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EXHIBIT 10.4
S CORPORATION TERMINATION, TAX ALLOCATION
AND INDEMNIFICATION AGREEMENT
This S CORPORATION TERMINATION, TAX ALLOCATION AND INDEMNIFICATION
AGREEMENT (the "Agreement"), between Amkor Technology, Inc., a Delaware
corporation ("ATI"), Amkor Electronics, Inc., a Pennsylvania corporation ("AEI",
ATI and AEI are collectively referred to the "Company"), and Xxxxx X. Xxx, the
Xxxxx X. Xxx Trust of December 31, 1987, the Xxxx X. Xxx Trust of December 31,
1987, and the Xxxxx X. Xxx Trust of December 31, 1987 (each such person or
entity, a "Shareholder," and such person and all such entities, collectively,
the "Shareholders") (the Company and the Shareholders are hereinafter referred
to individually as a "party" and collectively as the "parties").
WHEREAS, AEI is an S corporation, as defined in Section 1361(a) of the
Code (as hereinafter defined) and will continue to be an S corporation until the
Termination Date (as hereinafter defined); and
WHEREAS, AEI will be merged with and into ATI pursuant to a
reincorporation of AEI into Delaware in a tax free reorganization; and
WHEREAS, the Shareholders own capital stock of the Company; and
WHEREAS, it is anticipated that ATI will close an underwritten initial
public offering of its common stock (the "Public Offering"); and
WHEREAS, in connection with the Public Offering, it is anticipated that
AEI will distribute to the Shareholders an amount which represents AEI's
cumulative net income in all prior periods while it was an S corporation, less
the amount of distributions previously made to the Shareholders; and
WHEREAS, prior to the merger of AEI with and into ATI, the Shareholders
and the Company wish to revoke AEI's status as an S Corporation; and
WHEREAS, the Shareholders and the Company wish to enter into an
agreement as to the termination of AEI's status as an S corporation, the method
used to allocate AEI's income during its S Termination Year (as hereinafter
defined) pursuant to Code Section 1362(e)(3), and the indemnification of the
Company and the Shareholders with respect to certain tax matters.
NOW, THEREFORE, the parties agree as follows:
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ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the following
meanings:
"C Short Year" means the portion of the S Termination Year of the
Company beginning on the Termination Date and ending on December 31, 1998.
"Code" means the Internal Revenue Code of 1986, as amended, and, in
the context of a state or local tax, a reference to the Code or a section of the
Code includes any similar applicable provision of state or local law.
"Excess Distributions" means the excess of cash or property
distributions by the Company to a Shareholder over the federal and state income
taxes paid by the Shareholder with respect to the taxable income of the Company
for all periods during which the Company has been an S corporation, including
the S Short Year.
"S Short Year" means that portion of the S Termination Year of the
Company beginning on January 1, 1998, and ending on the day before the
Termination Date.
"S Termination Year" means the Company's fiscal year beginning
January 1, 1998.
"Taxes" means all taxes, however denominated, including any
interest, penalties or additions to tax that may become payable in respect
therewith, imposed by any federal, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income, payroll
and employee withholding, unemployment insurance, social security, sales and
use, excise, profits, value added, ad valorem, occupancy, disability, franchise,
gross receipts, environmental, occupation, real and personal property, stamp,
transfer, license, net worth, real property gains, capital, worker's
compensation taxes.
"Tax Benefit" shall mean (i) with respect to a Shareholder the
amount of the Tax savings resulting from a decrease in that Shareholder's
allocable share of S Corporation taxable income if and to the extent that
decrease results in an increase (or would result in an increase absent a net
operating loss) in the Tax liability of the Company, and (ii) with respect to
the Company the amount of the Tax savings resulting from a decrease in its
taxable income if and to the extent that decrease results in an increase in the
Tax liability of a Shareholder attributable to that Shareholder's allocable
share of S Corporation taxable income.
"Tax Returns" means all reports, estimates, information statements
and returns relating to, or required to be filed in connection with, any Taxes.
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"Termination Date" means the date on which S corporation status of
AEI is terminated as a result of revocation of such status in accordance with
Section 1362(d)(1) of the Code or otherwise.
ARTICLE II
TERMINATION
2.1 TERMINATION OF S STATUS. AEI's S corporation status shall be
terminated as a result of revocation of such status pursuant to Section
1362(d)(1) of the Code. The Company agrees to execute and file with the Internal
Revenue Service an executed election in substantially the form attached hereto
to as Exhibit A, prior to the Termination Date. The termination of the AEI's S
corporation status shall be effective prior to (i) its reincorporation as ATI
and (ii) the closing of the Public Offering.
2.2 SHAREHOLDER CONSENT. Each Shareholder agrees to execute and deliver
to the Company an executed consent in substantially the form attached hereto to
as Exhibit B, prior to the Termination Date.
ARTICLE III
ALLOCATION OF INCOME
3.1 ALLOCATION ELECTION. The Company agrees to elect and the
Shareholders agree to consent, pursuant to Section 1362(e)(3) of the Code, to
allocate Tax items to its S Short Year and C Short Year pursuant to normal tax
accounting rules (the "closing of the books method") rather than by the pro rata
allocation method contained in Section 1362(e)(2) of the Code. The Company and
each of the Shareholders agree to take all necessary actions under Treasury
Regulation Section 1.1362-6 (or successor thereto) to cause such election and
consents and the revocation election and consents to be effective for federal
income tax purposes, including the execution and delivery, by the Shareholders
to the Company of a consent in substantially the form attached hereto as Exhibit
C, prior to the Termination Date. Additionally, the Company agrees to execute
and attach to its Tax Return filed with the Internal Revenue Service an executed
election in substantially the form attached hereto to as Exhibit D.
ARTICLE IV
TAX RETURNS AND INDEMNIFICATION
4.1 FILING TAX RETURN FOR THE TERMINATION YEAR. The Company shall be
responsible for and shall effect the filing of all Tax Returns required to be
filed by the Company with respect to all taxable periods ending prior to, with
or within the Termination Year. The Company shall cause such returns to include
the Company's income from all sources for all periods covered by such returns.
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4.2 SHAREHOLDER INDEMNIFICATION FOR TAX LIABILITIES. Except with respect
to any tax jurisdiction that does not recognize S corporations as pass-through
entities and to the extent any tax jurisdiction either (i) does not accord S
corporation tax treatment to nonresident shareholders or (ii) requires an S
corporation to make an affirmative election to be treated as an S corporation
and the Company does not make such an election, each Shareholder, severally
(according to the percentage of the outstanding shares of the Company's common
stock owned by such Shareholder for the year in question) and not jointly,
hereby indemnifies and agrees to hold the Company harmless from, against and in
respect for any U.S. federal or state income Tax liability (including interest
and penalties), if any, resulting from the Company failing to qualify as an S
corporation under Code Section 1361(a)(1) (as enacted and in effect prior to the
Termination Date), pursuant to a final determination by the applicable taxing
authority, for every taxable year on or before the Termination Date as to which
the Company filed or files Tax Returns claiming status as an S corporation,
provided, however, that the total payments to be made by a Shareholder pursuant
to this Section 4.2 shall not exceed the Excess Distributions received by the
Shareholder with respect to all taxable years in which such Shareholder was a
Shareholder.
4.3 COMPANY INDEMNIFICATION FOR TAX LIABILITIES. Except with respect to
any tax jurisdiction that does not recognize S corporations as pass-through
entities and to the extent any tax jurisdiction either (i) does not accord S
corporation tax treatment to nonresident shareholders or (ii) requires an S
corporation to make an affirmative election to be treated as an S corporation
and the Company does not make such an election, the Company hereby indemnifies
and agrees to hold each Shareholder harmless from, against and in respect for,
on an after-tax basis, any U.S. federal or state income Tax liability (including
interest and penalties), if any, resulting from such Shareholder being required
to include in income, pursuant to a final determination by the applicable taxing
authority, amounts in excess of the income shown to be reportable by such
shareholder on the Tax Returns of the Company as originally filed for every
taxable year on or before the Termination Date as to which the Company filed or
files Tax Returns claiming status as an S corporation; provided, however, that
any indemnification and hold harmless hereunder shall be limited to the amount
of cash or the value of property actually received by the Company from another
party (or deemed received by the Company in the case of another entity actually
owned, directly or indirectly, by the Company) connected to the event giving
rise to such requirement to include additional amounts in a Shareholder's
income.
4.4 INDEMNIFICATION FOR TIMING DIFFERENCES. The Company and each of the
Shareholders hereby agree to pay to the other party the amount of any Tax
Benefit (as defined above) resulting from a final determination of an adjustment
(by reason of an amended return, claim for refund, audit or otherwise) with
respect to such parties' federal or state Tax liability.
4.5 AUDIT AND CONTEST RIGHTS. The parties hereto shall cooperate with
each other in the conduct of any audit or other proceeding relating to Taxes.
Within ten (10) days of the notice of any proposed or threatened adjustment
which could give rise to a claim for indemnification under Section 4.2, 4.3, or
4.4, the Company shall notify the Shareholders or a Shareholder shall notify the
Company thereof. The Shareholders shall have the right to control any resulting
proceedings and to determine when, whether and to what extent to settle any such
claim, assessment or dispute which would give rise to a claim for
indemnification under Section 4.2 or
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4.4. The Company shall have the right to control any resulting proceedings and
to determine when, whether and to what extent to settle any such claim,
assessment or dispute which would give rise to a claim for indemnification under
Section 4.3 or 4.4. A party hereto shall not make any election, take any Tax
Return position, or agree to any adjustment or adjustments that would have the
effect of increasing any Tax liability with respect to any period ending on or
before the Termination Date without obtaining the prior written consent of the
other party. Each party agrees to execute any powers of attorney or other
documents necessary to permit the appropriate party to conduct such proceedings.
4.6 PAYMENTS. A party required to make any payment under Section 4.2,
4.3 or 4.4 shall make such payment within thirty (30) days after the final
determination (as such term is defined in Section 1313(a) of the Code) of any
Tax liability resulting in a claim for indemnification.
ARTICLE V
MISCELLANEOUS
5.1 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute an instrument representing the
Agreement between the parties hereto.
5.2 CONSTRUCTION OF TERMS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, form or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
5.3 GOVERNING LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania choice of law rules.
5.4 AMENDMENT AND MODIFICATION. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties any rights or remedies hereunder.
5.5 INTERPRETATION. The title, article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
5.6 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to illegal, invalid and unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and
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the parties shall use their best efforts to replace such illegal, invalid or
unenforceable provisions with an enforceable provision approximating, to the
extent possible, the original intent of the parties.
5.7 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter constrained
herein. There are no representations, promises, warranties, covenants, or
undertakings with respect to the subject matter contained herein, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
5.8 EFFECTIVE DATE. This Agreement shall become effective on the
Termination Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of __________, 1998.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:_______________________________ By:___________________________________
Title: President Title: Secretary
AMKOR ELECTRONICS, INC., A PENNSYLVANIA CORPORATION
By:_______________________________ By:___________________________________
Title: President Title: Secretary
SHAREHOLDERS:
__________________________________ ______________________________________
Xxxxx X. Xxx the Xxxxx X. Xxx Trust of
December 31, 1987
__________________________________ ______________________________________
the Xxxx X. Xxx Trust of the Xxxxx X. Xxx Trust of
December 31, 1987 December 31, 1987
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EXHIBIT A
STATEMENT OF REVOCATION OF ELECTION
Internal Revenue Service Center
{Address}
RE: Amkor Technology, Inc., a Delaware corporation
EIN 00-0000000
Revocation of S Corporation Election
The S corporation election under IRC Section 1362(a) of Amkor
Technology, Inc., a Delaware corporation, with its principal office located at
0000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx 00000, is hereby revoked as of
(DATE). At the time of revocation, the number of shares (issued and outstanding)
of Amkor Technology, Inc. stock, including nonvoting stock, is (NUMBER).
Attached are the consents to the revocation by shareholders owning more
than one-half of the issued and outstanding shares.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:___________________________
Title: President
Date:_________________________
Attachment
{All revocations and consents should be mailed to the IRS certified mail return
receipt requested.}
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EXHIBIT B
SHAREHOLDERS' STATEMENT OF CONSENT TO REVOCATION OF ELECTION
We, the undersigned, being shareholders of Amkor Technology, Inc., a
Delaware corporation ("ATI") holding more than one-half of ATI's issued and
outstanding shares (including nonvoting stock), do hereby consent to the
revocation by ATI of its S corporation election under IRC Section 1362(a). The
revocation is to be effective as of __________ 1998.
Under penalties of perjury, the undersigned declare that the facts
presented in the accompanying statement are, to the best of our knowledge and
belief, true, correct, and complete.
Social Security Date
Name and or Employer Number of Acquired Tax Year End
Address Identification Shares Per Regs. (Month & Day)
Number Owned 1.1362-6(b)(1)
Xxxxx X. Xxx ________________ __________ ___________
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
the Xxxxx X. Xxx Trust
of December 31, 1987 ________________ __________ ___________
0000 X. Xxxxxxxxx Xxxxxx
Xxxxx, XX 00000
the Xxxx X. Xxx Trust
of December 31, 1987 ________________ __________ ___________
0000 X. Xxxxxxxxx Xxxxxx
Xxxxx, XX 00000
the Xxxxx X. Xxx Trust
of December 31, 1987 ________________ __________ ___________
0000 X. Xxxxxxxxx Xxxxxx
Xxxxx, XX 00000
______________________________ ______________________________________
Signature Signature
______________________________ ______________________________________
Signature Signature
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Dated:______________, 1998
{All election and consents should be mailed to the IRS certified mail return
receipt requested.}
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EXHIBIT C
SHAREHOLDER CONSENT
RE: Amkor Technology, Inc., a Delaware corporation
EIN 00-0000000
SHAREHOLDER NAME:_______________________________
SHAREHOLDER ADDRESS:____________________________
____________________________
____________________________
____________________________
TAXPAYER IDENTIFICATION NUMBER:_________________
NUMBER OF SHARES:_______________________________
DATE OR DATES SHARES ACQUIRED:__________________
__________________
DATE SHAREHOLDER'S TAX YEAR ENDS:_______________
THE UNDERSIGNED HEREBY CONSENTS TO THE ELECTION OF AMKOR TECHNOLOGY, INC., A
DELAWARE CORPORATION TO ALLOCATE THE TAXABLE INCOME OF THE CORPORATION FOR THE S
TERMINATION YEAR AS PROVIDED BY SECTION 1362(e)(3) OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED.
This consent is executed by the undersigned under penalties of perjury.
Date:____________________________ Signature:______________________________
Date:____________________________ Signature:______________________________
Note: Each person owning a community property, tenancy in common, joint tenancy,
or tenancy by the entirety interest must sign. Consent of minor must be by legal
representative or parent if no legal representative. Consent of qualifying trust
must be the person treated as shareholder under Section 1361(b)(1) of the Code.
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EXHIBIT D
ELECTION TO CLOSE BOOKS UPON S CORPORATION TERMINATION.
(Attach to Form 1120)
Amkor Technology, Inc., a Delaware corporation ("ATI"), EIN 00-0000000,
with the consent of all the shareholders of the short S year and all the
shareholders on the first day of the short C year (attached), elects under IRC
Section 1362(e)(3) not to have the pro rata allocation of S corporation items
under IRC Section 1362(e)(2) apply to the S termination year ending (Date). The
date of the ATI's termination was _______________, 1998 and the cause of
termination was an election to revoke its status as an S corporation.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:______________________________
Title: President
Date:____________________________
Attachment
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