Notice of 69 th Annual General Meeting of Shareholders (Scheduled to be held on March 24, 2017) To our Shareholders: You are cordially invited to attend the 69 th Annual General Meeting of Shareholders ( the Meeting ) of SK hynix Inc. ( the Company ), which is scheduled to be held on March 24, 2017 at 10:00 a.m. at Guest House of the Company s Head Office, located at 2091 GyeongChung-DaeRo, Bubal-eub, Icheon-si, Gyeonggi-do, for the following matters: Shareholders Meeting Agenda 1. Approval of the Financial Statements for the 69 th fiscal year (2016.1.1 ~ 2016.12.31) (Annual Cash dividend per share: KRW 600) 2. Approval of amendments to the Articles of Incorporation 3. Election of Inside Director (Candidate: Lee, Seok Hee) 4. Election of Non-Executive Director (Candidate: Park, Jung Ho) 5. Election of Outside Director 5-1. Election of Outside Director (Candidate: Choi, Jong-Won) 5-2. Election of Outside Director (Candidate: Shin, Changhwan) 6. Election of Outside Director taking concurrent office as member of the Audit Committee 6-1. Election of Outside Director taking concurrent office as member of the Audit Committee (Candidate: Choi, Jong-Won) 6-2. Election of Outside Director taking concurrent office as member of the Audit Committee (Candidate: Shin, Changhwan) 7. Approval of the Ceiling Amount of Remuneration for Directors (Proposed Ceiling Amount of Remuneration for Directors is KRW 12 billion, which is the same as in the previous year) 8. Approval of the Granting of Stock Options (Stock options granted to Park, Sung Wook)
These matters are described in detail in the Shareholders Meeting Agenda accompanying this notice. We note that this notice, the Shareholders Meeting Agenda and the attachments hereto (the Shareholders Materials ) are English-language translations of Korean-language materials that were already disclosed in Korea. We are providing the Shareholders Materials for your convenience and to facilitate the exercise of your voting rights with respect to the above-mentioned matters at the Meeting. Therefore, in the event of any discrepancy between this Shareholders Materials and the said Koreanlanguage materials, the Korean-language materials shall prevail. The original Korean-language materials have been disclosed to the Korea Exchange on February 22, 2017 and are available for your review. We strongly encourage you to contact Hyang Yeon Song at (+82-31) 8093-4581, should you have any further questions with respect to these matters to be voted upon at the Meeting. Only holders of record as of December 31, 2016 are entitled to receive this notice and to vote at the Meeting. With respect to Global Depositary Shares, the record date is December 30, 2016 pursuant to the Deposit Agreement. Please keep in mind that your vote is very important. All shares that are properly represented prior to the Meeting will be voted at the Meeting in accordance with your instructions. By Order of the Board of Directors Park, Sung Wook CEO & Vice Chairman SK hynix Inc.
Shareholders Meeting Agenda Agenda 1. Approval of the Financial Statements for the 69 th fiscal year (2016.1.1 ~ 2016.12.31) (Annual Cash dividend per share: KRW 600) Audit Report with Independent Auditors opinion was disclosed in its Korean version on Feb 23, 2017 and was disclosed in its English version on Feb 28, 2017. These reports are available in the disclosure dated Feb 23, 2017 and on our website (links provided below). Audit Report filing (KRX Corporate Disclosure website in Korean): http://kind.krx.co.kr/common/disclsviewer.do?method=search&acptno=20170223000636&docno=&view erhost=&viewerport= SK hynix website: http://www.skhynix.com/eng/ir/auditreport.do (Please refer to our 69 th fiscal year financial statements provided in Attachment A.) Agenda 2. Approval of amendments to the Articles of Incorporation (For more details of this agenda, please refer to the Translation of the Amended Sections of the Articles of Incorporation provided in Attachment B.) Agenda 3. Election of Inside Director (Candidate: Lee, Seok Hee) (For more details of this agenda, please refer to the Candidates for Inside Director provided in Attachment C.) Agenda 4. Election of Non-Executive Director (Candidate: Park, Jung Ho) (For more details of this agenda, please refer to the Candidates for Non-Executive Director provided in Attachment D.) Agenda 5. Election of Outside Director 5-1. Election of Outside Director (Candidate: Choi, Jong-Won) 5-2. Election of Outside Director (Candidate: Shin, Changhwan) (For more details of this agenda, please refer to the Candidates for Outside Director provided in Attachment E.) Agenda 6. Election of Outside Director taking concurrent office as member of the Audit Committee 6-1. Election of Outside Director taking concurrent office as member of the Audit Committee (Candidate: Choi, Jong-Won) 6-2. Election of Outside Director taking concurrent office as member of the Audit Committee 3
(Candidate: Shin, Changhwan) (For more details of this agenda, please refer to the Candidates for Outside Director taking concurrent office as member of the Audit Committee provided in Attachment E.) Agenda 7. Approval of the Ceiling Amount of Remuneration for Directors The proposed Ceiling Amount of Remuneration for the members of the board of directors is KRW 12 billion, which is the same as in the previous year. Agenda 8. Approval of the Granting of Stock Options (Stock options granted to Park, Sung Wook) (For more details of this agenda, please refer to the Vested Stock Option Plan provided in Attachment F.) 4
5 ATTACHMENT A
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Consolidated Financial Statements of the Company Consolidated Statements of Financial Position (As of Dec 31, 2016 and 2015, KRW in millions) 2016 2015 ASSETS Current Assets: Cash & Cash Equivalents 613,786 1,175,719 Short-term Financial instruments 3,521,893 3,615,554 Inventories 2,026,198 1,923,376 Total Current Assets 9,838,982 9,760,030 Non-current Assets: Property, Plant and Equipment 18,777,402 16,966,252 Intangible Assets 1,915,591 1,704,896 Deferred tax assets 792,368 361,204 Total Non-current Assets 22,377,044 19,917,876 Total Assets 32,216,026 29,677,906 LIABILITIES Current Liabilities Borrowings 704,860 1,013,372 Total Current Liabilities 4,160,849 4,840,698 Non-Current Liabilities Borrowings 3,631,118 2,805,223 Total Non-Current Liabilities 4,031,647 3,449,505 Total Liabilities 8,192,496 8,290,203 EQUITY Capital Stock 3,657,652 3,657,652 Capital Surplus 4,143,736 4,143,736 Other Equity (771,913) (771,913) Accumulated Other Comprehensive Income (Loss) (79,103) (1,600) Retained Earnings 17,066,583 14,358,988 Total Equity attributable to owners of the Parent Company 24,016,955 21,386,863 Non-controlling interest 6,575 840 Total Equity 24,023,530 21,387,703 Total Liabilities and Equity 32,216,026 29,677,906 7
Consolidated Statements of Comprehensive Income (Years ended Dec 31, 2016 and 2015, KRW in millions except EPS) 2016 2015 Net Sales 17,197,975 18,797,998 Cost of Sales 10,787,139 10,515,353 Gross Profit 6,410,836 8,282,645 Selling & Administrative Expenses 3,134,090 2,946,545 Operating Income (Loss) 3,276,746 5,336,100 Financial income 814,892 846,752 Financial costs 846,328 829,913 Share of profit of equity-accounted investees 22,752 24,642 Other non-operating income 52,371 40,479 Other non-operating expenses 103,979 148,939 Profit (Loss) before Income Tax (benefit) 3,216,454 5,269,121 Income Tax expense 255,971 945,526 Net Profit (Loss) for the year 2,960,483 4,323,595 Total Comprehensive income (loss) for the year 2,989,327 4,341,690 Basic EPS 4,184 6,002 Diluted EPS 4,184 6,002 Consolidated Statements of Cash Flows (Years ended Dec 31, 2016 and 2015, KRW in millions) 2016 2015 Net cash generated from Operating Activities 5,548,922 9,319,520 Net cash provided by (used in) in Investing Activities (6,230,451) (7,125,530) Net cash provided by (used in) Financing Activities 116,876 (1,462,257) Effect of foreign exchange rates on Cash & Cash Equivalents 2,720 7,225 Net increase (decrease) in Cash & Cash Equivalents (561,933) 738,958 Cash & Cash Equivalents at the Beginning of the Year 1,175,719 436,761 Cash & Cash Equivalents at the End of the Year 613,786 1,175,719 8
Consolidated Statements of Changes in Equity (Years ended Dec 31, 2016 and 2015, KRW in millions) Capital stock Capital surplus Attributable to owners of the Parent Company Other equity Accum. other comprehensi ve income (loss) Noncontrolling interest Total equity Balance at Jan 1, 2015 3,657,652 4,143,736 (24) (41,815) 10,276,904 18,036,453 (150) 18,036,303 Comprehensive income: Net Profit - - - - 4,322,356 4,322,356 1,239 4,323,595 Remeasurements of the net defined benefit liability - - - - (21,871) (21,871) - (21,871) Other comp. income(loss) from joint venture and associate - - - 6,487-6,487-6,487 Foreign currency translation differences for foreign operations - - - 33,728-33,728 (249) 33,479 Total Comprehensive income - - - 40,215 4,300,485 4,340,700 990 4,341,690 Transactions with owners of the Parent Company: Dividend payout - - - - (218,401) (218,401) - (218,401) Acquisition of treasury stocks - - (771,889) - - (771,889) - (771,889) Total transactions with owners of the Parent Company - - (771,889) - (218,401) (990,290) - (990,290) Balance at Dec 31, 2015 3,657,652 4,143,736 (771,913) (1,600) 14,358,988 21,386,863 840 21,387,703 Balance at Jan 1, 2016 3,657,652 4,143,736 (771,913) (1,600) 14,358,988 21,386,863 840 21,387,703 Comprehensive income: Net Profit - - - - 2,953,774 2,953,774 6,709 2,960,483 Remeasurements of the net defined benefit liability - - - - 106,822 106,822-106,822 Other comp. income(loss) from joint venture and associate - - - 4,088-4,088-4,088 Foreign currency translation differences for foreign operations - - - (81,981) - (81,981) (85) (82,066) Total Comprehensive income - - - (77,893) 3,060,596 2,982,703 6,624 2,989,327 Transactions with owners of the Parent Company: Dividend payout - - - - (353,001) (353,001) - (353,001) Acquisition of treasury stocks - - - 390-390 (889) (499) Total transactions with owners of the Parent Company - - - 390 (353,001) (352,611) (889) (353,500) Balance at Dec 31, 2016 3,657,652 4,143,736 (771,913) (79,103) 17,066,583 24,016,955 6,575 24,023,530 Retained earnings Total 9
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Non-Consolidated Financial Statements of the Company Non-Consolidated Statements of Financial Position (As of Dec 31, 2016 and 2015, KRW in millions) 2016 2015 ASSETS Current Assets: Cash & Cash Equivalents 476,917 1,014,939 Short-term Financial instruments 2,487,942 2,808,102 Inventories 1,698,723 1,407,614 Total Current Assets 7,933,301 8,421,984 Non-current Assets: Property, Plant and Equipment 16,071,281 13,853,549 Intangible Assets 1,546,733 1,299,257 Deferred tax assets 513,359 187,991 Total Non-current Assets 23,465,792 20,320,214 Total Assets 31,399,093 28,742,198 LIABILITIES Current Liabilities Borrowings 644,765 743,293 Total Current Liabilities 4,351,661 4,750,892 Non-Current Liabilities Borrowings 3,571,022 2,689,326 Total Non-Current Liabilities 3,955,919 3,308,841 Total Liabilities 8,307,580 8,059,733 EQUITY Capital Stock 3,657,652 3,657,652 Capital Surplus 4,183,564 4,182,016 Other Equity (771,913) (771,913) Retained Earnings 16,022,210 13,614,710 Total Equity 23,091,513 20,682,465 Total Liabilities and Equity 31,399,093 28,742,198 12
Non-Consolidated Statements of Comprehensive Income (Years ended Dec 31, 2016 and 2015, KRW in millions except EPS) 2016 2015 Net Sales 16,733,111 18,780,792 Cost of Sales 10,847,469 11,002,083 Gross Profit 5,885,642 7,778,709 Selling & Administrative Expenses 2,873,223 2,702,202 Operating Income (Loss) 3,012,419 5,076,507 Financial income 723,215 689,855 Financial costs 726,476 653,425 Other non-operating income 46,329 59,081 Other non-operating expenses 93,745 169,539 Profit (Loss) before Income Tax (benefit) 2,961,742 5,002,479 Income Tax expense 306,720 983,399 Net Profit (Loss) for the year 2,655,022 4,019,080 Total Comprehensive income (loss) for the year 2,760,501 3,998,091 Basic EPS 3,761 5,581 Diluted EPS 3,761 5,581 Non-Consolidated Statements of Cash Flows (Years ended Dec 31, 2016 and 2015, KRW in millions) 2016 2015 Net cash generated from Operating Activities 4,787,499 7,747,769 Net cash provided by (used in) in Investing Activities (5,709,777) (6,171,944) Net cash provided by (used in) Financing Activities 380,031 (812,874) Net increase (decrease) in Cash & Cash Equivalents (538,022) 762,861 Cash & Cash Equivalents at the Beginning of the Year 1,014,939 252,078 Cash & Cash Equivalents at the End of the Year 476,917 1,014,939 13
Non-Consolidated Statements of Changes in Equity (Years ended Dec 31, 2016 and 2015, KRW in millions) Capital Stock Capital Surplus Other Equity Retained earnings Total Equity Balance at Jan 1, 2015 3,657,652 4,182,016 (24) 9,835,020 17,674,664 Comprehensive income: Net Profit - - - 4,019,080 4,019,080 Remeasurements of the net defined benefit liability - - - (20,989) (20,989) Total comprehensive income - - - 3,998,091 3,998,091 Transactions with owners of the Company: Dividend payout - - - (218,401) (218,401) Acquisition of treasury shares - - (771,889) - (771,889) Total transactions with owners of the Company - - (771,889) (218,401) (990,290) Balance at Dec 31, 2015 3,657,652 4,182,016 (771,913) 13,614,710 20,682,465 Balance at Jan 1, 2016 3,657,652 4,182,016 (771,913) 13,614,710 20,682,465 Comprehensive income: Net Profit - - - 2,655,022 2,655,022 Remeasurements of the net defined benefit liability - - - 105,479 105,479 Total comprehensive income - - - 2,760,501 2,760,501 Transactions with owners of the Company: Dividend payout - - - (353,001) (353,001) Acquisition of treasury shares - 1,548 - - 1,548 Total transactions with owners of the Company - 1,548 - (353,001) (351,453) Balance at Dec 31, 2016 3,657,652 4,183,564 (771,913) 16,022,210 23,091,513 14
Statement of Appropriation of Retained Earnings (Years ended Dec 31, 2016 and 2015, KRW in millions) 2016 2015 Retained Earnings before Appropriation 15,720,710 13,348,510 Unappropriated Retained Earnings carried over from prior year 12,960,209 9,350,419 Remeasurements of defined benefit liability 105,479 (20,989) Net income (loss) 2,655,022 4,019,080 Appropriation of Retained Earnings 465,961 388,301 Earned Surplus Reserve 42,360 35,300 Cash Dividend 423,601 353,001 Unappropriated Retained Earnings carried forward to subsequent year 15,254,749 12,960,209 * Annual Cash dividend of KRW 600 per share is proposed. Dividend Payout & Yield (Years ended Dec 31, 2016 and 2015) 2016 2015 Total Cash Dividend (KRW in millions) 423,601 353,001 Outstanding ordinary shares (in thousands of shares) 706,002 706,002 Net Profit (Loss) for the year (Non-Consolidated Basis, KRW in millions)) 2,655,022 4,019,080 Dividend Payout (%) 15.95% 8.78% Cash Dividend per Share (KRW) 600 500 Fiscal Year-end Closing stock price (KRW) 44,700 30,750 Dividend Yield (%) 1.34% 1.63% 15
ATTACHMENT B [Summary of the Amended Sections of the Articles of Incorporation] (This summary has been marked to show the amendments proposed to the sections of the Articles of Incorporation.) PREAMBLE Present PREAMBLE Amended The Company shall preserve long-term profit of its shareholders by securing the survival of business, at a minimum, and continuing to evolve and progress in such a drastically changing business environment. To this end, the Company will establish the Management Perspective as follows and implement it as the basis of management activities. [ Mission ] The Company shall achieve its ultimate goal of sustained progress by maintaining stability and growth. Furthermore, it shall create value for its customers, people and shareholders, thereby contributing to social and economic development and human well-being. [ Value ] The Company aims to: gain trust from its customers by ensuring consistent customer satisfaction, and ultimately transform itself into a corporate entity whose progress goes hand in hand with theirs. create and establish a favorable environment where its people can work voluntarily and willingly, and ensure that all members contribute to the sustained progress during their tenure at the Company. upgrade its corporate value so as to create shareholder value, while enhancing the level of both transparency and management efficiency toward this end. make every effort to contribute to the welfare of the community by engaging in social/cultural activities in addition to facilitating economic prosperity, and to observe social norms and ethical standards. continuously create sufficient profit to enhance the value of stakeholders and finance the Company s future growth. The Company shall preserve long-term profit of its shareholders by securing the survival of business, at a minimum, and continuing to evolve and progress in such a drastically changing business environment. To this end, the Company will establish the Management Philosophy as follows and implement it as the basis of management activities. The Company shall achieve its ultimate goal of sustained progress by maintaining stability and growth. Furthermore, it shall create value for its customers, people and shareholders, thereby contributing to social and economic development and human well-being. The Company aims to: gain trust from its customers by ensuring consistent customer satisfaction, and ultimately transform itself into a corporate entity whose progress goes hand in hand with theirs. ensure that all its people develop with a sense of achievement in their work, while they contribute to the Company s sustained progress during their tenure at the Company. upgrade its corporate value so as to create shareholder value. grow along with the wider community through the creation of social values in addition to facilitating economic prosperity. should make a consistent effort to find a balance between the happiness of stakeholders and consider this in both the present and the future to remain sustainable over the long-term. 16
Article 10. Pre-emptive Rights (1) The shareholders of the Company shall have the right to subscribe for such newly issued shares in proportion to the number of shares held by each of them. (2) Notwithstanding paragraph 1, new shares may be allocated to persons other than the existing shareholders by a resolution of the Board in the following cases: 1. If the Company issues new shares by a public offering or has underwriters underwrite new shares by a public offering in accordance with the provisions of the Capital Market and Financial Investment Business Act; 2. If the Company allocates new shares to the members of the Company's Employee Stock Ownership Association in accordance with the provisions of the Capital Market and Financial Investment Business Act; 3. If the Company issues new shares for the issuance of depositary receipts in accordance with the provisions of the Capital Market and Financial Investment Business Act; 4. If the Company issues new shares through offering to the public investors by the resolutions of the Board in accordance with the Capital Market and Financial Investment Business Act; 5. If the Company issues new shares by the exercise of the stock option in accordance with the provisions of the Capital Market and Financial Investment Business Act; 6. If the Company issues new shares to domestic or foreign financial institutions(in this subparagraph financial institutions shall mean a professional investor set forth in the provisions of Article 9, paragraph 5 of the Capital Market and Financial Investment Business Act, except for a Stock-listed corporation set forth in the provision of subparagraph 4 of paragraph 5 of Article 9 of the said Act and corporation, organization or private individual set forth in the provision of subparagraph 16 and 17 of paragraph 3 of the Enforcement Decree of the said Act), cooperating companies, strategic investors or foreign investors for the management purpose such as fund raising or technology transfer; 7. If the Company issues new shares for in kind capital contribution; 8. If the Company issues new shares to the person set forth in (a) through (c), subparagraph 2 of paragraph 1 of Article 11 of the Enforcement Decree of the Capital Market and Financial Investment Business Act for its management necessity; and 9. If the Company issues new shares to the financial institutions in order to convert the debt into capital. 10. If the Company issues new shares by the exercise of the employee stock option (the ESO ) in accordance with the provisions of the Framework Act on Workers Welfare. (3) Any shares unsubscribed after the exercise of preemptive rights by shareholders who are entitled to them or any fractional shares remaining after the allocation of new Article 10. Issuance of New Shares and Allocation (1) The Company may issue new shares by a resolution of the Board in the following manners: 1. offering the existing shareholders an opportunity to make subscription for new shares in order to allocate new shares to the shareholders in proportion to the number of shares held by them; 2. to the extent that the number of newly-issued shares does not exceed 30% of the total issued and outstanding shares of the Company, offering specific person(s) (including shareholders of the Company) an opportunity to make subscription for new shares in order to allocate new shares to it(them) in a manner other than that prescribed under paragraph 1 above, where issuance of new shares is necessary to achieve the managerial purpose of the Company including introduction of new technology, improvement of financial status, etc. The issuance of new shares under this paragraph 2 shall include, and shall not be limited to, the following: (i) If the Company issues new shares for the issuance of depositary receipts in accordance with the provisions of the Capital Market and Financial Investment Business Act; (ii) If the Company issues new shares to domestic or foreign financial institutions(in this subparagraph financial institutions shall mean a professional investor set forth in the provisions of Article 9, paragraph 5 of the Capital Market and Financial Investment Business Act, except for a Stock-listed corporation set forth in the provision of subparagraph 4 of paragraph 5 of Article 9 of the said Act and corporation, organization or private individual set forth in the provision of subparagraph 16 and 17 of paragraph 3 of Article 10 of the Enforcement Decree of the said Act), cooperating companies, strategic investors or foreign investors for the management purpose such as fund raising or introduction of technology; (iii) If the Company issues new shares for capital contribution in kind; (iv) If the Company issues new shares to the person set forth in (a) through (c), subparagraph 2 of paragraph 1 of Article 11 of the Enforcement Decree of the Capital Market and Financial Investment Business Act for its management necessity; and (v) If the Company issues new shares to the financial institutions in order to convert the debt into capital. 3. to the extent that the number of newly-issued shares does not exceed 30% of the total issued and outstanding shares of the Company, offering unspecified persons (including shareholders of the Company) an opportunity to make subscription for new shares in a manner other than that prescribed under paragraph 1 above, and allocating new shares to those who have made subscriptions taking advantage of such opportunity. (2) Where new shares are allocated in the manner pursuant to Section (1), paragraph 3 above, they shall be 17
shares may be disposed of by a resolution of the Board. Article 10-2. Stock Option (5) 1. In case of delivery of new shares, the greater price between the following prices: a) Market price pursuant to Article 176-7, paragraph 2, subparagraph 1 of the Enforcement Decree of the Capital Market and Financial Investment Business Act as of the date of granting of stock option; or allocated through any of the following manners in accordance with a resolution adopted by the Board: 1. Allocating new shares to unspecified subscribers without categorizing persons who are offered an opportunity to subscribe for new shares; 2. Offering unspecified persons an opportunity to make subscriptions for new shares including the shares that have been allocated to the members of an employee stock ownership association under relevant laws but failed to get their subscriptions; 3. Offering unspecified persons an opportunity to make subscriptions for new shares for which a preferential opportunity has been given to shareholders to make subscriptions but failed to get their subscriptions; 4. Offering specifically categorized persons an opportunity to make subscriptions for new shares in accordance with reasonable standards prescribed by relevant laws, such as a demand forecast prepared by an investment trader or investment broker as an underwriter or intermediary. (3) Where new shares are allocated in the manner pursuant to Section (1), paragraph 2 or 3 above, the Company shall notify the shareholders of, or announce to the public, the items prescribed in Article 416, paragraphs 1, 2, 2-2, 3 and 4, two weeks prior to the date of payment of the subscription amounts; provided, however, that such notice or announcement may be replaced by the public disclosure of the Report on Material Facts to the Financial Services Commission and Korea Exchange pursuant to Article 165-9 of the Capital Market and Financial Investment Business Act. (4) In the case of issuance of new shares in the manner pursuant to any paragraph of Section (1) above, the type, number, issue price, etc. of the new shares shall be determined by a resolution of the Board. (5) Any shares unsubscribed, or unpaid, by relevant due date after the allocation of new shares shall be disposed of by a resolution of the Board in accordance with relevant laws regulating the issue price, etc. (6) Any fractional shares remaining after the allocation of new shares shall be disposed by a resolution of the Board. (7) Where new shares are allocated in the manner pursuant to Section (1), paragraph 1, the Company shall issue certificates of pre-emptive right to the shareholders Article 10-2. Stock Option (5) 1. In case of delivery of new shares, the greater price between the following prices: a) Market price pursuant to Article 176-7, paragraph 3, subparagraph 1 of the Enforcement Decree of the Capital Market and Financial Investment Business Act as of the date of granting of stock option; or Article 10-4. Capital Increase by Public Offering, etc. (1) The Company may issue new shares to the person set forth in subparagraphs 4, 6 to 9 of paragraph 2 of Article Article 10-4. Deleted 18
10, to the extent not exceeding the total number of issued and outstanding shares of the Company, by a resolution of the Board. (2) In case of the issuance of new shares pursuant to Paragraph (1) above, the type and number of shares to be issued and the issue price thereof shall be determined by a resolution of the Board in accordance with the relevant laws. Article 14-2. Issuance of Convertible Bonds Article 14-2. Issuance of Convertible Bonds (1) The Company may issue convertible bonds in the aggregate face amount not exceeding six trillion (6,000,000,000,000) Won to persons other than the shareholders by a resolution of the Board. (2) Convertible bonds mentioned in Paragraph (1) may, by resolution of the Board, be issued with their conversion rights limited to a certain portion of their face amount. (3) Upon conversion from the aggregate face amount of convertible bonds, different classes of shares may be issued up to the amount determined by resolution of the Board at the time of issuance of the convertible bonds, which shall not be less than the (1) The Company may issue convertible bonds in the aggregate face amount thereof not exceeding three trillion (3,000,000,000,000) Won to persons other than the shareholders by a resolution of the Board in any of the following manners: 1. offering specific person(s) (including shareholders of the Company) an opportunity to make subscription for convertible bonds in order to allocate convertible bonds to it(them) in a manner other than that prescribed under paragraph 1 of Article 10, Section (1) above, where issuance of new shares is necessary to achieve the managerial purpose of the Company including introduction of new technology, improvement of financial status, etc. 2. offering the unspecified persons (including shareholders of the Company) an opportunity to make subscription for convertible bonds in a manner other than that prescribed under paragraph 1 of Article 10, Section (1) above, and allocating convertible bonds to those who have made subscriptions taking advantage of such opportunity. (2) Where convertible bonds are allocated in the manner pursuant to Section (1), paragraph 2 above, they shall be allocated through any of the following manners in accordance with a resolution adopted by the Board: 1. Allocating convertible bonds to unspecified subscribers without categorizing persons who are offered an opportunity to subscribe for convertible bonds; 2. Offering unspecified persons an opportunity to make subscriptions for convertible bonds for which a preferential opportunity has been given to shareholders to make subscriptions but failed to get their subscriptions; 3. Offering specifically categorized persons an opportunity to make subscriptions for convertible bonds in accordance with reasonable standards prescribed by relevant laws, such as a demand forecast prepared by an investment trader or investment broker as an underwriter or intermediary. (3) Convertible bonds under Section (1) above may, by resolution of the Board, be issued with their conversion rights limited to a certain portion of their face amount. (4) Upon conversion from the aggregate face amount of convertible bonds, common shares shall be issued at the conversion price determined by resolution of the Board at the time of issuance of the convertible bonds, which shall not be less than 19
par value of the shares; provided, however, if the Company issues convertible bonds of which the conversion price is less than par value, it shall obtain the approval of shareholders with respect to such conversion price at the general meeting of shareholders in accordance with the provision of Article 434 of the Commercial Code. (4) The conversion period shall be the period commencing from the date following the issuance of the convertible bonds and ending on the date immediately preceding the date of redemption of the convertible bonds. The conversion period may be adjusted by a resolution of the Board; provided, that the conversion period shall in any event fall within the period mentioned above. (5) The provisions of Article 10-3 shall apply mutatis mutandis to the payment of dividends on the shares issued upon conversion and the payment of interest on the convertible bonds. Article 15. Issuance of Bonds with Warrants (1) The Company may issue bonds with warrants in the aggregate face amount not exceeding two trillion (2,000,000,000,000) Won to persons other than the shareholders. (2) The amount with respect to which the pre-emptive rights may be exercised shall be determined by resolution the par value of the shares. (5) The conversion period shall be the period commencing from the date following the issuance of the convertible bonds and ending on the date immediately preceding the date of redemption of the convertible bonds. The conversion period may be adjusted by a resolution of the Board; provided, that the conversion period shall in any event fall within the period mentioned above. (6) The provisions of Article 10-3 shall apply mutatis mutandis to the payment of dividends on the shares issued upon conversion and the payment of interest on the convertible bonds. Article 15. Issuance of Bonds with Warrants (1) The Company may issue bonds with warrants in the aggregate face amount thereof not exceeding two trillion (2,000,000,000,000) Won to persons other than the shareholders by a resolution of the Board in any of the following manners: 1. offering specific person(s) (including shareholders of the Company) an opportunity to make subscription for bonds with warrant in order to allocate bonds with warrant to it(them) in a manner other than that prescribed under paragraph 1 of Article 10, Section (1) above, where issuance of new shares is necessary to achieve the managerial purpose of the Company including introduction of new technology, improvement of financial status, etc. 2. offering unspecified persons (including shareholders of the Company) an opportunity to make subscription for bonds with warrant in a manner other than that prescribed under paragraph 1 of Article 10, Section (1) above, and allocating bonds with warrant to those who have made subscriptions taking advantage of such opportunity. (2) Where bonds with warrant are allocated in the manner pursuant to Section (1), paragraph 2 above, they shall be allocated through any of the following manners in accordance with a resolution adopted by the Board: 1. Allocating bonds with warrant to unspecified subscribers without categorizing persons who are offered an opportunity to subscribe for bonds with warrant; 2. Offering unspecified persons an opportunity to make subscriptions for bonds with warrant for which a preferential opportunity has been given to shareholders to make subscriptions but failed to get their subscriptions; 3. Offering specifically categorized persons an opportunity to make subscriptions for bonds with warrant in accordance with reasonable standards prescribed by relevant laws, such as a demand forecast prepared by an investment trader or investment broker as an underwriter or intermediary. (3) The amount of bonds with warrants for which new shares may be issued shall be determined by a resolution 20
of the Board; provided, that such amount shall not in any event exceed the aggregate face amount of the bonds with warrants. (3) Upon exercise of the warrants, from the aggregate face amount of bonds with warrants, different classes of shares may be issued up to the amount determined by resolution of the Board at the time of issuance of the bonds with warrants, which shall not be less than the face value of the shares. (4) The period during which the pre-emptive rights may be exercised shall be the period commencing from the date following the issuance of the bonds with warrants and ending on the date immediately preceding the date of redemption of the bonds with warrants. The period during which the pre-emptive rights may be exercised may be adjusted by resolution of the Board; provided, that such period shall in any event fall within the period mentioned above. (5) The provisions of Article 10-3 shall apply, mutatis mutandis, to the payment of dividends on the new shares issued upon exercise of the pre-emptive rights. Article 28. Number of Directors The Company shall have 6 or more directors. The number of outside directors shall be not less than 3 and the half of the total number of directors. If the outside directors become less than the half of the total number of directors, such vacancy shall be filled at the first general meeting of shareholders to be held thereafter. Article 39. Convening and Resolution Method of Board Meeting (5) A director who has special interest related to the resolution of the Board of Directors may not vote for such agenda. In this case, the director shall be regarded as absent at the meeting. Article 43. Minutes of the Board Meeting The proceedings, resolutions, objecting director (if any) and his/her reasons for objection of a meeting of the Board shall be recorded in the minutes on which the names and seals of the Chairman and all the directors present shall be affixed, and shall be displayed at the headquarter of the Company. Article 45-2. Outside Director Nomination Committee 1/2 or more of the Outside Director Nomination Committee shall consist of the outside directors. The Outside Director Nomination Committee shall recommend the candidates for the outside director at the general meeting of shareholders. of the Board within the aggregate face amount of the bonds with warrants. (4) Upon exercise of the warrants, from the aggregate face amount of bonds with warrants, common shares shall be issued at the issue price determined by resolution of the Board at the time of issuance of the bonds with warrants, which shall not be less than the face value of the shares. (5) The period during which the right to acquire new shares may be exercised shall be the period commencing from the date following the issuance of the bonds with warrants and ending on the date immediately preceding the date of redemption of the bonds with warrants. The period during which such right may be exercised may be adjusted by resolution of the Board; provided, that such period shall in any event fall within the period mentioned above. (6) The provisions of Article 10-3 shall apply, mutatis mutandis, to the payment of dividends on the new shares issued upon exercise of the pre-emptive rights.. Article 28. Number of Directors The Company shall have 6 or more directors but the number of directors shall not exceed 10. The number of outside directors shall be a majority of the total number of directors. If the outside directors become less than the half of the total number of directors, such vacancy shall be filled at the first general meeting of shareholders to be held thereafter. Article 39. Convening and Resolution Method of Board Meeting (5) A director who has special interest related to the resolution of the Board of Directors may not vote for such agenda. (Deleted) Article 43. Minutes of the Board Meeting The proceedings, resolutions, objecting director (if any) and his/her reasons for objection of a meeting of the Board shall be recorded in the minutes on which the names and seals of the Chairman and all the directors present shall be affixed. Article 45-2. Outside Director Nomination Committee A majority of the Outside Director Nomination Committee shall consist of the outside directors. The Outside Director Nomination Committee shall recommend the candidates for the outside director at the general meeting of shareholders. Addenda (Effective on March 24, 2017) Article 1. Effective Date These Articles shall come into effect on March 24, 2017. 21
[Candidate for Inside Director] ATTACHMENT C Agenda 3 Lee, Seok Hee 1) Educational Background Stanford University, Ph.D. in Materials Science and Engineering 2) Professional Experiences President & Chief Operating Officer, SK Hynix (current) Executive VP of DRAM Business Unit, SK Hynix Senior VP of Research & Development Division, SK Hynix Professor, KAIST Principal engineer and process integration group leader, Intel Corporation 3) His term shall be governed by Article 29 of the Articles of Incorporation. * *Article 29. Term of Office of Director The term of office of a director shall expire upon the time of the closing of the third ordinary general meeting of shareholders to be convened after his/her inauguration. 22
[Candidate for Non-Executive Director] ATTACHMENT D Agenda 4 Park, Jung Ho 1) Educational Background George Washington University, M.B.A. 2) Professional Experiences President of SK Telecom (current) CEO of SK Holdings (current) President & CEO of SK C&C Head of SK C&C Corporate Development Head of SK Telecom Business Development Office 3) His term shall be governed by Article 29 of the Articles of Incorporation. * *Article 29. Term of Office of Director The term of office of a director shall expire upon the time of the closing of the third ordinary general meeting of shareholders to be convened after his/her inauguration. 23
ATTACHMENT E [Candidates for Outside Director] [Candidates for Outside Director taking concurrent office as member of the Audit Committee] Agenda 5-1 & 6-1 Choi, Jong-Won 1) Educational Background Seoul National University, B.Sc. in Economics Seoul National University, M.P.A., Graduate School of Public Administration University of Michigan, Ph.D. in Policy Study 2) Professional Experiences Professor, Seoul National University, Graduate School of Public Administration (current) Head, Public Institutions Management Evaluation Committee, Ministry of Strategy and Finance Dean, Graduate School of Public Administration, Seoul National University Member, Policy Evaluation Committee, Fair Trade Commission Chief Researcher, Korea Development Institute Passed 26th National Highest Civil Service Examination, Korea 3) His term shall be governed by Article 29 of the Articles of Incorporation. * Agenda 5-2 & 6-2 Shin, Changhwan 1) Educational Background Korea University, B.E. in Electrical Engineering University of California, Berkeley, Ph.D. in Electrical Engineering and Computer Sciences 2) Professional Experiences Associate Professor in School of Electrical and Computer Engineering, University of Seoul Senior Engineer in Silicon Technology Group, Xilinx Device Modeling Professional, IBM Microelectronics 3) His term shall be governed by Article 29 of the Articles of Incorporation. * *Article 29. Term of Office of Director The term of office of a director shall expire upon the time of the closing of the third ordinary general meeting of shareholders to be convened after his/her inauguration. 24
[Vested Stock Option Plan] ATTACHMENT F Purpose of Vested Stock Option Plan To maximize corporate value through the alignment of management interest with those of shareholders, and link management compensation with corporate value through the granting of Stock Options. Recipient of Stock Options Name Position Subscription Rights Share type No. of Shares Park, Sung Wook CEO Common shares 298,800 shares in total Details of Stock Options Approval Date of Stock Option Grant: March 24, 2017 (date of AGM) Stock Options Granted using: Treasury Shares Number & Type of Stock Options granted: 298,800 Common shares Number of Stock Total Number of Stock Options granted: 298,800 Common shares Options granted 99,600 shares 99,600 shares 99,600 shares Exercise Period March 25, 2019 ~ March 24, 2022 March 25, 2020 ~ March 24, 2023 March 25, 2021 ~ March 24, 2024 Exercise Price Exercise Price* Exercise Price* X 1.08 Exercise Price* X (1.08) 2 Exercise Price*: Trading volume weighted average share price on the date prior to the approval of the plan i.e. date prior to March 24, 2017 (date of AGM) = (prior 2 month Weighted average + prior 1 month Weighted average + prior 1 week Weighted average) 3 Subsequent Exercise Prices will be increased by a factor of 1.08 as stated in above table. * In the case of alteration of share value through new share issue, dividend payment through shares, increase in capital, share split, M&A etc., the Exercise Price and/or Number of Shares issued can be altered as per the Vested Stock Option Grant contract or BOD ruling. * In the case of Recipient s resignation from office prior to the Exercise Period, the unexercised Stock Options will become nil. 25