Company to Parent; provided further that the Company shall not itself be in breach such that the conditions set forth in Section 7.02(a) or (b) would not be satisfied; or (j) by the Company (at any time prior to the Company Stockholders' Meeting) in order to enter into a definitive agreement with respect to a Superior Proposal if the Company Board shall have made a Change in the Company Board Recommendation in compliance with Section 6.04(c); provided, however, that any termination of this Agreement pursuant to this Section 8.01(j) shall not be effective until the Company has made full payment of all amounts provided under Section 8.03; or (k) by Parent (at any time prior to the Parent Shareholders' Meeting) in order to enter into a definitive agreement with respect to a Superior Proposal if the Parent Board shall have made a Change in the Parent Board Recommendation in compliance with Section 6.04(d); provided, however, that any termination of this Agreement pursuant to this Section 8.01(k) shall not be effective until Parent has made full payment of all amounts provided under Section 8.03; or (l) by either the Company or Parent if (i) despite both parties' reasonable best efforts, the IRS advises the parties that it will not issue the Private Letter Ruling and the parties have exhausted all reasonable opportunities to convince the IRS to reconsider its decision and to issue the Private Letter Ruling and (ii) after consulting with at least two nationally recognized law firms, no such law firm is able to deliver a Section 367 72 Opinion; provided, however, that the right to terminate under this Section 8.01(l) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the IRS to issue the Private Letter Ruling; and, provided further that Parent may not terminate under this Section 8.01(l) if until 20 days after a party notifies the other party of its determination that the circumstances described in clauses (i) and (ii) above have occurred and Parent may not terminate under this Section 8.01(l) if prior to the end of such 20 day period (x) the Company waives the condition set forth in Section 7.03(f) and (y) the parties to the Company Stockholder Voting Agreements agree that such waiver of such condition shall not affect the continued effect of the Company Stockholder Voting Agreement. For purposes of this Agreement, a "Triggering Event" with respect to a party hereto shall be deemed to have occurred if: (i) the Board of Directors of such party or any committee thereof withdraws, modifies or changes its recommendation of this Agreement, the Merger or the Transactions in a manner adverse to the other party or shall have resolved to do so; (ii) the Board of Directors of such party shall have recommended to the stockholders of such party a Competing Transaction or shall have resolved to do so or shall have entered into any letter of intent or similar document or any agreement, contract or commitment accepting any Competing Transaction; (iii) such party shall have failed to include in the Proxy Statement or the Parent Shareholders Circular, as the case may be, the recommendation of the Board of Directors of such party in favor of the approval and adoption of this Agreement and the approval of the Merger or approval of the Share Issuance, the New Stock Option Plans Adoption or the Parent Board Appointments as applicable; or (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of capital stock of such party is commenced, and the Board of Directors of such party fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders) within 20 days of the announcement of such tender offer or exchange offer. SECTION 8.02. Effect of Termination. Any termination of this Agreement pursuant to Section 8.01 will be effective immediately upon the delivery of a valid written notice of the terminating party to the non-terminating party. In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and there shall be no liability under this Agreement on the part of any party hereto, except (a) as set forth in Section 8.03 and (b) nothing herein shall relieve any party from liability for any breach of any of its representations, warranties, covenants or agreements set forth in this Agreement prior to such termination; provided, however, that the Confidentiality Agreement shall survive any termination of this Agreement. SECTION 8.03. Fees and Expenses. (a) All fees and expenses incurred in connection with this Agreement, the Merger and the other Transactions, including fees and expenses of financial advisors, financial sponsors, legal counsel and other advisors ("Advisors"), will be paid by the party incurring such expenses whether or not the Merger is consummated; provided, however, that Parent and the Company will share equally (i) the filing fee for the Notification and Report Forms filed with the FTC and DOJ under the HSR Act and (ii) fees directly associated with the printing, filing and mailing of the Registration Statement, the Proxy 73 Statement and the Parent Shareholder Circular; provided further that neither of (i) or (ii) shall be deemed to include fees or expenses payable to Advisors. (b) The Company agrees that: (i) if Parent shall terminate this Agreement pursuant to Section 8.01(d); or (ii) if (A) Parent or the Company shall terminate this Agreement pursuant to Section 8.01(f), (B) prior to the time of the Company Stockholders' Meeting a Competing Transaction shall have been publicly announced with respect to the Company, and (C) the Company completes a Third Party Acquisition (as defined below) within 12 months after the date of such termination or the Company enters into an agreement providing for a Third Party Acquisition within 12 months after the date of such termination and the Company subsequently completes such Third Party Acquisition; or (iii) if (A) Parent or the Company shall terminate this Agreement pursuant to Section 8.01(b), (B) prior to the time of such termination a Competing Transaction shall have been publicly announced with respect to the Company, and (C) the Company completes a Third Party Acquisition within 12 months after the date of such termination or the Company enters into an agreement providing for a Third Party Acquisition within 12 months after the date of such termination and the Company subsequently completes such Third Party Acquisition; or (iv) if the Company shall terminate this Agreement pursuant to Section 8.01(j); then the Company shall pay to Parent, in immediately available funds, a fee of $40 million (the "Fee"), (A) in the case of Section 8.03(b)(i), one business day following the termination, (B) in the case of Section 8.03(b)(ii) or (iii), one business day following the consummation of such Third Party Acquisition and (C) in the case of Section 8.03(b)(iv), on the day of termination of this Agreement. (c) Parent agrees that: (i) if the Company shall terminate this Agreement pursuant to Section 8.01(e); or (ii) if (A) Parent or the Company shall terminate this Agreement pursuant to Section 8.01(g), (B) prior to the time of the Parent Shareholders' Meeting a Competing Transaction shall have been publicly announced with respect to Parent, and (C) Parent completes a Third Party Acquisition within 12 months after the date of such termination or Parent enters into an agreement providing for a Third Party Acquisition within 12 months after the date of such termination and Parent subsequently completes such Third Party Acquisition; or (iii) if (A) Parent or the Company shall terminate this Agreement pursuant to Section 8.01(b), (B) prior to the time of such termination a Competing Transaction shall have been publicly announced with respect to Parent, and (C) Parent completes a Third Party Acquisition within 12 months after the date of such termination or Parent enters 74 into an agreement providing for a Third Party Acquisition within 12 months after the date of such termination and Parent subsequently completes such Third Party Acquisition; or (iv) if Parent terminates this Agreement pursuant to Section 8.01(k); then Parent shall pay to the Company, in immediately available funds, the Fee, (A) in the case of Section 8.03(c)(i), one business day following the termination, (B) in the case of Section 8.03(c)(ii) or (iii), one business day following the consummation of such Third Party Acquisition and (C) in the case of Section 8.03(c)(iv), on the day of termination of this Agreement. (d) Each of Parent and the Company acknowledges that the agreements contained in this Section 8.03 are an integral part of the transactions contemplated by this Agreement. In the event that Parent or the Company, as the case may be, shall fail to pay the Fee when due, the term "Fee" shall be deemed to include the costs and expenses actually incurred or accrued by the other party (including, without limitation, fees and expenses of counsel) in connection with the collection under and enforcement of this Section 8.03, together with interest on such unpaid Fee, commencing on the date that the Fee became due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in The City of New York, as such bank's Prime Rate plus 2.00%. Payment of the fees and expenses described in this Section 8.03 shall not be in lieu of any damages incurred in the event of willful or intentional breach of this Agreement. (e) "Third Party Acquisition" means any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or Parent, as the case may be, pursuant to which the stockholders of such party immediately preceding such transaction hold less than 50% of the aggregate equity interests in the surviving or resulting entity of such transaction or of any direct or indirect parent thereof; (ii) a sale or other disposition by the Company or Parent, as the case may be, of assets representing in excess of 50% of the aggregate fair market value of the business of such party, together with its Subsidiaries, taken as a whole, immediately prior to such sale or other disposition; (iii) an acquisition by any person or group (including by way of a tender offer or an exchange offer or an issuance of capital stock by the Company or Parent, as the case may be), directly or indirectly, of beneficial ownership of more than 50% of the voting power of the then outstanding shares of capital stock of the Company or Parent, as the case may be; or (iv) the repurchase by the Company or Parent, as the case may be, or any of their subsidiaries, of more than 50% of the outstanding shares of capital stock of such party. SECTION 8.04. Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after the approval and adoption of this Agreement and the Transactions by the stockholders of the Company, no amendment may be made that would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. 75 SECTION 8.05. Waiver. At any time prior to the Effective Time, any party hereto may, by action taken or authorized by its Board of Directors, (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement of any other party or any condition to its own obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement and in any certificate delivered pursuant hereto shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.01 as provided in Section 8.02, as the case may be, except that the agreements set forth in Articles I and II, Sections 6.06 and 6.10, Article VIII and this Article IX shall survive the Effective Time. SECTION 9.02. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or email or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02): (a) if to Parent or Merger Sub: ST Assembly Test Services Ltd 10 Ang Mo Kio Street 65 #05-17/20 Techpoint, Singapore 569059 Attention: Linda Nai Facsimile No: (+65) 6720-7829 Email Address: nailinda@stats.st.com.sg with copies to: Allen & Gledhill 36 Robinson Road #18-01 City House Singapore 068877 Attention: Lucien Wong Facsimile No: (+65) 6223-3787 76 Shearman & Sterling LLP 6 Battery Road, #25-03 Singapore 049909 Attention: Oren B. Azar, Esq. Facsimile No: (+65) 6230-3899 Email Address: oazar@shearman.com Shearman & Sterling LLP 1080 Marsh Road Menlo Park, California 94025 Attention: Michael J. Coleman, Esq. Facsimile No: (650) 838-3699 Email Address: mcoleman@shearman.com (b) if to the Company: ChipPAC, Inc. 47400 Kato Road Fremont, CA 94538 Attention: Patricia H. McCall Facsimile No: (510) 979-8004 Email Address: patricia.h.mccall@chippac.com with copies to: Kirkland & Ellis LLP 777 South Figueroa Street Los Angeles, CA 90017 Attention: Eva Davis Facsimile No: (213) 808-8229 Email Address: edavis@kirkland.com Rajah & Tann 4 Battery Road, #26-01 Bank of China Building, Singapore, 049909 Attention: Siok Chin Tan Facsimile No: 65-6536-9453 Email Address: siok.chin.tan@rajahtann.com SECTION 9.03. Certain Definitions. (a) For purposes of this Agreement: "affiliate" of a specified person means a person who is an affiliate within the meaning of Rule 145 of the rules and regulations promulgated under the Securities Act. "beneficial owner", with respect to any securities, has the meaning ascribed to such term under Rule 13d-3(a) of the Exchange Act. 77 "business day" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in Singapore or San Francisco, California. "Bain Group" means (i) Bain Capital Fund VI, L.P., (ii) BCIP Associates II, whose managing partner is Bain Capital Investors, LLC, (iii) BCIP Associates II-B, (iv) BCIP Trust Associates II, L.P., (v) BCIP Trust Associates II-B, (vi) BCIP Associates II-C, (vii) PEP Investments PTY, Ltd., (viii) Sankaty High Yield Assets Partners, L.P. and (ix) Bain Capital, L.L.C. "Central Provident Fund" shall have the same meaning as is ascribed to it by the Central Provident Fund Act, Chapter 36 of Singapore. "Central Provident Scheme" means any recognized mandatory social security scheme that is not subject to U.S. Law and under which benefits may be payable only upon the retirement, unemployment, physical injury or disability of the insured, which has or is capable of having effect in relation to one or more descriptions or categories of employment so as to provide benefits, in the form of pensions, allowances, gratuities or other payments, payable on termination of service, death or retirement, to or in respect of persons gainfully employed under a contract of service in any employment. "Company ERISA Affiliate" means each entity that is treated as a single employer with the Company or any Company Subsidiary pursuant to Section 414 of the Code. "Company Material Adverse Effect" means any change, event, violation, inaccuracy, circumstance or effect (any such item, an "Effect") that, individually or when taken together with all other Effects that have occurred during the applicable measurement period prior to the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole; provided, however, in no event will any of the following, alone or in combination, be deemed to constitute nor will any of the following be taken into account in determining whether there has been or will be, a Company Material Adverse Effect: (i) changes in general economic conditions or changes in securities markets in general, which Effects do not have a materially disproportionate effect on Company and the Company Subsidiaries, taken as a whole; (ii) changes in the industries in which the Company and the Company Subsidiaries operate, which Effects do not have a materially disproportionate effect on the Company and the Company Subsidiaries, taken as a whole; (iii) the public announcement or pendency of the transactions contemplated hereby; (iv) compliance with the terms and conditions of this Agreement, including actions or omissions of the Company or any Company Subsidiary taken with the written consent of Parent; (v) any attrition of U.S.-based employees of the Company or the Company Subsidiaries; (vi) a change in Law or GAAP or the interpretations thereof, which Effects do not have a materially disproportionate effect on the Company and the Company Subsidiaries, taken as a whole; and (vii) any declaration of war by or 78 against, or an escalation of hostilities involving, or an act of terrorism against, China, Korea, Malaysia, Singapore, Taiwan or the United States, which Effects do not have a materially disproportionate effect on the Company and the Company Subsidiaries, taken as a whole. "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise. "CVC Group" means (i) Citicorp Venture Capital, Ltd., (ii) Citicorp Mezzanine III, L.P. and (iii) CCT Partners VI, L.P. "Eligible Company Stockholders" means holders or deemed holders of Company Shares (including partners of a partnership that holds Company Shares) who will not be "five-percent transferee shareholders" as defined in Section 1.367(a)-3(c)(5)(ii) of the income tax regulations under the Code or who enter into (or whose consolidated tax group parent has entered into on their behalf) five-year gain recognition agreements in the form prescribed by Section 1.367(a)-8(b) of the income tax regulations under the Code. "Environmental Laws" means any United States federal, state or local or non-United States law (including the common law, statutes, regulations, orders and contractual obligations) relating to: (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, health, safety or natural resources. "Hazardous Substances" means: (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon; and (v) any other contaminant regulated by, or for which standards of conduct are imposed by, any Governmental Authority pursuant to any Environmental Law. "Intellectual Property" means: (i) patents and patent applications; (ii) trademarks, service marks, trade dress, logos, trade names, corporate names and other source identifiers, and registrations and applications for registration thereof; (iii) copyrightable works, copyrights, and registrations and applications for registration thereof; (iv) mask 79 works; and (v) confidential and proprietary information, including trade secrets, know-how and inventions. "Parent ADRs" means American Depositary Receipts, each of which evidences one Parent ADSs. "Parent ADSs" means the American Depositary Shares issued pursuant to the Parent Deposit Agreement, each of which represents the right to receive ten Parent Ordinary Shares. "Parent Deposit Agreement" means the Deposit Agreement, dated as of February 8, 2001, by and among Parent, Citibank, N.A., as Depositary, and the holders from time to time of Parents ADSs evidenced by Parent ADRs issued thereunder, as amended through the Effective Time. "Parent ERISA Affiliate" means each entity that is treated as a single employer with Parent or any Parent Subsidiary under Section 414 of the Code. "Parent Material Adverse Effect" means any Effect that, individually or when taken together with all other Effects that have occurred during the applicable measurement period prior to the date of determination of the occurrence of the Parent Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, financial condition or results of operations of Parent and the Parent Subsidiaries, taken as a whole; provided, however, in no event will any of the following, alone or in combination, be deemed to constitute nor will any of the following be taken into account in determining whether there has been or will be, a Parent Material Adverse Effect: (i) changes in general economic conditions or changes in securities markets in general, which Effects do not have a materially disproportionate effect on Parent and the Parent Subsidiaries, taken as a whole; (ii) changes in the industries in which Parent and the Parent Subsidiaries operate, which Effects do not have a materially disproportionate effect on Parent and the Parent Subsidiaries, taken as a whole; (iii) the public announcement or pendency of the transactions contemplated hereby; (iv) compliance with the terms and conditions of this Agreement, including actions or omissions of Parent or any Parent Subsidiary taken with the written consent of the Company; (v) a change in Law or GAAP or the interpretations thereof, which Effects do not have a materially disproportionate effect on Parent and the Parent Subsidiaries, taken as a whole; and (vi) any declaration of war by or against, or an escalation of hostilities involving, or an act of terrorism against, China, Korea, Malaysia, Singapore, Taiwan or the United States, which Effects do not have a materially disproportionate effect on Parent and the Parent Subsidiaries, taken as a whole. "Permitted Liens" means: (i) Liens for current taxes and assessments not yet past due as of the Effective Time or which are being legitimately contested by appropriate proceedings; (ii) inchoate mechanics' and materialmen's Liens for construction in progress; (iii) workmen's, repairmen's, warehousemen's, landlord's and carriers' Liens arising in the ordinary course of business consistent with past practice that are not delinquent and which, individually or in the aggregate, could not reasonably be expected 80 to be materially adverse to the use, value or ownership of the subject property; and (iv) all matters of record, Liens and other imperfections of title and encumbrances that, individually or in the aggregate, could not reasonably be expected to be materially adverse to the use, value or ownership of the subject property. "person" means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. "subsidiary" or "subsidiaries" of the Company, the Surviving Corporation, Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. "Taxes" shall mean any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers' duties, tariffs and similar charges. "Tax Return" means all Singapore or United States federal, state, local, provincial and any other domestic or foreign Tax return or report. (a) The following terms have the meaning set forth in the Sections set forth below:
Defined Term Location of Definition - ------------ ---------------------- 2.50% Convertible Notes.......................... Section 3.03(a) 2.50% Convertible Notes Indenture................ Section 6.17 8% Convertible Notes............................. Section 3.03(a) 8% Convertible Notes Indenture................... Section 6.17 12.75% Notes Indenture........................... Section 6.17 Action........................................... Section 3.09 Agreement........................................ Preamble Blue Sky Laws.................................... Section 3.05(b) Certificate of Merger............................ Section 1.02 Certificates..................................... Section 2.02(a) Change in the Company Board Recommendation....... Section 6.04(c) Change in the Parent Board Recommendation........ Section 6.04(d) Closing.......................................... Section 1.02 COBRA............................................ Section 3.10(c) Code............................................. Recitals
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Defined Term Location of Definition - ------------ ---------------------- Company......................................... Preamble Company Affiliate............................... Section 6.08 Company Board................................... Recitals Company Board Recommendation.................... Section 6.01(c) Company Class A Common Stock.................... Section 2.01(a) Company Class B Common Stock.................... Section 3.03(a) Company Common Stock............................ Section 3.03(a) Company Convertible Subordinated Notes.......... Section 3.03(a) Company Disclosure Schedule..................... Article III Company Lease Documents......................... Section 3.12(b) Company Licensed Intellectual Property.......... Section 3.13(c) Company Owned Intellectual Property............. Section 3.13(b) Company Permits................................. Section 3.06 Company Plans................................... Section 3.10(a) Company Preferred Stock......................... Section 3.03(a) Company SEC Reports............................. Section 3.07(a) Company Shares.................................. Section 2.01(a) Company Shares Trust............................ Section 2.02(e) Company Stock Awards............................ Section 3.03(a) Company Stock Option Plans...................... Section 2.04(a) Company Stock Options........................... Section 2.04(a) Company Stockholder Voting Agreements........... Recitals Company Stockholders' Meeting................... Section 6.01(a) Company Subsidiary.............................. Section 3.01(a) Competing Transaction........................... Section 6.04(f) Confidentiality Agreement....................... Section 6.03(b) Continuing Employees............................ Section 6.05(a) DGCL ........................................... Recitals Effective....................................... Section 89.03(a) Effective Time.................................. Section 1.02 End Date........................................ Section 8.01(b) ERISA........................................... Section 3.10(a) Excess ADSs..................................... Section 2.02(e) Exchange Act.................................... Section 3.05(b) Exchange Agent.................................. Section 2.02(a) Exchange Fund................................... Section 2.02(a) Exchange Ratio.................................. Section 2.01(a) Excluded Company Shares......................... Section 2.01(b) Expenses........................................ Section 8.03(a) Fee............................................. Section 8.03(b) Form F-6 Registration Statement................. Section 6.01(a) GAAP............................................ Section 3.07(b) Governmental Authority.......................... Section 3.05(b) HSR Act......................................... Section 3.05(b) IRS............................................. Section 3.10(a)
82
Defined Term Location of Definition - ------------ ---------------------- Law.............................................. Section 3.05(a) Liens............................................ Section 3.12(a) Material Company Contracts....................... Section 3.16(a) Material Parent Contracts........................ Section 4.16(a) Merger........................................... Recitals Merger Consideration............................. Section 2.01(a) Merger Sub....................................... Preamble Multiemployer Plan............................... Section 3.10(c) Multiple Employer Plan........................... Section 3.10(c) NASD............................................. 2.02(e) Nasdaq........................................... Section 2.02(e) New Purchase Date................................ Section 2.05 New Stock Option Plans Adoption.................. Recitals Non-U.S. Company Plan............................ Section 3.10(b) Non-U.S. Parent Plan............................. Section 4.10(b) Notice of Company Superior Proposal.............. Section 6.04(c) Notice of Parent Superior Proposal............... Section 6.04(d) Parent........................................... Preamble Parent Board..................................... Recitals Parent Board Appointments........................ Recitals Parent Board Recommendation...................... Section 6.01(d) Parent Convertible Notes......................... Section 4.03 Parent Disclosure Schedule....................... Article IV Parent Lease Documents........................... Section 4.12(b) Parent Licensed Intellectual Property............ Section 4.13(c) Parent Name Change............................... Recitals Parent Ordinary Shares........................... Recitals Parent Owned Intellectual Property............... Section 4.13(b) Parent Permits................................... Section 4.06 Parent Plans..................................... Section 4.10(a) Parent SEC Reports............................... Section 4.07(a) Parent Shareholder Voting Agreements............. Recitals Parent Shareholders Circular..................... Section 6.01(c) Parent Shareholders' Meeting..................... Section 6.01(b) Parent Singapore Filings......................... Section 4.07(b) Parent Stock Awards.............................. Section 4.03(a) Parent Stock Option Plan......................... Section 4.03(a) Parent Stock Options............................. Section 4.03(a) Parent Subsidiary................................ Section 4.01(a) Proxy Statement.................................. Section 6.01(a) Private Letter Ruling............................ Section 6.10(d) Purchase Plan.................................... Section 2.05 Registration Statement........................... Section 6.01(a) Regulations...................................... Section 3.14 Representatives.................................. Section 6.03(a)
83
Defined Term Location of Definition - ------------ ---------------------- SEC.............................................. Section 3.07(a) Section 367 Opinion.............................. Section 6.10(c) Securities Act................................... Section 3.05(b) SGX-ST........................................... Section 2.04(c) SGX-ST Letter.................................... Section 4.07(b) Share Issuance................................... Recitals Singapore Companies Act.......................... Section 4.07(b) Singapore Securities Act......................... Section 4.07(b) Stockholders' Meetings........................... Section 6.01(b) Substitute Option................................ Section 2.04(a) Superior Proposal................................ Section 6.04(g) Surviving Corporation............................ Section 1.01 Surviving Corporation Common Stock............... Section 2.01(c) Terminating Company Breach....................... Section 8.01(h) Terminating Parent Breach........................ Section 8.01(i) Third Party Acquisition.......................... Section 8.03(e) Transactions..................................... Section 3.01(a) Triggering Event................................. Section 8.01 U.S. Company Plan................................ Section 3.10(b) U.S. Parent Plan................................. Section 4.10(b) Voting Agreements................................ Recitals
SECTION 9.04. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 9.05. Entire Agreement; Assignment. This Agreement, together with the schedules and exhibits thereto, the Voting Agreements, the Employment Agreements and the Confidentiality Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede, except as set forth in Sections 6.03(b), all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether pursuant to a merger, by operation of law or otherwise), without the prior written consent of the other parties hereto, and any attempt to make any such assignment without such consent shall be null and void, except that Merger Sub may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to any direct or indirect wholly owned subsidiary of Parent without the consent of the Company, but no such assignment shall relieve Merger Sub of any of its obligations hereunder. 84 SECTION 9.06. Parties in Interest; Third Parties. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, subject to Section 9.05, their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Except to the extent set forth in Sections 9.05 and 9.06, no person who is not a party to this Agreement has any rights under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore to enforce any provision of this Agreement. SECTION 9.07. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 9.08. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State (other than those provisions set forth herein that are required to be governed by the laws of Singapore). All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any Delaware Chancery Court or any Delaware federal court. The parties hereto hereby (a) submit to the exclusive jurisdiction of the Delaware Chancery Court or any Delaware federal court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the Transactions may not be enforced in or by any of the above-named courts. SECTION 9.09. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.11. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO 85 ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. 86 IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. ST ASSEMBLY TEST SERVICES LTD By /s/ Tan Lay Koon --------------------------------- Name: Tan Lay Koon Title: President and Chief Executive Officer CAMELOT MERGER, INC. By /s/ Tan Lay Koon --------------------------------- Name: Tan Lay Koon Title: Chairman of the Board and President CHIPPAC, INC. By /s/ Dennis McKenna --------------------------------- Name: Dennis McKenna Title: Chairman, Chief Executive Officer and President 87 EX-4.16 8 u92302exv4w16.txt EX-4.16 STRATEGIC ASSISTANCE LOAN AGREEMENT EXHIBIT 4.16 EXECUTION COPY This Agreement is dated the 20th day of June 2003 BETWEEN ST ASSEMBLY TEST SERVICES LTD AND SIMMTECH CO. LTD ----------------------------------- STRATEGIC ASSISTANCE LOAN AGREEMENT ----------------------------------- C:\Simmtech\StrategicAssistanceLoanAgreement ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 THIS AGREEMENT is made on June 20, 2003. BETWEEN: 1. ST ASSEMBLY TEST SERVICES LTD, a company incorporated under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 ("STATS") 2. SIMMTECH CO. LTD, a corporation organized and existing under the laws of Korea and having its principal place of business at 70-5 Songjung-Dong, Heung Duk-Ku, Choungju, Chungchongbuk-do, Korea 361-290 ("SIMMTECH") WHEREAS: Simmtech has requested STATS and STATS has agreed to grant a loan amounting to United States Dollars Five Million only (US$5,000,000.00) on the terms and conditions hereinafter set out for the purposes of Simmtech's acquisition of equipment and machinery to support STATS's service requirements under the spirit of mutual strategic engagement. NOW IT IS HEREBY AGREED as follows: 1 DEFINITIONS 1.1 In this Agreement, unless the context otherwise requires, the following words shall have the following meanings:- "Agreement Term" means the period commencing from the Loan Date and ending on the Loan Repayment Date; "Banking Day" means a day on which banks are open for business in Seoul, Korea. "Capacity Commitment" means Simmtech's provision to STATS of the type and quantity of equipment, substrates, materials, labour and other supplies required by STATS to enable STATS to package and produce for STATS's customers not less than five hundred thousand (500,000) PBGA packages and five million (5,000,000) stPBGA packages per month; "Equipment" means the Existing Equipment, the Equipment to be Owned and the Equipment to be Purchased; "Existing Equipment" means the machinery and equipment listed in the Machine List attached hereto as Annex A which represents the equipment to which Simmtech has legal ownership as of the date thereof; 2 "Equipment to be Owned" means the machinery and equipment listed in the Machine List attached hereto as Annex B, which represents the equipment to which Simmtech has executed a purchase agreement but will not have legal ownership until the Loan Date; "Equipment to Be Purchased" means the machinery and equipment listed in the Machine List attached hereto as Annex C, which represents the equipment to be purchased by Simmtech following the Loan Date; "Loan" means a sum of United States Dollars Five Million only (US$5,000,000.00) loaned to Simmtech under this Agreement, which is to be repaid in full to STATS; "Loan Date" means June 23, 2003; "Loan Repayment Date" means the date when the Loan is repaid in full, being a date not later than 1st July 2007; "Lead-Time" means the length of time for goods or services purchased by STATS to be delivered to STATS; "Repayment Dates" mean the date falling one year after the Loan Date (i.e., (on June 23, 2004) and the first day of each subsequent three (3) month period thereafter during the Agreement Term, provided that any Repayment Date falling after 1st July 2007 shall be accelerated to fall on 1st July 2007; "Security Documents" means the YT Agreement and the Share Pledge Agreement, each duly executed and signed by authorized signatories of Simmtech and STATS and in the form required by STATS; "Share Pledge Agreement" means the Agreement for the pledge of Shares dated as of the date hereof between Simmtech (as pledgor) and STATS (as pledgee) whereby Simmtech pledged the Shares to STATS to secure its obligations under this Agreement and the Security Documents. "Shares" means the Seven Hundred Thousand (700,000) common shares of Simmtech which are pledged to STATS under the Share Pledge Agreement; and "YT Agreement" means the Yangdo Tambo Agreement dated as of the date hereof between Simmtech (as transferor) and STATS (as transferee) whereby Simmtech transferred title over certain property described therein to STATS for the purpose of securing its obligations under this Agreement and the Security Documents. 1.2 The headings to the Clauses hereof shall not be deemed to be a part thereof or be taken in consideration in the interpretation or construction thereof or of this Agreement. 3 2 LOAN 2.1 Subject to Section 3 below, STATS will provide a Loan to Simmtech on the Loan Date for the purposes and on the terms and conditions specified herein. 2.2 In consideration of STATS's execution of this Agreement, Simmtech commits and undertakes, as a minimum service guarantee for STATS, to comply with the Capacity Commitment at Lead Times not exceeding three weeks from the date of each of STATS's purchase order and pricing which is at least equal to or lower than the price charged to STATS at the date of execution of this Agreement for equivalent items or services, unless otherwise agreed by the parties. Simmtech further agrees to provide prompt support for new product samples and to develop new products according to a technology roadmap aligned with STATS's service requirements. 3. CONDITIONS PRECEDENT 3.1 The obligation of STATS to provide the Loan to Simmtech under Section 2 above is subject to the fulfillment, as reasonably determined by STATS, of the following conditions precedent on or 1 business day prior to the Loan Date (unless otherwise waived by STATS in its absolute discretion): (a) A certified copy of the most recent Articles of Incorporation and company registry of Simmtech; (b) A duly authenticated copy of the minutes of the board of directors' meeting of Simmtech at which resolutions authorizing the execution, delivery and performance of this Agreement and the Security Documents, including but not limited to incurring the debt obligations hereunder and providing the collateral as contemplated under the Security Documents, and authorizing the person(s) who signed, or will sign, this Agreement, the Security Documents or all other documents in connection thereto on Simmtech's behalf to do so, were adopted and any power of attorney executed in connection therewith; (c) Seal certificate of the Representative Director of Simmtech and specimen signature of the person(s) authorized to execute this Agreement, the Security Documents and all other documents in connection therewith; (d) The executed Security Documents duly signed by the authorized person(s) on behalf of Simmtech; (e) Certified copies of each approval of any governmental authority of Korea necessary or advisable in connection with the execution, delivery and performance of this Agreement or the provision of the collateral contemplated under the Security Documents, in form and substance satisfactory to STATS and its legal counsel, including but not limited to the relevant foreign exchange reporting/approval 4 requirements set forth in the Foreign Exchange Transaction Law (and regulations thereunder); (f) Evidence as may be reasonably requested by STATS and its legal counsel that all obligations of STATS under the YT Agreement shall be satisfied prior to or simultaneously with the provision of the Loan on the Loan Date, including but not limited to (i) satisfaction of relevant foreign exchange reporting/approval requirement; (ii) the placement of a plaque or sign on Existing Equipment, Equipment to be Owned and Equipment to be Purchased stating STATS' title and interest thereon and (iii) maintenance of adequate insurance over the Existing Equipment, Equipment to be Owned and Equipment to be Purchased as provided in the YT Agreement; (g) Evidence as may be reasonably requested by STATS and its legal counsel that all obligations of STATS under the Share Pledge Agreement shall be satisfied prior to or simultaneously with the provision of the Loan on the Loan Date, including but not limited to (i) registration of STATS' security interest over the Shares in Simmtech's shareholders' registry, (ii) delivery of the share certificates representing the Shares to STATS or its agent and (iii) satisfaction of relevant foreign exchange reporting/approval requirements, as provided in the Share Pledge Agreement; (h) A certified copy of any contracts or documents with respect to the Existing Equipment and Equipment to Be Owned; and (i) Such other documents that STATS may reasonable request. 3.2 Unless otherwise waived by STATS, failure to comply with any of the foregoing conditions precedent shall constitute an Event of Default under Section 8 hereunder, and STATS shall have no obligation to provide the Loan on the Loan Date. 4 USE OF LOAN PROCEEDS Subject to repayment of the Loan in full on Repayment Dates falling due, Simmtech shall be entitled to use the Loan monies solely for the purpose of acquiring the Equipment for its ordinary business purpose, including to render services to STATS in performance of the Capacity Commitment. Simmtech agrees between the Loan Date and December 31, 2003, to use the Loan (or necessary portion thereof) to purchase the Equipment to be Owned and Equipment to be Purchased, and, without delay, to provide STATS with evidence satisfactory to STATS or its legal counsel of the purchase of the Equipment to be Owned and Equipment to be Purchased. Immediately after Simmtech takes legal title to the Equipment to be Owned and Equipment to be Purchased, Simmtech shall take all necessary action so that the Equipment to be Owned and Equipment to be Purchased will be subject to the YT 5 Agreement, and Section 3.1(f) above shall be satisfied with respect to such Equipment to be Owned and Equipment to be Purchased. 5 REPAYMENT 5.1 Subject to Section 5.2 below, on each Repayment Date, Simmtech shall repay a portion of the Loan in the amount of United States Dollars Four Hundred and Fifty Thousand only (US$450,000.00), provided that, on the final Repayment Date, the amount of the repayment shall be United States Dollars Fifty Thousand only (US$ 50,000), provided further that, the full amount of the Loan shall be repaid by 1st July 2007. 5.2 If a Repayment Date (and/or July 1, 2007) does not fall on a Banking Day, such payment in respect of that Repayment Date shall be made on the immediately succeeding Banking Day. 5.3 In the event of default on a repayment by Simmtech on the due Repayment Date, STATS shall without prejudice to its other rights and remedies under this Agreement and Security Documents or otherwise, be entitled to charge interest of 1% per annum on the amount which is in default, chargeable from the due Repayment Date until such outstanding amount is paid in full. 6. WARRANTIES AND REPRESENTATIONS 6.1 Simmtech hereby warrants and represents to STATS as follows:- (a) that it is lawfully incorporated, validly existing and in good standing under the laws of the Republic of Korea; (b) that it has the corporate power and authority to carry on the business as now being conducted; (c) that it has the corporate power to execute and perform this Agreement; (d) that the execution, delivery and performance of this Agreement and the transaction hereunder have been duly authorised by all requisite corporate action and will not violate any provision of any agreement or other instrument to which Simmtech is a party; (e) save as disclosed to STATS, there has been no material adverse change in the business activities operations or financial condition of Simmtech since the latest audited accounts; (f) save as otherwise disclosed to STATS, there are no actions, suits or proceedings pending or, to the knowledge of Simmtech, threatened against Simmtech or any of its subsidiaries, at law or in equity before any court or competent body adjudicating such matters, which involve the possibility of any judgment or liability which may result in any 6 material adverse change in the business, operations, properties or assets, or in the condition, financial or otherwise of Simmtech or its parent or any of its subsidiaries; and (g) that to the best of the knowledge of Simmtech no steps have been taken or are being taken to appoint a receiver and/or manager or judicial manager or liquidator or any other person over it or any of its assets or in any winding up action. 6.2 Each of the warranties and representations contained in the preceding sub-clause shall survive and continue to have full force and effect after the execution of this Agreement for the Agreement Term. 7. UNDERTAKING 7.1 Simmtech hereby undertakes and agrees with STATS, for as long as the Loan has not been repaid in full, as follows:- (a) that the Loan shall be used solely for the purpose and in the manner herein before stipulated and not for any other purpose or manner; (b) that it will carry on and conduct its business and affairs with due diligence and efficiency in accordance with sound technical financial industrial and managerial standards and practices and pay all taxes as they fall due; (c) that it will keep the Equipment in good and substantial repair and proper working condition to the satisfaction of STATS; (d) that it shall give to STATS such written authorization or directions and provide such facilities and access as STATS may require for the inspection of the Equipment; and (e) that it will not sell, assign, transfer, pledge, mortgage, encumber or dispose of (or attempt or purport to do any of the foregoing) any of the Equipment or Shares nor do, or fail to do, anything whereby STATS's rights in respect of the Equipment or Shares or their respective value may be diminished; shall notify STATS if Simmtech becomes aware of any diminution in the rights attaching to, or the value of, the same or any circumstances whereby such rights or such value may be diminished. 7.2 Simmtech hereby undertakes and agrees with STATS that it shall not create or permit to arise or subsist, any mortgage, charge (whether fixed or floating), pledge, lien or other encumbrances whatsoever on the Equipment. 7 8 EVENTS OF DEFAULT 8.1 If any one or more of the following Events of Defaults shall occur, that is to say: (a) if Simmtech shall fail to repay when due any sums of money payable under this Agreement and Security Documents and such default shall not be rectified for a period of three (3) Banking Days after the date of receipt by SimmTech of written notice of such default from STATS; (b) if any representation or warranty made in or in pursuance of this Agreement, Security Documents or in any certificate, statement or other document delivered in connection with the execution and delivery hereof or in pursuance of this Agreement shall be or become incorrect in any material respect; (c) if Simmtech defaults in the due performance of any undertaking, condition or obligation on its part to be performed and observed under this Agreement or Security Documents (other than the payment of any sum due hereunder) and such default (if capable of being rectified) shall not be rectified for a period of thirty (30) Days after the date of receipt by Simmtech of written notice of such default from STATS; (d) if a petition is presented in any court of competent jurisdiction or a resolution is passed for the winding-up of Simmtech or for the filing or any application for placing Simmtech under judicial management or any similar or analogous proceedings are taken against Simmtech and are not withdrawn within thirty (30) Days after being presented; (e) if any encumbrancer or lessor shall take possession or a receiver and/or manager, judicial manager, liquidator or other similar officer is appointed of the whole of the undertaking, property or assets, or any part thereof, of Simmtech or if a distress or execution is levied or enforced upon or sued out against any part of the property or assets of Simmtech and is not discharged within thirty (30) Days of being levied and STATS is of the reasonable opinion that such an event will be materially prejudicial to the interests of STATS; (f) if a judgement or order is made against Simmtech and is not discharged within sixty (60) Days and STATS is in that case of the reasonable opinion that the said judgement will materially affect Simmtech's ability to perform and observe its obligations under this Agreement; (g) if a winding-up petition is presented by or against Simmtech or analogous proceedings shall be taken by or against it and is not discharged within thirty (30) Days after being presented or if Simmtech becomes insolvent or is unable or deemed unable to pay its debts or admits in writing its inability to pay its debts, as they mature, or enters into reorganization, composition, corporate restructuring, 8 compromise or arrangement with its creditors or makes a general assignment for the benefit of its creditors and STATS is of the opinion that any such event will be materially prejudicial to the interests of STATS; and (h) if Simmtech ceases or threatens to cease to carry on its business or a situation shall have arisen, which shall make it improbable that Simmtech will be able to perform its obligations under this Agreement; then and in any of such event, STATS may, by notice in writing to Simmtech declare that an Event of Default has occurred and such declaration shall be deemed to take effect from the date of such an Event of Default. 8.2 Upon the declaration by STATS that an Event of Default has occurred (by sending notification to Simmtech of such declaration pursuant to Section 9):- (a) the whole of the Loan which has not yet been repaid and all other sums agreed to be paid under this Agreement shall immediately become due and payable without any demand or notice of any kind by STATS to Simmtech; and (b) STATS shall be entitled to exercise all or any rights, powers or remedies under this Agreement, the Security Documents or any one or more of them. 9. NOTICES 9.1 Except as otherwise expressly provided herein, any notice, request, demand or other communication to be given or served hereunder by one of the parties hereto to or on the others may be delivered at or sent by prepaid registered post or by facsimile to the address or addresses herein specified of the other party or parties and shall be deemed to b duly served: (a) if it is delivered, at the time of delivery; (b) if it is sent by prepaid registered post, one (1) day after posting thereof, or (c) if it is sent by facsimile, immediately after transmission thereof, if the date of transmission is a working day, and if such a date is not a working day, then the notice by facsimile shall be deemed to be served on the immediately next succeeding working day. Except as otherwise expressly provided herein, all notices, requests, demands or other communications which are required by this Agreement to be in writing may be made by facsimile. 9.2 For the purpose of this Clause 9 each of the parties hereto shall from time to time notify the other party in writing of an address where such notice, request, demand or other communication as aforesaid can be given or served and such 9 notification shall be effective only when it is actually received. In the absence of such notification, the notice, request, demand or other communication aforesaid may be given or served to the concerned party as stated below. To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co. Ltd 70-5 Songjung-Dong Hueng Duk-Ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 10. WAIVER NOT TO PREJUDICE RIGHT OF STATS No neglect or forbearance of STATS to require and enforce payment of any moneys hereunder or the performance and observance of any undertaking stipulation term or condition herein contained, nor any time which may be given to Simmtech shall in any way prejudice or affect any of the rights, power or remedies of STATS at any time afterwards to act strictly in accordance with the provisions hereof. No such waiver of any such breach as aforesaid shall prejudice the rights of STATS in respect of any other or subsequent breach of any of the undertakings stipulations terms or conditions aforesaid. 11. SEVERABILITY In case any provision in this Agreement shall be, or at any time shall become invalid, illegal or unenforceable in any respect under any law, such invalidity, illegality or unenforceability shall not in any way affect or impair the other provisions of this Agreement but this Agreement shall be construed as if such invalid or illegal or unenforceable provision contained herein or therein did not from a part of this Agreement. 12. GOVERNING LAW AND DISPUTE RESOLUTION This Agreement shall be governed by and construed in all respects in accordance with the laws of the Republic of Singapore. 10 Any dispute arising out of or in connection with this Agreement, including any questions regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre for the time being in force which rules are deemed to be incorporated by reference to this Section 12. 13. MISCELLANEOUS 13.1 Legal and other professional fees, out-of-pocket expenses, charges and expenses of and in connection with this Agreement and the Security Documents incurred by either party, including STATS up to an amount not exceeding USD10,000 ("Fee Cap") shall be paid by Simmtech, except that this Fee Cap shall not apply to expenses and charges that are incurred as a result of STATS' decision to not make the Loan on the Loan Date due to Simmtech's failure to fulfill its obligations under this Agreement. 13.2 Simmtech shall further pay all legal fees as between solicitor and client and other costs and disbursements incurred in connection with or demanding and enforcing payment of moneys due under this Agreement and the Security Documents and otherwise howsoever in enforcing the performance of any other undertakings stipulations terms conditions or provisions of hereof and thereof. 13.3 This Agreement shall be binding upon the successors of Simmtech and shall enure to the benefit of STATS and its successors and assigns. 13.4 This Agreement may be executed by each of the parties hereto in any number of counterparts, and by each party hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SIGNATURE PAGE TO FOLLOW 11 IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date stated above. ST ASSEMBLY TEST SERVICES LTD By: /s/ Mr. Tan Lay Koon ------------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of: /s/ Suh Tae Suk ---------------------- SIMMTECH CO. LTD By: /s/ Se-Ho Chun ------------------------- Name: Title: Representative Director In the presence of: /s/ C. H. Oh ---------------------- 12 ANNEX A DESCRIPTION OF EXISTING EQUIPMENT
- ----------------------------------------------------------------------------------------- MACHINERY SUPPLIER CURRENCY AMOUNT (US$) OADER/LC DATE - ----------------------------------------------------------------------------------------- D/F LAMINATOR HITACHI Y18,500,000 169,583 4/16/2003 - ----------------------------------------------------------------------------------------- PSR DEVELOPING M/C KYOWA Y24,000,000 220,000 4/16/2003 - ----------------------------------------------------------------------------------------- D/F PRETREATMENT KYOWA Y33,500,000 307,083 4/16/2003 - ----------------------------------------------------------------------------------------- SOFT Au POST RINSE KYOWA Y17,000,000 155,833 4/16/2003 - ----------------------------------------------------------------------------------------- SOFT PRETREATMENT SYSTEM TKC Y17,000,000 155,833 4/16/2003 - ----------------------------------------------------------------------------------------- D/F EXPOSURE ADTEC Y60,000,000 550,000 4/25/2003 - ----------------------------------------------------------------------------------------- DES LINE (DEVELOP/ETCH/STRIP) HMS EUR500,000 520,833 2/20/2003 - ----------------------------------------------------------------------------------------- PSR ACID RINSE AST KRW70,000,000 58,333 2/10/2003 - ----------------------------------------------------------------------------------------- AVI ATI KRW700,000,000 541,667 4/25/2003 ========================================================================================= $2,679,165 - -----------------------------------------------------------------------------------------
13 ANNEX B DESCRIPTION OF EQUIPMENT TO BE OWNED
- ------------------------------------------------------------------------------------ MACHINERY SUPPLIER CURRENCY AMOUNT (US$) OADER/LC DATE - ------------------------------------------------------------------------------------ D/F AUTO PEELER COMI KRW80,000,000 66,667 4/25/2003 - ------------------------------------------------------------------------------------ REJECT MARKER SEMIMOTO KRW55,000,000 45,833 4/25/2003 ==================================================================================== $112,500 - ------------------------------------------------------------------------------------
14 ANNEX C DESCRIPTION OF EQUIPMENT TO BE PURCHASED
- -------------------------------------------------------------------------------------- MACHINERY SUPPLIER CURRENCY AMOUNT (US$) OADER/LC DATE - -------------------------------------------------------------------------------------- POSALUX DRILL M/C POSALUX $356,824 356,824 N/A - -------------------------------------------------------------------------------------- SOFT Au PLATING LINE TKC $1,009,082 1,009,082 N/A - -------------------------------------------------------------------------------------- AOI ORBOTEC $580,500 580,500 N/A - -------------------------------------------------------------------------------------- PSR FINAL CURE SYSTEM ITODENKI $28,900,000 264,917 N/A ====================================================================================== $2,211,323 - --------------------------------------------------------------------------------------
15 EX-4.17 9 u92302exv4w17.txt EX-4.17 YANGDO TAMBO AGREEMENT DD JUN 20, 2003 EXHIBIT 4.17 EXECUTION COPY THIS YANGDO TAMBO AGREEMENT (the "Agreement") is entered as of this 20th day of June, by and among: (i) SIMMTECH CO. LTD, a company duly incorporated and existing under the laws of Korea and having its principal place of of business at 70-5 Songjung-Dong, Heung Duk-Ku, Choungju, Chungchongbuk-do, Korea 361-290 (the "Transferor"); and (ii) ST ASSEMBLY TEST SERVICES LTD., a company duly incorporated and existing under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 (the "Transferee"). RECITALS WHEREAS: A. By the Strategic Assistance Loan Agreement dated as of June 20, 2003 (the "Loan Agreement") made by and between the Transferor and the Transferee, the Transferee has agreed, subject to and upon the terms and conditions contained therein, to provide a loan to the Pledgor in the amount of USD 5 million; B. The Transferor is the legal and beneficial owner of the Transferred Property (as defined below) and the Transferor will be, upon acquisition, the legal and beneficial owner of the Property To Be Owned (as defined below); C. For the purposes of securing the Secured Obligations (as defined below), the Transferor desires to transfer to the Transferee, among other things, all its rights, title and interests in and to the Transferred Property pursuant to terms and conditions herein. NOW, THEREFORE, it is agreed as follows: SECTION 1. INTERPRETATION Words and expressions defined in the Loan Agreement shall, unless otherwise defined herein or the context otherwise requires, have the same meaning when used in this Agreement. References to any agreement or document shall be construed as references to such agreement or document as varied, amended, novated or supplemented from time to time. In addition thereto, as used in this Agreement: 1.1 "Property to Be Owned" shall mean any and all Equipments to be Owned on or after the Loan Date (as defined in the Loan Agreement), as described in Schedule II hereto (as amended from time to time pursuant to this Agreement). 1.2. "Secured Obligations" shall mean (i) any and all obligations, liabilities and indebtedness of the Transferor owing to the Transferee, presently existing or to be incurred hereinafter under or with respect to the Loan Agreement, (ii) moneys, obligations and liabilities owing and payable by the Transferor to the Transferee under the Share Pledge Agreement dated June 20, 2003 made between the Transferor and the Transferee and (iii) moneys, obligations and liabilities owing and payable by the Transferor to the Transferee under this Agreement. 1.3 "Transferred Property" shall mean all right, title, interest and benefits whatsoever of the Transferor in and to the movable property described in Schedule I hereto (as amended from time to time pursuant to this Agreement). SECTION 2. YANGDO TAMBO AGREEMENT The Transferor hereby agrees to transfer and assign to the Transferee the Transferred Property as security for the punctual payment, performance and discharge in full of the Secured Obligations; provided, that unless and until an Event of Default occurs under the Loan Agreement the Transferee shall hold the title to the Transferred Property for the purpose of security only and shall not use, seize or dispose of the Transferred Property. The Transferor hereby agrees that any Property to Be Owned shall be subject to Yangdo Tambo on such property for the benefit of the Transferee pursuant to this Agreement and that if such property may not be subject to such Yando Tambo, the Transferor shall transfer and assign to the Transferee the Property to Be Owned as security for the punctual payment, performance and discharge in full of the Secured Obligations in the manner applicable to the nature of it and perform any and all actions necessary for the establishment and effectuation of such collateral arrangement under the laws of Korea. SECTION 3. REPRESENTATIONS AND WARRANTIES 3.1 The Transferor hereby represents, warrants and covenants to the Transferee that: 2 (a) the execution, delivery and performance by the Transferor of this Agreement have been duly authorized by the Transferor, and are not in conflict with any provision of any applicable laws or the articles of incorporation of the Transferor; (b) the execution, delivery and performance by the Transferor of this Agreement does not violate or cause any default under any indenture, agreement or undertaking by which the Transferor is bound; (c) all authorization required from any government or governmental agency in connection with this Agreement have been obtained and are in full force and effect; (d) this Agreement constitutes valid obligations of the Transferor, legally binding upon it and enforceable in accordance with its terms, subject, as to enforceability, to laws relating to bankruptcy, insolvency, liquidation, reorganization, court schemes, moratoria, administration and other laws generally affecting the rights of creditors; (e) all property forming part of the Transferred Property, prior to the transfer and assignment by the Transferor to the Transferee made hereby, is or, at the time it becomes part of the Transferred Property shall be, owned legally by the Transferor by good and marketable title free from all liens, and such title shall, by the transfer and assignment contained herein, be automatically transferred and assigned to the Transferee to provide for payment when due of the Secured Obligations and shall at all times be and remain free from any lien, except for the transfer and assignment of title made hereunder and any other lien agreed to in writing by the Transferee or otherwise permitted by the Loan Agreement; (f) the Transferor has not agreed to sell, assign, transfer or create any interest or other lien in or over all or any part of the Transferred Property other than in favor of the Transferee hereunder or as otherwise permitted under the Loan Agreement; (g) no Person (other than the Transferee and the Transferor) is exercising, has exercised or attempted to exercise any ownership interest or other lien over any of the Transferred Property; (h) to the knowledge of the Transferor, there are no circumstances that would diminish the value of the Transferred Property; and (i) the Transferor has not taken any corporate action nor have any other steps been taken or legal proceedings been started by it or any third party for its winding up, dissolution, reorganization or bankruptcy or for the appointment of a receiver, trustee or similar officer over the Transferor or its assets or revenues, and there occurs or continues no cause/event that may lead to such action or steps. 3 3.2 Each of the warranties and representations contained in the preceding sub-clause shall survive and continue to have full force and effect until the termination of this Agreement. SECTION 4. COVENANTS OF THE TRANSFEROR The Transferor covenants and undertakes the following with the Transferee: (a) duly and punctually to observe and perform all the conditions and obligations imposed on it by the Loan Agreement and this Agreement; (b) not, without the prior written consent of the Transferee, to attempt to sell, assign, transfer or create any lien over the Transferred Property or the Property to Be Owned to or in favor of any person other than the Transferee or otherwise dispose of any of the Transferred Property or the Property to Be Owned, and shall not remove the Transferred Property from the current premise unless it is replaced with the substitute property as provided in paragraph (f) below; (c) at any time following the occurrence of an Event of Default that is continuing, to do or permit to be done each and every act or thing the Transferee may from time to time reasonably require to be done for the purpose of enforcing the Transferee's rights under this Agreement or in respect of any of the Transferred Property or the Property to Be Owned and to allow its name to be used as and when required by the Transferee for such purpose; (d) to possess and use the Transferred Property in accordance with its customary usage and preserve the value of the Transferred Property with such care as is required of a good manager; (e) to make all registrations, filings and recordings, and take all other actions as are necessary or reasonably determined by the Transferee to be advisable to ensure the continued legality, validity, enforceability, priority and admissibility in evidence of this Agreement; (f) to promptly notify the Transferee of any theft, loss or destruction of and damage to any of the Transferred Property or any other accident or reduction in price that has occurred or is expected to occur with respect to the Transferred Property or the Property to Be Owned (including but not limited to reduction in value due to depreciation), and in connection therewith, the Transferor agrees not to claim against the Transferee for any damages or loss incurred in connection with any 4 such theft, loss destruction or damage unless attributable to any willful misconduct of the Transferee. In case the value of the Transferred Property or the Property to Be Owned is materially affected due to theft, loss, destruction, damage, depreciation, etc., and the Transferor notifies the Transferee of such as provided in this paragraph (f), the Transferee may request the Transferee to replace the concerned Transferred Property or the Property to Be Owned with other property that is reasonably acceptable to the Transferee, and the Parties hereto shall take all necessary steps to ensure that the terms of this Agreement shall apply to such replacement property, including but not limited to execution of an amendment to this Agreement which identifies the replacement property as the Transferred Property or the Property to Be Owned that is subject to this Agreement; (g) to be responsible for the resolution of any disputes with a third party in connection with the Transferred Property or the Property to Be Owned, including any disputes involving claims against the Transferred Property, and in connection therewith, the Transferor agrees not to take any action which might adversely affect the enforcement of the Transferee's rights or Transferee' interests in the Transferred Property or the Property to Be Owned and to affirmatively protect and defend such rights and interests in consultation with the Transferee; (j) to conduct its business in accordance with any applicable laws and regulations; (k) to pay all taxes, assessments and other governmental charges of any kind imposed on or in respect of its income or any of its business when due; (l) immediately upon the execution of this Agreement, or, in case of the Property To Be Owned, upon the acquisition thereof, and until all Secured Obligations have been fully discharged, to affix a clearly visible sign or plaque on each Transferred Property (to the satisfaction of the Pledgee) providing to the effect that the legal title to the Transferred Property belongs to the Transferee and that the Transferred Property may not be transferred, sold or offered as collateral (the exact content of which shall be approved in advance by the Transferee); and (m) throughout the term of this Agreement, to procure and maintain insurance on the Transferred Property in such an amount and such a form as approved by the Transferee and from such an insurance company as may be selected or approved by the Transferee; and (n) Each time when the Transferor obtains title to any Property to Be Owned, the Transferor shall immediately notify the Transferee together with a certified copy of amended Schedule I to add such property in the list thereto (if applicable, to revise description thereof in the existing Schedule I) and a certified copy of amended Schedule II to delete the reference to such property in the list thereto (if applicable, 5 to revise description thereof in the existing Schedule II). Upon confirmation by the Transferee, such amended Schedules shall be deemed as the Schedules hereunder. SECTION 5. ATTORNEY-IN-FACT The Transferor hereby irrevocably appoints the Transferee as its true and lawful attorney-in-fact with full power to require, demand and receive any and all moneys and claims for money due and to become due under or with respect to the Transferred Property to the extent transferred hereunder and to take any action or execute any instrument which the Transferee may deem necessary to accomplish the purpose hereof. SECTION 6. TERMINATION AND REASSIGNMENT The term of this Agreement shall begin on the date of this Agreement and end on the date on which all Secured Obligations shall have been unconditionally and irrevocably paid and discharged in. Upon termination of this Agreement, the Transferee shall, at the request and cost of the Transferor, promptly re-transfer to the Transferor all right, title, interest and benefit transferred hereunder and the security constituted hereby to the Transferee, and take such other actions as may be reasonably requested to effectuate such reassignment. SECTION 7. PRESERVATION OF TRANSFERRED PROPERTY The Transferor shall hold the Transferred Property, as custodian for the Transferee. The Transferor hereby agrees that it will, from time to time at its own expense, promptly execute and deliver all further instruments, and take all further actions, as may be necessary or desirable, or as the Transferee may request, in order to effect or protect the assignment of title to the Transferred Property by the Transferor to the Transferee granted hereunder and to enable the Transferee's rights and remedies hereunder with respect to the Transferred Property. SECTION 8. ADDITION TO TRANSFERRED PROPERTY Any structure, mechanical components, wires, parts, fuels and attached machinery and tools, which are united with or attached to the Transferred Property and goods to be attached to or united with the Transferred Property by extension, reconstruction, repair or rebuilding shall be deemed to have been transferred and delivered to the Transferee under this Agreement. 6 SECTION 9. ENFORCEMENT BY TRANSFEREE 9.1 If any of the Secured Obligations becomes due and payable, the Transferee shall be entitled to enforce its rights under this Agreement. 9.2 If any of the Secured Obligations becomes due and payable, the Transferee shall in its sole discretion have the authority to sell, transfer or otherwise dispose of the Transferred Property at such times and at such prices as are generally recognized as appropriate in custom and practice, without the necessity of any legal process or procedure. Upon such sale, transfer or disposal, the Transferee shall apply the Proceeds, after deducting the costs of such sale, transfer or disposal, against the Secured Obligations. Any excess amount shall be paid to the Transferor and any Secured Obligations not fully covered by the Proceeds shall remain due and owing and shall promptly be paid by the Transferor. Alternatively, the Transferee may, at its sole discretion, choose to maintain possession and ownership over the Transferred Property, in which case, the Transferee shall value the Transferred Property based on commercially reasonable standards and return any excess amount (net of any and all costs and taxes involving transfer of the ownership of the Transferred Property) to the Transferor and any Secured Obligations not fully covered by the value of the Transferred Property shall remain due and owing and shall promptly be paid by the Transferor. 9.3 If any of the Secured Obligations becomes due and payable, the Transferee shall at any time have the right to enter upon any premises where the Transferred Property is located, take possession of all or any part thereof and remove same from such premises and the Transferor shall not interfere with such taking of possession and removal. 9.4 The Transferor hereby consents to the procedures set out in Section 9.2 and 9.3 above and waives any and all objections it may have thereto. 9.5 The Transferee shall incur no liability as a result of the sale, maintenance of ownership or any other disposition of the Transferred Property or any part thereof pursuant to Section 9.2 hereof conducted in a commercially reasonable manner. The Transferor hereby waives any claims against the Transferee arising by reason of the fact that the price at which the Transferred Property has been sold at such private sale may be less than the price at which it could have been sold if the Transferee had not accepted the first offer received or had offered the Transferred Property to more than one offeree. 9.6 The application of the Proceeds shall be determined by the Transferee in its absolute discretion, subject only to any other agreements between the Transferee and the Transferor relating thereto and to the requirements of any applicable law. 7 As used in this Section 9, "Proceeds" of the Transferred Property shall mean cash, securities and other property realized in respect of, and distributions in kind of, the Transferred Property, including any thereof received under any reorganization, liquidation or adjustment of debt of the Transferor. 9.7 In case where the Transferor or a third party provides collateral (other than the Transferred Property) to the Transferee to secure all or any part of the Secured Obligations, the Transferee shall in its sole discretion have the authority to determine the priority and extent of enforcement between/among its rights under this Agreement and such other collateral arrangements, without the necessity of any legal process or consultation with the Transferor. SECTION 10. ASSIGNMENT This Agreement and the yangdo tambo created hereunder shall be binding upon and inure to the benefit of the Transferor and the Transferee and their respective successors and assigns. The Transferee may, in accordance with the Loan Agreement and applicable laws, at any time assign all or any part of its rights or obligations hereunder to any party (each an "Assignee"). The parties hereto agree that to the extent of any transfer, the Assignee shall be deemed to have the same rights and benefits under this Agreement as it would have had if it were a Transferee signatory hereunder. The Transferor may not assign any of its rights or obligations hereunder without the prior written consent of the Transferee. SECTION 11. FURTHER ASSURANCE The Transferor shall do all such acts as may be necessary or appropriate including, but not limited to, the execution and delivery of all further instruments, notices and documents and all further action (whilst acting in a commercially reasonable manner) that may be necessary in order to perfect and/or protect any lien granted or purported to be granted hereby or to enable the Transferee to exercise and enforce its rights and remedies hereunder with respect to the Transferred Property. SECTION 12. EXPENSES, TAXES AND INDEMNIFICATION The Transferor shall be liable for and shall indemnify the Transferee on demand against, and shall pay, (a) the reasonable costs, expenses, taxes and other liabilities incurred by the Transferee to protect or enforce the Transferee's title to and interest in the Transferred Property and the Transferee's rights against the Transferor under this Agreement (including, without limitation, the transfer and assignment by the Transferor to the Transferee of the Transferred Property and the re-transfer and re-assignment by the Transferee to the Transferor of the Transferred Property), 8 provided that any such enforcement shall be in a commercially reasonable manner; (b) all withholding, excise and other taxes and duties, and all reasonable costs, expenses and other liabilities, incurred by the Transferee in connection with, or otherwise attributable to, receipt by the Transferees of, or payment by Transferor of, any reasonable costs, expenses and other liabilities and indemnities provided for in this Section or any other provision of this Agreement, other than taxes imposed on overall net income of the Transferee. SECTION 13. MISCELLANEOUS 13.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective, shall be in writing and shall be personally delivered or sent by facsimile (with subsequent written confirmation) or by registered or certified first class mail, postage prepaid, return receipt requested, or by overnight (or next business day) courier service shall be deemed to have been duly given or made when delivered by hand, on the day that such facsimile is transmitted, or, if by first class mail, five days following the date on which such writing is deposited with the postal service, or the day after the date when deposited with an overnight (or next business day) courier service, addressed as follows, or to such other address as either party hereto may hereafter specify in writing to the other party: To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co. Ltd 70-5 Songjung-Dong Hueng Duk-Ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 13.2 Severability. If any of the provisions of this Agreement shall contravene any law or regulation or be held invalid, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 13.3 Amendments, Changes and Modifications. This Agreement shall not be amended, changed, modified, altered or terminated, unless the prior written approval of each of the 9 Transferor and the Transferee is obtained. This Agreement shall not be amended by an oral agreement. 13.4 Counterparts. This Agreement may be executed in multiple counterparts, each of which, when executed, shall constitute an original but all of which together shall constitute one and the same instrument. 13.5 Heading. Headings and titles herein are for convenience only and shall not affect the construction or interpretation of this Agreement. 13.6 Entire Agreement. This Agreement is intended by the parties as the written final expression of each party's obligations and rights in connection with the Transferred Property and supersedes all prior and contemporaneous understandings or agreements concerning the subject matter hereof. 13.7 Conflict. In the case of a conflict between the provisions of this Agreement and the provisions of the Loan Agreement, the Loan Agreement shall prevail. 13.8 No Waiver. The Transferee shall not, by any act, delay, indulgence, omission or otherwise, except by an express written instrument clearly indicating an intention to waive, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising on the part of the Transferee, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power, privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 13.9 Remedies Cumulative. The rights and remedies provided herein are cumulative and may be exercised individually or concurrently, and are not exclusive of any other rights or remedies provided by law. 13.10 Currencies. All Secured Obligations under this Agreement are payable in United States dollars (the "Required Currency"). If the Transferee receives or recovers any moneys in any other currency, whether upon enforcement of its rights under this Agreement or otherwise, the Transferor shall indemnify the Transferee against the difference (if any) between the amount received by the Transferee when it converts amounts received in currencies other than the Required Currency to the Required Currency and the amount due in the Required Currency. The Transferor shall assist the Transferee at all times to obtain any exchange conversion approval required by the Transferee in connection with this Agreement or the Secured Obligations. 13.11 Governing Law and Jurisdiction. This Agreement and the security created pursuant hereto shall be governed by the laws of Korea in all respects, including matters of construction, 10 validity and performance. The parties hereto agree to submit to the non-exclusive jurisdiction of Seoul District Court for the purpose of this Agreement. (Signature page to follow) 11 IN WITNESS WHEREOF, the parties hereto have caused this Yangdo Tambo Agreement to be duly executed as of the day and year first above written. TRANSFEROR: SIMMTECH CO. LTD By /s/ Se-Ho Chun ----------------------------------------------- Name: Title: Representative Director In the presence of : /s/ C. H. Oh ---------------------- TRANSFEREE: ST ASSEMBLY TEST SERVICES LTD By /s/ Tan Lay Koon ----------------------------------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of : /s/ Suh Tae Suk ---------------------- 12 SCHEDULE I Description of Transferred Property
- ----------------------------------------------------------------------------------------------------------------------- MACHINERY SUPPLIER CURRENCY AMOUNT (US$) Oader/LC DATE - ----------------------------------------------------------------------------------------------------------------------- D/F LAMINATOR HITACHI Y18,500,000 169,583 4/16/2003 - ----------------------------------------------------------------------------------------------------------------------- PSR DEVELOPING M/C KYOWA Y24,000,000 220,000 4/16/2003 - ----------------------------------------------------------------------------------------------------------------------- D/F PRETREATMENT KYOWA Y33,500,000 307,083 4/16/2003 - ----------------------------------------------------------------------------------------------------------------------- SOFT Au POST RINSE KYOWA Y17,000,000 155,833 4/16/2003 - ----------------------------------------------------------------------------------------------------------------------- SOFT PRETREATMENT SYSTEM TKC Y17,000,000 155,833 4/16/2003 - ----------------------------------------------------------------------------------------------------------------------- D/F EXPOSURE ADTEC Y60,000,000 550,000 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- DES LINE (DEVELOP/ETCH/STRIP) HMS EUR500,000 520,833 2/20/2003 - ----------------------------------------------------------------------------------------------------------------------- PSR ACID RINSE AST KRW70,000,000 58,333 2/10/2003 - ----------------------------------------------------------------------------------------------------------------------- AVI ATI KRW700,000,000 583,333 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- D/F AUTO PEELER COMI KRW80,000,000 66,667 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- REJECT MARKER SEMIMOTO KRW55,000,000 45,833 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- POSALUX DRILL M/C POSALUX $356,824 356,824 N/A - ----------------------------------------------------------------------------------------------------------------------- SOFT Au PLATING LINE TKC $1,009,082 1,009,082 N/A - ----------------------------------------------------------------------------------------------------------------------- AOI ORBOTEC $580,500 580,500 N/A - ----------------------------------------------------------------------------------------------------------------------- PSR FINAL CURE SYSTEM ITODENKI $28,900,000 264,917 N/A - ----------------------------------------------------------------------------------------------------------------------- $5,002,989 - -----------------------------------------------------------------------------------------------------------------------
13 SCHEDULE II Description of the Property to Be Owned
- ----------------------------------------------------------------------------------------------------------------------- MACHINERY SUPPLIER CURRENCY AMOUNT (US$) Oader/LC DATE - ----------------------------------------------------------------------------------------------------------------------- D/F AUTO PEELER COMI KRW80,000,000 66,667 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- REJECT MARKER SEMIMOTO KRW55,000,000 45,833 4/25/2003 - ----------------------------------------------------------------------------------------------------------------------- POSALUX DRILL M/C POSALUX $356,824 356,824 N/A - ----------------------------------------------------------------------------------------------------------------------- SOFT Au PLATING LINE TKC $1,009,082 1,009,082 N/A - ----------------------------------------------------------------------------------------------------------------------- AOI ORBOTEC $580,500 580,500 N/A - ----------------------------------------------------------------------------------------------------------------------- PSR FINAL CURE SYSTEM ITODENKI $28,900,000 264,917 N/A - ----------------------------------------------------------------------------------------------------------------------- $2,323,823 - -----------------------------------------------------------------------------------------------------------------------
14 EX-4.18 10 u92302exv4w18.txt EX-4.18 PLEDGE AGREEMENT DD JUN 20, 2003 Exhibit 4.18 EXECUTION COPY THIS PLEDGE AGREEMENT (the "Agreement") is entered as of this 20th day of June, by and among: (i) SIMMTECH CO. LTD, a company duly incorporated and existing under the laws of Korea and having its principal place of business at 70-5 Songjung-Dong, Heung Duk-Ku, Choungju, Chungchongbuk-do, Korea 361-290 (the "Pledgor"); and (ii) ST ASSEMBLY TEST SERVICES LTD., a company duly incorporated and existing under the law of Singapore and having a place of of business at 5 Yishun Street 23, Singapore 768442 (the "Pledgee"). RECITALS WHEREAS: A. By the Strategic Assistance Loan Agreement dated as of June 20, 2003 (the "Loan Agreement") made by and between the Pledgor and the Pledgee, the Pledgee has agreed, subject to and upon the terms and conditions contained therein, to provide a loan to the Pledgor in the amount of USD 5 million; B. The Pledgor is the legal and beneficial owner of the Securities (as defined below); C. For the purposes of securing the Secured Obligations (as defined below), the Pledgor hereby agrees to, inter alia, deposit with and pledge to the Pledgee the Securities (as defined below) pursuant to terms and conditions herein. NOW, THEREFORE, it is agreed as follows: SECTION 1. INTERPRETATION Words and expressions defined in the Loan Agreement shall, unless otherwise defined herein or the context otherwise requires, have the same meaning when used in this Agreement. References to any agreement or document shall be construed as references to such agreement or document as varied, amended, novated or supplemented from time to time. In addition thereto, as used in this Agreement: 1.1 "Securities" shall mean the securities described in Schedule I hereto. 1.2. "Secured Obligations" shall mean (i) any and all obligations, liabilities and indebtedness of the Pledgor owing to the Pledgee, presently existing or to be incurred hereinafter under or with respect to the Loan Agreement, (ii) moneys, obligations and liabilities owing and payable by the Pledgor to the Pledgee under the Yangdo Tambo Agreement dated June 20, 2003 between the Pledgor and the Pledgee and (iii) moneys, obligations and liabilities owing and payable by the Pledgor to the Pledgee under this Agreement. 1.3. "Proceeds" means all proceeds of, and all other profits, income or receipts, in whatever form and whatever currency, arising from the ownership, collection, sale, exchange, assignment or other disposition of, or realization of any of the Securities, and all interest, dividends (cash, stock or otherwise) and other payments and distributions on or with respect to such Securities or in exchange for such Securities. SECTION 2. PLEDGE 2.1. The Pledgor hereby agrees to pledge the Securities to the Pledgee and hereby agrees to grant in favor of the Pledge a first priority security interest (jilkwon) in the Securities and the Pledgee shall accept the security interest in the Securities for the due and punctual payment, performance and discharge of the Secured Obligations. The Pledgor hereby agrees that any Proceeds of any Securities on which a pledge under this Agreement has been established and perfected shall be subject to the pledge (jilkwon) on such Securities pursuant to this Agreement and that if any such Proceeds may not be subject to such pledge, the Pledgor shall pledge the Proceeds for the benefit of the Pledgee in the manner applicable to the nature of it and perform any and all actions necessary for the establishment and effectuation of such pledge under the laws of Korea. 2.2 Simultaneous with, or prior to the provision of the Loan on the Loan Date, the Pledgor shall have the Pledgee's name and address recorded in the shareholders' registry of the Pledgor (maintained with the Korea Securities Depository) as a holder of the security interest (jilkwon) in the Securities and have the Pledgee's name recorded on the share certificates representing the Securities. 2.3 Immediately upon performance of Section 2.2 hereof and on or one (1) business day prior to the provision of the Loan on the Loan Date, the Pledgor shall deliver or cause to be delivered the share certificates representing the Securities in physical form to the Pledgee or to the agent of the Pledgee, as requested by the Pledgee together with a certified copy 2 of the shareholders' registry of the Pledgor and any documents necessary to constitute a legally valid delivery of the certificates. SECTION 3. REPRESENTATIONS AND WARRANTIES The Pledgor hereby represents, warrants and covenants to the Pledgee that: (a) the execution, delivery and performance by the Pledgor of this Agreement have been duly authorized by the Pledgor, and are not in conflict with any provision of any applicable laws or the articles of incorporation of the Pledgor; (b) the execution, delivery and performance by the Pledgor of this Agreement does not violate or cause any default under any indenture, agreement or undertaking by which the Pledgor is bound; (c) all authorization required from any government or governmental agency in connection with this Agreement have been obtained and are in full force and effect; (d) this Agreement constitutes valid obligations of the Pledgor, legally binding upon it and enforceable in accordance with its terms, subject, as to enforceability, to laws relating to bankruptcy, insolvency, liquidation, reorganization, court schemes, moratoria, administration and other laws generally affecting the rights of creditors; (e) the Pledgor has full right, title and interest over the Securities; (f) the Pledgor has not agreed to sell, assign, transfer, pledge or create any other interest or other lien in or over all or any part of the Securities other than in favor of the Pledgee hereunder or as otherwise permitted under the Loan Agreement; (g) no person (other than the Pledgor and the Pledgee) is exercising, has exercised or attempted to exercise any ownership interest or other lien over any of the Securities; (h) to the knowledge of the Pledgor, there are no circumstances that would diminish the value of the Securities; (i) the Pledgor has not taken any corporate action nor have any other steps been taken or legal proceedings been started by it or any third party for its winding up, dissolution, reorganization or bankruptcy or for the appointment of a receiver, trustee or similar officer over the Pledgor or its assets or revenues, and there occurs or continues no cause/event that may lead to such action or steps; and 3 (j) the Pledgor has acquired the Securities in accordance with any provision of any applicable laws or the articles of incorporation of the Pledgor and has been, and during the term of the Loan Agreement will be, permitted to have right, title and interest over the Securities under such laws and articles of incorporation. SECTION 4. COVENANTS OF THE PLEDGOR The Pledgor covenants and undertakes the following with the Pledgee: (a) duly and punctually to observe and perform all the conditions and obligations imposed on it by the Loan Agreement and this Agreement; (b) not, without the prior written consent of the Pledgee, to attempt to sell, assign, transfer, create any lien over, or otherwise disposed of any of the Securities to or in favor of any person other than the Pledgee; (c) to do or permit to be done each and every act or thing the Pledgee may from time to time reasonably require to be done for the purpose of enforcing the Pledgee's rights under this Agreement or in respect of any of the Securities and to allow its name to be used as and when required by the Pledgee for such purpose; (d) to make all registrations, filings and recordings, and take all other actions as are necessary or reasonably determined by the Pledgee to be advisable to ensure the continued legality, validity, enforceability, priority and admissibility in evidence of this Agreement; (e) to be responsible for the resolution of any disputes with a third party in connection with the Securities, including any disputes involving claims against the Securities, and in connection therewith, the Pledgor agrees not to take any action which might adversely affect the enforcement of the Pledgee's rights or Pledgee's interests in the Securities and to affirmatively protect and defend such rights and interests in consultation with the Pledgee; (f) to conduct its business in accordance with any applicable laws and regulations; (g) to pay all taxes, assessments and other governmental charges of any kind imposed on or in respect of its income or any of its business when due; (h) to notify the Pledgee of any and all notices that the Pledgor has provided to its shareholders in their capacity as shareholders, at the same time as such notice; 4 (i) if and when it is required to or entitled to vote, give any consent or exercise any other rights with respect to the Securities, to first notify such situation to the Pledgee immediately and act in accordance with the instruction of the Pledgee; (j) not to make or cause to make any action, procedure or event that would diminish the value of the Securities; and (k) to notify the Pledgee of any event that would result in or lead to a breach of any representation and warranty provided under Section 3 immediately upon becoming aware of such event. SECTION 5. ADMINISTRATION OF SECURITIES 5.1 Until there shall have occurred an Event of Default or an event which with notice, lapse of time or both would constitute such an Event of Default, the Pledgor shall be entitled to vote, give any consent or exercise any other rights with respect to the Securities in any manner not inconsistent with this Agreement and subject to applicable law. 5.2 Unless an Event of Default has occurred and is continuing, and without prejudice to Section 2 hereof, the Pledgor shall receive or shall become entitled to receive, any dividend, interest or any other distribution whether in securities or property (including cash) with respect to the Securities by way of stock-split, spin-off, split-up or reclassification, combination of shares or the like. For the avoidance of doubt, any distributions (whether in cash or in shares or other property) received by the Pledgor shall be deemed to be the Proceeds and subject to the pledge created under this Agreement, and if any such Proceeds may not be subject to such pledge, the Pledgor shall pledge the Proceeds for the benefit of the Pledgee in the appropriate manner and perform any and all actions necessary for the establishment and effectuation of such pledge under the laws of Korea. SECTION 6. ATTORNEY-IN-FACT The Pledgor shall be deemed to irrevocably appoint the Pledgee as its true and lawful attorney-in-fact with full power to require, demand and receive any and all moneys and claims for money due and to become due under or with respect to the Securities to the extent pledged hereunder and to take any action or execute any instrument which the Pledgee may deem necessary to accomplish the purpose hereof. 5 SECTION 7. TERMINATION AND REASSIGNMENT The term of this Agreement shall begin on the date of this Agreement and end on the date on which all Secured Obligations shall have been unconditionally and irrevocably paid and discharged in. Upon termination of this Agreement, the Pledgee shall release the security interest in the Securities held by the Pledgee, return the share certificates representing the Securities to the Pledgor at the cost of the Pledgor and take any actions as may be reasonably requested by the Pledgor to effectuate such release. SECTION 8. ENFORCEMENT BY PLEDGEE 8.1 If any of the Secured Obligations becomes due and payable, the Pledgee shall be entitled, as and when it may see fit, to put into force and to exercise all or any of the rights and power possessed by it as pledgee of the Securities under the applicable laws and this Agreement in or towards satisfaction of the Secured Obligations, including without limitation, the right and power to: (a) sell, transfer or otherwise dispose of the Securities at such times and at such prices as are generally recognized as appropriate in custom and practice, without the necessity of any legal process or procedure ; (b) acquire title to the Securities in lieu of foreclosure of the Securities in any manner in its discretion without notice to the Pledgor ; and (c) demand, sue for, collect or receive, in the name of the Pledgor, any money or property at any time payable or receivable on account of or in exchange for any of the Securities, but shall be under no obligation to do so. 8.2 Upon the exercise of its rights pursuant to Section 8.1. hereof, the Pledgee shall apply the Proceeds, after deducting the costs of such exercise of rights, against the Secured Obligations. Any excess amount shall be paid to the Pledgor and any Secured Obligations not fully covered by the Proceeds shall remain due and owing and shall promptly be paid by the Pledgor. In the case of acquisition of the title to the Securities pursuant to Section 8.1.(b) hereof, the Pledgee shall value the Securities based on commercially reasonable standards and return any excess amount (net of any and all costs and taxes involving transfer of the ownership of the Securities) to the Pledgor and any Secured Obligations not fully covered by the value of the Securities shall remain due and owing and shall promptly be paid by the Pledgor. 8.3 The Pledgor hereby consents to the procedures set out in Sections 8.1 and 8.2 above and waives any and all objections it may have thereto. 8.4 The Pledgee shall incur no liability as a result of the sale, acquisition or any other disposition of the Securities or any part thereof by the Pledgee pursuant to Section 8.1 6 hereof conducted in a commercially reasonable manner. The Pledgor hereby waives any claims against the Pledgee arising by reason of the fact that the price at which the Securities has been sold at any private sale by the Pledgee may be less than the price at which it could have been sold if the Pledgee had not accepted the first offer received or had offered the Securities to more than one offeree. 8.5 The application of the Proceeds shall be determined by the Pledgee in its absolute discretion, subject only to any other agreements between the Pledgee and the Pledgor relating thereto and to the requirements of any applicable law. 8.6 In case where the Pledgor or a third party provides collateral (other than the Securities) to the Pledgee to secure all or any part of the Secured Obligations, the Pledgee shall in its sole discretion have the authority to determine the priority and extent of enforcement between/among its rights under this Agreement and such other collateral arrangements, without the necessity of any legal process or consultation with the Pledgor. SECTION 9. ASSIGNMENT This Agreement and the security interest created hereunder shall be binding upon and inure to the benefit of the Pledgor and the Pledgee and their respective successors and assigns. The Pledgee may, in accordance with the Loan Agreement and applicable laws, at any time assign all or any part of its rights or obligations hereunder to any party (each an "Assignee"). The parties hereto agree that to the extent of any transfer, the Assignee shall be deemed to have the same rights and benefits under this Agreement as it would have had if it were a Pledgee signatory hereunder. The Pledgor may not assign any of its rights or obligations hereunder without the prior written consent of the Pledgee. SECTION 10. FURTHER ASSURANCE The Pledgor shall do all such acts as may be necessary or appropriate including, but not limited to, the execution and delivery of all further instruments, notices and documents and all further action (whilst acting in a commercially reasonable manner) that may be necessary in order to perfect and/or protect any lien granted or purported to be granted hereby or to enable the Pledgee to exercise and enforce its rights and remedies hereunder with respect to the Securities and the Proceeds. SECTION 11. EXPENSES, TAXES AND INDEMNIFICATION The Pledgor shall be liable for and shall indemnify the Pledgee on demand against, and shall pay, (a) the reasonable costs, expenses, taxes and other liabilities incurred by the Pledgee to protect or 7 enforce the Pledgee's interest in the Securities and the Pledgee's rights against the Pledgor under this Agreement, provided that any such enforcement shall be in a commercially reasonable manner; (b) all withholding, excise and other taxes and duties, and all reasonable costs, expenses and other liabilities, incurred by the Pledgee in connection with, or otherwise attributable to, receipt by the Pledgee of, or payment by Pledgor of, any reasonable costs, expenses and other liabilities and indemnities provided for in this Section or any other provision of this Agreement, other than taxes imposed on overall net income of the Pledgee. SECTION 12. MISCELLANEOUS 12.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective, shall be in writing and shall be personally delivered or sent by facsimile (with subsequent written confirmation) or by registered or certified first class mail, postage prepaid, return receipt requested, or by overnight (or next business day) courier service shall be deemed to have been duly given or made when delivered by hand, on the day that such facsimile is transmitted, or, if by first class mail, five days following the date on which such writing is deposited with the postal service, or the day after the date when deposited with an overnight (or next business day) courier service, addressed as follows, or to such other address as either party hereto may hereafter specify in writing to the other party: To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co. Ltd 70-5 Songjung-Dong Hueng Duk-Ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 12.2 Severability. If any of the provisions of this Agreement shall contravene any law or regulation or be held invalid, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 8 12.3 Amendments, Changes and Modifications. This Agreement shall not be amended, changed, modified, altered or terminated, unless the prior written approval of each of the Pledgor and the Pledgee is obtained. This Agreement shall not be amended by an oral agreement. 12.4 Counterparts. This Agreement may be executed in multiple counterparts, each of which, when executed, shall constitute an original but all of which together shall constitute one and the same instrument. 12.5 Heading. Headings and titles herein are for convenience only and shall not affect the construction or interpretation of this Agreement. 12.6 Entire Agreement. This Agreement is intended by the parties as the written final expression of each party's obligations and rights in connection with the Securities and supersedes all prior and contemporaneous understandings or agreements concerning the subject matter hereof. 12.7 Conflict. In the case of a conflict between the provisions of this Agreement and the provisions of the Loan Agreement, the Loan Agreement shall prevail. 12.8 No Waiver. The Pledgee shall not, by any act, delay, indulgence, omission or otherwise, except by an express written instrument clearly indicating an intention to waive, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising on the part of the Pledgee, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power, privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 12.9 Remedies Cumulative. The rights and remedies provided herein are cumulative and may be exercised individually or concurrently, and are not exclusive of any other rights or remedies provided by law. 12.10 Currencies. All Secured Obligations under this Agreement are payable in United States dollars ("the Required Currency"). If the Pledgee receives or recovers any moneys in any other currency, whether upon enforcement of its rights under this Agreement or otherwise, the Pledgor shall indemnify the Pledgee against the difference (if any) between the amount received by the Pledgee when it converts amounts received in currencies other than the Required Currency to the Required Currency and the amount due in the Required Currency. The Pledgor shall assist the Pledgee at all times to obtain any exchange conversion approval required by the Pledgee in connection with this Agreement or the Secured Obligations. 9 12.11 Governing Law and Jurisdiction. This Agreement and the security created pursuant hereto shall be governed by the laws of Korea in all respects, including matters of construction, validity and performance. The parties hereto agree to submit to the non-exclusive jurisdiction of Seoul District Court for the purpose of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed as of the day and year first above written. PLEDGOR: SIMMTECH CO. LTD By /s/ Se-Ho Chun --------------------------------------------- Name: Se-Ho Chun Title: Representative Director In the presence of: /s/ C. H. Oh ---------------------------- PLEDGEE: ST ASSEMBLY TEST SERVICES LTD By /s/ Tan Lay Koon --------------------------------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of: /s/ Suh Tae Suk ---------------------------- 10 SCHEDULE I Description of Securities 700,000 shares of common stock of the Pledgor in denominations as the following:
Serial Number Denomination Number of share certificate(s) - ------------- ------------ ------------------------------ A-Je 000443~000482 10,000 shares 40 A-Je 000881~000890 10,000 shares 10 A-Je 000905~000924 10,000 shares 20
11 EX-4.19 11 u92302exv4w19.txt EX-4.19 LOAN AGREEMENT DATED DEC 26, 2003 EXHIBIT 4.19 This Agreement is dated the 26th day of December 2003 BETWEEN ST ASSEMBLY TEST SERVICES LTD AND SIMMTECH CO. LTD AND SE-HO CHUN ------------------------------------------------- LOAN AGREEMENT ------------------------------------------------- C:\Simmtech\LoanAgreement ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 THIS AGREEMENT is made on December 26, 2003. BETWEEN: 1. ST ASSEMBLY TEST SERVICES LTD, a company incorporated under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 ("STATS") 2. SIMMTECH CO. LTD, a corporation organized and existing under the laws of Korea and having its principal place of business at 70-5 Songjung-dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea 361-290 ("SIMMTECH") 3. MR. SE-HO CHUN, a Korean national with resident number 560515-1005415, holding 39.9% of the issued shares of Simmtech as of the date hereof ("MAJOR SHAREHOLDER") WHEREAS: Simmtech has requested STATS and STATS has agreed to grant a loan amounting to United States Dollars Fifteen Million only (US$15,000,000.00) on the terms and conditions hereinafter set out. NOW IT IS HEREBY AGREED as follows: 1 DEFINITIONS 1.1 In this Agreement, unless the context otherwise requires, the following words shall have the following meanings:- "Agreement Term" means the period commencing from the Loan Date and ending on the Loan Repayment Date; "Banking Day" means a day on which banks are open for business in Seoul, Korea and Singapore "Borrowed money" includes any indebtedness (1) for or in respect of money borrowed or raised (whether or not for cash), by whatever means (including acceptances, deposits, discounting, factoring, finance leases, hire purchase, sale-and-lease back, sale-and-repurchase and any form of "off-balance sheet" financing) or (2) for the deferred purchase price of assets or services; "CTS Agreement" means the Capacity and Continuing Support agreement dated as of the date hereof between Simmtech and STATS whereby Simmtech has agreed to provide continuous cost improvement, technology support and other services to STATS on the terms set out therein; "Equipment" means the machinery and equipment listed in the list attached hereto as Annex A which represents the equipment which Simmtech will purchase with the Loan monies; "Event of Default" means one of the events mentioned in Clause 9; 2 "Factory Kun-Mortgage" means the mortgage agreement dated as of the date hereof between Simmtech (as mortgagor) and STATS (as mortgagee) whereby Simmtech will grant a kun-mortgage over certain property described therein to STATS for the purpose of securing its obligations under this Agreement and the Security Documents. "Loan" means a sum of United States Dollars Fifteen Million only (US$15,000,000.00) loaned to Simmtech under this Agreement, which is to be repaid in full to STATS in accordance with the terms of this Agreement; "Loan Date" means January 2, 2004; "Loan Repayment Date" means the date when the Loan is to be repaid in full (subject to Clauses 5.2), being a date not later than January 2, 2009; "Potential Event of Default" means any event or circumstance which, if it continued after the giving of any notice, the expiry of any grace period, and/or the making of any determination by STATS (as the case may be), provided for in Clause 9, would become an Event of Default; "Repayment Dates" means the date falling one year after the Loan Date (i.e., (on January 2, 2005) and the first day of each subsequent three (3) month period thereafter during the Agreement Term, provided that any Repayment Date falling after January 2, 2009 shall be accelerated to fall on January 2, 2009; "Security Documents" means the YT Agreement, Factory Kun-Mortgage Agreement and the Share Pledge Agreement, each duly executed and signed by authorized signatories of Simmtech and STATS and in the form required by STATS; "Share Pledge Agreement" means the pledge agreement for the pledge of Shares dated as of the date hereof between the Major Shareholder (as pledgor) and STATS (as pledgee) whereby the Major Shareholder pledged the Shares to STATS to secure Simmtech's obligations under this Agreement and the Security Documents; "Shares" means the 2,400,000 common shares of Simmtech which are pledged to STATS under the Share Pledge Agreement; "Total Indebtedness" means the sum total of Simmtech's liabilities to STATS arising out of or in connection with the Loan including all sums agreed to be paid under this Agreement and the Security Documents, at any given time; and "YT Agreement" means the Yangdo Tambo agreement dated as of the date hereof between Simmtech (as transferor) and STATS (as transferee) whereby Simmtech will transfer title over certain property described therein to STATS for the purpose of securing its obligations under this Agreement and the Security Documents. 1.2 The headings to the Clauses hereof shall not be deemed to be a part thereof or be taken in consideration in the interpretation or construction thereof or of this Agreement. 3 2 LOAN Subject to Clause 3 below, STATS will provide the Loan to Simmtech on the Loan Date for the purposes and on the terms and conditions specified herein. 3. CONDITIONS PRECEDENT 3.1 Subject to the terms and conditions herein contained, the obligation of STATS to provide the Loan to Simmtech under Clause 2 above is subject to the fulfilment, as determined by STATS, of the following conditions precedent on or 1 Banking Day prior to the Loan Date (unless otherwise waived by STATS in its absolute discretion): (a) STATS has received the following documents and has found them satisfactory in both form and substance: (i) a certified copy of the most recent Articles of Incorporation of Simmtech; (ii) a duly authenticated copy of the minutes of the board of directors' meeting of Simmtech at which resolutions authorizing the execution, delivery and performance of this Agreement, the CTS Agreement and the Security Documents, including but not limited to incurring the debt obligations hereunder and providing the collateral as contemplated under the Security Documents, and authorizing the person(s) who signed, or will sign, this Agreement, the CTS Agreement and the YP Agreement or all other documents in connection thereto on Simmtech's behalf to do so, were adopted and any power of attorney executed in connection therewith; (iii) seal certificate of the Representative Director of Simmtech and specimen signature(s) of the person(s) authorized to execute this Agreement, the CTS Agreement, the YT Agreement and all other documents in connection therewith; (iv) the executed Security Documents duly signed or sealed by the authorized person(s) on behalf of Simmtech; (v) certified copies of each approval of any governmental authorities of Korea and Singapore necessary or advisable in connection with the execution, delivery and performance of this Agreement and the CTS Agreement or the provision of the collateral contemplated under the Security Documents, in form and substance satisfactory to STATS and its legal counsel, including but not limited to the relevant foreign exchange reporting/approval requirements set forth in any applicable laws and regulations; (vi) evidence as may be requested by STATS and its legal counsel that all obligations of Simmtech under the YT Agreement shall be 4 satisfied prior to or simultaneously with the provision of the Loan on the Loan Date, including but not limited to satisfaction of relevant foreign exchange reporting/approval requirement; (vii) evidence as may be requested by STATS and its legal counsel that all obligations of the Major Shareholder under the Share Pledge Agreement shall be satisfied prior to or simultaneously with the provision of the Loan on the Loan Date, including but not limited to (1) registration of STATS' security interest over the Shares in Simmtech's shareholders' registry, (2) delivery of the share certificates representing the Shares to STATS or its agent and (3) satisfaction of relevant foreign exchange reporting/approval requirements, as provided in the Share Pledge Agreement; (viii) the executed CTS Agreement duly signed or sealed by the authorized person(s) on behalf of Simmtech; and (ix) such other documents that STATS may reasonably require; (b) all acts, conditions and things required to be done and performed and to have happened precedent to the execution and delivery of this Agreement, the CTS Agreement and the Security Documents and to constitute the same legal, valid and binding obligations enforceable in accordance with their respective terms, shall have been done and performed and have happened in due and strict compliance with all applicable laws and regulations; (c) there is no material adverse change in the business, properties, assets, operations, management or financial condition of Simmtech or any material adverse change in the property charged under the Security Documents or other conditions which in the opinion of STATS will materially and adversely affect the ability of Simmtech or the Major Shareholder to perform its respective obligations under this Agreement, the CTS Agreement and the Security Documents; and (d) no Event of Default or Potential Event of Default has occurred. 3.2 Unless otherwise waived by STATS, in case of Simmtech's failure to comply with any of the foregoing conditions, STATS shall have no obligation to provide the Loan on the Loan Date. 4. USE OF LOAN PROCEEDS 4.1 Subject to repayment of the Loan in full on the Repayment Dates falling due, Simmtech shall be entitled to use the Loan monies solely for the purposes of acquiring the Equipment listed in Appendix A and subject to STATS' prior written consent, such other purposes as Simmtech may require for use of the Loan monies for its ordinary course of business. 4.2 Simmtech hereby agrees and confirms that the Loan monies may be used solely for the purposes set out in Clause 4.1 and that nothing herein shall cause STATS to be construed to fall within the definition of a moneylender or to be presumed to be a 5 moneylender under Sections 2 and 3 of the Moneylending Act of Singapore respectively. 4.3 Simmtech agrees between the Loan Date and December 31, 2004, to use the Loan (or necessary portion thereof) to purchase the Equipment and to immediately provide STATS with evidence satisfactory to STATS or its legal counsel of the purchase of the Equipment. Immediately after Simmtech takes legal title to the Equipment, Simmtech shall take all necessary action so that the Equipment will be subject to the YT Agreement, and shall cause (a) the placement of a plaque or sign on the Equipment stating STATS' title and interest thereon and (b) maintain adequate insurance over the Equipment, as provided in the YT Agreement. 5 REPAYMENT, PAYMENT AND INTEREST 5.1 Subject to Clauses 5.2, on each Repayment Date, Simmtech shall repay a portion of the Loan in the amount and currency of United States Dollars Eight Hundred and Eighty Two Thousand Three Hundred and Fifty Three only (US$882,353.00), provided that, the amount to be repaid on the Loan Repayment Date shall be the balance amount of the Loan outstanding and repayable as of such date. 5.2 If a Repayment Date (and/or January 2, 2009) does not fall on a Banking Day, such payment in respect of that Repayment Date shall be made on the immediately succeeding Banking Day. 5.3 On each date on which any sum is due from Simmtech, it shall make that sum available to STATS in United States Dollars and in immediately available and freely transferable funds by 11 a.m. on the day in question, by crediting such account of STATS with such bank as STATS shall have designated for the purpose. 5.4 STATS shall make the Loan to Simmtech by payment before close of business in Singapore on the Loan Date to such account with such bank as Simmtech may specify in writing. 5.5 Simmtech authorises STATS to apply (without prior notice) any sums from time to time due or owing from STATS to Simmtech howsoever arising in or towards satisfaction of any sum then due from Simmtech to STATS in respect of the Total Indebtedness. For that purpose, STATS is authorised to use all or any part of any such sums to buy such other currencies as may be necessary to effect such application. STATS shall not be obliged to exercise any of its rights under this Clause which shall be without prejudice and in addition to any right of set-off, lien or other right to which it is at any time otherwise entitled (whether by operation of law, contract or otherwise). 5.6 If the amount received by STATS from Simmtech on any date is less than the total sum remaining or becoming due under this Agreement and the Security Documents on that date, then regardless of any appropriation of all or part of that amount by Simmtech, STATS shall apply that amount in or towards payment of such part of the Total Indebtedness (whether principal, interest, fees or any other amounts due under this Agreement or the Security Documents) as it deems fit. 6 5.7 The parties hereto acknowledge Simmtech's intention to transfers all of its assets, equipment and facilities comprising its substrate manufacturing operations, including but not limited to all licences, contracts, rights and consents and employees relating to such operations ("Concerned Business"), by way of a spin-off or other methods permissible under Korean law and to form a new company ("NewCo") as a result of such transfer. STATS shall have the option, but not the obligation, to make an equity investment in NewCo up to 30 per cent. of the total number of shares of NewCo with the Loan repaid by Simmtech to STATS ("Option"). Simmtech shall complete the legal formation of NewCo as soon as practicable, but in any event, no less than three (3) months from the date STATS notifies Simmtech in writing of its election to exercise the Option. The specific terms of the investment in NewCo by STATS, including the timing of the investment, shall be agreed to by the parties separately, provided that, unless otherwise agreed and to the extent not prohibited by applicable law, the parties will for the purposes of STATS exercising its option to make an equity investment in NewCo, seek a valuation on an arm's length, willing seller and buyer basis, of the shares of the new company by one or more international investment banks or other persons of internationally recognized standing to be jointly or severally appointed by the parties. 6. TAXES 6.1 All sums payable by Simmtech under this Agreement and the Security Documents shall be paid (a) free of any restriction or condition, (b) free and clear of and (except to the extent required by law) without any deduction or withholding on account of any tax and (c) without deduction or withholding (except to the extent required by law) on account of any other amount, whether by way of set-off or otherwise. 6.2 If (a) Simmtech or STATS is required by law to make any deduction or withholding on account of any such tax or other amount from any sum paid or payable by Simmtech to STATS under this Agreement and the Security Documents or (b) STATS (or any person on its behalf) is required by law to make any deduction or withholding from, or (except on account of tax on the overall net income of STATS) any payment on or calculated by reference to the amount of, any sum received or receivable by STATS under this Agreement and the Security Documents: (i) Simmtech shall notify STATS of any such requirement or any change in any such requirement as soon as it becomes aware of it; (ii) Simmtech shall pay any such tax or other amount before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Simmtech) for its own account or (if that liability is imposed on STATS) on behalf of and in the name of STATS or (if STATS makes such payment) shall reimburse it on demand for the amount paid by it; (iii) the sum payable by Simmtech in respect of which the relevant deduction, withholding or payment is required shall (except, in the case of any such payment, to the extent that its amount is not ascertainable when that sum is 7 paid) be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, STATS receives on the due date and retains (free from any liability in respect of any such deduction, withholding or payment) a net sum equal to what it would have received and so retained had no such deduction, withholding or payment been required or made; and (iv) Simmtech shall, as soon as it is required by law, make any deduction or withholding, and immediately after the due date of payment of any tax or other amount which it is required by Clause 6.2(ii) above to pay, Simmtech shall deliver evidence satisfactory to STATS of such deduction, withholding or payment and (where remittance is required) of the remittance thereof to the relevant taxing or other authority. 6.3 Without prejudice to the survival of any other agreement of Simmtech hereunder, the agreements and obligations of Simmtech contained in Clauses 6.1 and 6.2 above shall survive the payment in full of the Loan and under any instrument delivered hereunder. 7. WARRANTIES AND REPRESENTATIONS 7.1 Simmtech hereby warrants and represents to STATS as follows:- (a) that it is lawfully incorporated, validly existing and in good standing under the laws of the Republic of Korea; (b) that it has the corporate power and authority to own assets and to carry on the business which it conducts and/or purports to conduct; (c) that it has the corporate power to execute and perform this Agreement, the CTS Agreement and the YT Agreement; (d) that the certified copies of the Articles of Incorporation and the board resolutions of Simmtech delivered to STATS are true and accurate copies of the corporate records of Simmtech; (e) that the execution, delivery and performance of this Agreement, the CTS Agreement and the Security Documents (i) have been duly authorised by all requisite corporate action (where applicable) and (ii) do not and will not violate any provision of any agreement or other instrument to which Simmtech or the Major Shareholder is a party or which is binding on each of them or its or his assets, or result in the existence of, or oblige them to create, any security over those assets; (f) there has been no material adverse change in the business, properties, assets, operations, management or financial condition of Simmtech since the lasted audited accounts; (g) there are no actions, suits or proceedings pending or, to the knowledge of Simmtech, threatened against Simmtech or the Major Shareholder, at law or in equity before any court or competent body adjudicating such matters or before any government agency or administrative body (i) to restrain the 8 entry into, exercise of Simmtech or the Major Shareholder's rights under and/or performance or enforcement of or compliance with its or his respective obligations under this Agreement, the CTS Agreement and the Security Documents to which it or he is a party; or (ii) which may result in any material adverse change in the business, operations, properties, assets or management, or in the condition, financial or otherwise of Simmtech; (h) that no steps have been taken or are being taken nor have any legal proceedings been started or threatened for the dissolution, winding up or bankruptcy of Simmtech or for the bankruptcy of the Major Shareholder or similar procedures with respect to Simmtech or the Major Shareholder for the appointment of a receiver and/or manager or judicial manager, liquidator or trustee or any other person over it or him or the whole or any part of its or his assets; (i) that this Agreement, the CTS Agreement and the Security Documents when executed are the legal, valid and binding obligations of Simmtech and the Major Shareholder enforceable in accordance with their respective terms; (j) that all actions, conditions and things required to be taken, fulfilled and done (including the obtaining of any necessary consents) in order (i) to enable Simmtech and the Major Shareholder lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under this Agreement, the CTS Agreement and the Security Documents to which it or he is a party, (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make this Agreement, the CTS Agreement and the Security Documents admissible in evidence in the courts of Singapore have been taken, fulfilled and done; (k) that Simmtech's and the Major Shareholder's entry into, exercise of its or his respective rights and/or performance of or compliance with its or his respective obligations under this Agreement, the CTS Agreement and the Security Documents to which it or he is a party do not and will not violate (i) any law or regulations to which each is subject or (ii) any of the documents constituting Simmtech.; (l) that Simmtech and the Major Shareholder have filed all tax returns which each of them is required by law to file and have paid all taxes, assessments, respective fees and other governmental charges assessed against each of them or upon any of its or his respective properties, assets or income; (m) that no Event of Default or Potential Event of Default has occurred; (n) that Simmtech or the Major Shareholder is not in default in the payment or performance of any of its or his respective obligations for Borrowed money or in respect of other liabilities which may have a material adverse effect on Simmtech or the Major Shareholder; (o) that the audited financial statements of Simmtech and all other information which have previously been submitted by Simmtech to STATS are complete and correct and that the audited financial statements fairly represent the financial condition of Simmtech and the results of its 9 operations for the period stated in accordance with generally accepted accounting principles applied on a consistent basis. 7.2 Each of the warranties and representations contained in the preceding sub-clause shall survive and continue to have full force and effect after the execution of this Agreement. Simmtech hereby warrants to STATS and that the above representations and warranties will be true and correct and fully observed as if repeated with reference to the then existing circumstances until the Total Indebtedness is fully paid. 8. UNDERTAKING 8.1 Simmtech and the Major Shareholder hereby undertake and agree with STATS, for as long as the Loan has not been repaid in full, as follows:- (a) that the Loan shall be used solely for the purpose and in the manner herein before stipulated and not for any other purpose or manner; (b) that Simmtech will, and the Major Shareholder will cause Simmtech to, carry on and conduct its business and affairs with due diligence and efficiency in accordance with sound technical financial industrial and managerial standards and practices and pay all taxes as they fall due; (c) that Simmtech will not, and the Major Shareholder will cause Simmtech not to, materially change the scope or nature of its business, whether by disposal, acquisition or otherwise; (d) that Simmtech will, and the Major Shareholder will cause Simmtech to, keep the Equipment and the property charged under the YT Agreement in good and substantial repair and proper working condition to the satisfaction of STATS; (e) that Simmtech shall, and the Major Shareholder shall cause Simmtech to, give to STATS such written authorization or directions and provide such facilities and access as STATS may require for the inspection of the Equipment; (f) that Simmtech and the Major Shareholder will not (whether by a single transaction or a number of related or unrelated transactions and whether at the same time or over a period of time) sell, assign, transfer, pledge, mortgage, encumber or dispose of (or cause, attempt or purport to do any of the foregoing) any of the Equipment or Shares or other property charged under the Security Documents or of any part of its or his assets which, when aggregated with all other disposals by it or him required to be taken into account under this Clause 8.1(f), is material in relation to its or his respective assets or the disposal of which (when so aggregated) may have a material adverse effect on it or him, (as may be relevant) nor do, or fail to do, anything whereby STATS' rights in respect of the Equipment or Shares or other property charged under the Security Documents or their respective value may be diminished, and shall notify STATS if Simmtech or the 10 Major Shareholder becomes aware of any diminution in the rights attaching to, or the value of, the same or any circumstances whereby such rights or such value may be diminished; (g) that Simmtech will not, and the Major Shareholder will cause Simmtech not to, amend or alter any provisions of its Articles of Incorporation relating to its borrowing powers, powers to guarantee and charge its assets and its principal business activities; (h) that Simmtech will not, and the Major Shareholder will cause Simmtech not to, effect any form of reconstruction or amalgamation by way of a scheme of arrangement or otherwise and shall not approve, permit or suffer any change of ownership (whether legal or beneficial) or transfer of any part of its issued capital; (i) that Simmtech will not, and the Major Shareholder will cause Simmtech not to, obtain any borrowings from other banks or financial institutions without the consent of STATS; (k) that Simmtech will not, and the Major Shareholder will cause Simmtech not to, incur any liability by way of guarantee, assign its account receivables or take any action which may substantially and adversely affect its financial condition; (l) that Simmtech shall, and the Major Shareholder shall cause Simmtech to, furnish and provide STATS with and permit STATS to obtain all such statements, information, explanation and data as STATS may require regarding its or his respective business, properties, assets, operations, management or financial condition or other condition or regarding the business, properties, assets, operations, management or financial condition or other condition of Simmtech, as permitted under relevant Korean laws and regulations; (q) that Simmtech shall obtain all necessary licences and comply with all laws, regulations, rules and orders relating to the carrying on of its business; (r) that Simmtech and the Major Shareholder shall at its own expense, execute, sign, perfect, and if required register every document, or do or procure the doing of any act or thing which in the opinion of STATS may be necessary or desirable for giving full effect to the terms and provisions of this Agreement, the CTS Agreement and the Security Documents and the benefit of the rights, powers and remedies conferred upon STATS under the same; (s) that Simmtech will, and the Major Shareholder will cause Simmtech to, deliver to STATS from time to time on reasonable request by STATS a duly signed certificate of no Event of Default or Potential Event of Default; (t) that Simmtech and the Major Shareholder will observe and comply with the terms and conditions of the Security Documents and all consents and approvals issued by relevant authorities in connection with the Loan; 11 (u) that Simmtech will, and the Major Shareholder will cause Simmtech to, notify STATS of the occurrence of any Event of Default and/or Potential Event of Default immediately upon becoming aware of it and thereupon, on request, deliver to STATS a certificate setting out details of any Event of Default and/or Potential Event of Default and the action taken or proposed to be taken to remedy it; (v) that Simmtech will, and the Major Shareholder will cause Simmtech to, ensure that Simmtech's obligations under this Agreement will rank at all times at least pari passu with all its other existing and future unsubordinated indebtedness, obligations and liabilities actual or contingent from time to time (save for those which are preferred by the mandatory operation of law); (w) if so and for so long as is required by STATS, Simmtech will, and the Major Shareholder will cause Simmtech to, at its own cost and expenses maintain or ensure the maintenance of a policy of insurance with a reputable insurance carrier over the Equipment and the property charged under the YT Agreement and will duly pay all premiums and other moneys necessary for effecting and keeping up such insurances and on demand produce to STATS such insurances and receipt for such payments. Such insurances shall: (i) be for such sum or sums adequately covering STATS' interest in the Equipment and the property charged under the YT Agreement; (ii) be taken out in the name of Simmtech; (iii) name STATS as loss payee or beneficiary; (iv) acknowledge that Simmtech is the sole party liable to pay the premium in respect thereof; (v) provide for the insurers or underwriters to give to STATS at least 30 days' prior notice of cancellation by reason of non-payment of calls, premiums or otherwise and allow STATS an opportunity of paying such calls or premiums which may be in default; (vi) provide that they may not be altered or amended without the prior consent in writing of STATS; (vii) acknowledge that all proceeds shall, irrespective of any other provisions therein contained, be paid to STATS without deduction, set-off or counterclaim in respect of any outstanding premiums or calls on Simmtech; (viii) contain a loss payee and non-cancellation clause, a notice of assignment signed in accordance with the relevant policy rules and such other terms and conditions as STATS may require; and (ix) be in all other respects in form and substance acceptable to STATS, 12 and if Simmtech fails to comply with the provisions of this Clause 8.1(w), STATS may at its discretion (but without any obligation on its part to do so) have such insurance effected at the cost of Simmtech and all moneys paid by STATS in respect of such insurances shall be paid by Simmtech on demand; 8.2 Simmtech and the Major Shareholder hereby undertake and agree with STATS that it and the Major Shareholder shall not create or permit to arise or subsist, any mortgage, charge (whether fixed or floating), pledge, lien or other encumbrances whatsoever on the Equipment or the Shares or the property charged under the Security Documents or on any of Simmtech and the Major Shareholder's assets, properties and undertaking both present and future and wheresoever situate. 8.3 For as long as the Loan remains outstanding and has not be repaid in full, STATS shall have the right to nominate for election one non-standing member of the board of directors of Simmtech. Such director shall be compensated by Simmtech on substantially the same terms (including salaries, benefits, reimbursement of out-of-pocket expenses in connection with the foregoing, etc.), manner and policies as other members serving in similar capacities. 8.4 If STATS desires to exercise its nomination right pursuant to Section 8.3 above, STATS shall submit a notice of nomination of such nominee (a "Nomination Notice") to Simmtech, and Simmtech and the Major Shareholder shall cause the election of such nominee at the general shareholders meeting of Simmtech, which shall be held by Simmtech in March 2004, including voting all of the Major Shareholder's common shares of Simmtech in favor of such applicable nominee. 9. EVENTS OF DEFAULT 9.1 If any one or more of the following Events of Defaults shall occur, that is to say: (a) if Simmtech or the Major Shareholder fails to repay any sums of money payable under this Agreement or any of the Security Documents (as the case may be) on the due date therefor or on demand if payable on demand (as the case may be) and such default shall not be rectified within three (3) Banking Days after the date of receipt by Simmtech or the Major Shareholder (as the case may be) of written notice of such default from STATS; (b) if any representation or warranty made by Simmtech or the Major Shareholder in or in pursuance of this Agreement, the CTS Agreement or any of the Security Documents or in any certificate, statement or other document delivered by Simmtech or the Major Shareholder in connection with the execution and delivery hereof or in pursuance of this Agreement, the CTS Agreement or any of the Security Documents shall be or become incorrect or untrue in any respect; (c) if Simmtech or the Major Shareholder defaults in the due performance of any undertaking, condition or obligation on its part to be performed and observed under this Agreement (other than the failure to pay any sum when due or on demand pursuant to Clause 9.1(a) above), the CTS Agreement or 13 the Security Documents and such default (if capable of being rectified in STATS' opinion) shall not be rectified for a period of fourteen (14) Days after the date of receipt by Simmtech or the Major Shareholder (as the case may be) of written notice of such default from STATS; (d) if any steps have been taken or are being taken or any legal proceedings have been started or threatened for the dissolution or winding up of Simmtech or for the bankruptcy of the Major Shareholder or for the appointment of a receiver and/or manager or judicial manager, liquidator or trustee or any other person over Simmtech or the Major Shareholder (as applicable) or the whole or any part of its or his respective assets; (e) if a distress or execution is levied or enforced upon or sued out against any part of the property or assets of Simmtech or the Major Shareholder; (f) if a judgement or order is made against Simmtech or the Major Shareholder and STATS is in that case of the opinion that the said judgement may materially affect Simmtech's or the Major Shareholder's ability to perform and observe its or his respective obligations under this Agreement, the CTS Agreement or any of the Security Documents; (g) if Simmtech or the Major Shareholder becomes insolvent or is unable or deemed unable to pay its or his respective debts or admits in writing its or his inability to pay its or his respective debts as they fall due, stops, suspends or threatens to stop or suspend payment of its or his respective debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its or his respective indebtedness (or of any part of its or his respective indebtedness which it or he will or might otherwise be unable to pay when due), or proposes or enters into reorganization, composition, corporate restructuring, compromise or arrangement with its or his creditors or proposes or makes a general assignment for the benefit of its creditors or a moratorium is agreed or declared in respect of or affecting its or his indebtedness; (h) if Simmtech ceases or threatens to cease to carry on its respective business or any part thereof or a situation shall have arisen, which shall make it improbable that Simmtech or the Major Shareholder will be able to perform its or his respective obligations under this Agreement, the CTS Agreement and the Security Documents; (i) if any other indebtedness in respect of Borrowed moneys of Simmtech or the Major Shareholder (i) is not paid when due or within the applicable grace period in any agreement relating to that indebtedness or (ii) becomes due and payable before its normal maturity by reason of a default or event of default howsoever described; (j) if there are any actions, suits or proceedings pending or threatened against Simmtech or the Major Shareholder, at law or in equity before any court or competent body adjudicating such matters or before any government agency or administrative body (i) to restrain the entry into, exercise of Simmtech or the Major Shareholder's rights under and/or performance or enforcement of or compliance with its or his respective obligations under 14 this Agreement, the CTS Agreement and the Security Documents; or (ii) which may result in any material adverse change in the business, operations, properties, assets or management, or in the condition, financial or otherwise of Simmtech or the Major Shareholder; (k) if any present or future security on or over the assets of Simmtech or the Major Shareholder becomes enforceable; (l) if it is or will become unlawful for Simmtech or the Major Shareholder to perform or comply with any one or more of its or his respective obligations under this Agreement, the CTS Agreement or any of the Security Documents; (m) if there shall occur a material adverse change in the business, properties, assets, operations, management or financial position of Simmtech or the Major Shareholder; (n) if anything shall be done or suffered or omitted to be done by Simmtech, or the Major Shareholder which in the opinion of STATS, imperils or may imperil the securities created by this Agreement or any of the Security Documents respectively; (o) any agency of any state seizes, compulsorily acquires, expropriates or nationalises all or a material part of the assets or shares of Simmtech or the Major Shareholder and, in the opinion of STATS, such event has or could have a material adverse effect on Simmtech or the Major Shareholder; (p) any change in the financial, economic or political conditions in Korea or Singapore which in the opinion of STATS renders it inadvisable or impracticable for STATS to continue to extend the Loan; (q) any actions, condition or thing (including the obtaining of any necessary consent) of any time required to be taken, fulfilled or done for any of the purposes stated in Clause 7.1(j) is not taken, fulfilled or done or any such consent ceases to be in full force and effect or any condition in or relating to any such consent is not complied with; or (r) if any event occurs which, under the laws of any applicable jurisdiction, has an analogous or equivalent effect to any of the events referred to in this Clause 9.1, then and in any of such event, STATS may, by notice in writing to Simmtech declare that an Event of Default has occurred and such declaration shall be deemed to take effect from the date of occurrence of such an Event of Default. 9.2 Upon the declaration by STATS that an Event of Default has occurred (by sending notification to Simmtech of such declaration pursuant to Clause 9.1):- (a) the Total Indebtedness shall immediately become due and payable without any demand or notice of any kind by STATS to Simmtech; and 15 (b) STATS shall be entitled to exercise forthwith all or any rights, powers or remedies under this Agreement, the CTS Agreement, the Security Documents or any one or more of them. The rights hereunder are cumulative and may be exercised concurrently or in any order as STATS may in its absolute discretion think fit. Nothing in this Clause 9.2 shall limit any right, powers or remedies of STATS under this Agreement, the CTS Agreement and the Security Documents. 10. INDEMNITIES 10.1 Simmtech and the Major Shareholder shall on demand indemnify STATS against any funding or other cost, loss, expense or liability sustained or incurred by it as a result of: (a) the Loan not being made by reason of non-fulfilment of any of the conditions in Clause 3; (b) the occurrence or continuance of any Event of Default or Potential Event of Default; (c) the accelerated repayment of the Total Indebtedness under Clause 9.2(a); (d) the receipt or recovery by STATS of all or any part of any amount payable by Simmtech hereunder otherwise than on its due date; and (e) any default in the payment of the Total Indebtedness or any portion thereof, or any other amounts payable under this Agreement or under the Security Documents, or on account of the non-observance of all or any of the terms, stipulations, agreements and provisions on the part of Simmtech or the Major Shareholder contained herein or under the CTS Agreement or the Security Documents, and such losses, damages and expenses shall include but are not limited to such amount as STATS shall certify (which shall be conclusive and binding upon Simmtech save for any manifest error). 10.2 Each of the above indemnities constitutes a separate and independent obligation from the other obligations in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by STATS and shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Agreement or any judgment or other order. No proof or evidence of any actual loss may be required. 11. CALCULATIONS AND EVIDENCE A certificate by STATS as to any sum payable to it under this Agreement and/or the Security Documents shall be conclusive and binding on Simmtech save for manifest error 16 12. DISCLOSURE The parties agree that neither will disclose confidential information relating to the business and operations of the other party, the existence of this Agreement, the CTS Agreement and the Security Documents, nor any of their details or the existence of the relationship created by this Agreement, the CTS Agreement and the Security Documents to any third party without the specific, written consent of the other, provided that STATS may disclose to any government or regulatory authority, the Major Shareholder, a potential assignee or transferee or such other persons as STATS may think necessary or appropriate such information about Simmtech or this Agreement, the CTS Agreement or the Security Documents as STATS may think fit and Simmtech hereby consents to such disclosure made now or hereafter. 13. NOTICES 13.1 Except as otherwise expressly provided herein, any notice, request, demand or other communication to be given or served hereunder by one of the parties hereto to or on the others may be delivered at or sent by prepaid registered post or by facsimile to the address or addresses herein specified of the other party or parties and shall be deemed to be duly served: (a) if it is delivered, at the time of delivery; (b) if it is sent by prepaid registered post, one (1) day after posting thereof, or (c) if it is sent by facsimile, immediately after transmission thereof, if the date of transmission is a working day, and if such a date is not a working day, then the notice by facsimile shall be deemed to be served on the immediately next succeeding working day. Except as otherwise expressly provided herein, all notices, requests, demands or other communications which are required by this Agreement to be in writing may be made by facsimile. 13.2 For the purpose of this Clause 13 each of the parties hereto shall from time to time notify the other party in writing of an address where such notice, request, demand or other communication as aforesaid can be given or served and such notification shall be effective only when it is actually received. In the absence of such notification, the notice, request, demand or other communication aforesaid may be given or served to the concerned party as stated below. To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co. Ltd. and/or Mr. Se-Ho Chun 70-5 Songjung-dong Huengduk-ku 17 Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 14. WAIVER NOT TO PREJUDICE RIGHT OF STATS 14.1 No neglect or forbearance of STATS to require and enforce payment of any moneys hereunder or the performance and observance of any undertaking, stipulation, term or condition herein contained, nor any time which may be given to Simmtech shall in any way prejudice or affect any of the rights, power or remedies of STATS at any time afterwards to act strictly in accordance with the provisions hereof. No such waiver of any such breach as aforesaid shall prejudice the rights of STATS in respect of any other or subsequent breach of any of the undertakings, stipulations, terms or conditions aforesaid. The rights and remedies provided in this Agreement, the CTS Agreement and the Security Documents are cumulative and not exclusive of any rights or remedies (whether provided by law or otherwise). 14.2 Any provision of this Agreement may be amended only if Simmtech and STATS so agrees in writing and any Event of Default or Potential Event of Default, provision or breach of any provision of this Agreement may be waived before or after it occurs only if STATS so agrees in writing. Any such waiver, and any consent by STATS under any provision of this Agreement, must be in writing and may be given subject to any conditions as STATS thinks fit. Any waiver or consent shall be effective only in the instance and for the purpose for which it is given. 15. SEVERABILITY In case any provision in this Agreement shall be, or at any time shall become invalid, illegal or unenforceable in any respect under any law, such invalidity, illegality or unenforceability shall not in any way affect or impair the other provisions of this Agreement but this Agreement shall be construed as if such invalid or illegal or unenforceable provision contained herein did not from a part of this Agreement. 16. GOVERNING LAW AND DISPUTE RESOLUTION This Agreement shall be governed by and construed in all respects in accordance with the laws of the Republic of Singapore. Any dispute arising out of or in connection with this Agreement, including any questions regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration 18 Rules of the Singapore International Arbitration Centre for the time being in force which rules are deemed to be incorporated by reference to this Clause 16. 17. MISCELLANEOUS 17.1 Legal and other professional fees on a full indemnity basis, out-of-pocket expenses, charges and expenses of and in connection with this Agreement and the matters contemplated hereunder, including professional fees incurred for the purposes of STATS' making an equity investment in the new company, the CTS Agreement and the Security Documents incurred by either party, including STATS up to an amount not exceeding USD Twenty Thousand (USD20,000) ("Fee Cap") shall be paid by Simmtech upon demand by STATS, except that this Fee Cap shall not apply to expenses and charges that are incurred as a result of STATS' decision to not make the Loan on the Loan Date due to Simmtech's failure to fulfil its obligations under this Agreement. 17.2 Simmtech shall further pay all legal fees on a full indemnity basis and other costs and disbursements incurred in connection with or demanding and enforcing payment of moneys due under this Agreement and the Security Documents and otherwise howsoever in enforcing the performance of any other undertakings, stipulations, terms, conditions or provisions hereof and thereof. 17.3 This Agreement shall be binding upon the successors of Simmtech and shall enure to the benefit of STATS and its successors and assigns. 17.4 Simmtech shall have no right to assign or transfer any of its rights under this Agreement. STATS may assign all or any part of its rights or transfer all or any part of its obligations under this Agreement without the consent of Simmtech. Any such assignee or transferee shall be and be treated as a party for all purposes of this Agreement and shall be entitled to the full benefit of this Agreement to the same extent as if it were an original party in respect of the rights or obligations assigned or transferred to it. 17.5 This Agreement may be executed by each of the parties hereto in any number of counterparts, and by each party hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT (CAP. 53B) A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act (Cap. 53B) to enforce any of its terms. SIGNATURE PAGE TO FOLLOW 19 IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date stated above. ST ASSEMBLY TEST SERVICES LTD By: /s/ Suh Tae Suk ----------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of: /s/ Juliana Ho --------------------------- SIMMTECH CO. LTD By: /s/ Se-Ho Chun ---------------------- Name: Se-Ho Chun Title: Representative Director In the presence of: /s/ Young Goo Kim --------------------------- SE-HO CHUN By: /s/ Se-Ho Chun --------------------- Name: Se-Ho Chun In the presence of: [/s/ Young Goo Kim] --------------------------- 20 ANNEX A DESCRIPTION OF EQUIPMENT
- ----------------------------------------------------------------------------------------------------------- EQUIPMENT UNIT PRICE (US$) QUANTITY PRICE (KUS$) - ----------------------------------------------------------------------------------------------------------- DESMEAR+PTH+PNL LINE 4,275,000 1 4,275 - ----------------------------------------------------------------------------------------------------------- DEBURRING (CHEMICAL) 380,000 1 380 - ----------------------------------------------------------------------------------------------------------- EXPOSURE 598,500 1 599 - ----------------------------------------------------------------------------------------------------------- SCAN 304,000 3 912 - ----------------------------------------------------------------------------------------------------------- VRS 114,000 5 570 - ----------------------------------------------------------------------------------------------------------- SEMI AUTO PRINTER 47,500 2 95 - ----------------------------------------------------------------------------------------------------------- ROLL COATER WITH TUNNEL OVEN 532,000 1 532 - ----------------------------------------------------------------------------------------------------------- AUTO PRINTING SYSTEM 182,000 2 364 - ----------------------------------------------------------------------------------------------------------- TUNNEL OVEN FOR PRECURE 228,000 2 456 - ----------------------------------------------------------------------------------------------------------- AUTO EXPOSURE SYSTEM 349,600 1 350 - ----------------------------------------------------------------------------------------------------------- TUNNEL OVEN FOR FINAL CURE 199,500 1 200 - ----------------------------------------------------------------------------------------------------------- JET SCRUBBING FOR PRETREATMENT 277,400 1 277 - ----------------------------------------------------------------------------------------------------------- SOFT AU PLATING LINE 748,885 1 749 - ----------------------------------------------------------------------------------------------------------- BBT (FOR PBGA) 190,000 1 190 - ----------------------------------------------------------------------------------------------------------- BBT (FOR CSP) 475,000 1 475 - ----------------------------------------------------------------------------------------------------------- AVI 211,600 3 635 - ----------------------------------------------------------------------------------------------------------- VRS 28,500 3 86 - ----------------------------------------------------------------------------------------------------------- ROUTING RINSING 190,000 1 190 - ----------------------------------------------------------------------------------------------------------- EXPOSURE SYSTEM 19,000 1 19 - ----------------------------------------------------------------------------------------------------------- DEVELOP 152,000 1 152 - ----------------------------------------------------------------------------------------------------------- ALKALINE ETCHING WITH R/STRIPPING 228,000 1 228 - ----------------------------------------------------------------------------------------------------------- S/W GENESIS LICEN. 46,474 5 232 ----------------------------------------------------------------------------------- GENESIS GRAHP. 12,350 8 99 ----------------------------------------------------------------------------------- WORKSTATION 19,627 13 255 ----------------------------------------------------------------------------------- STELLAR 95,000 1 95 - ----------------------------------------------------------------------------------------------------------- MACHINE LASER PLOTTER 250,000 3 750 ----------------------------------------------------------------------------------- DEVELOPER 30,970 3 93 ----------------------------------------------------------------------------------- FILM AOI 213,300 2 427 - ----------------------------------------------------------------------------------------------------------- HAST 45,108 1 45 - ----------------------------------------------------------------------------------------------------------- IR REFLOW 42,505 1 43 - ----------------------------------------------------------------------------------------------------------- TC 73,733 1 74 - ----------------------------------------------------------------------------------------------------------- MEASURING SCOPE 30,000 1 30 - ----------------------------------------------------------------------------------------------------------- VACUUM LAMINATOR 562,500 1 563 - ----------------------------------------------------------------------------------------------------------- YAG LASER 562,500 1 563 - ----------------------------------------------------------------------------------------------------------- TOTAL 15,000 - -----------------------------------------------------------------------------------------------------------
21 EX-4.20 12 u92302exv4w20.txt EX-4.20 YANGDO TAMBO AGREEMENT DD DEC 26, 2003 EXHIBIT 4.20 EXECUTION COPY THIS YANGDO TAMBO AGREEMENT (the "Agreement") is entered as of this 26th day of December 2003, by and between: (i) SIMMTECH CO. LTD, a company duly incorporated and existing under the laws of Korea and having its principal place of of business at 70-5 Songjung-Dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea 361-290 (the "Transferor"); and (ii) ST ASSEMBLY TEST SERVICES LTD., a company duly incorporated and existing under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 (the "Transferee"). RECITALS WHEREAS: A. By the Loan Agreement dated as of December 26, 2003 (the "Loan Agreement") made by and between the Transferor, the Transferee and Mr. Se-Ho Chun, the Transferee has agreed, subject to and upon the terms and conditions contained therein, to provide a loan to the Transferor in the amount of USD 15 million (USD 15,000,000); B. The Transferor will be, upon acquisition, the legal and beneficial owner of the Property To Be Owned (as defined below); and C. For the purposes of securing the Secured Obligations (as defined below), the Transferor desires to transfer to the Transferee, among other things, all its rights, title and interests in and to the Property To Be Owned pursuant to terms and conditions herein. NOW, THEREFORE, it is agreed as follows: SECTION 1. INTERPRETATION Words and expressions defined in the Loan Agreement shall, unless otherwise defined herein or the context otherwise requires, have the same meaning when used in this Agreement. References to any agreement or document shall be construed as references to such agreement or document as varied, amended, novated or supplemented from time to time. In addition thereto, as used in this Agreement: 1.1 "Property to Be Owned" shall mean any and all Equipment (as defined in the Loan Agreement) to be purchased by the Transferor using the Loan monies, as described in Schedule I hereto (as amended from time to time pursuant to this Agreement). 1.2. "Secured Obligations" shall mean (i) any and all obligations, liabilities and indebtedness of the Transferor owing to the Transferee, presently existing or to be incurred hereinafter under or with respect to the Loan Agreement, (ii) moneys, obligations and liabilities owing and payable by the Major Shareholder (defined in the Loan Agreement) to the Transferee under the Share Pledge Agreement dated December 26, 2003 made between the Major Shareholder and the Transferee, (iii) moneys, obligations and liabilities owing and payable by the Company to the Pledgee under the Factory Kun-Mortgage Agreement dated December 26, 2003 between the Transferor and Transferee and (iv) moneys, obligations and liabilities owing and payable by the Transferor to the Transferee under this Agreement. SECTION 2. YANGDO TAMBO AGREEMENT 2.1 Immediately upon the Transferor obtaining legal title to the Property To Be Owned, the Transferor shall transfer and assign to the Transferee the Property To Be Owned as security for the punctual payment, performance and discharge in full of the Secured Obligations; provided, that unless and until an Event of Default occurs under the Loan Agreement the Transferee shall hold the title to the Property To Be Owned for the purpose of security only and shall not use, seize or dispose of the Property To Be Owned. The Transferor hereby agrees that any Property to Be Owned shall be subject to Yangdo Tambo on such property for the benefit of the Transferee pursuant to this Agreement and that if such property may not be subject to such Yangdo Tambo, the Transferor shall transfer and assign to the Transferee the Property to Be Owned as security for the punctual payment, performance and discharge in full of the Secured Obligations in the manner applicable to the nature of it and perform any and all actions necessary for the establishment and effectuation of such collateral arrangement under the laws of Korea. 2.2 At each time the Transferor obtaining legal title to the Property To Be Owned, but no later than 2 days after obtaining such legal title, the Transferor shall send to the Transferee a written notice which shall include a statement that that the Transferor has obtained legal title to the concerned Property To Be Owned and a detailed description of the concerned Property To Be Owned (to the reasonable satisfaction of the Transferee). SECTION 3. REPRESENTATIONS AND WARRANTIES 3.1 The Transferor hereby represents, warrants and covenants to the Transferee that: (a) the execution, delivery and performance by the Transferor of this Agreement have been duly authorized by the Transferor, and are not in conflict with any provision of any applicable laws or regulations or the articles of incorporation of the Transferor; 2 (b) the execution, delivery and performance by the Transferor of this Agreement does not violate or cause any default under any indenture, agreement or undertaking by which the Transferor is bound; (c) all authorizations required from any government or governmental agency in connection with this Agreement have been obtained and are in full force and effect; (d) this Agreement constitutes valid obligations of the Transferor, legally binding upon it and enforceable in accordance with its terms, subject, as to enforceability, to laws relating to bankruptcy, insolvency, liquidation, reorganization, court schemes, moratoria, administration and other laws generally affecting the rights of creditors; (e) all property forming part of the Property To Be Owned, prior to the transfer and assignment by the Transferor to the Transferee to be made hereby, shall be owned legally by the Transferor by good and marketable title free from all security, interest, lien or other encumbrance, and such title shall, by the transfer and assignment contained herein, be automatically transferred and assigned to the Transferee to provide for payment when due of the Secured Obligations and shall at all times be and remain free from any security, interest, lien or other encumbrance, except for the transfer and assignment of title made hereunder; (f) the Transferor has not agreed, and will not agree to sell, assign, transfer or create any security, interest, lien or other encumbrance in or over all or any part of the Property To Be Owned other than in favor of the Transferee hereunder; (g) to the knowledge of the Transferor, there are no circumstances that may or will diminish the value of the Property To Be Owned; and (h) the Transferor has not taken any corporate action nor have any other steps been taken or legal proceedings been started by it or any third party for its winding up, dissolution, reorganization or bankruptcy or for the appointment of a receiver, trustee or similar officer over the Transferor or its assets or revenues, and there occurs or continues no cause/event that may lead to such action or steps. 3.2 Each of the warranties and representations contained in the preceding sub-clause shall survive and continue to have full force and effect until the termination of this Agreement. SECTION 4. COVENANTS OF THE TRANSFEROR The Transferor covenants and undertakes the following with the Transferee: 3 (a) duly and punctually to observe and perform all the conditions and obligations imposed on it by the Loan Agreement and this Agreement; (b) not, without the prior written consent of the Transferee, to attempt to sell, assign, transfer or create any security, interest or lien over the Property To Be Owned to or in favor of any person other than the Transferee or otherwise dispose of or encumber any of the Property To Be Owned, and shall not remove the Property To Be Owned from the Transferor's premise unless it is replaced with the substitute property as provided in paragraph (f) below; (c) at any time following the occurrence of an Event of Default, to do or permit to be done each and every act or thing the Transferee may from time to time require to be done for the purpose of enforcing the Transferee's rights under this Agreement or in respect of any of the Property To Be Owned and to allow its name to be used as and when required by the Transferee for such purpose; (d) to possess and use the Property To Be Owned in accordance with its customary usage and preserve the value of the Property To Be Owned with such care as is required of a good manager; (e) to make all registrations, filings and recordings, and take all other actions as are necessary or determined by the Transferee to be advisable to ensure the continued legality, validity, enforceability, priority and admissibility in evidence of this Agreement; (f) to promptly notify the Transferee of any theft, loss or destruction of and damage to any of the Property To Be Owned or any other accident or reduction in price that has occurred or is expected to occur with respect to the Property To Be Owned (including but not limited to reduction in value due to depreciation), and in connection therewith, the Transferor agrees not to claim against the Transferee for any damages or loss incurred in connection with any such theft, loss destruction or damage unless attributable to any wilful misconduct of the Transferee. In case the value of the Property To Be Owned is materially affected due to theft, loss, destruction, damage, depreciation, etc., and the Transferor notifies the Transferee of such as provided in this paragraph (f), the Transferee may request the Transferee to replace the concerned the Property To Be Owned with other property that is acceptable to the Transferee, and the Parties hereto shall take all necessary steps to ensure that the terms of this Agreement shall apply to such replacement property, including but not limited to execution of an amendment to this Agreement which identifies the replacement property as the Property To Be Owned that is subject to this Agreement; (g) to be responsible for the resolution of any disputes with a third party in connection with the Property To Be Owned, including any disputes involving claims against the Property To Be Owned , and in connection therewith, the Transferor agrees not to take any action which might adversely affect the enforcement of the Transferee's rights or Transferee' 4 interests in the Property To Be Owned and to affirmatively protect and defend such rights and interests in accordance with the instructions of the Transferee; (i) to conduct its business in accordance with any applicable laws and regulations; (j) to pay all taxes, assessments and other governmental charges of any kind imposed on or in respect of its income or any of its business when due; (k) immediately upon the acquisition of the Property To Be Owned , and until all Secured Obligations have been fully discharged, to affix a clearly visible sign or plaque on each Property To Be Owned (to the satisfaction of the Transferee) providing to the effect that the legal title to the Property To Be Owned belongs to the Transferee and that the Property To Be Owned may not be transferred, sold or offered as collateral (the exact content of which shall be approved in advance by the Transferee); and (l) throughout the term of this Agreement, to procure and maintain insurance on the Property To Be Owned in such an amount and such a form as approved by the Transferee and from such an insurance company as may be selected or approved by the Transferee; and (m) Each time when the Transferor obtains title to any Property to Be Owned, the Transferor shall immediately notify the Transferee together with a certified copy of amended Schedule I to add such property in the list thereto. Upon confirmation by the Transferee, such amended Schedule shall be deemed as the Schedule hereunder. SECTION 5. ATTORNEY-IN-FACT The Transferor hereby irrevocably appoints the Transferee as its true and lawful attorney-in-fact with full power to require, demand and receive any and all moneys and claims for money due and to become due under or with respect to the Property To Be Owned to the extent transferred hereunder and to take any action or execute any instrument which the Transferee may deem necessary or appropriate to accomplish the purpose hereof. SECTION 6. TERMINATION AND REASSIGNMENT The term of this Agreement shall begin on the date of this Agreement and end on the date on which all Secured Obligations shall have been unconditionally and irrevocably paid and discharged. Upon termination of this Agreement, the Transferee shall, at the request and cost of the Transferor, promptly re-transfer to the Transferor all right, title, interest and benefit transferred hereunder and the security constituted hereby to the Transferee, and take such other actions as may be reasonably requested to effectuate such reassignment. 5 SECTION 7. PRESERVATION OF TRANSFERRED PROPERTY The Transferor shall hold the Property To Be Owned, as custodian for the Transferee. The Transferor hereby agrees that it will, from time to time at its own expense, promptly execute and deliver all further instruments, and take all further actions, as may be necessary or desirable in the opinion of the Transferee, or as the Transferee may request, in order to effect or protect the assignment of title to the Property To Be Owned by the Transferor to the Transferee granted hereunder and to enable the Transferee's rights and remedies hereunder with respect to the Property To Be Owned. SECTION 8. ADDITION TO TRANSFERRED PROPERTY Any structure, mechanical components, wires, parts, fuels and attached machinery and tools, which are united with or attached to the Property To Be Owned and goods to be attached to or united with the Property To Be Owned by extension, reconstruction, repair or rebuilding shall be deemed to have been transferred and delivered to the Transferee under this Agreement. SECTION 9. ENFORCEMENT BY TRANSFEREE 9.1 If any of the Secured Obligations becomes due and payable, the Transferee shall be entitled to enforce its rights under this Agreement. 9.2 If any of the Secured Obligations becomes due and payable, the Transferee shall in its sole discretion have the authority to sell, transfer or otherwise dispose of the Property To Be Owned at such times and at such prices as are generally recognized as appropriate in custom and practice, without the necessity of any legal process or procedure. Upon such sale, transfer or disposal, the Transferee shall apply the Proceeds, after deducting the costs of such sale, transfer or disposal, against the Secured Obligations. Any excess amount shall be paid to the Transferor and any Secured Obligations not fully covered by the Proceeds shall remain due and owing and shall promptly be paid by the Transferor. Alternatively, the Transferee may, at its sole discretion, choose to maintain possession and ownership over the Property To Be Owned, in which case, the Transferee shall value the Property To Be Owned based on commercially reasonable standards and return any excess amount (net of any and all costs and taxes involving transfer of the ownership of the Property To Be Owned y) to the Transferor and any Secured Obligations not fully covered by the value of the Property To Be Owned shall remain due and owing and shall promptly be paid by the Transferor. 9.3 If any of the Secured Obligations becomes due and payable, the Transferee shall at any time have the right to enter upon any premises where the Property To Be Owned is located, take possession of all or any part thereof and remove the same from such premises and the Transferor shall not interfere with such taking of possession and removal. 9.4 The Transferor hereby consents to the procedures set out in Section 9.2 and 9.3 above and waives any and all objections it may have thereto. 6 9.5 The Transferee shall incur no liability as a result of the sale, maintenance of ownership or any other disposition of the Property To Be Owned or any part thereof pursuant to Section 9.2 hereof conducted in a commercially reasonable manner. The Transferor hereby waives any claims against the Transferee arising by reason of the fact that the price at which the Property To Be Owned has been sold at such private sale may be less than the price at which it could have been sold if the Transferee had not accepted the first offer received or had offered the Property To Be Owned to more than one offeree. 9.6 The application of the Proceeds shall be determined by the Transferee in its absolute discretion, subject only to any other agreements between the Transferee and the Transferor relating thereto and to the requirements of any applicable law. As used in this Section 9, "Proceeds" of the Property To Be Owned shall mean cash, securities and other property realized in respect of, and distributions in kind of, the Property To Be Owned , including any thereof received under any reorganization, liquidation or adjustment of debt of the Transferor. 9.7 In case where the Transferor or a third party provides collateral (other than the Property To Be Owned) to the Transferee to secure all or any part of the Secured Obligations, the Transferee shall in its sole discretion have the authority to determine the priority and extent of enforcement between/among its rights under this Agreement and such other collateral arrangements, without the necessity of any legal process or consultation with the Transferor. SECTION 10. ASSIGNMENT This Agreement and the yangdo tambo created hereunder shall be binding upon and inure to the benefit of the Transferor and the Transferee and their respective successors and assigns. The Transferee may, in accordance with the Loan Agreement and applicable laws, at any time assign all or any part of its rights or obligations hereunder to any party (each an "Assignee"). The parties hereto agree that to the extent of any transfer, the Assignee shall be deemed to have the same rights and benefits under this Agreement as it would have had if it were a Transferee signatory hereunder. The Transferor may not assign any of its rights or obligations hereunder without the prior written consent of the Transferee. SECTION 11. FURTHER ASSURANCE The Transferor shall do all such acts as may be necessary or appropriate in the opinion of the Transferor including, but not limited to, the execution and delivery of all further instruments, notices and documents and all further action (whilst acting in a commercially reasonable manner) that may be necessary or appropriate in the opinion of the Transferee in order to perfect and/or protect any lien granted or purported to be granted hereby or to enable the Transferee to exercise and enforce its rights and remedies hereunder with respect to the Property To Be Owned. 7 SECTION 12. EXPENSES, TAXES AND INDEMNIFICATION The Transferor shall be liable for and shall indemnify the Transferee on demand against, and shall pay, (a) the reasonable costs, expenses, taxes and other liabilities (including legal fees on a full indemnity basis) incurred by the Transferee to protect or enforce the Transferee's title to and interest in the Property To Be Owned and the Transferee's rights against the Transferor under this Agreement (including, without limitation, the transfer and assignment by the Transferor to the Transferee of the Property To Be Owned and the re-transfer and re-assignment by the Transferee to the Transferor of the Property To Be Owned), provided that any such enforcement shall be in a commercially reasonable manner; (b) all withholding, excise, stamp, registration and other taxes, fees and duties payable in connection with the entry into, performance, enforcement or admissibility in evidence of this Agreement, and all reasonable costs, expenses and other liabilities, incurred by the Transferee in connection with, or otherwise attributable to, receipt by the Transferees of, or payment by Transferor of, any reasonable costs, expenses and other liabilities and indemnities provided for in this Section or any other provision of this Agreement, other than taxes imposed on overall net income of the Transferee. SECTION 13. MISCELLANEOUS 13.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective, shall be in writing and shall be personally delivered or sent by facsimile (with subsequent written confirmation) or by registered or certified first class mail, postage prepaid, return receipt requested, or by overnight (or next business day) courier service shall be deemed to have been duly given or made when delivered by hand, on the day that such facsimile is transmitted, or, if by first class mail, five days following the date on which such writing is deposited with the postal service, or the day after the date when deposited with an overnight (or next business day) courier service, addressed as follows, or to such other address as either party hereto may hereafter specify in writing to the other party: To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co., Ltd. 70-5 Songjung-dong Huengduk-ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 13.2 Severability. If any of the provisions of this Agreement shall contravene any law or regulation or be held invalid, this Agreement shall be construed as if not containing 8 those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 13.3 Amendments, Changes and Modifications. This Agreement shall not be amended, changed, modified, altered or terminated, unless the prior written approval of each of the Transferor and the Transferee is obtained. This Agreement shall not be amended by an oral agreement. 13.4 Counterparts. This Agreement may be executed in multiple counterparts, each of which, when executed, shall constitute an original but all of which together shall constitute one and the same instrument. 13.5 Heading. Headings and titles herein are for convenience only and shall not affect the construction or interpretation of this Agreement. 13.6 Entire Agreement. This Agreement is intended by the parties as the written final expression of each party's obligations and rights in connection with the Transferred Property and supersedes all prior and contemporaneous understandings or agreements concerning the subject matter hereof. 13.7 Conflict. In the case of a conflict between the provisions of this Agreement and the provisions of the Loan Agreement, the Loan Agreement shall prevail. 13.8 No Waiver. The Transferee shall not, by any act, delay, indulgence, omission or otherwise, except by an express written instrument clearly indicating an intention to waive, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising on the part of the Transferee, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power, privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 13.9 Remedies Cumulative. The rights and remedies provided herein are cumulative and may be exercised individually or concurrently, and are not exclusive of any other rights or remedies provided by law. 13.10 Currencies. All Secured Obligations under this Agreement are payable in United States dollars (the "Required Currency"). If the Transferee receives or recovers any moneys in any other currency, whether upon enforcement of its rights under this Agreement or otherwise, the Transferor shall indemnify the Transferee against the difference (if any) between the amount received by the Transferee when it converts amounts received in currencies other than the Required Currency to the Required Currency and the amount due in the Required Currency. The Transferor shall assist the Transferee at all times to obtain any exchange conversion approval required by the Transferee in connection with this Agreement or the Secured Obligations. 13.11 Governing Law and Jurisdiction. This Agreement and the security created pursuant hereto shall be governed by the laws of Korea in all respects, including matters of construction, validity and performance. The parties hereto agree to submit to the non-exclusive jurisdiction of the Seoul District Court for the purpose of this Agreement. SIGNATURE PAGE TO FOLLOW 9 IN WITNESS WHEREOF, the parties hereto have caused this Yangdo Tambo Agreement to be duly executed as of the day and year first above written. TRANSFEROR: SIMMTECH CO. LTD By: /s/ Se-Ho Chun ------------------------------------------ Name: Se-Ho Chun Title: Representative Director In the presence of: /s/ Young Goo Kim -------------------------- TRANSFEREE: ST ASSEMBLY TEST SERVICES LTD By: /s/ Suh Tae Suk ------------------------------------------ Name: Mr. Tan Lay Koon Title: President and CEO In the presence of : /s/ Juliana Ho ------------------------- 10 SCHEDULE I
- --------------------------------------------------------------------------------------- EQUIPMENT UNIT PRICE (US$) QUANTITY PRICE (KUS$) - --------------------------------------------------------------------------------------- DESMEAR+PTH+PNL LINE 4,275,000 1 4,275 - --------------------------------------------------------------------------------------- DEBURRING (CHEMICAL) 380,000 1 380 - --------------------------------------------------------------------------------------- EXPOSURE 598,500 1 599 - --------------------------------------------------------------------------------------- SCAN 304,000 3 912 - --------------------------------------------------------------------------------------- VRS 114,000 5 570 - --------------------------------------------------------------------------------------- SEMI AUTO PRINTER 47,500 2 95 - --------------------------------------------------------------------------------------- ROLL COATER WITH TUNNEL OVEN 532,000 1 532 - --------------------------------------------------------------------------------------- AUTO PRINTING SYSTEM 182,000 2 364 - --------------------------------------------------------------------------------------- TUNNEL OVEN FOR PRECURE 228,000 2 456 - --------------------------------------------------------------------------------------- AUTO EXPOSURE SYSTEM 349,600 1 350 - --------------------------------------------------------------------------------------- TUNNEL OVEN FOR FINAL CURE 199,500 1 200 - --------------------------------------------------------------------------------------- JET SCRUBBING FOR PRETREATMENT 277,400 1 277 - --------------------------------------------------------------------------------------- SOFT AU PLATING LINE 748,885 1 749 - --------------------------------------------------------------------------------------- BBT (FOR PBGA) 190,000 1 190 - --------------------------------------------------------------------------------------- BBT (FOR CSP) 475,000 1 475 - --------------------------------------------------------------------------------------- AVI 211,660 3 635 - --------------------------------------------------------------------------------------- VRS 28,500 3 86 - --------------------------------------------------------------------------------------- ROUTING RINSING 190,000 1 190 - --------------------------------------------------------------------------------------- EXPOSURE SYSTEM 19,000 1 19 - --------------------------------------------------------------------------------------- DEVELOP 152,000 1 152 - --------------------------------------------------------------------------------------- ALKALINE ETCHING WITH R/STRIPPING 228,000 1 228 - --------------------------------------------------------------------------------------- S/W GENESIS LICEN. 46,474 5 232 --------------------------------------------------------------------------- GENESIS GRAHP. 12,350 8 99 --------------------------------------------------------------------------- WORKSTATION 19,627 13 255 --------------------------------------------------------------------------- STELLAR 95,000 1 95 - --------------------------------------------------------------------------------------- MACHINE LASER PLOTTER 250,000 3 750 --------------------------------------------------------------------------- DEVELOPER 30,970 3 93 --------------------------------------------------------------------------- FILM AOI 213,300 2 427 - --------------------------------------------------------------------------------------- HAST 45,108 1 45 - --------------------------------------------------------------------------------------- IR REFLOW 42,505 1 43 - --------------------------------------------------------------------------------------- TC 73,733 1 74 - --------------------------------------------------------------------------------------- MEASURING SCOPE 30,000 1 30 - --------------------------------------------------------------------------------------- VACUUM LAMINATOR 562,500 1 563 - --------------------------------------------------------------------------------------- YAG LASER 562,500 1 563 - --------------------------------------------------------------------------------------- TOTAL 15,000 =======================================================================================
11 EX-4.21 13 u92302exv4w21.txt EX-4.21 SHARE PLEDGE AGREEMENT DD DEC 26, 2003 Exhibit 4.21 EXECUTION COPY THIS SHARE PLEDGE AGREEMENT (the "Agreement") is entered as of this 26th day of December, 2003 by and among: (i) MR. SE-HO CHUN, a shareholder of Simmtech Co. Ltd (the "Company") holding 39.9% of the issued and outstanding shares of the Company, with resident card number 560515-1005415 (the "Pledgor"); and (ii) ST ASSEMBLY TEST SERVICES LTD., a company duly incorporated and existing under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 (the "Pledgee"). RECITALS WHEREAS: A. By the Loan Agreement dated as of December 26, 2003 (the "Loan Agreement") made by and between the Company, the Pledgor and the Pledgee, the Pledgee has agreed, subject to and upon the terms and conditions contained therein, to provide a loan to the Company in the amount of USD 15 million (USD 15,000,000); B. The Pledgor is the legal and beneficial owner of the Securities (as defined below); and C. For the purposes of securing the Secured Obligations (as defined below), the Pledgor hereby agrees to, inter alia, deposit with and pledge to the Pledgee the Securities (as defined below) pursuant to terms and conditions herein. NOW, THEREFORE, it is agreed as follows: SECTION 1. INTERPRETATION Words and expressions defined in the Loan Agreement shall, unless otherwise defined herein or the context otherwise requires, have the same meaning when used in this Agreement. References to any agreement or document shall be construed as references to such agreement or document as varied, amended, novated or supplemented from time to time. In addition thereto, as used in this Agreement: 1.1 "Securities" shall mean the securities described in Schedule I hereto. 1.2. "Secured Obligations" shall mean (i) any and all obligations, liabilities and indebtedness of the Company owing to the Pledgee, presently existing or to be incurred hereinafter under or with respect to the Loan Agreement, (ii) moneys, obligations and liabilities owing and payable by the Company to the Pledgee under the Yangdo Tambo Agreement dated December 26, 2003 between the Company and the Pledgee, (iii) moneys, obligations and liabilities owing and payable by the Company to the Pledgee under the Factory Kun-Mortgage Agreement dated December 26, 2003 between the Company and the Pledgee and (iv) moneys, obligations and liabilities owing and payable by the Pledgor to the Pledgee under this Agreement. 1.3. "Proceeds" means all proceeds of, and all other profits, income or receipts, in whatever form and whatever currency, arising from the ownership, collection, sale, exchange, assignment or other disposition of, or realization of any of the Securities, and all interest, dividends (cash, stock or otherwise) and other payments and distributions on or with respect to such Securities or in exchange for such Securities. SECTION 2. PLEDGE 2.1. The Pledgor hereby agrees to pledge the Securities to the Pledgee and hereby agrees to grant in favor of the Pledgee a first priority security interest (jilkwon) in the Securities and the Pledgee shall accept the security interest in the Securities for the due and punctual payment, performance and discharge of the Secured Obligations. The Pledgor hereby agrees that any Proceeds of any Securities on which a pledge under this Agreement has been established and perfected shall be subject to the pledge (jilkwon) on such Securities pursuant to this Agreement and that if any such Proceeds may not be subject to such pledge, the Pledgor shall pledge the Proceeds for the benefit of the Pledgee in the manner applicable to the nature of it and perform any and all actions necessary or appropriate in the opinion of the Pledgee for the establishment and effectuation of such pledge under the laws of Korea. 2.2 Simultaneous with, or prior to the provision of the Loan on the Loan Date, the Pledgor shall have the Pledgee's name and address recorded in the shareholders' registry of the Company (maintained with the Korea Securities Depository) as a holder of the security interest (jilkwon) in the Securities and have the Pledgee's name recorded on the share certificates representing the Securities. 2.3 Immediately upon performance of Section 2.2 hereof and at least [one (1)] business day prior to the provision of the Loan on the Loan Date, the Pledgor shall deliver or cause to be delivered the share certificates representing the Securities in physical form to the Pledgee or to the agent of the Pledgee, as requested by the Pledgee together with a certified copy of the shareholders' registry of the Company and any documents necessary or appropriate in the opinion of the Pledgee to constitute a legally valid delivery of the certificates. SECTION 3. REPRESENTATIONS AND WARRANTIES 3.1 The Pledgor hereby represents, warrants and covenants to the Pledgee that: (a) the execution, delivery and performance by the Pledgor of this Agreement are not in conflict with any provision of any applicable laws or regulations or the articles of incorporation of the Company; (b) the execution, delivery and performance by the Pledgor of this Agreement does not violate or cause any default under any indenture, agreement or undertaking by which the Pledgor is bound; (c) all authorizations required from any government or governmental agency in connection with this Agreement have been obtained and are in full force and effect; (d) this Agreement constitutes valid obligations of the Pledgor, legally binding upon it and enforceable in accordance with its terms, subject, as to enforceability, to laws relating to bankruptcy, insolvency, liquidation, reorganization, court schemes, moratoria, administration and other laws generally affecting the rights of creditors; (e) the Pledgor has full right, title and interest over the Securities; (f) the Pledgor has not agreed to sell, assign, transfer, pledge or create any security, interest, lien or other encumbrance in or over all or any part of the Securities other than in favor of the Pledgee hereunder; (g) no person (other than the Pledgor and the Pledgee) is exercising, has exercised or attempted to exercise any ownership interest or other lien over any of the Securities; (h) to the knowledge of the Pledgor, there are no circumstances that may diminish the value of the Securities; (i) the Pledgor has not taken any action nor have any other steps been taken or legal proceedings been started by him or any third party for bankruptcy, workout, or similar proceedings over the Pledgor or his assets, and there occurs or continues no cause/event that may lead to such action or steps; and (j) the Pledgor has acquired the Securities in accordance with any provision of any applicable laws or the articles of incorporation of the Company and has been, and during the term of the Loan Agreement will be, permitted to have right, title and interest over the Securities under such laws and articles of incorporation. 3.2 Each of the warranties and representations contained in the preceding sub-clause shall survive and continue to have full force and effect until the termination of this Agreement. SECTION 4. COVENANTS OF THE PLEDGOR The Pledgor covenants and undertakes the following with the Pledgee: (a) duly and punctually to observe and perform all the conditions and obligations imposed on it by this Agreement; (b) not, without the prior written consent of the Pledgee, to attempt to sell, assign, transfer, create any security, interest or lien over, or otherwise dispose of or encumber any of the Securities to or in favor of any person other than the Pledgee; (c) to do or permit to be done each and every act or thing the Pledgee may from time to time require to be done for the purpose of enforcing the Pledgee's rights under this Agreement or in respect of any of the Securities and to allow its name to be used as and when required by the Pledgee for such purpose; (d) to make all registrations, filings and recordings, and take all other actions as are necessary or determined by the Pledgee to be advisable to ensure the continued legality, validity, enforceability, priority and admissibility in evidence of this Agreement; (e) to be responsible for the resolution of any disputes with a third party in connection with the Securities, including any disputes involving claims against the Securities, and in connection therewith, the Pledgor agrees not to take any action which might adversely affect the enforcement of the Pledgee's rights or Pledgee's interests in the Securities and to affirmatively protect and defend such rights and interests in accordance with the instructions of the Pledgee; (f) to pay all taxes, assessments and other governmental charges of any kind imposed on or in respect of his income or any of his assets when due; (g) to immediately notify the Pledgee of any and all notices that the Pledgor has received from the Company in his capacity as a shareholder upon the receipt of such notice; (h) if and when it is required to or entitled to vote, give any consent or exercise any other rights with respect to the Securities, to first notify such situation to the Pledgee immediately and act in accordance with the instruction of the Pledgee; (i) not to make or cause to make any action, procedure or event that may diminish the value of the Securities; and (j) to notify the Pledgee of any event that would result in or lead to a breach of any representation and warranty provided under Section 3 immediately upon becoming aware of such event. SECTION 5. ADMINISTRATION OF SECURITIES 5.1 Until there shall have occurred an Event of Default or a Potential Event of Default, the Pledgor shall be entitled to vote, give any consent or exercise any other rights with respect to the Securities in any manner not inconsistent with this Agreement and subject to applicable law. 5.2 Unless an Event of Default or a Potential Event of Default has occurred, and without prejudice to Section 2 hereof, the Pledgor shall receive or shall become entitled to receive, any dividend, interest or any other distribution whether in securities or property (including cash) with respect to the Securities by way of stock-split, spin-off, split-up or reclassification, combination of shares or the like. For the avoidance of doubt, any distributions (whether in cash or in shares or other property) received by the Pledgor shall be deemed to be the Proceeds and subject to the pledge created under this Agreement, and if any such Proceeds may not be subject to such pledge, the Pledgor shall pledge the Proceeds for the benefit of the Pledgee in the appropriate manner and perform any and all actions necessary or appropriate in the opinion of the Pledgee for the establishment and effectuation of such pledge under the laws of Korea. SECTION 6. ATTORNEY-IN-FACT The Pledgor shall be deemed to irrevocably appoint the Pledgee as its true and lawful attorney-in-fact with full power to require, demand and receive any and all moneys and claims for money due and to become due under or with respect to the Securities to the extent pledged hereunder and to take any action or execute any instrument which the Pledgee may deem necessary or appropriate to accomplish the purpose hereof. SECTION 7. TERMINATION AND REASSIGNMENT The term of this Agreement shall begin on the date of this Agreement and end on the date on which all Secured Obligations shall have been unconditionally and irrevocably paid and discharged. Upon termination of this Agreement, the Pledgee shall release the security interest in the Securities held by the Pledgee, return the share certificates representing the Securities to the Pledgor at the cost of the Pledgor and take any actions as may be reasonably requested by the Pledgor to effectuate such release. SECTION 8. ENFORCEMENT BY PLEDGEE 8.1 If any of the Secured Obligations becomes due and payable, the Pledgee shall be entitled, as and when it may see fit, to put into force and to exercise all or any of the rights and power possessed by it as pledgee of the Securities under the applicable laws and this Agreement in or towards satisfaction of the Secured Obligations, including without limitation, the right and power to: (a) sell, transfer or otherwise dispose of the Securities at such times and at such prices as are generally recognized as appropriate in custom and practice, without the necessity of any legal process or procedure; (b) acquire title to the Securities in lieu of foreclosure of the Securities in any manner in its discretion without notice to the Pledgor; and (c) demand, sue for, collect or receive, in the name of the Pledgor, any money or property at any time payable or receivable on account of or in exchange for any of the Securities, but shall be under no obligation to do so. 8.2 Upon the exercise of its rights pursuant to Section 8.1. hereof, the Pledgee shall apply the Proceeds, after deducting the costs of such exercise of rights, against the Secured Obligations. Any excess amount shall be paid to the Pledgor and any Secured Obligations not fully covered by the Proceeds shall remain due and owing and shall promptly be paid by the Pledgor. In the case of acquisition of the title to the Securities pursuant to Section 8.1.(b) hereof, the Pledgee shall value the Securities based on commercially reasonable standards and return any excess amount (net of any and all costs and taxes involving transfer of the ownership of the Securities) to the Pledgor and any Secured Obligations not fully covered by the value of the Securities shall remain due and owing and shall promptly be paid by the Pledgor. 8.3 The Pledgor hereby consents to the procedures set out in Sections 8.1 and 8.2 above and waives any and all objections it may have thereto. 8.4 The Pledgee shall incur no liability as a result of the sale, acquisition or any other disposition of the Securities or any part thereof by the Pledgee pursuant to Section 8.1 hereof conducted in a commercially reasonable manner. The Pledgor hereby waives any claims against the Pledgee arising by reason of the fact that the price at which the Securities has been sold at any private sale by the Pledgee may be less than the price at which it could have been sold if the Pledgee had not accepted the first offer received or had offered the Securities to more than one offeree. 8.5 The application of the Proceeds shall be determined by the Pledgee in its absolute discretion, subject only to any other agreements between the Pledgee and the Pledgor relating thereto and to the requirements of any applicable law. 8.6 In case where the Pledgor or a third party provides collateral (other than the Securities) to the Pledgee to secure all or any part of the Secured Obligations, the Pledgee shall in its sole discretion have the authority to determine the priority and extent of enforcement between/among its rights under this Agreement and such other collateral arrangements, without the necessity of any legal process or consultation with the Pledgor. SECTION 9. ASSIGNMENT This Agreement and the security interest created hereunder shall be binding upon and inure to the benefit of the Pledgor and the Pledgee and their respective successors and assigns. The Pledgee may, in accordance with the Loan Agreement and applicable laws, at any time assign all or any part of its rights or obligations hereunder to any party (each an "Assignee"). The parties hereto agree that to the extent of any transfer, the Assignee shall be deemed to have the same rights and benefits under this Agreement as it would have had if it were a Pledgee signatory hereunder. The Pledgor may not assign any of its rights or obligations hereunder without the prior written consent of the Pledgee. SECTION 10. FURTHER ASSURANCE The Pledgor shall do all such acts as may be necessary or appropriate in the opinion of the Pledgee including, but not limited to, the execution and delivery of all further instruments, notices and documents and all further action (whilst acting in a commercially reasonable manner) that may be necessary or appropriate in the opinion of the Pledgee in order to perfect and/or protect any lien granted or purported to be granted hereby or to enable the Pledgee to exercise and enforce its rights and remedies hereunder with respect to the Securities and the Proceeds. SECTION 11. EXPENSES, TAXES AND INDEMNIFICATION The Pledgor shall be liable for and shall indemnify the Pledgee on demand against, and shall pay, (a) the reasonable costs, expenses, taxes and other liabilities (including legal fees on a full indemnity basis) incurred by the Pledgee to protect or enforce the Pledgee's interest in the Securities and the Pledgee's rights against the Pledgor under this Agreement, provided that any such enforcement shall be in a commercially reasonable manner; (b) all withholding, excise, stamp, registration and other taxes, fees and duties payable in connection with the entry into, performance, enforcement or admissibility in evidence of this Agreement, and all reasonable costs, expenses and other liabilities, incurred by the Pledgee in connection with, or otherwise attributable to, receipt by the Pledgee of, or payment by Pledgor of, any reasonable costs, expenses and other liabilities and indemnities provided for in this Section or any other provision of this Agreement, other than taxes imposed on overall net income of the Pledgee. SECTION 12. MISCELLANEOUS 12.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective, shall be in writing and shall be personally delivered or sent by facsimile (with subsequent written confirmation) or by registered or certified first class mail, postage prepaid, return receipt requested, or by overnight (or next business day) courier service shall be deemed to have been duly given or made when delivered by hand, on the day that such facsimile is transmitted, or, if by first class mail, five days following the date on which such writing is deposited with the postal service, or the day after the date when deposited with an overnight (or next business day) courier service, addressed as follows, or to such other address as either party hereto may hereafter specify in writing to the other party: To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: Mr. S.H. Chun SimmTech Co. Ltd. 70-5 Songjung-dong Huengduk-ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 12.2 Severability. If any of the provisions of this Agreement shall contravene any law or regulation or be held invalid, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 12.3 Amendments, Changes and Modifications. This Agreement shall not be amended, changed, modified, altered or terminated, unless the prior written approval of each of the Pledgor and the Pledgee is obtained. This Agreement shall not be amended by an oral agreement. 12.4 Counterparts. This Agreement may be executed in multiple counterparts, each of which, when executed, shall constitute an original but all of which together shall constitute one and the same instrument. 12.5 Heading. Headings and titles herein are for convenience only and shall not affect the construction or interpretation of this Agreement. 12.6 Entire Agreement. This Agreement is intended by the parties as the written final expression of each party's obligations and rights in connection with the Securities and supersedes all prior and contemporaneous understandings or agreements concerning the subject matter hereof. 12.7 Conflict. In the case of a conflict between the provisions of this Agreement and the provisions of the Loan Agreement, the Loan Agreement shall prevail. 12.8 No Waiver. The Pledgee shall not, by any act, delay, indulgence, omission or otherwise, except by an express written instrument clearly indicating an intention to waive, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising on the part of the Pledgee, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power, privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 12.9 Remedies Cumulative. The rights and remedies provided herein are cumulative and may be exercised individually or concurrently, and are not exclusive of any other rights or remedies provided by law. 12.10 Currencies. All Secured Obligations under this Agreement are payable in United States dollars ("the Required Currency"). If the Pledgee receives or recovers any moneys in any other currency, whether upon enforcement of its rights under this Agreement or otherwise, the Pledgor shall indemnify the Pledgee against the difference (if any) between the amount received by the Pledgee when it converts amounts received in currencies other than the Required Currency to the Required Currency and the amount due in the Required Currency. The Pledgor shall assist the Pledgee at all times to obtain any exchange conversion approval required by the Pledgee in connection with this Agreement or the Secured Obligations. 12.11 Governing Law and Jurisdiction. This Agreement and the security created pursuant hereto shall be governed by the laws of Korea in all respects, including matters of construction, validity and performance. The parties hereto agree to submit to the non-exclusive jurisdiction of the Seoul District Court for the purpose of this Agreement. SIGNATURE PAGE TO FOLLOW IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed as of the day and year first above written. PLEDGOR: /s/ Se-Ho Chun ----------------------------- In the presence of: /s/ Young Goo Kim ----------------------------- PLEDGEE: ST ASSEMBLY TEST SERVICES LTD By /s/ Suh Tae Suk -------------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of: /s/ Juliana Ho ---------------------- SCHEDULE I Description of Securities 2,400,000 shares of common stock of the Company in denominations as the following:
Serial Number Denomination Number of share certificate(s) - ------------- ------------ ------------------------------ 2601~2636 10,000 shares 36 2397~2446 10,000 shares 50 2447~2496 10,000 shares 50 2497~2546 10,000 shares 50 2547~2596 10,000 shares 50 2597~2600 10,000 shares 4
EX-4.22 14 u92302exv4w22.txt EX-4.22 FACTORY KUN-MORTAGE AGRMT DD DEC 26, 2003 EXHIBIT 4.22 EXECUTION COPY THIS FACTORY KUN-MORTGAGE AGREEMENT (the "Agreement") is entered into as of this 26th day of December, 2003 by and among: (i) SIMMTECH CO. LTD, a company duly incorporated and existing under the laws of Korea and having its principal place of business at 70-5 Songjung-Dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea 361-290 (the "Mortgagor"); and (ii) ST ASSEMBLY TEST SERVICES LTD., a company duly incorporated and existing under the law of Singapore and having a place of business at 5 Yishun Street 23, Singapore 768442 (the "Mortgagee"). RECITALS WHEREAS: A. By the Loan Agreement dated as of December 26, 2003 (the "Loan Agreement") made by and between the Mortgagor, the Mortgagee and Mr. Se-Ho Chun, the Mortgagee has agreed, subject to and upon the terms and conditions contained therein, to provide a loan to the Mortgagor in the amount of USD 15 million (USD 15,000,000); and B For the purposes of securing the Secured Obligations (as defined below), the Mortgagor grant to the Mortgagees, inter alia, a fourth priority maximum amount factory mortgage over the properties located at 70-5 Songjung-Dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea (including all building and equipment located thereon). NOW, THEREFORE, it is agreed as follows: 1. Interpretation Words and expressions defined in the Loan Agreement shall, unless otherwise defined herein or the context otherwise requires, have the same meaning when used in this Agreement. References to any agreement or document shall be construed as references to such agreement or document as varied, amended, novated or supplemented from time to time. In addition thereto, as used in this Agreement: 1.1 "Mortgaged Properties" shall mean the properties located at 70-5 Songjung-Dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea, which include all building and equipment located thereon as agreed by the parties. 1.2 "Secured Obligations" shall mean (i) any and all obligations, liabilities and indebtedness of the Mortgagor owing to the Mortgagor, presently existing or to be incurred hereinafter under or with respect to the Loan Agreement, (ii) moneys, obligations and liabilities owing and payable by the Major Shareholder (defined in the Loan Agreement) to the Mortgagee under the Share Pledge Agreement dated December 26, 2003 made between the Major Shareholder and the Mortgagee, (iii) moneys, obligations and liabilities owing and payable by the Mortgagor to the Mortgagee under the Yangdo Tambo Agreement dated December 26, 2003 made between the Mortgagor and the Mortgagee ("Yangdo Tambo Agreement") and (iv) moneys, obligations and liabilities owing and payable by the Mortgagor to the Mortgagee under this Agreement. 2. Establishment of Factory Kun-Mortgage 2.1 The Mortgagor does hereby grant to the Mortgagee a fourth priority maximum amount mortgage (the "Factory Kun-Mortgage") on the Mortgaged Property to secure the Secured Obligations pursuant to the Factory Mortgage Act of Korea. The Mortgagee understands and acknowledged that there is a first priority, second priority and third priority mortgage over the Mortgaged Property for the benefit of Korea Development Bank ("Priority Mortgages"). 2.2 The maximum mortgage amount to be secured by the Factory Kun-Mortgage over the Mortgaged Property shall be United States Dollars Fifteen Million Only (USD 15,000,000.00), provided that, the Mortgagee shall, upon demand from the Mortgagor, allow this maximum mortgage amount to be reduced from time to time to the extent of the value of the Property To Be Owned (as defined under the Yangdo Tambo Agreement) which is purchased by the Mortgagor and becomes subject to the yandgo tambo pursuant to the Yangdo Tambo Agreement. All costs and expenses incurred as a result of reducing the maximum mortgage amount shall be borne by the Mortgagor. 2.3. Immediately upon the execution of this Agreement, the Mortgagor shall cause the Factory Kun-Mortgage in the maximum amount of United States Dollars Fifteen Million in favor of the Mortgagee to be registered in the real estate registry for the Mortgaged Property with the relevant registry office. Upon completion of the registration of the Factory Kun-Mortgage, the Mortgager shall deliver to the Mortgagee a certified copy of relevant real estate registry extract and list of equipment. 3. Representations, Warranties and Covenants The Mortgagor hereby represents, warrants and covenants to the Mortgagee that as of the date hereof: (a) the execution, delivery and performance by the Mortgagor of this Agreement has been duly authorized by the Mortgagor, and are not in conflict with any provision of any applicable laws or regulations or the articles of incorporation of the Mortgagor; 2 (b) the execution, delivery and performance by the Mortgagor of this Agreement does not violate or cause any default under any indenture, agreement or undertaking by which the Mortgagor is bound; (c) all authorizations required from any government or governmental agency in connection with this Agreement have been obtained and are in full force and effect except for the report to the foreign exchange bank under the Korean Foreign Exchange Transaction Law and the regulations, which will be submitted by the Mortgagee immediately after the execution of this Agreement; (d) this Agreement constitutes valid obligations of the Mortgagor, legally binding upon it and enforceable in accordance with its terms, subject, as to enforceability, to laws relating to bankruptcy, insolvency, liquidation, reorganization, court schemes, moratoria, administration and other laws generally affecting the rights of creditors; (e) all property forming part of the Mortgaged Property is owned legally by the Mortgagor by good and marketable title free from all security, interest, lien or other encumbrance other than the Priority Mortgages, and shall at all times be and remain free from any security, interest, lien or other encumbrance, except for the Priority Mortgages and the mortgage created hereunder; (f) the Mortgagor has not agreed, and will not agree to sell, assign, transfer or create any security, interest, lien or other encumbrance in or over all or any part of the Mortgaged Property other than the Priority Mortgages; (g) to the knowledge of the Mortgagor, there are no circumstances that may or will diminish the value of the Mortgaged Property; and (h) the Mortgagor has not taken any corporate action nor have any other steps been taken or legal proceedings been started by it or any third party for its winding up, dissolution, reorganization or bankruptcy or for the appointment of a receiver, trustee or similar officer over the Mortgagor or its assets or revenues, and there occurs or continues no cause/event that may lead to such action or steps. 4. Scope of Factory Kun-Mortgage 4.1 The Factory Kun-Mortgage created hereunder shall be effective as a matter of course with respect to not only doors, walls, terraces, garden trees, garden stones, structures, appurtenant buildings, facilities for water supply and sewage, electrical facilities including the facilities for supply and transformation of electric power, air-conditioning and heating 3 facilities, elevator facilities, facilities for gas supply, and all other facilities in or outside the buildings but also attached machinery and tools, which are united with or attached to the Mortgaged Property and goods to be attached to or united from time to time with the Mortgaged Property by extension, reconstruction, repair or rebuilding. 4.2 If any building located on the land which is subject to this Factory Kun-Mortgage is not registered on the official register or if a new building is built on such land, the Mortgagor shall promptly register the unregistered existing or new buildings (including the buildings which are owned by a third party) and cause to be granted to the Mortgagee a Factory Kun-Mortgage on such buildings pursuant to Section 2 hereof, upon the Mortgagee's request for purposes of protecting the rights of the Mortgagee hereunder and submit an amended registry showing the establishment of a Factory Kun-Mortgage on such previously unregistered or new buildings. 4.3 The Factory Kun-Mortgage created hereunder shall also extend as to any actual part of the Mortgaged Property not actually shown in the registry to the extent that such part is deemed to fall within the scope of the property described in the registry thereof. If the Mortgagee, in its reasonable judgment, deems it necessary to file for an amendment or addition to the Factory Kun-Mortgage for the preservation of the Mortgagee's rights, the Mortgagor shall immediately take all such actions as the Mortgagees may request. 5. Preservation of the Mortgaged Property 5.1 The Mortgagor shall not transfer the Mortgaged Property or materially change the nature or condition of the Mortgaged Property (other than in the ordinary course of business of the Mortgagor or as a consequence of normal wear and tear), without the prior consent of the Mortgagee, nor do any act (legal or otherwise) which may cause damage or losses to the Mortgagee. 5.2 The Mortgagor shall give prompt notice to the Mortgagee in the event there is any material damage, destruction or expropriation, or there occurs any event that may cause material impairment in the value of the Mortgaged Property. 5.3 In the event any party (other than the Mortgagee) attaches (including provisional attachment), seizes or otherwise creates, asserts, claims or otherwise acquires any lien or security interest over the Mortgaged Property, the Mortgagor shall promptly notify the Mortgagee thereof and take all necessary actions to dismiss, discharge and release such attachment, seizure, lien or other security interest. 6. Enforcement of Factory Kun-Mortgage 6.1 If any of the Secured Obligations becomes due and payable, the Mortgagee shall become 4 forthwith entitled, as and when it may see fit, to put into force and to exercise all or any of the power possessed by it as mortgagees, chargees and assignees of the Mortgaged Property, including without limitation, the power to: (a) exercise their rights to any of the Mortgaged Property, regardless of whether such Mortgaged Property is in its own name, in the name of the Mortgagor or otherwise; (b) assign, sell or other dispose of the Mortgaged Property to such person, at a public or a private sale, and upon such terms and in such manner as the Mortgagee may reasonably determine, and the Mortgagee or anyone else may be the purchaser, assignee or recipient of any or all of the Mortgaged Property and thereafter hold the same absolutely free from any claims or rights of the Mortgagor whatsoever; (c) take over or institute (by using the name of the Mortgagor, if necessary) all such proceedings in connection with the Mortgaged Property as the Mortgagee may in its sole discretion think fit (but shall be under no obligation to do so); and (d) make any reasonable compromise or settlement deemed desirable with respect to any of the Mortgaged Property. Notwithstanding the foregoing, if the holder of the Priority Mortgages enforces its rights against the Mortgaged Property, the Mortgagee shall be entitled to participate in the distribution of the proceeds from such enforcement to the extent permitted by applicable laws. 6.2 If the proceeds of the sale, collection or other collection upon or realization of the Mortgaged Property pursuant to Section 6.1 hereof, which will be applied to the Secured Obligations, are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Mortgagor shall remain liable for any such deficiency. 6.3 The Mortgagee shall incur no liability as a result of the sale of the Mortgaged Property or any part thereof, at any private sale pursuant to Section 6.1 hereof conducted in a commercially reasonable manner. The Mortgagor hereby waives any claims against the Mortgagee arising by reason of the fact that the price at which the Mortgaged Property has been sold at such private sale may be less than the price at which it could have been sold if the Mortgagee had not accepted the first offer received or had offered the Mortgaged Property to more than one offeree. 6.05 The Mortgagor hereby irrevocably appoints the Mortgagee as its attorneys-in-fact, for and on behalf of the Mortgagor and in its name, to: (i) execute, seal and deliver and otherwise perfect any such documents as mentioned in Section 8; (ii) execute, seal and deliver to any 5 purchaser of the Mortgaged Property from the Mortgagee in the exercise of the Mortgagee's power under Section 6, a bill of sale or other assurance of title; and (iii) execute all such documents as the Mortgagor could do in respect of the Factory Kun-Mortgage, registration or deregistration of the Mortgaged Property or Factory Kun-Mortgage with the relevant registry office in connection with the exercise of the Mortgagees' powers under Section 6; provided, that the Mortgagee shall not exercise the authority conferred in sub-clause (ii) and (iii) above unless an Event of Default has occurred and is continuing. 7. Assignment This Agreement and the Factory Kun-Mortgage created hereunder shall be binding upon and inure to the benefit of the Mortgagor and the Mortgagee and their respective heirs, successors and assigns. The Mortgagee may, in the ordinary course of business and in accordance with the applicable law, at any time assign all or any part of its rights or obligations hereunder to any party (each an "Assignee") without the consent of the Mortgagor. The parties hereto agree that to the extent of any assignment, the Assignee shall be deemed to have the same rights and benefits under this Agreement as it would have had if it were a Mortgagee hereunder. The Mortgagor may not assign any of its rights or obligations hereunder without the prior written consent of the Mortgagee. 8. Further Assurances 8.1 The Mortgagor covenants that it will promptly from time to time at the reasonable request of the Mortgagee do all such things and execute all such documents as Mortgagee may reasonably consider necessary or desirable for giving full effect to this Agreement or for securing the rights of the Mortgagees hereunder. 8.2 Upon the request of the Mortgagee and at the Mortgagor's expense, the Mortgagor hereby agrees to take any and all necessary actions for the registration, recordation or any other procedures that may be required for the creation, amendment, refiling or deregistration of the Factory Kun-Mortgage. 9. Termination and Release of Mortgage The term of this Agreement shall begin on the date of this Agreement and end on the date on which all of the Secured Obligations have been unconditionally and irrevocably paid and discharged in full. Upon termination of this Agreement, the Mortgagee shall, at the request of the Mortgagor and at the Mortgagor's cost and expense, deregister the Factory Kun-Mortgage from the relevant registry office and take such other action as may be reasonably requested by the 6 Mortgagor to effectuate the release of the Factory Kun-Mortgage. 10. Governing Law and Jurisdiction This Agreement and the grant of mortgage pursuant hereto shall be governed by the laws of Korea in all respects. The parties hereto agree that any legal action or proceeding arising out of or relating to this Agreement may be brought in the Seoul District Court in Korea and irrevocably submit to the non-exclusive jurisdiction of such court. 11. Miscellaneous 11.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective, shall be in writing and shall be personally delivered or sent by facsimile (with subsequent written confirmation) or by registered or certified first class mail, postage prepaid, return receipt requested, or by overnight (or next business day) courier service shall be deemed to have been duly given or made when delivered by hand, on the day that such facsimile is transmitted, or, if by first class mail, five days following the date on which such writing is deposited with the postal service, or the day after the date when deposited with an overnight (or next business day) courier service, addressed as follows, or to such other address as either party hereto may hereafter specify in writing to the other party: To: ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Attention: Director, Legal DID: 65 6824 1948 Fax: 65 822 7837 To: SimmTech Co., Ltd. 70-5 Songjung-dong Huengduk-ku Choungju, Chungchongbuk-Do Korea Attention: Chief Marketing Officer DID: 82-43-269 9280 Fax: 82-43-269 9048 11.2 Severability. If any of the provisions of this Agreement shall contravene any law or regulation or be held invalid, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and 7 enforced accordingly. 11.3 Amendments, Changes and Modifications. This Agreement shall not be amended, changed, modified, altered or terminated unless the prior written approval of each of the Mortgagor and the Mortgagee is obtained. This Agreement shall not be amended by an oral agreement. 11.4 Counterparts. This Agreement may be executed in multiple counterparts, each of which, when executed, shall constitute an original but all of which together shall constitute one and the same instrument. 11.5 Heading. Headings and titles herein are for convenience only and shall not affect the construction or interpretation of this Agreement. 11.6 Entire Agreement. This Agreement is intended by the parties as the written final expression of each party's obligations and rights in connection with the Mortgaged Property and supersedes all prior and contemporaneous understandings or agreements concerning the subject matter hereof. 11.7 No Waiver. Neither the Security Agent nor any Mortgagee shall, by any act, delay, indulgence, omission or otherwise, except by an express written instrument clearly indicating an intention to waive, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising on the part of the Mortgagee, any rights, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power, privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 11.8 Remedies Cumulative. The rights and remedies provided herein are cumulative and may be exercised individually or concurrently, and are not exclusive of any other rights or remedies provided by law. SIGNATURE PAGE TO FOLLOW 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. MORTGAGOR: SIMMTECH CO. LTD By: /s/ Se-Ho Chun ----------------------------------------------- Name: Se-Ho Chun Title: Representative Director In the presence of : /s/ Young Goo Kim ---------------------- MORTGAGEE: ST ASSEMBLY TEST SERVICES LTD By: /s/ Suh Tae Suk ----------------------------------------------- Name: Mr. Tan Lay Koon Title: President and CEO In the presence of : /s/ Juliana Ho ---------------------- 9 EX-4.23 15 u92302exv4w23.txt EX-4.23 SUPPORT AGREEMENT DD DEC 26, 2003 Exhibit 4.23 Execution Copy This Agreement is dated the 26th day of December 2003 BETWEEN ST ASSEMBLY TEST SERVICES LTD AND SIMMTECH CO. LTD ---------------------------------------------- BASE CAPACITY AND CONTINUING SUPPORT AGREEMENT ---------------------------------------------- C:\Simmtech\Base Capacity Agreement ST Assembly Test Services Ltd 5 Yishun Street 23 Singapore 768442 Execution Copy Agreement No:___________________________ This Base Capacity and Continuing Support Agreement (this "AGREEMENT") is made this 26th day of December 2003 BETWEEN: ST ASSEMBLY TEST SERVICES LTD, a company incorporated under the laws of Singapore and having its principal place of business at 5 Yishun Street 23, Singapore 768442 ("BUYER") AND SIMMTECH CO. LTD, a corporation organized and existing under the laws of Korea and having its principal place of business at 70-5 Songjung-dong, Heungduk-ku, Choungju, Chungchongbuk-do, Korea 361-290 ("SUPPLIER") WHEREAS: The parties have on the date hereof executed a Strategic Alliance Agreement for the purpose of establishing an alliance in the spirit of a partnership and in furtherance of such purpose, the parties are entering into this Agreement under which Supplier will provide Buyer the Products and Services and continuing support to meet Buyer's needs, in accordance with the terms and conditions hereof. IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS: 1.1 In this Agreement, unless the context otherwise requires, the following words shall have the following meanings:- "AFFILIATES" means entities that control, are controlled by, or are under common control with, a party to this Agreement. "AGREEMENT" means this Base Capacity and Continuing Support Agreement and other attachments or appendices specifically referenced herein. "EFFECTIVE DATE" means 1st January 2004 "FORECAST" means the 6-monthly rolling forecast issued by Buyer in the middle of each month immediately preceding the first month of the Forecast Execution Copy "PERSONNEL" means agents, employees or subcontractors engaged or appointed by Buyer or Supplier. "PRICES" means the agreed upon payment for Products and Services, including all applicable fees, payments and taxes, as specified in the relevant POs. "PRODUCTS" means equipment, substrates, laminates, materials and other items that Supplier performs for or supplies to Buyer during the term of this Agreement. "SERVICES" means work that Supplier performs for Buyer pursuant to a PO. "PURCHASE ORDER" or "PO" means any document that identifies itself as a purchase order, is signed by Buyer and to which Supplier makes delivery or performs accordingly, incorporates by reference this Agreement and describes the Products and Services, including any requirements, specifications or schedules (including but not limited to any quantity, price and delivery date for the Products agreed between the parties from time to time, being in the absence of agreement, as specified and in accordance with this Agreement) 2 SCOPE OF AGREEMENT; ORDER AND SUPPLY PROCESS 2.1 Supplier shall provide the Products and the Services to support the provision of such Products in accordance with this Agreement and as ordered by Buyer pursuant to a PO. Unless otherwise expressly specified in writing by Buyer, all POs issued by Buyer to Supplier during the term of this Agreement shall be deemed to be issued pursuant to this Agreement and its terms. The Supplier commits and undertakes to supply, unless otherwise expressly agreed in writing otherwise, as a minimum service guarantee, at least the quantity of Products specified in the Guaranteed Capacity attached hereto as Schedule A and the Services to support such Guaranteed Capacity for the duration of this Agreement. 2.2 Buyer will issue the Forecast to the Supplier. The Forecast shall not be construed as a commitment by Buyer to order any Product nor shall the Forecast be construed as a commitment by Supplier to supply any Product. If Buyer does not provide an updated Forecast in any particular week, Supplier shall be entitled to treat the current Forecast as the most recent Forecast. Buyer shall give Supplier the opportunity to review and give its feedback on a Forecast. Supplier shall deliver the Products ordered under a PO issued by Buyer up to the quantity of the Guaranteed Capacity. . The parties agree that the Forecast will be a planning tool for Supplier to meet Buyer's requirements provided under a relevant PO and an actual order made under a PO shall prevail over the Forecast. Buyer will issue the Forecast to the Supplier and Buyer shall use best endeavors to issue POs covering orders up to 2 consecutive months based on the Forecast. Supplier will provide the Products and Services as specified in the relevant PO, and will begin work only after receiving such PO. 2.3 Unless otherwise notified to Buyer, Supplier's confirmation of a PO containing an order of the Products in excess of the Guaranteed Capacity shall constitute Execution Copy acceptance of such part of the PO. Supplier shall give its confirmation of the order made by Buyer in excess of the Guaranteed Capacity within 3 working days of the date of the PO, failing which Supplier shall be deemed not to have accepted such part of the PO. 2.4 Buyer may reschedule, request to place on hold (which shall not exceed 3 weeks from the original delivery date stated in the relevant PO), cancel or terminate the orders of any Products for convenience. In the event of cancellation of the orders for any Products under a PO, Buyer shall upon receipt of Buyer's written or electronic mail notice of cancellation, immediately stop all work in progress and cause all of its suppliers or subcontractors to cease all related work. Any claim for termination charges must be submitted to Buyer in writing within thirty (30) days after receipt of Buyer's cancellation notice along with a summary of all mitigation efforts. 2.5 Supplier acknowledges and agrees that Buyer shall be liable only for cancellation charges if Buyer gives notice of cancellation on a date after 30 days prior to shipment date of such cancellation products ("Cancellation Liability Date"). If Buyer cancels all or part of any order for the Products after the Cancellation Liability Date, which Buyer has confirmed and commenced performance under, Buyer shall be obligated to pay Supplier for the work-in-process for the on-order Products completed up to the date Supplier receives Buyer's notice of cancellation; provided, that Supplier shall take all reasonable steps to mitigate the cost impact to Buyer for any cancelled Products. Buyer's liability for such cancelled or excess orders shall be limited to the charges specified in the Cancellation Charges Table in Schedule B. Supplier agrees to continuously keep Buyer informed, on a real-time basis through its Internet website, of the precise stage of the work-in-process relating to the Product ordered by Buyer. Buyer shall not be howsoever liable for any Products or cancellation charges in respect of which notice of cancellation is sent on a date earlier than the Cancellation Liability Date. 2.6 Supplier shall provide delivery flexibility in addition to the Guaranteed Capacity in accordance with the Delivery Flexibility Table attached hereto as Schedule B and the terms of this Agreement. 3 DELIVERY, QUALITY AND CONTINUING SUPPORT 3.1 Supplier shall deliver the correct quantity of Products in accordance with the delivery dates and quantities stipulated in the PO. In the PO, Buyer shall specify the date of shipment of the Products to be a date no earlier than 21 days after the date of the PO; provided, that the Supplier may, from time to time upon the request of Buyer, agree with Buyer to permit Buyer to set the date of shipment in the PO to be a date which is 3 or less days earlier than 21 days after the date of the PO; provided, further, that the delivery date for the Products ordered pursuant to and in accordance with the Delivery Flexibility Table shall be within the relevant lead times specified in the Delivery Flexibility Table. Supplier shall ship and deliver the Products by the exact ship date specified on the PO or an earlier date, if so specifically requested by Execution Copy Buyer; provided, that Supplier shall have no liability whatsoever for its failure to deliver the Products by a date requested by Buyer if such date is earlier than the delivery date stipulated in the PO. If Supplier fails to comply with a delivery commitment, Supplier will promptly notify Buyer of a revised delivery date and Buyer may: 3.1.1 cancel without charge Products or Services not yet delivered; 3.1.2 require Supplier to deliver Products using priority freight delivery at Supplier's expense for the incremental freight charges; and/or 3.1.3 exercise all other remedies provided at law, in equity and this Agreement. 3.2 The Supplier shall achieve 100% of the incoming acceptance test criteria of Buyer, as previously notified to Supplier by Buyer in writing from time to time or upon request by Supplier, for all Products delivered to Buyer and shall meet Quality Levels previously notified to Supplier by Buyer from time to time or upon request by Supplier. Any changes to such Quality Levels and or other inspection procedures to be made by the Buyer shall be consulted in advance with the Supplier, and such change shall become effective only if Supplier confirms and expressly accepts such change in advance. 3.3 No change shall be allowed for packing, crating, freight, express charges, cartage, or containers unless previously agreed to in writing or specified in this order. Supplier shall ensure that all shipment include purchase order number, packing slip stating the exact quantity and description of the goods. All deliveries of the Products by Supplier to Buyer pursuant to the P.O. shall be made F.O.B. Supplier shall be held responsible for ensuring that the goods are packed so as to ensure that they reach their destination intact and undamaged. Damage to any article including that of surface scratches, resulting from improper packaging will be charged to Supplier; provided, that Buyer shall procure insurance for the transportation of the Products and such insurance shall be of a kind and on terms current at the port of shipment. 3.4 All goods supplied shall be of quantity desired by the Buyer and/or to such specifications, plans, drawings, patterns or sample as shall form part of the contract. 3.5 Any request by Buyer for work suspensions or changes in quantities, drawings, designs, specifications place, time or mode of delivery, methods of shipment and packaging, and services to be furnished by Supplier shall be made in writing and shall become effective only if confirmed and agreed to in advance by Supplier. Subject to Clauses 2.4 and 2.5, if any such change causes an increase or decrease in the price of this order or in the time required for its performance, Supplier shall promptly notify Buyer thereof and assert its claim for adjustment within ten (10) days after the change is requested by Buyer and is accepted by Supplier. Upon acceptance of the change requested by Buyer, Supplier shall proceed immediately with the order as changed. Execution Copy 3.6 Whether made pursuant to this clause or by mutual agreement, Supplier agrees to implement all changes referred to in Clause 3.5, if accepted by Supplier, within fifteen (15) working days lead time unless otherwise specified. 3.7 Supplier shall render continuing support to Buyer and participate in the Co-Development Work Plan attached hereto as Schedule C, which may be revised by Buyer from time to time with the agreement of Supplier ("Co-Development Work Plan"). Supplier shall work towards and meet the targets specified in the Co-Development Work Plan in relation to panel utilization efficiency, yield, cost competitiveness improvement, core process technology development and the specified timelines to achieve such targets. The parties shall dedicate resources as specified in such Work Plan to achieve the specified targets. 3.8 The term of this Agreement shall be for a period of 5 years commencing from the Effective Date. 4 PRICING 4.1 Supplier will provide Product and Services to Buyer for the Prices. Subject to Section 2.4 and 2.5, the Prices for Products and Services specified in a PO and accepted by Buyer shall be the only amount due to Supplier from Buyer. 4.2 The price charged Buyer for any Product by Supplier, and the price at which Buyer make an order for the Products under a PO, shall be the price which is agreed between the parties prior to any PO and shall be Supplier's lowest price charged any customer for that equivalent Product. In respect of each Product supplied to Buyer, Supplier agrees to maintain pricing levels for such Product that are competitive with market prices for an equivalent product. Supplier shall, from time to time or upon request by Buyer, disclose to Buyer or a person designated by Buyer the price for the Products charged to its other customers besides Buyer. If Supplier sells any Product to any customer at a net price less than as set forth herein, Supplier shall adjust its price to the lower price for any uninvoiced Product and for all future invoices for such Product. 4.3 Supplier shall separately state on all invoices any taxes imposed. No tax shall be included from which an exemption is available. In the event any tax include was not required, Supplier will notify Buyer and promptly take all necessary and proper steps to procure a refund and, when received, will pay it to Buyer. 4.4 Payment shall be made by Buyer to Supplier 45 days after the invoice date. Supplier represents that prices quoted include all charges. 4.5 Buyer shall be entitled at all times to set-off any amount owing at any time from Supplier and any of its subsidiaries to Buyer; provided, that any set-off by Buyer shall be first notified to Supplier in writing before Buyer implements the set-off. Execution Copy 5. PAYMENTS AND ACCEPTANCE Payment of invoices will not be deemed acceptance of Products or Services, but rather such Products or Services will be subject to inspection, test, acceptance or rejection by Buyer until successful integration into Buyer's products, or for a period as specified in the relevant PO, whichever occurs first. Buyer may, at its option, either reject Products or Services that do not comply with the specifications and requirements for a refund plus any inspection, test and transportation charges paid by Buyer, or require prompt correction or replacement or of such Products upon Buyer's written instruction. Buyer may reject entire lot of Products, which do not meet stipulated quality levels. Upon discovery of any shortage, defect, damage or other non-compliance with specification and requirements, Buyer shall immediately notify Supplier in writing the details of the non-compliance prior to either rejecting Products or Services, or requiring correction or replacements of Products. Supplier shall not be required to agree to any rejection of Products or Services, or be responsible for correcting or replacing any Product, for which Buyer fails to give prior written notice of the non-compliance in accordance with this Clause 5. 6 WARRANTIES 6.1 In addition to all warranties provided or implied by law and without limitation, Supplier makes the following ongoing representations and warranties: 6.1.1 It has the right to enter into this Agreement and its performance of this Agreement will comply, at its own expense, with the terms of any contract, obligation, law, regulation or ordinance to which it is or becomes subject (including but not limited to all applicable privacy laws); 6.1.2 No claim, lien, or action exists or is threatened against Supplier that would interfere with Buyer's use or sale of the Products; 6.1.3 Products and Services do not infringe any intellectual property right of a third party; 6.1.4 All authors have agreed not to assert their moral rights (personal rights associated with authorship of a work under applicable law) in the Products, to the extent permitted by law; 6.1.5 Products are free from defects in design (except for written designs provided by buyer unless such designs are based entirely on Supplier's specifications), material and workmanship and will conform to the warranties, specifications and requirements, including but not limited to quality requirements, in this Agreement for a period of 1 year from the date of shipment; 6.1.6 Products are safe for use consistent with and will comply with warranties, specifications and requirements in this Agreements; Execution Copy 6.1.7 None of the Products contain nor are any of the Products manufactured using ozone depleting substances know as halons, chlorofluorocarbons, hydrochlorofluorocarbons, methyl chloroform and carbon tetrachlorideas defined by the Montreal Protocol; 6.1.8 Products are new and do not contain used or reconditioned parts; and 6.1.9 It is knowledgeable with, and is and will remain in full compliance and all applicable export and import laws, regulations, orders, and policies (including, but not limited to, securing all necessary clearance requirements, export and import licenses and exemptions from, and making all proper filings with appropriate governmental bodies and/or disclosures relating to the release or transfer to technology and software to non U.S. nationals). 6.2 Subject to Section 5 and Section 8, if Products or Services do not comply with the warranties in this Agreement, Supplier will repair or replace Products (at the latest revision level) or re-perform Services, or credit or refund the Price of Products or Services such remedy at Buyer's discretion. For such Products, Supplier will issue to Buyer a Return Material Authorization ("RMA") within five (5) days of Buyer's notice. Subject to Section 5, if Supplier fails to repair or replace Products or re-perform Services in a timely manner, Buyer may do so and Supplier will reimburse Buyer for actual and reasonable expenses. Subject to Section 5, Buyer may return Products which do not conform to the warranties in this Agreement from any Buyer location to the nearest authorized Supplier location at cost of Supplier and Supplier will, at cost of Supplier, return any repaired or replaced Product in a timely manner. 6.3 Subject to Section 5, Supplier will repair or replace, or credit or refund Products that are Defective ("Defective Products") as notified by Buyer in writing, or where a safety defect is found. Supplier will commence such performance within five (5) calendar days of Buyer's notice to Supplier of Defective Products pursuant to and in accordance with Section 5. Supplier will reimburse Buyer for all actual and reasonable expenses incurred by Buyer for such repair and replacement of Defective Products, including expenses associated with problem diagnosis, field and finished goods inventory repair, and replacement. 7 INTELLECTUAL PROPERTY 7.1 Buyer and Supplier shall jointly own all designs inventions, materials and information (the "Developed Information") jointly developed in the course of or as a result of discussions on the Co-Development Work Plan. Supplier shall with Buyer's full assistance and cooperation on the basis of equal sharing of legal fees, take all necessary steps to patent, register and protect their rights in the Developed Information. Any patent applied in respect of Developed Information shall name Buyer and Supplier as joint inventors and owners of the Developed Information. Buyer and Supplier shall be entitled to use, license or howsoever exploit the Developed Information as each party deems fit. Execution Copy 7.2 Subject to Clause 7.1, all rights to patents, trademarks, copyrights, and trade secrets on the Products owned by Supplier (hereinafter, "Supplier Intellectual Property") as well as any modifications, updates or enhancements to said Supplier Intellectual Property during the term of this Agreement remain the exclusive property of Supplier, and Supplier does not grant Buyer any right or license to such Supplier Intellectual Property; provided, that notwithstanding the foregoing, Supplier grants Buyer all Intellectual Property rights licensable by Supplier which are necessary for Buyer to use and sell the Products. This Agreement does not grant either party the right to use the other party's or their Affiliates' trademarks, trade names or service marks. 8 INDEMNIFICATION 8.1 A party hereto (the "Indemnifying Party") agrees, at its expense, to defend, indemnify and hold the other party, its Affiliates, officers, directors, employees and agents (collectively, the "Indemnified Parties"), harmless from any and all claims, demands, damages, costs, expenses, suits, actions, liabilities and losses (including, without limitation, reasonable attorneys' fees and expenses) arising by virtue of, in connection with, or related to, the Indemnified Party's performance hereunder or execution hereof, except as such claims losses or damages may result from the Indemnified Party's gross negligence, bad faith or willful misconduct. Notwithstanding anything to the contrary herein, the indemnification obligations under this paragraph shall survive the termination of this Agreement. 8.2 Supplier will defend, or at Buyer's option cooperate in the defense of, hold harmless and indemnify, including legal fees, Buyer from third party claims that Supplier's Products or Services infringe the intellectual property rights of a third party. If such a claim is or is likely to be made, Supplier will, at its own expense, exercise the first of the following remedies that is practicable: 8.2.1 obtain for Buyer the right to continue to use and sell the Products and Services consistent with this Agreement; 8.2.2 modify the Products and Services so they are non-infringing and in compliance with this Agreement; 8.2.3 replace the products and Services, or other affected deliverables or Services, with non-infringing ones that comply with this agreement; or 8.2.4 at Buyer's request, accept the cancellation of infringing Services and the return of the infringing Products and refund any amount paid. Buyer will give Supplier a prompt notice of third party claims against Buyer, and cooperate in the investigation, settlement and defense of such claims. Execution Copy 8.3 Supplier will have no obligation to indemnify Buyer for claims that Supplier's Products or Services infringe the Intellectual property rights of a third party to the extend such claims arise as a result of : 8.3.1 Buyer's combination of Products or Services with other products or services not reasonably foreseeable by Supplier and such infringement or claim would have been avoided in the absence of such combination; 8.3.2 Supplier's implementation of a Buyer originated design or a design originated from Developed Information and such infringement or claim would have been avoided in the absence of such implementation; or 8.3.3 Buyer's modification of the Products except for intended modifications required for use of the Products and such infringement or claim would have been avoided in the absence of such modification. 9 SUPPLIER AND SUPPLIER PERSONNEL Each party hereto is an independent contractor and this Agreement does not create an agency relationship between Buyer and Supplier. A party assumes no liability or responsibility for the other party's Affiliates, officers, directors, employees or agents (together, "Party Personnel"). A party will ensure that it and Party Personnel are in compliance with all laws, regulations, ordinances, and licensing requirements. 10 TERM AND TERMINATION 10.1 Either party may terminate this Agreement, without any cancellation charge, for a material breach of this Agreement by the other party or if the other party becomes insolvent or files or has filed against it a petition in bankruptcy ("Cause"), to the extent permitted by law. Such termination will be effective at the end of a thirty (30) day written notice period if the Cause remains uncured. 10.2 Upon termination, in accordance with Buyer's written direction, Supplier will immediately: 10.2.1 cease work; 10.2.2 prepare and submit to Buyer an itemization of all completed and partially completed Products and Services; 10.2.3 deliver to Buyer Products satisfactorily completed up to the date of termination at the agreed upon Prices set forth in the Cancellation Charges Table in Schedule B; and 10.2.4 deliver upon request any work in process. Execution Copy 11 GENERAL 11.1 This Agreement may only be amended by a writing specifically referencing this Agreement which has been signed by authorized representatives of the parties. 11.2 Each party shall not assign its rights or delegate or subcontract its duties under this Agreement to any third party or Affiliate without the prior written consent of the other party, such consent not to be withheld unreasonably. Any unauthorized assignment of this Agreement is void. 11.3 This Agreement and the performance of the transactions under this Agreement will be governed by the laws of Singapore and the parties submit to the exclusive jurisdiction of the laws of Singapore. 11.4 All communications between the parties regarding this Agreement will be conducted through the parties designated representatives. Supplier will use reasonable efforts to participate in replenishment logistics programs presented by Buyer. 11.5 This Agreement may be signed in one or more counterparts, each of which will be deemed to be an original and all of which when taken together will constitute the same agreement. Any copy of this Agreement made by reliable means (for example, photocopy or facsimile) is considered an original. 11.6 This provision is without prejudice to any non-disclosure or confidentiality agreement signed between the parties. Each party will not publicize the terms of this Agreement, or the relationship, in any advertising, marketing or promotional materials without prior written consent of the other party except as may required by law. Each party will use information regarding this Agreement only in the performance of this Agreement. For any business personal information relating to Party Personnel that a party provides to the other party, each party has obtained the agreement of the Party Personnel to release the information to the other party and to allow the other party to use such information in connection with this Agreement. 11.7 Neither party will be in default or liable for any delay or failure to comply with this Agreement due to any act beyond the control of the affected party, excluding labor disputes, provide such party immediately notifies the other. 11.8 This Agreement replaces any prior oral or written agreements or other communications between the parties with respect to the subject matter of this Agreement, excluding any confidential disclosure agreements. In the event of any conflict in these documents, the order of precedence will be: 11.8.1 this Agreement including the attachments and schedules hereto: followed by 11.8.2 the relevant PO. Execution Copy The terms of this Agreement constitute the entire agreement of the parties. No modifications shall be valid unless accepted in writing by Buyer. 11.9 Each party will maintain (and provide to the other party upon request) relevant business and accounting records to support invoices under this Agreement and proof of required permits and professional licenses, for a period of time as required by local law, but not for less than three (3) years following completion or termination of the relevant PO. All accounting records will be maintained in accordance with generally accepted accounting principles applicable to the respective party. 11.10 If any term in this Agreement is found by competent judicial authority to be unenforceable in any respect, the validity of the remainder of this Agreement will be unaffected, provided that such unenforceability does not materially affect the parties' rights under this Agreement. 11.11 The provisions set forth in the following Sections and Subsections of this Agreement will survive after termination or expiration of this Agreement and will remain in effect until fulfilled: Clauses 6.1, 6.2, 6.3, 7, 8.1, 8.2, 8.3, 11.3, 11.6, 11.8 and 11.9. 11.12 An effective waiver under this Agreement must be in writing signed by the party waiving its rights. A waiver by either party of any instance of the other party's noncompliance with any obligation or responsibility under this Agreement will not be deemed a waiver of subsequent instances. 11.13 This contract shall be enforceable by and shall be for the benefit of only the parties herein and no other parties. IN WITNESS WHEREOF, this Agreement has been executed by the authorized representatives of the parties hereto as of the date first above written. Buyer Supplier ST Assembly Test Services Ltd. Simmtech Co. Ltd. By: /s/ Suh Tae Suk By: /s/ Se-Ho Chun ---------------------- ---------------------- Name: Suh Tae Suk Name: Se-Ho Chun Title: Chief Operating Title: Representative Director Officer Execution Copy SCHEDULE A GUARANTEED CAPACITY 1. The Guaranteed Capacity for each Quarter of 2004 shall be as follows:-
PRODUCT TYPE FOR 1Q04 FOR 2Q04 FOR 3Q04 FOR 4Q04 PBGA (35 BD) 425,000 425,000 500,000 500,000 per week stPBGA (10 2,000,000 2,250,000 2,750,000 3,000,000 BD) per week Total PBGA: PBGA: PBGA: PBGA: Guaranteed 1,000,000 (Jan., Feb.) 1,700,000 2,000,000 2,000,000 Capacity Per 1,700,000 (March) Month stPBGA: stPBGA: stPBGA: stPBGA: 8,000,000 9,000,000 11,000,000 12,000,000
2. The Guaranteed Capacity for 2005 shall be 21 million units per month and the breakdown of the weekly Capacity requirements shall be notified by STATS to Simmtech in writing. 3. The Guaranteed Capacity for 2006 shall be 30 million units per month and the breakdown of the weekly Capacity requirements shall be notified by STATS to Simmtech in writing. 4. The Guaranteed Capacity for 2007 shall be 36 million units per month and the breakdown of the weekly Capacity requirements shall be notified by STATS to Simmtech in writing. 5. The Guaranteed Capacity for 2008 shall be 43.2 million units per month and the breakdown of the weekly Capacity requirements shall be notified by STATS to Simmtech in writing. 6. The breakdown as to PBGA and stPBGA units as a % of the abovestated Guaranteed Capacity for the years 2005 to 2008 will be 80% 2tPBGA and 20% PBGA. Execution Copy SCHEDULE B DELIVERY FLEXIBILITY TABLE 1. In the event Buyer requires "delivery flexibility" under the Guaranteed Capacity, Supplier shall supply such "delivery flexibility," provided that Supplier's services shall extend only to the Maximum Capacity per calendar week as stipulated in Table 1 below subject to Buyer: - 1.1 stipulating a date for shipment of the Products that is on or after the end of the Lead Time stipulated in Table 1 in accordance with the type of Product ordered calculated from the date of the PO; and 1.2 limiting the requested number of parts designs per week to the Maximum No. of Designs for PBGA and or stPBGA parts stipulated in Table 1 below. Table 1
- ---------------------------------------------------------------------------------------------------------------- PRODUCT TYPE PRODUCT TYPE BY LEAD TIME IN LEAD TIME IN LEAD TIME IN LEAD TIME IN LAYER CALENDAR DAYS - CALENDAR DAYS - CALENDAR DAYS - CALENDAR DAYS - 1Q04 2Q04 3Q04 4Q04 - ---------------------------------------------------------------------------------------------------------------- PBGA parts 2 10 10 8 8 ------------------------------------------------------------------------------------------ 4 12 12 10 10 ------------------------------------------------------------------------------------------ stPBGA parts 2 9 9 7 7 ------------------------------------------------------------------------------------------ 4 11 11 9 9 ------------------------------------------------------------------------------------------ Maximum No. of Designs for PBGA and or 2 2 3 4 stPBGA parts - ---------------------------------------------------------------------------------------------------------------- Maximum Capacity (% PBGA parts 25% 25% 25% 25% of total ordered ------------------------------------------------------------------------------------------- quantity/week) stPBGA parts 25% 25% 25% 25% - ----------------------------------------------------------------------------------------------------------------
CANCELLATION CHARGES TABLE
- ------------------------------------------------------------------------------------------------------ I/L MLB Drill Cu O/L S/M AU R/T B/B FVI - ------------------------------------------------------------------------------------------------------ 30% 40% 65% 67% 75% 85% 92% 95% 97% 100% - ------------------------------------------------------------------------------------------------------
* % means a rate of chargeable amount to PO prices Execution Copy SCHEDULE C CO-DEVELOPMENT WORK PLAN Execution Copy STATS & SIMMTECH CO-DEVELOPMENT WORK PLAN
- ------------------------------------------------------------------------------------------------------------------------------- MFG COST COMPETITIVENESS Target 1Q'04 2Q'04 3Q'04 4Q'04 -------------------------------------------------------------------------------------- Target IMPROVEMENT Util/Yield Cost Saving Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Date - ------------------------------------------------------------------------------------------------------------------------------- * Panel Utilization Efficiency 85% 6% XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Jun ++++++++++ Aug - ------------------------------------------------------------------------------------------------------------------------------- * Yield 93% 6% XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Jun - -------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------- CORE PROCESS TECHNOLOGY Target 1Q'04 2Q'04 3Q'04 4Q'04 ----------------------------------------------------------- Target IMPROVEMENT Product Requirement Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Date - ------------------------------------------------------------------------------------------------------------------------------- Tail-less BGA Substrate PBGA & stPBGA XXXXXXXXXXXXXXXXXXXX Apr +++++++++++++++ May - ------------------------------------------------------------------------------------------------------------------------------- Thin Core Laminate 2L, 0.15mm Thick XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Sep 4L, 0.26mm Thick +++++++++++++++ Oct - ------------------------------------------------------------------------------------------------------------------------------- Build-up Substrate (WB) Laser Drill/VIP/Blind Via XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Jul +++++++++++++++ Aug - ------------------------------------------------------------------------------------------------------------------------------- Low Pin Count Flip Chip 5x6mm 71 FC-LGA XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Jun +++++++++++++++ Jul - ------------------------------------------------------------------------------------------------------------------------------- High Pin Count Flip Chip 35x35mm 1152 FCBGA XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Dec +++++++++++++++ Dec - -------------------------------------------------------------------------------------------------------------------------------
XXX Target of completion/Qualification @@@ In Progress +++ Target of Implementation/Readiness *** Completed
MFG COST COMPETITIVENESS IMPROVEMENT * Panel Utilization Efficiency Target : 85 % in Avg. by Q2/'04
4Q'03 2Q'04 STRIP SIZE (MM) # of strips per panel # of strips per panel 190x43 (ST1) 18 20 190x42.5 (New ST1) 18 22 190x46.25 (ST2&3) 18 20 187.5x25 (19x19) 32 36 187.5x29 (23x23) 28 32 187.5x33 (27x27) 26 28 187.5x37 (31x31) 22 24 187.5x41 (35x35) 20 22 187.5x46 (37.5 & 40) 18 20
* Yield Target : 93 % in Avg. by Q2/'04
% OF STRIPS WITH PACKAGE TYPE # OF X-OUTS PER STRIP X-OUTS PER SHIPMENT PBGA 1 Max. 20% stPBGA Max. 10 % of total units N/A Per strip
CORE PROCESS TECHNOLOGY DEVELOPMENT o RESOURCE DEPLOYMENT PLAN - SIMMTECH
RESOURCE NOV/03 DEC/03 JAN/04 FEB/04 Sr. Manager 1 1 2 (1) 2 Engineer 3 3 5 (2) 8 (3) Total 4 4 7 10
Note] ( ) : # of New Hire - STATS
RESOURCE NOV/03 DEC/03 JAN/04 FEB/04 Eng'r 1 2 3 3 (shared) Eng'r 0 1 1 2 (1) (dedicated) Total 1 3 4 5
Note] ( ) : STATS Resident Eng'r @ SIMMTECH (TBH) o 3 W'S
- ------------------------------------------------------------------------------------- What Who When - ------------------------------------------------------------------------------------- 1. Project Management Plan - To assign Primary & Secondary contact person in charge All WW49 - To set up Bi-weekly/Monthly update meeting - ------------------------------------------------------------------------------------- 2. Panel Utilization Improvement - Detailed action plan ; Process/Equipment SIMMTECH WW50 - Timeline (Gannt Chart) - ------------------------------------------------------------------------------------- 3. Yield Improvement - Detailed action plan ; Process/Equipment SIMMTECH WW51 - Timeline (Gannt Chart) - ------------------------------------------------------------------------------------- 4. Core Process Technology Development - To send respective drawing per project STATS WW49 - Detailed action plan & timeline SIMMTECH WW51 - -------------------------------------------------------------------------------------
EX-4.24 16 u92302exv4w24.txt EX-4.24 INDENTURE DD NOV 7, 2003 Exhibit 4.24 EXECUTION COPY - -------------------------------------------------------------------------------- ST ASSEMBLY TEST SERVICES LTD AND THE BANK OF NEW YORK -------------------- INDENTURE DATED AS OF NOVEMBER 7, 2003 -------------------- CONVERTIBLE NOTES DUE 2008 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.................................................................................9 Accreted Value.............................................................................10 Act........................................................................................10 Additional Amounts.........................................................................10 Adjustment Effective Date..................................................................10 ADRs.......................................................................................10 ADS Depositary.............................................................................10 ADSs; American Depositary Shares...........................................................10 Affiliate..................................................................................10 Authenticating Agent.......................................................................10 Authorized Officer.........................................................................10 Average Market Price.......................................................................10 Beneficial Owner...........................................................................10 Board of Directors.........................................................................10 Board Resolution...........................................................................11 Branch Register............................................................................11 Business Day...............................................................................11 Cash Settlement Amount.....................................................................11 Cash Settlement Notice.....................................................................11 Cash Settlement Notice Date................................................................11 CDP........................................................................................11 Change of Control..........................................................................11 Clearstream................................................................................12 Closing Date...............................................................................12 Closing Price..............................................................................12 Commission.................................................................................12 Company....................................................................................12 Company Request; Company Order.............................................................12 Conversion Agent...........................................................................12 Conversion Date............................................................................12 Conversion Notice..........................................................................12 Conversion Period..........................................................................12 Convertible Notes..........................................................................12 Corporate Trust Office.....................................................................13 Corporation................................................................................13 Definitive Note............................................................................13 Delisting..................................................................................13 Deposit Agreement..........................................................................13 Euroclear..................................................................................13 Event of Default...........................................................................13
i Exchange Act...............................................................................13 Extraordinary Resolution...................................................................13 Fixed Exchange Rate........................................................................13 Global Notes...............................................................................13 Holder.....................................................................................13 Holder's Redemption Notice.................................................................13 Indenture..................................................................................13 International Investment Securities........................................................14 Local Currency.............................................................................14 Market Price...............................................................................14 Material Subsidiary........................................................................14 Maturity...................................................................................14 Nasdaq National Market.....................................................................14 Officer's Certificate......................................................................14 Opinion of Counsel.........................................................................14 Ordinary Shares............................................................................14 Outstanding................................................................................15 Paying Agent...............................................................................16 Person.....................................................................................16 Predecessor Security.......................................................................16 Prevailing Exchange Rate...................................................................16 Principal Register.........................................................................16 Proceeding.................................................................................16 Purchase Agreement.........................................................................16 Redemption Amount..........................................................................16 Redemption Date............................................................................16 Registration Date..........................................................................16 Regulation S...............................................................................16 Regulation S Certificate...................................................................16 Repayment Acceptance Notice................................................................17 Repurchase Date............................................................................17 Repurchase Event...........................................................................17 Repayment Price............................................................................17 Responsible Officer........................................................................17 S$.........................................................................................17 Securities Act.............................................................................17 Security Register; Security Registrar......................................................17 Share Conversion Price.....................................................................17 Singapore..................................................................................17 Singapore Exchange.........................................................................17 Stated Maturity............................................................................17 Subsidiary.................................................................................17 Trading Day................................................................................18 Trustee....................................................................................18 Trust Indenture Act........................................................................18 Vice President.............................................................................18 Volume-Weighted Average Prices.............................................................18
ii SECTION 102. Compliance Certificates and Opinions.......................................................18 SECTION 103. Form of Documents Delivered to Trustee.....................................................19 SECTION 104. Acts of Holders; Record Dates..............................................................19 SECTION 105. Notices, Etc., to Trustee and Company......................................................20 SECTION 106. Notice to Holders; Waiver..................................................................21 SECTION 107. Effect of Headings and Table of Contents...................................................21 SECTION 108. Successors and Assigns.....................................................................21 SECTION 109. Separability Clause........................................................................22 SECTION 110. Benefits of Indenture......................................................................22 SECTION 111. Governing Law and Jurisdiction.............................................................22 SECTION 112. Legal Holidays.............................................................................22 SECTION 113. Waiver of Jury Trial.......................................................................23 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally............................................................................23 SECTION 202. Form of Face of Security...................................................................24 SECTION 203. Form of Reverse of Security................................................................28 SECTION 204. Form of Trustee's Certificate of Authentication............................................33 SECTION 205. Form of Holder's Redemption Notice.........................................................33 SECTION 206. Form of Conversion Notice..................................................................34 SECTION 207. Form of Holder's Repayment Acceptance Notice...............................................36 SECTION 208. Form of Cash Settlement Notice.............................................................37 ARTICLE THREE THE CONVERTIBLE NOTES SECTION 301. Title and Terms............................................................................38 SECTION 302. Denominations..............................................................................38 SECTION 303. Execution, Authentication, Delivery and Dating.............................................38
iii SECTION 304. Temporary Convertible Notes................................................................39 SECTION 305. Registration, Registration of Transfer and Exchange........................................39 SECTION 306. Mutilated, Destroyed, Lost and Stolen Convertible Notes....................................44 SECTION 307. [Reserved].................................................................................44 SECTION 308. Persons Deemed Owners......................................................................44 SECTION 309. Cancellation...............................................................................45 SECTION 310. [Reserved].................................................................................45 SECTION 311. Common Code or ISIN Numbers................................................................45 SECTION 312. Certification Form.........................................................................45 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture....................................................45 SECTION 402. Application of Trust Money.................................................................46 ARTICLE FIVE REMEDIES SECTION 501. Events of Default..........................................................................47 SECTION 502. Acceleration of Maturity; Rescission and Annulment.........................................48 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................49 SECTION 504. Trustee May File Proofs of Claim...........................................................49 SECTION 505. Trustee May Enforce Claims Without Possession of Convertible Notes.........................50 SECTION 506. Application of Money Collected.............................................................50 SECTION 507. Limitation on Suits........................................................................50 SECTION 508. Unconditional Right of Holders to Receive Principal and Redemption Interest and to Convert.............................................................................51 SECTION 509. Restoration of Rights and Remedies.........................................................51 SECTION 510. Rights and Remedies Cumulative.............................................................52 SECTION 511. Delay or Omission Not Waiver...............................................................52
iv SECTION 512. Control by Holders.........................................................................52 SECTION 513. Waiver of Past Defaults....................................................................52 SECTION 514. Undertaking for Costs......................................................................53 SECTION 515. Waiver of Stay or Extension Laws...........................................................53 ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities........................................................53 SECTION 602. Notice of Defaults.........................................................................54 SECTION 603. Certain Rights of Trustee..................................................................55 SECTION 604. Not Responsible for Recitals or Issuance of Convertible Notes..............................56 SECTION 605. May Hold Convertible Notes.................................................................56 SECTION 606. Money Held in Trust........................................................................56 SECTION 607. Compensation and Reimbursement.............................................................57 SECTION 608. Disqualification; Conflicting Interests....................................................57 SECTION 609. Corporate Trustee Required; Eligibility....................................................58 SECTION 610. Resignation and Removal; Appointment of Successor..........................................58 SECTION 611. Acceptance of Appointment by Successor.....................................................59 SECTION 612. Merger, Conversion, Consolidation or Succession to Business................................59 SECTION 613. Preferential Collection of Claims Against Company..........................................60 SECTION 614. Appointment of Authenticating Agent........................................................60 SECTION 615. Appointment of Co-Trustee..................................................................61 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders..................................62 SECTION 702. Preservation of Information; Communications to Holders.....................................63 SECTION 703. Reports by Trustee.........................................................................63 SECTION 704. Reports by Company.........................................................................63
v ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.......................................64 SECTION 802. Successor Person Substituted...............................................................65 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders.........................................65 SECTION 902. Supplemental Indentures with Consent of Holders............................................66 SECTION 903. Execution of Supplemental Indentures.......................................................67 SECTION 904. Effect of Supplemental Indentures..........................................................67 SECTION 905. Reference in Convertible Notes to Supplemental Indentures..................................67 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal and Redemption Interest...............................................67 SECTION 1002. Maintenance of Office or Agency............................................................67 SECTION 1003. Money for Security Payments to Be Held in Trust............................................68 SECTION 1004. Statement by Officers as to Compliance.....................................................69 SECTION 1005. Existence..................................................................................69 SECTION 1006. Maintenance of Properties..................................................................69 SECTION 1007. Payment of Taxes and Other Claims..........................................................70 SECTION 1008. Restriction on Liens.......................................................................70 SECTION 1009. Payment of Additional Amounts..............................................................71 ARTICLE ELEVEN REDEMPTION OF CONVERTIBLE NOTES SECTION 1101. Right of Redemption........................................................................72 SECTION 1102. Applicability of Article...................................................................73 SECTION 1103. Election to Redeem; Notice to Trustee......................................................73 SECTION 1104. Selection by Trustee of Convertible Notes to Be Redeemed...................................74
vi SECTION 1105. Notice of Redemption.......................................................................74 SECTION 1106. Deposit of Redemption Amount...............................................................75 SECTION 1107. Convertible Notes Payable on Repayment Date................................................76 SECTION 1108. Convertible Notes Redeemed in Part.........................................................76 ARTICLE TWELVE REPAYMENT AT OPTION OF HOLDERS SECTION 1201. Repayment at Option of Holders.............................................................76 SECTION 1202. Notice of Repayment Event..................................................................76 SECTION 1203. Notice to Trustee..........................................................................77 SECTION 1204. Deposit of Repayment Price.................................................................77 SECTION 1205. Convertible Notes Payable on Repurchase Date...............................................78 SECTION 1206. Convertible Notes Repaid in Part...........................................................78 SECTION 1207. Tender Offer.............................................................................. 78 ARTICLE THIRTEEN [RESERVED] ARTICLE FOURTEEN CONVERSION OF CONVERTIBLE NOTES SECTION 1401. Conversion Right...........................................................................78 SECTION 1402. Exercise of Conversion Right...............................................................79 SECTION 1403. Fractions of Shares........................................................................81 SECTION 1404. Cash Settlement............................................................................81 SECTION 1405. Adjustment of Share Conversion Price.......................................................82 SECTION 1406. Notice of Adjustments of Share Conversion Price............................................89 SECTION 1407. Notice of Certain Corporate Action.........................................................89 SECTION 1408. Taxes and Expenses on Conversions..........................................................91 SECTION 1409. Covenants Relating to Conversion...........................................................91 SECTION 1410. Cancellation of Converted Convertible Notes................................................92
vii SECTION 1411. Trustee Adjustment Disclaimer..............................................................92 ANNEX A FORM OF REGULATION S CERTIFICATE.................................................................................95
viii INDENTURE, dated as of November 7, 2003, between ST Assembly Test Services Ltd, a corporation duly organized and existing under the laws of Singapore (herein called the "Company"), having its principal office at 5 Yishun Street 23, Singapore 768442, and The Bank of New York, a New York banking corporation duly organized and existing under the laws of the State of New York (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its Convertible Notes Due 2008 (herein called the "Convertible Notes") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Convertible Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase and acceptance of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders from time to time of the Convertible Notes, as follows: ARTICLE ONE Definitions and Other Provisions of General Application SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and 9 (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Accreted Value" means, with respect to a Convertible Note, as of any date of determination, the principal amount of such Convertible Note together with such redemption interest that would provide to the Holder of such Convertible Note an annual yield from November 7, 2003 to (but excluding) the date of determination, of 4.25% per annum, computed on a semi-annual internal rate of return bond equivalent basis, of the principal amount of such Convertible Note. "Act", when used with respect to any Holder, has the meaning specified in Section 104(a). "Additional Amounts" means any additional amounts which are required hereby, under circumstances specified in this Indenture, to be paid by the Company in respect of certain taxes imposed on Holders and which are owing to such Holders. "Adjustment Effective Date" means the date on which an adjustment to the Share Conversion Price takes effect with respect to the Convertible Notes. "ADRs" means American depositary receipts issued from time to time under the Deposit Agreement. "ADS Depositary" means Citibank, N.A., as depositary, appointed pursuant to the Deposit Agreement or such other depositary appointed by the Company with respect to the ADSs from time to time. "ADSs" or "American Depositary Shares" means American depositary shares evidenced by the ADRs. "Affiliate" has the meaning specified in Rule 12b-2 under the Exchange Act. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Convertible Notes. "Authorized Officer" means the Chairman of the Board of Directors, the Deputy Chairman of the Board of Directors, the Chief Executive Officer or the Chief Financial Officer of the Company or other officers of the Company duly authorized pursuant to a Board Resolution, a power of attorney or other available means to act on behalf of the Company. "Average Market Price" has the meaning specified in Section 1405(g)(i). "Beneficial Owner" will be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. 10 "Board Resolution" means a copy of a resolution certified by an Authorized Officer of the Company or the Company Secretary or Assistant Company Secretary to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Branch Register" has the meaning specified in Section 305. "Business Day" means, in any location, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in such location are authorized or obligated by law or executive order to close. Unless stated otherwise, Business Day shall mean a Business Day in London, New York and Singapore. "Cash Settlement Amount" means: (i) in the event that a Holder has chosen to convert Convertible Notes into Ordinary Shares, the product of (x) the number of Ordinary Shares deliverable upon exercise of the conversion right in respect of a Convertible Note but not delivered by the Company, and (y) the arithmetic average of the Volume-Weighted Average Prices (in Singapore dollars) of the Company's Ordinary Shares on the Singapore Exchange for each day during the five Trading Days immediately following the Cash Settlement Notice Date converted into US dollars at the Prevailing Exchange Rate; and (ii) in the event that a Holder has chosen to convert Convertible Notes into ADSs, the product of (x) the number of ADSs deliverable upon exercise of the conversion right in respect of a Convertible Note but not delivered by the Company, and (y) the arithmetic average of the Volume-Weighted Average Prices (in US dollars) of the Company's ADSs on the Nasdaq National Market for each day during the five Trading Days immediately following the Cash Settlement Notice Date. "Cash Settlement Notice" has the meaning specified in Section 1404. "Cash Settlement Notice Date" has the meaning specified in Section 1404. "CDP" means The Central Depository (Pte) Limited. "Change of Control" means the occurrence of any of the following events: (i) other than Singapore Technologies Pte Ltd and its Affiliates, any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the then outstanding securities entitled to vote generally in elections of directors of the Company; (ii) the Company consolidates with or merges into any other Person, or any other Person merges into the Company, and, in the case of any such transaction, the outstanding Ordinary Shares of the Company are reclassified into or exchanged for any other property or securities, unless the shareholders of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined 11 voting power of then outstanding voting securities entitled to vote generally in elections of directors of the corporation resulting from such transaction; or (iii) the Company and its Subsidiaries, taken as a whole, sell, assign, convey, transfer or lease all or substantially all assets of the Company and its Subsidiaries, taken as a whole, (other than to one or more wholly-owned Subsidiaries of the Company). "Clearstream" means Clearstream Banking, societe anonyme (or any successor securities clearing agency). "Closing Date" means November 7, 2003. "Closing Price" means for any Trading Day the last reported transaction price or, if no transaction takes place on such day, the average of the closing bid and asked prices of Ordinary Shares for such day as furnished by a leading independent securities firm licensed to trade on the Singapore Exchange selected from time to time by the Company for such purpose. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Depositary" means, with respect to the Convertible Notes, The Bank of New York Depository (Nominees) Limited, as common depositary for Clearstream and Euroclear. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board of Directors or the Chief Executive Officer of the Company or by any other Authorized Officer and delivered to the Trustee. "Conversion Agent" means any Person authorized by the Company to accept the presentation of Convertible Notes by Holders for conversion. The Company has initially appointed the Trustee as its Conversion Agent in London. "Conversion Date" has the meaning specified in Section 1402. "Conversion Notice" has the meaning specified in Section 203, a form of which is provided in Section 206. "Conversion Period" has the meaning specified in Section 1401. "Convertible Notes" has the meaning specified in the first Recital of this Indenture comprising the US$115,000,000 aggregate principal amount of the Convertible Notes 12 issued, authenticated and delivered under this Indenture as of the date hereof and for the time being outstanding or, as the context may require, a specific number or principal amount of them. "Corporate Trust Office" means the principal office of the Trustee at 101 Barclay Street, Floor 21W, New York, New York 10286, at which at any particular time its corporate trust business shall be principally administered, or such other address as the Trustee (or successor trustee) may designate from time to time by notice to the Holders and the Company. "Corporation" means a corporation, association, company, joint-stock company or business trust. "Definitive Note" has the meaning specified in Section 305(c)(ii). "Delisting" means the Ordinary Shares are not listed on the Singapore Exchange (or its successor). "Deposit Agreement" means the Deposit Agreement, dated as of February 8, 2000, by and among the Company, the ADS Depositary, and all holders and beneficial owners from time to time of the ADSs issued thereunder, as the same may be amended and/or supplemented from time to time in accordance with its terms. "Euroclear" means Euroclear Bank S.V./N.V., as operator of the Euroclear System (or any successor securities clearing agency). "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the U.S. Securities Exchange Act of 1934 and any statute successors thereto, in each case as amended from time to time. "Extraordinary Resolution" means a resolution approved by the Holders of not less than 66 2/3% in principal amount of the Outstanding Convertible Notes. "Fixed Exchange Rate" means the exchange rate of US$1.00=S$1.7403. "Global Note" has the meaning specified in Section 201, as the case may be, and "Global Securities" means all of such securities. "Holder" means a Person in whose name a Convertible Note is registered in the Security Register. "Holder's Redemption Notice" has the meaning specified in Section 1105, a form of which is provided in Section 205. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. 13 "International Investment Securities" means any bonds, notes, debentures, debenture stocks, loan stocks, certificates or other instruments evidencing indebtedness (excluding, for the avoidance of any doubt, any loans from banks or other financial institutions or lenders) with a maturity of greater than one year and which (1) are, or are intended to be, listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market) and (2) either (A) are by their terms payable, or confer a right to receive payment, in any currency other than a Local Currency or (B) are denominated in a Local Currency and more than 50% of the aggregate principal amount of the offering of such International Investment Securities is initially distributed outside the jurisdiction using such Local Currency as its form of legal tender by or with the consent of the Company. "Local Currency" means the Singapore dollar and the currency of any jurisdiction (other than the United States) in which any Material Subsidiary is organized and principally operating; provided that such Material Subsidiary was not organized in such jurisdiction in contemplation of or in connection with the issuance of any international investment securities. "Market Price" means for any Trading Day with respect to the Ordinary Shares, the closing sales price of the Ordinary Shares on the Singapore Exchange on such day or, if no reported sales take place on such day, the average of the reported closing bid and offered prices, in either case as reported by the Singapore Exchange for such day as furnished by a leading independent securities firm in Singapore selected from time to time by the Company and approved by the Trustee for this purpose. "Material Subsidiary" means any subsidiary of the Company whose consolidated net revenues or consolidated net assets, as shown on its most recent audited consolidated financial statements, represents 10% or more of the Company's consolidated net revenues or consolidated net assets, as shown on the Company's most recent audited consolidated financial statements. "Maturity", when used with respect to any Convertible Note, means the date on which the principal of such Convertible Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, repurchase or otherwise. "Nasdaq National Market" means the Nasdaq National Market System. "Officer's Certificate" means a certificate signed by the Chairman of the Board or by any other Authorized Officer of the Company, and delivered to the Trustee. The officer signing an Officer's Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Ordinary Shares" includes any stock of any class of the Company which has 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 is not subject to redemption by the Company. However, subject to the provisions of Section 801, shares issuable 14 on conversion of Convertible Notes shall include only shares of the class designated as Ordinary Shares of the Company at the date of this instrument or shares of any class or classes 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 (except for any right the record date for which precedes the Conversion Date for such Convertible Notes; with respect to preemptive rights in connection with rights issues and rights to dividends, except in the case where the record date for closure of the Company's register of shareholders for a shareholders' meeting precedes such Conversion Date; and except for any other right excluded by mandatory provisions of applicable law) and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable 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 all such reclassifications. "Outstanding", when used with respect to Convertible Notes, means, as of the date of determination, all Convertible Notes theretofore authenticated and delivered under this Indenture, except: (i) Convertible Notes cancelled by the Trustee or delivered to the Trustee for cancellation including those surrendered for payment, conversion, redemption or repayment; (ii) Convertible Notes for whose payment, redemption or repurchase money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Convertible Notes; provided that, if such Convertible Notes are to be redeemed, notice of such redemption or repurchase has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Convertible Notes in respect of which the Conversion Right has been duly exercised and discharged; and (iv) Convertible Notes which have been paid pursuant to Section 402 or in exchange for or in lieu of which other Convertible Notes have been authenticated and delivered pursuant to this Indenture, other than any such Convertible Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Convertible Notes are held by a bona fide purchaser in whose hands such Convertible Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Convertible Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Convertible Notes owned by the Company or any other obligor upon the Convertible Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, 15 notice, consent or waiver, only Convertible Notes which the Trustee knows to be so owned shall be so disregarded. Convertible Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Convertible Notes and that the pledgee is not the Company or any other obligor upon the Convertible Notes or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal or redemption interest on any Convertible Notes on behalf of the Company. The Company has initially appointed the Trustee as its Paying Agent in London. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Convertible Note" of any particular Convertible Note means every previous security evidencing all or a portion of the same debt as that evidenced by such particular Convertible Note; and, for the purposes of this definition, any Convertible Note authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Convertible Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Convertible Note. "Prevailing Exchange Rate" means, on any date of determination, the noon buying rate in New York City for cable transfers in Singapore dollars, as certified for customs purposes by the Federal Reserve Bank in New York on such date. "Principal Register" has the meaning specified in Section 305. "Proceeding" has the meaning specified in Section 111. "Purchase Agreement" means the purchase agreement, dated October 29, 2003, between the Company and the several initial purchasers thereto, in relation to the offering of the Convertible Notes. "Redemption Amount", when used with respect to any Convertible Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Redemption Date", when used with respect to any Convertible Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Registration Date" has the meaning specified in Section 203. "Regulation S" means Regulation S promulgated under the Securities Act, or any successor provision thereto. "Regulation S Certificate" has the meaning specified in Section 305(c)(i). 16 "Repayment Acceptance Notice" has the meaning specified in Section 1202, a form of which is provided in Section 207. "Repayment Date", when used with respect to any Convertible Note to be repaid at the option of the Holder, means the date fixed for such repayment pursuant to this Indenture. "Repayment Event" means the occurrence of a Change of Control or a Delisting. "Repayment Price", when used with respect to any Convertible Note to be repaid at the option of the Holder, means the price at which it is to be repaid pursuant to this Indenture. "Responsible Officer", when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee having direct responsibility for the administration of this Indenture, including without limitation any vice president, assistant vice president, assistant treasurer, corporate trust officer, assistant corporate trust officer or other employee of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject. "S$" means Singapore dollar. "Securities Act" means the U.S. Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305(a). "Share Conversion Price" is initially S$3.05 per Ordinary Share, subject to adjustments from time to time as specified in Section 1405. "Singapore" means the Republic of Singapore. "Singapore Exchange" means the Singapore Exchange Securities Trading Limited. "Stated Maturity", when used with respect to any Convertible Note, means the date specified in such Convertible Note as the fixed date on which the principal of such Convertible Note or any redemption interest on such Convertible Note is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. 17 "Trading Day" means, with respect to a stock exchange, a day when such stock exchange is open for business, provided, however, that if no transaction price or closing bid and offered prices are reported by such exchange in respect of the relevant security for one or more Trading Days, such day or days will be disregarded in any relevant calculation relating to a period of consecutive Trading Days. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Unrestricted Date" means the 41st day after the later of (i) the date that the Convertible Notes are first offered to persons other than distributors (as defined in Regulation S) and (ii) the Closing Date. "Vice President", when used with respect to the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Volume-Weighted Average Prices" mean the volume-weighted average prices of the Ordinary Shares or ADSs, as the case may be, quoted on Bloomberg under the "AQR" function. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required hereunder. Each such certificate or opinion, and any certificate evidencing a determination required to be made by the Company under this Indenture, shall be given in the form of an Officer's Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements set forth hereunder. Every certificate or opinion with respect to compliance by or on behalf of the Company with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (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; 18 (3) a statement that, in the opinion of each 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, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, election, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 104. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying 19 that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, election, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders at the close of business in Singapore on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Convertible Notes shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Convertible Note shall bind every future Holder of the same Convertible Note and the Holder of every Convertible Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Convertible Note. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, election, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Global Finance Unit, with a copy to the Trustee at its Singapore branch at One Temasek Avenue, 02-01 Millenia Tower, 039192, Singapore; Attention: Global Trust Services, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. 20 SECTION 106. Notice to Holders; Waiver. When this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if (i) in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice and (ii) published in English in London in the Financial Times and in Singapore in a leading daily newspaper (which is expected to be The Business Times), provided that for so long as any Convertible Notes are represented by the Global Note notices may be given by delivery of the relevant notice to Euroclear and Clearstream, for communication by them to their respective accountholders in substitution for publication in any such newspaper. If at any time publication in any such newspaper is not practicable, notices will be valid if published in an English language newspaper selected by the Company with general circulation in the respective market regions. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once on different dates, on the first date on which publication is made. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders of Convertible Notes by mail, then such notification to such Holders as shall be given with the approval of the Trustee shall constitute a sufficient notice to such Holders for every purpose hereunder. In case by reason of any other cause it shall be impracticable to publish any notice to Holders of Convertible Notes as provided in this Section 106, then such notification to such Holders as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. SECTION 107. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. 21 SECTION 109. Separability Clause. In case any provision in this Indenture or in the Convertible Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. Benefits of Indenture. Nothing in this Indenture or in the Convertible Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Convertible Notes, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. Governing Law and Jurisdiction. THIS INDENTURE AND THE CONVERTIBLE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. IF ANY SUIT, ACTION OR PROCEEDING SHALL BE BROUGHT IN ORDER TO ENFORCE ANY RIGHT OR REMEDY UNDER THE INDENTURE OR UNDER THE CONVERTIBLE NOTES (A "PROCEEDING"), EACH OF THE PARTIES HEREBY, WITH RESPECT TO ANY SUCH PROCEEDING, CONSENTS AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE CITY OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL CLAIMS WITH RESPECT TO SUCH PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE COMPANY IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH PROCEEDING AND ANY OBJECTION TO SUCH PROCEEDING WHETHER ON THE GROUNDS OF VENUE, RESIDENCE OR DOMICILE. The Company irrevocably appoints CT Corporation System at its office at 111 8th Avenue, New York, U.S.A., as its authorized agent for service of process to serve in such capacity so long as any of the Convertible Notes are outstanding. If for any reason such person shall cease to be such agent for service of process, the Company shall forthwith appoint a new agent for service of process in the State of New York and deliver to the Trustee a copy of the new agent's acceptance of that appointment within 30 days of such appointment. The Company agrees that service of process upon such agent and written notice of such service mailed or delivered to the Company shall to the extent permitted by law be deemed in every respect effective service of process upon the Company in any Proceeding. Nothing herein shall affect the right to serve process in any other manner permitted by law. SECTION 112. Legal Holidays. In any case where any Redemption Date, Repayment Date or Stated Maturity of any Convertible Note or the last day of the Conversion Period shall not be a Business Day, then 22 (notwithstanding any other provision of this Indenture or of the Convertible Notes) payment of principal or redemption interest or conversion of the Convertible Notes need not be made on such date, but may be made on the next succeeding Business Day (and, in the case of the last day of the Conversion Period, the next succeeding Business Day) with the same force and effect as if made on the Redemption Date or Repayment Date, at the Stated Maturity or on such last day of the Conversion Period. SECTION 113. Waiver of Jury Trial EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE CONVERTIBLE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY. ARTICLE TWO Security Forms SECTION 201. Forms Generally. The Convertible Notes, the Conversion Notice, the Holder's Redemption Notice, the Holder's Repayment Acceptance Notice, the Cash Settlement Notice and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article Two, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Convertible Notes, as evidenced by their execution of the Convertible Notes. The Convertible Notes shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Convertible Notes may be listed, all as determined by the officers executing such Convertible Notes, as evidenced by their execution of such Convertible Notes. The Trustee's certificate of authentication shall be in substantially the form set forth in Section 204. Convertible Notes will be offered and sold as part of their initial distribution in reliance on Regulation S under the Securities Act and shall be represented by beneficial interests in a global certificate in definitive, fully registered form, substantially in the form set forth herein, with such applicable legends as are provided for in Section 202. Such global certificate, duly executed and authenticated by the Trustee as herein provided, shall be deposited with the Common Depositary for Euroclear and Clearstream and registered in the name of The Bank of New York Depository (Nominees) Limited as nominee for the Common Depositary. Such global certificate shall be referred to herein as the "Global Note". The aggregate principal amount of the Global Note may from time to time be increased or decreased by adjustments 23 made on the records of the Trustee, at its Corporate Trust Office for Clearstream and Euroclear for such Global Note. SECTION 202. Form of Face of Security. 24 The following is the form of the face of the Global Note: THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE BANK OF NEW YORK DEPOSITARY (NOMINEES) LIMITED AS NOMINEE FOR THE COMMON DEPOSITARY (THE "COMMON DEPOSITARY") FOR EUROCLEAR BANK S.A./N.V. ("EUROCLEAR") AND CLEARSTREAM BANKING, SOCIETE ANONYME ("CLEARSTREAM") OR A NOMINEE THEREOF, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE OR ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS GLOBAL NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN THE BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN THE COMMON DEPOSITARY OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN INTEREST HEREIN. NONE OF THE CONVERTIBLE NOTES IN RESPECT OF WHICH THIS CERTIFICATE IS ISSUED NOR THE ORDINARY SHARES OF THE COMPANY ISSUABLE UPON CONVERSION THEREOF HAVE BEEN OR WILL BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR WITH ANY REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD OR PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE LAWS. Prior to the 41st day after the later of (1) the date that the convertible notes are first offered to investors and (2) the closing date, no beneficial interest in the Global Note may be transferred to, OR FOR, THE ACCOUNT OR BENEFIT OF, any U.S. person. TERMS USED ABOVE HAVE THE MEANING GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT. 25 GLOBAL NOTE ST ASSEMBLY TEST SERVICES LTD CONVERTIBLE NOTE DUE 2008 No. S- US$ ISIN No. XS0179763973 Common Code 017976397 ST Assembly Test Services Ltd, a corporation duly organized and existing under the laws of the Republic of Singapore (herein called the "Company", which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to THE BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED, or registered assigns, 123.40% of the principal sum of U.S. DOLLARS (US$ ) on November 7, 2008. Payment of the principal of and redemption interest on this Convertible Note will be made at the office or agency of the Company maintained for that purpose in London or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The statements set forth in the legends set forth above are an integral part of the terms of this Global Note and by acceptance hereof each holder of this Global Note agrees to be subject to and bound by the terms and provisions set forth in such legends. Reference is hereby made to the further provisions of this Convertible Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Convertible Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: November 7, 2003 ST ASSEMBLY TEST SERVICES LTD By: -------------------------------- Name: Title: Certificate of Authentication 26 This is one of the Convertible Notes Due 2008 of ST ASSEMBLY TEST SERVICES LTD referred to in the within-mentioned Indenture. Dated: November 7, 2003 The Bank of New York as Trustee By: -------------------------------- Authorized Signatory 27 SECTION 203. Form of Reverse of Security. This Convertible Note is one of a duly authorized issue of Convertible Notes of the Company designated as its Convertible Note Due 2008 (herein called the "Convertible Notes"), unlimited in principal amount, to be issued under an Indenture, dated as of November 7, 2003 (herein called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee"), which term includes any successor trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Convertible Notes and of the terms upon which the Convertible Notes are, and are to be, authenticated and delivered. This Convertible Note is redeemable at the option of the Company upon prior notice to the Holder hereof mailed and published not less than 30 nor more than 60 days prior to the Redemption Date, as a whole but not in part, on any date at a Redemption Amount equal to the Accreted Value if the Company determines that, as a result of any change in or amendment to the laws or any regulations or rulings promulgated thereunder of Singapore or any official or judicial authority thereof or therein having power to tax, or any change in the general application or official or judicial interpretation of such laws, regulations or rulings, or any change in the general application or official or judicial interpretation of, or any execution or amendment to, any treaty or treaties affecting taxation to which Singapore is a party, which change, execution or amendment becomes effective on or after the original issue date of the Convertible Notes, the Company has been or shall be required to pay Additional Amounts with respect to the Convertible Notes. This Convertible Note is redeemable at the option of the Company, in whole or in part, at any time on or after November 7, 2006, at a Redemption Amount equal to the Accreted Value upon prior notice to the Holder hereof mailed and published not less than 30 nor more than 60 days prior to the Redemption Date; provided, however, that no such redemption may be made unless the Closing Price of each Ordinary Share on the Singapore Exchange (translated into U.S. dollars at the Prevailing Exchange Rate on such Trading Day) or of each ADS on the Nasdaq National Market for any 20 Trading Days in a 30 consecutive Trading Day period ending not more than five days prior to the date on which notice of such redemption is given, is at least 130% of the Share Conversion Price (translated into U.S. dollars at the Fixed Exchange Rate) or of the Share Conversion Price per ADS (translated into U.S. dollars at the Fixed Exchange Rate and taking into account the prevailing Ordinary Share-to-ADS ratio), in each case as adjusted through, and effective on, such notice date. Notwithstanding the foregoing, the Company may redeem all of the Outstanding Convertible Notes, including this Convertible Note, at a Redemption Amount equal to the Accreted Value, if at any time the aggregate principal amount of the Convertible Notes Outstanding is less than 10% of the aggregate principal amount of the Convertible Notes issued pursuant to the Indenture. This Convertible Note, or a portion thereof equal to US$1,000 or any integral multiple thereof, may be redeemed at the option of the Holder hereof, unless notice of redemption of all or any portion this Convertible Note shall have been given by the Company on 28 or prior to the date of deposit of a demand of redemption by the Holder hereof under this paragraph, on November 7, 2007 at a Redemption Amount equal to 118.32% of the principal amount being redeemed, by completing, signing and depositing at the specified office of the Paying Agent during normal business hours a demand of redemption in the form obtainable from the Paying Agent not less than 60 or more than 75 days prior to November 7, 2007. This Convertible Note, or a portion thereof equal to US$1,000 or any integral multiple thereof, is subject to repayment by the Company at the option of the Holder hereof upon the occurrence of certain Repayment Events described in the Indenture (including events relating to a Change of Control of the Company or a Delisting of the Ordinary Shares), at a Repayment Price equal to the Accreted Value. In order to be repaid at the option of the Holder, this Convertible Note, with the "Repayment Acceptance Notice" form duly completed by the Holder hereof (or the Holder's attorney duly authorized in writing), must be received by the Company during normal business hours at its office or agency maintained for that purpose in London or Singapore, not later than the date specified by the Company in its notice of the Repayment Event in accordance with Section 1202 of the Indenture. Exercise of such option by the Holder of this Convertible Note shall be irrevocable unless waived by the Company. This Convertible Note is convertible into Ordinary Shares or, subject to the limitations set forth below, ADSs at any time after 40 days from the original issuance of the Convertible Notes and before the close of business on the seventh day preceding the earlier of November 7, 2008 and the Redemption Date fixed for any early redemption, at the Share Conversion Price then in effect; provided, however, that, if this Convertible Note is called for redemption pursuant to Section 1101 of the Indenture, such conversion right shall terminate at the close of business on the seventh day preceding the Redemption Date for this Convertible Note (unless the Company shall default in making the redemption 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 Convertible Note is redeemed). A Holder may convert a portion of this Convertible Note equal to US$1,000 or any integral multiple thereof. The number of Ordinary Shares issuable upon conversion of this Convertible Note (or a portion hereof equal to US$1,000 or any integral multiple thereof) shall be determined by dividing the aggregate principal amount (translated into Singapore dollars at the Fixed Exchange Rate specified in the Indenture) of this Convertible Note or portion hereof to be converted by a Holder by the Share Conversion Price per Ordinary Share in effect on the Conversion Date. The initial Share Conversion Price is S$3.05 per Ordinary Share (equivalent to an initial number of 570.5902 Ordinary Shares per US$1,000 principal amount of Convertible Notes, based on the Fixed Exchange Rate), subject to adjustment for certain anti-dilution events as provided in Section 1405 of the Indenture. The Ordinary Shares issuable upon conversion will be duly authorized, validly issued, fully paid, non-assessable and will rank equally with all other Ordinary Shares. No Holder will be entitled to receive physical share certificates in respect of the Ordinary Shares arising from the conversion of the Convertible Notes. Delivery of the Ordinary Shares shall be made by crediting such Ordinary Shares to a Holder's securities account or the securities account of a Holder's depository agent with The Central Depository (Pte) Limited ("CDP"). The Company shall allot and issue the Ordinary Shares arising from the conversion of 29 the Convertible Notes in accordance with instructions as set out in the Conversion Notice and shall deliver to CDP the share certificate(s) relating to such Ordinary Shares in the name of CDP for the credit of the Holder's securities account or the securities account of Holder's depository agent as specified in the Conversion Notice as soon as practicable, and in any event not later than 14 days, after the Conversion Date, subject to all applicable laws and in accordance with the Indenture. The Company will register the Person or Persons designated for the purpose in the Conversion Notice as Holder(s) of the relevant number of Ordinary Shares in its share register. The Person or Persons specified for that purpose will become the Holder of record of the number of Ordinary Shares issuable upon conversion with effect from the date he is or they are registered as such in the Company's share register (the "Registration Date"). Subject to the limitations set out in the Indenture and the ability to provide the representations and agreements set out in the Conversion Notice, the form of which set forth in Section 206 of the Indenture, a Holder may elect to receive Ordinary Shares upon conversion in the form of ADSs. In such event, the Company agrees to, on behalf of such Holder, as soon as practicable, deliver to and deposit with the ADS Depositary or its custodian, in accordance with the terms of the ADS Deposit Agreement, such number of Ordinary Shares as the Holder would have received upon conversion had he not elected to receive such Ordinary Shares in the form of ADSs that is the maximum number of such Ordinary Shares that is divisible by the then current ratio of Ordinary Shares to ADSs and shall issue any Ordinary Shares that if deposited with the ADS Depositary or its custodian would result in the issuance of fractional ADSs to the converting holder. Such Ordinary Shares will be registered in the name of the ADS Depositary or its nominee. Subject to compliance with the terms of the ADS Deposit Agreement, including payment of the fees and expenses of the ADS Depositary by such Holder and completion of any additional documentation that may be required by the ADS Depositary pursuant to the Deposit Agreement, the ADS Depositary will issue such number of ADSs representing the deposited Ordinary Shares to such Holder based on the applicable Ordinary Share-to-ADS ratio then in effect. All calculations relating to redemption and conversion, including adjustment of the Share Conversion Price, will be made to the nearest 0.01 of an Ordinary Share or other property or the nearest cent. However, fractions of Ordinary Shares will not be issued on conversion or deposited with the ADS Depositary, and no cash adjustments will be made in respect of any such fraction. Under the ADS Deposit Agreement, the ADS Depositary will not issue fractions of ADSs. To convert this Convertible Note, a Holder must, during the normal business hours at the office of the Conversion Agent, in London, (a) complete and manually sign a "Conversion Notice" substantially in the form included herein, including an election on whether to receive Ordinary Shares or ADSs upon conversion, and deliver such notice to the Conversion Agent, and (b) surrender this Convertible Note to the Conversion Agent duly endorsed or assigned to the Company or in blank (such date of receipt by the Conversion Agent, the "Conversion Notice Date"); provided, that appropriate endorsements and transfer documents, if any, required by the Registrar or the Conversion Agent must be furnished and any required transfer or similar tax and other required payments must be paid. 30 The Indenture contains various provisions concerning circumstances where the record date set for a dividend on the Ordinary Shares or an Adjustment Effective Date for the adjustment of the Share Conversion Price falls between the Conversion Date and the Registration Date. Notwithstanding the conversion rights referred to above, at any time when a Conversion Notice has been properly deposited with the Conversion Agent, the Company shall have the option to pay to the relevant Holder an amount of cash in U.S. dollars equal to the Cash Settlement Amount in order to satisfy such conversion right in full. The Company is required to provide notice of its exercise of the cash settlement option in the form provided in the Indenture (the "Cash Settlement Notice") to the relevant Holder as soon as practicable but no later than the fifth Business Day following the Conversion Notice Date (the actual date of such notice being the "Cash Settlement Notice Date"). The Cash Settlement Notice must specify the number of Ordinary Shares or ADSs in respect of which the Company will make such a cash payment. The Company will pay the Cash Settlement Amount not less than five Trading Days but no later than the tenth Trading Day following the Cash Settlement Notice Date. A Conversion Notice once given will be irrevocable and may not be withdrawn without the prior written consent of the Company. The Company or the Conversion Agent on its behalf may reject any incomplete or incorrect Conversion Notice. All costs and expenses incurred by an incomplete or incorrect Conversion Notice will be for the account of the relevant Holder. As conditions precedent to conversion, the Holder must pay to the Conversion Agent any taxes and capital, stamp, issue and registration duties (if any) arising on conversion, other than any taxes or capital or stamp duties payable in Singapore in respect of the allotment and issuance of the Ordinary Shares and listing of the Ordinary Shares upon conversion. In addition, the Holder will be required to pay any tax or duty relating to the conversion and transfer involved in the delivery of the Ordinary Shares upon conversion. The Company will pay all other expenses arising on the allotment and delivery of the Ordinary Shares issuable upon conversion. The Holder will be required to pay applicable fees and expenses of the Depositary upon conversion to ADSs. In the event of conversion or repayment of this Convertible Note in part only, a new Convertible Note or Convertible Notes for the unpaid portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Convertible Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Convertible Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Convertible Notes at the time Outstanding, on 31 behalf of the Holders of all the Convertible Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Convertible Note shall be conclusive and binding upon such Holder and upon all future Holders of this Convertible Note and of any Convertible Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Convertible Note. As provided in and subject to the provisions of the Indenture, the Holder of this Convertible Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Convertible Notes, the Holders of not less than 25% in principal amount of the Convertible Notes at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Convertible Notes at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Convertible Note for the enforcement of any payment of principal hereof after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Convertible Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and redemption interest of this Convertible Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Convertible Note is registrable in the Security Register, upon surrender of this Convertible Note for registration of transfer at the office or agency of the Company in London and Singapore, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Convertible Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Convertible Notes are issuable only in registered form in denominations of US$1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Convertible Notes are exchangeable for a like aggregate principal amount of Convertible Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 32 Prior to due presentment of this Convertible Note for registration of transfer the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Convertible Note is registered as the owner hereof for all purposes, whether or not this Convertible Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All capitalized terms used but not defined in this Convertible Note shall have the meanings assigned to them in the Indenture. SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES The following exchanges of a part of this Global Note for Definitive Notes have been made:
Amount of Amount of Principal Amount decrease in increase in of this Global Note Signature Principal Principal following such authorized Date of Amount of this Amount of this decrease (or officer Exchange Global Note Global Note increase) of Trustee - -------- -------------- -------------- ------------------- ----------
SECTION 204. Form of Trustee's Certificate of Authentication. This is one of the Convertible Notes Due 2008 of ST Assembly Test Services Ltd referred to in the within-mentioned Indenture. Dated: ______________ The Bank of New York, as Trustee By _________________________________ Authorized Signatory SECTION 205. Form of Holder's Redemption Notice. HOLDER'S REDEMPTION NOTICE 1. Pursuant to Section 1101(c) of the Indenture, the undersigned hereby elects to have this Convertible Note, or any portion of the principal amount hereof (which is US$1,000 or any integral multiple thereof, provided that the unredeemed portion of such principal amount is US$1,000 or any integral multiple thereof) redeemed by the Company. 2. The undersigned hereby directs the Paying Agent or the Company to pay it or ____________ an amount in cash equal to the Redemption Amount as provided in the Indenture. 33 [set forth payment instructions] Dated: ----------------------------- ----------------------------- Signature Principal amount to be redeemed (US$1,000 or any integral multiple thereof): ----------------------------- Remaining principal amount following such redemption (US$1,000 or any integral multiple thereof): ----------------------------- NOTICE: The signature to the foregoing Holder's Redemption Notice must correspond to the Name as written upon the face of this Convertible Note in every particular, without alteration or any change whatsoever. SECTION 206. Form of Conversion Notice. CONVERSION NOTICE To: The Bank of New York, as Conversion Agent One Canada Square 48th Floor London E14 5AL United Kingdom Fax: +44 20 7964 7294 or +44 20 7964 6369 The undersigned registered Holder of the within Convertible Note hereby irrevocably exercises the option to convert this Convertible Note (or the portion thereof specified below) into Ordinary Shares of the Company and elects to receive such Ordinary Shares in the form of: [ ] Ordinary Shares, for the principal amount of the Convertible Note of US$__________, or [ ] ADSs, for the principal amount of the Convertible Note of US$__________, pursuant to the terms of the Indenture referred to in this Convertible Note, and directs that Ordinary Shares or ADSs, as the case may be, issuable upon conversion and any Convertible 34 Note representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been provided below: ----------------------------------------------------- (Name, Address and Taxpayer Identification Number.) If Ordinary Shares are to be issued upon conversion of this Convertible Note, the details of the Holder's securities account, or the securities account of the Holder's depository agent, with The Central Depository (Pte) Limited is as follows: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- If ADSs are to be issued upon conversion of this Convertible Note, the details of the Holder's participant account, or the participant account of the Holder's agent, with The Depository Trust Company is as follows: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- If ADSs are to be issued upon conversion of this Convertible Note, (i) the undersigned will pay all fees and expenses payable to the ADS Depositary upon issuance of the ADSs; (ii) the ADS Depositary will issue a number of ADSs representing the deposited Ordinary Shares to the registered Holder based on the applicable Ordinary Share-to-ADS ratio then in effect under the ADS Deposit Agreement; and (iii) any Ordinary Shares issuable upon conversion which are not divisible by such ratio shall be delivered directly to the registered Holder by the Company. If less than the entire principal amount of this Convertible Note is to be converted, specify the denomination(s) of the Convertible Note(s) to be issued for the unconverted amount (US$1,000 or any integral multiple of US$1,000): US$__________. If Ordinary Shares or any portion of this Convertible Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith a certificate in proper form certifying that the applicable restrictions on transfer have been complied with. 35 The undersigned hereby acknowledges that fractions of Ordinary Shares will not be issued on conversion and no cash adjustments will be made in respect of any such fraction. The undersigned hereby agrees that, promptly after request of the Company or the Conversion Agent, it will furnish such proof in support of this certificate as the Company or the Conversion Agent may request. Terms used and not defined in this Conversion Notice are used with the same meanings ascribed thereto in the Indenture pursuant to which the attached Convertible Note is issued. Dated: By: -------------------------------- Signature of Registered Holder For Conversion Agent's Use only: (A) Conversion Date: _______________ (B) Conversion Price on Conversion Date: ________________ (C) Number of Ordinary Shares or ADSs (as applicable) issuable:___________ SECTION 207. Form of Holder's Repayment Acceptance Notice. HOLDER'S REPAYMENT ACCEPTANCE NOTICE 1. Pursuant to Section 1201 of the Indenture, the undersigned hereby elects to have this Convertible Note, or any portion of the principal amount hereof (which is US$1,000 or any integral multiple thereof, provided that the portion not so repurchased of such principal amount is US$1,000 or any integral multiple thereof) repurchased by the Company. 2. The undersigned hereby directs the Trustee or the Company to pay it or ____________ an amount in cash equal to the Redemption Amount as provided in the Indenture. [set forth payment instructions] Dated; -------------------------------- -------------------------------- Signature Principal amount to be repurchased (US$1,000 or any integral multiple thereof): -------------------------------- 36 Remaining principal amount following such repayment (US$1,000 or any integral multiple thereof): -------------------------------- SECTION 208. Form of Cash Settlement Notice. CASH SETTLEMENT NOTICE Pursuant to Section 1404 of the Indenture, we hereby acknowledge receipt of your Conversion Notice and notify you of our exercise of our cash settlement option with respect to your conversion. The number of Ordinary Shares or ADSs which you are entitled to receive and in respect of which we shall provide you with the Cash Settlement Amount in order to satisfy such conversion right is set forth below. Please use the form below to provide us with your payment instructions if you have not done so already. Dated: -------------------------------- -------------------------------- Signature Number of Ordinary Shares: -------------------------- Number of ADSs: -------------------------- Holder Name: -------------------------- The undersigned hereby directs the Trustee or the Company to pay it or ____________ the Cash Settlement Amount as provided in the Indenture. [set forth payment instructions] Dated: -------------------------------- -------------------------------- Signature 37 ARTICLE THREE The Convertible Notes SECTION 301. Title and Terms. US$115,000,000 aggregate principal amount of Convertible Notes was issued, authenticated and delivered under this Indenture as of the date hereof. In addition, the Company shall be permitted to issue additional notes that are fully fungible with the Convertible Notes including in respect of their principal amount, interest rate, redemption dates and terms and conditions of redemption and conversion without the consent of the Holders. In the event that the Company does so issue such additional notes, provided that the terms and conditions of such additional notes so allow, the Company may consolidate all such additional notes with the Convertible Notes, for purposes of redemptions and conversions, so that redemptions and conversions would be made without any distinction in respect of the Convertible Notes and all such additional Convertible Notes subsequently issued. In the event of such consolidation, the Holders and the holders of such additional notes would be deemed to be, and treated as though they were, members of a single class. The Convertible Notes shall be known and designated as the "Convertible Notes Due 2008" of the Company. Their Stated Maturity shall be November 7, 2008. The principal of and redemption interest on the Convertible Notes shall be payable at the office or agency of the Company in London, maintained for such purpose or at any such other office or agency maintained by the Company for such purpose. The Convertible Notes shall be redeemable or may be repurchased as provided in Article Eleven and Article Twelve, respectively. The Convertible Notes shall be convertible as provided in Article Fourteen. SECTION 302. Denominations. The Convertible Notes shall be issuable only in registered form and only in denominations of US$1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Convertible Notes shall be executed on behalf of the Company by its Chairman of the Board, its Deputy Chairman of the Board, its Chief Executive Officer or its Chief Financial Officer. The signature of any of these officers on the Convertible Notes may be manual or facsimile. Convertible Notes bearing the manual or facsimile signatures of individuals who were at the time of execution proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Convertible Notes or did not hold such offices at the date of such Convertible Notes. 38 At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Convertible Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Convertible Note shall be dated the date of its authentication. No Convertible Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Convertible Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Convertible Note shall be conclusive evidence, and the only evidence, that such Convertible Note has been duly authenticated and delivered thereunder. SECTION 304. Temporary Convertible Notes. Pending the preparation of definitive Convertible Notes, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Convertible Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Convertible Notes in lieu of which they are issued and with such appropriate insertion, omissions, substitutions and other variations as the officers executing such Convertible Notes may determine, as evidenced by their execution of such Convertible Notes. If temporary Convertible Notes are issued, the Company will cause definitive Convertible Notes to be prepared without unreasonable delay. After the preparation of definitive Convertible Notes, the temporary Convertible Notes shall be exchangeable for definitive Convertible Notes upon surrender of the temporary Convertible Notes at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Convertible Notes the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Convertible Notes of authorized denominations. Until so exchanged the temporary Convertible Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Convertible Notes. SECTION 305. Registration, Registration of Transfer and Exchange. (a) General The Company shall cause to be kept at an office of the Trustee in Singapore a principal register (the "Principal Register") and may also keep a branch register (the "Branch Register") in any other office or agency designated pursuant to Section 1002, such Principal Register and Branch Register being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Convertible Notes and of transfers of Convertible Notes. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Convertible Notes and transfers of Convertible Notes as herein provided. 39 The Security Register shall contain the names and addresses of Holders of Convertible Notes and the principal amounts of each such Convertible Note. The Security Register shall be open to inspection by Holders and any holders of Ordinary Shares. Within 7 days after the Principal Register in Singapore is kept at a place other than the registered office of the Company, the Company shall lodge with the Registrar of Companies and Businesses in Singapore notice of the place where the Principal Register is kept. The Company shall also within 7 days lodge with the Registrar of Companies and Businesses in Singapore notice of any change in the place in Singapore at which the Principal Register is kept. The Company shall lodge with the Registrar of Companies and Businesses in Singapore notice of the opening of any Branch Register, any change in its situation, and of any discontinuance, within one month of the opening of the Branch Register or of the change or discontinuance, as the case may be. Upon surrender for registration of transfer of any Convertible Note at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Convertible Notes of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Convertible Notes may be exchanged for other Convertible Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Convertible Notes to be exchanged at such office or agency. Whenever any Convertible Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Convertible Notes which the Holder making the exchange is entitled to receive. Upon the exchange of a Global Note for fully registered Convertible Notes in definitive form, such Global Note shall be cancelled by the Trustee. Convertible Notes issued in exchange for a Global Note pursuant to this Indenture shall be registered in such names and in such authorized denominations as Euroclear or Clearstream, pursuant to instructions from their respective accountholders, shall instruct the Trustee. The Trustee shall deliver such Convertible Notes to the Persons in whose names such Convertible Notes are so registered. All Convertible Notes issued upon any registration of transfer or exchange of Convertible Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Convertible Notes surrendered upon such registration of transfer or exchange. Every Convertible Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Convertible Notes, but the Company may require payment by the Holder of a sum sufficient to 40 cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Convertible Notes, other than exchanges pursuant to Section 304, 1108 or 1402 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Convertible Note during a period beginning at the opening of business 15 days before the day of the mailing of a Holder's Redemption Notice of Convertible Notes selected for redemption under Section 1105 or a Repayment Acceptance Notice of Convertible Notes under Section 1202 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Convertible Note so selected for redemption in whole or in part, except the unredeemed portion of any Convertible Note being redeemed in part. Notwithstanding the foregoing, any Global Note shall be exchangeable pursuant to this Section 305 for Convertible Notes registered in the names of Persons other than the Common Depositary or its nominee only if (i) such Common Depositary notified the Company that it is unwilling or unable to continue as Common Depositary or if at any time it is no longer eligible to act as such, and the Company is unable to locate a qualified successor within 90 days of receiving notice or becoming aware of such ineligibility on the part of the Common Depositary, (ii) there shall have occurred and be continuing an Event of Default with respect to the Convertible Notes or (iii) either Euroclear or Clearstream (or any other clearing system as shall have been designated by the Company and approved by the Trustee on behalf of which the Convertible Notes evidenced by the Global Note may be held) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. The Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable for Convertible Notes registered in such names as Euroclear or Clearstream or any successor clearing system, pursuant to instructions from its accountholders, shall direct. Notwithstanding any other provision in this Indenture, a Global Note may not be transferred except as a whole by the Common Depositary to a nominee of such Common Depositary or by a nominee of such Common Depositary to such Common Depositary or another nominee of such Common Depositary or by the Common Depositary or any such nominee to a successor Common Depositary or a nominee of such successor Common Depositary. 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 Convertible Note 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. (b) Global Note Any Global Note authenticated under this Indenture shall be registered in the nominee name of the Common Depositary and delivered to such nominee name of the Common Depositary, and each such Global Note shall constitute a single Convertible Note for all purposes of this Indenture. 41 Ownership of beneficial interests in the Convertible Notes will be limited to the accountholders, or persons who hold interests through accountholders, of Euroclear or Clearstream or any successor clearing system. Upon the issuance of the Global Note, Euroclear and Clearstream shall credit, on its respective internal system, the respective principal amount of the individual beneficial interests represented by such Global Note to the accounts of its accountholders. The accounts to be credited will be designated by the underwriter or any dealers or agents participating in the distribution of the Convertible Notes. Ownership of beneficial interests in the Global Note shall be shown only on, and the transfer of such ownership interest shall be effected only though, records maintained by Euroclear or Clearstream or its respective nominee (with respect to interests of accountholders) or by any such accountholders (with respect to interests of persons held by such accountholders on their behalf). Payments, transfers, exchanges and other matters relating to beneficial interests in the Global Note may be subject to various policies and procedures adopted by Euroclear and Clearstream from time to time. None of the Company, the Trustee or any of their agents shall have any responsibility or liability for any aspect of Euroclear's or Clearstream's or any accountholder's records, policies or procedures relating to, or for payments made on account of, beneficial interests in the Global Note or for any other aspect of the relationship between Euroclear or Clearstream and its accountholders, or for maintaining, supervising or reviewing any records relating to such beneficial interests. As long as the Common Depositary, or its nominee, is the registered Holder of the Global Note, the Common Depositary or such nominee, as the case may be, shall be considered the sole owner and Holder of such Global Note (and of the Convertible Notes represented thereby) for all purposes under the Indenture and the Convertible Notes. Except in the circumstances described in this Indenture, owners of beneficial interests in the Global Note shall not be entitled to have such Global Note or any Convertible Notes represented thereby registered in their names, shall not receive or be entitled to receive physical delivery of certificated Convertible Notes in exchange therefor and shall not be considered the owners or Holders of such Global Note (or any Convertible Notes represented thereby) for any purpose under the Indenture or the Convertible Notes. In addition, no Beneficial Owner of an interest in the Global Note shall be able to transfer the interest except in accordance with Euroclear's or Clearstream's applicable procedures (in addition to those under the Indenture referred to herein). All payments principal or redemption interest of, or Additional Amounts on, the Global Note shall be made to the Common Depositary or its nominee, as the case may be, as the Holder thereof. Every Convertible Note authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, the Global Note or any portion thereof, whether pursuant to this Section, Section 304, 306, 1108, 1206 or 1402 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note, unless such Convertible Note is registered in the name of a Person other than the Common Depositary or a nominee thereof. (c) Transfers or Exchanges (i) Transfers or Exchange of Interests in the Global Note for or in the form of Interests in the same Global Note. Prior to the Unrestricted Date, no beneficial interest in the Global Note may be transferred to, or for, the account or benefit of, any U.S. person (as defined in Regulation S) and such transfer is accompanied by a duly completed certificate substantially in the form of Annex A hereto (the "Regulation S Certificate") 42 and received by the Security Registrar as custodian (or Euroclear or Clearstream or any of its respective accountholders which shall forward such instructions, orders or certificate to the Security Registrar). After such period, no such certification will be required with respect to such transfers. Such transfer or exchange shall be effected in accordance with the rules of Euroclear or Clearstream, as applicable. (ii) Exchange of Interests in the Global Note for Definitive Certificates. (1) if (1) the Common Depositary notifies the Company that it is no longer willing or able to discharge properly its responsibilities as Common Depositary with respect to the Global Note, or if at any time it is no longer eligible to act as such, and the Company is unable to locate a qualified successor within 90 days of receiving notice or becoming aware of such ineligibility on the part of the Common Depositary, or (2) there shall have occurred and be continuing an Event of Default or (3) either Euroclear or Clearstream (or any other clearing system as shall have been designated by the Company and approved by the Trustee on behalf of which the Convertible Notes evidenced by the Global Note may be held) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so, the Company will cause Definitive Notes in definitive registered form (each a "Definitive Note") to be executed and delivered to the Security Registrar in sufficient quantities and authenticated by the Security Registrar to deliver to individual Holders (in an amount equal to the principal amount of Convertible Note held by the respective Holder) in accordance with Section 201. The Company may, at any time and in its sole discretion, determine not to have any of the Convertible Notes represented by the Global Note and, in such event, the Company will issue Definitive Notes in exchange for the Global Note. The Definitive Notes issued by the Company will be registered in such name or names as Euroclear or Clearstream or any successor clearing system shall instruct the Trustee, which instructions are expected to be based on directions received by Euroclear or Clearstream from their respective accountholders with respect to the Convertible Notes and will not be issued in bearer form. (2) A person having an interest in the Global Note will provide the Security Registrar with a written order containing instructions and such other information as the Company and the Security Registrar may require to complete, execute and deliver such Definitive Note with respect thereto. (3) On the receipt of the documents referred to in Section 305(c)(i) above and, if required, Section 305(c)(ii) above, the Security Registrar shall arrange for the execution and delivery to a person having an interest in the Global Note, or on the order of such person, the person or persons named in such order, of an Definitive Note with respect to such Convertible Note in an authorized denomination and duly executed and authenticated and registered in the name or names requested by such person or persons and shall alter the entries in the Security Register in respect of the Global Note accordingly. 43 SECTION 306. Mutilated, Destroyed, Lost and Stolen Convertible Notes. If any mutilated Convertible Note is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Convertible Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Convertible Note and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Convertible Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Convertible Note, a new Convertible Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Convertible Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Convertible Note, pay such Convertible Note. Upon the issuance of any new Convertible Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Convertible Note issued pursuant to this Section 306 in lieu of any destroyed, lost or stolen Convertible Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Convertible Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Convertible Notes duly issued hereunder. The provisions of this Section 306 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Convertible Notes. SECTION 307. [Reserved] SECTION 308. Persons Deemed Owners. Prior to due presentment of a Convertible Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Convertible Note is registered as the owner of such Convertible Note for the purpose of receiving payment of principal and redemption interest on such Convertible Note and for all other purposes whatsoever, whether or not such Convertible Note be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. 44 SECTION 309. Cancellation. All Convertible Notes surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Convertible Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Convertible Notes so delivered shall be promptly cancelled by the Trustee. No Convertible Notes shall be authenticated in lieu of or in exchange for any Convertible Notes cancelled as provided in this Section 309, except as expressly permitted by this Indenture. All cancelled Convertible Notes held by the Trustee shall be disposed of as directed by a Company Order; provided, however, that the Trustee shall not be required to destroy cancelled Convertible Notes. SECTION 310. [Reserved] SECTION 311. Common Code or ISIN Numbers. The Company in issuing the Convertible Notes may use common code or "ISIN" numbers (if then generally in use), and, if so, the Trustee shall use common code or "ISIN" numbers in notices of redemption as a convenience to Holders; provided that the Trustee shall assume no responsibility for the accuracy of such numbers and any such redemption 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 common code or "ISIN" numbers. SECTION 312. Certification Form. Whenever any certification is required to be given pursuant to Section 305(c)(i) of this Indenture in connection with the transfer prior to the Unrestricted Date of a beneficial interest in the Global Note to a person who wishes to take delivery thereof in the from of a beneficial interest in the same Global Note, such certification shall be provided substantially in the form of Annex A to this Indenture, with only such changes as shall be approved in writing by the Company. ARTICLE FOUR Satisfaction and Discharge SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Convertible Notes herein expressly provided for), 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 (1) either: (A) all Convertible Notes theretofore authenticated and delivered (other than (i) Convertible Notes which have been destroyed, lost or stolen and which 45 have been replaced or paid as provided in Section 306 and (ii) Convertible Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Convertible Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of a (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Convertible Notes not theretofore delivered to the Trustee for cancellation, for principal and redemption interest to the date of such deposit (in the case of Convertible Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officer's 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 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to Section 401(1)(B) above, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Convertible Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and 46 redemption interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the payment of Convertible Notes subsequently converted shall be returned to the Company upon Company Request. ARTICLE FIVE Remedies SECTION 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default, whether it shall be voluntary or involuntary or be 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, and whether or not a notice of redemption shall have been given with respect to all or any portion of the Convertible Notes or all or any portion of the Convertible Notes shall have been redeemed): (1) a default in the payment of the principal on any Convertible Notes after the date the same is due and payable; (2) a default for more than 30 days in the payment of the redemption interest (if any) with respect to any Convertible Note after the date the same is due and payable; (3) a default by the Company in the performance or observance of any covenant, condition or provision contained in this Indenture or in the Convertible Note on its part to be performed or observed (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with) which default continues for a period of 60 days following the date on which a written notice requiring such default to be remedied is delivered by the Trustee to the Company or by the Holders of not less than 25% in principal amount of the Convertible Notes then Outstanding to the Company, with a copy to the Trustee; (4) any failure to pay when due, after expiration of any applicable grace periods upon final maturity the principal of, or acceleration of, any indebtedness having an aggregated principal amount of at least US$30,000,000 (or its equivalent in any other currency) of the Company or any Material Subsidiary if such debt is not discharged, or such acceleration is not annulled, within 30 days following the date on which a written notice requiring such default to be remedied is delivered by the Trustee to the Company or by the Holders of not less than 25% in principal amount of the Convertible Notes then Outstanding to the Company, with a copy to the Trustee; (5) a decree or order by a court having jurisdiction shall have been entered adjudging the Company or any Material 47 Subsidiary bankrupt or insolvent, or approving a petition seeking reorganization of the Company or any Material Subsidiary under any applicable bankruptcy, insolvency or reorganization law, or for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or any Subsidiary or of all or substantially all of the business or assets, or for the winding up or liquidation of the affairs, of the Company or any Material Subsidiary (other than such winding up or liquidation for the purposes of effecting a reconstruction, amalgamation, merger, consolidation or reorganization that is subject to and in accordance with Section 801); (6) the Company or any Material Subsidiary shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under any applicable bankruptcy, insolvency or reorganization law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of all or substantially all of its business or assets, or shall make an assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Company or any Material Subsidiary in furtherance of any of the aforesaid purposes (other than for the purposes of effecting a reconstruction, amalgamation, merger, consolidation or reorganization that is subject to or in accordance with Section 801); or (7) proceedings shall have been initiated against the Company or any Material Subsidiary under any applicable bankruptcy, insolvency or reorganization law and such proceedings shall not have been discharged or stayed within a period of 60 days. For the purposes of Clause (4) above, any indebtedness which is in a currency other than U.S. dollars shall be translated into U.S. dollars at the spot rate for the sale of U.S. dollars against the purchase of the relevant currency quoted by any leading bank in the relevant market selected by the Trustee on any day when the Trustee requests such a quotation for such purposes. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Convertible Notes may declare the Accreted Value (calculated on the basis of a date of determination of November 7, 2008) of all the Convertible Notes to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such Accreted Value shall become immediately due and payable; provided, however, that if an Event of Default results from an event specified in Section 501(5), (6) or (7), the Accreted Value (calculated on the basis of a date of determination of November 7, 2008) shall become, without any declaration or other act by the Trustee or any holder of any Outstanding Convertible Notes, immediately due and payable. 48 At any time after such declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Convertible Notes, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) the principal of any Convertible Notes which have become due otherwise than by such declaration of acceleration, (B) all sums paid or advanced by the Trustee hereunder and the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of and redemption interest on the Convertible Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if default is made in the payment of the principal of or redemption interest on any Convertible Note at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Convertible Notes, (i) the whole amount then due and payable on such Convertible Notes for principal and redemption interest, (ii) Redemption Amount on the due date for repayment, and (iii) in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Convertible Notes), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar 49 official in any such judicial proceeding is hereby authorized by each Holder to make such 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 compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Convertible Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Convertible Notes. All rights of action and claims under this Indenture or the Convertible Notes may be prosecuted and enforced by the Trustee without the possession of any of the Convertible Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Convertible Notes in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article Five shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or redemption interest upon presentation of the Convertible Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal, redemption interest and interest (if any) on the Convertible Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Convertible Notes for principal and redemption interest, respectively. SECTION 507. Limitation on Suits. No Holder of any Convertible Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; 50 (2) the Holders of not less than 25% in principal amount of the Outstanding Convertible Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity to its satisfaction against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Convertible Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal and Redemption Interest and to Convert. Notwithstanding any other provision in this Indenture, the Holder of any Convertible Notes shall have the right, which is absolute and unconditional, to receive payment of the principal and redemption interest on such Convertible Note on the respective Stated Maturities expressed in such Convertible Note (or, in the case of redemption, on the Redemption Date) and to convert such Convertible Note in accordance with Article Fourteen and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. Claims in respect of payment of principal on the Convertible Notes will be prescribed unless made within a period of ten years becomes due and payable. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 51 SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Convertible Notes in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Convertible Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Convertible Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Convertible Notes may on behalf of the Holders of all the Convertible Notes waive any past default hereunder and its consequences, except a default (1) in the payment of the principal or redemption interest on any Convertible Note, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Convertible Notes affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no 52 such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. 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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, including reasonable attorney's fees and expenses, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Trustee or in any suit for the enforcement of the right to convert any Convertible Note in accordance with Article Fourteen. SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX The Trustee SECTION 601. Certain Duties and Responsibilities. (a) 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; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but not to confirm or investigate the accuracy of mathematical calculations or other facts stated therein). 53 (b) In case 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 man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent actions, its own negligent failure to act, or its own willful misconduct, except that (1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Convertible Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any 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 for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, 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. SECTION 602. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. The Trustee may withhold notice to the Holders of any default (except in respect of payment on any Convertible Notes) if the corporate trust committee or a committee of Responsible Officers of the Trustee determines in good faith that withholding notice is in the best interests of the Holders. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. 54 SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer's Certificate; (d) the Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless the Trustee shall have received from such Holders security or indemnity satisfactory to the Trustee against any loss, liability or expense which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine in good faith and with cause to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and the Trustee shall incur no liability or additional liability of any kind by reason of such inquiry investigation; provided, that such investigation is conducted at location specified by the Company during the business hours of the Company and the Company receives prior written notice of such investigation; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; 55 (h) the Trustee shall not be deemed to have notice of any Event of Default unless a Responsible Officer of the Trustee shall have actual knowledge thereof. For purposes of this paragraph, a Responsible Officer shall be deemed to have actual knowledge of the contents of any notice which has been properly addressed to such Responsible Officer and sent via facsimile or prepaid registered mail, return receipt requested, and, in either case, for which the sender has received confirmation of receipt; (i) the rights, privileges, protections, immunities and benefits given to the Trustee, 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 each agent, custodian and other Person employed to act hereunder; (j) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and (k) the Trustee may request that the Company deliver an Officer's Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer's Certificate may be signed by any person authorized to sign an Officer's Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. SECTION 604. Not Responsible for Recitals or Issuance of Convertible Notes. The recitals contained herein and in the Convertible Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee make no representations as to the validity or sufficiency of this Indenture or of the Convertible Notes. The Trustee shall not be accountable for the use or application by the Company of Convertible Notes or the proceeds thereof. SECTION 605. May Hold Convertible Notes. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Convertible Notes and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. 56 SECTION 607. Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any loss, liability, damages, claims or expense, including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall have a lien prior to the Convertible Notes as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 607, except with respect to funds held in trust for payment of principal or redemption interest on particular Convertible Notes. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(6) or Section 501(7), the reasonable expenses (including the reasonable charges and expenses iof its counsel) and the compensation for the services actually rendered are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture and the resignation or removal of the Trustee. SECTION 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. 57 SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least US$50,000,000 and its Corporate Trust Office in New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 609, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation or removal, the retiring Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Convertible Notes, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Convertible Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Convertible Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 58 (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Convertible Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Convertible Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided, however, that on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Convertible Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Convertible Notes so 59 authenticated with the same effect as if such successor Trustee had itself authenticated such Convertible Notes. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Convertible Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Convertible Notes issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption or pursuant to Section 306, and Convertible Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Whenever reference is made in this Indenture to the authentication and delivery of Convertible Notes by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than US$50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions 60 of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment is made pursuant to this Section, the Convertible Notes may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Convertible Notes Due 2008 of ST Assembly Test Services Ltd referred to in the within-mentioned Indenture. Dated: ____________________ The Bank of New York, as Trustee By ---------------------------------- As Authenticating Agent By ---------------------------------- Authorized Signatory SECTION 615. Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture, and in particular in case of the enforcement thereof on default, or in the case the Trustee deems that by reason of any present of future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee of hold title to the properties, in trust, as herein granted or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint and the Trustee may appoint an individual or institution as a separate or co-trustee in accordance with this Section 615. The following provisions of this Section are adopted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, 61 estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and only to the extent that the Trustee by the laws of any jurisdiction (including particularly the State) is incapable of exercising such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. No separate or co-trustee may be appointed by the Trustee under this Section 615 without the prior written consent of the Company, which may not unreasonably be withheld; provided that, if an Event of Default shall have occurred and be continuing, the Trustee shall be empowered to appoint a separate or co-trustee without the consent of the Company. Any separate or co-trustee appointed hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 610 and notice to Holders of the appointment of any separate or co-trustee shall be required under Section 610 hereof. Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees as effectively as if given to each of them. Every instrument appointing any separate or co-trustee shall refer to this Indenture and the conditions of this Article Six. Each separate trustee and co-trustee, upon its acceptance of the appointment, shall be vested with the estates of property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. Should any instrument in writing from the Company be required by the separate or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Company at the expense of the Company; provided, that if an Event of Default shall have occurred and be continuing, if the Company does not execute any such instrument within 15 days after request therefor, the Trustee shall be empowered as an attorney-in-fact for the Company to execute any such instrument in the Company's name and stead. In case any separate or co-trustee or a successor to either shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate or co-trustee. ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee 62 (1) annually, not more than 15 days after each anniversary date of the Closing Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such anniversary date, and (2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Convertible Notes, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Convertible Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Convertible Notes are listed, with the Commission and with the Company. The Company will notify the Trustee in writing when the Convertible Notes are listed on any stock exchange. SECTION 704. Reports by Company. (a) The Company shall file with the Trustee a copy, translation or substantially similar version, in each case in the English language, of all notices, reports, statements and documents which are issued to the holders of the Ordinary Shares or which are required to be issued to the Holders by the Singapore Exchange as soon as practicable (but not later than 30 days after the date of issue thereof) and make available to the Trustee as many further copies, 63 translations or versions, as the case may be, as the Trustee may reasonably require in order to satisfy requests from Holders for the same. (b) 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 exclusively on Officer's Certificates). ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. (a) The Company shall not consolidate with or merge into any other corporation or, together with or through one or more of its Subsidiaries, convey, transfer or lease all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis to any Person, unless: (1) (A) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety (a) shall be a corporation, partnership or trust or other entity organized and validly existing under the laws of Singapore or the United States and (b) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in a form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal and redemption interest, on all the Convertible Notes and the performance and observance of every covenant of this Indenture on the part of the Company to be performed or observed, and (B) such supplemental indenture shall (a) provide that the Holder of each Convertible Note then Outstanding will have the rights, during the Conversion Period, to convert the Convertible Note into the kind and amount of Ordinary Shares, other securities, cash or other assets (with the Share Conversion Price appropriately allocated to such Ordinary Shares, other securities, cash or other assets) receivable upon the consolidation, merger, sale or similar event by a Holder of the number of Ordinary Shares into which the Convertible Note might have been converted immediately prior to that consolidation, merger, sale, transfer or similar events, and (b) provide for adjustments to Share Conversion Price which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for under Section 1405; (2) immediately after giving effect to such transaction, no Event of Default and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing; and (3) the Company or such Person shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with the 64 relevant terms and conditions of this Indenture and that all conditions precedent herein provided for relating to such transaction have been complied with. (b) This Section 801 shall only apply to a merger or consolidation in which the Company is not the surviving corporation and to conveyances, leases and transfers by the Company as transferor or lessor. SECTION 802. Successor Person Substituted. Upon any consolidation by the Company with or merger by the Company into any other entity or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety to any Person in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and in the event of any such conveyance or transfer, the Company (which term shall for this purpose mean the Person named as the "Company" in the first paragraph of this Indenture or any successor Person which shall theretofore become such in the manner described in Section 801), except in the case of a lease, shall be discharged of all obligations and covenants under this Indenture and the Convertible Notes and may be dissolved and liquidated. ARTICLE NINE Supplemental Indentures SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Convertible Notes; (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; (3) to secure the Convertible Notes pursuant to the requirements of Section 1008 or otherwise; (4) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 801; (5) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which 65 shall not be inconsistent with the provisions of this Indenture, provided that such action pursuant to this Clause (5) shall not adversely affect the interests of the Holders in any material respect; (6) to create a depositary receipt facility into which Ordinary Shares issuable upon conversion of the Convertible Notes may be deposited; or (7) to make any other modifications to the Convertible Notes or this Indenture of a formal, minor or technical nature or necessary to correct a manifest error or upon Opinion of Counsel to comply with mandatory provisions of the law of Singapore so long as such modification does not adversely affect the rights of any Holder in any material respect. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Convertible Notes, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Convertible Note affected thereby, (1) change the amount of Convertible Notes whose Holders must consent to an amendment, supplement or waiver to the provisions of this Indenture; (2) reduce the principal or redemption interest on, or change the Stated Maturity of any Convertible Note or reduce the amount of, or postpone the date fixed for, the payment of any Additional Amounts; (3) change the provisions of Article Eleven or Article Twelve with respect to any Convertible Note in a manner adverse to the Holder thereof; (4) waive a Default in the payment of the principal or redemption interest on, any Convertible Notes (except a rescission of acceleration of the Convertible Notes by the Holders of at least a majority in principal amount of the Outstanding Convertible Notes and a waiver of the payment default that resulted from such acceleration); (5) change the currency or place of payment of principal or redemption interest on any Convertible Note or the method of calculating any such payment; (6) make any change in Sections 507, 508, 513 or 902 (this Section); or (7) waive a redemption payment with respect to any Convertible Note or change any of the provisions with respect to the redemption of the Convertible Notes. 66 It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Convertible Notes therefore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Reference in Convertible Notes to Supplemental Indentures. Convertible Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Convertible Notes so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Convertible Notes. ARTICLE TEN Covenants SECTION 1001. Payment of Principal and Redemption Interest. The Company will duly and punctually pay the principal and redemption interest on the Convertible Notes in accordance with the terms of the Convertible Notes and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in London an office or agency where Convertible Notes may be presented or surrendered for payment, where Convertible Notes may be surrendered for registration of transfer or exchange, where Convertible Notes may be surrendered for conversion, redemption or repayment and where notices and demands to or upon the Company in respect of the Convertible Notes and this Indenture may be served. In addition, 67 at any time that the Convertible Notes shall be issued in definitive form the Company will maintain in Singapore an office or agency where securities may be surrendered for conversion, redemption or repayment. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of any 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, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Convertible Notes 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 London, for such purposes. The Company will give prompt written notice to the Trustee and the Holders (in accordance with Section 105 and Section 106) of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal or redemption interest on any of the Convertible Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or redemption interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal or redemption interest on any Convertible Notes, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held in trust for the benefit of the Persons entitled to such principal or any redemption interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) hold all sums held by it for the payment of the principal or redemption interest on Convertible Notes in trust for the benefit of the Person entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided, (ii) give the Trustee notice of any default by the Company in the making of any payment of principal or redemption interest on the Convertible Notes and (iii) during the continuance of any default by the Company (or any other obligor upon the Convertible Notes) in the making of any payment in respect of the Convertible Notes, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any 68 Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal or redemption interest on any Convertible Note and remaining unclaimed for two years after such principal and redemption interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Convertible Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in accordance with the first paragraph of Section 106, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Statement by Officers as to Compliance. The Company will deliver to the Trustee, within 90 days after the end of each fiscal year of the Company ending after the date hereof, an Officer's Certificate, stating whether or not to the best knowledge of the signer thereof the Company is in compliance with the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall not be in compliance, specifying all such defaults and the nature and status thereof of which they may have knowledge. The Company shall deliver to the Trustee, as soon as possible and in any event within five (5) Business Days after the Chief Executive Officer or Chief Financial Officer of the Company becomes aware of the occurrence of any Event of Default, an Officer's Certificate setting forth the details of such Event of Default. SECTION 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1006. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Material Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made 69 all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Material Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Material Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1008. Restriction on Liens. So long as any Convertible Note remains Outstanding, the Company shall not, and shall procure that none of its Material Subsidiaries shall, create or permit to subsist any security interest upon the whole or any part of any present or future property or assets to secure the repayment of, or any guarantee or indemnity in respect of, any International Investment Securities without (i) at the same time or prior thereto securing the Convertible Notes equally and ratably with such securities or otherwise as may be approved by an Extraordinary Resolution or (ii) providing such other security for the Convertible Notes as may be approved by an Extraordinary Resolution. The foregoing restrictions shall not apply to (a) any security interest upon the whole or a part of any property or assets of a Subsidiary existing at such time the Subsidiary becomes a Material Subsidiary, provided that such security interest shall not have been created in contemplation of or in connection with such entity becoming a Material Subsidiary, and (b) any security interest upon the whole or part of any property or assets of the Company or any of its Material Subsidiaries, which security interest is: (i) to secure any indebtedness evidenced by International Investment Securities issued by the Company or by any of its Material Subsidiaries in each case solely for the purposes of financing the cost of the purchase, development, construction, equipping, alteration, repair or improvement of any property or assets acquired by the Company or by any of its Material Subsidiaries after November 7, 2003; provided that (A) the security interest is confined to such property or assets, (B) the principal amount of the International Investment Securities secured by such security interest shall not exceed such cost and (C) the security interest attaches to such property or assets concurrently with or within 120 days of the time of the acquisition of such property or assets or the completion of the activity being financed; 70 (ii) to secure any indebtedness evidenced by International Investment Securities existing on (A) any property or asset of any entity at the time the Company or one of its Subsidiaries acquires such entity after November 7, 2003, whether by merger, consolidation or otherwise or (B) any property or asset at the time it is acquired by the Company or one of its Subsidiaries after November 7, 2003; provided that in each case such security interest shall not have been created in contemplation of or in connection with such acquisition; or (c) a renewal, extension or replacement (in whole or in part) of any security interest permitted in subsections (a) and (b) above of this Section 1008. The Company shall give written notice to the Trustee and the Holders (in accordance with Sections 105 and 106) of the issuance of any International Investment Securities the terms or manner of issuance of which requires security to be granted to the Holders pursuant to this Section. SECTION 1009. Payment of Additional Amounts. All payments of, or in respect of, principal of and redemption interest on, the Convertible Notes shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax unless such taxes, duties, assessments or governmental charges are required to be withheld or deducted. In that event, the Company will pay any such additional amounts of, or in respect of, principal and redemption interest as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges of Singapore) in the payment to each Holder of a Convertible Note of the amounts that would have been payable in respect of such Convertible Notes had no withholding or deduction been required, except that no Additional Amounts shall be payable for or on account of: (a) any tax, duty, assessment or other governmental charge that would not have been imposed but for the fact that such Holder: (1) was for Singapore tax purposes treated as a resident of Singapore or who is otherwise subject to such taxes, duties, assessments or governmental charges by reason of being connected with Singapore other than the mere ownership of, or receipt of payment under, such Convertible Note; or (2) presented such Convertible Note more than 30 days after the date on which the payment in respect of such Convertible Note first became due and payable or provided for, whichever is later, except to the extent that the Holder would have been entitled to such Additional Amounts if it had presented such Convertible Note for payment on any day within such period of 30 days; (b) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge; 71 (c) any tax, duty, assessment or other governmental charge which is payable otherwise than by deduction or withholding from payment of principal or redemption interest on the Convertible Notes; (d) any tax, duty, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder or the Beneficial Owner of a Convertible Note with a reasonable request by the Company addressed to the Holder (A) to provide information concerning the nationality, residence or identity of the Holder or such Beneficial Owner or (B) to make any declaration or other similar claim or satisfy any reasonable information or reporting requirement, which, in the case of (A) and (B), is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, duty, assessment or other governmental charge; or (e) any combination of the items listed above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or redemption interest on, any Convertible Note to any Holder who is a fiduciary or partnership or other than the sole Beneficial Owner of the payment to the extent that payment would be required by the laws of Singapore to be included in income for tax purposes of the fiduciary if the Beneficial Owner would not otherwise have been entitled to the Additional Amounts. Any reference herein to the payment of the principal of, or redemption interest on, any Convertible Note shall be deemed to include the payment of Additional Amounts provided for in this Indenture, to the extent that, in such context, Additional Amounts are, were or would be payable under this Indenture. ARTICLE ELEVEN Redemption of Convertible Notes SECTION 1101. Right of Redemption. (a) The Convertible Notes are redeemable at the option of the Company, in whole or in part, at any time on or after November 7, 2006, at a Redemption Amount equal to the Accreted Value; provided, however, that no such redemption may be made unless the Closing Price of each Ordinary Share on the Singapore Exchange (translated into U.S. dollars at the Prevailing Exchange Rate on such Trading Day), or of each ADS on the Nasdaq National Market, for any 20 Trading Days in a 30 consecutive Trading Day period ending not more than five days prior to the date on which notice of such redemption is given, is at least 130% of the Share Conversion Price (translated into U.S. dollars at the Fixed Exchange Rate) or of the Share Conversion Price per ADS (translated into U.S. dollars at the Fixed Exchange Rate and taking into account the prevailing Ordinary Share-to-ADS ratio), in each case as adjusted through, and effective on, such notice date. Notwithstanding the foregoing, the Company may redeem the Convertible Notes, in whole but not in part, at a Redemption Amount equal to the Accreted Value, if at any time the aggregate principal amount of the Convertible Notes Outstanding is less than 10% of the aggregate principal amount of the Convertible Notes issued hereunder. 72 (b) The Convertible Notes are redeemable at the option of the Company, in whole but not in part, on any date at a Redemption Amount equal to the Accreted Value, if the Company determines that, as a result of any change in or amendment to the laws or any regulations or rulings promulgated thereunder of Singapore or any authority thereof or therein having the power to tax, or any change in the general application or official or judicial interpretation of such laws, regulations or rulings, or any change in the general application or official or judicial interpretation of, or any execution or amendment to, any treaty or treaties affecting taxation to which Singapore is a party, which change, execution or amendment becomes effective on or after the original issue date of the Convertible Notes, the Company has been or will be required to pay Additional Amounts with respect to the Convertible Notes. (c) The Convertible Notes are redeemable at the option of a Holder, in whole or in part, unless notice of redemption of all or any portion of the Convertible Notes (which Convertible Notes include the Convertible Notes which such Holder could otherwise require the Company to redeem pursuant to this Section 1101(c)) pursuant to Section 1101(a) or (b) shall have been given by the Company on or prior to the date of deposit of a demand of redemption under this Section 1101(c), by completing, signing and depositing at the specified office of the Paying Agent during normal business hours of such Paying Agent not less than 60 or more than 75 days prior to November 7, 2007 a demand of redemption in the form obtainable from the Paying Agent, requiring the Company to redeem on November 7, 2007 all or any portion (being US$1,000 in principal amount or an integral multiple thereof) of the Convertible Notes or portion thereof held by such holder at a Redemption Amount equal to 118.32% of the principal amount of the Convertible Notes or portion thereof, as the case may be, being redeemed. No such demand of redemption will be valid unless completed in its entirety. Any such demand of redemption will be irrevocable and will bind the Company, upon surrender by the Holder of the certificates in respect of the relevant Convertible Note or Convertible Notes at the specified office of the Paying Agent. SECTION 1102. Applicability of Article. Redemption of Convertible Notes at the election of the Company or at the election of the Holders, as permitted or required by any provision of this Indenture or of the Convertible Notes, shall be made in accordance with such provision and this Article. SECTION 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Convertible Notes pursuant to Sections 1101(a) and (b) shall be evidenced by a Board Resolution. In the case of any redemption pursuant to Section 1101(a) of less than all the Convertible Notes, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Convertible Notes to be redeemed. Prior to any redemption pursuant to Section 1101(b) the Company agrees to provide the Trustee with an Opinion of Counsel that the conditions precedent to such redemption have occurred. Prior to any redemption pursuant to Section 1101(a), the Company agrees to provide the Trustee with an Officer's Certificate setting forth the relevant Closing Prices or the amount of Convertible Notes 73 Outstanding and the amount originally issued and its conclusion that the conditions precedent to such redemption have occurred. SECTION 1104. Selection by Trustee of Convertible Notes to Be Redeemed. If less than all of the Outstanding Convertible Notes are to be redeemed, the Trustee shall select the Convertible Notes to be redeemed in principal amounts of US$1,000 or integral multiples of US$1,000, on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate. The Trustee shall make the selection not more than 60 days and not less than 30 days before the Redemption Date from Convertible Notes Outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Convertible Notes that have denominations larger than US$1,000. Convertible Notes and portions of them it selects shall be in principal amounts of US$1,000 or integral multiples of US$1,000. Provisions of this Indenture that apply to Convertible Notes called for redemption also apply to Convertible Notes that are called for partial redemption. If any Convertible Note selected for partial redemption is converted by the Holder in part after such selection, the partially converted portion of such Convertible Note shall be deemed (so far as may be) to have been redeemed for such purpose. Upon any redemption of less than all the Convertible Notes, the Company and the Trustee may treat as Outstanding any Convertible Notes surrendered for conversion during the period 15 days immediately preceding the mailing of a notice of redemption and need not treat as Outstanding any new Convertible Note authenticated and delivered during such period in exchange for the unconverted portion of any Convertible Note converted in part during such period. The Trustee shall promptly notify the Company and each Security Registrar in writing of the Convertible Notes selected for redemption and, in the case of any Convertible Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Convertible Notes shall relate, in the case of any Convertible Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Convertible Notes which has been or is to be redeemed. SECTION 1105. Notice of Redemption. Notice of redemption at the election of the Company shall be given in accordance with Section 106, mailed and published not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Convertible Notes to be redeemed. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Amount, (3) the Share Conversion Price as of the date of such notice, 74 (4) the Closing Price of the Ordinary Shares and the ADSs, as the case may be, (5) the aggregate principal amount of the Outstanding Convertible Notes as of the latest practicable date prior to the publication of such notice, (6) if less than all the Outstanding Convertible Notes are to be redeemed, the list identifying (and, in the case of partial redemption of any Convertible Notes, the principal amounts) the particular Convertible Notes to be redeemed, (7) that on the Redemption Date the Redemption Amount will become due and payable upon each such Convertible Note to be redeemed, (8) that the Convertible Notes being redeemed may be converted at any time during the Conversion Period (unless the Company defaults in making the payment in full due upon redemption), the Share Conversion Price the date on which the Conversion Period for the Convertible Notes being redeemed will terminate and the place or places where such Convertible Notes may be surrendered for conversion, (9) the place or places where such Convertible Notes are to be surrendered for payment of the Redemption Amount, and (10)the common code and/or ISIN numbers. Notice of redemption of Convertible Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Notice of redemption of Convertible Notes to be redeemed at the election of a Holder shall be given by a Holder in the form of a notice (the "Holder's Redemption Notice") as set forth in Section 205 or in such other form as may be approved by the Trustee and, in any case, in the manner specified in the form of Convertible Notes hereinbefore set forth. SECTION 1106. Deposit of Redemption Amount. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Amount of all the Convertible Notes which are to be redeemed on that date other than any Convertible Notes called for redemption on that date which have been converted prior to the date of such deposit. If any Convertible Note called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Convertible Note shall be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. 75 SECTION 1107. Convertible Notes Payable on Repayment Date. Notice of redemption having been given as aforesaid, the Convertible Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Amount from and after such date (unless the Company shall default in the payment of the Redemption Amount). Upon surrender of any such Convertible Note for redemption in accordance with said notice, such Convertible Note shall be paid by the Company at the Redemption Amount. SECTION 1108. Convertible Notes Redeemed in Part. Any Convertible Note which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Convertible Note, at the expense of the Company, a new Convertible Note or Convertible Notes, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Convertible Note so surrendered. ARTICLE TWELVE Repayment At Option Of Holders SECTION 1201. Repayment at Option of Holders. Upon the occurrence of a Repayment Event, each Holder of the Convertible Notes shall have the right to require repayment by the Company for all (or any portion equal to US$1,000 or any integral multiple thereof) of such Holder's Convertible Notes in cash at the Accreted Value in accordance with the provisions of this Article Twelve. To exercise the right of repayment provided in this Section 1201, a holder must complete and manually sign a Repayment Acceptance Notice in substantially the form set forth in Section 207 and deliver such notice together with the Convertible Note to the Company during normal business hours at the office or agency designated pursuant to Section 1002 not later than the date specified by the Company in the Company's notice of a Repayment Event in accordance with Section 1202. A Repayment Acceptance Notice once given will be irrevocable and may not be withdrawn without the prior written consent of the Company. The Company may reject any incomplete or incorrect Repayment Acceptance Notice. All costs and expenses incurred by the Company as a result of an incomplete or incorrect Repayment Acceptance Notice will be for the account of the relevant Holder. SECTION 1202. Notice of Repayment Event. Notice of a Repayment Event shall be given in the manner provided for in Sections 105 and 106 as soon as practicable, but in no event later than five Business Days after 76 the Company becomes aware of the occurrence of such event, to the Trustee and each Holder of Convertible Notes. All notices of a Repayment Event shall identify the nature of such Repayment Event and its date of occurrence and state: (1) the Repayment Date, which shall be the date that is 45 days from the notice day (or, if not a Business Day, the next succeeding Business Day thereafter), and the latest date by which the Repayment Acceptance Notice (as defined below), specifying the principal amount of Convertible Notes submitted for repayment, must be received, which shall be the date that is 10 days prior to the Repayment Date (or, if not a Business Day, the next succeeding Business Day thereafter); (2) the Repayment Price; (3) that on the Repayment Date, the Repayment Price will become due and payable upon each such Convertible Note in relation to which a valid Repayment Acceptance Notice has been received by the Company; and (4) the place or places where such Convertible Notes are to be surrendered for payment of the Repayment Price. Notice of any Repayment Event shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company, in which case the Trustee shall provide the Company with a notice stating the date on which such notice was mailed to Holders and/or proof that such notice was published, in each case in accordance with Section 106. The Notice of any Repayment Event shall also include the form of a notice (the "Repayment Acceptance Notice") as set forth in Section 207 to be completed by any Holder electing to have all or a portion of such Holder's Convertible Notes repaid by the Company as provided in Section 1201. SECTION 1203. Notice to Trustee. The Company shall furnish the Trustee with an Officer's Certificate setting forth the calculation of the Repayment Amount. SECTION 1204. Deposit of Repayment Price. Prior to any Repayment Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Repayment Price of all the Convertible Notes which are to be repurchased on that date other than any Convertible Notes to be repurchased on that date which have been converted prior to the date of such repurchase. If any Convertible Note to be repurchased is converted prior to the date of such repurchase, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the repurchase of such Convertible Note shall be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. 77 SECTION 1205. Convertible Notes Payable on Repurchase Date. Any Convertible Notes surrendered for repayment as provided in this Article shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Convertible Notes on such Repayment Date) such Convertible Notes shall not bear interest. Upon surrender of any such Convertible Note for repayment in accordance with such provisions the Repayment Price of such Convertible Note to be repaid shall be paid by the Company. SECTION 1206. Convertible Notes Repaid in Part. Subject to Section 305 in the case of the Global Note, upon surrender of any Convertible Note which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Convertible Note, without service charge and at the expense of the Company, a new Convertible Note or Convertible Notes of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Convertible Note so surrendered which is not to be repaid. SECTION 1207. Tender Offer. If a Holder exercises its right to require the Company to repurchase the Convertible Notes, and the repurchase constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act, the Company will comply with the requirements of Rule 14e-1 as then in effect with respect to any repurchase. ARTICLE THIRTEEN [Reserved] ARTICLE FOURTEEN Conversion of Convertible Notes SECTION 1401. Conversion Right. A Holder of a Convertible Note may convert such Convertible Note (or a portion thereof equal to US$1,000 or any integral multiple thereof) into Ordinary Shares or, subject to the limitations set forth below, ADSs of the Company at any time after 40 days from the original issuance of the Convertible Notes and before the close of business on the seventh day preceding Maturity and the Redemption Date fixed for any early redemption, at the Share Conversion Price then in effect; provided, however, that, if such Convertible Note is called for redemption pursuant to Sections 1101(a) or (b) of this Indenture, such conversion right shall terminate at the close of business on the seventh day preceding the Redemption Date for such Convertible Note (unless the Company shall default in making the redemption 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 Convertible Note is redeemed) (such period during which the Convertible Notes are 78 convertible, the "Conversion Period"). The number of Ordinary Shares issuable upon conversion of a Convertible Note (or a portion thereof equal to US$1,000 or any integral multiple thereof) will be determined by dividing the aggregate principal amount (translated into Singapore dollars at the Fixed Exchange Rate) of all the Convertible Notes or portion thereof to be converted by a Holder by the Share Conversion Price per Ordinary Share in effect on the Conversion Date, and, in the case of conversion to ADSs, applying the ratio of Ordinary Shares to ADSs in effect on the Conversion Date. A Holder may, subject to the limitations set forth below, elect to receive Ordinary Shares upon conversion in the form of ADSs. Upon receipt of the Conversion Notice, the Company shall, on behalf of such Holder, as soon as practicable, deliver to and deposit with the ADS Depositary or its custodian, in accordance with the applicable terms and conditions of the ADS Deposit Agreement, such number of the Ordinary Shares such Holder would have received upon conversion had such Holder not elected to receive such Ordinary Shares in the form of ADSs that is the maximum number of such Ordinary Shares issuable upon conversion that is divisible by the then current ratio of Ordinary Shares to ADSs and shall issue to such Holder any remaining Ordinary Shares issuable upon conversion that if deposited with the ADS Depositary or its custodian would result in the issuance of fractional ADSs to the converting holder. Such Ordinary Shares will be listed on the Singapore Exchange prior to deposit with the ADS Depositary or custodian and will be registered in the name of the ADS Depositary or its nominee. Subject to compliance with the terms of the ADS Deposit Agreement, including payment of the fees and expenses of the ADS Depositary by such Holder and completion of any additional documentation which may be required under the terms of the Deposit Agreement, the ADS Depositary will issue such number of ADSs representing the deposited Ordinary Shares to such Holder based on the applicable share-to-ADS ratio then in effect. A Convertible Note may not be converted if a Holder has delivered a Repayment Acceptance Notice form in respect of such Convertible Note pursuant to Article Twelve exercising the option of such Holder to require repayment by the Company for such Convertible Note. Upon conversion, with effect from the Registration Date, the person designated in the Conversion Notice will be registered as the holder of record of the applicable number of Ordinary Shares, but beginning on the Conversion Date such converting Holder shall cease to have any right as a Holder with respect to the Convertible Notes surrendered for conversion. SECTION 1402. Exercise of Conversion Right. To convert a Convertible Note, a Holder must (a) complete and manually sign a Conversion Notice in substantially the form included in the form set forth in Section 206 and deliver such notice to the Conversion Agent during normal business hours at the offices of the Conversion Agent in the London at its own expense, (b) surrender the Convertible Note to the Conversion Agent during normal business hours at the offices of the Conversion Agent in London, duly endorsed or assigned to the Company or in blank, (c) furnish appropriate endorsements and transfer documents (if any) required by the Registrar or the Conversion Agent, 79 and (d) pay any required transfer or similar tax and make any other required payment. The date on which the Holder satisfies all of those requirements is the "Conversion Notice Date". Immediately following deposit of a Convertible Note and Conversion Notice and payment by the converting Holder of any required amount in accordance with this Section 1402, the Conversion Agent shall (i) verify that the Conversion Notice has been duly completed in accordance with its terms and purports to have been signed by or on behalf of the Holder of such Convertible Note named therein and (ii) set out in the Conversion Notice (A) the Conversion Date in respect of the deposited Convertible Note, (B) the Share Conversion Price on Conversion Date and (C) the number of Ordinary Shares or ADSs issuable upon conversion of such deposited Convertible Note. The date on which the Conversion Agent completes the matters referred to in (i) and (ii) above is the "Conversion Date". The Conversion Agent shall reject such deposited Convertible Note if the Conversion Notice in respect of which has not been duly completed in accordance with its terms or does not purport to have been signed by or on behalf of the Holder of such Convertible Note named therein. On the Conversion Date, the Conversion Agent shall send a copy of the Conversion Notice by facsimile to the Company, and shall send by post to the Company the original Conversion Notice as soon as practicable following any such request by the Company in writing. If a Holder has requested ADSs and the Conversion Agent does not receive notice by the close of business on the fifth business day after the Conversion Notice Date that a Cash Settlement will be effected, the Conversion Agent shall send a copy of such Conversion Notice to: Citibank, NA, ADR Department, 15th Floor, 111 Wall Street, New York, 10043, Fax: 212-825-2029. On deposit of a Convertible Note and a Conversion Notice (and payment by a converting Holder of any required amount in accordance with Section 1408), the Convertible Note and the Conversion Notice so deposited and any relevant amounts shall be deemed to be held by the Conversion Agent as the agent of the Company. No Holder will be entitled to receive physical share certificates in respect of the Ordinary Shares arising from the conversion of the Convertible Notes. Delivery of the Ordinary Shares shall be made by crediting such Ordinary Shares to a Holder's securities account or the securities account of a Holder's depository agent with CDP. The Company shall allot and issue the Ordinary Shares arising from the conversion of the Convertible Notes in accordance with instructions as set out in the Conversion Notice and shall deliver to CDP the share certificate(s) relating to such Ordinary Shares in the name of CDP for the credit of the Holder's securities account or the securities account of Holder's depository agent as specified in the Conversion Notice as soon as practicable, and in any event not later than 14 days, after the Conversion Date, subject to all applicable laws and in accordance with this Indenture. The Company will register the Person or Persons designated for the purpose in the Conversion Notice as holder(s) of the relevant number of Ordinary Shares in its share register. The Person or Persons specified for that purpose will become the holder of record of the number of Ordinary Shares issuable upon conversion with effect from the date he is or they are registered as such in the Company's share register. The Ordinary Shares issued upon conversion of the Convertible Notes will be duly authorized, validly issued, fully paid, non-assessable and rank equally with all the Ordinary Shares in issue on the relevant Registration Date. A holder of Ordinary Shares issued on 80 conversion of Convertible Notes shall not be entitled to any rights of a shareholder the record date for which precedes the relevant Registration Date. If the record date for the payment of any dividend or other distribution in respect of the Ordinary Shares is on or after the Conversion Date in respect of any Convertible Notes converted, but before the Registration Date, the Company shall pay to the converting Holder an amount equal to any such dividend or other distribution to which he would have been entitled had he on that record date been such a shareholder of record of such number of Ordinary Shares issued upon conversion (disregarding any retroactive adjustment of the Share Conversion Price pursuant to Section 1405(g)(iv)), and will make such payment at the same time as it makes payment of the dividend or other distribution, or as soon as practicable thereafter, but, in any event, not later than seven days thereafter. The delivery to a Holder of the fixed number of Ordinary Shares or ADSs into which the Convertible Note is convertible will be deemed to satisfy the Company's obligation to pay the principal amount and any unpaid redemption interest. If a Holder converts more than one Convertible Note at the same time, the number of Ordinary Shares or ADSs issuable upon the conversion shall be based on the aggregate principal amount of Convertible Notes converted. Upon surrender of a Convertible Note that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Convertible Note equal in principal amount to the unconverted portion of the Convertible Note surrendered. A Conversion Notice once given will be irrevocable and may not be withdrawn without the prior written consent of the Company. The Company or the Conversion Agent on its behalf may reject any incomplete or incorrect Conversion Notice. All costs and expenses incurred by the Company or the Conversion Agent as a result of an incomplete or incorrect Conversion Notice will be for the account of the relevant Holder. SECTION 1403. Fractions of Shares. All calculations relating to redemption and conversion, including adjustment of the Share Conversion Price, will be made to the nearest 0.01 of an Ordinary Share or other property or the nearest cent. However, fractions of Ordinary Shares will not be issued and delivered on conversion and will not be deposited with the ADS Depositary, and no cash adjustments will be made in respect of any such fraction of Ordinary Shares. Under the terms of the ADS Deposit Agreement, the ADS Depositary will not issue and deliver fractions of ADSs. To the extent the ADS Depositary does not accept a certain number of Ordinary Shares for deposit pursuant to the ADS Deposit Agreement, the Company will deliver such Ordinary Shares to the Holder notwithstanding such Holder's election to receive Ordinary Shares in the form of ADSs. SECTION 1404. Cash Settlement. Notwithstanding a properly deposited Conversion Notice with the Conversion Agent as set forth under Section 1401, the Company shall have the option to pay to the relevant Holder an amount of cash in U.S. dollars equal to the Cash Settlement Amount in order to satisfy 81 such conversion right in full. The Company is required to provide notice of its exercise of the cash settlement option in the form provided in Section 208 (the "Cash Settlement Notice") to the relevant Holder as soon as practicable but no later than the fifth business day following the Conversion Notice Date (the actual date of such notice being the "Cash Settlement Notice Date"). The Cash Settlement Notice must specify the number of Ordinary Shares or ADSs in respect of which the Company will make such cash payment in the manner described in this Section. The Company will pay the Cash Settlement Amount not less than five Trading Days but no later than the tenth Trading Day following the Cash Settlement Notice Date. SECTION 1405. Adjustment of Share Conversion Price. The Share Conversion Price shall be adjusted from time to time by the Company as follows (save and except no adjustments will be made to the Conversion Price by virtue of the placement of ordinary shares by the Company on or about November 5, 2003): In each case, the adjusted Share Conversion Price is determined by multiplying the Share Conversion Price before adjustment, denoted as "P", by an applicable adjustment factor. The formulae for determining the adjustment factors are set forth in the following subsections. In each case, the Share Conversion Price will be adjusted with effect from the applicable Adjustment Effective Date. (a) If the Company: (i) pays a dividend or makes a distribution on its Ordinary Shares in the form of its Ordinary Shares other than a cash dividend or distribution, in each case, that permits the recipient to elect to receive Ordinary Shares instead of cash (all reference to "dividend" in this Section 1405(a) being a dividend other than an Extraordinary Dividend as defined below); (ii) splits or reclassifies the outstanding Ordinary Shares into a greater number of Ordinary Shares; or (iii) consolidates or reclassifies the outstanding Ordinary Shares into a lesser number of Ordinary Shares, the Share Conversion Price will be adjusted as follows: X Adjusted Share Conversion Price = P x --- Y where: "X" means the number of Ordinary Shares outstanding immediately prior to the effectiveness of the relevant event giving rise to the adjustment; and "Y" means the number of Ordinary Shares outstanding immediately after effectiveness of the relevant event giving rise to the adjustment. 82 The Adjustment Effective Date, in the case of Section 1405(a)(i) above, is the record date set for the relevant dividend or distribution giving rise to the adjustment. The Adjustment Effective Date, in the case of Sections 1405(a)(ii) and (a)(iii) above, is the date on which the relevant split, consolidation or reclassification giving rise to the adjustment becomes effective. (b) If (i) the Company issues or distributes Ordinary Shares, or any of its Subsidiaries issues or distributes any securities or rights which are convertible into or exchangeable for Ordinary Shares, or issues or distributes any warrants or rights to purchase or subscribe for Ordinary Shares, in each case, to all or substantially all holders of Ordinary Shares; and (ii) the applicable issuance, distribution, conversion, exchange, purchase or subscription price per Ordinary Share, after taking into account any per Ordinary Share consideration received by the Company in respect of such issuance or distribution, is below 95% of the Average Market Price of Ordinary Shares as of the date of announcement of details concerning such applicable issuance, distribution, conversion, exchange, purchase or subscription price; provided, however, that this Section 1405(b) shall not apply to issuances or distributions made pursuant to Section 1405(a). the Share Conversion Price will be adjusted as follows: (S + f) Adjusted Share Conversion Price = P x ------- (S + a) where: "S" means the number of Ordinary Shares outstanding at the close of business on the date of announcement of details concerning such applicable issuance, distribution, conversion, exchange, purchase or subscription price; "f" means the number of additional Ordinary Shares which the aggregate applicable issuance, distribution, conversion, exchange, purchase or subscription price, reduced by any aggregate consideration received by the Company in respect of such issuance or distribution, would purchase at the Average Market Price of Ordinary Shares as of such date of announcement; and "a" means the number of additional Ordinary Shares which are issued or are initially issuable pursuant to the terms of the securities or rights that are the subject of such issuance or distribution. The Adjustment Effective Date for an adjustment pursuant to this subsection (b) shall be the record date the Company sets for such issuance or distribution. In case of any adjustment as a result of issuance of Ordinary Shares by way of a rights offering to all or substantially all holders of Ordinary Shares, the Company may elect to defer the effectiveness of that adjustment until the 83 subscription period applicable to such rights offering has expired. In that case, the Share Conversion Price shall be adjusted using elements "f" and "a" in the above formula that are calculated on the basis of the actual number of the Ordinary Shares issued and aggregate purchase price actually paid in the rights offering. The adjustment shall take effect retroactively from the record date the Company sets for such rights offering. (c) If the Company issues or distributes, for less than 95% of their Fair Market Value (as determined below), to all or substantially all holders of Ordinary Shares, any (i) securities other than as described in Sections 1405 (a) or (b) above or Section 1405(e) below, (ii) assets, other than cash dividends addressed in (d) below or other cash dividends or dividends in kind, in each case declared and paid in the ordinary course (as described below), but, for the avoidance of doubt, including any dividend or portion of such dividend which constitutes a redemption of share capital as part of a reduction in par value of the Ordinary Shares, or (iii) rights to acquire those securities or assets described in subsection (i) and (ii) above, the Share Conversion Price will be adjusted as follows: (M - d) Adjusted Share Conversion Price = P x ------- M where: "M" means the Average Market Price per Ordinary Share as of the date of announcement of terms of such issuance or distribution; and "d" means the Fair Market Value of the portion of the securities, assets or rights to acquire such securities, assets or rights per Ordinary Share, less any per share consideration received by the Company in respect of such portion. The Fair Market Value will be as determined by the Board of Directors of the Company, which determination will be conclusive and calculated on the last Trading Day preceding such date of announcement. For purposes of this subsection (c), dividends "in the ordinary course" shall mean, with respect to any fiscal year, the declaration and payment by the Company of no more than (x) an interim dividend with respect to its interim financial results for such fiscal year and (y) a final dividend with respect to its full year financial results for such fiscal year. The Adjustment Effective Date, in the case of this subsection (c), is the record date set for the relevant issuance or distribution giving rise to the adjustment. 84 (d) If the Company issues or distributes an Extraordinary Dividend in the form of cash (as described below) to all or substantially all holders of Ordinary Shares, the Share Conversion Price will be adjusted as follows: (M - e) Adjusted Share Conversion Price = P x ------- M where: "M" has the same meaning as in subsection (c) above; and "e" means the amount of Extraordinary Dividend payable per Ordinary Share. For the purposes of this subsection (d): "Extraordinary Dividend" means, with respect of a dividend on a certain date, a Total Current Dividend that, as of such date, equals or exceeds on a per Ordinary Share basis: (i) 2% of the One-Year Average Closing Price of the Ordinary Shares if the Company has never declared or paid any cash dividend; or (ii) the lower of (A) twice the Reference Dividend and (B) the Reference Dividend plus 1% of the One-Year Average Closing Price of the Ordinary Shares if the Company has declared and paid at least one cash dividend. The Extraordinary Dividend shall be, in the case of (i) above, the amount by which the Total Current Dividend exceeds 2% of the One-Year Average Closing Price of Ordinary Shares, and in the case of (ii) above, the amount by which the Total Current Dividend exceeds the Reference Dividend. For the avoidance of doubt, all amounts are on a per Ordinary Share basis. "One-Year Average Closing Price" means the arithmetic average of the official closing price per Ordinary Share quoted on the Singapore Exchange for each stock exchange trading day during the 365 consecutive day period ending on the record date set for the dividend that may result in an adjustment. "Reference Dividend" means, at any time, the largest aggregate amount of cash dividend(s) declared with respect to any previous fiscal year (or any interim period of such fiscal year) on a per Ordinary Share basis. "Total Current Dividend" means any and all cash dividends declared by the Company on the Ordinary Shares, prior to the deduction of any withholding tax plus any corporate tax attributable to that dividend, in the period starting from the beginning of the fiscal year in which the record date set for the dividend that may result in an adjustment falls and 85 ending on and including that record date (including the dividend that may result in an adjustment), other than any dividend or portion thereof which previously resulted in an adjustment under this Section 1405(d). The Adjustment Effective Date, in the case of this subsection (d), is the record date set for the relevant issuance or distribution giving rise to the adjustment. (e) If the Company pays a dividend or makes a distribution to all or substantially all holders of its Ordinary Shares consisting of Ordinary Shares of any class or series, or similar equity interests, of or relating to any of its Subsidiaries or other business units, the Share Conversion Price will be adjusted as follows: ( D ) Adjusted Share Conversion Price = P x (-----) (D + v) where: "D" means the arithmetic mean of the daily Post-Distribution Prices of the Ordinary Shares for the 10 Trading Days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for such dividend or distribution on the Singapore Exchange or such other principal exchange or market on which the Ordinary Shares are then listed or quoted (the "Ex-Dividend Date"). "v" means the Fair Market Value of portion of the securities distributed as is attributable to one Ordinary Share, less any consideration received by the Company in respect of such portion. For purposes of this subsection (e): "Fair Market Value" means the number of securities distributed in respect of each Ordinary Share multiplied by the arithmetic mean of the daily Post-Distribution Prices of those Convertible Notes distributed for the 10 Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date. "Post-Distribution Price" of Ordinary Shares or any similar equity interest on any date means the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "when issued" basis without due bills (or similar concept) as reported in the composite transactions for the principal securities exchange on which such share or equity interest is traded provided that if on any date such units have not traded on a "when issued" basis, the post-distribution price shall be the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "regular way" basis without due bills (or similar concept) as reported in the composite transactions for the principal securities exchange on which such share or equity interest is traded. In the absence of such quotation, the Company shall determine the 86 post-distribution price on the basis of such quotations which reflect the post-distribution value of the Ordinary Shares or equity interests as the Company considers appropriate. The Adjustment Effective Date, in the case of this subsection (e), is the record date set for the relevant dividend or distribution giving rise to the adjustment. (f) If the Company determines that any other adjustment should be made to the Share Conversion Price in connection with any other event or circumstance which would have an analogous effect to any of the events or circumstances provided for in subsections (a) to (e) above, the Company will make such adjustment which is fair and reasonable in the opinion of its Board of Directors. (g) For purposes of subsection (a) to (f) above, as applicable: (i) "Average Market Price" as of a date means the arithmetic mean of the daily Closing Prices quoted for the Ordinary Shares on the Singapore Exchange for the 10 consecutive Trading Days immediately preceding that date. (ii) The Company may not reduce the Share Conversion Price so that on conversion, Ordinary Shares would be issued and delivered at a discount to their par value. (iii) Except in the case of a consolidation or reclassification of Ordinary Shares pursuant to Section 1405 (a) (iii), the Share Conversion Price will not be increased as a result of any adjustment. (iv) In case of an adjustment under Section 1405(a), (b) or (c), if the actual amount of adjustment cannot be determined on such record date because certain terms of issuance or distribution have not been determined, the Company may elect to defer the effectiveness of such adjustment until it can be determined and such adjustment will take effect retroactively from the record date set for such issuance or distribution. In such case, the Company shall issue additional Ordinary Shares, as a result of such adjustment, to the Holders who surrendered for conversion between such record date and the date on which such adjustment is determinable. (v) If any doubt arises as to the appropriate adjustment to the Share Conversion Price, a certificate of the Company's auditors at the time will be conclusive and binding on all concerned except in the case of manifest error. (vi) No adjustment will be made to the Share Conversion Price where the adjustment, rounded to the nearest cent as provided below, if applicable, would be less than one percent of the Share Conversion Price then in effect. On any adjustment, the resulting Share Conversion Price will be rounded to the nearest cent (or the smaller of the nearest cent in the case of two equally near cents). Any adjustment not required to be made and any amount by which the Share Conversion Price will be rounded will be carried forward and taken into account in any subsequent adjustment. 87 (vii) No adjustment will be made to the Share Conversion Price where Ordinary Shares or other securities, options or rights to subscribe for or purchase Ordinary Shares or other securities are issued pursuant to any stock option or purchase programs, plans or similar arrangements approved by the Board of Directors or the shareholders of the Company. (viii) If a Conversion Date falls prior to the Adjustment Effective Date of an adjustment of the Share Conversion Price in circumstances where the delivery of Ordinary Shares in respect of the exercise of relevant conversion right falls on or after such Adjustment Effective Date, the Company shall deliver to the relevant Holder the additional number of Ordinary Shares to which that Holder would have been entitled had the relevant Conversion Date fallen immediately following the Adjustment Effective Date. (ix) Whenever the Company plans to take action that will result in the adjustment of the Share Conversion Price under this Section 1405 or the Share Conversion Price has been adjusted, the Company shall promptly notify Holders in a manner prescribed by Section 106 and file with the Trustee an Officer's Certificate briefly stating the facts requiring the adjustment and the manner of computing it. (x) The Trustee has no duty to determine when an adjustment under this Section 1405 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any Convertible Notes or assets issued upon conversion of the Convertible Notes. The Trustee shall not be responsible for the Company's failure to comply with this Article Fourteen. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 1405 as the Trustee. (xi) The Company may, from time to time to the extent permitted by applicable law, reduce the Share Conversion Price of the Convertible Notes, at the sole discretion of the Board of Directors of the Company, by any amount for any period of at least 20 days, in which case the Company shall give at least 15 days' notice of such decrease. The Company may, at its option, make such reductions in the Share Conversion Price, in addition to those set forth above, as the Board of Directors deems advisable to avoid or diminish any income tax to holders of Ordinary Shares resulting from any dividend or distribution of Ordinary Shares (or rights to acquire Ordinary Shares) or from any event treated as such for income tax purposes. 88 SECTION 1406. Notice of Adjustments of Share Conversion Price. Whenever the Share Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted Share Conversion Price in accordance with Section 1405 and shall prepare a certificate signed by the Treasurer of the Company setting forth such adjusted Share Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at each office or agency maintained for the purpose of conversion of Convertible Notes pursuant to Section 1002; and (b) a notice stating that the Share Conversion Price has been adjusted and setting forth such adjusted Share Conversion Price, shall forthwith be required, and as soon as practicable after it is required, such notice shall be given by the Company to all Holders in accordance with Section 106. SECTION 1407. Notice of Certain Corporate Action. In case at any time after the date 20 days prior to the commencement of the Conversion Period: (a) the Company shall declare a dividend in or make any other distribution on, or pay or make any cash or other distribution with respect to its Ordinary Shares, other than a regular periodic cash dividend not constituting an adjusted Share Conversion Price in accordance with Section 1405, or shall authorize the granting, issue or offer to the holders of Ordinary Shares of options, rights or warrants to subscribe for or purchase any shares or Convertible Notes (other than Ordinary Shares or any shares or any Convertible Notes convertible into or exchangeable for Ordinary Shares or any shares or Convertible Notes other than Ordinary Shares); or (b) there shall be any reclassification of the Ordinary Shares (including a subdivision or consolidation of the Company's outstanding Ordinary Shares) or any consolidation, amalgamation or merger to which Section 1405(a) applies or the sale or transfer of all or substantially all of the assets of the Company; or (c) the Company shall authorize the issue of any Convertible Notes convertible into or exchangeable for Ordinary Shares or options, rights or warrants to subscribe for or purchase Ordinary Shares or Convertible Notes (other than those referred to in paragraph (a) above), or any Ordinary Shares, which will upon issue give rise to an adjustment to the Share Conversion Price pursuant to Section 1405; or (d) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company shall forthwith give written notice thereof to the Trustee and, in addition it will at least 20 days prior to the applicable (in the case of sub-paragraph (i) below) record date or (in the case of sub-paragraph (ii) below) record date or date of submission, whichever is earlier, or (in the case of sub-paragraph (iii) below) date of submission or (in the case of sub-paragraph (iv) 89 below) date of issue or (in the case of sub-paragraph (v) below) record date or effective date, whichever is earlier, cause such notice to be filed at each office or agency maintained for the conversion of Convertible Notes pursuant to Section 1002 and given to the Holders in accordance with Section 106 stating, as the case may require: (i) the record date for such granting, issue or offer of rights or warrants, dividend, distribution or payment or such reclassification (and, in the case of the granting, issue or offer of options, rights or warrants, the period during which such rights or warrants may be exercised); or (ii) the date (x) on which such reclassification, consolidation, merger, amalgamation, sale, transfer, dissolution, liquidation or winding-up is to be submitted to a general meeting of shareholders of the Company for approval and (y) that is the record date for the same (if applicable) and (z) on which such reclassification, consolidation, merger, amalgamation, sale, transfer, dissolution, liquidation or winding-up is expected to become effective and as of which it is expected that holders of Ordinary Shares of record shall be entitled to exchange their Ordinary Shares for Ordinary Shares, Convertible Notes, cash or other property deliverable upon such reclassification, consolidation, merger, amalgamation, sale, transfer, dissolution, liquidation or winding-up; or (iii) (in the event of the declaration of a dividend or other distribution referred to in paragraph (a) above, the payment of which must, under mandatory provisions or the laws of Singapore be submitted for approval to a general meeting of shareholders before such dividend or other distribution may legally be paid or made) the date of such submission; or (iv) in the event of an issue referred to in paragraph (c) above, the date of such issue; or (v) (in the event of a reclassification, consolidation, merger, amalgamation, sale, transfer, dissolution, liquidation or winding-up referred to in paragraph (b) above not being submitted to a general meeting of shareholders of the Company for approval) (y) the record date for the same (if applicable) and (z) the date when the same becomes effective; provided that if the exact date or period required to be given in a notice referred to in this Section is not known at the time of such notice to the Trustee, such notice shall indicate the approximate date thereof and the Company shall give a second notice to the Trustee as soon as practicable, specifying such exact date or period of submission, and shall also cause such second notice to be filed at each office or agency maintained for the conversion of Convertible Notes pursuant to Section 1002 and given to all the Holders in accordance with Section 106 as soon as practicable. Notwithstanding the foregoing, in the case of any issue referred to in paragraph (iii) above, the Company shall not be required to give any notice mentioned above before the date upon which the relevant consideration per Ordinary Share for such issue is fixed by the Company but in any such case the Company shall promptly upon the fixing of such consideration give notice in accordance with the above provisions of this Section 1407. 90 The failure to give notice required by this Section 1407 or any defect therein shall not affect the legality or validity of any dividend, distribution, rights, warrants, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up, or the vote on any such action. SECTION 1408. Taxes and Expenses on Conversions. As conditions precedent to conversion, the Holder must pay to the Conversion Agent any taxes and capital, stamp, issue and registration duties arising on conversion, other than any taxes or capital or stamp duties payable in Singapore in respect of the allotment, issuance and listing of the Ordinary Shares upon conversion. In addition, the Holder will be required to pay any tax or duty relating to any disposal or any deemed disposal relating to conversion and transfer involved in the delivery of the Ordinary Shares deliverable upon conversion. The Company will pay all other expenses arising on the issue, allotment and delivery of the Ordinary Shares issuable upon conversion. SECTION 1409. Covenants Relating to Conversion. The Company hereby agrees that, so long as any conversion right is, or is capable of being or becoming, exercisable, it shall: (a) at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Ordinary Shares, for the purpose of effecting the conversion of Convertible Notes, the full number of Ordinary Shares then issuable upon the conversion of all outstanding Convertible Notes. (b) cause all Ordinary Shares issued upon conversion of Convertible Notes to be upon issuance duly and validly issued, fully paid and non-assessable and, except as provided in Section 1408, the Company will pay all taxes, liens and charges with respect to the issue thereof. (c) except as required under Singapore law or the Company's Articles of Incorporation, not close its register of shareholders or take any other action which prevents the transfer of its Ordinary Shares generally unless, under the laws of Singapore as then in effect, the Convertible Notes may be converted legally and the Ordinary Shares issued upon conversion may (subject to any limitation imposed by law) be transferred (as between transferor and transferee although not as against the Company) at all times during the period of such closure or while such other action is effective, and shall not take any action which prevents the conversion of the Convertible Notes or the issuance of Ordinary Shares with respect thereto or the registration of the Ordinary Shares issued upon conversion of the Convertible Notes; (d) not take any action which would result in an adjustment of the Share Conversion Price if, after giving effect thereto, the Share Conversion Price would (but for the provisions of Section 1405(vii)) be decreased to such an extent that the Ordinary Shares to be issued on conversion of any Convertible Note could not, under any applicable law then in effect, be legally issued; 91 (e) use its best efforts to obtain and maintain a listing on the Singapore Exchange for all the issued Ordinary Shares or, if, having used such best efforts, it is unable to obtain or maintain such listing, use its best efforts to obtain and maintain a listing for the Ordinary Shares on such other stock exchange or exchanges as the Company may from time to time determine, and shall give notice of the identity of such stock exchange or exchanges to the Holders; (f) at any time after the commencement of the Conversion Period, not create or issue any class of share capital other than Ordinary Shares without giving to the Holders notice at least 20 days (or, if practicable, 30 days) prior to the relevant record date for the determination of shareholders entitled to vote at the general meeting of shareholders at which an amendment to the Company's Articles of Incorporation to enable the Company to create such class of share capital is to be voted upon; (g) if any firm public offer is made to all holders of Ordinary Shares (or such holders other than the offeror and/or any Affiliate of the offeror and/or persons associated or acting in concert with the offeror) to acquire all or a portion of the Ordinary Shares and such offer comes to the knowledge of an Authorized Officer of the Company, give notice of such offer to the Holders in accordance with Section 106 within 15 days after obtaining such knowledge; and (h) cause to be filed at each office or agency maintained for the purpose of conversion of Convertible Notes pursuant to Section 1002 and cause to be given to all Holders in accordance with Section 106, at least 10 days prior to the commencement or termination of a Closed Period (or, in the event the Company does not have 10 days advance knowledge of the commencement or termination of a Closed Period, as soon as practicable after the Company receives knowledge thereof), a notice setting forth the dates upon which the Closed Period shall commence and shall terminate; and, if the termination date of such Closed Period is not fixed at the time of filing and giving such notice, such notice shall set forth an approximation of such termination date, and the Company shall upon the fixing or occurrence of such termination date (whichever shall occur first) file and give in like manner another notice setting forth the termination date of such Closed Period. SECTION 1410. Cancellation of Converted Convertible Notes. All Convertible Notes delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 309. SECTION 1411. Trustee Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article Fourteen should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of 92 Convertible Notes. The Trustee shall not be responsible for the Company's failure to comply with this Article Fourteen. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 1411 as the Trustee. 93 ------------------------- This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. The Common Seal of ) ST ASSEMBLY TEST SERVICES LTD ) was hereunto affixed ) in the presence of: ) /s/ Tan Lay Koon Director - ----------------------------------- /s/ Chua Su Li Secretary - ----------------------------------- THE BANK OF NEW YORK By: /s/ Kelvyn Ee ------------------------------- Name: Kelvyn Ee Title: Assistant Vice President 94 ANNEX A FORM OF REGULATION S CERTIFICATE The Bank of New York, as Trustee 101 Barclay Street Floor 21W New York, New York 10286 Attn: Global Finance Unit Re: Convertible Notes due 2008 of ST Assembly Test Services Ltd (the "Convertible Notes") Reference is hereby made to the Indenture, dated as of November 7, 2003 (the "Indenture"), between ST Assembly Test Services Ltd (the "Company") and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to US$__________ principal amount of Convertible Notes which are held in the form of a beneficial interest in the Global Note with the Common Depositary in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest for a beneficial interest in the Global Note to be held with the Common Depositary in the name of [insert name of transferee]. In connection with such request and in respect of such Convertible Note, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Indenture and the Convertible Notes and pursuant to and in accordance with Regulations ("Regulation S") under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor does hereby certify that: (1) the offer of the Convertible Notes was not made to, or for, the account or benefit of, a U.S. person (as defined in Regulation S) in the United States; [(2) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States;]* - ---------- * Insert one of these two provisions, which come from the definition of "offshore transaction" in Regulation S. 95 [(2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;]* (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Insert Name of Transferor] By: ________________________________ Name: Title: Dated: _____________________ cc: ST Assembly Test Services Ltd 96 EX-4.25 17 u92302exv4w25.txt EX-4.25 CONVERTIBLE NOTE DUE 2008 Exhibit 4.25 THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE BANK OF NEW YORK DEPOSITARY (NOMINEES) LIMITED AS NOMINEE FOR THE COMMON DEPOSITARY (THE "COMMON DEPOSITARY") FOR EUROCLEAR BANK S.A./N.V. ("EUROCLEAR") AND CLEARSTREAM BANKING, SOCIETE ANONYME ("CLEARSTREAM") OR A NOMINEE THEREOF, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE OR ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS GLOBAL NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN THE BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN THE COMMON DEPOSITARY OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN INTEREST HEREIN. NONE OF THE CONVERTIBLE NOTES IN RESPECT OF WHICH THIS CERTIFICATE IS ISSUED NOR THE ORDINARY SHARES OF THE COMPANY ISSUABLE UPON CONVERSION THEREOF HAVE BEEN OR WILL BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR WITH ANY REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD OR PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGLUATION S UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE LAWS. Prior to the 41st day after the later of (1) the date that the convertible notes are first offered to investors and (2) the closing date, no beneficial interest in the Global Note may be transferred to, OR FOR, THE ACCOUNT OR BENEFIT OF, any U.S. person. TERMS USED ABOVE HAVE THE MEANING GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT. 1 GLOBAL NOTE ST ASSEMBLY TEST SERVICES LTD CONVERTIBLE NOTE DUE 2008 No. S-1 US$115,000,000 ISIN No. XS0179763973 Common Code 017976397 ST Assembly Test Services Ltd, a corporation duly organized and existing under the laws of the Republic of Singapore (herein called the "Company", which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to THE BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED, or registered assigns, 123.40% of the principal sum of U.S. DOLLARS ONE HUNDRED FIFTEEN MILLION (US$115,000,000) on November 7, 2008. Payment of the principal of and redemption interest on this Convertible Note will be made at the office or agency of the Company maintained for that purpose in London or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The statements set forth in the legends set forth above are an integral part of the terms of this Global Note and by acceptance hereof each holder of this Global Note agrees to be subject to and bound by the terms and provisions set forth in such legends. Reference is hereby made to the further provisions of this Convertible Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Convertible Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: November 7, 2003 ST ASSEMBLY TEST SERVICES LTD By: /s/ Tan Lay Koon -------------------------------- Name: Tan Lay Koon Title: Director, President & Chief Executive Officer 2 CERTIFICATE OF AUTHENTICATION This is one of the Convertible Notes Due 2008 of ST ASSEMBLY TEST SERVICES LTD referred to in the within-mentioned Indenture. Dated: November 7, 2003 The Bank of New York as Trustee By: /s/ Kelvyn Ee -------------------------------- Authorized Signatory Kelvyn Ee Assistant Vice President 3 This Convertible Note is one of a duly authorized issue of Convertible Notes of the Company designated as its Convertible Note Due 2008 (herein called the "Convertible Notes"), unlimited in principal amount, to be issued under an Indenture, dated as of November 7, 2003 (herein called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee"), which term includes any successor trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Convertible Notes and of the terms upon which the Convertible Notes are, and are to be, authenticated and delivered. This Convertible Note is redeemable at the option of the Company upon prior notice to the Holder hereof mailed and published not less than 30 nor more than 60 days prior to the Redemption Date, as a whole but not in part, on any date at a Redemption Amount equal to the Accreted Value if the Company determines that, as a result of any change in or amendment to the laws or any regulations or rulings promulgated thereunder of Singapore or any official or judicial authority thereof or therein having power to tax, or any change in the general application or official or judicial interpretation of such laws, regulations or rulings, or any change in the general application or official or judicial interpretation of, or any execution or amendment to, any treaty or treaties affecting taxation to which Singapore is a party, which change, execution or amendment becomes effective on or after the original issue date of the Convertible Notes, the Company has been or shall be required to pay Additional Amounts with respect to the Convertible Notes. This Convertible Note is redeemable at the option of the Company, in whole or in part, at any time on or after November 7, 2006, at a Redemption Amount equal to the Accreted Value upon prior notice to the Holder hereof mailed and published not less than 30 nor more than 60 days prior to the Redemption Date; provided, however, that no such redemption may be made unless the Closing Price of each Ordinary Share on the Singapore Exchange (translated into U.S. dollars at the Prevailing Exchange Rate on such Trading Day) or of each ADS on the Nasdaq National Market for any 20 Trading Days in a 30 consecutive Trading Day period ending not more than five days prior to the date on which notice of such redemption is given, is at least 130% of the Share Conversion Price (translated into U.S. dollars at the Fixed Exchange Rate) or of the Share Conversion Price per ADS (translated into U.S. dollars at the Fixed Exchange Rate and taking into account the prevailing Ordinary Share-to-ADS ratio), in each case as adjusted through, and effective on, such notice date. Notwithstanding the foregoing, the Company may redeem all of the Outstanding Convertible Notes, including this Convertible Note, at a Redemption Amount equal to the Accreted Value, if at any time the aggregate principal amount of the Convertible Notes Outstanding is less than 10% of the aggregate principal amount of the Convertible Notes issued pursuant to the Indenture. This Convertible Note, or a portion thereof equal to US$1,000 or any integral multiple thereof, may be redeemed at the option of the Holder hereof, unless notice of redemption of all or any portion this Convertible Note shall have been given by the Company on or prior to the date of deposit of a demand of redemption by the Holder 4 hereof under this paragraph, on November 7, 2007 at a Redemption Amount equal to 118.32% of the principal amount being redeemed, by completing, signing and depositing at the specified office of the Paying Agent during normal business hours a demand of redemption in the form obtainable from the Paying Agent not less than 60 or more than 75 days prior to November 7, 2007. This Convertible Note, or a portion thereof equal to US$1,000 or any integral multiple thereof, is subject to repayment by the Company at the option of the Holder hereof upon the occurrence of certain Repayment Events described in the Indenture (including events relating to a Change of Control of the Company or a Delisting of the Ordinary Shares), at a Repayment Price equal to the Accreted Value. In order to be repaid at the option of the Holder, this Convertible Note, with the "Repayment Acceptance Notice" form duly completed by the Holder hereof (or the Holder's attorney duly authorized in writing), must be received by the Company during normal business hours at its office or agency maintained for that purpose in London or Singapore, not later than the date specified by the Company in its notice of the Repayment Event in accordance with Section 1202 of the Indenture. Exercise of such option by the Holder of this Convertible Note shall be irrevocable unless waived by the Company. This Convertible Note is convertible into Ordinary Shares or, subject to the limitations set forth below, ADSs at any time after 40 days from the original issuance of the Convertible Notes and before the close of business on the seventh day preceding the earlier of November 7, 2008 and the Redemption Date fixed for any early redemption, at the Share Conversion Price then in effect; provided, however, that, if this Convertible Note is called for redemption pursuant to Section 1101 of the Indenture, such conversion right shall terminate at the close of business on the seventh day preceding the Redemption Date for this Convertible Note (unless the Company shall default in making the redemption 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 Convertible Note is redeemed). A Holder may convert a portion of this Convertible Note equal to US$1,000 or any integral multiple thereof. The number of Ordinary Shares issuable upon conversion of this Convertible Note (or a portion hereof equal to US$1,000 or any integral multiple thereof) shall be determined by dividing the aggregate principal amount (translated into Singapore dollars at the Fixed Exchange Rate specified in the Indenture) of this Convertible Note or portion hereof to be converted by a Holder by the Share Conversion Price per Ordinary Share in effect on the Conversion Date. The initial Share Conversion Price is S$3.05 per Ordinary Share (equivalent to an initial number of 570.5902 Ordinary Shares per US$1,000 principal amount of Convertible Notes, based on the Fixed Exchange Rate), subject to adjustment for certain anti-dilution events as provided in Section 1405 of the Indenture. The Ordinary Shares issuable upon conversion will be duly authorized, validly issued, fully paid, non-assessable and will rank equally with all other Ordinary Shares. No Holder will be entitled to receive physical share certificates in respect of the Ordinary Shares arising from the conversion of the Convertible Notes. Delivery of the Ordinary Shares shall be made by crediting such Ordinary Shares to a Holder's securities account or the securities account of a Holder's depository agent with The Central Depository (Pte) Limited ("CDP"). The Company shall allot and issue the Ordinary Shares arising from the conversion of the Convertible Notes in accordance with 5 instructions as set out in the Conversion Notice and shall deliver to CDP the share certificate(s) relating to such Ordinary Shares in the name of CDP for the credit of the Holder's securities account or the securities account of Holder's depository agent as specified in the Conversion Notice as soon as practicable, and in any event not later than 14 days, after the Conversion Date, subject to all applicable laws and in accordance with the Indenture. The Company will register the Person or Persons designated for the purpose in the Conversion Notice as Holder(s) of the relevant number of Ordinary Shares in its share register. The Person or Persons specified for that purpose will become the Holder of record of the number of Ordinary Shares issuable upon conversion with effect from the date he is or they are registered as such in the Company's share register (the "Registration Date"). Subject to the limitations set out in the Indenture and the ability to provide the representations and agreements set out in the Conversion Notice, the form of which set forth in Section 206 of the Indenture, a Holder may elect to receive Ordinary Shares upon conversion in the form of ADSs. In such event, the Company agrees to, on behalf of such Holder, as soon as practicable, deliver to and deposit with the ADS Depositary or its custodian, in accordance with the terms of the ADS Deposit Agreement, such number of Ordinary Shares as the Holder would have received upon conversion had he not elected to receive such Ordinary Shares in the form of ADSs that is the maximum number of such Ordinary Shares that is divisible by the then current ratio of Ordinary Shares to ADSs and shall issue any Ordinary Shares that if deposited with the ADS Depositary or its custodian would result in the issuance of fractional ADSs to the converting holder. Such Ordinary Shares will be registered in the name of the ADS Depositary or its nominee. Subject to compliance with the terms of the ADS Deposit Agreement, including payment of the fees and expenses of the ADS Depositary by such Holder Holder and completion of any additional documentation that may be required by the ADS Depositary pursuant to the Deposit Agreement, the ADS Depositary will issue such number of ADSs representing the deposited Ordinary Shares to such Holder based on the applicable Ordinary Share-to-ADS ratio then in effect. All calculations relating to redemption and conversion, including adjustment of the Share Conversion Price, will be made to the nearest 0.01 of an Ordinary Share or other property or the nearest cent. However, fractions of Ordinary Shares will not be issued on conversion or deposited with the ADS Depositary, and no cash adjustments will be made in respect of any such fraction. Under the ADS Deposit Agreement, the ADS Depositary will not issue fractions of ADSs. To convert this Convertible Note, a Holder must, during the normal business hours at the office of the Conversion Agent, in London, (a) complete and manually sign a "Conversion Notice" substantially in the form included herein, including an election on whether to receive Ordinary Shares or ADSs upon conversion, and deliver such notice to the Conversion Agent, and (b) surrender this Convertible Note to the Conversion Agent duly endorsed or assigned to the Company or in blank (such date of receipt by the Conversion Agent, the "Conversion Notice Date"); provided, that appropriate endorsements and transfer documents, if any, required by the Registrar or the Conversion Agent must be furnished and any required transfer or similar tax and other required payments must be paid. 6 The Indenture contains various provisions concerning circumstances where the record date set for a dividend on the Ordinary Shares or an Adjustment Effective Date for the adjustment of the Share Conversion Price falls between the Conversion Date and the Registration Date. Notwithstanding the conversion rights referred to above, at any time when a Conversion Notice has been properly deposited with the Conversion Agent, the Company shall have the option to pay to the relevant Holder an amount of cash in U.S. dollars equal to the Cash Settlement Amount in order to satisfy such conversion right in full. The Company is required to provide notice of its exercise of the cash settlement option in the form provided in the Indenture (the "Cash Settlement Notice") to the relevant Holder as soon as practicable but no later than the fifth Business Day following the Conversion Notice Date (the actual date of such notice being the "Cash Settlement Notice Date"). The Cash Settlement Notice must specify the number of Ordinary Shares or ADSs in respect of which the Company will make such a cash payment. The Company will pay the Cash Settlement Amount not less than five Trading Days but no later than the tenth Trading Day following the Cash Settlement Notice Date. A Conversion Notice once given will be irrevocable and may not be withdrawn without the prior written consent of the Company. The Company or the Conversion Agent on its behalf may reject any incomplete or incorrect Conversion Notice. All costs and expenses incurred by an incomplete or incorrect Conversion Notice will be for the account of the relevant Holder. As conditions precedent to conversion, the Holder must pay to the Conversion Agent any taxes and capital, stamp, issue and registration duties (if any) arising on conversion, other than any taxes or capital or stamp duties payable in Singapore in respect of the allotment and issuance of the Ordinary Shares and listing of the Ordinary Shares upon conversion. In addition, the Holder will be required to pay any tax or duty relating to the conversion and transfer involved in the delivery of the Ordinary Shares upon conversion. The Company will pay all other expenses arising on the allotment and delivery of the Ordinary Shares issuable upon conversion. The Holder will be required to pay applicable fees and expenses of the Depositary upon conversion to ADSs. In the event of conversion or repayment of this Convertible Note in part only, a new Convertible Note or Convertible Notes for the unpaid portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Convertible Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Convertible Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Convertible Notes at the time Outstanding, on behalf of the Holders of all the Convertible Notes, to waive compliance by the Company with certain provisions of the Indenture and 7 certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Convertible Note shall be conclusive and binding upon such Holder and upon all future Holders of this Convertible Note and of any Convertible Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Convertible Note. As provided in and subject to the provisions of the Indenture, the Holder of this Convertible Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Convertible Notes, the Holders of not less than 25% in principal amount of the Convertible Notes at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Convertible Notes at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Convertible Note for the enforcement of any payment of principal hereof after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Convertible Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and redemption interest of this Convertible Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Convertible Note is registrable in the Security Register, upon surrender of this Convertible Note for registration of transfer at the office or agency of the Company in London and Singapore, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Convertible Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Convertible Notes are issuable only in registered form in denominations of US$1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Convertible Notes are exchangeable for a like aggregate principal amount of Convertible Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Convertible Note for registration of transfer the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Convertible Note is registered as the owner hereof for all 8 purposes, whether or not this Convertible Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All capitalized terms used but not defined in this Convertible Note shall have the meanings assigned to them in the Indenture. 9 EX-8.1 18 u92302exv8w1.txt EX-8.1 LIST OF SUBSIDIARIES EXHIBIT 8.1 Subsidiaries of ST Assembly Test Services Ltd ST Assembly Test Services, Inc. Jurisdiction of Incorporation: Delaware, United States FastRamp Test Services, Inc. Jurisdiction of Incorporation: Delaware, United States Winstek Semiconductor Corporation Jurisdiction of Incorporation: Taiwan, R.O.C. STATS Holdings Ltd Jurisdiction of Incorporation: British Virgin Islands STATS Shanghai Ltd Jurisdiction of Incorporation: Shanghai, People's Republic of China Camelot Merger, Inc. Jurisdiction of Incorporation: Delaware, United States EX-12.1 19 u92302exv12w1.txt CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER EXHIBIT 12.1 CERTIFICATIONS I, Tan Lay Koon, certify that: 1. I have reviewed this annual report on Form 20-F of ST Assembly Test Services Ltd; 2. Based on my knowledge, this annual 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(e)) for the company 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 company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the company'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 company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company'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 company'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 company's internal control over financial reporting. Date: March 19, 2004 /s/ Tan Lay Koon - ----------------------------------- Tan Lay Koon President and Chief Executive Officer EX-12.2 20 u92302exv12w2.txt CERTIFICATION BY THE CHIEF FINANCIAL OFFICER EXHIBIT 12.2 I, Pearlyne Wang, certify that: 1. I have reviewed this annual report on Form 20-F of ST Assembly Test Services Ltd; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(e)) for the company 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 company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the company'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 company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company'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 company'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 company's internal control over financial reporting. Date: March 19, 2004 /s/ Pearlyne Wang - ------------------------------ Pearlyne Wang Acting Chief Financial Officer EX-13.1 21 u92302exv13w1.txt CERTIFICATE OF SECTION 906 TO SARBANES OXLEY ACT EXHIBIT 13.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of ST Assembly Test Services Ltd (the "Company") on Form 20-F for the period ending December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify that to the best of our knowledge: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 19, 2004 /s/ Tan Lay Koon ------------------------------------- Name: Tan Lay Koon Title: President and Chief Executive Officer Date: March 19, 2004 /s/ Pearlyne Wang ------------------------------------- Name: Pearlyne Wang Title: Acting Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----