Exhibit (b)(iii) AU Optronics Corp.
Exhibit
(b)(iii)
AU
Optronics Corp.
0
Xx-Xxxx Xxxx 0
Xxxxxxx-Xxxxx
Xxxxxxxxxx Xxxx
Xxxx-Xxxx
000
Xxxxxx,
Xxxxxxxx of China
Dated as
of October 1, 2006
Citibank,
N.A. - ADR Department
000
Xxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Issuance of ADSs in Exchange
for GDSs of Quanta Display Inc. and
Assumption of Convertible
Bonds of Quanta Display Inc.
Ladies
and Gentlemen:
Reference
is made to the Deposit Agreement, dated as of May 29, 2002, as amended by
Amendment No. 1 to the Deposit Agreement, dated as of February 15, 2006 (as so
amended, the “Deposit
Agreement”), by and among AU Optronics Corp., a company incorporated
under the laws of the Republic of China (the “Company”), Citibank,
N.A., as depositary (the “Depositary”), and the
Holders and Beneficial Owners of American Depositary Shares (the “ADSs”) evidenced by
American Depositary Receipts issued thereunder, each ADS representing 10 shares
of common stock, par value NT$10.00 per share, of the Company (the “Shares”). All
capitalized terms used, but not otherwise defined in this letter agreement (the
“Letter
Agreement”), shall have the meaning assigned thereto in the Deposit
Agreement.
The
Company has entered into a Merger Agreement, dated April 7, 2006 (the “Merger Agreement”),
between the Company and Quanta Display Inc., a company incorporated under the
laws of the Republic of China (“QDI”), pursuant to
which QDI will merge with and into the Company (such transaction, the “Merger”). As
a result of the Merger, QDI will be dissolved and the Company will be the
surviving company. Subject to the satisfaction or waiver of the
conditions to closing of the Merger provided by the Merger Agreement, the
effective date for the Merger is the date hereof (the “Effective
Date”).
Prior to
the Effective Date, QDI had issued and outstanding shares of common stock, par
value NT$10.00 per share (the “QDI Common
Stock”). In accordance with the Merger Agreement, the shares
of QDI Common Stock are to be cancelled and extinguished and converted into
Shares at the conversion ratio of 1 Share for every 3.5 shares of the QDI Common
Stock outstanding immediately prior to the Effective Date (the “Share Exchange”, and
the Shares issued to the QDI Depositary (as defined below) in exchange for the
shares of QDI Common Stock held by the QDI Depositary underlying the issued and
outstanding QDI GDSs (as defined below) as of the Effective Date pursuant to
such Share Exchange, the “Exchange
Shares”).
1
In
addition, prior to the Effective Date, QDI had issued and outstanding global
depositary shares (the “QDI International
GDSs”) issued pursuant to an International Deposit Agreement, dated as of
October 2, 2003, among QDI, Citibank, N.A., as depositary thereunder (the “QDI Depositary”), and
the holders and beneficial owners from time to time of QDI International GDSs
evidenced by International global depositary receipts issued thereunder, as the
same may have been amended and supplemented from time to time (such agreement,
as so amended and supplemented, the “QDI International Deposit
Agreement”). In addition, QDI and the QDI Depositary had
entered into a Rule 144A Deposit Agreement, dated as of October 2, 2003, among
QDI, the QDI Depositary, and the holders and beneficial owners from time to time
of Rule 144A global depositary shares (“QDI Rule 144A GDSs”,
and together with the QDI International GDSs, the “QDI GDSs”) evidenced
by Rule 144A global depositary receipts issued thereunder, as the same may have
been amended and supplemented from time to time (such agreement, as so amended
and supplemented, the “QDI Rule 144A Deposit
Agreement,” and collectively with the QDI International Deposit
Agreement, the “QDI
Deposit Agreements”). As of the Effective Date, there were no
QDI Rule 144A GDSs issued or outstanding. As a result of the Merger,
each QDI GDS issued and outstanding as of the Effective Date, shall, promptly
after the Effective Date, be automatically exchanged for 0.57142857 ADSs without
any action on the part of the holders of QDI GDSs (the “GDS Exchange”, and
the ADSs issued pursuant to such GDS Exchange, the “Exchange
ADSs”).
In
addition, in two separate prior transactions, QDI issued in concurrent
transactions under Rule 144A under the Securities Act and Regulation S under the
Securities Act (a) Zero Coupon Convertible Bonds due 2009 (the “February 2004
Bonds”), in the aggregate principal amount of $270,000,000, pursuant to
an Indenture, dated as of February 5, 2004 (the “February 2004
Indenture”), between QDI and Citibank, N.A., as trustee thereunder, and
(b) Zero Coupon Convertible Bonds due 2009 (the “November 2004 Bonds”,
and collectively with the February 2004 Bonds, the “Bonds”), in the
aggregate principal amount of $294,500,000, pursuant to an Indenture, dated as
of November 26, 2004 (the “November 2004
Indenture”, and collectively with the February 2004 Indenture, the “Indentures”), between
QDI and Citibank, N.A., as trustee thereunder. Each of the Bonds was,
prior to the Effective Date, convertible, at the option of the holder thereof
(such holder, a “Converting
Bondholder”), into shares of QDI Common Stock or into QDI GDSs, as the
case may be, in each case in accordance with terms of the applicable Indenture
and QDI Deposit Agreement.
In
connection with the Merger and as required by the terms of each of the
Indentures, the Company has agreed to assume the obligations of QDI pursuant to
the Indentures. In connection with such assumption of obligations,
the Company has concurrently herewith entered into supplemental indentures, each
dated as of September 30, 2006 (the “Supplemental
Indentures”), each among the Company, QDI and the respective Indenture
trustee with regards to each of the Indentures. Pursuant to the terms
of each of the Supplemental Indentures, the Deposit Agreement and this Letter
Agreement, Converting Bondholders, at their option, will be entitled to receive
Shares or ADSs upon conversion of their Bonds (the ADSs to be received by
holders of the Bonds, the “Conversion ADSs”)
rather than shares of QDI Common Stock or QDI GDSs issued pursuant to the
applicable QDI Deposit Agreement. In connection with such issuance of
Conversion ADSs, the Company will deposit with the Custodian Shares (the Shares
underlying the Conversion ADSs, the “Conversion Shares”)
in order to enable the issuance by the Depositary of the corresponding
Conversion ADSs.
2
The
Company wishes to establish, under the terms of Section 2.3 of the Deposit
Agreement, procedures for the issuance of Exchange ADSs and, upon conversion of
Bonds by Converting Bondholders, of Conversion ADSs, and the delivery of
Exchange ADSs to the holders of QDI GDSs and of Conversion ADSs to Converting
Bondholders, upon the terms and conditions of this Letter Agreement and, in the
case of Conversion ADSs, the Supplemental Indentures. The purpose and
intent of this Letter Agreement is to supplement the Deposit Agreement for the
sole purpose of accommodating the issuance and delivery of the Exchange ADSs
and, upon the conversion of the Bonds, the Conversion ADSs. The
Company and the Depositary agree that this Letter Agreement shall be filed as an
exhibit to the next Registration Statement on Form F-6 filed with the Commission
in respect of the ADSs and, if applicable, shall be filed by the Company with
governmental authorities in the ROC in accordance with applicable ROC laws and
regulations.
For good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Depositary hereby agree, as
follows:
A. Exchange
of QDI GDSs
In
furtherance of the foregoing and pursuant to the terms of Section 2.3 of the
Deposit Agreement and notwithstanding any terms of the Deposit Agreement to the
contrary, the Company hereby consents to the deposit of the Exchange Shares with
the Custodian and authorizes and directs the Depositary, and the Depositary
agrees upon the terms and subject to the conditions set forth in this Letter
Agreement, to accept a deposit of Exchange Shares from the QDI Depositary on
behalf of holders of QDI GDSs in order to facilitate the GDS Exchange and the
issuance of Exchange ADSs by the Depositary upon the terms and conditions set
forth in the Deposit Agreement, as supplemented by the terms of this Letter
Agreement.
Notwithstanding
anything contained herein or in the Deposit Agreement to the contrary, the
Company hereby advises the Depositary, and the Depositary hereby acknowledges
that, as a result of the operation of ROC law with respect to the Merger and the
prior government approvals obtained by QDI, after the Effective Date, the
aggregate number of Shares that may be deposited into the ADS facility (the
“Facility”)
will be increased by 172,287,973 Shares and the aggregate number of ADSs that
may be issued against deposits of Shares will be increased by 17,228,797
ADSs.
The Company agrees that the holders of
QDI GDSs shall be entitled, upon the GDS Exchange, only to an integral number of
Exchange ADSs. Fractions of Exchange ADSs shall not be issuable, and
instead, all fractional entitlements to Exchange ADSs will be aggregated by the
QDI Depositary and sold in the open market. The net proceeds from the
sale of the fractional entitlements to Exchange ADSs (after deduction of
applicable fees, taxes and expenses) will be distributed to the applicable
holders of QDI GDSs.
3
B. Conversion
of Bonds
The
Company and the Depositary hereby confirm and agree that the Company shall
procure all Converting Bondholders who desire to convert their Bonds and receive
Conversion ADSs to cause the person receiving such Conversion ADSs to provide
the Depositary with documentation required by the Depositary or the Custodian in
connection with the deposit of Conversion Shares issuable upon conversion of the
Bonds. Notwithstanding anything herein or in any other agreement to
the contrary, the Depositary shall have no obligation to issue any Conversion
ADSs until and unless it has received fully and properly completed documentation
and the payments pursuant to the Deposit Agreement.
C. Procedures
Accommodating the Issuance of Conversion ADSs
1. Deposits
of Conversion Shares. In furtherance of the foregoing and
pursuant to the terms of Section 2.3 of the Deposit Agreement and
notwithstanding any terms of the Deposit Agreement to the contrary, the Company
hereby consents to the deposit of the Conversion Shares with the Custodian upon
the conversion of Bond and authorizes and directs the Depositary to issue and
deliver to the applicable Converting Bondholder the corresponding number of
Conversion ADSs. In furtherance of the foregoing, the Company requests the
Depositary, and the Depositary agrees upon the terms and subject to the
conditions set forth in this Letter Agreement, to establish procedures to enable
the deposit of Conversion Shares with the Custodian by the Company in order to
enable the issuance and delivery by the Depositary of the corresponding
Conversion ADSs upon the terms and conditions set forth in the Deposit
Agreement, as supplemented by the terms of this Letter Agreement.
Notwithstanding
anything contained herein or in the Deposit Agreement to the contrary, the
Company hereby advises the Depositary, and the Depositary hereby acknowledges
that, as a result of the operation of ROC law with respect to the Merger and the
prior government approvals obtained by QDI, after the Effective Date, the
aggregate number of Shares that may be deposited into the Facility and the
corresponding aggregate number of ADSs that may be issued against deposits of
Shares will be increased by the number of Conversion Shares and the
corresponding number of Conversion ADSs issued with respect to the Conversion
Shares.
The
Company agrees that the Converting Bondholders shall be entitled, upon
conversion, only to a number of the applicable Conversion Shares to be
represented by an integral number of Conversion ADSs. Conversion
Shares which would be represented by a fraction of one Conversion ADS shall not
be issuable, and such Converting Bondholders will not receive cash adjustments
in respect of such fractions from the Company.
2. Depositary
Fees. The Company and the Depositary agree that the Depositary
shall, as contemplated in the Deposit Agreement, be authorized to charge to the
person receiving the Conversion ADSs issued in connection with a conversion of
Bonds a depositary fee of up to U.S.$0.05 per Conversion ADS
issued.
3. Limitations
on Issuance of Conversion ADSs. The Company hereby instructs
the Depositary, and the Depositary agrees, upon the terms and subject to the
conditions set forth in this Letter Agreement, and notwithstanding the terms of
the Deposit Agreement, to issue and deliver to the applicable Converting
Bondholder the Conversion ADSs issued in respect of the Conversion Shares
deposited by the Company upon satisfaction by the applicable Converting
Bondholder of the conditions set forth in the applicable Supplemental Indenture,
only upon receipt from the Company (or any of its designated agents) of a
deposit of the applicable number of Conversion Shares.
4
D. Miscellaneous
1. Representations
and Warranties. The Company hereby represents and warrants
that, upon issuance, the Exchange Shares and the Conversion Shares shall be
(a) duly authorized, validly issued, fully paid and non-assessable, and all
preemptive (and similar) rights, if any, with respect to the Exchange Shares and
the Conversion Shares shall have been validly waived or exercised, (b) free and
clear of any lien, encumbrance, security interest, charge, mortgage or adverse
claim, and (c) of the same class, shall rank fully pari passu with and shall be
fully fungible in all regards, including with regard to trading and settlement,
with the other Shares on deposit under the Deposit Agreement. Such
representations and warranties shall survive the deposit and withdrawal of the
Exchange Shares or the Conversion Shares, as the case may be, and the issuance,
delivery, cancellation and transfer of Exchange ADSs or Conversion ADSs, as the
case may be.
In
addition, the Company hereby represents and warrants that (x) the deposit of the
Exchange Shares and, upon conversion of Bonds, the relevant Conversion Shares is
permitted by, and is being conducted in accordance with, all ROC laws and
regulations, and shall not breach or violate the terms of any indenture, trust
deed, mortgage, lease or other agreement of the Company, and (y) except for the
filing of the Supplement Indentures and this Letter Agreement to the ROC
Financial Supervisory Commission and the prior government approvals obtained by
QDI, all governmental and administrative authorizations, consents, approvals,
registrations and permits required under applicable ROC law have been obtained
for the deposit of Exchange Shares and, upon conversion of Bonds, the Conversion
Shares, the issuance of Exchange ADSs in respect of such Exchange Shares or
Conversion ADSs in respect of such Conversion Shares, respectively.
2. Company
Assistance. The Company agrees to (a) provide
commercially reasonable assistance to the Depositary upon the request of the
Depositary in the establishment of the procedures contemplated herein to enable
the acceptance of the deposit by the Company of the Exchange Shares and the
Conversion Shares and the issuance and delivery of Exchange ADSs to the holders
of QDI GDSs or Conversion ADSs to the applicable Converting Bondholders, as the
case may be, and (b) take all commercially reasonable steps requested by
the Depositary to ensure that the acceptance of the deposit of the Exchange
Shares and the Conversion Shares, as the case may be, and the issuance and
delivery of Exchange ADSs to the holders of QDI GDSs and Conversion ADSs to the
applicable Converting Bondholders, as the case may be, in each case upon the
terms and conditions set forth herein, do not prejudice any substantial existing
rights of Holders and Beneficial Owners of ADSs and do not violate the
provisions of the Securities Act or any other applicable laws.
5
In
furtherance of the foregoing, upon the Effective Date, the Company shall deliver
to the Depositary (x) a copy of all approvals (with English translations to
follow as soon as practicable after the Effective Date) received from
governmental agencies in the ROC approving the issuance of the Bonds, the
issuance of the Exchange Shares and the Conversion Shares and the deposit of the
Exchange Shares and the Conversion Shares, and (y) opinions of U.S. and ROC
counsel regarding the legality of the conversion of Bonds, the deposit of the
Conversion Shares with the Custodian and the issuance of Conversion
ADSs.
3. Fungibility. The
Company hereby confirms that the Exchange ADSs and the Conversion ADSs shall be
treated as and shall be fully fungible with the ADSs issued and outstanding
under the terms of the Deposit Agreement that are not Exchange ADSs or
Conversion ADSs. Nothing contained herein shall obligate the
Depositary to treat Exchange ADSs or Conversion ADSs differently from ADSs
otherwise issued under the Deposit Agreement.
4. Indemnity. Each of the
Company and the Depositary acknowledges and agrees that the indemnification and
other provisions of Section 5.8 of the Deposit Agreement shall apply to the
acceptance of Exchange Shares and Conversion Shares for deposit and the issuance
and delivery of Exchange Shares and Conversion ADSs, in each case upon the terms
set forth herein, as well as to any other acts performed or omitted by the
Depositary and the Company, as contemplated by this Letter
Agreement.
5. Governing
Law. This Letter
Agreement shall be interpreted under, and all the rights and obligations
hereunder shall be governed by, the laws of the State of New York, without
regard to the principle of conflicts of law thereof.
6. Further
Assurances. The parties
hereto agree to duly execute and deliver, or cause to be duly executed and
delivered, such further documents and instruments and do and cause to be done
such further acts, as may be reasonably requested by the other party in order to
implement the terms and provisions of this Letter Agreement and to effectuate
the purpose and intent hereof.
7. Counterparts. This Letter
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, and all of which, taken together, shall constitute one and the same
instrument.
[Signature page follows.]
6
The
Company and the Depositary have caused this Letter Agreement to be executed and
delivered on their behalf by their respective officers thereunto duly authorized
as of the date set forth above.
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AU
OPTRONICS CORP.
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By:
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/s/ Max
Xxxxxxx Xxxxx
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| Name: |
Max
Xxxxxxx Xxxxx
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| Title: |
Chief
Financial Officer
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Agreed to
as of the date set forth above:
CITIBANK,
N.A.,
as Depositary
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By:
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/s/ Xxxxx X.
Xxxxxxx
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| Name: |
Xxxxx
X. Xxxxxxx
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| Title: |
Vice
President
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S-1
