FORM S-4
As filed with the Securities and Exchange Commission on
October 2, 2006
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FLEXTRONICS INTERNATIONAL LTD.
(Exact name of Registrant as specified in its charter)
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Singapore |
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3672 |
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Not Applicable |
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
One Marina Boulevard, #28-00
Singapore 018989
(65) 6890 7188
(Address, including zip code, and telephone number, including
area code,
of Registrants principal executive offices)
Michael M. McNamara
Chief Executive Officer
Flextronics International Ltd.
One Marina Boulevard, #28-00
Singapore 018989
(65) 6890-7188
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Jeffrey N. Ostrager, Esq.
Curtis, Mallet-Prevost, Colt & Mosle LLP
101 Park Avenue
New York, New York 10178
(212) 696-6000 |
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David C. Adams, Esq.
Bullivant Houser Bailey, PC
1415 L Street, Suite 1000
Sacramento, CA 95814
(916) 930-2500 |
Approximate date of commencement of proposed sale of the
securities to the public: Upon completion of the merger
described herein.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Amount of |
Title of Each Class of |
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Amount to be |
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Offering |
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Aggregate |
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Registration |
Securities to be Registered |
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Registered(1) |
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Price per Share |
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Offering Price(2) |
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Fee |
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Ordinary Shares, no par value
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29,370,096 |
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N/A |
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$298,341,824 |
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$31,923 |
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(1) |
This Registration Statement relates to the ordinary shares, no
par value, of the Registrant issuable to holders of common
stock, $0.001 par value per share, of International
DisplayWorks, Inc. (IDW) in the proposed merger of
Granite Acquisition Corp., a wholly-owned subsidiary of the
Registrant, with and into IDW. The number of ordinary shares of
the Registrant to be registered pursuant to this Registration
Statement is the product of (a) 47,355,845, the estimated
maximum number of shares of IDW common stock to be exchanged
pursuant to the merger described herein, and (b) the
maximum exchange ratio of 0.6202 of an ordinary share of the
Registrant for each share of IDW common stock to be exchanged
pursuant to the merger described herein. |
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(2) |
Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(f) under the Securities Act of
1933, as amended. The proposed maximum aggregate offering price
is the product of (x) $6.30, the average of the high and
low sales prices of IDW common stock, as quoted on the Nasdaq
Global Market, on September 26, 2006, and
(y) 47,355,845, the estimated maximum number of shares of
IDW common stock to be exchanged pursuant to the merger
described herein. |
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this proxy statement/ prospectus is not complete
and may be changed. Flextronics may not sell the securities
offered by this proxy statement/ prospectus until the
registration statement filed with the Securities and Exchange
Commission is effective. This proxy statement/ prospectus is not
an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any jurisdiction where the
offer, solicitation or sale is not
permitted.
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SUBJECT TO
COMPLETION, DATED OCTOBER 2, 2006
PRELIMINARY COPY
To International DisplayWorks, Inc. Stockholders:
You are cordially invited to attend a special meeting of the
stockholders of International DisplayWorks, Inc.
(IDW) to be held
on ,
2006, at the Hilton Garden Inn, in Roseville, California at
10:00 a.m., local time. At the special meeting, IDW
stockholders will be asked to adopt the Agreement and Plan of
Merger that IDW entered into on September 4, 2006, with
Flextronics International Ltd. (Flextronics) and
Granite Acquisition Corp., a wholly-owned subsidiary of
Flextronics, and approve a merger that will result in IDW
becoming a wholly-owned subsidiary of Flextronics. Upon
completion of the merger, each outstanding share of IDW common
stock will be converted into a fraction of a Flextronics
ordinary share based on an exchange ratio formula. The exchange
ratio will be calculated using the average per share closing
price of Flextronicss ordinary shares on the Nasdaq Global
Select Market for the 20 consecutive trading days ending on the
fifth trading day before the closing of the merger, and will
provide the following:
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If the average Flextronics closing price is equal to or greater
than $10.5606 and equal to or less than $12.9074, you will
receive a fraction of a Flextronics ordinary share that will
range from 0.6202 to 0.5075 for each share of IDW common stock,
which would represent an equivalent of $6.55 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater than
$12.9074 and equal to or less than $13.4941, you will receive a
fraction of a Flextronics ordinary share equal to 0.5075 for
each share of IDW common stock, which would represent an
equivalent of more than $6.55 and up to $6.85 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater than
$13.4941, you will receive a fraction of a Flextronics ordinary
share equal to $6.85 divided by the average Flextronics closing
price for each share of IDW common stock, which would represent
an equivalent of $6.85 of value in Flextronics ordinary shares
based on the average Flextronics closing price; and |
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If the average Flextronics closing price is less than $10.5606,
you will receive a fraction of a Flextronics ordinary share
equal to 0.6202 for each share of IDW common stock, which would
represent an equivalent of less than $6.55 of value in
Flextronics ordinary shares based on the average Flextronics
closing price. |
At an average Flextronics closing price of $9.9739, you would
receive a fraction of a Flextronics ordinary share equal to
0.6202 for each share of IDW common stock, which would represent
an equivalent of $6.19 of value in Flextronics ordinary shares
based on this average Flextronics closing price. If the average
Flextronics closing price is less than $9.9739, IDW would have
the right to call off the merger, unless Flextronics elects to
adjust the exchange ratio in order to provide that you would
receive a fraction of a Flextronics ordinary share with an
equivalent value, based on the average Flextronics closing
price, of $6.19 for each share of IDW common stock. However, IDW
might not elect to exercise this right to call off the merger,
in which case you would receive a fraction of a Flextronics
ordinary share equal to 0.6202 for each share of IDW common
stock, which would represent an equivalent of less than $6.19 of
value in Flextronics ordinary shares based on the average
Flextronics closing price
Flextronicss ordinary shares are listed on the Nasdaq
Global Select Market under the trading symbol FLEX.
On ,
2006, the last trading day prior to the printing of this
document, the closing price for Flextronicss ordinary
shares on the Nasdaq Global Select Market was
$ per
share. If that closing price was the applicable average
Flextronics closing price, you would receive a fraction of a
Flextronics ordinary share equal to 0. ,
representing a value, based on the average Flextronics closing
price, of $ for
each share of IDW common stock. Flextronics and IDW plan to
issue a joint press release one day prior to the IDW special
meeting setting forth the anticipated average Flextronics
closing price and the exchange ratio calculation.
IDWs board of directors has carefully reviewed and
considered the terms and conditions of the merger agreement and
a number of other factors described more fully in the
accompanying proxy statement/ prospectus. After careful
consideration, IDWs board of directors unanimously
determined that the merger is fair to, and in the best interests
of, IDW and its stockholders and declared the merger to be
advisable. Accordingly, the IDW board of directors unanimously
approved the merger agreement and the merger and unanimously
recommends that you vote FOR the adoption of
the merger agreement and approval of the merger.
Your vote is very important. The merger cannot be
completed unless IDWs stockholders adopt the merger
agreement and approve the merger. Because adoption of the merger
agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of IDW common stock entitled
to vote at the special meeting, a failure to vote will have the
same effect as a vote AGAINST the merger. Whether or
not you plan to attend the meeting, please complete, date, sign
and promptly return the enclosed proxy in the enclosed
postage-paid envelope, or submit your proxy by telephone or via
the Internet using the instructions on the proxy card, before
the meeting so that your shares will be represented at the
meeting. Returning the proxy card, or submitting your proxy by
telephone or via the Internet does not deprive you of your right
to attend the meeting and to vote your shares in person.
The accompanying proxy statement/ prospectus explains the merger
agreement and proposed merger in detail and provides specific
information concerning the special meeting. Please review this
document carefully. In particular, you should carefully
consider the matters discussed under Risk Factors
beginning on page 19 of the proxy statement/ prospectus.
Thank you for you cooperation and continued support.
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Sincerely, |
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Thomas A. Lacey |
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Chief Executive Officer and |
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Chairman of the Board of Directors |
Neither the Securities and Exchange Commission nor any state
securities commission has approved of the Flextronics ordinary
shares to be issued in connection with the merger, or passed
upon the adequacy or accuracy of this proxy statement/
prospectus. Any representation to the contrary is a criminal
offense.
This proxy statement/ prospectus is
dated ,
2006, and is first being mailed to IDWs stockholders on or
about ,
2006.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Dear International DisplayWorks, Inc. Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of International DisplayWorks, Inc., a Delaware
corporation. The meeting will be held at 10:00 a.m., local
time,
on ,
2006, at the Hilton Garden Inn located at 1951 Taylor Road,
Roseville, California, for the following purposes:
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1. To consider and vote upon the approval and adoption of
the Agreement and Plan of Merger, dated as of September 4,
2006, by and among Flextronics International Ltd., Granite
Acquisition Corp., a wholly-owned subsidiary of Flextronics, and
IDW, and the approval of the merger contemplated by the
Agreement and Plan of Merger. |
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2. To grant the persons named as proxies discretionary
authority to vote to adjourn or postpone the special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes in favor of approving and adopting the merger
agreement. |
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3. To transact such other business as may properly come
before the special meeting and any adjournment or postponement
thereof. |
The board of directors of IDW has
fixed ,
2006 as the record date for the determination of IDW
stockholders entitled to notice of, and to vote at, the special
meeting and any adjournment or postponement thereof. Only
holders of record of shares of IDW common stock at the close of
business on the record date are entitled to notice of, and to
vote at, the special meeting. At the close of business on the
record date, IDW
had shares
of common stock outstanding and entitled to vote.
You are invited to attend the special meeting in person. Whether
or not you expect to attend the special meeting in person,
please submit a proxy by telephone or over the Internet as
instructed in the enclosed proxy card, or complete, date, sign
and return the enclosed proxy card as promptly as possible in
order to ensure we receive your proxy with respect to your
shares. A return envelope (which is postage pre-paid if mailed
in the United States) is enclosed for your convenience. If you
sign, date and mail your proxy card without indicating how you
wish to have your shares voted, the shares represented by the
proxy will be voted in favor of (i) the approval and
adoption of the merger agreement and approval of the merger, and
(ii) the grant of discretionary authority to the persons
named as proxies to vote to adjourn or postpone the special
meeting, if necessary, to permit further solicitation of proxies
if there are not sufficient votes to vote in favor of approving
and adopting the merger agreement. If you fail to submit your
proxy by telephone or over the Internet or return your proxy
card, or if your shares are held in street name and
you do not instruct your broker how to vote your shares, the
effect will be as though you cast a vote Against the
adoption of the merger agreement and approval of the merger. If
you attend the special meeting and wish to vote in person, you
may withdraw your proxy and vote in person prior to the close of
voting at the special meeting. Please note, however, that if
your shares are held of record by a broker, bank or other
nominee and you wish to vote at the special meeting, you must
obtain a proxy issued in your name from that recordholder.
Your vote is important. The affirmative vote of the holders
of a majority of shares of IDW common stock outstanding on the
record date for the special meeting is required for approval of
Proposal No. 1 regarding the adoption of the merger
agreement and approval of the merger. The affirmative vote of
the holders of a majority of shares of IDW common stock
represented and entitled to vote at the special meeting is
required to approve Proposal No. 2 regarding the grant
of discretionary authority to the persons named as proxies to
vote to adjourn or postpone the special meeting, if necessary,
to permit further solicitation of proxies if there are not
sufficient votes to vote in favor of approving and adopting the
merger agreement.
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By Order of the Board of
Directors
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Alan M. Lefko |
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Secretary |
Roseville, California
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2006
TABLE OF CONTENTS
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ii
REFERENCES TO ADDITIONAL INFORMATION
Unless the context requires otherwise, when used in this proxy
statement/ prospectus, Flextronics refers to
Flextronics International Ltd. and its subsidiaries, and
IDW refers to International DisplayWorks, Inc. and
its subsidiaries. In this proxy statement/ prospectus,
references to $ are to United States dollars and
references to S$ are to Singapore dollars.
This proxy statement/ prospectus incorporates important business
and financial information about Flextronics and IDW from
documents that each company has filed with the Securities and
Exchange Commission, which is referred to in this proxy
statement/ prospectus as the SEC, under the Securities and
Exchange Act of 1934, as amended, or the Exchange Act, but that
have not been included in or delivered with this proxy
statement/ prospectus. For a list of documents incorporated by
reference into this proxy statement/ prospectus, please see the
section entitled Where You Can Find More Information
beginning on page 84.
This information is available to you without charge upon your
written or oral request. You can obtain the documents
incorporated by reference into this proxy statement/ prospectus
by accessing the SECs website maintained at www.sec.gov.
Flextronics will provide you with copies of this information
relating to Flextronics (excluding all exhibits, unless
Flextronics has specifically incorporated by reference an
exhibit in this proxy statement/ prospectus), without charge,
upon written or oral request to:
Flextronics International Ltd.
2090 Fortune Drive
San Jose, California 95131
Attention: Investor Relations
Telephone: (408) 576-7722
IDW will provide you with copies of this information relating to
IDW (excluding all exhibits, unless IDW has specifically
incorporated by reference an exhibit in this proxy statement/
prospectus), without charge, upon written or oral request to:
International DisplayWorks, Inc.
1613 Santa Clara Drive, Suite 100
Roseville, CA 95661-3542
Attention: Corporate Secretary
(916) 797-6800
In order to receive the documents before the special meeting of
IDW stockholders, you must make your requests no later
than ,
2006.
Flextronicss website, which is located at
www.flextronics.com, contains additional information about
Flextronics and provides access to Flextronicss filings
with the SEC. IDWs website, which is located at
www.IDWK.com, contains additional information about IDW and
provides access to IDWs filings with the SEC. Information
contained on Flextronicss website and IDWs website
is not incorporated by reference in, and should not be
considered a part of, this proxy statement/ prospectus.
Flextronics and IDW have both contributed to the information
contained in this proxy statement/ prospectus relating to the
merger. Any information contained in or incorporated by
reference in this proxy statement/ prospectus relating to
Flextronics has been supplied by Flextronics, and any
information contained in or incorporated by reference in this
proxy statement/ prospectus relating to IDW has been supplied by
IDW.
iii
ABOUT THIS DOCUMENT
This document, which forms part of a registration statement on
Form S-4 filed
with the SEC by Flextronics, constitutes the following:
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a prospectus of Flextronics under Section 5 of the
Securities Act of 1933, as amended, or the Securities Act, with
respect to the Flextronics ordinary shares to be issued to the
holders of IDW common stock in the merger; |
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a proxy statement of IDW under Section 14(a) of the
Exchange Act; and |
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a notice of special meeting of IDW stockholders, at which, among
other things, IDW stockholders will consider and vote upon the
approval and adoption of the merger agreement and the approval
of the merger. |
iv
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
OF STOCKHOLDERS OF INTERNATIONAL DISPLAYWORKS, INC.
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Q: |
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Why am I receiving this proxy statement/ prospectus? |
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Flextronics International Ltd. has agreed to acquire
International DisplayWorks, Inc. under the terms of a merger
agreement that is described in this proxy statement/ prospectus.
Please see the section entitled The Merger Agreement
beginning on page 57 of this proxy statement/ prospectus. A
copy of the merger agreement is attached to this proxy
statement/ prospectus as Annex A. |
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In order to complete the merger, IDW stockholders must adopt the
merger agreement and approve the merger by the affirmative vote
of the holders of a majority of the shares of IDW common stock
outstanding on the record date for the special meeting and all
other conditions to the merger must be satisfied or waived. IDW
will hold a special meeting of its stockholders to obtain the
required stockholder approval. You should read this proxy
statement/ prospectus carefully, as it contains important
information about the merger agreement, the merger and the
special meeting. The enclosed voting materials for the special
meeting allow you to vote your shares of IDW common stock
without attending the special meeting. Shareholders of
Flextronics are not required to approve the merger agreement,
the merger, the issuance of Flextronics ordinary shares in the
merger or any matter relating to the merger, and accordingly,
Flextronics will not hold a special meeting of its shareholders
in connection with the merger. |
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What will I receive in the merger for my IDW common stock? |
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Upon completion of the merger, each share of IDW common stock
that you hold will be converted into a fraction of a Flextronics
ordinary share based on an exchange ratio formula that is
provided in the merger agreement. The exchange ratio will be
calculated using the average per share closing price of
Flextronicss ordinary shares on the Nasdaq Global Select
Market for the 20 consecutive trading days ending on the
fifth trading day before the closing of the merger, and will
provide the following: |
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If the average Flextronics closing price is equal to
or greater than $10.5606 and equal to or less than $12.9074, you
will receive a fraction of a Flextronics ordinary share that
will range from 0.6202 to 0.5075 for each share of IDW common
stock, which would represent an equivalent of $6.55 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater
than $12.9074 and equal to or less than $13.4941, you will
receive a fraction of a Flextronics ordinary share equal to
0.5075 for each share of IDW common stock, which would represent
an equivalent of more than $6.55 and up to $6.85 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater
than $13.4941, you will receive a fraction of a Flextronics
ordinary share equal to $6.85 divided by the average Flextronics
closing price for each share of IDW common stock, which would
represent an equivalent of $6.85 of value in Flextronics
ordinary shares based on the average Flextronics closing
price; and |
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If the average Flextronics closing price is less
than $10.5606, you will receive a fraction of a Flextronics
ordinary share equal to 0.6202 for each share of IDW common
stock, which would represent an equivalent of less than $6.55 of
value in Flextronics ordinary shares based on the average
Flextronics closing price. |
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At an average Flextronics closing price of $9.9739, you would
receive a fraction of a Flextronics ordinary share equal to
0.6202 for each share of IDW common stock, which would represent
an equivalent of $6.19 of value in Flextronics ordinary shares
based on this average Flextronics closing price. If the average
Flextronics closing price is less than $9.9739, IDW would have
the right to call off the merger, unless Flextronics elects to
adjust the exchange ratio in order to provide that you would
receive a fraction of a Flextronics ordinary share with an
equivalent value, based on the average Flextronics closing
price, of $6.19 for each share of IDW common stock. However, IDW
might not elect to exercise this right to call off the merger,
in which case you would receive a fraction of a Flextronics
ordinary share equal to 0.6202 for each share of IDW common
stock, which would represent an equivalent of less than $6.19 of
value in Flextronics ordinary shares based on the average
Flextronics closing price. |
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On ,
2006, the last trading day prior to the printing of this
document, the closing price of Flextronicss ordinary
shares on the Nasdaq Global Select Market was
$ .
If that closing price was the applicable average Flextronics
closing price, then you would receive a fraction of a
Flextronics ordinary share equal to
0. , representing a value, based on
the average Flextronics closing price, of
$ for
each share of IDW common stock. Flextronics and IDW plan to
issue a joint press release one day prior to the IDW special
meeting setting forth the anticipated average Flextronics
closing price and the exchange ratio calculation. |
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Are Flextronics ordinary shares traded on any public stock
market? |
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A: |
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Yes. Flextronics ordinary shares are traded on the Nasdaq Global
Select Market under the symbol FLEX. |
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Q: |
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When and where will the IDW special meeting be held? |
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A: |
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The special meeting will take place
on ,
2006, at the Hilton Garden Inn located at 1951 Taylor Road,
Roseville, California, at 10:00 a.m. local time. |
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Q: |
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Who is entitled to vote? |
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A: |
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You are entitled to vote at the special meeting if you owned
shares of IDW common stock at the close of business
on ,
2006, the record date for the special meeting. You will have one
vote at the special meeting for each share of IDW common stock
you owned at the close of business on the record date. There
are shares
of IDW common stock entitled to be voted at the special meeting. |
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How can I vote? |
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If you are a stockholder of record, you may submit a proxy for
the special meeting: (i) by completing, signing, dating and
returning the proxy card in the pre-addressed envelope provided;
(ii) using the telephone; or (iii) via the Internet.
For specific instructions on how to use the telephone or the
Internet to submit a proxy for the special meeting, please refer
to the instructions on your proxy card. |
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If you hold your shares of IDW common stock in a stock brokerage
account or if your shares are held by a bank or nominee (i.e.,
in street name), you must provide the record holder
with instructions on how to vote your shares. Please check the
voting instruction card included by your bank, broker or nominee
for directions on providing instructions to vote your shares. |
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If you are a stockholder of record, you may also vote in person
at the special meeting. If you hold shares in street name, you
may not vote in person at the special meeting unless you obtain
a signed proxy from the record holder giving you the right to
vote the shares. |
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How will my proxy be exercised with respect to the
proposals? |
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If you properly give your proxy and submit it to IDW by
11:59 p.m. Pacific Time
on ,
2006, one of the individuals named as your proxy will vote your
shares as you have directed. You may direct your shares to be
voted FOR or AGAINST the proposals or
abstain from voting. If you submit your proxy but do not make
specific choices with respect to the proposals, your proxy will
follow the recommendations of the IDW board of directors and
vote your shares in favor of the proposals. |
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What happens if I do not return a proxy card or vote? |
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If you do not sign and send in your proxy card or vote in person
at the special meeting, or if you mark the abstain
box on the proxy card or voting instruction card, it will have
the same effect as a vote against the proposal to adopt the
merger agreement and approve the merger, but will have no effect
on the proposal to grant discretionary authority to the persons
named as proxies to vote to adjourn or postpone the special
meeting. |
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If my shares are held in street name, will my
broker vote my shares for me? |
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Your broker will vote your shares held in street
name on the proposal to adopt the merger agreement and
approve the merger only if you provide instructions on how to
vote. Therefore, you should be sure to provide your broker with
instructions on how to vote your shares. Without instructions,
your shares will not be voted on the proposal to adopt the
merger agreement and approve the merger, which will have the
same effect as a vote against the proposal to adopt the merger
agreement and approve the merger. |
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What should I do if I receive more than one set of voting
materials? |
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Please complete, sign, date and return each proxy card and
voting instruction card that you receive. You may receive more
than one set of voting materials, including multiple copies of
this proxy statement/prospectus and multiple proxy cards or
voting instruction cards. For example, if you hold shares in
more than one brokerage account, you will receive a separate
voting instruction card for each brokerage account in which you
hold shares. If your shares are held in more than one name, you
will receive more than one proxy or voting instruction card. |
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May I change my vote after I have mailed my signed proxy card
or voting instruction card or submitted my proxy using the
telephone or Internet? |
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Yes. If you have submitted a proxy, you may change your vote at
any time before your proxy is voted at the IDW special meeting
of stockholders. Prior to the special meeting, you may: |
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timely submit another properly completed proxy card
with a later date; |
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timely submit another proxy by telephone or over the
Internet; or |
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send a written notice that you are revoking your
proxy to IDWs Corporate Secretary at its principal offices
located at 1613 Santa Clara Drive, Suite 100,
Roseville, CA 95661-3542. |
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During the special meeting, you may vote in person prior to the
close of voting. Simply attending the special meeting will not,
by itself, revoke your proxy. If you have instructed a bank,
broker or nominee to vote your shares of IDW common stock by
executing a voting instruction card or by using the telephone or
Internet, you must follow the directions received from your
bank, broker or nominee to change your instructions. |
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Who will bear the cost of this solicitation? |
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IDW will pay the expenses of soliciting proxies for the special
meeting. IDW has retained Georgeson Shareholder Communications,
Inc., a proxy solicitation firm, to solicit proxies in
connection with the special meeting at a cost of approximately
$10,000 plus
out-of-pocket expenses.
In addition, IDW may reimburse banks, brokerage houses,
fiduciaries and custodians representing beneficial owners of
shares for their expenses in forwarding soliciting materials to
such beneficial owners. IDW directors, officers and employees
may also solicit proxies in-person or by mail, telephone,
facsimile, e-mail or by other means of communication. No
additional compensation will be paid to IDW directors, officers
and employees for these services. |
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Do I need to send in my IDW stock certificates now? |
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No. You should not send in your IDW stock certificates now.
Following the merger, the exchange agent selected by Flextronics
will send IDW stockholders a letter of transmittal informing
them where to deliver their IDW stock certificates in order to
receive Flextronics ordinary shares and any cash in lieu of a
fractional share of IDW common stock. You should not send in
your IDW common stock certificates prior to receiving this
letter of transmittal. |
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When do you expect the merger to be completed? |
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If IDW stockholders adopt the merger agreement and approve the
merger at the special meeting, Flextronics and IDW expect to
complete the merger as soon as practicable after the special
meeting, assuming all other conditions to the merger have been
satisfied or waived, including the receipt of required
regulatory approvals. |
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Who can answer my questions about the merger or IDWs
special meeting of stockholders? |
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A: |
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If you would like additional copies of this proxy statement/
prospectus without charge or if you have questions about the
merger or IDWs special meeting of stockholders, including
the procedures for voting your shares, you should contact: |
Georgeson Shareholder Communications, Inc.
Toll free from within the United States and Canada:
(866) 628-6102
From outside the United States and Canada: (212) 440-9800
Banks and brokers call: (212) 440-9800
3
SUMMARY
The following is a summary of the information contained in this
proxy statement/ prospectus. This summary may not contain all of
the information about the merger that is important to you. For a
more complete description of the merger, Flextronics and IDW
encourage you to carefully read this entire proxy statement/
prospectus, including the attached annexes. In addition,
Flextronics and IDW encourage you to read the information
incorporated by reference into this proxy statement/ prospectus,
which includes important business and financial information
about Flextronics and IDW. You may obtain the information
incorporated by reference into this proxy statement/ prospectus
without charge by following the instructions in the section
entitled Where You Can Find More Information
beginning on page 84 of this proxy statement/ prospectus.
The Merger and the Merger Agreement (see pages 37 and
57)
Flextronics has agreed to acquire IDW pursuant to the terms of a
merger agreement that is described in this proxy statement/
prospectus. Under the terms of the merger agreement, a
wholly-owned subsidiary of Flextronics will merge with and into
IDW with IDW surviving the merger as a wholly-owned subsidiary
of Flextronics. Upon completion of the merger, each share of IDW
common stock will be converted into a fraction of a Flextronics
ordinary share based on an exchange ratio formula that is
provided in the merger agreement. The exchange ratio will be
calculated using the average per share closing price of
Flextronicss ordinary shares on the Nasdaq Global Select
Market for the 20 consecutive trading days ending on the fifth
trading day before the closing of the merger, and will provide
the following:
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If the average Flextronics closing price is equal to or greater
than $10.5606 and equal to or less than $12.9074, each share of
IDW common stock will be converted into a fraction of a
Flextronics ordinary share that will range from 0.6202 to
0.5075, which would represent an equivalent of $6.55 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater than
$12.9074 and equal to or less than $13.4941, each share of IDW
common stock will be converted into a fraction of a Flextronics
ordinary share equal to 0.5075, which would represent an
equivalent of more than $6.55 and up to $6.85 of value in
Flextronics ordinary shares based on the average Flextronics
closing price; |
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If the average Flextronics closing price is greater than
$13.4941, each share of IDW common stock will be converted into
a fraction of a Flextronics ordinary share equal to $6.85
divided by the average Flextronics closing price, which would
represent an equivalent of $6.85 of value in Flextronics
ordinary shares based on the average Flextronics closing
price; and |
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If the average Flextronics closing price is less than $10.5606,
each share of IDW common stock will be converted into a fraction
of a Flextronics ordinary share equal to 0.6202, which would
represent an equivalent of less than $6.55 of value in
Flextronics ordinary shares based on the average Flextronics
closing price. |
At an average Flextronics closing price of $9.9739, each share
of IDW common stock would be converted into a fraction of a
Flextronics ordinary share equal to 0.6202, which would
represent an equivalent of $6.19 of value in Flextronics
ordinary shares based on this average Flextronics closing price.
If the average Flextronics closing price is less than $9.9739,
IDW would have the right to call off the merger, unless
Flextronics elects to adjust the exchange ratio in order to
provide that each share of IDW common stock would be converted
into a fraction of a Flextronics ordinary share with an
equivalent value, based on the average Flextronics closing
price, of $6.19. However, IDW might not elect to exercise this
right to call off the merger, in which case each share of IDW
common stock would be converted into a fraction of a Flextronics
ordinary share equal to 0.6202, which would represent an
equivalent of less than $6.19 of value in Flextronics ordinary
shares based on the average Flextronics closing price.
On ,
2006, the last trading day prior to the printing of this
document, the closing price of Flextronicss ordinary
shares on the Nasdaq Global Select Market was
$ . .
If that closing price was the applicable average Flextronics
closing price, then each share of IDW common stock would be
converted into a
4
fraction of a Flextronics ordinary share equal to
0. , representing an equivalent
value, based on the average Flextronics closing price, of
$ .
Flextronics and IDW plan to issue a joint press release one day
prior to the IDW special meeting setting forth the anticipated
average Flextronics closing price and the exchange ratio
calculation.
A copy of the merger agreement is attached as Annex A to
this proxy statement/ prospectus, and Flextronics and IDW
encourage you to read the merger agreement in its entirety.
Parties to the Merger
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Flextronics International Ltd. |
Flextronics International Ltd., referred to in this proxy
statement/ prospectus as Flextronics, is a leading provider of
advanced design and electronics manufacturing services
(EMS) to original equipment manufacturers (OEMs) in the
following markets:
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computing, which includes products such as desktop, handheld and
notebook computers, electronic games and servers; |
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mobile communication devices, which includes GSM, CDMA, and
WCDMA handsets; |
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consumer digital devices, which includes products such as set
top boxes, home entertainment equipment, printers, copiers and
cameras; |
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industrial, semiconductor and white goods, which includes
products such as home appliances, industrial meters, bar code
readers and test equipment; |
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automotive, marine and aerospace, which includes products such
as navigation instruments, radar components, instrument panel
and radio components; |
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infrastructure, which includes products such as cable modems,
cellular base stations, hubs and switches; and |
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medical devices, which includes products such as drug delivery,
diagnostic and telemedicine devices. |
Flextronics is one of the worlds largest EMS providers,
with revenues from continuing operations of $15.3 billion
in fiscal year 2006. As of March 31, 2006,
Flextronicss total manufacturing capacity was
approximately 15.8 million square feet in over 30 countries
across four continents. Flextronics has established an extensive
network of manufacturing facilities in the worlds major
electronics markets (Asia, Europe and the Americas) in order to
serve the growing outsourcing needs of both multinational and
regional OEMs. In fiscal year 2006, Flextronicss net sales
in the Americas, Europe, and Asia represented 22%, 22% and 56%
of its total net sales, respectively.
Flextronics provides a full range of vertically-integrated
global supply chain services through which it designs, builds,
and ships a complete packaged product for its OEM customers.
Flextronicss OEM customers leverage its services to meet
their requirements throughout their products entire
product life cycle. Services provided by Flextronics include:
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printed circuit board and flexible circuit fabrication; |
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systems assembly and manufacturing; |
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logistics; |
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after-sales services; |
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design and engineering services; |
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original design manufacturing (ODM) services; and |
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components design and manufacturing. |
5
Flextronics believes that these vertically-integrated
capabilities provides it with a competitive advantage in the
market for designing and manufacturing electronic products for
leading multinational and regional OEMs. Through these services
and capabilities, Flextronics simplifies the global product
development process and provides meaningful time and cost
savings for its customers.
Flextronicss customers include industry leaders such as
Casio, Dell, Ericsson, Hewlett-Packard, Kyocera, Microsoft,
Motorola, Nortel, Sony-Ericsson, and Xerox.
As part of Flextronicss efforts to focus its resources on
its core EMS business, Flextronics divested its network services
and semiconductor businesses in fiscal year 2006, and sold its
software development and solutions business in September 2006.
Flextronics was incorporated in the Republic of Singapore in May
1990. Its principal corporate office is located at One Marina
Boulevard, #28-00, Singapore 018989, and its
U.S. corporate headquarters are located at 2090 Fortune
Drive, San Jose, California, 95131. Flextronicss
website is located at www.flextronics.com. Information contained
on this website does not constitute part of this proxy
statement/ prospectus.
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International DisplayWorks, Inc. |
International DisplayWorks, Inc., referred to in this proxy
statement/ prospectus as IDW, designs and manufactures liquid
crystal display (LCD) products and is a supplier to several
Fortune 500 companies, major Japanese and other Asian and
European corporations and smaller companies operating in a
variety of end-markets. IDWs product focus is on the small
form factor (SFF) LCD market, which includes 7
displays or smaller. IDWs customers include OEMs, original
design manufacturers (ODMs) and EMS companies, serving high
growth markets including mobile phones, handheld games, portable
media players, medical devices, consumer electronics, and
industrial and telecommunications equipment.
IDW assists its customers in the design and development of their
products and provide full turnkey manufacturing services. It
offers a broad suite of services and solutions, including
outsourced design, component purchasing, electronic
subassemblies and finished products assembly, post-assembly
testing and post-sales support. IDW provides value-added custom
design and manufacturing services, in which it designs and
develops products that are sold by IDWs customers to their
end customers and markets using their brand names. IDW supports
a broad product portfolio, with offerings in three SFF LCD
technologies: monochrome super-twisted nematic (STN), color
super-twisted nematic (CSTN) and thin film transistor
(TFT). In addition, IDW supports an extensive set of production
techniques for manufacturing its SFF LCD modules: surface mount
(SMT), chip-on-board
(COB), chip-on-glass
(COG), chip-on-film
(COF) and tape carrier package (TCP).
IDW was incorporated in the state of Delaware in July of 1999.
On October 31, 2001, IDW merged with its parent, Granite
Bay Technologies, Inc., a California corporation. IDWs
principal executive offices are located at 1613 Santa Clara
Drive, Suite 100, Roseville, California, 95661, and its
telephone number is (916) 797-6800. IDWs website
address is www.IDWK.com. Information contained in this website
does not constitute part of this proxy statement/ prospectus.
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Granite Acquisition Corp. |
Granite Acquisition Corp. is a wholly-owned subsidiary of
Flextronics formed on August 30, 2006. Flextronics formed
Granite Acquisition Corp. solely to effect the merger, and
Granite Acquisition Corp. has not conducted any business during
any period of its existence.
Special Meeting of Stockholders of IDW (see page 34)
Time, Date and Place. IDW will hold a special meeting of
its stockholders
on ,
2006, at 10:00 a.m., local time, at the Hilton Garden Inn
located at 1951 Taylor Road, Roseville, California, at which IDW
stockholders will be asked to vote to adopt the merger agreement
and approve the merger and to grant discretionary authority to
the persons named as proxies to vote to adjourn or postpone the
special meeting, if necessary, to solicit additional proxies if
there are not sufficient votes for the adoption of the merger
agreement and approval of the merger.
6
Record Date and Voting Power. You are entitled to vote at
the special meeting if you owned shares of IDW common stock at
the close of business
on ,
2006, the record date for the special meeting. You will have one
vote at the special meeting for each share of IDW common stock
you owned at the close of business on the record date. There
are shares
of IDW common stock entitled to be voted at the special meeting.
Required Vote. The affirmative vote of holders of a
majority of the shares of IDW common stock outstanding as of the
record date of the special meeting is required to approve the
proposal to approve and adopt the merger agreement and approve
the merger. The proposal to grant discretionary authority to the
persons named as proxies to vote to adjourn or postpone the
special meeting requires the affirmative vote of the holders of
a majority of shares of IDW common stock represented and
entitled to vote at the special meeting.
Voting Agreements with IDWs Directors and Executive
Officers. IDWs executive officers and directors have
entered into voting agreements with Flextronics under which they
agreed (i) to vote all shares of IDW common stock owned by
them in favor of the adoption of the merger agreement and
approval of the merger and any other actions presented to IDW
stockholders for the purpose of facilitating the merger, and
(ii) not to dispose of any shares of IDW common stock they
own before the earlier of the termination of the merger
agreement or the consummation of the merger.
Risk Factors (see page 19)
The Risk Factors section beginning on
page of this proxy statement/
prospectus should be considered carefully by IDW stockholders in
evaluating whether to approve the proposals. These risk factors
should be considered along with any additional risk factors
contained in the reports of Flextronics and IDW filed with the
SEC, and any other information included in or incorporated by
reference into this proxy statement/ prospectus.
Recommendation of the IDW Board of Directors (see
page 40)
After careful consideration, IDWs board of directors
unanimously determined that the merger is fair to, and in the
best interests of, IDW and its stockholders and declared the
merger to be advisable. Accordingly, the IDW board of directors
unanimously approved the merger agreement and the merger and
unanimously recommends that stockholders vote FOR
the adoption of the merger agreement and approval of the
merger, and FOR the proposal to grant
discretionary authority to the persons named as proxies to vote
to adjourn or postpone the special meeting, if necessary, to
solicit additional proxies if there are not sufficient votes in
favor of the proposal to adopt the merger agreement and approve
the merger.
IDWs Reasons for the Merger (see page 40)
After careful consideration, the IDW board of directors approved
the merger agreement and the merger, and determined that the
merger is fair to, and in the best interests of, IDW and its
stockholders, based on a number of factors that are described in
the section entitled Proposal No. 1
The Merger IDWs Reasons for the Merger and
Recommendation of IDWs Board.
Opinion of IDWs Financial Advisor (see page 43)
Deutsche Bank Securities Inc., referred to in this proxy
statement/ prospectus as Deutsche Bank, has acted as financial
advisor to IDW in connection with the merger. At a meeting of
the board of directors of IDW on September 4, 2006,
Deutsche Bank delivered its oral opinion, subsequently confirmed
in writing as of the same date, that, as of the date of such
opinion and subject to the assumptions made, matters considered
and limits of the review undertaken by Deutsche Bank, the
exchange ratio was fair, from a financial point of view, to the
stockholders of IDW. For purposes of this section and the
Deutsche Bank opinion, the term exchange ratio means the ratio
under which each share of IDW will be converted into a fraction
of a Flextronics ordinary share in accordance with the formula
set forth in the merger agreement.
The full text of Deutsche Banks written opinion dated
September 4, 2006, which sets forth, among other things,
the assumptions made, matters considered and limits on the
review undertaken by Deutsche Bank in connection with its
opinion, is attached as Annex C to this proxy statement/
prospectus. You are urged to read
7
the Deutsche Bank opinion in its entirety. Deutsche Bank
provided its opinion to inform and assist the board of directors
of IDW in connection with its consideration of the transactions
contemplated by the merger agreement. The Deutsche Bank opinion
is not a recommendation to you as to how you should vote with
respect to the merger and merger agreement.
IDWs Directors and Executive Officers Have Interests in
the Merger (see page 50)
When IDW stockholders consider the recommendation of IDWs
board of directors that stockholders vote in favor of the
proposal to adopt the merger agreement and approve the merger,
they should be aware that the executive officers of IDW and the
members of IDWs board of directors have interests in the
merger that may be different from, or in addition to, the
interests of stockholders generally. These interests include,
among other things: (i) the merger will accelerate the
vesting of options held by the directors and executive officers
and the vesting of restricted stock held by executive officers,
and (ii) IDWs directors and officers and other option
holders will be entitled to receive a cash payment for their IDW
stock options equal to the excess, if any of (a) the final
exchange ratio multiplied by the closing price of
Flextronics ordinary shares on the last trading day
immediately prior to the date of closing of the merger, over
(b) the applicable exercise price of such stock option. It
also is anticipated that Mr. Thomas A. Lacey, IDWs
Chairman and Chief Executive Officer, will hold a senior
management position in Flextronics following the merger.
Flextronics has also agreed to, and will cause IDW, as the
surviving company after the merger, to fulfill IDWs
indemnification obligations as in effect on the date of the
merger agreement and maintain directors and officers
liability insurance for six years following the effective time
of the merger. IDWs board of directors was aware of these
interests when the directors approved the merger agreement.
What Is Needed to Complete the Merger (see page 66)
Several conditions must be satisfied or waived before
Flextronics and IDW complete the merger, including those
summarized below:
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adoption of the merger agreement by the IDW stockholders; |
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absence of any law, regulation or order making the merger
illegal or otherwise prohibiting the merger; |
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the expiration or termination of any applicable waiting periods
under the HSR Act with respect to the merger and the receipt of
any consents, waivers or approvals required under foreign merger
control regulations; |
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the effectiveness of a registration statement filed in
connection with the issuance of Flextronics ordinary shares in
the merger and no stop order proceedings suspending the
registration statement or this proxy statement/ prospectus; |
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the delivery of opinions to Flextronics and IDW by their
respective tax counsel that the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the U.S. Internal Revenue Code of
1986, as amended, referred to in this proxy statement/prospectus
as the Code; |
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IDWs representations and warranties must be true and
correct in all material respects as of the date of the merger
agreement and as of the closing date (except those
representations and warranties which address matters only as of
a particular date, which must be true and correct as of that
date); |
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Flextronicss representations and warranties must be true
and correct as of the date of the merger agreement and as of the
closing date (except those representations and warranties which
address matters only as of a particular date, which must be true
and correct as of that date), except as does not constitute a
material adverse effect on Flextronics on the closing date; |
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the absence of any change, event, development, violation,
inaccuracy, circumstance or effect which, individually or in the
aggregate, has had or would reasonably be expected to have a
material adverse effect on IDW; |
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material compliance by each party with its covenants in the
merger agreement; and |
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no pending or overtly threatened suit, action or proceeding
asserted by a governmental entity challenging or threatening to
restrain or prohibit the merger or seeking to require one of the
parties to make a divestiture. |
If the law permits, either IDW or Flextronics could choose to
waive a condition to its obligation to complete the merger even
though that condition has not been satisfied. Shareholders of
Flextronics are not required to approve the merger, the issuance
of shares of Flextronics ordinary shares in the merger or any
matter relating to the merger, and, accordingly, Flextronics
will not hold a special meeting of its shareholders in
connection with the merger.
IDW Is Prohibited from Soliciting Other Offers (see
page 62)
The merger agreement contains detailed provisions that prohibit
IDW and its subsidiaries, and their officers and directors, from
taking any action to solicit or engage in discussions or
participate in negotiations with any person or group with
respect to an acquisition proposal, as defined in the merger
agreement, including an acquisition that would result in the
person or group acquiring more than a 20% interest in IDWs
total outstanding voting securities, a merger or other business
combination involving IDW, a sale, lease, exchange, transfer or
license of more than 20% of IDWs assets, or any
liquidation or dissolution of IDW. IDW is also required to use
all reasonable efforts to cause its advisors to comply with
these restrictions. The merger agreement does not, however,
prohibit IDW or its board of directors from considering and, in
the event of a tender or exchange offer made directly to IDW
stockholders, from potentially recommending, an unsolicited bona
fide written acquisition proposal from a third party if
specified conditions are met.
Change of Board Recommendation (see page 64)
Subject to specified conditions, the board of directors of IDW
may withdraw or modify its recommendation in support of the
adoption of the merger agreement and approval of the merger by
IDWs stockholders. In the event that the board of
directors of IDW withdraws or modifies its recommendation in a
manner adverse to Flextronics, IDW may be required to pay a
termination fee of $8.0 million to Flextronics.
Flextronics and IDW May Terminate the Merger Agreement under
Specified Circumstances (see page 68)
Under circumstances specified in the merger agreement, either
Flextronics or IDW may terminate the merger agreement. These
circumstances generally include if:
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Flextronics and IDW mutually agree to terminate the merger
agreement; |
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the merger is not completed by March 4, 2007 (which date
may be extended to June 6, 2007 in certain circumstances),
except that this right to terminate is not available to any
party whose action or failure to act was a principal cause of or
resulted in the failure of, the merger to occur on or before
such date and such action or failure to act constitutes a breach
of the merger agreement; |
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a final, non-appealable order of a court or other action or
inaction of any governmental entity has the effect of
permanently prohibiting completion of the merger; |
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|
|
the required approval of IDW stockholders has not been obtained
at the special meeting, except that this right to terminate is
not available to IDW if IDWs action or failure to act
caused the failure to obtain the requisite vote and such action
or failure to act constitutes a breach of the merger agreement; |
|
|
|
there has been, or any event has occurred since the date of the
merger agreement that would reasonably be expected to have, a
material adverse effect on IDW, which material adverse effect is
not cured prior to the earlier of March 4, 2007, and
30 days following receipt of written notice from
Flextronics of such material adverse effect (which right to
terminate may only be exercised by Flextronics); or |
|
|
|
the other party breaches its representations, warranties or
covenants in the merger agreement such that the conditions to
completion of the merger regarding its representations,
warranties or covenants would not be satisfied, subject to a
30-day cure period. |
9
Additionally, prior to the adoption of the merger agreement and
approval of the merger by IDW stockholders, Flextronics may
terminate the merger agreement if the board of directors of IDW
takes any of the actions in opposition to the merger described
as a triggering event in the merger agreement. IDW may terminate
the merger agreement if (i) it enters into a definitive
agreement with respect to an alternative acquisition under
specified conditions and pays the termination fee to
Flextronics; or (ii) the average Flextronics closing price
is less than $9.9739, unless Flextronics has elected to adjust
the exchange ratio in order to provide that each share of IDW
common stock would be converted into a fraction of a Flextronics
ordinary share with an equivalent value, based on the average
Flextronics closing price, of $6.19.
IDW May Be Required to Pay a Termination Fee under Specified
Circumstances (see page 69)
If the merger agreement is terminated under specified
circumstances, IDW may be required to pay a termination fee of
$8.0 million to Flextronics.
Material United States Federal Income Tax Consequences of the
Merger (see page 52)
The merger has been structured to qualify as a
reorganization within the meaning of
Section 368(a) of the Code, and it is a condition to
closing that each of Flextronics and IDW receive an opinion from
legal counsel to the effect that the merger will so qualify. If
the merger qualifies as a reorganization, IDW stockholders will
not recognize any gain or loss upon the receipt of Flextronics
ordinary shares in exchange for IDW common stock in connection
with the merger, except with respect to cash received in lieu of
a fractional Flextronics ordinary share.
IDW stockholders are urged to read the discussion in the section
entitled Proposal No. 1 The
Merger Material United States Federal Income Tax
Consequences of the Merger and to consult their tax
advisors as to the United States federal income tax consequences
of the merger, as well as the effect of state, local and
non-United States tax laws.
Accounting Treatment of the Merger (see page 55)
In accordance with United States generally accepted accounting
principles, Flextronics will account for the merger under the
purchase method of accounting for business combinations.
The Merger Is Subject to Antitrust Laws (see page 56)
Flextronics and IDW are required to make filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or the HSR Act, with the Antitrust Division of the
United States Department of Justice, or the DOJ, and the United
States Federal Trade Commission, or the FTC. Flextronics and IDW
filed the required notification and report forms
on ,
2006 and requested early termination of the required waiting
period. In addition, Flextronics and IDW will make any necessary
filings with competition authorities in China, Brazil, Austria,
Germany and Ukraine. Reviewing agencies or governments or
private persons may challenge the merger under antitrust or
similar laws at any time before or after its completion.
Flextronics Ordinary Shares Received in the Merger Will Be
Listed on the Nasdaq Global Select Market
(see page 59)
If Flextronics and IDW complete the merger, IDW stockholders
will be able to trade the Flextronics ordinary shares they
receive in the merger on the Nasdaq Global Select Market,
subject to restrictions on affiliates of IDW described in the
section entitled Proposal No. 1 The
Merger Restrictions on Sales of Flextronics Ordinary
Shares Received in the Merger beginning on page 56 of
this proxy statement/ prospectus. If Flextronics and IDW
complete the merger, IDW common stock will no longer be quoted
on the Nasdaq Global Market or any other market or exchange.
No Appraisal Rights (see page 57)
Under Delaware law, IDW stockholders will not have appraisal
rights pursuant to the merger and the other transactions
contemplated by the merger agreement.
10
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
FLEXTRONICS
The selected historical consolidated financial data in the table
below for the three months ended June 30, 2006 and
June 30, 2005, were derived from Flextronicss
unaudited consolidated financial statements for those periods.
The data for each year in the five-year period ended
March 31, 2006, were derived from Flextronicss
consolidated financial statements for those periods. This
information is only a summary and should be read in conjunction
with Flextronicss historical consolidated financial
statements and related notes and the sections entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in the
annual and quarterly reports of Flextronics and in conjunction
with the other information that Flextronics has filed with the
SEC which have been incorporated by reference into this proxy
statement/ prospectus. See the section entitled Where You
Can Find More Information beginning on
page of this proxy statement/
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
Fiscal Year Ended March 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share amounts) | |
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
4,059,143 |
|
|
$ |
3,823,055 |
|
|
$ |
15,287,976 |
|
|
$ |
15,730,717 |
|
|
$ |
14,479,262 |
|
|
$ |
13,329,197 |
|
|
$ |
13,034,670 |
|
Cost of sales
|
|
|
3,823,147 |
|
|
|
3,573,142 |
|
|
|
14,354,461 |
|
|
|
14,720,532 |
|
|
|
13,676,855 |
|
|
|
12,626,105 |
|
|
|
12,193,476 |
|
Restructuring charges(1)
|
|
|
|
|
|
|
27,572 |
|
|
|
185,631 |
|
|
|
78,381 |
|
|
|
474,068 |
|
|
|
266,244 |
|
|
|
461,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
235,996 |
|
|
|
222,341 |
|
|
|
747,884 |
|
|
|
931,804 |
|
|
|
328,339 |
|
|
|
436,848 |
|
|
|
380,134 |
|
Selling, general and administrative expenses
|
|
|
119,135 |
|
|
|
129,053 |
|
|
|
463,946 |
|
|
|
525,607 |
|
|
|
469,229 |
|
|
|
434,615 |
|
|
|
420,453 |
|
Intangible amortization
|
|
|
7,228 |
|
|
|
8,935 |
|
|
|
37,160 |
|
|
|
33,541 |
|
|
|
34,543 |
|
|
|
20,058 |
|
|
|
10,605 |
|
Restructuring charges(1)
|
|
|
|
|
|
|
5,117 |
|
|
|
30,110 |
|
|
|
16,978 |
|
|
|
54,785 |
|
|
|
30,711 |
|
|
|
65,591 |
|
Other (income) charges, net(2)
|
|
|
|
|
|
|
|
|
|
|
(17,200 |
) |
|
|
(13,491 |
) |
|
|
|
|
|
|
7,456 |
|
|
|
44,444 |
|
Interest and other expense, net
|
|
|
29,200 |
|
|
|
23,865 |
|
|
|
92,951 |
|
|
|
89,996 |
|
|
|
77,241 |
|
|
|
92,774 |
|
|
|
91,853 |
|
Gain on divestiture of operations
|
|
|
|
|
|
|
|
|
|
|
(23,819 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,328 |
|
|
|
103,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
80,433 |
|
|
|
55,371 |
|
|
|
164,736 |
|
|
|
262,845 |
|
|
|
(411,368 |
) |
|
|
(148,766 |
) |
|
|
(252,812 |
) |
Provision for (benefit from) income taxes
|
|
|
4,746 |
|
|
|
(1,407 |
) |
|
|
54,218 |
|
|
|
(68,652 |
) |
|
|
(64,958 |
) |
|
|
(64,987 |
) |
|
|
(92,341 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
75,687 |
|
|
|
56,778 |
|
|
|
110,518 |
|
|
|
331,497 |
|
|
|
(346,410 |
) |
|
|
(83,779 |
) |
|
|
(160,471 |
) |
Income (loss) from discontinued operations, net of tax
|
|
|
8,816 |
|
|
|
1,929 |
|
|
|
30,644 |
|
|
|
8,374 |
|
|
|
(5,968 |
) |
|
|
326 |
|
|
|
6,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
84,503 |
|
|
|
58,707 |
|
|
$ |
141,162 |
|
|
$ |
339,871 |
|
|
$ |
(352,378 |
) |
|
$ |
(83,453 |
) |
|
$ |
(153,748 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
0.13 |
|
|
$ |
0.09 |
|
|
$ |
0.18 |
|
|
$ |
0.57 |
|
|
$ |
(0.66 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
0.14 |
|
|
$ |
0.10 |
|
|
$ |
0.24 |
|
|
$ |
0.58 |
|
|
$ |
(0.67 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, | |
|
As of March 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
( In thousands) | |
CONSOLIDATED BALANCE SHEET DATA(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$ |
920,091 |
|
|
$ |
999,956 |
|
|
$ |
938,632 |
|
|
$ |
906,971 |
|
|
$ |
884,816 |
|
|
$ |
897,741 |
|
|
$ |
1,394,883 |
|
|
Total assets
|
|
|
11,886,437 |
|
|
|
11,097,455 |
|
|
|
10,958,407 |
|
|
|
11,009,766 |
|
|
|
9,583,937 |
|
|
|
8,394,104 |
|
|
|
8,644,699 |
|
|
Total long-term debt and capital lease obligations, excluding
current portion
|
|
|
1,660,190 |
|
|
|
1,937,352 |
|
|
|
1,489,366 |
|
|
|
1,709,570 |
|
|
|
1,624,261 |
|
|
|
1,049,853 |
|
|
|
863,293 |
|
|
Shareholders equity
|
|
|
5,427,262 |
|
|
|
5,241,044 |
|
|
|
5,354,647 |
|
|
|
5,224,048 |
|
|
|
4,367,213 |
|
|
|
4,542,020 |
|
|
|
4,455,496 |
|
|
|
(1) |
Flextronics recognized restructuring charges of
$215.7 million, $95.4 million, $540.3 million
(including $11.5 million attributable to discontinued
operations), $297.0 million, and $530.0 million
(including $3.3 million attributable to discontinued
operations) in fiscal years 2006, 2005, 2004, 2003, and 2002,
respectively, and $32.7 million during the three-months
ended June 30, 2005 associated with the consolidation and
closure of several manufacturing facilities. |
|
(2) |
Flextronics recognized $20.6 million of net gains, and
$29.3 million of gains from the liquidation of certain
international entities in fiscal years 2006 and 2005,
respectively. Flextronics also recognized $7.7 million and
$7.6 million in executive separation costs in fiscal years
2006 and 2005, respectively. |
|
|
Flextronics recognized charges of $8.2 million,
$7.4 million and $44.4 million in fiscal years 2005,
2003 and 2002, respectively, for the other than temporary
impairment of its investments in certain non-publicly traded
companies. In fiscal year 2006, Flextronics recognized a net
gain of $4.3 million related to its investments in certain
non-publicly traded companies. |
|
(3) |
Includes continuing and discontinued operations. |
12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF IDW
The selected historical consolidated financial data in the table
below for the nine months ended July 31, 2006 and
July 31, 2005 were derived from IDWs unaudited
consolidated financial statements. The selected historical
consolidated financial data for each year in the four-year
period ended October 31, 2005 and the ten months ended
October 31, 2001, were derived from IDWs audited
consolidated financial statements. This information should be
read in conjunction with IDWs historical consolidated
financial statements and related notes and the sections entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in the
annual and quarterly reports of IDW and in conjunction with the
other information that IDW has filed with the SEC which have
been incorporated by reference into this proxy statement/
prospectus. See the section entitled Where You Can Find
More Information beginning on page 84 of this proxy
statement/prospectus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Ten | |
|
|
Nine Months Ended | |
|
For Twelve Months Ended | |
|
Months Ended | |
|
|
| |
|
| |
|
| |
|
|
July 31, | |
|
July 31, | |
|
October 31, | |
|
October 31, | |
|
October 31, | |
|
October 31, | |
|
October 31, | |
|
|
2006 | |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
83,103 |
|
|
$ |
64,323 |
|
|
$ |
88,278 |
|
|
$ |
46,234 |
|
|
$ |
22,715 |
|
|
$ |
20,806 |
|
|
$ |
14,658 |
|
Cost of goods sold
|
|
|
69,063 |
|
|
|
52,423 |
|
|
|
72,618 |
|
|
|
36,123 |
|
|
|
17,600 |
|
|
|
15,730 |
|
|
|
11,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,040 |
|
|
|
11,900 |
|
|
|
15,660 |
|
|
|
10,111 |
|
|
|
5,115 |
|
|
|
5,076 |
|
|
|
3,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
7,408 |
|
|
|
5,532 |
|
|
|
7,693 |
|
|
|
5,403 |
|
|
|
3,487 |
|
|
|
4,036 |
|
|
|
4,071 |
|
|
Selling, marketing and customer service
|
|
|
2,112 |
|
|
|
1,918 |
|
|
|
2,750 |
|
|
|
2,096 |
|
|
|
1,524 |
|
|
|
1,440 |
|
|
|
1,231 |
|
|
Engineering, advanced design and product management
|
|
|
827 |
|
|
|
525 |
|
|
|
877 |
|
|
|
625 |
|
|
|
593 |
|
|
|
691 |
|
|
|
901 |
|
|
Litigation settlement(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of machinery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270 |
|
|
|
|
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,347 |
|
|
|
7,975 |
|
|
|
11,320 |
|
|
|
8,749 |
|
|
|
5,604 |
|
|
|
11,724 |
|
|
|
6,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
3,693 |
|
|
|
3,925 |
|
|
|
4,340 |
|
|
|
1,362 |
|
|
|
(489 |
) |
|
|
(6,648 |
) |
|
|
(3,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
(309 |
) |
|
|
(426 |
) |
|
|
(681 |
) |
|
|
(396 |
) |
|
|
(389 |
) |
|
|
(464 |
) |
|
|
(530 |
) |
|
Investment income
|
|
|
1,017 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
39 |
|
|
|
(27 |
) |
|
|
|
|
|
|
108 |
|
|
|
70 |
|
|
|
170 |
|
|
|
972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income
|
|
|
747 |
|
|
|
(453 |
) |
|
|
(672 |
) |
|
|
(288 |
) |
|
|
(319 |
) |
|
|
(294 |
) |
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
4,440 |
|
|
|
3,472 |
|
|
|
3,668 |
|
|
|
1,074 |
|
|
|
(808 |
) |
|
|
(6,942 |
) |
|
|
(2,571 |
) |
|
Income tax benefit
|
|
|
(438 |
) |
|
|
|
|
|
|
(99 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$ |
4,878 |
|
|
$ |
3,472 |
|
|
$ |
3,767 |
|
|
$ |
1,074 |
|
|
$ |
(808 |
) |
|
$ |
(6,942 |
) |
|
$ |
(2,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing per share
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
37,873,056 |
|
|
|
31,282,781 |
|
|
|
31,388,406 |
|
|
|
25,647,763 |
|
|
|
19,448,718 |
|
|
|
19,207,246 |
|
|
|
19,192,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38,206,490 |
|
|
|
32,326,370 |
|
|
|
32,710,238 |
|
|
|
27,511,228 |
|
|
|
19,448,718 |
|
|
|
19,207,246 |
|
|
|
19,192,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The litigation settlement is related to IDWs former
operations as a manufacturer of snowboards, and was part of a
claim arising from a snowboard injury prior to 1999. The last
time IDW manufactured snowboards was prior to 1999. |
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31, | |
|
As of October 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Amounts in thousands) | |
CONSOLIDATED BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
8,081 |
|
|
$ |
6,079 |
|
|
$ |
9,258 |
|
|
$ |
10,186 |
|
|
$ |
1,178 |
|
|
$ |
1,556 |
|
|
$ |
982 |
|
Net current assets
|
|
|
103,168 |
|
|
|
39,797 |
|
|
|
41,489 |
|
|
|
28,504 |
|
|
|
9,264 |
|
|
|
6,618 |
|
|
|
5,950 |
|
Property, plant and equipment, net
|
|
|
28,087 |
|
|
|
27,311 |
|
|
|
27,031 |
|
|
|
16,418 |
|
|
|
4,796 |
|
|
|
5,197 |
|
|
|
6,389 |
|
Total assets
|
|
|
132,473 |
|
|
|
67,108 |
|
|
|
68,782 |
|
|
|
44,922 |
|
|
|
14,060 |
|
|
|
11,815 |
|
|
|
18,058 |
|
Current liabilities
|
|
|
22,625 |
|
|
|
32,310 |
|
|
|
33,424 |
|
|
|
15,718 |
|
|
|
7,959 |
|
|
|
6,093 |
|
|
|
5,861 |
|
Long-term debt and capital lease obligations, net of current
portion
|
|
|
1,501 |
|
|
|
5 |
|
|
|
5 |
|
|
|
70 |
|
|
|
1,877 |
|
|
|
1,280 |
|
|
|
807 |
|
Stockholders equity
|
|
|
108,347 |
|
|
|
34,793 |
|
|
|
35,353 |
|
|
|
29,134 |
|
|
|
4,224 |
|
|
|
4,442 |
|
|
|
11,390 |
|
14
MARKET PRICE AND DIVIDEND INFORMATION
Market Price Information
The following tables set forth, for the periods indicated, the
high and low sales prices of Flextronics ordinary shares as
reported on the Nasdaq Global Select Market and IDW common stock
as reported on the Nasdaq Global Market.
Flextronicss fiscal year ends on March 31, and
IDWs fiscal year ends on October 31.
Flextronics Ordinary Shares
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
High | |
|
Low | |
|
|
| |
|
| |
March 31, 2005
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
19.12 |
|
|
$ |
14.85 |
|
|
Second Quarter
|
|
$ |
15.58 |
|
|
$ |
10.06 |
|
|
Third Quarter
|
|
$ |
15.01 |
|
|
$ |
11.02 |
|
|
Fourth Quarter
|
|
$ |
14.44 |
|
|
$ |
11.77 |
|
March 31, 2006
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
13.95 |
|
|
$ |
10.43 |
|
|
Second Quarter
|
|
$ |
14.37 |
|
|
$ |
12.19 |
|
|
Third Quarter
|
|
$ |
12.95 |
|
|
$ |
8.97 |
|
|
Fourth Quarter
|
|
$ |
11.29 |
|
|
$ |
9.63 |
|
March 31, 2007
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
12.55 |
|
|
$ |
9.62 |
|
|
Second Quarter
|
|
$ |
13.10 |
|
|
$ |
9.80 |
|
IDW Common Stock
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
High | |
|
Low | |
|
|
| |
|
| |
October 31, 2004
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
2.99 |
|
|
$ |
0.49 |
|
|
Second Quarter
|
|
$ |
6.94 |
|
|
$ |
2.40 |
|
|
Third Quarter
|
|
$ |
6.15 |
|
|
$ |
3.00 |
|
|
Fourth Quarter
|
|
$ |
5.75 |
|
|
$ |
2.66 |
|
October 31, 2005
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
9.85 |
|
|
$ |
5.20 |
|
|
Second Quarter
|
|
$ |
10.65 |
|
|
$ |
8.00 |
|
|
Third Quarter
|
|
$ |
9.75 |
|
|
$ |
6.65 |
|
|
Fourth Quarter
|
|
$ |
7.54 |
|
|
$ |
4.97 |
|
October 31, 2006
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
6.81 |
|
|
$ |
4.88 |
|
|
Second Quarter
|
|
$ |
6.94 |
|
|
$ |
5.32 |
|
|
Third Quarter
|
|
$ |
5.99 |
|
|
$ |
4.58 |
|
|
Fourth Quarter (through September 30, 2006)
|
|
$ |
6.42 |
|
|
$ |
4.51 |
|
Dividend Information
Flextronics has never paid dividends on its ordinary shares and
has no current intentions to do so. IDW has paid no dividends on
its common stock since its inception.
15
COMPARATIVE HISTORICAL PER SHARE DATA
The following table sets forth certain historical per share data
of Flextronics and IDW and certain equivalent IDW per share
data. The information set forth below should be read in
conjunction with Selected Historical Consolidated
Financial Data of Flextronics and Selected
Historical Consolidated Financial Data of IDW on
pages 11 and 13 of this proxy statement/ prospectus and the
respective audited and unaudited financial statements and
related notes of Flextronics and IDW that are incorporated by
reference into this proxy statement/ prospectus. Neither
Flextronics nor IDW has declared or paid cash dividends in the
last five years. Pro forma Flextronics data giving effect to the
merger under the purchase method of accounting have not been
presented because it is not materially different from historical
Flextronics information.
|
|
|
|
|
|
Historical Flextronics:
|
|
|
|
|
Income per diluted share from continuing operations:
|
|
|
|
|
|
For the twelve months ended March 31, 2006
|
|
$ |
0.18 |
|
|
For the three months ended June 30, 2006
|
|
$ |
0.13 |
|
Book value per share(1):
|
|
|
|
|
|
As of March 31, 2006
|
|
$ |
9.26 |
|
|
As of June 30, 2006
|
|
$ |
9.38 |
|
Historical IDW:
|
|
|
|
|
Net income per diluted share:
|
|
|
|
|
|
For the twelve months ended October 31, 2005
|
|
$ |
0.12 |
|
|
For the nine months ended July 31, 2006
|
|
$ |
0.13 |
|
Book value per share(1):
|
|
|
|
|
|
As of October 31, 2005
|
|
$ |
1.11 |
|
|
As of July 31, 2006
|
|
$ |
2.42 |
|
Equivalent IDW(2):
|
|
|
|
|
Income per diluted share from continuing operations:
|
|
|
|
|
|
For the twelve months ended March 31, 2006
|
|
$ |
0.10 |
|
|
For the three months ended June 30, 2006
|
|
$ |
0.07 |
|
Book value per share(1):
|
|
|
|
|
|
As of March 31, 2006
|
|
$ |
5.15 |
|
|
As of June 30, 2006
|
|
$ |
5.22 |
|
|
|
(1) |
Historical book value per share is computed by dividing total
stockholders equity by the number of shares outstanding at
the end of each period. |
|
(2) |
Because the exchange ratio will not be determined until after
the date of this proxy statement/ prospectus, the equivalent IDW
per share data shown on this table is calculated based on an
assumed exchange ratio equal to the quotient of (a) $6.55
divided by (b) $11.77, which is the per share closing price
of Flextronicss ordinary shares on the Nasdaq Global
Select Market on September 1, 2006, the last full trading
day preceding public announcement of the merger. If the merger
is completed, the exchange ratio will be calculated using the
average daily closing price for Flextronicss ordinary
shares during the 20 consecutive trading days ending on the
fifth trading day immediately preceding the closing of the
merger. If the average Flextronics closing price is:
(a) equal to or greater than $10.5606 and equal to or less
than $12.9074, the exchange ratio will equal $6.55 divided by
the average Flextronics closing price; (b) greater than
$12.9074 and equal to or less than $13.4941, the exchange ratio
will be fixed at 0.5075; (c) greater than $13.4941, the
exchange ratio will equal $6.85 divided by the average
Flextronics closing price; and (d) less than $10.5606, the
exchange ratio will be fixed at 0.6202. If the average
Flextronics closing price is less than $9.9739, IDW would have
the right to call off the merger, unless Flextronics elects to
adjust the exchange ratio in order to provide that each share of
IDW common stock will be converted into a fraction of a
Flextronics ordinary share with an equivalent value, based on
the average Flextronics closing price, of $6.19. However, IDW
may elect not to exercise this right to call off the merger, in
which case the exchange ratio would remain fixed at 0.6202. See
The Merger Agreement Conversion of IDW Common
Stock in the Merger beginning on page 58 of this
proxy statement/ prospectus. |
16
COMPARATIVE PER SHARE MARKET PRICE DATA
Flextronics ordinary shares are listed on the Nasdaq Global
Select Market under the symbol FLEX. IDW common
stock is listed on the Nasdaq Global Market under the symbol
IDWK. The following table sets forth the closing
sale prices of Flextronics ordinary shares and IDW common stock
as reported on the Nasdaq Global Select Market and the Nasdaq
Global Market, respectively, on September 1, 2006, which is
the last full trading day preceding public announcement of the
merger, and
on ,
2006, which is the last full trading day for which the closing
sale prices were available as of the date of this proxy
statement/ prospectus. The following table also shows the
equivalent IDW per share price, calculated by multiplying the
closing Flextronics sale price by an assumed exchange ratio.
These comparisons may not provide meaningful information to IDW
stockholders in determining whether to adopt the merger
agreement and approve the merger. IDW stockholders are urged to
obtain current market quotations for Flextronics ordinary shares
and IDW common stock and to review carefully the other
information contained in this proxy statement/ prospectus or
incorporated by reference into this proxy statement/ prospectus
when considering whether to adopt the merger agreement and
approve the merger. See the section entitled Where You Can
Find More Information beginning on page 84 of this
proxy statement/ prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent IDW | |
|
|
Flextronics | |
|
|
|
per Share | |
Date |
|
Ordinary Shares | |
|
IDW Common Stock | |
|
Price (1) | |
|
|
| |
|
| |
|
| |
September 1, 2006
|
|
$ |
11.77 |
|
|
$ |
5.95 |
|
|
$ |
6.55 |
|
,
2006
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
Because the exchange ratio will not be determined until after
the date of this proxy statement/ prospectus, the equivalent IDW
per share price shown on this table is calculated based on an
assumed exchange ratio equal to the quotient of (a) $6.55
divided by (b) $11.77, which is the per share closing price
of Flextronicss ordinary shares on the Nasdaq Global
Select Market on September 1, 2006, the last full trading
day preceding public announcement of the merger. If the merger
is completed, the exchange ratio will be calculated using the
average daily closing price for Flextronics ordinary shares
during the 20 consecutive trading days ending on the fifth
trading day immediately preceding the closing of the merger. If
the average Flextronics closing price is: (a) equal to or
greater than $10.5606 and equal to or less than $12.9074, the
exchange ratio will equal $6.55 divided by the average
Flextronics closing price; (b) greater than $12.9074 and
equal to or less than $13.4941, the exchange ratio will be fixed
at 0.5075; (c) greater than $13.4941, the exchange ratio
will equal $6.85 divided by the average Flextronics closing
price; and (d) less than $10.5606, the exchange ratio will
be fixed at 0.6202. If the average Flextronics closing price is
less than $9.9739, IDW would have the right to call off the
merger, unless Flextronics elects to adjust the exchange ratio
in order to provide that each share of IDW common stock will be
converted into a fraction of a Flextronics ordinary share with
an equivalent value, based on the average Flextronics closing
price, of $6.19. However, IDW may elect not to exercise this
right to call off the merger, in which case the exchange ratio
would remain fixed at 0.6202. See The Merger
Agreement Conversion of IDW Common Stock in the
Merger beginning on page 58 of this proxy statement/
prospectus. |
17
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus, including the documents
incorporated by reference into this proxy statement/prospectus,
contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements can be
identified by terminology referring to or signifying future
events, such as will, may,
designed to, outlook,
believes, should,
anticipates, plans, expects,
intends, estimates, could
and similar expressions. Generally, forward-looking statements
include information concerning possible or assumed future
actions, events or results of operations of Flextronics, IDW and
the combined company. The forward-looking statements in this
proxy statement/prospectus are principally contained under the
sections titled Questions and Answers About the Special
Meeting, Summary, Risk Factors and
Proposal No. 1 The Merger in this
proxy statement/prospectus, as well as the sections titled
Risk Factors, Business and
Managements Discussion and Analysis of Financial
Condition and Results of Operations which are incorporated
by reference into this proxy statement/prospectus from the
Quarterly and Annual Reports of Flextronics and IDW, as the same
may be updated or supplemented by future filings with the SEC
under the Exchange Act, which are identified in Where You
Can Find More Information on page 84 of this proxy
statement/prospectus. Because these forward-looking statements
are also subject to risks and uncertainties, actual results may
differ materially from the expectations expressed in the
forward-looking statements. Important factors that could cause
actual results to differ materially from the expectations
reflected in the forward-looking statements are those described
in the Risk Factors section of this proxy
statement/prospectus and in the Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations sections of the
Quarterly and Annual Reports of Flextronics and IDW which are
incorporated by reference into this proxy statement prospectus.
See Where You Can Find More Information on page 84
for information on the documents that are incorporated by
reference into this proxy statement/prospectus.
The forward-looking statements in this proxy
statement/prospectus (including information incorporated by
reference herein) are based on current expectations and neither
Flextronics nor IDW undertakes any obligation (other than as
required by law) to update or revise these forward-looking
statements to reflect subsequent events or circumstances.
18
RISK FACTORS
In addition to the other information included in or
incorporated by reference into this proxy statement/ prospectus,
you should carefully read and consider the following risk
factors before deciding whether to vote in favor of the proposal
to approve and adopt the merger agreement and approve the
merger. By voting in favor of the proposal to approve and adopt
the merger agreement and approve the merger, you will be
choosing to invest in Flextronics ordinary shares. An investment
in Flextronics ordinary shares involves a high degree of risk
and involves different risks than an investment in IDW common
stock. Additional risks and uncertainties not presently known to
Flextronics and IDW or that are not currently believed to be
important to you, if they materialize, also may adversely affect
the merger and Flextronics.
Risks Relating to the Merger
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Because the market price of Flextronicss shares may
fluctuate, you cannot be certain of the market value of the
Flextronics shares that you will receive in the merger. |
If the average closing price of Flextronics ordinary shares
during the measurement period shortly before the merger is
$10.5606 or more, up to and including $12.9074, then, for each
of your shares of IDW common stock, you will receive a fraction
of a Flextronics ordinary share ranging from 0.6202 to 0.5075,
and having an equivalent value, based on the average Flextronics
closing price, of $6.55. The merger agreement defines the
average Flextronics closing price as the average of the closing
price of a Flextronics ordinary share on the Nasdaq Global
Select Market for the 20 consecutive trading days ending on the
fifth trading day before the merger. Within this range of
average closing prices, the actual fraction of a Flextronics
ordinary share that you receive will be calculated by dividing
$6.55 by the average Flextronics closing price. However, the
market value of that fraction of a Flextronics ordinary share
that you would receive may be greater or less than $6.55,
because the trading price of Flextronics ordinary shares on the
date of the merger may be greater or less than the average
Flextronics closing price. Also, because the value of
Flextronics shares that you will receive within this range of
average closing prices is calculated to provide a value of $6.55
per IDW share, based on the average Flextronics closing price,
the equivalent value of the Flextronics shares that you will
receive in the merger may not increase if the trading price of
Flextronics ordinary shares increases within or above this range.
If the average Flextronics closing price is less than $10.5606,
then you will receive 0.6202 of a Flextronics ordinary share for
each of your shares of IDW common stock, which would have an
equivalent value, based on the average Flextronics closing
price, of less than $6.55 per IDW share. At an average
Flextronics closing price of $9.9739, 0.6202 of a Flextronics
ordinary share would represent an equivalent value of $6.19
based on this average Flextronics closing price. If the average
Flextronics closing price is less than $9.9739, IDW would have
the right to call off the merger unless Flextronics elects to
adjust the exchange ratio to provide that you would receive a
fraction of a Flextronics ordinary share with an equivalent
value, based on the average Flextronics closing price, of $6.19
for each share of IDW common stock. However, IDW might not elect
to exercise this right to call off the merger, in which case,
you would receive 0.6202 of a Flextronics ordinary share for
each share of IDW common stock, which would have an equivalent
value of less than $6.19 per IDW share based on the average
Flextronics closing price.
If the average Flextronics closing price is greater than
$12.9074 up to and including $13.4941, you will receive a
fraction of a Flextronics ordinary share equal to 0.5075 for
each of your shares of IDW common stock, which would have an
equivalent value, based on the average Flextronics closing
price, of between $6.55 and $6.85. If the average Flextronics
closing price is greater than $13.4941, you will receive a
fraction of a Flextronics ordinary share that is less than
0.5075, and having an equivalent value, based on the average
Flextronics closing price, of $6.85 per IDW share. As a result,
if the trading price of Flextronics ordinary shares increases
above $13.4941 during the measurement period shortly before the
merger, the equivalent value of the Flextronics ordinary shares
that you will receive in the merger may not increase up to or
above $6.85 per IDW share.
Because the actual trading price of Flextronics ordinary shares
at the time of the merger or after the merger is likely to be
either lower or higher than the average Flextronics closing
price during the measurement
19
period, the market value of the Flextronics ordinary shares that
you will receive in the merger may be either lower or higher
than the equivalent value determined by the exchange ratio
formula. As a result, at the time of the special meeting, you
will not know the value of the Flextronics shares that you will
receive in the merger. In addition, the merger may not be
completed until a significant period of time after the special
meeting, and therefore, you may not know what the exchange ratio
will be on the date of the special meeting. The prices of
Flextronics ordinary shares and IDW common stock are subject to
the general price fluctuations in the market for publicly traded
equity securities, and the prices of both companies shares
have experienced volatility in the past. Flextronics cannot
predict or give any assurances as to the market prices of
Flextronics ordinary shares before or after completion of the
merger.
The formula for calculating the exchange ratio is set forth in
the section entitled The Merger Agreement
Conversion of IDW Common Stock in the Merger beginning on
page 58 of this proxy statement/prospectus and you are
urged to read it carefully.
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The market price of Flextronics ordinary shares may be
affected by factors different from those affecting the shares of
IDW common stock. |
Upon consummation of the merger, holders of IDW common stock
will become holders of Flextronics ordinary shares.
Flextronicss business differs from that of IDW. An
investment in Flextronics ordinary shares involves different
risks than an investment in IDW common stock. Therefore, upon
consummation of the merger, former holders of IDW common stock
will be subject to different risks upon exchange of their shares
of IDW common stock for Flextronics ordinary shares in the
merger, some of which are described below in the section
entitled Risks Relating to Flextronics
beginning on page 23 of this proxy statement/ prospectus.
For a discussion of the businesses of Flextronics and IDW, see
the documents incorporated by reference into this proxy
statement/ prospectus and referred to in the section entitled
Where You Can Find More Information beginning on
page 84 of this proxy statement/ prospectus.
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IDW stockholders will have limited ability to influence
Flextronicss actions and decisions following the
merger. |
Upon the consummation of the merger, former IDW stockholders
will hold a small percentage of the then-outstanding Flextronics
ordinary shares. For example, if the merger was consummated on
the record date, and assuming the maximum exchange ratio of
0.6202, former IDW stockholders would hold in the aggregate
approximately percent of the
outstanding Flextronics ordinary shares. As a result, IDW
stockholders will have a limited ability to influence
Flextronicss business. Former IDW stockholders will not
have separate approval rights with respect to any actions or
decisions of Flextronics.
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The directors and executive officers of IDW have interests
and arrangements that could affect their decision to support or
approve the merger. |
When considering the IDW board of directors recommendation
that IDW stockholders vote in favor of the proposal to approve
and adopt the merger agreement and approve the merger, you
should be aware that IDWs directors and executive officers
have interests in the merger that may be different from, or in
addition to, the interests of IDW stockholders generally. These
interests create a potential conflict of interest and may be
perceived to have affected their decision to support or approve
the merger. The IDW board of directors was aware of these
potential conflicts of interest during its deliberations on the
merits of the merger and in making its decision in approving the
merger, the merger agreement and the related transactions. These
interests include indemnification rights and continued coverage
under existing or new directors and officers
liability insurance policies, and accelerated vesting of stock
awards to executive officers and directors upon the consummation
of the merger. It is also anticipated that Mr. Thomas A.
Lacey, IDWs Chairman and Chief Executive Officer, will
hold a senior management position in Flextronics following the
merger. IDW stockholders should be aware of these interests when
considering the IDW board of directors recommendation to
adopt the merger agreement and merger. See
Proposal No. 1 The
Merger Interests of IDWs Directors and
Executive Officers in the Merger beginning on page 50
of this proxy statement/ prospectus.
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If the merger does not qualify as a tax-free
reorganization for U.S. federal income tax purposes, you
will recognize gain or loss on the exchange of your shares of
IDW common stock. |
Although the U.S. Internal Revenue Service, referred to in
this proxy statement/ prospectus as the IRS, has not provided a
ruling on the merger, Flextronics and IDW will each obtain a
legal opinion from their respective counsel that the merger will
qualify as a tax-free reorganization under Section 368(a)
of the Code. These opinions, however, neither bind the IRS nor
prevent the IRS from adopting a contrary position. If the merger
fails to qualify as a tax-free reorganization, you would
generally recognize gain or loss on each share of IDW common
stock surrendered in the merger in the amount of the difference
between your basis in such share and the fair market value of
the Flextronics ordinary shares you receive in exchange for each
share of IDW common stock. You should consult with your own tax
advisor regarding the proper reporting of the amount and timing
of such gain or loss.
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Flextronics and IDW may be unable to obtain the regulatory
approvals required to complete the merger. |
Flextronics and IDW may be unable to obtain the regulatory
approvals required to complete the transaction. The merger is
subject to U.S. antitrust laws and, as such, is subject to
review by the DOJ and the FTC under the HSR Act. Flextronics and
IDW made filings under the HSR Act
on ,
2006, and the statutory waiting period thereunder must expire or
be terminated prior to completing the merger. Each of
Flextronics and IDW may receive a request for additional
information and other documentary material from the DOJ or the
FTC under the HSR Act in connection with the merger, which would
extend the waiting period for the merger under the HSR Act until
30 days after both parties substantially comply with the
request for additional information. In addition, Flextronics and
IDW will make any necessary filings with competition authorities
in China, Brazil, Austria, Germany and Ukraine. Reviewing
agencies or governments or private persons may challenge the
merger under antitrust or similar laws at any time before or
after its completion. Any resulting 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.
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 separate of assets or
businesses. Pursuant to the terms of the merger agreement,
Flextronics is not required to agree to any divestiture of any
shares of capital stock or of any business, assets or properties
of Flextronics or its subsidiaries or affiliates (including IDW
or its subsidiaries). In addition, Flextronics may refuse to
complete the merger if governmental authorities impose any
material restrictions or limitations on Flextronics, IDW or
their respective subsidiaries and their ability to conduct their
respective businesses. Flextronics and IDW 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 companys operations.
In addition, during or after the statutory waiting periods, and
even after 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 or after it
is completed. Flextronics and/or IDW may not prevail, or may
incur significant costs, in defending or settling any action
under the antitrust laws.
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Failure to complete the merger with Flextronics could
materially and adversely affect IDWs results of operations
and IDWs stock price. |
Consummation of the merger is subject to customary closing
conditions, including antitrust approvals and approval by
IDWs stockholders. There can be no assurance that these
conditions will be met or waived, that the necessary approvals
will be obtained, or that IDW will be able to successfully
consummate the merger as currently contemplated under the merger
agreement or at all.
21
If the merger is not consummated:
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IDW will remain liable for significant transaction costs,
including legal, accounting, financial advisory and other costs
relating to the merger; |
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under specified circumstances, IDW may have to pay a termination
fee in the amount of $8.0 million to Flextronics; (see
The Merger Agreement Payment of Termination
Fee beginning on page 69 of this proxy statement/
prospectus); |
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any operational investments that IDW may delay due to the
pending transaction would need to be made, potentially on an
accelerated timeframe, which could then prove costly and more
difficult to implement; and |
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the market price of IDWs common stock may decline to the
extent that the current market price reflects a belief by
investors that the merger will be completed. |
Additionally, the announcement of the pending merger may lead to
uncertainty for IDWs employees and some of IDWs
customers and suppliers.
This uncertainty may mean:
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the attention of IDWs management and IDWs employees
may be diverted from
day-to-day operations; |
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IDWs customers and suppliers may seek to modify or
terminate existing agreements, or prospective customers may
delay entering into new agreements or purchasing IDWs
products as a result of the announcement of the merger; and |
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IDWs ability to attract new employees and retain
IDWs existing employees may be harmed by uncertainties
associated with the merger. |
The occurrence of any of these events individually or in
combination could materially and adversely affect IDWs
results of operations and IDWs stock price.
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The termination fee and the restrictions on solicitation
contained in the merger agreement may discourage other companies
from trying to acquire IDW. |
Until the completion of the merger (with some exceptions) IDW is
prohibited from initiating or engaging in discussions with third
parties regarding some types of extraordinary transactions, such
as a merger, business combination or sale of a material amount
of assets or capital stock. In addition, IDW has agreed to pay a
termination fee in the amount of $8.0 million to
Flextronics under specified circumstances. These provisions
could discourage other companies from trying to acquire IDW even
though those other companies might be willing to offer greater
value to IDW stockholders than Flextronics has offered in the
merger. The payment of the termination fee could also have an
adverse effect on IDWs financial condition.
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IDW will be subject to business uncertainties and
contractual restrictions while the merger is pending. |
Uncertainty about the effect of the merger on employees and
customers may have an adverse effect on IDW and consequently on
Flextronics. These uncertainties may impair IDWs ability
to retain and motivate key personnel until the merger is
completed, and could cause customers and others that deal with
IDW to defer purchases or other decisions concerning IDW, or to
seek to change existing business relationships with IDW. If key
employees depart because of uncertainty about their future roles
and the potential complexities of integration, the combined
companys business following the merger could be harmed. In
addition, the merger agreement restricts IDW from making certain
acquisitions and taking other specified actions without the
consent of Flextronics until the merger occurs. These
restrictions may prevent IDW from pursuing attractive business
opportunities that may arise prior to the completion of the
merger. Please see the section entitled The Merger
Agreement IDWs Conduct of Business Before
Completion of the Merger beginning on page 60 of this
proxy statement/ prospectus for a description of these
restrictions.
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Flextronics may not realize the expected benefits of the
merger due to difficulties integrating the businesses,
operations and product lines of Flextronics and IDW. |
Flextronicss ability to achieve the benefits of the merger
will depend in part on the integration of technology, operations
and personnel of Flextronics and IDW. The integration process
will be a complex, time-consuming and expensive process and
could disrupt Flextronicss business if not completed in a
timely and efficient manner. The challenges involved in this
integration include the following:
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demonstrating to Flextronicss and IDWs customers and
suppliers that the merger will not result in adverse changes in
client service standards or business focus; |
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persuading Flextronicss employees that Flextronicss
and IDWs business cultures are compatible; and |
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addressing any perceived adverse changes in business focus. |
Flextronics may have difficulty successfully integrating the
businesses, operations or product lines of Flextronics and IDW,
and as a result, Flextronics may not realize any of the
anticipated benefits of the merger.
Risks Relating to Flextronics
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Flextronics depends on industries that continually produce
technologically advanced products with short life cycles and
Flextronicss business would be adversely affected if
Flextronicss customers products are not successful
or if Flextronicss customers lose market share. |
Flextronics derives its revenues from the following markets:
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Computing, which includes products such as desktop, handheld and
notebook computers, electronic games and servers; |
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Mobile communication devices, which includes GSM, CDMA, and
WCDMA handsets; |
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Consumer digital devices, which includes products such as set
top boxes, home entertainment equipment, printers, copiers and
cameras; |
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Industrial, Semiconductor and White Goods, which includes
products such as home appliances, industrial meters, bar code
readers and test equipment; |
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Automotive, Marine and Aerospace, which includes products such
as navigation instruments, radar components, instrument panel
and radio components; |
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Infrastructure, which includes products such as cable modems,
cellular base stations, hubs and switches; and |
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Medical devices, which includes products such as drug delivery,
diagnostic and telemedicine devices. |
Factors affecting any of these industries in general, or
Flextronicss customers in particular, could seriously harm
Flextronics. These factors include:
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rapid changes in technology or evolving industry standards and
requirements for continuous improvement in products and
services, result in short product life cycles; |
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demand for Flextronicss customers products may be
seasonal; |
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Flextronicss customers may fail to successfully market
their products, and Flextronicss customers products
may fail to gain widespread commercial acceptance; |
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Flextronicss customers may experience dramatic market
share shifts in demand which may cause them to exit the
business; and |
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there may be recessionary periods in Flextronicss
customers markets. |
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Flextronicss customers may cancel their orders,
change production quantities or locations, or delay production,
and the inherent difficulties involved in responding to these
demands could harm Flextronicss business. |
As a provider of electronics design and manufacturing services
and components, Flextronics must provide increasingly rapid
product turnaround time for its customers. Flextronics generally
does not obtain firm, long-term purchase commitments from its
customers, and Flextronics often experiences reduced lead times
in customer orders which may be less than the lead time
Flextronics requires to procure necessary components and
materials.
Cancellations, reductions or delays by a significant customer or
by a group of customers have harmed, and may continue to harm,
Flextronicss results of operations by reducing the volumes
of products Flextronics manufactures and delivers for these
customers, by causing a delay in the repayment of
Flextronicss expenditures for inventory in preparation for
customer orders and by lowering Flextronicss asset
utilization resulting in lower gross margins.
The short-term nature of Flextronicss customers
commitments and the rapid changes in demand for their products
reduce Flextronicss ability to accurately estimate the
future requirements of those customers. This makes it difficult
to schedule production and maximize utilization of
Flextronicss manufacturing capacity. In that regard,
Flextronics must make significant decisions, including
determining the levels of business that Flextronics will seek
and accept, setting production schedules, making component
procurement commitments, and allocating personnel and other
resources, based on Flextronicss estimates of its
customers requirements.
On occasion, customers require rapid increases in production or
require that manufacturing of their products be transitioned
from one facility to another to achieve cost or other
objectives. These demands stress Flextronicss resources
and reduce Flextronicss margins. Flextronics may not have
sufficient capacity at any given time to meet its
customers demands, and transfers from one facility to
another can result in inefficiencies and costs due to excess
capacity in one facility and corresponding capacity constraints
at another. In addition, because many of Flextronicss
costs and operating expenses are relatively fixed, a reduction
in customer demand, or transfer of demand from one facility to
another, harms Flextronicss gross profit and operating
income.
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Flextronicss industry is extremely competitive; if
Flextronics is not able to continue to provide competitive
services, Flextronics may lose business. |
Flextronics competes with a number of different companies,
depending on the type of service Flextronics provides or the
location of Flextronicss operations. For example,
Flextronics competes with major global EMS providers, other
smaller EMS companies that have a regional or product-specific
focus, and ODMs with respect to some of the services that
Flextronics provide. Flextronicss industry is extremely
competitive and many of Flextronicss competitors have
achieved substantial market share and some may have lower cost
structures or greater design, manufacturing, financial or other
resources than Flextronics does. Flextronics faces particular
competition from suppliers in Asia, including Taiwanese ODM
suppliers who have a substantial share of the global market for
information technology hardware production, primarily relating
to notebook and desktop computers and personal computer
motherboards, and who manufacture consumer products and provide
other technology manufacturing services. Some of
Flextronicss competitors may have lower cost structures or
greater value-added performance, such as in their design or
engineering capabilities, which may cause Flextronics to lose
business. If Flextronics is unable to provide comparable
manufacturing services and improved products at lower cost than
the other companies in Flextronicss industry,
Flextronicss net sales could decline.
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Flextronicss operating results may fluctuate
significantly due to a number of factors, many of which are
beyond Flextronicss control. |
Some of the principal factors that contribute to the
fluctuations in Flextronicss annual and quarterly
operating results are:
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changes in demand for Flextronicss products or services; |
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Flextronicss effectiveness in managing manufacturing
processes and costs; |
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Flextronicss increased design services and components
offerings may reduce profitability as Flextronics continues to
make substantial investments in these capabilities; |
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the mix of the types of manufacturing services Flextronics
provide, as high-volume and low-complexity manufacturing
services typically have lower gross margins than lower volume
and more complex services; |
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changes in the cost and availability of labor and components,
which often occur in the electronics manufacturing industry and
which affect Flextronicss margins and its ability to meet
delivery schedules; |
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Flextronicss ability to achieve commercially viable
production yields and manufacture commercial quantities of
Flextronicss components; |
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the degree to which Flextronics is able to utilize its available
manufacturing capacity; |
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Flextronicss ability to manage the timing of its component
purchases so that components are available when needed for
production, while avoiding the risk of purchasing inventory in
excess of immediate production needs; |
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local conditions and events that may affect Flextronicss
production volumes, such as labor conditions, political
instability and local holidays; |
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changes in demand in Flextronicss customers end
markets; and |
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adverse changes in general economic or geopolitical conditions. |
Two of Flextronicss significant end markets are the mobile
devices market and the consumer devices market. These markets
exhibit particular strength toward the end of the calendar year
in connection with the holiday season. As a result, Flextronics
has historically experienced stronger revenues in its third
fiscal quarter as compared to its other fiscal quarters.
Economic or other factors leading to diminished orders in the
end of the calendar year could harm Flextronicss business.
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The majority of Flextronicss sales come from a small
number of customers and a decline in sales to any of these
customers could adversely affect Flextronicss
business. |
Sales to Flextronicss ten largest customers represent a
significant percentage of Flextronicss net sales.
Flextronicss ten largest customers accounted for
approximately 63% and 62% of net sales from continuing
operations in fiscal years 2006 and 2005, respectively.
Flextronicss largest customers during fiscal years 2006
and 2005 were Sony-Ericsson and Hewlett-Packard, which each
accounted for more than 10% of net sales from continuing
operations. No other customer accounted for more than 10% of net
sales from continuing operations in fiscal year 2006 or fiscal
year 2005.
Flextronicss principal customers have varied from year to
year. These customers may experience dramatic declines in their
market shares or competitive position, due to economic or other
forces, that may cause them to reduce their purchases from
Flextronics, or, in some cases, result in the termination of
their relationship with Flextronics. Significant reductions in
sales to any of these customers, or the loss of major customers,
would seriously harm Flextronicss business. If Flextronics
is not able to timely replace expired, canceled or reduced
contracts with new business, Flextronicss revenues could
be harmed.
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Flextronics may encounter difficulties with acquisitions,
which could harm Flextronicss business. |
Flextronics has completed numerous acquisitions of businesses
and Flextronics expects to continue to acquire additional
businesses in the future. Flextronics is currently in
preliminary discussions with respect to potential acquisitions
and strategic customer transactions. Any future acquisitions may
require additional debt or equity financing, which could
increase Flextronicss leverage or be dilutive to
Flextronicss existing shareholders. As a result,
Flextronics may not be able to complete acquisitions or
strategic customer transactions in the future to the same extent
as in the past, or at all.
To integrate acquired businesses, Flextronics must implement its
management information systems, operating systems and internal
controls, and assimilate and manage the personnel of the
acquired operations. The difficulties of this integration may be
further complicated by geographic distances. The integration of
acquired businesses may not be successful and could result in
disruption to other parts of Flextronicss business.
In addition, acquisitions involve numerous risks and challenges,
including:
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diversion of managements attention from the normal
operation of Flextronicss business; |
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potential loss of key employees and customers of the acquired
companies, which is a particular concern in the acquisition of
companies engaged in product and software design; |
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difficulties managing and integrating operations in
geographically dispersed locations; |
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lack of experience operating in the geographic market or
industry sector of the acquired business; |
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the potential for deficiencies in internal controls at acquired
companies; |
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increases in Flextronicss expenses and working capital
requirements, which reduce Flextronicss return on invested
capital; and |
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exposure to unanticipated liabilities of acquired companies. |
These and other factors have harmed, and in the future could
harm, Flextronicss ability to achieve anticipated levels
of profitability at acquired operations or realize other
anticipated benefits of an acquisition, and could adversely
affect Flextronicss business and operating results.
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Flextronicss strategic relationships with major
customers create risks. |
Over the past several years, Flextronics has completed numerous
strategic transactions with OEM customers, including, among
others, Casio, Ericsson, Xerox, Kyocera, and Nortel. Under these
arrangements, Flextronics generally acquires inventory,
equipment and other assets from the OEM, and lease or acquire
their manufacturing facilities, while simultaneously entering
into multi-year supply agreements for the production of their
products. Flextronics intends to continue to pursue these OEM
divestiture transactions in the future. There is strong
competition among EMS companies for these transactions, and this
competition may increase. These transactions have contributed to
a significant portion of Flextronicss revenue growth, and
if Flextronics fails to complete similar transactions in the
future, Flextronicss revenue growth could be harmed. The
arrangements entered into with divesting OEMs typically involve
many risks, including the following:
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Flextronics may need to pay a purchase price to the divesting
OEMs that exceeds the value Flextronics may realize from the
future business of the OEM; |
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the integration of the acquired assets and facilities into
Flextronicss business may be time-consuming and costly; |
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Flextronics, rather than the divesting OEM, bears the risk of
excess capacity at the facility; |
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Flextronics may not achieve anticipated cost reductions and
efficiencies at the facility; |
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Flextronics may be unable to meet the expectations of the OEM as
to volume, product quality, timeliness and cost reductions; |
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Flextronicss supply agreements with the OEMs generally do
not require any minimum volumes of purchase by the OEMs, and the
actual volume of purchases may be less than anticipated; and |
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if demand for the OEMs products declines, the OEM may
reduce its volume of purchases, and Flextronics may not be able
to sufficiently reduce the expenses of operating the facility or
use the facility to provide services to other OEMs. |
As a result of these and other risks, Flextronics has been, and
in the future may be, unable to achieve anticipated levels of
profitability under these arrangements. In addition, these
strategic arrangements have not, and in the future may not,
result in any material revenues or contribute positively to
Flextronicss earnings per share.
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If Flextronics does not effectively manage changes in its
operations, Flextronicss business may be harmed;
Flextronics has taken substantial restructuring charges in the
past and Flextronics may need to take material restructuring
charges in the future. |
Flextronics has experienced growth in its business through a
combination of internal growth and acquisitions, and Flextronics
expects to make additional acquisitions in the future.
Flextronicss global workforce has more than doubled in
size since the beginning of fiscal year 2001. During that time,
Flextronics has also reduced its workforce at some locations and
closed certain facilities in connection with its restructuring
activities. These changes have placed considerable strain on
Flextronicss management control systems and resources,
including decision support, accounting management, information
systems and facilities. If Flextronics does not continue to
improve its financial and management controls, reporting systems
and procedures to manage its employees effectively and to expand
its facilities, Flextronicss business could be harmed.
Flextronics plans to continue to transition manufacturing to
lower-cost locations and Flextronics may be required to take
additional restructuring charges in the future as a result of
these activities. Flextronics also intends to increase its
manufacturing capacity in its low-cost regions by expanding its
facilities and adding new equipment. Acquisitions and expansions
involve significant risks, including, but not limited to, the
following:
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Flextronics may not be able to attract and retain the management
personnel and skilled employees necessary to support
newly-acquired or expanded operations; |
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Flextronics may not efficiently and effectively integrate new
operations and information systems, expand its existing
operations and manage geographically dispersed operations; |
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Flextronics may incur cost overruns; |
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Flextronics may incur charges related to its expansion
activities; |
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Flextronics may encounter construction delays, equipment delays
or shortages, labor shortages and disputes and production
start-up problems that
could harm Flextronicss growth and its ability to meet
customers delivery schedules; and |
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Flextronics may not be able to obtain funds for acquisitions and
expansions on attractive terms, and Flextronics may not be able
to obtain loans or operating leases with attractive terms. |
In addition, Flextronics expects to incur new fixed operating
expenses associated with its expansion efforts that will
increase its cost of sales, including increases in depreciation
expense and rental expense. If Flextronicss revenues do
not increase sufficiently to offset these expenses,
Flextronicss operating results could be seriously harmed.
Flextronicss transition to low-cost manufacturing regions
has contributed to significant restructuring and other charges
that have resulted from reducing Flextronicss workforce
and capacity at higher-cost locations. Flextronics recognized
restructuring charges of approximately $215.7 million,
$95.4 million and $540.3 million (including
$11.5 million attributable to discontinued operations) in
fiscal years 2006, 2005 and 2004, respectively, associated with
the consolidation and closure of several manufacturing
facilities, and related impairment of certain long-lived assets.
Flextronics may be required to take additional charges in the
future as a result of these activities. There can be no
assurance as to the timing or amount of any future restructuring
charges. If Flextronics is required to take additional
restructuring
27
charges in the future, it could have a material adverse impact
on Flextronicss operating results, financial position and
cash flows.
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Flextronicss substantial investments and
start-up and
integration costs in Flextronicss design services business
may adversely affect Flextronicss margins and
profitability. |
As part of Flextronicss strategy to enhance
Flextronicss vertically-integrated
end-to-end service
offerings, Flextronics is actively pursuing the expansion of its
design and engineering capabilities. Providing these services
can expose Flextronics to different or greater potential risks
than those Flextronics faces when providing its regular
manufacturing services.
Although Flextronics enters into contracts with its design
services customers, Flextronics may design and develop products
for these customers prior to receiving a purchase order or other
firm commitment from them. Flextronics is required to make
substantial investments in the resources necessary to design and
develop these products, and no revenue may be generated from
these efforts if Flextronicss customers do not approve the
designs in a timely manner or at all, or if they do not then
purchase anticipated levels of products. Flextronicss
design activities often require that Flextronics purchases
inventory for initial production runs before Flextronics has a
purchase commitment from a customer. Even after Flextronics has
a contract with a customer with respect to a product, these
contracts may allow the customer to delay or cancel deliveries
and may not obligate the customer to any volume of purchases.
These contracts can generally be terminated on short notice.
Some of the products Flextronics designs and develops must
satisfy safety and regulatory standards and some must receive
government certifications. If Flextronics fails to obtain these
approvals or certifications on a timely basis, Flextronics would
be unable to sell these products, which would harm
Flextronicss sales, profitability and reputation.
Due to the increased risks associated with Flextronicss
design services offerings, Flextronics may not be able to
achieve a high enough level of sales for this business, and the
significant investments in research and development, technology
licensing, test and tooling equipment, patent applications,
facility expansion and recruitment that it requires, to be
profitable. The initial costs of investing in the resources
necessary to expand Flextronicss design and engineering
capabilities, and in particular to support Flextronicss
design services offerings, have historically adversely affected
Flextronicss profitability, and may continue to do so as
Flextronics continues to make investments in these capabilities.
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Flextronicss components business is dependent on
Flextronicss ability to quickly launch world-class
components products, and Flextronicss investment in
development, and
start-up and
integration costs necessary to achieve quick launches of
world-class components products may adversely affect
Flextronicss margins and profitability. |
Flextronicss components business, which primarily includes
camera modules and power supplies, is part of Flextronicss
strategy to improve its competitive position and to grow its
future margins, profitability and shareholder returns by
expanding its vertical integration capabilities. The camera
module and power supply industries have experienced, and are
expected to continue to experience, rapid technological change.
The success of Flextronicss components business is
contingent on Flextronicss ability to design and introduce
world-class components that have performance characteristics
that are suitable for a broad market and that offer significant
price and/or performance advantages over competitive products.
To create these world class components offerings, Flextronics
must make substantial investments in the development of
Flextronicss components capabilities, in resources such as
research and development, technology licensing, test and tooling
equipment, facility expansions and personnel requirements.
Flextronics may not be able to achieve or maintain market
acceptance for any of Flextronicss components offerings in
any of Flextronicss current or target markets. The success
of Flextronicss components business will also depend upon
the level of market acceptance of Flextronicss
customers end products, which incorporate
Flextronicss components, and over which Flextronics has no
control.
In addition, OEMs often require unique configurations or custom
designs which must be developed and integrated in the OEMs
product well before the product is launched by the OEM. Thus,
there is often substantial lead time between the commencement of
design efforts for a customized component and the
28
commencement of volume shipments of the component to the OEM. As
a result, Flextronics may make substantial investments in the
development and customization of products for Flextronicss
customers and no revenue may be generated from these efforts if
Flextronicss customers do not accept the customized
component at all, or do not purchase anticipated levels of
products.
Flextronicss achievement of anticipated levels of
profitability in Flextronicss components business is also
dependent on Flextronicss ability to achieve commercially
viable production yields and to manufacture components in
commercial quantities to the performance specifications demanded
by Flextronicss OEM customers.
As a result of these and other risks, Flextronics has been, and
in the future may be, unable to achieve anticipated levels of
profitability in Flextronicss components business. In
addition, Flextronicss components business has not, and in
the future may not, result in any material revenues or
contribute positively to Flextronicss earnings per share.
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Intellectual property infringement claims against
Flextronicss customers or Flextronics could harm
Flextronicss business. |
Flextronicss design and manufacturing services and
components offerings involve the creation and use of
intellectual property rights, which subject Flextronics to the
risk of claims of intellectual property infringement from third
parties, as well as claims arising from the allocation of
intellectual property rights among Flextronics and
Flextronicss customers. In addition, Flextronicss
customers may require that Flextronics indemnifies them against
the risk of intellectual property infringement. If any claims
are brought against Flextronics or Flextronicss customers
for such infringement, whether or not these have merit,
Flextronics could be required to expend significant resources in
defense of such claims. In the event of such an infringement
claim, Flextronics may be required to spend a significant amount
of money to develop non-infringing alternatives or obtain
licenses. Flextronics may not be successful in developing such
alternatives or obtaining such licenses on reasonable terms or
at all.
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The success of certain of Flextronicss activities
depends on Flextronicss ability to protect its
intellectual property rights. |
Flextronics retains certain intellectual property rights to some
of the technologies that Flextronics develops as part of
Flextronicss engineering and design activities in
Flextronicss design and manufacturing services and
components offerings. As the level of Flextronicss
engineering and design activities increases, the extent to which
Flextronics relies on rights to intellectual property
incorporated into products is increasing. The measures
Flextronics has taken to prevent unauthorized use of
Flextronicss technology may not be successful. If
Flextronics is unable to protect its intellectual property
rights, this could reduce or eliminate the competitive
advantages of Flextronicss proprietary technology, which
would harm Flextronicss business.
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If Flextronicss products or components contain
defects, demand for Flextronicss services may decline and
Flextronics may be exposed to product liability and product
warranty liability. |
Defects in the products Flextronics manufactures or designs,
whether caused by a design, engineering, manufacturing or
component failure or deficiencies in Flextronicss
manufacturing processes, could result in product or component
failures, which may damage Flextronicss business
reputation, and expose Flextronics to product liability or
product warranty claims.
Product liability claims may include liability for personal
injury or property damage. Product warranty claims may include
liability to pay for the recall, repair or replacement of a
product or component. Although Flextronics generally allocates
liability for these claims in Flextronicss contracts with
its customers, even where Flextronics has allocated liability to
its customers, its customers may not, or may not have the
resources to, satisfy claims for costs or liabilities arising
from a defective product or component for which they have
assumed responsibility.
If Flextronics designs, engineers or manufactures a product or
component that is found to cause any personal injury or property
damage or is otherwise found to be defective, Flextronics could
spend a significant amount of money to resolve the claim. In
addition, product liability and product recall insurance
coverage are
29
expensive and may not be available with respect to all of
Flextronicss services offerings on acceptable terms, in
sufficient amounts, or at all. A successful product liability or
product warranty claim in excess of Flextronicss insurance
coverage or any material claim for which insurance coverage is
denied, limited or is not available could have a material
adverse effect on Flextronicss business, results of
operations and financial condition.
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Flextronics may not meet regulatory quality standards
applicable to Flextronicss manufacturing and quality
processes for medical devices, which could have an adverse
effect on Flextronicss business, financial condition or
results of operations. |
As a medical device manufacturer, Flextronics is required to
register with the FDA and is subject to periodic inspection by
the FDA for compliance with the FDAs Quality System
Regulation (QSR) requirements, which require manufacturers
of medical devices to adhere to certain regulations, including
testing, quality control and documentation procedures.
Compliance with applicable regulatory requirements is subject to
continual review and is rigorously monitored through periodic
inspections by the FDA. In the European Community, Flextronics
is required to maintain certain ISO certifications in order to
sell its products and must undergo periodic inspections by
notified bodies to obtain and maintain these certifications. If
any FDA inspection reveals that Flextronics is not in compliance
with QSRs or other FDA regulations, the FDA may take action
against Flextronics, including issuing a letter of inspectional
observations on FDA Form 483, issuing a warning letter,
imposing fines on Flextronics, requiring a recall of the
products Flextronics manufactured for its customers, or shutting
down Flextronicss manufacturing facility. If any of these
actions were to occur, it would harm Flextronicss
reputation and cause Flextronicss business to suffer.
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Flextronics is subject to the risk of increased income
taxes. |
Flextronics has structured its operations in a manner designed
to maximize income in countries where:
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tax incentives have been extended to encourage foreign
investment; or |
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income tax rates are low. |
Flextronics bases its tax position upon the anticipated nature
and conduct of its business and upon its understanding of the
tax laws of the various countries in which Flextronics has
assets or conduct activities. However, Flextronicss tax
position is subject to review and possible challenge by taxing
authorities and to possible changes in law, which may have
retroactive effect. Flextronics cannot determine in advance the
extent to which some jurisdictions may require Flextronics to
pay taxes or make payments in lieu of taxes.
Several countries in which Flextronics is located allow for tax
holidays or provide other tax incentives to attract and retain
business. These tax incentives expire over various periods
through 2020 and are subject to certain conditions with which
Flextronics expects to comply. Flextronics has obtained tax
holidays or other incentives where available, primarily in
China, Hungary, India and Malaysia. In these four countries,
Flextronics generated an aggregate of approximately
$8.9 billion and $9.1 billion of Flextronicss
total revenues from continuing operations during fiscal years
2006 and 2005, respectively. Flextronicss taxes could
increase if certain tax holidays or incentives are not renewed
upon expiration, or tax rates applicable to Flextronics in such
jurisdictions are otherwise increased. In addition, further
acquisitions or divestitures may cause Flextronicss
effective tax rate to increase.
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Flextronics is exposed to intangible asset risk. |
Flextronics has a substantial amount of intangible assets. These
intangible assets are attributable to acquisitions and represent
the difference between the purchase price paid for the acquired
businesses and the fair value of the net tangible assets of the
acquired businesses. Flextronics is required to evaluate
goodwill and other intangibles for impairment on at least an
annual basis, and whenever changes in circumstances indicate
that the carrying amount may not be recoverable from estimated
future cash flows. As a result of Flextronicss annual and
other periodic evaluations, Flextronics may determine that the
intangible asset values need to be written down to their fair
values, which could result in material charges that could be
adverse to Flextronicss operating results and financial
position.
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Flextronicss exposure to financially troubled
customers, particularly in the automotive industry, may
adversely affect Flextronicss financial results. |
Flextronics provides EMS services to the automotive industry,
which has been experiencing significant financial difficulty.
Flextronicss largest customer in the automotive industry
is Delphi, which filed for bankruptcy on October 8, 2005.
There can be no assurance that Flextronics will be able to
maintain the same level of business with Delphi as Flextronics
did prior to Delphis bankruptcy. If other customers in the
automotive industry or in other industries file for bankruptcy,
Flextronics could have difficulty recovering amounts owed to it
from these customers, or demand for Flextronicss products
from these customers could decline, either of which could
adversely affect Flextronicss financial position and
results of operations.
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If OEMs stop or reduce their manufacturing and supply
chain management outsourcing, Flextronicss business could
suffer. |
Future growth in Flextronicss revenues depends on new
outsourcing opportunities in which Flextronics assumes
additional manufacturing and supply chain management
responsibilities from OEMs. Current and prospective customers
continuously evaluate Flextronicss capabilities against
other providers and the merits of manufacturing products
themselves. To the extent that outsourcing opportunities are not
available, either because OEMs decide to perform these functions
internally or because they use other providers of these
services, Flextronicss future growth would be limited.
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Flextronics may be adversely affected by shortages of
required electronic components. |
From time to time, Flextronics has experienced shortages of some
of the electronic components that it uses. These shortages can
result from strong demand for those components or from problems
experienced by suppliers. These unanticipated component
shortages have resulted in curtailed production or delays in
production, which prevented Flextronics from making scheduled
shipments to customers in the past and may do so in the future.
Flextronicss inability to make scheduled shipments could
cause Flextronics to experience a reduction in sales, increase
in inventory levels and costs, and could adversely affect
relationships with existing and prospective customers. Component
shortages may also increase Flextronicss cost of goods
sold because Flextronics may be required to pay higher prices
for components in short supply and redesign or reconfigure
products to accommodate substitute components. As a result,
component shortages could adversely affect Flextronicss
operating results for a particular period due to the resulting
revenue shortfall and increased manufacturing or component costs.
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Flextronics conducts operations in a number of countries
and is subject to risks of international operations. |
The distances between the Americas, Asia and Europe create a
number of logistical and communication challenges for us. These
challenges include managing operations across multiple time
zones, directing the manufacture and delivery of products across
distances, coordinating procurement of components and raw
materials and their delivery to multiple locations, and
coordinating the activities and decisions of the core management
team, which is based in a number of different countries.
Facilities in several different locations may be involved at
different stages of the production of a single product, leading
to additional logistical difficulties.
Because Flextronicss manufacturing operations are located
in a number of countries throughout the Americas, Asia and
Europe, Flextronics is subject to the risks of changes in
economic and political conditions in those countries, including:
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fluctuations in the value of local currencies; |
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labor unrest and difficulties in staffing; |
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longer payment cycles; |
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cultural differences; |
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increases in duties and taxation levied on Flextronicss
products; |
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imposition of restrictions on currency conversion or the
transfer of funds; |
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limitations on imports or exports of components or assembled
products, or other travel restrictions; |
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expropriation of private enterprises; and |
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a potential reversal of current favorable policies encouraging
foreign investment or foreign trade by Flextronicss host
countries. |
The attractiveness of Flextronicss services to
U.S. customers can be affected by changes in
U.S. trade policies, such as most favored nation status and
trade preferences for some Asian countries. In addition, some
countries in which Flextronics operates, such as Brazil,
Hungary, Mexico, Malaysia and Poland, have experienced periods
of slow or negative growth, high inflation, significant currency
devaluations or limited availability of foreign exchange.
Furthermore, in countries such as China and Mexico, governmental
authorities exercise significant influence over many aspects of
the economy, and their actions could have a significant effect
on Flextronics. Finally, Flextronics could be seriously harmed
by inadequate infrastructure, including lack of adequate power
and water supplies, transportation, raw materials and parts in
countries in which Flextronics operates.
Operations in foreign countries also present risks associated
with currency exchange and convertibility, inflation and
repatriation of earnings. In some countries, economic and
monetary conditions and other factors could affect
Flextronicss ability to convert Flextronicss cash
distributions to U.S. dollars or other freely convertible
currencies, or to move funds from Flextronicss accounts in
these countries. Furthermore, the central bank of any of these
countries may have the authority to suspend, restrict or
otherwise impose conditions on foreign exchange transactions or
to approve distributions to foreign investors.
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Fluctuations in foreign currency exchange rates could
increase Flextronicss operating costs. |
Flextronicss manufacturing operations and industrial parks
are located in lower cost regions of the world, such as Asia,
Eastern Europe and Mexico; however, most of Flextronicss
purchase and sale transactions are denominated in United States
dollars or euros. As a result, Flextronics is exposed to
fluctuations in the functional currencies of Flextronicss
fixed cost overhead or Flextronicss supply base relative
to the currencies in which Flextronics conducts transactions.
Currency exchange rates fluctuate on a daily basis as a result
of a number of factors, including changes in a countrys
political and economic policies. Volatility in the functional
and non-functional currencies of Flextronicss entities and
the U.S. dollar could seriously harm Flextronicss
business, operating results and financial condition. The primary
impact of currency exchange fluctuations is on
Flextronicss cash, receivables, and payables of
Flextronicss operating entities. As part of
Flextronicss currency hedging strategy, Flextronics uses
financial instruments, primarily forward purchase contracts, to
hedge United States Dollar and other currency commitments in
order to reduce the short-term impact of foreign currency
fluctuations on current assets and liabilities. If
Flextronicss hedging activities are not successful or if
Flextronics changes or reduces these hedging activities in the
future, Flextronics may experience significant unexpected
expenses from fluctuations in exchange rates.
Flextronics is also exposed to risks related to the valuation of
the Chinese currency relative to other foreign currencies. The
Chinese currency is the renminbi yuan (RMB). The Chinese
government relaxed its control over the exchange rate of the RMB
relative to the United States Dollar by managing the fluctuation
of the RMB within a range of 0.3% per day and pegging its
value to the value of a basket of currencies, which currencies
have not been identified. The RMB was previously pegged to the
value of the United States Dollar. There is no certainty as to
whether the Chinese government will elect to revalue the RMB
again in the near future, or at all. A significant increase in
the value of the RMB could adversely affect Flextronicss
financial results and cash flows by increasing both
Flextronicss manufacturing costs and the costs of
Flextronicss local supply base.
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Flextronics depends on its executive officers and skilled
management personnel. |
Flextronicss success depends to a large extent upon the
continued services of Flextronicss executive officers.
Generally, Flextronicss employees are not bound by
employment or non-competition agreements, and there can be no
assurance that Flextronics will retain its executive officers
and other key employees. Flextronics could be seriously harmed
by the loss of any of Flextronicss executive officers. In
order to manage
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Flextronicss growth, Flextronics will need to recruit and
retain additional skilled management personnel and if
Flextronics is not able to do so, Flextronicss business
and Flextronicss ability to continue to grow could be
harmed. In addition, in connection with expanding
Flextronicss design services offerings, Flextronics must
attract and retain experienced design engineers. There is
substantial competition in Flextronicss industry for
highly skilled employees. Flextronicss failure to recruit
and retain experienced design engineers could limit the growth
of Flextronicss design services offerings, which could
adversely affect Flextronicss business.
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Flextronicss failure to comply with environmental
laws could adversely affect Flextronicss business. |
Flextronics is subject to various federal, state, local and
foreign environmental laws and regulations, including
regulations governing the use, storage, discharge and disposal
of hazardous substances used in Flextronicss manufacturing
processes. Flextronics is also subject to laws and regulations
governing the recyclability of products, the materials that may
be included in products, and Flextronicss obligations to
dispose of these products after end users have finished with
them. Additionally, Flextronics may be exposed to liability to
its customers relating to the materials that may be included in
the components that Flextronics procures for its customers
products. Any violation or alleged violation by Flextronics of
environmental laws could subject it to significant costs, fines
or other penalties.
In addition, Flextronics is responsible for cleanup of
contamination at some of Flextronicss current and former
manufacturing facilities and at some third party sites. If more
stringent compliance or cleanup standards under environmental
laws or regulations are imposed, or the results of future
testing and analyses at Flextronicss current or former
operating facilities indicate that Flextronics is responsible
for the release of hazardous substances, Flextronics may be
subject to additional liability. Additional environmental
matters may arise in the future at sites where no problem is
currently known or at sites that Flextronics may acquire in the
future. Flextronicss failure to comply with environmental
laws and regulations or adequately address contaminated sites
could limit Flextronicss ability to expand
Flextronicss facilities or could require Flextronics to
incur significant expenses, which would harm Flextronicss
business.
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The market price of Flextronicss ordinary shares is
volatile. |
The stock market in recent years has experienced significant
price and volume fluctuations that have affected the market
prices of technology companies. These fluctuations have often
been unrelated to or disproportionately impacted by the
operating performance of these companies. The market for
Flextronicss ordinary shares may be subject to similar
fluctuations. Factors such as fluctuations in Flextronicss
operating results, announcements of technological innovations or
events affecting other companies in the electronics industry,
currency fluctuations and general market conditions may cause
the market price of Flextronicss ordinary shares to
decline.
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It may be difficult for investors to effect service of
process on Flextronics within the United States or to enforce
civil liabilities under the federal securities laws of the
United States against Flextronics. |
Flextronics is incorporated in Singapore under the Companies
Act, Chapter 50 of Singapore. Some of Flextronicss
officers reside outside the United States, and a substantial
portion of Flextronicss assets is located outside the
United States. As a result, it may not be possible for investors
to effect service of process upon Flextronics within the United
States. Additionally, judgments obtained in U.S. courts
based on the civil liability provisions of the U.S. federal
securities laws may not be enforceable against Flextronics.
Judgments of U.S. courts based on the civil liability
provisions of the federal securities laws of the United States
are not directly enforceable in Singapore courts, and Singapore
courts may not enter judgments in original actions brought in
Singapore courts based solely upon the civil liability
provisions of the federal securities laws of the United States.
33
THE SPECIAL MEETING OF IDW STOCKHOLDERS
The IDW board of directors is using this document to solicit
proxies from the holders of IDW common stock for use at the
special meeting of IDWs stockholders. IDW is first mailing
this proxy statement/ prospectus and accompanying form of proxy
to IDW stockholders on or
about ,
2006.
Matters Relating to the Special Meeting
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Time and Place:
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2006, at the Hilton Garden Inn located at 1951 Taylor Road,
Roseville, California, at 10:00 a.m., local time. |
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Purpose of Special Meeting Is to Vote on the Following
Items:
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1. To consider and vote upon the approval and adoption of
the merger agreement and the approval of the merger, as
described in the section titled
Proposal No. 1 The Merger on
page 37. |
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2. To grant the persons named as proxies discretionary
authority to vote to adjourn or postpone the special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes in favor of approving and adopting the merger
agreement. |
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3. To transact such other business as may properly come
before the special meeting and any adjournment or postponement
thereof. |
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Record Date:
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The board of directors of IDW has
fixed ,
2006 as the record date for the determination of IDW
stockholders entitled to notice of, and to vote at, the special
meeting and any adjournment or postponement thereof. Only
holders of record of shares of IDW common stock at the close of
business on the record date are entitled to notice of, and to
vote at, the special meeting. |
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Outstanding Shares Held on Record Date:
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On the record date, there were an aggregate
of shares
of IDW common stock outstanding and entitled to vote. |
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Shares Entitled to Vote:
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Only shares of IDW common stock are entitled to vote at the
special meeting. Each share of IDW common stock is entitled to
one vote. |
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Quorum Requirement:
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A quorum is necessary to hold a valid special meeting. A
majority of shares of IDW common stock outstanding as of the
record date, represented by proxy or present in person,
constitutes a quorum for the special meeting. Based on the
aggregate
of shares
of IDW common stock outstanding on the record
date, shares
must be represented by proxy or present in person at the special
meeting to have a quorum. The inspector of elections will
determine whether or not a quorum is present. |
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Abstentions and broker non-votes count towards the quorum
requirement. If there is no quorum, a majority of the shares
present in person or by proxy at the special meeting may vote to
adjourn the special meeting to another date. |
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Shares Owned by IDW Directors and Executive Officers as of
the Record Date:
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On the record date, IDW directors and executive officers
owned shares
of IDW common stock and vested options that if exercised would
represent an
additional shares.
In the aggregate, these shares represented
approximately % of the total
voting power of IDWs common stock on the record date. |
Votes Necessary to Approve Proposals
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Proposal |
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Vote Necessary |
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Merger Proposal
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Adoption of the merger agreement and approval of the merger
requires the affirmative vote of a majority of the shares of IDW
common stock outstanding on the record date. Abstentions and
broker non-votes have the same effect as a vote against the
merger proposal. |
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Proposal to Grant Discretionary Authority to the Persons
Named as Proxies
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Approval of the proposal to grant discretionary authority to
vote to adjourn or postpone the special meeting, if necessary,
to solicit additional proxies if there are not sufficient votes
in favor of approving and adopting the merger agreement,
requires the affirmative vote of the holders of a majority of
shares of IDW common stock represented and entitled to vote at
the special meeting. |
Proxies
Submitting Your Proxy. You may vote in person by ballot
at the IDW special meeting or by submitting a proxy. Please
submit your proxy even if you plan to attend the IDW special
meeting. If you attend the special meeting in person, you may
cancel any proxy previously given and vote by ballot.
Voting instructions are included on your proxy card. If you
properly give your proxy and submit it to IDW by 11:59 p.m.
Pacific Time
on ,
2006, one of the individuals named as your proxy will vote your
shares as you have directed. You may direct your shares to be
voted FOR or AGAINST the proposals or
abstain from voting.
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By telephone:
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You may submit your proxy by telephone by following the
instructions included on your proxy card. Telephone voting will
be accessible until 11:59 p.m. Pacific Time
on ,
2006. If you submit your proxy by telephone, you do not need to
return your proxy card. |
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By Internet:
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You may also choose to submit your proxy on the Internet. The
website for Internet voting is listed on your proxy card.
Internet voting will be accessible until 11:59 p.m. Pacific
Time
on ,
2006. If you submit your proxy on the Internet, you do not need
to return your proxy card. |
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By mail:
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To submit your proxy by mail, simply complete, date and sign
your proxy and return it in the return envelope provided.
Postage will be pre-paid if mailed in the United States. |
If you submit your proxy but do not make specific choices
with respect to the proposals, your proxy will follow the IDW
board of directors recommendations and vote your
shares:
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FOR adoption of the merger agreement and
approval of the merger; and |
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FOR the proposal to grant the persons named
as proxies discretionary authority to vote to adjourn or
postpone the special meeting, if necessary, to solicit
additional proxies if there are not sufficient votes in favor of
approving and adopting the merger agreement. |
35
Changing or Revoking Your Proxy
You can revoke your proxy at any time before the close of voting
at the special meeting. To revoke your proxy prior to the
special meeting, you may:
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timely submit another properly completed proxy card with a later
date; |
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timely submit another proxy by telephone or over the
Internet; or |
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send a written notice that you are revoking your proxy to our
Corporate Secretary at IDWs principal offices at 1613
Santa Clara Drive, Suite 100, Roseville, CA 95661-3542. |
During the special meeting, you may vote in person prior to the
close of voting. Simply attending the special meeting will not,
by itself, revoke your proxy. If you have instructed a bank,
broker or nominee to vote your shares of IDW common stock by
executing a voting instruction card or by using the telephone or
Internet, you must follow the directions received from your
bank, broker or nominee to change your instructions.
Voting in Person
If you are a stockholder of record and you wish to vote in
person at the special meeting, a ballot will be provided at the
special meeting. However, if your shares are held in the name of
your bank, broker, custodian or other record holder, you must
obtain a proxy, executed in your favor, from the holder of
record to be able to vote at the meeting.
Proxy Solicitation
IDW will pay its own costs of soliciting proxies. In addition to
the IDW proxy materials, IDW directors, officers, employees and
any other solicitors that IDW may retain may also solicit
proxies in person or by mail, telephone, facsimile, email or by
other means of communication. Directors, officers and employees
will not be paid any additional compensation for soliciting
proxies. IDW will provide copies of its solicitation materials
to banks, brokerage houses, fiduciaries and custodians that hold
beneficially owned shares of IDW common stock for distribution
to such beneficial owners. IDW may reimburse banks, brokerage
houses, fiduciaries and custodians for their expenses in
forwarding soliciting materials to beneficial owners. IDW has
retained Georgeson Shareholder Communications, Inc. to assist in
IDWs proxy solicitation process. IDW estimates that its
proxy solicitor fees will be approximately $10,000 plus
out-of-pocket expenses.
Do not send in any stock certificates with your proxy cards. The
exchange agent selected by Flextronics will mail transmittal
forms with instructions for the surrender of stock certificates
for IDW common stock to former IDW stockholders as soon as
practicable after the completion of the merger.
Other Business
IDW is not currently aware of any other business to be acted
upon at the special meeting. If, however, other matters are
properly brought before the special meeting, or any adjourned
meeting, your proxies include discretionary authority on the
part of the individuals appointed to vote your shares or act on
those matters according to their best judgment.
Stockholder Account Maintenance
IDWs transfer agent is Computershare Trust Co. N.A. All
communications concerning accounts of stockholders of record,
including address changes, name changes, inquiries as to
requirements to transfer shares of common stock, and similar
issues, should be made by contacting Computershare Trust Co.
N.A. by telephone at (303) 262-0600 or by facsimile at
(303) 262-0700.
36
PROPOSAL NO. 1 THE MERGER
The following is a description of the material aspects of the
merger, including the merger agreement. While Flextronics and
IDW believe that the following description covers the material
terms of the merger, the description may not contain all of the
information that is important to you. Flextronics and IDW
encourage you to read carefully this entire proxy statement/
prospectus, including the merger agreement attached to this
proxy statement/ prospectus as Annex A, for a more complete
understanding of the merger.
General
IDWs board of directors is using this document to solicit
proxies from the holders of IDW common stock for use at the
special meeting.
Proposals
At the special meeting, holders of IDW common stock will be
asked to vote upon a proposal to approve and adopt the merger
agreement and a proposal to grant the persons named as proxies
discretionary authority to vote to adjourn or postpone the
special meeting, if necessary, to solicit additional proxies if
there are not sufficient votes in favor of approving and
adopting the merger agreement.
The IDW merger will not be completed unless its stockholders
approve and adopt the merger agreement. The vote of the
Flextronics stockholders will not be required under applicable
law to adopt the merger agreement, which has been approved by
its board of directors.
Background of the Merger
Flextronics has been a significant IDW customer for several
years, accounting for between 3.0 to 15.2 percent of
IDWs annual revenues during fiscal years 2003 through
2005. Over the past several years, IDW has from time to time
considered a diverse range of strategic opportunities, including
potential joint ventures with OEMs, investments in new
technologies, strategic alliances with customers, and
acquisitions focused on vertical integration of key components
used in the manufacture of IDWs products. IDWs board
of directors determined that scaling the revenue and business of
IDW was a critical strategic goal, and that such growth should
be made both through organic sales growth and such strategic
transactions. These strategic opportunities were considered
regularly by management in the course of IDWs business and
discussed with IDWs board of directors. To assist in
evaluating certain of these opportunities, IDW engaged outside
financial advisors and legal counsel.
From October 2005 through July 2006, IDW held numerous meetings
and discussions with Flextronics to explore new business
opportunities, potential joint ventures and other possible
transactions, and a mutual non-disclosure agreement was executed
on December 7, 2005. Among the proposals considered during
these meetings and discussions was a transaction in which
Flextronicss camera module unit would be combined with
IDW, with Flextronics becoming the majority stockholder of IDW
and with IDW being consolidated into the financial statements of
Flextronics. IDW and Flextronics each conducted extensive due
diligence of the other party in connection with that proposed
transaction. In addition, Deutsche Bank was engaged by IDW as
its exclusive financial advisor with respect to this proposed
transaction.
On July 27, 2006, Michael M. McNamara, Flextronicss
Chief Executive Officer, and Thomas J. Smach, Flextronicss
Chief Financial Officer, met with Deutsche Bank and Thomas A.
Lacey, IDWs Chairman and Chief Executive Officer, to
discuss the proposed transaction involving the combination of
IDW and Flextronicss camera module business. During that
meeting, Mr. McNamara suggested for the first time that IDW
consider a transaction in which Flextronics would acquire IDW.
The meeting ended without further discussion of the terms of
such an acquisition.
On August 1, 2006, Mr. Smach made an oral offer to
Mr. Lacey that Flextronics acquire 100% of IDW at a
proposed price of $6.00 per share of IDW common stock.
Mr. Lacey responded by suggesting that the parties continue
their prior discussions regarding the proposed combination of
IDW and Flextronicss camera
37
module business. During ensuing discussions, Flextronicss
management indicated that such a proposal was unlikely to move
forward.
On August 2, 2006, IDWs board of directors held a
meeting, which also was attended by representatives of Deutsche
Bank. During this meeting, Mr. Lacey briefed IDWs
board of directors on Flextronicss decision not to proceed
with the proposed combination of IDW and Flextronicss
camera module business and Flextronicss expressed interest
in acquiring IDW at a proposed valuation of $6.00 per IDW
share. After being briefed on its fiduciary obligations and
duties by IDWs legal counsel, Bullivant Houser Bailey, PC,
or Bullivant, IDWs board of directors evaluated and
discussed the possibility of continuing to pursue the
combination of IDW and Flextronicss camera module
business. The IDW board authorized Mr. Lacey to contact
Flextronics to pursue further discussions regarding the
combination of IDW and Flextronicss camera module
business. In addition, the IDW board instructed Mr. Lacey
to advise Flextronics that before IDWs board of directors
would consider an offer to acquire IDW, a higher premium to
market would be required, as well as sufficient definitive terms
to permit a meaningful evaluation of the proposed transaction.
The IDW board also discussed the possibility of exploring the
potential interest of other possible acquirors, but decided for
a number of reasons that it was in the best interests of IDW and
its stockholders to focus exclusively on pursuing the merger
discussions with Flextronics to their potential successful
conclusion. Among the reasons discussed by the IDW board were
the fact that IDW had received no expression of interest at any
time from any potential acquiror other than Flextronics, the
boards view that the terms proposed by Flextronics offered
the potential opportunity for an attractive transaction with
further negotiations, and the boards view that pursuing
alternatives might jeopardize that opportunity. The board
determined that a preferable course was to seek to negotiate
with Flextronics the right for IDW to entertain competing offers
and to terminate the merger agreement after it was signed in
order to accept a superior offer upon payment of a termination
fee amount that would not be likely to deter any alternative
acquiror that was seriously interested in pursuing an
acquisition of IDW.
On August 3, 2006, Mr. Lacey spoke by telephone with
Mr. McNamara and Mr. Smach, at which time he again
proposed that IDW and Flextronics pursue a combination of IDW
and Flextronicss camera module business. Mr. Smach
advised Mr. Lacey that Flextronics was no longer interested
in pursuing such a transaction. After further discussion and
negotiation, Mr. Smach proposed that Flextronics acquire
IDW in a stock-for-stock merger at a share exchange value of
$6.55 per IDW share. Immediately following the call,
Mr. Lacey briefed IDWs board of directors on his
discussions with Mr. McNamara and Mr. Smach.
IDWs board of directors then evaluated and discussed the
market volatility and price risk associated with
Flextronicss offer. Based on the price and terms proposed
by Flextronics, IDWs board of directors instructed
Mr. Lacey to pursue further negotiations with Flextronics
on the terms of a definitive merger agreement.
On August 4, 2006, Mr. Lacey, Ronald Cohan, an
independent director on IDWs board of directors, and
representatives of Deutsche Bank discussed and evaluated a
proposed structure for the merger that would help assure a share
exchange value of $6.55 per IDW share throughout a range of
potential market prices for Flextronicss ordinary shares,
subject to further adjustments and provisions. Following that
discussion, Mr. Lacey and Deutsche Bank representatives
conveyed to Mr. Smach a proposal regarding an exchange
ratio on the basis of which IDW would have the authority of
IDWs board of directors to proceed with negotiations.
Under this proposal, IDW stockholders would receive an exchange
ratio based on an average Flextronics closing price providing a
share exchange value of $6.55 per IDW share within a 10%
collar above or below a referenced Flextronics share price, a
fixed exchange ratio inside a 10% and 15% collar above or below
the referenced price, a floating exchange ratio based on a share
exchange value of $6.85 per share if the average
Flextronics closing price was 15% or more above the reference
price, and the right of IDW to terminate the merger if the
average Flextronics closing price fell below a specified price.
On August 7, 2006, Flextronicss legal counsel,
Curtis, Mallet-Prevost, Colt & Mosle LLP, or CM-P,
furnished IDW and Bullivant with a preliminary due diligence
request list, and on August 9, 2006, Flextronics furnished
IDW with additional business and financial diligence requests.
On August 8, 2006, Mr. Smach responded to IDWs
proposal and agreed to the proposed exchange ratio formula,
subject to Flextronics having a top-up right to
increase the exchange ratio if the average
38
Flextronics closing price fell below a specified price and IDW
exercised its right to terminate. Mr. Smach also proposed
that the reference price would be based on the
10-day average closing
price of Flextronicss ordinary shares ending one day prior
to the signing of the merger agreement, and proposed that
IDWs right to terminate would be triggered only if the
average Flextronics closing price would result in a share
exchange value of less than $6.00 per IDW share.
Following further negotiations on August 8, 2006,
Mr. Lacey and Mr. Smach agreed that Flextronics would
have a top-up right, the reference price would be
based on the 10-day
average closing price of Flextronicss ordinary shares
ending one day prior to the signing of the merger agreement, and
that IDWs right to terminate would be triggered if the
average Flextronics closing price fell more than 15% below the
agreed-upon reference price.
During the period August 10, 2006 through September 4,
2006, Flextronics and representatives of CM-P conducted
business, legal and financial diligence of IDW, and IDW and
representatives of Bullivant conducted business, legal and
financial diligence of Flextronics.
On August 14, 2006, CM-P distributed an initial draft of
the proposed merger agreement to Bullivant.
During the period August 15, 2006 through September 4,
2006, Mr. Smach and representatives of CM-P negotiated the
provisions of the merger agreement and the voting agreements
with Mr. Lacey, representatives of Bullivant, and
representatives of Deutsche Bank.
On August 16, 2006, IDW and Deutsche Bank executed an
engagement agreement, under which IDW engaged Deutsche Bank as
its exclusive financial advisor with respect to a possible
acquisition of IDW.
On August 17, 2006, IDWs board of directors met to
discuss the proposed terms and conditions of the merger, the
draft merger agreement, the proposed timeline for concluding the
merger, and related matters. The directors were briefed on their
fiduciary duties and responsibilities under Delaware law by
Bullivant. After further discussions and financial briefings,
including discussions of the rationale of the proposed merger,
IDWs board of directors authorized IDWs management
and legal counsel to proceed to negotiate definitive agreements
with Flextronics, with provisions that would allow IDWs
board of directors to entertain unsolicited competing offers,
and to allow for termination of the proposed merger in the event
IDWs board of directors determined that a competing
proposal was a superior offer. The board also considered again
the possibility of exploring the potential interest of possible
acquirors other than Flextronics and reconfirmed its
August 2, 2006 decision that it was in the best interests
of IDW and its stockholders to focus exclusively on pursuing the
merger discussions with Flextronics to their potential
successful conclusion, including the negotiation of IDWs
right to accept a superior offer in consideration for a
termination fee that would not be likely to deter any serious
alternative acquiror.
On August 18, 2006, IDWs management, financial
advisors, and legal counsel spoke by telephone with
Mr. Smach and Patricia Doherty, an attorney in
Flextronicss legal department, to conduct further legal
and business due diligence of Flextronics.
On August 31, 2006, IDWs board of directors met to
discuss further the proposed merger, review the proposed
definitive merger agreement, and evaluate further IDWs due
diligence and financial analysis. During this meeting, Bullivant
outlined and discussed with the IDW board the terms and
conditions of the merger agreement. In addition, Deutsche Bank
made a preliminary presentation to the IDW board regarding its
financial analysis of the proposed exchange ratio, which
analysis was subject to confirmation at such time as Deutsche
Bank was requested to render a fairness opinion regarding the
exchange ratio. IDWs board of directors discussed with
Deutsche Bank the market data and the analyses presented by
Deutsche Bank.
On August 31, 2006, Flextronicss board of directors
held a telephonic meeting at which Mr. Smach presented an
overview of the proposed transaction, including IDWs
business and capabilities, potential synergies arising from the
integration of IDWs business into that of Flextronics, and
opportunities to enhance Flextronicss vertical integration
strategy as a result of the proposed merger, as well as the
pricing terms of the transaction. After discussion,
Flextronicss board of directors approved the acquisition
of IDW and authorized management to complete the negotiation of
the merger agreement.
39
On September 3, 2006, Mr. Lacey contacted
Mr. Smach to express IDWs interest in seeking to
alter the exchange ratio provisions that had been under
discussion in light of a recent increase in the trading price of
IDWs stock and a corresponding decrease in the premium
implied by the $6.55 share exchange value that had been agreed
in early August as the basis for negotiating the definitive
merger agreement. Mr. Smach advised Mr. Lacey that
Flextronics would not consider changing the proposed exchange
ratio since, in its view, the inherent value of IDW had not
changed in the intervening month.
On September 4, 2006, IDWs board of directors held a
special meeting, during which IDWs board of directors
considered a detailed review and summary of the terms and
conditions of the proposed transaction. Representatives of
Deutsche Bank presented their financial analysis of the fairness
of the proposed exchange ratio, from a financial point of view,
to IDWs stockholders and delivered Deutsche Banks
oral opinion to IDWs board of directors, and subsequently
confirmed such opinion in writing as of the same date, that, as
of the date of such opinion, and based upon and subject to the
assumptions made, matters considered and limits of the review
undertaken by Deutsche Bank, the exchange ratio contained in the
proposed merger agreement was fair, from a financial point of
view, to IDWs stockholders (the full text of Deutsche
Banks written opinion, dated September 4, 2006, is
attached as Annex C to this proxy statement/ prospectus,
and IDW stockholders are urged to read in their entirety both
the opinion and the description of the opinion contained under
the caption Opinion of IDWs Financial
Advisor beginning on page 43 of this proxy statement/
prospectus). Following these discussions and presentations, the
IDW board of directors unanimously determined that the merger
was fair to, and in the best interests of IDW and its
stockholders, and declared the merger to be advisable.
Accordingly, IDWs board of directors unanimously approved
the merger agreement and the merger and unanimously recommended
that the IDW stockholders vote FOR the
adoption of the merger agreement and approval of the merger.
In the evening of September 4, 2006, IDW and Flextronics
executed the merger agreement. IDW and Flextronics issued a
joint press release announcing the execution of the merger
agreement before the opening of trading on September 5,
2006.
IDWs Reasons for the Merger and Recommendation of
IDWs Board
IDWs board of directors has unanimously determined that
the merger is fair to, and in the best interests of, IDW and its
stockholders and declared the merger to be advisable.
Accordingly, IDWs board of directors unanimously approved
the merger agreement and the merger and unanimously recommends
that IDW stockholders vote FOR adoption of the
merger agreement and approval of the merger.
In reaching its decision to approve the merger and recommend the
merger to IDWs stockholders, IDWs board of directors
consulted with IDWs management, as well as with IDWs
legal counsel and financial advisors, and considered a number of
factors, including the following factors, all of which it viewed
as generally supporting its decision:
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historical information concerning IDWs and
Flextronicss respective businesses, prospects, financial
performance and condition, operations, management, competitive
positions and pro forma assumptions on synergies from the
combination of the companies; |
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IDW managements view of the financial condition, results
of operations and business of IDW and Flextronics before and
after giving effect to the proposed merger; |
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current financial market conditions and historical stock prices,
volatility and trading information with respect to both IDW and
Flextronics; |
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the relationship between the market value of the merger
consideration implied by the exchange ratio, and a comparison of
comparable merger transactions, including the premium to market
at the time the merger agreement was reached and the trading
averages of each companys respective stock price for the
30-, 60-, and 90-day
periods preceding such date; |
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potential synergistic opportunities through a larger
international footprint for sales, and increased access to
larger customers and working capital by the combined company; |
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the significant vertical integration opportunities arising from
the combination, which should allow rapid scaling in the use of
IDWs manufacturing capacity with resulting cost savings; |
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the expectation that the combined company would utilize the
skills and resources of an expanded employee base in developing
new products; |
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the risks associated with IDW continuing to operate
independently and continuing with its strategy of scaling and
aggressive growth; |
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the risk that IDWs customers, including Flextronics, would
develop or acquire capabilities and solutions that compete with
IDWs products and services; |
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the increased liquidity that IDW stockholders, including
employees who hold stock options, would realize from the
proposed merger; |
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the potential to achieve future growth in additional markets
from an improved integrated platform resulting from the merger; |
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the structure of the merger, including the fact that the
exchange ratio formula provides a share exchange value of
$6.55 per IDW share within a 10% collar based on the
average Flextronics closing, which would limit the risk of a
decrease in the trading price of Flextronics shares prior
to the completion of the merger; |
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the structure of the exchange ratio formula in providing IDW
with a right to terminate the merger if the average Flextronics
closing price falls more than 15% below the reference price; |
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the written opinion of Deutsche Bank dated September 4,
2006, that, as of the date of such opinion, and based upon and
subject to the assumptions made, matters considered and limits
of the review undertaken by Deutsche Bank, the exchange ratio
contained in the merger agreement was fair, from a financial
point of view, to IDWs stockholders (the full text of
Deutsche Banks written opinion is attached as Annex C
to this proxy statement/prospectus, and IDW stockholders are
urged to read in their entirety both the opinion and the
description of the opinion contained under the caption
Opinion of IDWs Financial Advisor beginning on
page 43 of this proxy statement/prospectus) and the related
financial analysis of Deutsche Bank with respect to such opinion; |
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the inclusion of a fiduciary out in the merger
agreement that permits IDW, subject to the payment of a
termination fee, to terminate the merger agreement in order to
accept a superior acquisition proposal made by a third party; |
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the ability to consummate the merger, including the conditions
to the merger requiring receipt of necessary regulatory
approvals, and the likelihood of the merger being approved by
the appropriate regulatory authorities; and |
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the fact that the merger is expected to be tax-free to IDW
stockholders for U.S. federal income tax purposes, except
to the extent that IDW stockholders recognize gain on cash
received for any fractional shares. |
In addition, IDWs board of directors also identified and
considered a variety of potentially negative factors in its
deliberations concerning the proposed merger, including, but not
limited to:
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the risk that the potential synergies sought in the proposed
merger might not be fully realized; |
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the possibility that the proposed merger might not be
consummated, or that consummation might be unduly delayed, and
the potential adverse consequences resulting therefrom; |
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the risk that the expected benefits from the merger will not be
achieved; |
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the potential financial expenses that would be incurred, and the
impact of those expenses on operating results, in the event the
proposed merger is not consummated; |
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the risks associated with the exchange ratio formula, which
provides a share exchange value of $6.55 per IDW share
within a 10% collar based on the average Flextronics closing
price, which would limit IDW stockholders from benefitting from
any increase in the trading price of Flextronicss shares
prior to the completion of the merger; |
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the risk that the exchange ratio formula would result in a share
exchange value of less than $6.55 per IDW share if the
average Flextronics closing price fell more than 10% below the
reference price; |
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the potential loss of customers and suppliers and the
termination of contracts of either company as a result of a
customers, suppliers, or other counterpartys
unwillingness to do business with the combined company; |
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the challenges and costs of integrating the assets, operations,
management teams, strategies, cultures and organizations of the
companies; |
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the interests of IDWs executive officers with respect to
the merger may be different from, or in addition to, the
interests of IDWs stockholders, as described in the
section entitled Interests of IDWs
Directors and Executive Officers in the Merger beginning
on page 50 of this proxy statement/prospectus; |
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the decision of IDWS board of directors to pursue the
proposed merger without soliciting third party offers based on
the IDW boards determination that it was preferable not to
risk the loss of the proposed transaction with Flextronics and
that it was unlikely that another party would propose a more
favorable transaction, and based on the structure of the merger
agreement allowing the IDWs board of director to consider
unsolicited acquisition proposals if the IDWs board of
directors determined in good faith that an acquisition proposal
was or was reasonably likely to result in an acquisition
proposal that was more favorable to the IDW
stockholders; and |
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various other risks associated with the merger and the business
of Flextronics and the combined company, including some of those
described in the section entitled Risk Factors
beginning on page 19 of this proxy statement/prospectus. |
IDWs board of directors concluded that the potential
benefits of the merger to the IDW stockholders outweighed these
potentially negative factors.
The discussion of factors considered by IDWs board of
directors is not intended to be exhaustive, but sets forth the
principal factors considered during its deliberations. The
members of IDWs board of directors collectively reached
the conclusion to approve the merger agreement and transactions
contemplated by the merger agreement. After taking into account
all of the factors set forth above, IDWs board of
directors unanimously determined that the proposed merger is
fair to, and in the best interests of, IDW and its stockholders,
and declared the merger to be advisable. Accordingly, IDWs
board of directors unanimously approved the merger agreement and
the merger and unanimously recommended that IDW stockholders
vote FOR the proposal to adopt the merger
agreement and approve the merger. In view of the complexity of
the matters discussed and evaluated, and the wide variety of the
factors considered, IDWs board of directors did not
consider it practical, and did not attempt to quantify, rank, or
otherwise assign relative weights to any of the factors
considered, and made its determination based on the totality of
information presented to the board, the investigations conducted
on its behalf, and the advice of its legal counsel and financial
advisors.
When considering the recommendation of IDWs board of
directors to vote FOR the proposal to adopt
the merger agreement, IDWs stockholders should be aware
that the executive officers and directors of IDW have certain
interests in the merger that may be different from, or in
addition to, the interests of IDWs stockholders generally.
IDWs board of directors was aware of these interests and
considered them when approving the merger agreement and
recommending that IDWs stockholders vote to adopt the
merger agreement and approve the merger. See
Interests of IDWs Directors and
Executive Officers in the Merger beginning on page 50
of this proxy statement/prospectus.
This discussion of IDWs reasons for the merger and all
other information presented in this section is forward-looking
in nature and, therefore, should be read in light of the factors
discussed under the heading
42
Cautionary Statement Regarding Forward-Looking
Information beginning on page 18 of this proxy
statement/prospectus.
Opinion of IDWs Financial Advisor
Deutsche Bank has acted as financial advisor to IDW in
connection with the merger. At the September 4, 2006
meeting of IDWs board of directors, Deutsche Bank
delivered its oral opinion, subsequently confirmed in writing as
of the same date, to IDWs board of directors to the effect
that, as of the date of such opinion, and based upon and subject
to the assumptions made, matters considered and limits of the
review undertaken by Deutsche Bank, the exchange ratio was fair,
from a financial point of view, to the stockholders of IDW. For
purposes of this section and the Deutsche Bank opinion, the term
exchange ratio means the ratio under which each share of IDW
common stock will be converted into a fraction of a Flextronics
ordinary share in accordance with the formula set forth in the
merger agreement.
The full text of Deutsche Banks written opinion, dated
September 4, 2006, which sets forth, among other things,
the assumptions made, matters considered and limits on the
review undertaken by Deutsche Bank in connection with the
opinion, is attached as Annex C to this proxy statement/
prospectus and is incorporated herein by reference. IDW
stockholders are urged to read the Deutsche Bank opinion in its
entirety. The summary of the Deutsche Bank opinion set forth in
this proxy statement/ prospectus is qualified in its entirety by
reference to the full text of the Deutsche Bank opinion. The
Deutsche Bank opinion is not a recommendation to you as to how
you should vote with respect to the merger and the merger
agreement.
For purposes of Deutsche Banks written opinion, dated
September 4, 2006, and the analyses described in this
section, Deutsche Bank used an implied exchange ratio of 0.5582
which equals $6.55 divided by $11.734 (the ten consecutive day
average market value of Flextronics ordinary shares for the
period ended September 1, 2006, the last business day prior
to announcement of the merger). $6.55 and $11.734 represent,
respectively, the reference purchase price per IDW share and the
reference Flextronics share price established by the parties in
the merger agreement as the basis for the exchange ratio
formula. As set forth more fully in Section 1.6(a) of the
merger agreement attached to this proxy statement/ prospectus as
Annex A, the exchange ratio will depend upon the average
daily closing price for Flextronics ordinary shares for the
20 consecutive trading days ending on the fifth trading day
before the closing of the merger and the dollar value of the
exchange ratio will vary accordingly.
In using these metrics as a reference point for the analyses,
Deutsche Bank was not expressing any opinion regarding the
exchange ratio that will be determined at closing based on the
formula set forth in the merger agreement nor the dollar value
of that exchange ratio at or following closing.
In connection with Deutsche Banks role as financial
advisor to IDW, and in arriving at its opinion, Deutsche Bank
reviewed certain publicly available financial information and
other information concerning IDW and Flextronics and certain
financial and other information furnished to it by IDW and
Flextronics. Deutsche Bank also held discussions with the
members of the senior managements of IDW and Flextronics
regarding the businesses and prospects of their respective
companies.
In addition, Deutsche Bank:
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reviewed the reported prices and trading activity for the common
stock of IDW and the ordinary shares of Flextronics; |
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compared certain financial and stock market information for IDW
and Flextronics with similar information for selected companies
whose securities are publicly traded; |
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reviewed the financial terms of certain recent business
combinations which it deemed comparable to the merger; |
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reviewed the terms of the September 3 draft merger
agreement (the latest draft merger
agreement); and |
43
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performed such other studies and analyses and considered such
other factors as it deemed appropriate. |
In preparing its opinion, Deutsche Bank did not assume
responsibility for the independent verification of, and did not
independently verify, any information, whether publicly
available or furnished to it, concerning IDW or Flextronics,
including, without limitation, any financial information,
forecasts or projections considered in connection with the
rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank assumed and relied upon the accuracy and
completeness of all such information. Deutsche Bank did not
conduct a physical inspection of any of the properties or
assets, and did not prepare or obtain any independent evaluation
or appraisal of any of the assets or liabilities of IDW or
Flextronics.
With respect to the financial forecasts and projections made
available to Deutsche Bank by IDW and used in Deutsche
Banks analysis, Deutsche Bank assumed that they had been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of IDW as to
the matters covered thereby. In rendering its opinion, Deutsche
Bank expressed no view as to the reasonableness of such
forecasts and projections or the assumptions on which they were
based. The Deutsche Bank opinion was necessarily based upon
economic, market and other conditions as in effect on, and the
information made available to Deutsche Bank as of, the date of
such opinion.
For purposes of rendering its opinion, Deutsche Bank assumed
that, in all respects material to its analysis:
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the executed version of the merger agreement would, in no
respect material to its analysis, differ from the latest draft
merger agreement (which IDW has confirmed to Deutsche Bank); |
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the representations and warranties of IDW, Flextronics and the
Flextronics merger subsidiary that will be merged into IDW
(merger subsidiary) contained in the merger
agreement were true and correct; |
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Flextronics, merger subsidiary and IDW would each perform all of
the covenants and agreements to be performed by it under the
merger agreement; |
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all conditions to the obligation of each of Flextronics, merger
subsidiary and IDW to consummate the merger would be satisfied
without any waiver of any of them; |
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all material governmental, regulatory, judicial or other
approvals and consents required in connection with the
consummation of the merger would be obtained; and |
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in connection with obtaining any necessary governmental,
regulatory, judicial or other approvals and consents, or any
amendments, modifications or waivers to any agreements,
instruments or orders to which either Flextronics or IDW was a
party or subject or by which it was bound, no limitations,
restrictions or conditions would be imposed or amendments,
modifications or waivers made that would have a material adverse
effect on Flextronics or IDW or materially reduce the
contemplated benefits of the merger to IDW. |
In addition, IDW informed Deutsche Bank, and Deutsche Bank
assumed, that the merger would be tax-free to each of IDW and
Flextronics and their respective stockholders.
The Deutsche Bank opinion was limited to the fairness of the
exchange ratio, from a financial point of view, to the
stockholders of IDW and Deutsche Bank expressed no opinion as to
the merits of the underlying decision by IDW to engage in the
merger or as to any other terms of the merger. The Deutsche Bank
opinion did not in any manner address the prices at which
Flextronics ordinary shares would trade after the announcement
or consummation of the merger.
* * * * * * * * *
The following is a summary of the material financial analyses
performed by Deutsche Bank in connection with its opinion and
reviewed with the IDW board of directors at its meeting on
September 4, 2006. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand the financial analyses used by Deutsche Bank,
the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the
financial analyses. Accordingly, the analyses listed in the
tables and described below must be considered as a whole.
Considering
44
any portion of such analyses and of the factors considered,
without considering all analyses and factors, could create a
misleading or incomplete view of the analyses underlying the
Deutsche Bank opinion.
Historical Trading Analysis. Deutsche Bank reviewed the
range of historical daily per share market closing prices of IDW
common stock over the
30-day,
60-day and
52-week periods prior
to September 1, 2006 (the last full trading day preceding
the delivery of the Deutsche Bank opinion). The maximum closing
prices for these time periods were $5.95, $5.95 and $6.72,
respectively. The minimum closing price for each of the three
time periods was $4.56.
Deutsche Bank noted that the transaction value per share used
for purposes of its analysis, $6.55, was within or above the
trading range of IDW common stock based on the 30-day, 60-day
and 52-week periods prior to September 1, 2006.
Selected Publicly Traded Companies Analysis. Deutsche
Bank compared certain financial information and commonly used
valuation measurements for IDW to corresponding information and
measurements for a group of sixteen publicly traded companies in
the electronics manufacturing services (EMS)
industry, the U.S. components and modules industry and the U.S.
high growth electronics industry (collectively, the
Selected Companies). The Selected Companies are
listed below:
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Benchmark Electronics, Inc. |
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Celestica Inc. |
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Flextronics International, Ltd. |
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Hon Hai Precision Industry Co., Ltd. |
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Jabil Circuit, Inc. |
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Plexus Corp. |
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Sanmina-SCI Corporation |
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Solectron Corporation |
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U.S. components and modules |
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Amphenol Corporation |
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Anaren, Inc. |
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Molex Incorporated |
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SMART Modular Technologies (WWH), Inc. |
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U.S. high growth electronics |
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Diodes Incorporated |
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Genesis Microchip Incorporated |
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Microsemi Corporation |
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RF Micro Devices, Inc. |
Such financial information and valuation measurements included,
among other things: (i) common equity market valuation;
(ii) revenue growth rates; (iii) operating
performance; (iv) ratios of common equity market value as
adjusted for debt and cash (Enterprise Value) to
earnings before interest expense, income taxes and depreciation
and amortization (EBITDA), and earnings before
interest expense and income taxes (EBIT); and
(v) ratios of common equity market prices per share to
earnings per share (P/ E).
45
To calculate the trading multiples for IDW and the Selected
Companies, Deutsche Bank used publicly available information
concerning historical and projected financial performance,
including published historical financial information and
earnings estimates reported by the Institutional Brokers
Estimate System (IBES) and equity research analysts.
IBES is a data service that monitors and publishes compilations
of earnings estimates by selected research analysts regarding
companies of interest to institutional investors. Financial data
for IDW were based on internal estimates of IDW management.
Based on stock prices as of the close of business on
September 1, 2006, the results of Deutsche Banks
calculations were as follows:
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Range of | |
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Implied Share | |
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Prices of IDW | |
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Common Stock | |
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Financial Metric |
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Low | |
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High | |
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EBITDA
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Trailing twelve months
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$ |
2.57 |
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$ |
3.13 |
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CY 2006 E
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3.46 |
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5.33 |
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CY 2007 E
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4.85 |
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6.89 |
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EBIT
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Trailing twelve months
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$ |
2.31 |
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$ |
2.73 |
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CY 2006 E
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3.60 |
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4.69 |
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CY 2007 E
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5.54 |
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6.92 |
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EPS
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Trailing twelve months
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$ |
1.90 |
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$ |
2.30 |
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CY 2006 E
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3.44 |
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4.77 |
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CY 2007 E
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4.92 |
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6.64 |
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None of the Selected Companies is identical to IDW. Accordingly,
Deutsche Bank did not view its Selected Companies analysis as
solely mathematical. Rather, the analysis involved complex
considerations and qualitative judgments, reflected in Deutsche
Banks opinion, concerning differences in financial and
operating characteristics of the Selected Companies and other
factors that could affect the public trading value of the
Selected Companies.
Deutsche Bank noted that the transaction value per share used
for purposes of its analysis, $6.55, was within or above the
range of implied share prices of IDW common stock based upon
trailing twelve-month, calendar year 2006 and calendar year 2007
Enterprise Value/ EBITDA multiples, Enterprise Value/ EBIT
multiples and P/ E multiples of the Selected Companies.
Discounted Cash Flow Analysis. Deutsche Bank performed a
discounted cash flow analysis for IDW. Deutsche Bank calculated
the discounted cash flow values for IDW as the sum of the net
present values of (i) the estimated future cash flow that
IDW would generate for fiscal year 2006 through fiscal year 2011
plus (ii) the value of IDW at the end of such period. The
estimated future cash flows were based on the financial
projections for fiscal year 2006 through fiscal year 2012
prepared by IDW management. The terminal value was calculated
based on projected EBITDA for fiscal year 2012 and a range of
multiples from 6.0x to 8.0x. Deutsche Bank used a discount rate
of 16%, based on its judgment of the estimated weighted average
cost of capital of IDW, and used such multiples based on its
review of the trading characteristics of the common stock of the
Selected Companies. This analysis indicated a range of values of
$5.94 to $7.15 per share for IDW common stock.
Deutsche Bank noted that the transaction value per share used
for purposes of its analysis, $6.55, was within the range of
implied share prices of IDW common stock based upon the
discounted cash flow analysis.
Analysis of Selected Precedent Transactions. Deutsche
Bank reviewed the financial terms, to the extent publicly
available, of three completed merger and acquisition
transactions involving acquired companies in the
46
components and modules industry or the display industry (the
Selected Transactions). Deutsche Bank calculated
various financial multiples based on certain publicly available
information for each of the Selected Transactions and compared
them to corresponding financial multiples for the merger, based
on the exchange ratio. All multiples for the Selected
Transactions were based on public information available at the
time of announcement of such transaction, without taking into
account differing market or other conditions during the periods
during which the Selected Transactions occurred. The Selected
Transactions were (with announcement dates of such transactions
in parentheses):
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SMART Modular/ Francisco Partners, Shah Capital, Texas Pacific
Group (2/12/04) |
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Philips Display Business/ Toppoly (11/10/05) |
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Quanta Display/ AU Optronics (4/7/06) |
Deutsche Bank calculated that:
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the range of implied share prices of IDW common stock based upon
multiples of enterprise value to forward twelve-month EBITDA for
the target companies in the Selected Transactions was $2.38 to
$3.91 per share; and |
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the range of implied share prices of IDW common stock based upon
forward twelve-month P/ E multiples for the target companies in
the Selected Transactions was $1.41 to $5.21 per share. |
Because the reasons for, and circumstances surrounding, each of
the Selected Transactions analyzed were diverse, and due to the
inherent differences between the operations and financial
conditions of IDW and the companies involved in the Selected
Transactions, Deutsche Bank did not view its Selected
Transactions analysis as solely mathematical. Rather, the
analysis involved complex considerations and qualitative
judgments, reflected in Deutsche Banks opinion, concerning
differences between the characteristics of the Selected
Transactions and the merger that could affect the value of the
acquired companies and businesses, on the one hand, and IDW and
its business, on the other hand.
Deutsche Bank noted that the transaction value per share used
for purposes of its analysis, $6.55, was above the range of
implied share prices of IDW common stock based upon multiples of
enterprise value to forward twelve-month EBITDA and forward
twelve-month P/ E multiples for the Selected Transactions.
Premiums Paid Analysis. Deutsche Bank examined the
premiums paid for historical stock-for-stock business
combinations in the U.S. and historical stock-for-stock business
combinations in the U.S. involving technology companies.
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U.S. Transactions: the group included sixteen selected
completed merger and acquisition transactions valued at between
$200 million and $600 million and publicly announced
since January 1, 2002 (the Selected (All)
Transactions). All premiums for the Selected (All)
Transactions were based on public information available at the
time of announcement of such transactions, without taking into
account differing market or other conditions during the periods
during which such transactions occurred. |
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U.S. Technology Transactions: the group included seven
selected completed merger and acquisition transactions valued at
between $200 million and $600 million and publicly
announced since January 1, 2002 (the Selected
(Technology) Transactions). All premiums for the Selected
(Technology) Transactions were based on public information
available at the time of announcement of such transactions,
without taking into account differing market or other conditions
during the periods during which such transactions occurred. |
47
Based on stock prices as of the close of business on
September 1, 2006, the results of Deutsche Banks
calculations were as follows:
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Range of | |
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Implied Share | |
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Prices of IDW | |
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Common Stock | |
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Metric |
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Low | |
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High | |
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Selected (All) Transactions
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1 day prior to announcement
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$ |
7.38 |
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$ |
7.68 |
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20 days prior to announcement
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5.82 |
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6.11 |
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Selected (Technology) Transactions
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1 day prior to announcement
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$ |
7.44 |
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$ |
7.74 |
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20 days prior to announcement
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5.96 |
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6.44 |
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Because the reasons for, and circumstances surrounding, each of
the Selected (All) Transactions and Selected (Technology)
Transactions were diverse, and due to the inherent differences
between the operations and financial conditions of IDW and the
companies involved in the Selected (All) Transactions and the
Selected (Technology) Transactions, Deutsche Bank did not view
its Premiums Paid analysis as solely mathematical. Rather, the
analysis involved complex considerations and qualitative
judgments, reflected in Deutsche Banks opinion, concerning
differences between the characteristics of these transactions
and the merger that could affect the value of the acquired
companies and businesses, on the one hand, and IDW and its
business, on the other hand.
Deutsche Bank noted that: (i) the transaction value per
share used for purposes of its analysis, $6.55, was above the
range of implied share prices on the date twenty trading days
prior to announcement for both the Selected (Technology)
Transactions and the Selected (All) Transactions; and
(ii) the transaction value per share used for purposes of
its analysis, $6.55, was below the ranges of premiums paid on
the date one day prior to announcement for both the Selected
(All) Transactions and the Selected (Technology) Transactions.
Other Analyses. In addition to performing the analyses
summarized above to reach its conclusion with respect to the
fairness of the exchange ratio, from a financial point of view,
to the stockholders of IDW, Deutsche Bank also presented to the
board of directors of IDW, for the boards information in
evaluating the mergers financial terms and not as part of
Deutsche Banks fairness analysis:
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an historical exchange ratio analysis, and |
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a combination analysis |
each of which is summarized below.
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Historical Exchange Ratio Analysis. Deutsche Bank
reviewed the historical ratio of the daily per share market
closing prices of IDW common stock divided by the corresponding
prices of Flextronics ordinary shares over the 90-day, 60-day
and 30-day periods prior to September 1, 2006. The average
exchange ratios for these time periods were 0.4762x, 0.4736x,
and 0.4466x, respectively. Deutsche Bank then calculated the
respective premiums over such average daily exchange ratios
represented by the exchange ratio used for purposes of its
analysis, 0.5582x, which were 17.2%, 17.9%, and 25.0%,
respectively. In addition, Deutsche Bank reviewed the historical
exchange ratios as of August 7, 2006 (20 business days, or
four weeks, prior to announcement of the merger) and as of
September 1, 2006 (the last business day prior to
announcement of the merger). The exchange ratios for these dates
were 0.4148x and 0.5055x, respectively. Deutsche Bank then
calculated the respective premiums over such daily exchange
ratios represented by the exchange ratio used for purposes of
its analysis, 0.5582x, which were 34.6% and 10.4%, respectively. |
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Combination Analysis. Deutsche Bank calculated certain
pro forma impacts of the merger on the combined Flextronics/ IDW
company in the second half of Flextronicss fiscal 2007 and
Flextronicss fiscal 2008. To prepare this analysis,
Deutsche Bank utilized projections of net income, earnings per
share |
48
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and weighted average number of outstanding shares for each of
those years furnished by the management of IDW for IDW and
analyst estimates published by another investment banking firm
for Flextronics, without making any assumptions regarding
synergies that the combined company might realize from, or any
costs related to, the merger. From this analysis, Deutsche Bank
estimated that the merger would be approximately 1.3% dilutive
to earnings per share of the combined company for the second
half of Flextronicss fiscal 2007 and approximately 0.8%
dilutive to earnings per share of the combined company for
Flextronicss fiscal 2008. |
* * * * * * * * *
In reaching its opinion, Deutsche Bank did not assign any
particular weight to any one analysis, or the results yielded by
that analysis. Rather, having reviewed these results in the
aggregate, Deutsche Bank exercised its professional judgment in
determining that, based on the aggregate of the analyses used
and the results they yielded, the exchange ratio was fair, from
a financial point of view, to IDWs stockholders. Deutsche
Bank believed that it was inappropriate to, and therefore did
not, rely solely on the quantitative results of the analyses
and, accordingly, also made qualitative judgments concerning
differences between the characteristics of IDW and the merger
and the data selected for use in its analyses, as further
discussed in this section.
The foregoing summary describes all analyses and factors that
Deutsche Bank deemed material in its presentation to the IDW
board of directors, but is not a comprehensive description of
all analyses performed and factors considered by Deutsche Bank
in connection with preparing its opinion. The preparation of a
fairness opinion is a complex process involving the application
of subjective business judgment in determining the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, is not readily susceptible to summary
description. Deutsche Bank believes that its analyses must be
considered as a whole and that considering any portion of such
analyses and of the factors considered without considering all
analyses and factors could create a misleading view of the
process underlying the opinion.
In conducting its analyses and arriving at its opinion, Deutsche
Bank utilized a variety of generally accepted valuation methods.
The analyses were prepared solely for the purpose of enabling
Deutsche Bank to provide its opinion to the IDW board of
directors as to the fairness of the exchange ratio, from a
financial point of view, to the stockholders of IDW and do not
purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold, which are
inherently subject to uncertainty. In connection with its
analyses, Deutsche Bank made, and was provided by IDW management
with, numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many
of which are beyond IDWs control. Analyses based on
estimates or forecasts of future results are not necessarily
indicative of actual past or future values or results, which may
be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of IDW, Flextronics or their respective advisors,
neither IDW, Flextronics nor Deutsche Bank nor any other person
assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions.
The terms of the merger were determined through negotiations
between Flextronics and IDW. Although Deutsche Bank provided
advice to IDW during the course of these negotiations, the
decision to enter into the merger was solely that of IDWs
board of directors. The opinion and presentation of Deutsche
Bank to IDWs board of directors were only one of a number
of factors taken into consideration by IDWs board of
directors in making its determination to approve the merger.
IDW selected Deutsche Bank as financial advisor in connection
with the merger based on Deutsche Banks qualifications,
expertise, reputation and experience in mergers and
acquisitions, and related transactions. IDW retained Deutsche
Bank as exclusive financial advisor to IDW with respect to the
exploration of strategic alternatives that might lead to
specified types of transactions, such as the merger, pursuant to
a letter agreement dated August 16, 2006. As compensation
for Deutsche Banks services in connection with the merger,
Deutsche Bank will receive a cash fee of $3,250,000, a portion
of which is creditable against the fee paid to Deutsche Bank for
the delivery of its opinion and the balance of which is
49
contingent upon the consummation of the merger. Regardless of
whether the merger is consummated, IDW has agreed to reimburse
Deutsche Bank for reasonable fees and disbursements of Deutsche
Banks counsel and all of Deutsche Banks reasonable
travel and other
out-of-pocket expenses
incurred in connection with the merger or otherwise arising out
of the retention of Deutsche Bank under its engagement letter.
IDW has also agreed to indemnify Deutsche Bank and certain
related persons to the full extent lawful against certain
liabilities, including certain liabilities under the federal
securities laws arising out of its engagement or the merger.
Deutsche Bank is an affiliate of Deutsche Bank AG (together with
its affiliates, the DB Group). One or more members
of the DB Group have, from time to time, provided investment
banking services to IDW, comprising serving as managing
underwriter/bookrunner for IDWs follow-on public offering
of common stock in January 2006, for which the DB Group received
customary commissions, and serving as exclusive financial
advisor to IDW in connection with a possible acquisition of
Flextronics camera module unit which was under
consideration prior to the negotiations between IDW and
Flextronics that culminated in the execution of the merger
agreement and for which no fee became payable to Deutsche Bank
under the terms of its engagement for that assignment. One or
more members of the DB Group have also, from time to time,
provided investment banking, commercial banking (including
extension of credit) and other financial services to Flextronics
or its affiliates, for which the DB Group has received customary
fees or commissions (as the case may be), including services as:
financial advisor with respect to a merger of a subsidiary of
Flextronics with a third party in 2005; co-documentation agent
for a revolving credit facility in 2005; and joint bookrunning
manager in connection with an offering of debt securities in
2004. In addition, one or more members of the DB Group, for
customary compensation, have from time to time performed, and
continue to perform, a variety of services for Flextronics and
its affiliates in connection with corporate treasury matters
such as foreign exchange transactions, cash management and
repurchases of debt securities. The board of directors of IDW
was aware of the DB Groups services for Flextronics when
the company engaged Deutsche Bank. In the ordinary course of
business, members of the DB Group may actively trade securities
of IDW or Flextronics for their own account or the account of
their customers and, accordingly, may from time to time hold a
long or short position in such securities, instruments and
obligations.
Flextronicss Reasons for the Merger
Flextronics believes that its proposed acquisition of IDW is a
strategic addition to Flextronicss product offering and
capabilities. Flextronics is acquiring IDW for a variety of
reasons, including the following:
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Flextronics believes that adding IDWs LCD design and
manufacturing capabilities to Flextronicss product
offering and capabilities will augment Flextronicss
vertically integrated solutions capabilities; |
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Flextronics expects to benefit from a number of synergies by
combining IDWs LCD operations with Flextronicss
Camera Module Group, and TV tuner and Wifi and TFT module
assembly operations; and |
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Flextronics expects to add to its customer base by having access
to IDWs portable media player market. |
Interests of IDWs Directors and Executive Officers in
the Merger
In considering the recommendation of IDWs board of
directors with respect to adopting the merger agreement and
approving the merger, IDW stockholders should be aware that
certain IDW directors and executive officers have interests in
the merger that are different from, or in addition to, their
interests as IDW stockholders. These interests create a
potential conflict of interest. IDWs board of directors
was aware of these potential conflicts of interest during its
deliberations on the merits of the merger and in making its
decision in approving the merger, the merger agreement and the
related transactions.
50
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Indemnification and Insurance |
The merger agreement provides that IDW, as the surviving
corporation in the merger, will observe, to the fullest extent
permitted by Delaware law, all rights of persons who were
present or former directors, officers, employees or agents of
IDW before the effective time of the merger to indemnification,
advancement of expenses and exculpation for acts and omissions
as directors, officers, employees or agents of IDW occurring
before the effective time of the merger, as provided in the IDW
certificate of incorporation and bylaws (as in effect on
September 4, 2006) and in indemnification agreements (as in
effect on September 4, 2006 and identified in the merger
agreement).
The merger agreement further provides that IDW, as the surviving
corporation in the merger, will fulfill any obligations pursuant
to the IDW certificate of incorporation, bylaws and any
indemnification agreement in effect on September 4, 2006,
and will indemnify and hold harmless, to the fullest extent
permitted by Delaware law, persons who were present or former
directors, officers, employees and agents of IDW before the
effective time of the merger.
In addition, the merger agreement provides that, for a period of
six years after the effective time of the merger, IDW, as the
surviving corporation in the merger, will maintain in effect its
existing directors and officers liability insurance
policy as of September 4, 2006, or a policy of comparable
coverage, for the benefit of the persons who were present or
former directors, officers, employees or agents of IDW before
the effective time of the merger with respect to their acts or
omissions as directors, officers, employees or agents of IDW
prior to the effective time of the merger. If the annual
premiums payable for such insurance coverage exceed 200% of the
annual premium paid by IDW for the existing policy in effect as
of September 4, 2006, the surviving corporation may reduce
the amount of coverage to the maximum coverage reasonably
procurable for a premium equal to that amount.
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IDW Options and Restricted Stock Held by Directors and
Executive Officers |
IDWs equity incentive plans provide for the acceleration
of all unvested options and unvested shares of restricted stock
in connection with the merger. In accordance with the terms of
IDWs equity incentive plans, IDW will cancel all options
that are unexpired, unexercised and outstanding at the effective
time of the merger, and IDW will pay to the holder of each such
option an amount of cash equal to the excess, if any, of
(a) the final exchange ratio multiplied by the closing
price of Flextronicss ordinary shares on the Nasdaq Global
Select Market on the last trading day immediately prior to the
date of closing of the merger, over (b) the applicable
exercise price of such stock option. Immediately prior to the
effective time of the merger, IDWs equity incentive plans
will be terminated.
The members of IDWs board of directors are: Ronald A.
Cohan, Mark A. Christensen, Glenn E. Neland, D. Paul Regan and
Thomas A. Lacey. Mr. Lacey, who is Chairman of the Board,
is also IDWs Chief Executive Officer. As of
September 4, 2006, Mr. Cohan held 35,000 options, all
of which were vested, and Messrs. Christensen, Neland and
Regan each held 30,000 options, all of which were vested.
Assuming an exchange ratio of
0. (using
an average Flextronics closing price of
$ ,
which was the closing price of Flextronicss ordinary
shares on the Nasdaq Global Select Market on the last trading
day prior to the printing of this document), Messrs. Cohan,
Christensen, Neland and Regan would be entitled to receive a
cash payment for their IDW options upon consummation of the
merger which equals in the
aggregate .
IDWs executive officers are Thomas A. Lacey, Jeffrey G.
Winzeler, IDWs Chief Operating Officer, Joseph Bedewi,
IDWs Chief Financial Officer and Alan M. Lefko, IDWs
Vice President of Finance and Corporate Secretary. As of
September 4, 2006, Mr. Lacey held 1,000,000 options,
of which 750,000 were unvested; Mr. Winzeler held 150,000
options, of which 125,000 were unvested; Mr. Bedewi held
75,000 options, of which 75,000 were unvested; and
Mr. Lefko held 45,000 options, of which 17,500 were
unvested. Assuming an exchange ratio of
0. (using
an average Flextronics closing price of
$ ,
which was the closing price of Flextronicss ordinary
shares on the Nasdaq Global Select Market on the last trading
day prior to the printing of this document), Messrs. Lacey,
Winzeler, Bedewi and Lefko would be entitled to receive a cash
payment for their IDW options upon consummation of the merger
which equals in the
aggregate .
51
Mr. Winzeler held 36,250 shares of IDW restricted
stock as of September 4, 2006, all of which were unvested.
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Executive Positions with Surviving Corporation |
Flextronics has not yet determined whether the IDW executive
officers will be employed by Flextronics following the
consummation of the merger. However, it is anticipated that
Mr. Lacey will hold a senior management position in
Flextronics following the merger.
On September 4, 2006, each of Joseph Bedewi, Mark A.
Christensen, Ronald A. Cohan, Thomas A. Lacey, Alan M. Lefko,
Glenn E. Neland, D. Paul Regan and Jeffrey G. Winzeler,
representing all of IDWs executive officers and directors,
entered into voting agreements with Flextronics. As of the
record date, IDWs executive officers and directors owned
in the
aggregate shares
of IDW common stock and vested options that if exercised would
represent an
additional shares
of IDW common stock.
Pursuant to the voting agreements, IDWs executive officers
and directors agreed: (i) to vote their shares of IDW
common stock in favor of the adoption of the merger agreement
and approval of the merger; and (ii) to not dispose of any
shares of IDW common stock they hold before the earlier of the
termination of the merger agreement or the consummation of the
merger. See The Voting Agreements
beginning on page 70 of this proxy statement/ prospectus.
Material United States Federal Income Tax Consequences of the
Merger
The following is a summary of the material United States federal
income tax consequences of the merger applicable to a holder of
shares of IDW common stock that receives Flextronics ordinary
shares in the merger. This discussion is based upon the Code,
Treasury Regulations, judicial authorities, published positions
of the Internal Revenue Service, and other applicable
authorities, all as currently in effect and all of which are
subject to change or differing interpretations (possibly with
retroactive effect). This discussion is limited to United States
persons that hold their shares of IDW common stock as capital
assets for United States federal income tax purposes (generally,
assets held for investment). As used in this section, a
United States person is a citizen or resident of the
United States, a corporation (or other entity treated as a
corporation for United States federal income tax purposes)
organized under the laws of the United States or any State or
the District of Columbia; an estate the income of which is
subject to United States federal income taxation regardless of
its source, or a trust (other than a grantor trust) if
(i) a court within the United States is able to exercise
primary supervision over the administration of the trust, and
(ii) one or more United States persons have the authority
to control all substantial decisions of the trust.
This discussion does not address all of the tax consequences
that may be relevant to particular IDW stockholders in light of
their individual investment circumstances, including persons
receiving payment for terminated options, or persons who have
acquired IDW stock upon the exercise of stock options or
pursuant to other compensatory arrangements, and other IDW
stockholders that are subject to special treatment under United
States federal income tax laws. Such stockholders would also
include, for example, stockholders who are not United States
persons, insurance companies, tax-exempt organizations,
financial institutions, investment companies, broker-dealers,
domestic shareholders whose functional currency is
not the United States dollar, and stockholders who hold IDW
stock as part of a hedge, straddle, constructive sale or
conversion transaction. This discussion does not discuss the tax
consequences of transactions effectuated prior or subsequent to,
or concurrently with, the merger, whether or not in connection
with the merger. In addition, this discussion does not address
the tax consequences of the merger under state, local, or
foreign tax laws. No ruling has been or will be sought from the
Internal Revenue Service regarding the tax consequences of the
merger, and no assurance can be given that the Internal Revenue
Service would not assert, or that a court would not sustain, a
position contrary to any of the tax consequences set forth below.
Flextronicss obligation to complete the merger is
conditioned upon its receipt at closing of a tax opinion from
Curtis, Mallet-Prevost, Colt & Mosle LLP that the
merger will qualify as a reorganization within the
52
meaning of Section 368(a) of the Code. IDWs
obligation to complete the merger is conditioned upon its
receipt at closing of a tax opinion from Bullivant Houser
Bailey, PC that the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the Code; provided that if Bullivant
Houser Bailey, PC fails to render such opinion, the condition to
IDWs obligation to complete the merger nonetheless will be
deemed satisfied if Curtis, Mallet-Prevost, Colt &
Mosle LLP renders such opinion to IDW. These opinions will be
based on the truth and accuracy of certain factual
representations and covenants made by Flextronics and IDW
(including those contained in tax representation letters to be
provided by Flextronics and IDW at the time of closing), and on
customary factual assumptions, limitations and qualifications.
The tax opinions are not binding on the Internal Revenue Service
or any court and do not preclude the Internal Revenue Service
from asserting, or a court from sustaining, a contrary
conclusion.
The following material United States federal income tax
consequences will result from qualification of the merger as a
reorganization within the meaning of
Section 368(a) of the Code:
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an IDW stockholder will not recognize any gain or loss upon the
receipt of Flextronics ordinary shares in exchange for IDW
common stock in connection with the merger, except with respect
to cash received in lieu of a fractional Flextronics ordinary
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an IDW stockholder will have an aggregate tax basis in the
Flextronics ordinary shares received in the merger (including a
fractional share deemed received and redeemed as described
below) equal to the stockholders aggregate tax basis in
its shares surrendered pursuant to the merger, reduced by the
portion of the stockholders tax basis in its shares
surrendered in the merger that is allocable to a fractional
Flextronics ordinary share. If an IDW stockholder acquired any
of its shares of IDW common stock at different prices or at
different times, Treasury Regulations provide guidance on how
such stockholder may allocate its tax basis to Flextronics
ordinary shares received in the merger. IDW stockholders that
hold multiple blocks of IDW common stock are urged to consult
their tax advisors regarding the proper allocation of their
basis among shares of Flextronics ordinary shares received under
the Treasury Regulations; |
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the holding period of the Flextronics ordinary shares received
by an IDW stockholder in connection with the merger (including a
fractional Flextronics ordinary share deemed received and
redeemed) will include the holding period of the IDW common
stock surrendered in connection with the merger; and |
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cash received by an IDW stockholder in lieu of a fractional
Flextronics ordinary share in the merger will be treated as if
such fractional share had been issued in connection with the
merger and then redeemed by Flextronics, and an IDW stockholder
will generally recognize capital gain or loss with respect to
such cash payment, measured by the difference between the amount
of cash received and the tax basis in such fractional share. Any
capital gain will be long-term capital gain if, as of the date
of the merger, the shareholders holding period in IDW
stock is greater than one year. |
Any IDW stockholder who will own 5% or more of either the total
voting power or total value of Flextronicss ordinary
shares after the merger (taking into account ownership under
applicable attribution rules) is subject to additional
requirements to avoid recognizing gain on the merger. Any such
stockholder should consult its tax advisor.
Treatment of Flextronics, Granite and IDW. No gain or
loss will be recognized by Flextronics, Granite or IDW as a
result of the merger.
Neither Flextronics nor IDW will request a ruling from the
Internal Revenue Service regarding the tax consequences of the
merger to IDW stockholders. The closing tax opinions do not bind
the Internal Revenue Service and do not prevent the Internal
Revenue Service from successfully asserting a contrary opinion.
In addition, if any of the representations or assumptions upon
which the closing tax opinions are based are inconsistent with
the actual facts, the tax consequences of the merger could be
adversely affected.
Backup Withholding. Any cash payments to IDW stockholders
in connection with the merger may be subject to backup
withholding at a rate of 28% on a holders receipt of cash,
unless such holder furnishes a correct taxpayer identification
number and certifies that he or she is not subject to backup
withholding. Any
53
amount withheld under the backup withholding rules will
generally be allowed as a refund or credit against the
holders U.S. federal income tax liability, provided
the required information is furnished to the Internal Revenue
Service.
HOLDERS OF SHARES OF IDW COMMON STOCK ARE URGED TO CONSULT
THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, AS WELL AS THE EFFECTS OF STATE,
LOCAL, AND FOREIGN TAX LAWS.
Singapore Tax Considerations
This summary is of a general nature and is included herein
solely for informational purposes. It is not intended to be, nor
should it be construed as being, legal or tax advice. No
representation regarding the consequences to any particular
holder of ordinary shares is made. This summary of Singapore tax
considerations is based on current law, which is subject to
change, possibly on a retroactive basis, and is provided for
general information. These discussions do not purport to deal
with all aspects of taxation that may be relevant to particular
stockholders in light of their investment or tax circumstances,
or to certain types of stockholders (including insurance
companies, tax-exempt organizations, U.S. stockholders who
actually or constructively own 10% or more of the total combined
voting power of all of Flextronics outstanding shares,
regulated investment companies, partnerships or other pass
through entities or investors in such entities, financial
institutions or broker-dealers, expatriates and shareholders
that are not U.S. stockholders subject to special treatment
under the U.S. federal income tax laws). Stockholders
should consult their own tax advisors regarding the particular
tax consequences to such stockholders of any investment in
Flextronicss ordinary shares. In this summary, references
to S$ are to Singapore dollars.
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Income Taxation Under Singapore Law |
Under current provisions of the Income Tax Act, Chapter 134
of Singapore, corporate profits are taxed at a rate equal to 20%
with effect from the year of assessment 2005. In addition, 75%
of up to the first S$10,000, and 50% of up to the next S$90,000
of a companys chargeable income (other than Singapore
dividends received by the company) will be exempt from corporate
tax.
Singapore does not impose withholding tax on dividends. Prior to
January 1, 2003, Singapore applied a full imputation system
to all dividends (other than exempt dividends) paid by a
Singapore resident company. With effect from January 1,
2003, tax on corporate profits is final and dividends paid by a
Singapore resident company will be tax exempt in the hands of a
stockholder, whether or not the stockholder is a company or an
individual and whether or not the stockholder is a Singapore
resident. However, if the resident company was previously under
the imputation system and has unutilized dividend franking
credits as at December 31, 2002, there will be a
5-year transition
period from January 1, 2003 to December 31, 2007,
during which a company may remain on the imputation system.
Dividends declared by non-resident companies are not subject to
the imputation system.
Under current Singapore tax law there is no tax on capital
gains, and, thus, any profits from the disposal of shares are
not taxable in Singapore unless the gains arising from the
disposal of ordinary shares is construed to be of an income
nature and subject to tax, especially if they arise from
activities which Inland Revenue Authority of Singapore regards
as the carrying on of a trade or business in Singapore (in which
case, the disposal profits would be taxable as trade profits
rather than capital gains).
There is no stamp duty payable in respect of the holding of
ordinary shares. No duty is payable on the acquisition of new
ordinary shares. Where existing shares are acquired in
Singapore, stamp duty is payable on the instrument of transfer
of the ordinary shares at the rate of S$2 for every S$1,000 of
the market value of the ordinary shares. The stamp duty is borne
by the purchaser unless there is an agreement to the contrary.
Where the instrument of transfer is executed outside of
Singapore, stamp duty must be paid if the instrument of transfer
is received in Singapore. Under Article 22(iii) of
Flextronicss Articles of Association, Flextronicss
directors are authorized to refuse to register a transfer unless
the instrument of transfer has been duly stamped. If the
proposed amendments to Flextronicss Articles of
Association are approved at Flextronicss 2006 annual
general meeting of shareholders, Article 22 will be
modified to provide that Flextronicss board of directors
are
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authorized to refuse to register any instrument of transfer of
shares unless such instrument is accompanied by a certificate of
payment of stamp duty (if any).
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Singapore Estate Taxation |
In the case of an individual who is not domiciled in Singapore
and who died before January 1, 2002, a Singapore estate tax
is imposed on the value of all movable and immovable properties
situated in Singapore. Flextronicss ordinary shares are
considered to be movable property situated in Singapore. Thus,
an individual stockholder who is not domiciled in Singapore at
the time of his or her death before January 1, 2002 will be
subject to Singapore estate tax on the value of any such
ordinary shares held by the individual upon the
individuals death. Such a stockholder will be required to
pay Singapore estate tax to the extent that the value of the
ordinary shares (or in aggregate with any other assets subject
to Singapore estate tax) exceeds S$600,000. Any such excess will
be taxed at a rate equal to 5% on the first S$12,000,000 of the
individuals Singapore chargeable assets and thereafter at
a rate equal to 10%. If an individual who is not domiciled in
Singapore dies on or after January 1, 2002, no estate duty
is payable on his moveable property in Singapore.
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Tax Treaties Regarding Withholding Taxes |
There is no reciprocal income tax treaty between the United
States and Singapore regarding withholding taxes on dividends
and capital gains.
Accounting Treatment of the Merger
In accordance with United States generally accepted accounting
principles, Flextronics will account for the merger using the
purchase method of accounting. Under this method of accounting,
Flextronics will record the market value (based on an average of
the closing prices of Flextronicss ordinary shares for a
range of trading days from a few days before and after
September 5, 2006, the announcement date) of its ordinary
shares issued in connection with the merger, the amount of cash
consideration to be paid to holders of IDW common stock, and the
amount of direct transaction costs associated with the merger as
the estimated purchase price of acquiring IDW. Flextronics will
allocate the estimated purchase price to the net tangible and
amortizable intangible assets acquired (including developed and
core technology and patents, advertiser contracts and lists, and
affiliate agreements), based on their respective fair values at
the date of the completion of the merger. Any excess of the
estimated purchase price over those fair values will be
accounted for as goodwill.
Intangible assets, other than goodwill and indefinite-lived
intangible assets, if any, will be amortized over their
estimated useful lives. Goodwill resulting from the business
combination will not be amortized but instead will be tested for
impairment at least annually (more frequently if certain
indicators are present).
In the event that the management of the combined company
determines that the value of goodwill has become impaired, the
combined company will incur an accounting charge for the amount
of impairment during the fiscal quarter in which the
determination is made.
Effect of the Merger on IDW Stock Option Plans
IDWs equity incentive plans provide for the acceleration
of all unvested options and unvested shares of restricted stock
in connection with the merger. In accordance with the terms of
IDWs equity incentive plans, IDW will cancel all options
that are unexpired, unexercised and outstanding at the effective
time of the merger, and IDW will pay to the holder of each such
option an amount of cash equal to the excess, if any, of
(a) the final exchange ratio multiplied by the closing
price of Flextronicss ordinary shares on the Nasdaq Global
Select Market on the last trading day immediately prior to the
date of closing of the merger, over (b) the applicable
exercise price of such stock option. Immediately prior to the
effective time of the merger, IDWs equity incentive plans
will be terminated. See Interests of
IDWs Directors and Executive Officers in the Merger
beginning on page 50.
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Regulatory Filings and Approvals Required to Complete the
Merger
Under the HSR Act and related rules, Flextronics and IDW may not
complete the merger until the expiration of a
30-day waiting period
following the filing of notification reports with the DOJ and
the FTC by Flextronics and IDW, which each party made
on ,
2006, unless a request for additional information or documents
is received from the FTC or the DOJ or unless early termination
of the waiting period is granted. If, within the initial
30-day waiting period,
either the DOJ or the FTC requests additional information or
documents concerning the merger, then the waiting period will be
extended until the 30th calendar day after the date of
substantial compliance with the request by both parties, unless
earlier terminated by the FTC or the DOJ.
Flextronics and IDW may not complete the merger until they
notify, furnish information to, and, where applicable, obtain
clearance from competition authorities in China, Brazil,
Austria, Germany and Ukraine.
Although Flextronics and IDW expect to obtain all of these
regulatory approvals, there can be no assurance that Flextronics
and IDW will obtain the regulatory approvals necessary or that
the granting of these regulatory approvals will not involve the
imposition of conditions on the completion of the merger or
require changes to the terms of the merger. These conditions or
changes could require the grant of a complete or partial
license, a divestiture or spin-off, or the holding separate of
assets or businesses and, if such required actions are not
immaterial, could result in the conditions to Flextronicss
obligation to complete the merger not being satisfied.
In addition, at any time before or after the completion of the
merger, the DOJ, the FTC or others could take action under the
antitrust laws, including seeking to prevent the merger, to
rescind the merger or to conditionally approve the merger upon
the divestiture by IDW or Flextronics of substantial assets. In
addition, in some jurisdictions, a competitor, customer or other
third party could initiate a private action under the antitrust
or other laws challenging or seeking to enjoin the merger,
before or after it is completed.
Delisting and Deregistration of IDW Common Stock After the
Merger
When the merger is completed, IDW common stock will be delisted
from the Nasdaq Global Market and deregistered under the
Exchange Act. In addition, IDW will cease to be a reporting
company under the Exchange Act.
Restrictions on Sales of Flextronics Ordinary Shares Received
in the Merger
The Flextronics ordinary shares to be issued in connection with
the merger will be registered under the Securities Act and will
be freely transferable, except for Flextronics ordinary shares
issued to any person who is deemed to be an
affiliate of IDW prior to the merger. Persons who
may be deemed to be affiliates of IDW prior to the
merger include individuals or entities that control, are
controlled by, or are under common control of IDW, prior to the
merger, and may include officers and directors, as well as
principal stockholders of IDW, prior to the merger. Affiliates
of IDW will be notified separately of their affiliate status.
Persons who may be deemed to be affiliates of IDW prior to the
merger may not sell any Flextronics ordinary shares received by
them in connection with the merger except pursuant to:
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an effective registration statement under the Securities Act
covering the resale of those shares; |
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an exemption under paragraph (d) of Rule 145
under the Securities Act; or |
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any other applicable exemption under the Securities Act. |
Flextronicss registration statement on
Form S-4, of which
this proxy statement/ prospectus forms a part, does not cover
the resale of shares of Flextronics ordinary shares to be
received in connection with the merger by persons who may be
deemed to be affiliates of IDW prior to the merger.
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No Appraisal Rights
Under Delaware law, IDW stockholders will not have appraisal
rights pursuant to the merger and the other transactions
contemplated by the merger agreement because IDW common stock
was listed on the Nasdaq Global Market on the record date for
the determination of IDW stockholders entitled to notice of, and
to vote at the special meeting of IDWs stockholders.
THE MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement. This summary does not purport to describe all
the terms of the merger agreement and is qualified by reference
to the complete merger agreement which is attached as
Annex A to this proxy statement/ prospectus and
incorporated herein by reference. We urge you to read carefully
the full text of the merger agreement.
Explanatory Note Regarding Summary of Merger Agreement
and Representations and Warranties in the Merger Agreement
The summary of the terms of the merger agreement is intended to
provide information about the terms of the merger. Except for
its status as a legal document governing the contractual rights
among the parties thereto in relation to the proposed merger and
the other transactions contemplated thereby, the merger
agreement is not intended to be a source of factual or
operational information about Flextronics, IDW or their
respective businesses. The representations and warranties
contained in the merger agreement are not necessarily accurate
or complete as made and may be subject to exceptions set forth
in the disclosure schedules provided in accordance with the
merger agreement. Such representations, warranties and covenants
have been negotiated by IDW and Flextronics for the purpose of
allocating contractual risk between the parties, including where
the parties do not have complete knowledge of all the facts, and
not for the purpose of establishing matters as facts. In
particular, the representations and warranties made by the
parties to each other in the merger agreement have been
negotiated between the parties with the principal purpose of
setting forth their respective rights with respect to their
obligation to close the merger should events or circumstances
change or be different from those stated in the representations
and warranties. Matters may change from the state of affairs
contemplated by the representations and warranties. The
representations and warranties also may be subject to a
contractual standard of materiality different from those
generally applicable to investors. Flextronics and IDW will
provide additional disclosure in their public reports to the
extent that they are aware of the existence of any material
facts that are required to be disclosed under U.S. federal
securities law and that might otherwise contradict the terms and
information contained in the merger agreement and will update
such disclosure as required by federal securities laws.
Investors are not third-party beneficiaries under the merger
agreement and any stockholder of IDW or shareholder of
Flextronics or any potential investor should not rely on the
representations, warranties and covenants therein or any
descriptions thereof as characterizations of the actual state of
facts or condition of the parties or any of their affiliates.
Structure of the Merger
Under the merger agreement, Granite Acquisition Corp., a
wholly-owned subsidiary of Flextronics, will merge with and into
IDW, with IDW continuing as the surviving corporation. As a
result of the merger, IDW will become a wholly-owned subsidiary
of Flextronics. The merger agreement also provides that the
directors of Granite Acquisition Corp. at the effective time of
the merger will be the directors of the surviving corporation,
and the officers of Granite Acquisition Corp. will be the
officers of the surviving corporation, until, in each case,
their respective successors are duly elected or appointed and
qualified in accordance with applicable law.
Completion and Effectiveness of the Merger
Flextronics and IDW will complete the merger when all of the
conditions to completion of the merger contained in the merger
agreement described in the section entitled
Conditions to Completion of the Merger
beginning on page 66 of this proxy statement/ prospectus
are satisfied or waived, including adoption
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of the merger agreement and approval of the merger by the
stockholders of IDW. The merger will become effective upon the
filing of a certificate of merger with the Secretary of State of
the State of Delaware.
Flextronics and IDW are working to complete the merger as
quickly as possible. Flextronics and IDW currently plan to
complete the merger during the fourth calendar quarter of 2006.
However, because completion of the merger is subject to various
conditions, Flextronics and IDW cannot predict the exact timing
of the merger or whether the merger will occur at all.
Conversion of IDW Common Stock in the Merger
Upon completion of the merger, each share of IDW common stock
outstanding immediately prior to the effective time of the
merger will be canceled and extinguished and automatically
converted into the right to receive a fraction of a Flextronics
ordinary share (such fraction is referred to as the exchange
ratio) upon surrender of the certificate representing such share
of IDW common stock in the manner provided in the merger
agreement. The exchange ratio will be calculated using the
average daily closing price for Flextronicss ordinary
shares during the 20 consecutive trading days ending on the
fifth trading day immediately preceding the closing of the
merger, which is referred to in this description as the average
Flextronics closing price. If the average Flextronics closing
price is:
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equal to or greater than $10.5606 and equal to or less than
$12.9074, the exchange ratio will be equal to $6.55 divided by
the average Flextronics closing price; |
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greater than $12.9074 and equal to or less than $13.4941, the
exchange ratio will be fixed at 0.5075; |
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greater than $13.4941, the exchange ratio will be equal to $6.85
divided by the average Flextronics closing price; or |
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less than $10.5606, the exchange ratio will be fixed at 0.6202. |
If the average Flextronics closing price is less than $9.9739,
IDW may elect to terminate the merger agreement by delivering a
walk-away notice to Flextronics. However, such termination will
not be effective if Flextronics, upon receipt of a walk-away
notice, elects to increase the exchange ratio to equal $6.19
divided by the average Flextronics closing price. Flextronics
and IDW plan to issue a joint press release one day prior to the
IDW special meeting setting forth the anticipated average
Flextronics closing price and the exchange ratio calculation.
The exchange ratio also will be adjusted to reflect the effect
of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities
convertible into Flextronics ordinary shares or IDW common
stock), reorganization, recapitalization, reclassification or
other like change with respect to Flextronics ordinary shares or
IDW common stock having a record date on or after
September 4, 2006, and prior to completion of the merger.
Based on an assumed exchange ratio of
0. (calculated by using an average
Flextronics closing price of
$ . ,
which was the closing price for Flextronics ordinary
shares
on ,
2006, the last trading day prior to the printing of this proxy
statement/prospectus) and the number of shares of IDW common
stock outstanding as of the record date, a total of
approximately Flextronics
ordinary shares would be issued in connection with the merger to
holders of IDW common stock. Please note that this number may
change based on the actual average Flextronics closing price,
which will determine the exchange ratio in accordance with the
formula set forth above.
Fractional Shares
Flextronics will not issue any fractional shares in connection
with the merger. Instead, each holder of IDW common stock
exchanged in connection with the merger who would otherwise be
entitled to receive a fraction of an ordinary share of
Flextronics will receive cash, without interest, in an amount
equal to the fraction multiplied by the average Flextronics
closing price.
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Exchange of IDW Common Stock; Distributions on Flextronics
Shares
Prior to the effective time of the merger, Flextronics will
appoint an exchange agent to handle the exchange of IDW stock
certificates or uncertificated shares of IDW common stock for
ordinary shares of Flextronics (which shares will be in
uncertificated form unless a physical certificate is requested
by such holder) and the payment of cash for fractional shares.
Promptly after the effective time of the merger, the exchange
agent will send a letter of transmittal, which is to be used to
exchange IDW stock certificates or uncertificated shares of IDW
common stock for ordinary shares of Flextronics, to each former
IDW stockholder. The letter of transmittal will contain
instructions explaining the procedure for surrendering IDW stock
certificates or transferring uncertificated IDW common stock.
IDW stockholders who surrender their stock certificates,
together with a properly completed letter of transmittal, or
transfer their uncertificated shares of IDW common stock, will
receive (1) ordinary shares of Flextronics (which shares
will be in uncertificated book-entry form unless a physical
certificate is requested by such holder) into which the shares
of IDW common stock were converted in the merger, and
(2) cash in lieu of any fractional shares. After the
effective date of the merger, each certificate or uncertificated
share that previously represented shares of IDW common stock
will only represent the right to receive the ordinary shares of
Flextronics (and cash in lieu of fractions thereof) into which
those shares of IDW common stock have been converted.
After the completion of the merger, Flextronics will not pay any
dividends or other distributions with a record date after the
effective time of the merger to any holder of any IDW stock
certificates or uncertificated shares of IDW common stock until
the holder surrenders the IDW stock certificates or transfers
the uncertificated shares of IDW common stock. However, once
those certificates are surrendered or those uncertificated
shares are transferred, Flextronics will pay to the holder,
without interest, (1) the amount of any dividends or other
distributions with a record date after the effective date of the
merger previously paid or payable on the date of such surrender
with respect to such securities, and (2) at the appropriate
payment date, the amount of dividends or other distributions
with a record date after the effective time of the merger and
prior to surrender or transfer and with a payment date
subsequent to surrender or transfer payable with respect to such
securities.
Holders of IDW common stock should not send in their IDW
stock certificates until they receive a letter of transmittal
from the exchange agent for the merger, with instructions for
the surrender of IDW stock certificates.
Transfers of Ownership and Lost Stock Certificates
Flextronics will issue (i) Flextronics ordinary shares,
(ii) cash in lieu of fractional shares, and (iii) any
dividends or distributions that may be payable in a name other
than the name in which a surrendered IDW stock certificate is
registered only if the person requesting such exchange presents
to the exchange agent all documents required to show and effect
the unrecorded transfer of ownership and to show that such
person paid any applicable stock transfer taxes. If an IDW stock
certificate is lost, stolen or destroyed, the holder of such
certificate may need to deliver an affidavit or bond prior to
receiving the merger consideration payable with respect to such
stock.
Representations and Warranties
The merger agreement contains a number of representations and
warranties with respect to IDW and Flextronics. The
representations and warranties are subject, in some cases, to
specified exceptions and qualifications.
Flextronics and IDW have made similar representations and
warranties relating to the following matters:
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corporate organization, power and authority; |
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corporate authority to enter into, and complete the transactions
under, the merger agreement; and enforceability of the merger
agreement; |
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absence of any conflict or violation of the charter documents,
legal requirements or contracts as a result of the merger; |
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regulatory approvals required to complete the merger; |
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outstanding shares, options, warrants and convertible securities; |
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information supplied for inclusion in this proxy statement/
prospectus; |
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filings with the SEC, financial statements, internal controls
over financial reporting and disclosure controls and procedures; |
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brokers and finders fees owed in connection with the
merger; |
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compliance with laws; and |
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the absence of certain legal proceedings. |
IDW has made additional representations and warranties relating
to the following matters:
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corporate organization, power and capitalization of its
subsidiaries; |
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the unanimous approval by its board of directors of the merger
agreement and the transactions contemplated by the merger
agreement; |
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the absence of undisclosed material liabilities; |
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the absence of certain changes to IDW or its subsidiaries or
events not in the ordinary course consistent with past practices
since October 31, 2005 through the date of the merger
agreement; |
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the filing of required tax returns, payment of taxes, the
absence of tax audits and certain other tax matters; |
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title to the assets it owns and validity of its leases; |
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its intellectual property and the non-infringement of the
intellectual property of others; |
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governmental authorizations; |
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its compliance with environmental laws, its hazardous materials
activities and its environmental liabilities; |
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the absence of related party transactions; |
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its employee benefit plans and related matters; |
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material contracts to which IDW or any of its subsidiaries is a
party; |
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its insurance; |
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its customers, suppliers, warranties and product returns; |
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the opinion received from its financial advisor as to fairness
to the IDW stockholders, from a financial point of view, of the
exchange ratio; and |
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actions related to anti-takeover statutes. |
IDWs Conduct of Business Before Completion of the
Merger
Under the merger agreement, IDW has agreed that, until the
earlier of the completion of the merger or termination of the
merger agreement, IDW and each of its subsidiaries will carry on
their business in the usual, regular and ordinary course, in
substantially the same manner as previously conducted, and in
compliance with all applicable laws and regulations, pay their
debts and obligations when due, subject to good faith disputes
over such debts and obligations, and use all reasonable efforts
consistent with past practice to preserve intact their present
business organization and employee base and preserve their
relationships with
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customers, suppliers, licensors, licensees and others with which
they have business dealings. Under the merger agreement, IDW
also has agreed that, until the earlier of the completion of the
merger or termination of the merger agreement, or unless
Flextronics consents in writing, it will not (and will not
permit its subsidiaries to), subject to specified exceptions:
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enter into a new line of business; |
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adopt or propose any change to its certificate of incorporation
or bylaws; |
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declare or pay dividends or make any other distributions in
respect of any capital stock, or effect any stock splits,
combinations or reclassifications or authorize the issuance of
any other securities in respect of its capital stock; |
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purchase, redeem or otherwise acquire any shares of IDW capital
stock or the capital stock of any subsidiary; |
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issue, sell, transfer, pledge, redeem, accelerate rights under,
dispose of or encumber any shares of IDW capital stock or any
options, warrants, convertible securities or other rights of any
kind to acquire any shares of IDW capital stock, or any other
ownership interest in IDW or any of its subsidiaries, other than
the issuances of shares pursuant to the exercise of outstanding
stock options; |
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acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity or voting interest in or all or
substantially all the assets of, or by any other manner, any
business or other entity or division; |
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except for purchases of inventory in the ordinary course of
business consistent with past practice, acquire or agree to
acquire any assets that are material, individually or in the
aggregate, to the business of IDW and its subsidiaries, or in
any event, for consideration in excess of $250,000; |
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enter into any agreement with respect to the formation of any
joint ventures, strategic partnerships or alliance; |
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sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the
aggregate, to the business of IDW and its subsidiaries, for
consideration in excess of $500,000, except for the sale or
license of current IDW products in the ordinary course of
business consistent with past practice; |
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effect any material restructuring activities by IDW or any of
its subsidiaries with respect to their employees; |
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make any loans, financings or investments in any other person or
entity, other than loans or investments by IDW or a wholly-owned
subsidiary to or in IDW or a wholly-owned subsidiary, employee
loans or advances for expenses in the ordinary course of
business consistent with past practice and in accordance with
applicable law, or extensions of credit or financing to
customers made in the ordinary course of business consistent
with past practice; |
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except as required by generally accepted accounting principles,
as concurred by IDWs independent auditors, make any change
in accounting methods or principles of accounting or revalue any
of its assets; |
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amend any material tax returns, make or change any material
election relating to taxes, adopt or change any material
accounting method relating to taxes, or settle, consent or enter
into any closing agreement relating to any audit or consent to
any waiver of the statutory period of limitations of any audit; |
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cancel, terminate or materially amend any material insurance
policy other than the renewal of existing policies; |
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commence or settle any lawsuit, proceeding or other
investigation, other than settlements entered into in the
ordinary course of business and only requiring IDW and its
subsidiaries to pay monetary |
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damages not exceeding $250,000 or involving ordinary course
collection claims for accounts receivable due and payable to IDW
and its subsidiaries; |
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except as required by legal requirements or pursuant to
contracts binding on IDW or its subsidiaries on the date of the
merger agreement: |
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increase in any manner the compensation or benefits of, or pay
or grant any bonus, change of control, severance or termination
pay to, any employees, service providers or directors of IDW or
its subsidiaries, other than increases or payments to
non-officer employees in the ordinary course and consistent with
past practice; |
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adopt or amend any employee benefit plan or make any
contributions, other than regularly scheduled contributions, to
any employee benefit plan; |
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except as provided in the merger agreement, accelerate, amend or
change the vesting or exercisability of options, reprice options
or authorize cash payments in exchange for options; |
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subject to certain exceptions, enter into, modify or amend any
management, employment, severance, separation, settlement,
consulting, contractor, change of control or other agreement or
contract with any employees or service providers; or |
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enter into any collective bargaining agreement; |
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enter into any agreement that would subject Flextronics or the
surviving company or their businesses to any non-compete,
most-favored nation, unpaid future deliverables rights,
exclusivity or other material restrictions; |
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provide any material refund, credit or rebate to any customer,
reseller or distributor other than in the ordinary course of
business consistent with past practice; |
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incur or guarantee any indebtedness in excess of $250,000, issue
or sell any debt securities or options, warrants or other rights
to acquire debt securities, enter into any keep well
or other agreement to maintain any financial statement condition
of another person, other than (i) in connection with the
financing of ordinary course trade payables consistent with past
practice, (ii) pursuant to existing credit facilities as in
effect on the date of the merger agreement, or (iii) loans,
investments, or guarantees by IDW or any of its subsidiaries to,
in or of its subsidiaries; |
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create or incur any lien on any material asset of IDW or any of
its subsidiaries; |
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enter into, modify or amend or terminate any material contract
or waive, release or assign any material rights under such
material contracts other than in the ordinary course of business
consistent with past practice; or |
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take or commit or agree to any of the foregoing actions. |
IDWs Covenant Against Soliciting Other Offers
Under the terms of the merger agreement, subject to limited
exceptions described below, IDW has agreed that none of it, any
of its subsidiaries or any of its or its subsidiaries
officers or directors will, and IDW will use all reasonable
efforts to cause IDWs affiliates, subsidiaries, agents and
representatives, including their investment bankers, attorneys
and accountants not to, directly or indirectly:
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solicit, initiate, or take any action that could reasonably be
expected to facilitate or encourage, the making, submission or
announcement of, any acquisition proposal, as described below; |
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enter into or participate in any discussions or negotiations
with any third party regarding any acquisition proposal; |
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furnish any non-public information to any third party regarding
any acquisition proposal; |
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cooperate in any manner with, or assist, participate in,
facilitate or encourage any effort by any third party concerning
the making of any proposal that constitutes or would reasonably
be expected to lead to, any acquisition proposal; |
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approve, endorse or recommend or make or authorize any public
statement, recommendation or solicitation in support of any
acquisition proposal; or |
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execute or enter into, or agree to execute or enter into, any
letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any
acquisition proposal or any transaction contemplated by such an
acquisition proposal. |
An acquisition proposal is any offer or proposal
relating to any transaction or series of related transactions
involving:
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any purchase from IDW or acquisition by any person or group of
more than a 20% interest in the total outstanding voting
securities of IDW or any of its subsidiaries; |
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any tender offer or exchange offer that if consummated would
result in any person or group beneficially owning 20% or more of
the total outstanding voting securities of IDW or any of its
subsidiaries; |
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any merger, consolidation, business combination or similar
transaction involving IDW or any of its subsidiaries; |
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any sale, lease outside the ordinary course of business,
exchange, transfer, license outside the ordinary course of
business, acquisition or disposition of more than 20% of the
assets of IDW (including its subsidiaries taken as a
whole); or |
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any liquidation or dissolution of IDW. |
Under the merger agreement, IDW agreed to cease, as of the date
of the merger agreement, all existing activities, discussions or
negotiations by IDW and its subsidiaries conducted to such date
with any third parties with respect to the consideration of any
acquisition proposal.
IDW is obligated to promptly, and in any event within
24 hours, notify Flextronics upon receipt of any
acquisition proposal or any request for non-public information
or inquiry that would reasonably be expected to lead to an
acquisition proposal or from any third party seeking to have
discussions or negotiations with IDW relating to a possible
acquisition proposal. Among other things, IDW must notify
Flextronics of the identity of the person or group making the
acquisition proposal, request or inquiry and the material terms
and conditions of the acquisition proposal, request or inquiry,
and must keep Flextronics informed as to the status of the
acquisition proposal, request or inquiry.
Notwithstanding the prohibitions contained in the merger
agreement with respect to acquisition proposals, if IDW receives
an unsolicited, bona fide written acquisition proposal that its
board of directors concludes in good faith, after consultation
with its outside legal counsel and its financial advisor, is, or
is reasonably likely to result in, an acquisition proposal that
constitutes a superior offer, as described below, then IDW may
furnish non-public information to, and engage in negotiations
with, the third party making the acquisition proposal, provided
that:
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IDW complies with the terms of the merger agreement relating to
acquisition proposals; |
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prior to furnishing non-public information or entering into any
negotiations or discussions with such third party, IDW enters
into a confidentiality agreement with the third party that
contains customary limitations on the use and disclosure of such
information and also contemporaneously furnishes Flextronics
with a copy of the information furnished to the potential third
party acquirer to the extent not previously furnished to
Flextronics; and |
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IDWs board of directors reasonably determines in good
faith, after consultation with its outside legal counsel, that
failure to do so would reasonably likely be expected to result
in a breach of its fiduciary duties to IDW stockholders under
applicable law. |
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An acquisition proposal will constitute a superior
offer if each of the following conditions is met:
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the acquisition proposal is an unsolicited bona fide acquisition
proposal (with the 20% thresholds in the definition
of acquisition proposal replaced with
50%) made by a third party; and |
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the acquisition proposal is on terms that the IDW board of
directors has in good faith concluded, after consultation with
its outside legal counsel and financial advisor, taking into
account, among other things, all legal, financial, regulatory
and other aspects of the offer and the third party making the
offer, to be more favorable to IDWs stockholders (in their
capacities as stockholders) than the terms of the merger and is
reasonably capable of being completed. |
IDWs Covenant that its Board of Directors Recommend the
Merger and Hold a Stockholders Meeting
IDW has agreed to take all action necessary to call, hold and
convene a meeting of its stockholders to consider the approval
of the merger, and to use reasonable efforts to solicit from its
stockholders proxies in favor of adopting and approving the
merger agreement and approving the merger, and to take all other
action necessary or advisable to secure the vote or consent of
its stockholders required by the Delaware General Corporation
Law to obtain such approvals. The IDW board of directors agreed
to recommend that IDW stockholders vote in favor of adopting the
merger agreement and approve the merger at the special meeting.
Notwithstanding IDWs board of directors obligations
described in the preceding paragraph, in response to a superior
offer, (i) the board of directors of IDW may withhold,
withdraw, amend or modify its recommendation to its stockholders
in favor of the merger and, in the case of a superior offer that
is a tender or exchange offer made directly to its stockholders,
may recommend that IDWs stockholders accept the tender or
exchange offer, (ii) the board of directors of IDW may
approve, endorse or recommend a superior offer, and
(iii) IDW or its subsidiaries may execute or enter into or
propose to execute or enter into any letter of intent or
agreement contemplating or relating to a superior offer, if all
of the following conditions are met:
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the board of directors of IDW has determined in good faith,
after consultation with its financial advisor and its outside
legal counsel, that a superior offer has been made and has not
been withdrawn; |
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the stockholders of IDW have not approved the merger agreement
in accordance with applicable law; |
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IDW has provided Flextronics, at least four business days prior
to publicly changing its recommendation, written notice of its
receipt of a superior offer and has disclosed in the notice the
most recent terms and conditions of the superior offer, the
identity of the third party or group making the superior offer,
and its intent to change its recommendation to its stockholders; |
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during the four business day period described above, IDW has
provided Flextronics with a reasonable opportunity to make
adjustments to the terms and conditions of the merger agreement
proposed by Flextronics and negotiated in good faith with
respect to such adjustments, to enable IDW to proceed with its
recommendation to the IDW stockholders in favor of the adoption
of the merger agreement and approval of the merger; |
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the board of directors of IDW has determined in good faith,
after consultation with its financial advisor, that the terms of
the superior offer are more favorable to the stockholders of IDW
than the merger (as it may be adjusted during the four day
period described above) and after consultation with its outside
legal counsel, that the failure of the board of directors to
change its recommendation would reasonably be expected to result
in a breach of its fiduciary duties to its stockholders under
applicable law; and |
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IDW has not breached any of the provisions in the merger
agreement relating to the special meeting of stockholders, the
recommendation of the board of directors and non-solicitation of
other acquisition proposals. |
Regardless of whether the board of directors of IDW has received
an acquisition proposal or has withheld, withdrawn, amended or
modified its recommendation to its stockholders to vote
FOR the proposal to adopt the merger
agreement and approve the merger, IDW is obligated under the
terms of the merger agreement to
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call, give notice of, convene and hold a special meeting of its
stockholders to consider and vote upon the proposal to adopt the
merger agreement and approve the merger unless IDW has entered
into a definitive binding agreement with respect to a superior
offer in compliance with its obligations described above in the
section entitled IDWs Covenant Against
Soliciting Other Offers beginning on page 62 of this
proxy statement/ prospectus and IDW has paid Flextronics the
termination fee described below in the section entitled
Payment of Termination Fee beginning on
page 69 of this proxy statement/ prospectus.
Notwithstanding the obligations described in the preceding
paragraphs, IDW and its board of directors may take and disclose
to its stockholders a position contemplated by
Rules 14a-9,
14d-9 and
14e-2(a) under the
Exchange Act. Without limiting the preceding sentence, the IDW
board of directors may not change its recommendation to
stockholders to vote in favor of adoption of the merger
agreement and approval of the merger except in accordance with
the procedures described in the preceding paragraphs.
Treatment of IDW Stock Options
IDWs equity incentive plans provide for the acceleration
of all unvested options and unvested shares of restricted stock
in connection with the merger. In accordance with the terms of
IDWs equity incentive plans, IDW will cancel all options
that are unexpired, unexercised and outstanding at the effective
time of the merger, and IDW will pay to the holder of each such
option an amount of cash equal to the excess, if any, of
(a) the final exchange ratio multiplied by the closing
price of Flextronicss ordinary shares on the Nasdaq Global
Select Market on the last trading day immediately prior to the
date of closing of the merger, over (b) the applicable
exercise price of such stock option. Immediately prior to the
effective time of the merger, IDWs equity incentive plans
will be terminated.
In connection with the termination of outstanding options, the
merger agreement requires IDW to take any actions necessary to
allow for the net share settlement of IDW options upon their
exercise, if such actions can be taken without adversely
effecting IDW and if effected in a manner approved by
Flextronics.
Director and Officer Indemnification and Insurance
The merger agreement provides that Flextronics will and will
cause the surviving company in the merger to fulfill and honor
IDWs obligations under any indemnification agreements with
its present and former directors and officers that existed on
the date of the merger agreement. In addition, Flextronics has
agreed to cause the surviving corporation to maintain in the
certificate of incorporation and bylaws of the surviving company
provisions relating to exculpation, indemnification and the
advancement of expenses that are at least as favorable to the
indemnified directors, officers, employees and agents as those
contained in IDWs organizational documents that were in
effect on the date of the merger agreement. Flextronics also has
agreed to indemnify present and former directors and officers of
IDW to the fullest extent permitted by applicable law for a
period of six years after the effective time of the merger and
to provide officers and directors liability
insurance covering such persons for acts and omissions occurring
prior to the effective time of the merger (subject to
limitations on increases in the premium).
Tax Matters
Each of Flextronics, Granite Acquisition Corp. and IDW agreed
that it will not, and will not permit any of its subsidiaries
to, take, or fail to take, any action prior to the closing of
the merger that would reasonably be expected to cause the merger
to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code.
Regulatory Filings
Flextronics and IDW have agreed to make all filings and
submissions required by any governmental entity in connection
with the merger and the other transactions contemplated by the
merger agreement including those filings or submissions required
under the HSR Act, as well as any other comparable merger
notification or control laws of any applicable jurisdiction, as
agreed by the parties.
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Reasonable Efforts and Further Actions
Subject to the provisions of the merger agreement, Flextronics
and IDW have agreed to use reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable to consummate
and make effective the merger and the other transactions
contemplated by the merger agreement. Notwithstanding the
foregoing, Flextronics shall not be required to divest any
business or agree to any material limitation on the conduct of
its business in order to effect the merger.
Conditions to Completion of the Merger
The obligations of Flextronics and IDW to complete the merger
are subject to the satisfaction or waiver of the following
conditions:
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the adoption of the merger agreement and approval of the merger
by IDW stockholders; |
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no statute, rule, regulation or other order having been enacted
or issued by a governmental entity of competent jurisdiction
which is in effect and has the effect of making the merger
illegal or otherwise prohibiting completion of the merger; |
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the effectiveness of a registration statement filed in
connection with the issuance of Flextronics ordinary shares in
the merger and no stop order proceedings suspending the
registration statement or this prospectus/proxy statement; |
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the expiration or termination of any applicable waiting periods
under the HSR Act with respect to the merger and the receipt of
any consents, waivers or approvals required under foreign merger
control regulations; and |
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Flextronics and IDW having each received from their respective
tax counsel an opinion to the effect that the merger will
constitute a reorganization within the meaning of
Section 368(a) of the Code. |
Flextronicss obligation to complete the merger is also
subject to the satisfaction or waiver by Flextronics of the
following additional conditions:
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IDWs representations and warranties being true and correct
in all material respects as of the date of the merger agreement
and as of the closing date (except those representations and
warranties which address matters only as of a particular date,
which must be true and correct as of that date); |
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the performance and compliance by IDW in all material respects
with all of its agreements and covenants required by the merger
agreement to be performed or complied with by it before
completion of the merger; |
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the absence of any change, event, development, violation,
inaccuracy, circumstance or effect which, individually or in the
aggregate, has had or would reasonably be expected to have a
material adverse effect on IDW; and |
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there being no pending or overtly threatened suit, action or
proceeding asserted by any governmental authority challenging or
seeking to restrain or prohibit the completion of the merger or
seeking to require Flextronics or IDW to divest any business or
agree to any material limitation on the conduct of its business
in order to effect the merger. |
IDWs obligation to complete the merger is also subject to
the satisfaction or waiver by IDW of the following additional
conditions:
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Flextronicss representations and warranties being true and
correct as of the date of the merger agreement and as of the
closing date (except those representations and warranties which
address matters only as of a particular date, which must be true
and correct as of that date), except as does not constitute a
material adverse effect on Flextronics on the closing date; |
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the performance and compliance by Flextronics in all material
respects with all of its agreements and covenants required by
the merger agreement to be performed or complied with by it
before completion of the merger; and |
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there being no pending or overtly threatened suit, action or
proceeding asserted by any governmental authority challenging or
seeking to restrain or prohibit the completion of the merger. |
Definition of Material Adverse Effect
Under the terms of the merger agreement, a material adverse
effect on either Flextronics or IDW is defined to mean any
change, event, violation, inaccuracy, circumstance or effect
(any such item, an Effect), individually or when taken together
with all other Effects that have occurred during the applicable
measurement period, that is or is reasonably likely to
(i) be materially adverse to the business, assets
(including intangible assets), capitalization, financial
condition or results of operations of such entity taken as a
whole with its subsidiaries or (ii) materially impede the
authority of such entity to consummate the transactions
contemplated by the merger agreement. However, under the terms
of the merger agreement, with respect to clause (i), any
Effect primarily and proximately resulting from the following
will not be taken into account in determining whether there has
been or will be, a material adverse effect on Flextronics or
IDW, as the case may be:
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changes in general economic or market conditions or Effects
affecting the industry generally in which such entity and its
subsidiaries operates, which changes do not disproportionately
affect such entity taken as a whole with its subsidiaries as
compared to other similarly situated participants in the
industry in which such entity and its subsidiaries operate; |
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changes in applicable law, United States generally accepted
accounting principles or international accounting standards; |
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acts of terrorism or war which do not disproportionately affect
such entity taken as a whole with its subsidiaries; |
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with respect to IDW, compliance with the express terms of the
merger agreement which require that IDW take actions in
furtherance of the transactions contemplated by the merger
agreement; |
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a failure to meet securities analysts published revenue or
earnings projections, which failure occurred in the absence of a
material deterioration in the business or financial condition of
such entity that would otherwise constitute a material adverse
effect; |
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the announcement or pendency of the merger agreement or the
proposed merger; or |
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any legal claims made or brought by any IDW stockholders or
other legal proceedings primarily and proximately arising out of
or related to the merger agreement or the proposed merger. |
In the case of IDW, there shall be deemed to have occurred a
material adverse effect in relation to IDW if IDW shall have
breached any representation, warranty, covenant or agreement or
if any of its representations and warranties shall have become
untrue that, individually or when taken together with all other
such breaches or such representations or warranties becoming
untrue, is or is reasonably likely to result in an adverse
financial impact of $2 million or more.
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Termination of the Merger Agreement
The merger agreement may be terminated in accordance with its
terms at any time prior to completion of the merger and, except
as provided below, whether before or after the requisite
approvals of the merger by IDW stockholders:
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by mutual written consent duly authorized by the boards of
directors of Flextronics and IDW; |
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by IDW or Flextronics: |
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if the merger is not completed by the date that is six months
from the date of the merger agreement, provided that either
party may extend such date by three months if the condition
requiring the obtaining of requisite regulatory approvals and
consents shall not have been satisfied, provided that this right
to terminate is not available to any party whose action or
failure to act was a principal cause of, or resulted in the
failure of, the merger to occur on or before such date and such
action or failure to act constitutes a breach of the merger
agreement (we refer to such six month anniversary date, as may
be extended to nine months, as the termination date of the
merger agreement); |
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if any governmental entity issues any order or takes any other
action having the effect of permanently restraining, enjoining
or prohibiting the completion of the merger; or |
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if the required vote of IDW stockholders is not obtained at a
duly convened meeting of stockholders, except that this right to
terminate is not available to IDW if IDWs action or
failure to act caused the failure to obtain the requisite vote
and such action or failure to act constitutes a breach of the
merger agreement; |
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by Flextronics, at any time prior to the adoption of the merger
agreement and approval of the merger by the required vote of IDW
stockholders, if any of the following triggering events occur
with respect to IDW: |
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its board of directors withdraws, amends or modifies, in a
manner adverse to Flextronics, its unanimous recommendation in
favor of the adoption of the merger agreement and approval of
the merger; |
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it fails to include in this proxy statement/ prospectus the
unanimous recommendation of its board of directors in favor of
the adoption of the merger agreement and approval of the merger; |
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its board of directors fails to reaffirm (publicly, if
Flextronics requests) its unanimous recommendation in favor of
adoption of the merger agreement and approval of the merger
within 10 business days after being requested in writing by
Flextronics to reaffirm such recommendation; |
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its board of directors fails to reject, or approves or
recommends any acquisition proposal described in the section
entitled IDWs Covenant Against
Soliciting Other Offers beginning on page 62 of this
proxy statement/ prospectus; |
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it enters into any letter of intent or similar document or any
agreement, contract or commitment accepting any superior offer,
following notice of such superior offer to Flextronics no later
than 24 hours after IDWs board of directors
determined, in good faith, after consultation with its outside
legal counsel and its financial advisors that the failure to
take such action with respect to the superior offer would
reasonably be expected to result in a breach of the board of
directors fiduciary duties to the stockholders of IDW
under applicable law, and during the five business days
following such notice, IDW provided Flextronics a reasonable
opportunity to make adjustments in the terms and conditions of
the merger agreement and negotiate in good faith to enable IDW
to proceed with the merger; |
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a tender or exchange offer relating to its securities is
initiated by a third party, and it does not send to its security
holders, pursuant to
Rule 14e-2
promulgated under the Securities and Exchange Act, within 10
business days after the tender or exchange offer is first
published, sent or given, a statement disclosing that its board
of directors recommends rejection of the tender or exchange
offer; |
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it materially breaches its non-solicitation obligations under
the merger agreement; |
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it breaches its obligations with respect to the recommendation
of its board of directors and holding a meeting of its
stockholders; or |
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its board of directors has resolved to do any of the above; |
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by IDW upon a breach of any representation, warranty, covenant
or agreement on the part of Flextronics in the merger agreement
or if any representation or warranty of Flextronics has become
untrue so that the condition to completion of the merger
regarding Flextronicss representations and warranties or
covenants would not be met, except if the breach or inaccuracy
is curable by Flextronics prior to the termination date of the
merger agreement, then IDW may not terminate the merger
agreement for 30 days after delivery of written notice from
IDW to Flextronics of the breach if such breach is cured during
those 30 days, or if IDW is otherwise in material breach of
the merger agreement; |
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by Flextronics upon a breach of any representation, warranty,
covenant or agreement on the part of IDW in the merger agreement
or if any representation or warranty of IDW has become untrue so
that the condition to completion of the merger regarding
IDWs representations and warranties or covenants would not
be met, except if the breach or inaccuracy is curable by IDW
prior to the termination date of the merger agreement, then
Flextronics may not terminate the merger agreement for
30 days after delivery of written notice from Flextronics
to IDW of the breach if such breach is cured during those
30 days, or if Flextronics is otherwise in material breach
of the merger agreement; |
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by IDW, if IDW enters into a binding definitive agreement with
respect to a superior offer in compliance with the rules
described in the section entitled IDWs
Covenant that its Board of Directors Recommend the Merger and
Hold a Stockholders Meeting beginning on page 64 of
this proxy statement/ prospectus and IDW has paid to Flextronics
the termination fee described below; |
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by Flextronics, if there has been, or any event has occurred
since the date of the merger agreement that would reasonably be
expected to have, a material adverse effect on IDW, and
(i) the material adverse effect is not reasonably capable
of being cured prior to the termination date of the merger
agreement, or (ii) the material adverse effect is not cured
prior to the earlier of the termination date and 30 days
following the receipt of written notice from Flextronics to IDW
of the material adverse effect, provided that Flextronics may
not exercise this termination right if it is in material breach
of the merger agreement or if the material adverse effect is
cured; or |
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by IDW, if the average Flextronics closing price is less than
$9.9739 and IDW exercises its right to notify Flextronics of its
election to terminate the merger agreement and Flextronics does
not exercise its right to increase the exchange ratio to the
quotient obtained by dividing $6.19 by the average Flextronics
closing price. |
Payment of Termination Fee
Under the terms of the merger agreement, IDW has agreed to pay
to Flextronics a termination fee of $8.0 million prior to
the termination of the merger agreement if the merger agreement
is terminated by IDW and IDW enters into a definitive binding
agreement with respect to a superior offer as described in the
section entitled IDWs Covenant that its
Board of Directors Recommend the Merger and Hold a Stockholders
Meeting beginning on page 64 of this proxy statement/
prospectus.
In addition, IDW must pay the termination fee of
$8.0 million to Flextronics if the merger agreement is
terminated by Flextronics upon the occurrence of a triggering
event with respect to IDW as described in the section entitled
Termination of the Merger Agreement
beginning on page 68 of this proxy statement/ prospectus.
In addition, IDW must pay the termination fee of
$8.0 million to Flextronics if the merger agreement is
terminated by Flextronics as a result of IDWs breach of
the merger agreement or if the merger agreement is
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terminated either by Flextronics or IDW as a result of the
merger not being completed by the termination date or due to the
failure to obtain IDW stockholder approval, if in any of such
cases,
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prior to the termination of the merger agreement, there has been
a public disclosure of an acquisition proposal with respect to
IDW; and |
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within 12 months following termination of the merger
agreement, an acquisition involving IDW is consummated or IDW
enters into a definitive agreement or letter of intent with
respect to an acquisition. |
The termination fee must be paid within two business days
following the acquisition of IDW.
Under the terms of the merger agreement, an acquisition of IDW,
for the purposes of these termination provisions, is any of the
following:
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a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving IDW,
pursuant to which its stockholders immediately preceding such
transaction hold less than 50% of the aggregate equity interests
in the surviving or resulting entity of such transaction, or any
direct or indirect parent of such entity; |
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a sale or other disposition by the party of assets representing
in excess of 40% of the aggregate fair market value of
IDWs business immediately prior to such sale; or |
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the acquisition by any person or group, including by way of a
tender offer or an exchange offer or issuance by it, directly or
indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 40% of
the voting power of the then outstanding shares of IDWs
capital stock. |
If IDW fails to pay when due the termination fee and Flextronics
must make a claim against IDW and such claim results in a
judgment against IDW, IDW will pay Flextronicss reasonable
costs and expenses in connection with the suit together with
interest on the unpaid termination fee. Except in the case of a
willful breach of the merger agreement by IDW, payment of the
termination fee by IDW will be the sole and exclusive remedy of
Flextronics.
THE VOTING AGREEMENTS
Contemporaneously with the execution and delivery of the merger
agreement, Joseph Bedewi, Mark A. Christensen, Ronald
A. Cohan, Thomas A. Lacey, Alan M. Lefko, Glenn E. Neland, D.
Paul Regan and Jeffrey G. Winzeler, representing all of
IDWs executive officers and directors, entered into voting
agreements with Flextronics. As of the record date, IDWs
executive officers and directors owned in the
aggregate shares
of IDW common stock and vested options that if exercised would
represent an
additional shares
of IDW common stock. In the aggregate, these shares represent
approximately %
of the shares of IDW common stock outstanding on the record date.
The following is a summary description of the voting agreements.
The form of voting agreement is attached as Annex B to this
proxy statement/ prospectus and is incorporated by reference
into this proxy statement/ prospectus.
Agreement to Vote and Irrevocable Proxy
Each IDW stockholder who has entered into a voting agreement has
granted to Flextronics an irrevocable proxy and irrevocably
appointed Flextronics and any designee of Flextronics as such
stockholders sole and exclusive
attorney-in-fact and
proxy to vote such stockholders IDW shares at every
annual, special, adjourned or postponed meeting of stockholders
of IDW and in every written consent in lieu of such meeting, as
follows:
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in favor of the adoption of the merger agreement and approval of
the merger, including all other actions and transactions
contemplated by the merger agreement or the proxy and any other
actions presented |
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to IDW stockholders that would reasonably be expected to
facilitate the merger agreement, the merger and the other
actions and transactions contemplated by the merger agreement or
the proxy; |
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against approval of any proposal made in opposition to, or in
competition with, the merger agreement or the consummation of
the merger and the other transactions contemplated by the merger
agreement; and |
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against any acquisition proposal or any other action that is
intended, or would reasonably be expected to impede, interfere
with, delay, postpone, discourage or adversely affect the merger
or any of the other transactions contemplated by the merger
agreement. |
Each such stockholder has agreed not to enter into any agreement
or understanding with any person to vote or make any public
announcement that is inconsistent with the preceding paragraph.
In addition, to the extent not voted by the person(s) appointed
by the irrevocable proxy, each such stockholder has agreed to
vote their IDW shares as set forth above at every meeting of the
stockholders of IDW, however called, at every adjournment or
postponement thereof, and on every action or approval by written
consent of stockholders of IDW.
Nothing in the voting agreement limits or restricts the
stockholder from acting in his or her capacity as an officer or
director of IDW or from fulfilling the obligations of such
office (including the performance of obligations required by the
fiduciary obligations of such stockholder acting solely in his
or her capacity as an officer or director).
In addition, the above IDW stockholders may not transfer any of
their shares without the prior written consent of Flextronics
during the period commencing on September 4, 2006, and
ending the earlier of (i) the date on which the merger
agreement is validly terminated; or (ii) the date on which
a final vote is taken by the stockholders of IDW to approve the
merger, except that each such stockholder may transfer such
shares to any member of the stockholders immediate family
or to a trust for the benefit of the stockholder or any member
of the stockholders immediate family, provided, that any
such transferee agrees to assume the obligations of the
stockholder with respect to any shares so transferred. These IDW
stockholders may also not transfer (including by entering into a
voting agreement or depositing their shares into a voting trust)
the voting rights which accompany their shares of IDW common
stock.
The voting agreements will terminate upon the earlier to occur
of the termination of the merger agreement and the completion of
the merger. The form of voting agreement entered into by each of
the parties to the voting agreements is attached as Annex B
to this proxy statement/ prospectus, and you are urged to read
it in its entirety.
DESCRIPTION OF FLEXTRONICS SHARE CAPITAL
The following statements are brief summaries of
Flextronicss capital structure and important rights and
privileges of shareholders conferred by applicable Singapore law
and Flextronicss Memorandum and Articles of Association,
which are referred to in this proxy statement/ prospectus as
Flextronicss Articles of Association, in each case as
currently in effect. These statements summarize the material
provisions of applicable Singapore law governing the rights of
Flextronics shareholders and Flextronicss Articles of
Association, in each case as currently in effect, but are
qualified in their entirety by reference to applicable Singapore
law and Flextronicss Articles of Association, a copy of
which has been filed as Exhibit 3.01 to Flextronicss
Quarterly Report on
Form 10-Q for the
fiscal quarter ended December 31, 2000, as amended by
Exhibit 3.01 to Flextronicss Report on
Form 8-K filed on
February 3, 2006. A copy of Flextronicss Articles of
Association is also available for inspection at
Flextronicss registered office in Singapore.
At Flextronicss 2006 annual general meeting of
shareholders, Flextronicss board of directors will propose
a special resolution for Flextronicss shareholders to
approve amendments to Flextronicss Articles of
Association. The following statements also include, to the
extent applicable, statements that summarize certain of these
amendments. These statements are qualified in their entirety by
reference to Flextronicss Articles of Association, as
proposed to be amended. A full text of Flextronicss
Articles of Association, as
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proposed to be amended, that is marked to show changes to
Flextronicss Articles of Association as currently in
effect, is set forth as Annex B to Flextronicss
definitive proxy statement on Schedule 14A filed with the
SEC on July 31, 2006.
Ordinary Shares
Flextronicss share capital consists of ordinary shares,
with no par value per ordinary share. As a result of amendments
to the Singapore Companies Act effected by the Singapore
Companies (Amendment) Act 2005, which became effective on
January 30, 2006, companies no longer have an authorized
share capital. There is a provision in Flextronicss
Articles of Association to enable it in specified circumstances
to issue shares with preferential, deferred or other special
rights or restrictions as Flextronicss directors may
determine, subject to the provisions of the Singapore Companies
Act and Flextronicss Articles of Association. All ordinary
shares presently issued are fully paid and existing shareholders
are not subject to any calls on ordinary shares. All ordinary
shares are in registered form. Flextronics cannot, except in the
circumstances permitted by the Singapore Companies Act, grant
any financial assistance for the acquisition or proposed
acquisition of Flextronicss own ordinary shares.
New Shares
Under applicable Singapore law, new shares may be issued only
with the prior approval from Flextronicss shareholders in
a general meeting. General approval may be sought from
Flextronicss shareholders in a general meeting for the
issue of shares. Approval, if granted, will lapse at the earlier
to occur of:
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(i) the conclusion of the next annual general
meeting; or |
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(ii) the expiration of the period within which the next
annual general meeting is required by law to be held. |
Subject to this approval, the provisions of the Singapore
Companies Act and Flextronicss Articles of Association,
all new shares are under the control of the directors who may
allot and issue new shares to such persons on such terms and
conditions and with the rights and restrictions as they may
think fit to impose.
Shareholders
Only persons who are registered in Flextronicss books are
recognized as shareholders and absolute owners of the ordinary
shares. Flextronics may, on giving not less than fourteen
days notice, close the register of members for any time or
times, but the register may not be closed for more than thirty
days in any calendar year. Closure is normally made for the
purpose of determining shareholders entitlement to receive
dividends and other distributions and would, in the usual case,
not exceed ten days.
Transfer of Ordinary Shares
Subject to applicable securities laws and Flextronicss
Articles of Association, Flextronicss ordinary shares are
freely transferable. The directors may decline to register any
transfer of ordinary shares on which Flextronics has a lien and,
for shares not fully paid up, may refuse to register a transfer
to a transferee of whom they do not approve. Shares may be
transferred by a duly signed instrument of transfer in a form
approved by the directors. The directors may decline to register
any transfer unless, among other things, it has been duly
stamped and is presented for registration together with the
share certificate and other evidence of title as they may
require. Flextronics will replace lost or destroyed certificates
for shares upon notice to it and upon, among other things, the
applicant furnishing evidence and indemnity as the directors may
require.
Re-election of Directors
Under Article 95 of Flextronicss Articles of
Association, at each annual general meeting, one-third of the
directors, or, if their number is not a multiple of three, then
the number nearest to but not less than one-third of the
directors, are required to retire by rotation from office. If
the proposed amendments to Flextronicss Articles of
Association are approved at Flextronicss 2006 annual
general meeting of shareholders, Article 95
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will be modified to provide that the number of directors
required to retire by rotation from office at each annual
general meeting, if the number is not a multiple of three, shall
be rounded to the number closest to, but not more than,
one-third of the directors. Under Article 96 of
Flextronicss Articles of Association, the directors
required to retire in each year are those who have been in
office longest since their last re-election or appointment. As
between persons who became or were last re-elected directors on
the same day, those required to retire are (unless they
otherwise agree among themselves) determined by lot. Retiring
directors are eligible for re-election. Under Article 101
of Flextronicss Articles of Association, any director
appointed by Flextronicss board of directors is subject to
re-election at the next annual meeting, but shall not be taken
into account in determining the number of directors required to
retire by rotation at that annual general meeting.
Shareholders Meetings
Flextronics is required to hold an annual general meeting in
each year. Under Flextronicss Articles of Association, any
general meeting other than the annual general meeting is called
an extraordinary general meeting. The directors may
convene an extraordinary general meeting whenever they think
fit, and they must also do so upon the written request of
shareholders representing not less than one-tenth of the
paid-up capital as at
the date of the deposit of the written request (disregarding
paid-up capital held as
treasury shares) carries the right of voting at general
meetings. In addition, two or more shareholders holding not less
than one-tenth of the total number of issued shares of
Flextronics (excluding treasury shares) may call a meeting of
Flextronicss shareholders.
Unless otherwise required by law or by Flextronicss
Articles of Association, voting at general meetings is by
ordinary resolution, requiring the affirmative vote of a simple
majority of the votes cast at a meeting of which at least
fourteen days written notice is given. An ordinary
resolution suffices, for example, for appointments of directors.
A special resolution, requiring an affirmative vote of a
majority of not less than 75% of the votes cast at a general
meeting of which not less than 21 days written notice
specifying the intention to propose the resolution as a special
resolution has been duly given, is necessary for certain matters
under Singapore law, such as an alteration of Flextronicss
Articles of Association.
Voting Rights
Voting at any meeting of shareholders is by a show of hands
unless a poll is duly demanded before or on the declaration of
the result of the show of hands. If voting is by a show of
hands, every shareholder who is present in person or by proxy at
the meeting has one vote. On a poll, every shareholder who is
present in person or by proxy or by attorney, or in the case of
a corporation, by a representative, has one vote for every share
held by him. A poll may be demanded by any of:
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(i) the chairman of the meeting (being a person entitled to
vote at that meeting); |
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(ii) not less than three shareholders present in person or
by proxy and entitled to vote; |
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(iii) shareholders present in person or by proxy or by
attorney, or in the case of a corporation, by a representative,
and representing not less than one-tenth of the total voting
rights of all shareholders having the right to vote at the
meeting; or |
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(iv) shareholders present in person or by proxy or by
attorney, or in the case of a corporation, by a representative,
and holding shares conferring a right to vote at the meeting
being shares on which the aggregate sum
paid-up is equal to not
less than one-tenth of the total sum paid up on all shares
conferring that right. |
If the proposed amendments to Flextronicss Articles of
Association are approved at Flextronicss 2006 annual
general meeting of shareholders, Flextronicss Articles of
Association will be modified to clarify that each of the three
shareholders required to demand a poll referred to in
(ii) above must be entitled to vote at the meeting at which
the resolution is put to the vote.
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Dividends
In an annual general meeting, Flextronicss shareholders
may declare dividends, but no dividend will be payable in excess
of the amount recommended by the directors. The directors may
also declare an interim dividend. No dividend may be paid except
out of Flextronicss profits. Except as otherwise may be
provided in special rights as to dividends specified in the
terms of issue of any ordinary shares (no such ordinary shares
currently being in issue), all dividends are paid pro rata among
the shareholders. To date, Flextronics has not declared any cash
dividends on Flextronicss ordinary shares and has no
current plans to pay cash dividends in the foreseeable future.
Bonus and Rights Issues
In a general meeting, Flextronicss shareholders may, upon
the recommendation of the directors, capitalize any reserves or
profits and distribute them as bonus shares to the shareholders
in proportion to their shareholdings. The directors may also
issue to shareholders rights to take up additional shares, in
proportion to their shareholdings. These rights are subject to
any conditions attached to the issue and the regulations of any
stock exchange on which the ordinary shares are listed.
Takeovers
The acquisition of Flextronicss ordinary shares is
regulated by the Securities and Futures Act and the Singapore
Code on Take-overs and Mergers.
Under the Singapore Code on Take-overs and Mergers, where:
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(i) any person acquires whether by a series of transactions
over a period of time or not, shares which (taken together with
shares held or acquired by persons acting in concert with him)
carry 30% or more of the voting rights of a company, or |
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(ii) any person who, together with persons acting in
concert with him, holds not less than 30% but not more than 50%
of the voting rights and such person, or any person acting in
concert with him, acquires in any period of six months
additional shares carrying more than 1% of the voting rights, |
such person is required to extend a mandatory take-over offer
for the remaining voting shares of the company. The Securities
Industry Council is empowered to waive compliance with this
requirement.
Subject to certain exceptions, a mandatory offer made must be in
cash or be accompanied by a cash alternative at not less than
the highest price paid by the offeror or any person acting in
concert with him for voting rights of the offeree company during
the offer period and within six months prior to its commencement.
Liquidation or Other Return of Capital
On a winding-up or
other return of capital, subject to any special rights attaching
to any other class of shares, holders of ordinary shares will be
entitled to participate in any surplus assets in proportion to
their shareholdings.
Indemnity
As permitted by the laws of Singapore, Flextronicss
Articles of Association provide that, subject to the Singapore
Companies Act, Flextronicss directors and officers will be
indemnified by Flextronics against any liability incurred by
them 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, directors or employees of
Flextronics and in which judgment is given in their favor (or
where the proceedings are otherwise disposed of without any
finding or admission of any material breach of duty on their
part) 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.
Directors and officers may not be indemnified by Flextronics
against any liability which by law would otherwise attach to
them relating to any negligence, default, breach of duty or
breach of trust of which they may be guilty in relation to
Flextronics.
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Limitations on Rights to Hold or Vote Ordinary Shares
Except as discussed above under Takeovers, there are
no limitations imposed by the laws of Singapore or by
Flextronicss Articles of Association on the right of
non-resident shareholders to hold or vote ordinary shares.
Transfer Agent
Flextronicss transfer agent is Computershare Trust
Company, N.A., 250 Royall Street, Canton MA, 02021 U.S.A.
COMPARISON OF RIGHTS OF HOLDERS OF IDW COMMON STOCK
AND HOLDERS OF FLEXTRONICS ORDINARY SHARES
Upon consummation of the merger, the former stockholders of IDW,
a Delaware corporation, will become shareholders of Flextronics,
a company incorporated under the laws of Singapore, and
applicable Singapore law and Flextronicss Articles of
Association will govern the rights of former IDW stockholders as
holders of Flextronics ordinary shares. The following is a
summary of certain material differences between (i) the
rights of IDW stockholders under applicable Delaware law and
IDWs Certificate of Incorporation and Bylaws, in each case
as currently in effect and (ii) the rights of Flextronics
shareholders under applicable Singapore law and
Flextronicss Articles of Association, in each case as
currently in effect. The following summary does not purport to
be a complete statement of the provisions affecting, and the
differences between, the rights of IDW stockholders and the
rights of Flextronics shareholders. The following summary is
qualified in its entirety by reference to applicable Delaware
law, IDWs Certificate of Incorporation and Bylaws,
applicable Singapore law and Flextronicss Articles of
Association. Flextronics has filed its Articles of Association
with the SEC, and IDW has filed its Certificate of Incorporation
and Bylaws with the SEC. See the section entitled Where
You Can Find More Information, beginning on page 84
of this proxy statement/ prospectus. The identification of
specific differences is not intended to indicate that other
equally or more significant differences do not exist.
As discussed in Description of Flextronics Share
Capital beginning on page 71 of this proxy statement/
prospectus, at Flextronicss 2006 annual general meeting of
shareholders, Flextronicss board of directors will propose
a special resolution for Flextronicss shareholders to
approve amendments to Flextronicss Articles of
Association. The following statements also include, to the
extent applicable, statements that summarize certain of these
amendments. These statements are qualified in their entirety by
reference to Flextronicss Articles of Association, as
proposed to be amended. A full text of Flextronicss
Articles of Association, as proposed to be amended, that is
marked to show changes to Flextronicss Articles of
Association as currently in effect, is set forth as Annex B
to Flextronicss definitive proxy statement on
Schedule 14A filed with the SEC on July 31, 2006.
Capital Stock
IDW IDWs Certificate of Incorporation
authorizes IDW to issue (i) 100,000,000 shares of IDW
common stock, $0.001 par value per share and
(ii) 10,000,000 shares of preferred stock,
$0.001 par value per share.
Flextronics Flextronicss share capital
consists of ordinary shares, with no par value per ordinary
share. As a result of amendments to the Singapore Companies Act
effected by the Singapore Companies (Amendment) Act 2005, which
became effective on January 30, 2006, companies no longer
have an authorized share capital. There is a provision in
Flextronicss Articles of Association to enable it in
specified circumstances to issue shares with preferential,
deferred or other special rights or restrictions as
Flextronicss directors may determine, subject to the
provisions of the Singapore Companies Act and Flextronicss
Articles of Association.
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Board Authority to Issue Shares
IDW Under applicable Delaware law, IDWs
directors may, if all of the shares of stock authorized by
IDWs Certificate of Incorporation have not been issued,
subscribed for or otherwise committed to be issued, issue or
take subscriptions for additional shares of stock up to the
amount authorized in IDWs Certificate of Incorporation.
Flextronics Under applicable Singapore law,
new shares may be issued only with the prior approval from
Flextronicss shareholders in a general meeting. General
approval may be sought from Flextronicss shareholders in a
general meeting for the issue of shares. Approval, if granted,
will lapse at the earlier to occur of:
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the conclusion of the next annual general meeting; or |
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the expiration of the period within which the next annual
general meeting is required by law to be held. |
Subject to this approval, the provisions of the Singapore
Companies Act and Flextronicss Articles of Association,
all new shares are under the control of the directors who may
allot and issue new shares to such persons on such terms and
conditions and with the rights and restrictions as they may
think fit to impose.
Number and Qualification of Directors
IDW IDWs Bylaws provide that the number
of directors which shall constitute the whole board of directors
shall be fixed by resolution of the board. IDWs board of
directors currently has five directors.
Flextronics Under Flextronicss Articles
of Association and subject to the provisions of the Singapore
Companies Act, the number of directors may not be less than two
nor, unless otherwise determined by the shareholders at a
general meeting, more than eleven. Flextronicss board of
directors currently has eight directors.
Classification of Board of Directors
IDW Under applicable Delaware law, all
directors of a Delaware corporation generally are elected
annually; however, a corporation may designate a classified
board in its initial certificate of incorporation or bylaws or
by adopting amendments to its certificate of incorporation
and/or bylaws, which amendments must be approved by the
corporations stockholders. IDWs Certificate of
Incorporation and Bylaws do not provide for a classified board
of directors. IDWs Bylaws provide that directors are
elected at each annual meeting of stockholders to hold office
for a term of one year until the next annual meeting.
Flextronics Under Article 95 of
Flextronicss Articles of Association, at each annual
general meeting, one-third of the directors, or, if their number
is not a multiple of three, then the number nearest to but not
less than one-third of the directors, are required to retire by
rotation from office. If the proposed amendments to
Flextronicss Articles of Association are approved at
Flextronicss 2006 annual general meeting of shareholders,
Article 95 will be modified to provide that the number of
directors required to retire by rotation from office at each
annual general meeting, if the number is not a multiple of
three, shall be rounded to the number closest to, but not more
than, one-third of the directors. Under Article 96 of
Flextronicss Articles of Association, the directors
required to retire in each year are those who have been in
office longest since their last re-election or appointment. As
between persons who became or were last re-elected directors on
the same day, those required to retire are (unless they
otherwise agree among themselves) determined by lot. Retiring
directors are eligible for re-election. Under Article 101
of Flextronicss Articles of Association, any director
appointed by Flextronicss board of directors is subject to
re-election at the next annual meeting, but shall not be taken
into account in determining the number of directors required to
retire by rotation at that annual general meeting.
Filling Vacancies on the Board of Directors
IDW IDWs Bylaws provide that vacancies
in the board of directors are deemed to exist in case of the
death, resignation or removal of any director or if the
authorized number of directors is increased or if the
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stockholders fail, at any annual or special meeting of
stockholders at which any director or directors are elected, to
elect the full authorized number of directors to be voted for at
that meeting. IDWs Bylaws provide that vacancies in the
board of directors may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining
director. The stockholders may elect a director or directors at
any time to fill any vacancy or vacancies not filled by the
directors.
Flextronics Under Flextronicss Articles
of Association, shareholders may in any general meeting appoint
another person in place of a director removed from office. Any
director 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 as a director. In addition, under Flextronicss
Articles of Association, the board of directors has the power,
at any time, to appoint any person to be a director either to
fill a casual vacancy or as an additional director, provided
that the total number of directors does not at any time exceed
the maximum number of directors fixed by Flextronicss
Articles of Association. Any person so appointed will only hold
office until the next annual general meeting, and will then be
eligible for re-election.
Removal of Directors
IDW IDWs Bylaws provide that any
director or the entire board of directors may be removed, with
or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors; provided that
(i) if the board of directors is classified (which is
currently not the case with IDW), directors may be removed only
for cause and (ii) if the corporation has cumulative voting
(which is currently not the case with IDW) and less than the
entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an
election of the entire board of directors, or if there be
classes, at an election of the class of directors of which he is
a part.
Flextronics Under Flextronicss Articles
of Association, shareholders may, in accordance with the
provisions of the Singapore Companies Act and by ordinary
resolution of which special notice has been given, remove any
director before the expiration of his period of office.
Action by Written Consent of Shareholders or Stockholders
IDW IDWs Bylaws provide that any action
that is required to or may be taken at any annual or special
meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if the holders of outstanding
stock having not less than the minimum number of votes that
would be necessary to authorize such action at a meeting at
which all shares entitled to vote thereon were present and
voted, consent in writing. If action taken without a meeting is
approved by less than unanimous written consent, prompt notice
of the action must be given to those stockholders who have not
consented in writing.
Flextronics Under Flextronicss Articles
of Association and subject to the provisions of the Singapore
Companies Act, a written resolution signed by every registered
shareholder has the same effect and validity as an ordinary
resolution passed at a duly convened, held and constituted
general meeting of shareholders.
Special or Extraordinary General Meetings
IDW IDWs Bylaws provide that special
meetings of the stockholders may be called at any time by the
President or by the board of directors or the Chairman of the
Board or by one or more stockholders holding shares in the
aggregate entitled to cast not less than ten percent of the
votes at that meeting.
Flextronics Flextronics is required to hold
an annual general meeting in each year. Under Flextronicss
Articles of Association, any general meeting other than the
annual general meeting is called an extraordinary general
meeting. The directors may convene an extraordinary
general meeting whenever they think fit, and they must also do
so upon the written request of shareholders representing not
less than one-tenth of the
paid-up capital as at
the date of the deposit of the written request (disregarding
paid-up capital held as
treasury shares) carries the right of voting at general
meetings. In addition, two or more shareholders holding
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not less than one-tenth of the total number of issued shares of
Flextronics (excluding treasury shares) may call a meeting of
Flextronicss shareholders.
Inspections of Shareholders List
IDW Delaware General Corporation Law, or the
DGCL, provides any stockholder of a Delaware corporation with
the right to inspect the corporations stock ledger,
stockholder lists and other books and records for a purpose
reasonably related to the persons interest as a
stockholder.
Flextronics Under the Singapore Companies
Act, a Singapore companys register of members and index is
required to be open to the inspection of any member without
charge and of any other person on payment for each inspection of
one Singapore dollar or a lower amount as determined by the
company.
Dividends, Distributions and Repurchase of Shares
IDW Under applicable Delaware law, a Delaware
corporation generally may declare and pay dividends out of
surplus, or, if there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the
corporation following the declaration and payment of the
dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets. IDWs
Bylaws provide that the board of directors may declare and pay
dividends upon the shares of its capital stock at any regular or
special meeting. Dividends may be paid in cash, property, or in
shares of the capital stock, subject to any preferential
dividend rights of any then outstanding preferred stock. IDW has
paid no dividend on its common stock since its inception.
Under applicable Delaware law, any Delaware corporation may
redeem or repurchase its own shares, except that generally it
may not redeem or repurchase these shares if the capital of the
corporation is impaired at the time or would become impaired as
a result of the redemption. A Delaware corporation may redeem or
repurchase shares having a preference, or if no share entitled
to such a preference are outstanding, any of its shares, upon
the distribution of any of its assets if such shares will be
retired upon acquisition, and provided that, after the reduction
in capital made in connection with such retirement of shares,
the corporations remaining assets are sufficient to pay
any debts not otherwise provided for.
Flextronics In an annual general meeting,
Flextronicss shareholders may declare dividends, but no
dividend will be payable in excess of the amount recommended by
the directors. The directors may also declare an interim
dividend. No dividend may be paid except out of
Flextronicss profits. Except as otherwise may be provided
in special rights as to dividends specified in the terms of
issue of any ordinary shares (no such ordinary shares currently
being in issue), all dividends are paid pro rata among the
shareholders. To date, Flextronics has not declared any cash
dividends on Flextronicss ordinary shares and has no
current plans to pay cash dividends in the foreseeable future.
Flextronicss Articles of Association provide that subject
to the provisions of the Singapore Companies Act, Flextronics
may purchase or otherwise acquire its ordinary shares on such
terms and in such manner as Flextronics may think fit. If the
proposed amendments to Flextronicss Articles of
Association are approved at Flextronicss 2006 annual
general meeting of shareholders, Flextronicss Articles of
Association will be modified to provide that these shares so
purchased or acquired by Flextronics may be (i) held as
treasury shares in accordance with the Singapore Companies Act
or cancelled and (ii) held or dealt with by Flextronics in
such manner as may be permitted by, and in accordance with, the
Singapore Companies Act. On any cancellation of the shares, the
rights and privileges attached to those shares will expire.
Flextronics may not, except as provided in the Singapore
Companies Act, grant any financial assistance for the
acquisition or proposed acquisition of its own ordinary shares.
Indemnification and Limitation on Personal Liability
IDW Section 145 of the DGCL empowers a
Delaware corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or
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proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director,
officer, employee or agent of another corporation or enterprise.
A corporation may, in advance of the final action of any civil,
criminal, administrative or investigative action, suit or
proceeding, pay the expenses (including attorneys fees)
incurred by any officer, director, employee or agent in
defending such action, provided that the director or officer
undertakes to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by
the corporation. A corporation may indemnify such person against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding
if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
A Delaware corporation may indemnify officers and directors in
an action by or in the right of the corporation to procure a
judgment in its favor under the same conditions, except that no
indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the
corporation must indemnify him or her against the expenses
(including attorneys fees) which he or she actually and
reasonably incurred in connection therewith. The indemnification
provided is not deemed to be exclusive of any other rights to
which an officer or director may be entitled under any
corporations bylaw, agreement, vote or otherwise.
IDWs Certificate of Incorporation and Bylaws provide that
IDW shall indemnify to the fullest extent permitted by
applicable law, any person who was or is made or is threatened
to be made a party or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a
director or officer or is or was serving at the request of IDW
as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust, enterprise or
nonprofit entity against all liability and loss suffered and
expenses (including attorneys fees) reasonably incurred by
such person.
IDWs Bylaws provide that IDW may purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of IDW, or is or was serving at the
request of IDW as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body
against any liabilities incurred by that person in any such
capacity or arising out of that persons status as such.
Flextronics As permitted by the laws of
Singapore, Flextronicss Articles of Association provide
that, subject to the Singapore Companies Act, Flextronicss
directors and officers will be indemnified by Flextronics
against any liability incurred by them 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, directors or employees of Flextronics and in which
judgment is given in their favor (or where the proceedings are
otherwise disposed of without any finding or admission of any
material breach of duty on their part) 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. Directors and officers may not
be indemnified by Flextronics against any liability which by law
would otherwise attach to them relating to any negligence,
default, breach of duty or breach of trust of which they may be
guilty in relation to Flextronics.
Amendments to Governing Documents
Flextronics Under applicable Singapore law,
Flextronicss Articles of Association may be altered,
amended or repealed and new articles may be adopted by the
affirmative vote by a show of hands of at least 75% of the
shareholders present and voting at an extraordinary general
meeting or annual general meeting of shareholders, or, if a poll
is duly demanded as previously described, at least 75% of the
shares voting at the meeting. Flextronicss board of
directors has no right to amend Flextronicss Articles of
Association.
IDW Under the DGCL, a majority vote of the
outstanding shares of common stock is required to amend a
Delaware corporations certificate of incorporation.
IDWs Certificate of Incorporation contains no
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provisions requiring a vote greater than that required by the
DGCL to amend its Certificate of Incorporation. IDWs
Certificate of Incorporation authorizes the board of directors
to make, alter or repeal IDWs Bylaws, subject to the power
of the stockholders of IDW to alter or repeal any Bylaws made by
the board. New bylaws may be adopted or IDWs Bylaws may be
amended or repealed by the vote or written consent of IDW
stockholders entitled to exercise a majority of the voting power
of IDW.
Transactions with Officers and Directors
IDW Under the DGCL, some contracts or
transactions in which one or more of a Delaware
corporations directors has an interest are not void or
voidable because of such interest provided that some conditions,
such as obtaining the required approval and fulfilling the
requirements of good faith and full disclosure, are met. Under
the DGCL, either (i) the stockholders or the board of
directors must approve in good faith any such contract or
transaction after full disclosure of the material facts or
(ii) the contract or transaction must have been
fair as to the corporation at the time it was
approved. If board approval is sought, the contract or
transaction must be approved in good faith by a majority of
disinterested directors after full disclosure of material facts,
even though less than a majority of a quorum.
Flextronics Under the Singapore Companies
Act, directors are not prohibited from dealing with the company,
but where they have an interest in a transaction with the
company, that interest must be disclosed to the board of
directors. In particular, every director who is in any way,
whether directly or indirectly, interested in a transaction or
proposed transaction with the company must, as soon as
practicable after the relevant facts have come to his knowledge,
declare the nature of his interest at a board of directors
meeting.
In addition, a director who holds any office or possesses any
property which directly or indirectly might create interests in
conflict with his duties as director is required to declare the
fact and the nature, character and extent of the conflict at a
meeting of directors.
The Singapore Companies Act extends the scope of this statutory
duty of a director to disclose any interests by pronouncing that
an interest of a member of a directors family (including
his spouse, son, adopted son, step-son, daughter, adopted
daughter and step-daughter) will be treated as an interest of
the director.
There is however no requirement for disclosure where the
interest of the director consists only of being a member or
creditor of a corporation which is interested in the proposed
transaction with the company and that the interest may properly
be regarded as immaterial. Where the proposed transaction
relates to any loan to the company, no disclosure need be made
where the director has only guaranteed the repayment of such
loan, unless the articles of association provide otherwise.
Further, where the proposed transaction pertains to a related
corporation (i.e. the holding company, subsidiary or subsidiary
owned by a common holding company) no disclosure need be made of
the fact that the director is also a director of that
corporation, unless the articles of association provide
otherwise.
Subject to specified exceptions, the Singapore Companies Act
prohibits a Singapore company from making a loan to its
directors or to directors of a related corporation, or giving a
guarantee or security in connection with such a loan. Companies
are also prohibited from making loans to its directors
spouse or children (whether adopted or naturally or
step-children), or giving a guarantee or security in connection
with such a loan.
Stockholder or Shareholder Suits
IDW Under the DGCL, a stockholder may bring a
derivative action on behalf of the corporation to enforce the
rights of the corporation. An individual also may commence a
class action suit on behalf of himself or herself and other
similarly situated stockholders where the requirements for
maintaining a class action under the DGCL have been met.
Generally, a person may institute and maintain such a suit only
if such person was a stockholder at the time of the transaction
which is the subject of the suit or his or her shares thereafter
devolved upon him or her by operation of law. The DGCL also
requires that the derivative plaintiff make a demand on the
directors of the corporation to assert the corporate claim
before the suit may be prosecuted by the derivative plaintiff,
unless such demand would be futile.
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Flextronics The Singapore Companies Act has a
provision, which is limited in its scope to companies that are
not listed on the securities exchange in Singapore, which
provides a mechanism enabling shareholders to apply to the court
for leave to bring a derivative action on behalf of the company.
Applications are generally made by shareholders of the company
or individual directors, but courts are given the discretion to
allow such persons as they deem proper to apply (e.g.,
beneficial owner of shares).
This section of the Singapore Companies Act is primarily used by
minority shareholders to bring an action in the name and on
behalf of the company or intervene in an action to which the
company is a party for the purpose of prosecuting, defending or
discontinuing the action on behalf of the company.
The concept of class action suits in the sense which allows
individual shareholders to bring an action on behalf of the
class of shareholders, does not exist in Singapore. Although
there have been suggestions that shareholders may bring a
representative action under the Singapore courts
procedural rules, there is no reported case in Singapore where
such an action has been pursued. The representative action is
merely a procedural device which generally allows a person to
act in a representative capacity for the other parties to the
action. Accordingly, it is doubtful whether such a procedural
provision would be of much applicability in relation to class
actions.
Although there is the possibility of common law derivative
actions under Section 216A of the Singapore Companies Act,
doubts have arisen as to whether the common law derivative
action is still available for a Singapore company that is not
listed on a securities exchange in Singapore, and in practice,
resort is commonly made to Section 216A of the Singapore
Companies Act. A Singapore court may also order derivative
actions to proceed when hearing an action based on unfair
prejudice or oppression under Section 216 of the Singapore
Companies Act.
Takeovers
IDW Section 203 of the DGCL generally
prohibits a Delaware corporation from engaging in specified
corporate transactions (such as mergers, stock and asset sales,
and loans) with an interested stockholder for three
years following the time that the stockholder becomes an
interested stockholder. Subject to specified exceptions, an
interested stockholder is a person or group that
owns 15% or more of the corporations outstanding voting
stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or
upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only), or is
an affiliate or associate of the corporation and was the owner
of 15% or more of the voting stock at any time within the
previous three years.
A Delaware corporation may elect to opt out of, and
not be governed by, Section 203 through a provision in
either its original certificate of incorporation or its bylaws,
or an amendment to its original certificate or bylaws that was
approved by majority stockholder vote. IDW has not made this
election.
Flextronics The acquisition of
Flextronicss ordinary shares is regulated by the
Securities and Futures Act and the Singapore Code on Take-overs
and Mergers.
Under the Singapore Code on Take-overs and Mergers, where:
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any person acquires whether by a series of transactions over a
period of time or not, shares which (taken together with shares
held or acquired by persons acting in concert with him) carry
30% or more of the voting rights of a company, or |
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any person who, together with persons acting in concert with
him, holds not less than 30% but not more than 50% of the voting
rights and such person, or any person acting in concert with
him, acquires in any period of six months additional shares
carrying more than 1% of the voting rights, |
such person is required to extend a mandatory take-over offer
for the remaining voting shares of the company. The Securities
Industry Council is empowered to waive compliance with this
requirement.
81
Subject to certain exceptions, a mandatory offer made must be in
cash or be accompanied by a cash alternative at not less than
the highest price paid by the offeror or any person acting in
concert with him for voting rights of the offeree company during
the offer period and within six months prior to its commencement.
Shareholder or Stockholder Approval of Business
Combinations
IDW Generally, under the DGCL, completion of
a merger, consolidation, or the sale, lease or exchange of
substantially all of a Delaware corporations assets or
dissolution requires approval by the board of directors and by a
majority (unless the certificate of incorporation requires a
higher percentage) of outstanding stock of the corporation
entitled to vote.
The DGCL also requires a special vote of stockholders in
connection with a business combination with an interested
stockholder as defined in section 203 of the DGCL.
See Takeovers above.
Flextronics The Singapore Companies Act
mandates that specified business combinations require approval
by the shareholders in a general meeting, notably:
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notwithstanding anything in the companys memorandum or
articles of association, directors are not permitted to carry
into effect any proposals for disposing of the whole or
substantially the whole of the companys undertaking or
property unless those proposals have been approved by
shareholders in a general meeting; |
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subject to the memorandum of each amalgamating company, an
amalgamation proposal must be approved by the shareholders of
each amalgamating company via special resolution at a general
meeting; and |
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notwithstanding anything in the companys memorandum or
articles of association, the directors may not, without the
prior approval of shareholders, issue shares. |
Appraisal or Dissenters Rights
IDW Under the DGCL, a stockholder of a
Delaware corporation participating in some types of major
corporate transactions may, under varying circumstances, be
entitled to appraisal rights pursuant to which the stockholder
may receive cash in the amount of the fair market value of his
or her shares in lieu of the consideration he or she would
otherwise receive in the transaction. No appraisal rights are
available to holders of shares of any class of stock which is
either: (i) listed on a national securities exchange or
designated as national market system security on an interdealer
quotation system by the NASD or (ii) held by more than
2,000 stockholders of record.
Flextronics There are no equivalent
provisions in Singapore under the Singapore Companies Act.
Dissolution
IDW Under applicable Delaware law, the
dissolution of a Delaware corporation may be authorized by the
corporations board of directors and by the holders of a
majority of the corporations outstanding stock, or by all
the corporations stockholders entitled to vote on the
dissolution.
Flextronics Under applicable Singapore law, a
Singapore company can be dissolved if it is liquidated,
voluntarily by its shareholders or creditors, or otherwise by an
order of a court on the petition of various interested parties.
A defunct company which has ceased to carry on business may be
struck off the Singapore Register of Companies. On a
winding-up or other
return of capital, subject to any special rights attaching to
any other class of shares, holders of ordinary shares will be
entitled to participate in any surplus assets in proportion to
their shareholdings.
Transferability of Shares
IDW Under applicable Delaware law, as a
general matter, and subject to applicable securities laws and
restrictions on transfer as may be imposed by a Delaware
corporations certificate of incorporation, bylaws or
82
by agreement, shares and share certificates are freely
transferable, provided that the necessary steps are taken to
have the transfer properly recorded in the records of the
corporation.
Flextronics Subject to applicable securities
laws and Flextronicss Articles of Association,
Flextronicss ordinary shares are freely transferable. The
directors may decline to register any transfer of ordinary
shares on which Flextronics has a lien and, for shares not fully
paid up, may refuse to register a transfer to a transferee of
whom they do not approve. Shares may be transferred by a duly
signed instrument of transfer in a form approved by the
directors. The directors may decline to register any transfer
unless, among other things, it has been duly stamped and is
presented for registration together with the share certificate
and other evidence of title as they may require. Flextronics
will replace lost or destroyed certificates for shares upon
notice to it and upon, among other things, the applicant
furnishing evidence and indemnity as the directors may require.
Shareholder Rights Plan
IDW IDW has not adopted a shareholder rights
plan.
Flextronics Flextronics has not adopted a
shareholder rights plan.
PROPOSAL NO. 2 ADJOURNMENT OF THE SPECIAL
MEETING
If IDW fails to receive a sufficient number of votes to approve
Proposal No. 1, IDW may propose to grant the persons
named as proxies discretionary authority to vote to adjourn or
postpone the special meeting to solicit additional proxies to
approve and adopt the merger agreement. IDW currently does not
intend to grant such authority to vote to adjourn or postpone
the special meeting if there are sufficient votes in favor of
approving and adopting the merger agreement. If approval of the
proposal to grant the persons named as proxies discretionary
authority to vote to adjourn or postpone the special meeting to
solicit additional proxies is submitted to stockholders for
approval at the special meeting, such approval requires the
affirmative vote of the holders of a majority of the votes cast
in person or by proxy at the special meeting.
IDWS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE PROPOSAL TO GRANT THE PERSONS
NAMED AS PROXIES DISCRETIONARY AUTHORITY TO VOTE TO ADJOURN OR
POSTPONE THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT
ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF
APPROVING AND ADOPTING THE MERGER AGREEMENT.
FUTURE IDW STOCKHOLDER PROPOSALS
If the merger occurs, there will be no IDW annual meeting of
stockholders in 2007. In the event the merger is not completed,
proposals by stockholders intended to be presented at the IDW
Annual Meeting of stockholders to be held in 2007 must be
received by IDW no later than November 1, 2006, for
consideration for possible inclusion in the proxy statement
relating to that meeting. All proposals must meet the
requirements of
Rule 14a-8 of the
Exchange Act. For any proposal that is not submitted for
inclusion in IDWs 2007 proxy statement, but is instead
intended to be presented directly at the IDW annual meeting of
stockholders to be held during 2007, SEC rules permit management
to vote proxies in its discretion if IDW (a) receives
notice of the proposal before the close of business on
January 16, 2007 and advises stockholders in the proxy
statement for that meeting about the nature of the matter and
how management intends to vote on such matter or (b) does
not receive notice of the proposal prior to the close of
business on January 16, 2007. Notices of intention to
present a proposal at the IDW annual stockholders meeting in
2007 should be addressed to Corporate Secretary, International
DisplayWorks, Inc., 1613 Santa Clara Drive, Suite 100,
Roseville, California 95661-3542. IDW reserves the right to
reject, rule out of order or to take other appropriate action
with respect to any proposal that does not comply with these and
other applicable requirements.
83
LEGAL MATTERS
Allen & Gledhill will pass upon the validity of the
Flextronics ordinary shares offered under this proxy statement/
prospectus.
Curtis, Mallet-Prevost, Colt & Mosle LLP will pass upon
certain United States federal income tax consequences of the
merger for Flextronics.
Bullivant Houser Bailey, PC will pass upon certain United States
federal income tax consequences of the merger for IDW.
EXPERTS
The financial statements, the related financial statement
schedule, and managements report on the effectiveness of
internal control over financial reporting incorporated in this
prospectus by reference from the Annual Report on
Form 10-K of
Flextronics International Ltd. for the year ended March 31,
2006 have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in
their reports, which are incorporated herein by reference, and
have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
With respect to the unaudited interim financial information of
Flextronics International Ltd. for the quarters ended
June 30, 2006 and 2005 which is incorporated herein by
reference, Deloitte & Touche LLP, an independent
registered public accounting firm, have applied limited
procedures in accordance with the standards of the Public
Company Accounting Oversight Board (United States) for a review
of such information. However, as stated in their report included
in the Quarterly Report on
Form 10-Q of
Flextronics International Ltd. for the quarters ended
June 30, 2006 and 2005 and incorporated by reference
herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of
reliance on their report on such information should be
restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited interim
financial information because that report is not a
report or a part of the registration
statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
(which is included in Managements Report on Internal
Control over Financial Reporting) incorporated in this proxy
statement/ prospectus by reference to the Annual Report on
Form 10-K of
International DisplayWorks, Inc. for the fiscal year ended
October 31, 2005 have been so incorporated in reliance on
the report of Grant Thornton LLP, an independent registered
public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This proxy statement/ prospectus incorporates documents by
reference which are not presented in or delivered with this
proxy statement/ prospectus. You should rely only on the
information contained in this proxy statement/ prospectus and in
the documents that are incorporated by reference into this proxy
statement/ prospectus. Flextronics and IDW have not authorized
anyone to provide you with information that is different from or
in addition to the information contained in this document and
incorporated by reference into this proxy statement/
prospectus.
The following documents, which were filed by Flextronics with
the SEC, are incorporated by reference into this proxy
statement/ prospectus:
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Flextronicss Annual Report on
Form 10-K for the
fiscal year ended March 31, 2006, filed with the SEC on
May 31, 2006; |
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Flextronicss Quarterly Reports on
Form 10-Q for the
quarters ended June 30, 2005 and June 30, 2006, filed
with the SEC on August 10, 2005 and August 8, 2006,
respectively; |
84
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Flextronicss Current Reports on
Form 8-K filed on
April 19, 2006, April 21, 2006, July 7, 2006,
July 18, 2006, August 24, 2006, September 5,
2006, September 6, 2006 , September 8, 2006 and
September 18, 2006; and |
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the description of Flextronicss ordinary shares contained
in Flextronicss registration statement on
Form 8-A, declared
effective by the SEC on January 31, 1994, including any
amendments or reports filed for the purpose of updating such
description. |
The following documents, which were filed by IDW with the SEC,
are incorporated by reference into this proxy statement/
prospectus:
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IDWs Annual Report on
Form 10-K for the
fiscal year ended October 31, 2005, filed with the SEC on
January 10, 2006; and |
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IDWs Quarterly Reports on
Form 10-Q for the
quarters ended January 31, 2006, April 30, 2006 and
July 31, 2006, filed with the SEC on March 13, 2006,
June 8, 2006, and September 7, 2006, respectively. |
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IDWs Current Reports on
Form 8-K filed on
November 18, 2006, December 13, 2006, January 10,
2006, January 27, 2006, February 1, 2006,
March 13, 2006, June 8, 2006, September 5, 2006,
September 6, 2006, and September 7, 2006 and Form
8-K/A on July 28,
2005; and |
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The description of IDWs common stock contained in
IDWs registration statement on
Form 8-A filed
with the SEC on October 17, 1995 under Section 12(g)
of the Exchange Act, including any amendment or report filed for
the purpose of updating such description. |
In addition, all documents filed by Flextronics and IDW pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this proxy statement/ prospectus and before
the date of the IDW special meeting are deemed to be
incorporated by reference into, and to be a part of, this proxy
statement/ prospectus from the date of filing of those
documents, except for any disclosures furnished pursuant to
Item 2.02 or Item 7.01 (and in each case, the
corresponding exhibits under Item 9.01) of any Current
Report on
Form 8-K, unless
otherwise expressly stated in that Current Report on
Form 8-K.
Any statement contained in this proxy statement/ prospectus or
in a document incorporated or deemed to be incorporated by
reference into this proxy statement/ prospectus will be deemed
to be modified or superseded for purposes of this proxy
statement/ prospectus to the extent that a statement contained
in this proxy statement/ prospectus or any other subsequently
filed document that is deemed to be incorporated by reference
into this proxy statement/ prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a
part of this proxy statement/ prospectus.
Flextronics has supplied all information contained or
incorporated by reference in this proxy statement/ prospectus
about Flextronics, and IDW has supplied all information
contained or incorporated by reference in this proxy statement/
prospectus about IDW.
The documents incorporated by reference into this proxy
statement/ prospectus are available upon request. Flextronics or
IDW, as appropriate, will provide a copy of any and all of the
information that is incorporated by reference in this proxy
statement/ prospectus (not including exhibits to the information
unless those exhibits are specifically incorporated by reference
into this proxy statement/ prospectus) to any person, without
charge, upon written or oral request.
85
IDW stockholders may request a copy of information incorporated
by reference into this proxy statement/ prospectus by contacting
each of Flextronics and IDW at:
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For information relating to Flextronics: |
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For information relating to IDW: |
Flextronics International Ltd. |
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International DisplayWorks, Inc. |
2090 Fortune Drive |
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1613 Santa Clara Drive, Suite 100 |
San Jose, California 95131 |
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Roseville, CA 95661-3542 |
Attention: Investor Relations |
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Attention: Corporate Secretary |
Telephone: (408) 576-7722 |
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(916) 797-6800 |
Flextronics and IDW file annual, quarterly and current reports,
proxy and information statements and other information with the
SEC. Copies of the reports, proxy and information statements and
other information filed by Flextronics and IDW with the SEC may
be read and copied by the public at the Public Reference Room
maintained by the SEC at:
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Please call the SEC at
1-800-SEC-0330 for
information on the operation of the Public Reference Room. The
SEC maintains a website that contains reports, proxy and
information statements and other information regarding
Flextronics and IDW. The address of the SEC website is
www.sec.gov.
Flextronics has filed a registration statement on
Form S-4 under the
Securities Act with the SEC with respect to Flextronicss
ordinary shares to be issued to IDW stockholders in connection
with the merger. This proxy statement/ prospectus constitutes
the prospectus of Flextronics filed as part of the registration
statement. This proxy statement/ prospectus does not contain all
of the information set forth in the registration statement
because certain parts of the registration statement are omitted
in accordance with the rules and regulations of the SEC. The
registration statement and its exhibits are available for
inspection and copying as set forth above.
IDW stockholders with questions about the merger should contact:
Georgeson Shareholder Communications, Inc.
Toll Free from within the United States and Canada:
(866) 628-6102
From outside the United States and Canada: (212) 440-9800
Banks and Brokers call collect: (212) 440-9800
Any IDW stockholder who needs additional copies of this proxy
statement/ prospectus or voting materials should contact
Georgeson Shareholder Communications, Inc.
This proxy statement/ prospectus does not constitute an offer
to sell, or a solicitation of an offer to purchase, the
securities offered by this proxy statement/ prospectus, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such
jurisdiction. Neither the delivery of this proxy statement/
prospectus nor any distribution of securities pursuant to this
proxy statement/ prospectus shall, under any circumstances,
create any implication that there has been no change in the
information set forth or incorporated into this proxy statement/
prospectus by reference or in the affairs of Flextronics or IDW
since the date of this proxy statement/ prospectus.
86
Annex A
CAUTIONARY STATEMENT
This copy of the Merger Agreement is intended to provide
information about the terms of the merger. Except for its status
as a legal document governing the contractual rights among the
parties thereto in relation to the proposed merger and the other
transactions contemplated thereby, the merger agreement is not
intended to be a source of factual, business or operational
information about Flextronics, IDW or their respective
businesses.
The representations and warranties contained in the merger
agreement are not necessarily accurate or complete as made and
may be subject to exceptions set forth in the disclosure
schedules provided in accordance with the merger agreement. Such
representations, warranties and covenants have been negotiated
by IDW and Flextronics for the purpose of allocating contractual
risk between the parties, including where the parties do not
have complete knowledge of all the facts, and not for the
purpose of establishing matters as facts. In particular, the
representations and warranties made by the parties to each other
in the merger agreement have been negotiated between the parties
with the principal purpose of setting forth their respective
rights with respect to their obligation to close the merger
should events or circumstances change or be different from those
stated in the representations and warranties. Matters may change
from the state of affairs contemplated by the representations
and warranties. The representations and warranties also may be
subject to a contractual standard of materiality different from
those generally applicable to investors. Flextronics and IDW
will provide additional disclosure in their public reports to
the extent that they are aware of the existence of any material
facts that are required to be disclosed under U.S. federal
securities law and that might otherwise contradict the terms and
information contained in the merger agreement and will update
such disclosure as required by federal securities laws.
Investors are not third-party beneficiaries under the merger
agreement and any stockholder of IDW or shareholder of
Flextronics or any potential investor should not rely on the
representations, warranties and covenants therein or any
descriptions thereof as characterizations of the actual state of
facts or condition of the parties or any of their affiliates.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FLEXTRONICS INTERNATIONAL LTD.
GRANITE ACQUISITION CORP.
AND
INTERNATIONAL DISPLAYWORKS, INC.
Dated as of September 4, 2006
Table of Contents
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Page No. | |
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Article I THE MERGER |
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A-1 |
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1.1
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The Merger |
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A-1 |
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1.2
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Effective Time; Closing |
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A-1 |
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1.3
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Effect of the Merger |
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A-2 |
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1.4
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Certificate of Incorporation and Bylaws |
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A-2 |
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1.5
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Directors and Officers |
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A-2 |
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1.6
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Effect on Capital Stock |
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A-2 |
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1.7
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Surrender of Certificates |
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A-4 |
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1.8
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No Further Ownership Rights in Company Common Stock |
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A-5 |
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1.9
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Lost, Stolen or Destroyed Certificates |
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A-6 |
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1.10
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Amendment to Agreement |
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A-6 |
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1.11
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Further Action |
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A-6 |
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Article II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY |
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A-6 |
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2.1
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Organization; Standing and Power; Charter Documents; Subsidiaries |
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A-6 |
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2.2
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Capital Structure |
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A-7 |
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2.3
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Authority; No Conflict; Necessary Consents |
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A-9 |
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2.4
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SEC Filings; Financial Statements; Internal Controls |
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A-10 |
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2.5
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Absence of Certain Changes or Events |
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A-12 |
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2.6
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Taxes |
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A-14 |
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2.7
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Title to Properties |
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A-16 |
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2.8
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Intellectual Property |
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A-17 |
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2.9
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Restrictions on Business Activities |
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A-20 |
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2.10
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Governmental Authorizations |
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A-20 |
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2.11
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Litigation |
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A-21 |
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2.12
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Compliance with Law |
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A-21 |
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2.13
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Environmental Matters |
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A-21 |
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2.14
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Brokers and Finders Fees |
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A-22 |
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2.15
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Transactions with Affiliates |
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A-22 |
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2.16
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Employee Benefit Plans and Compensation |
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A-22 |
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2.17
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Contracts |
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A-26 |
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2.18
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Insurance |
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A-28 |
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2.19
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Customers and Suppliers |
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A-28 |
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2.20
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Foreign Corrupt Practices Act |
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A-28 |
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2.21
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Information in Registration Statement and Prospectus/ Proxy
Statement |
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A-29 |
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2.22
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Fairness Opinion |
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A-29 |
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2.23
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Takeover Statutes and Rights Plans |
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A-29 |
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Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB |
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A-29 |
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3.1
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Organization |
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A-29 |
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3.2
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Authority; No Conflict; Necessary Consents |
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A-30 |
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3.3
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Capital Structure |
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A-30 |
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3.4
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Information in Registration Statement and Prospectus/ Proxy
Statement |
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A-31 |
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3.5
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SEC Filings; Financial Statements |
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A-31 |
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3.6
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Brokers and Finders Fees |
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A-32 |
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3.7
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Interim Operations of Merger Sub |
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A-33 |
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A-i
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3.8
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Foreign Corrupt Practices Act |
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A-33 |
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3.9
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Legal Proceedings |
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A-33 |
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Article IV CONDUCT BY THE COMPANY PRIOR TO THE EFFECTIVE
TIME |
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A-33 |
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4.1
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Conduct of Business by the Company |
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A-33 |
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Article V ADDITIONAL AGREEMENTS |
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A-35 |
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5.1
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Prospectus/ Proxy Statement; Registration Statement |
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A-35 |
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5.2
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Meeting of Company Stockholders; Board Recommendation |
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A-36 |
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5.3
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Acquisition Proposals |
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A-36 |
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5.4
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Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants |
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A-40 |
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5.5
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Public Disclosure |
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A-40 |
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5.6
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Regulatory Filings; Reasonable Efforts |
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A-41 |
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5.7
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Notification of Certain Matters |
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A-42 |
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5.8
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Third-Party Consents |
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A-42 |
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5.9
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Equity Awards and Employee Matters |
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A-42 |
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5.10
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Indemnification |
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A-43 |
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5.11
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Section 16 Matters |
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A-44 |
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5.12
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Tax Matters |
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A-44 |
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5.13
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145 Affiliates |
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A-45 |
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Article VI CONDITIONS TO THE MERGER |
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A-45 |
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6.1
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Conditions to the Obligations of Each Party to Effect the Merger |
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A-45 |
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6.2
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Additional Conditions to the Obligations of Parent |
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A-45 |
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6.3
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Additional Conditions to the Obligations of the Company |
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A-46 |
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Article VII TERMINATION, AMENDMENT AND WAIVER |
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A-47 |
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7.1
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Termination |
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A-47 |
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7.2
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Notice of Termination; Effect of Termination |
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A-48 |
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7.3
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Fees and Expenses |
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A-49 |
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7.4
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Amendment |
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A-50 |
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7.5
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Extension; Waiver |
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A-50 |
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Article VIII GENERAL PROVISIONS |
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A-50 |
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8.1
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Non-Survival of Representations and Warranties |
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A-50 |
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8.2
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Notices |
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A-50 |
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8.3
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|
Interpretation; Knowledge |
|
|
A-51 |
|
8.4
|
|
Counterparts |
|
|
A-52 |
|
8.5
|
|
Entire Agreement; Third-Party Beneficiaries |
|
|
A-52 |
|
8.6
|
|
Severability |
|
|
A-52 |
|
8.7
|
|
Other Remedies; Specific Performance |
|
|
A-53 |
|
8.8
|
|
Governing Law |
|
|
A-53 |
|
8.9
|
|
Rules of Construction |
|
|
A-53 |
|
8.10
|
|
Assignment |
|
|
A-53 |
|
8.11
|
|
Waiver of Jury Trial |
|
|
A-53 |
|
Exhibit A Form of Voting Agreement |
|
|
|
|
Exhibit B Form of Affiliate Agreement |
|
|
|
|
A-ii
INDEX OF DEFINED TERMS
|
|
|
|
|
Defined Term |
|
Section | |
|
|
| |
401(k) Plan
|
|
|
5.9(d) |
|
Acquisition
|
|
|
7.3(b)(iv) |
|
Acquisition Proposal
|
|
|
5.3(h)(i) |
|
Action of Divestiture
|
|
|
5.6(d) |
|
Agreement
|
|
|
Preamble |
|
Audit
|
|
|
2.6(a) |
|
Average Parent Share Price
|
|
|
1.6(a) |
|
Business Day
|
|
|
1.2 |
|
Certificate of Merger
|
|
|
1.2 |
|
Certificates
|
|
|
1.7(c) |
|
Change of Recommendation
|
|
|
5.3(d) |
|
Change of Recommendation Notice
|
|
|
5.3(d)(iii) |
|
Closing
|
|
|
1.2 |
|
Closing Date
|
|
|
1.2 |
|
COBRA
|
|
|
2.16(a) |
|
Code
|
|
|
Recitals |
|
Company
|
|
|
Preamble |
|
Company Balance Sheet
|
|
|
2.4(b) |
|
Company Charter Documents
|
|
|
2.1(b) |
|
Company Common Stock
|
|
|
1.6(a) |
|
Company Disclosure Schedule
|
|
|
Article II |
|
Company Employee Plan
|
|
|
2.16(a) |
|
Company Financials
|
|
|
2.4(b) |
|
Company Intellectual Property
|
|
|
2.8 |
|
Company Material Contract
|
|
|
2.17(a) |
|
Company Options
|
|
|
2.2(b) |
|
Company Preferred Stock
|
|
|
2.2(a) |
|
Company Products
|
|
|
2.8 |
|
Company Registered Intellectual Property
|
|
|
2.8 |
|
Company SEC Reports
|
|
|
2.4(a) |
|
Company Significant Customer
|
|
|
2.19(a) |
|
Confidentiality Agreements
|
|
|
5.4(a) |
|
Contaminants
|
|
|
2.8(j) |
|
Continuing Employees
|
|
|
5.9(e) |
|
Contract
|
|
|
2.1(a) |
|
Delaware Law
|
|
|
1.1 |
|
Deutsche Bank
|
|
|
2.14 |
|
DOJ
|
|
|
2.3(d) |
|
DOL
|
|
|
2.16(a) |
|
Effect
|
|
|
8.3(d) |
|
Effective Time
|
|
|
1.2 |
|
Employee/ Service Provider
|
|
|
2.16(a) |
|
A-iii
|
|
|
|
|
Defined Term |
|
Section | |
|
|
| |
Employee Agreement
|
|
|
2.16(a) |
|
End Date
|
|
|
7.1(b) |
|
Environmental Claim
|
|
|
2.13(a) |
|
Environmental Laws
|
|
|
2.13(a) |
|
ERISA
|
|
|
2.16(a) |
|
ERISA Affiliate
|
|
|
2.16(a) |
|
Exchange Act
|
|
|
2.3(d) |
|
Exchange Agent
|
|
|
1.7(a) |
|
Exchange Fund
|
|
|
1.7(b) |
|
Exchange Ratio
|
|
|
1.6(a) |
|
FCPA
|
|
|
2.20 |
|
FTC
|
|
|
2.3(d) |
|
GAAP
|
|
|
2.4(b) |
|
Governmental Authorizations
|
|
|
2.10 |
|
Governmental Entity
|
|
|
2.3(d) |
|
HSR Act
|
|
|
2.3(d) |
|
HIPAA
|
|
|
2.16(a) |
|
Include, Includes, Including
|
|
|
8.3(a) |
|
Indemnified Parties
|
|
|
5.10(a) |
|
Intellectual Property
|
|
|
2.8 |
|
Intellectual Property Contracts
|
|
|
2.8(a) |
|
Intellectual Property Rights
|
|
|
2.8 |
|
International Employee Plan
|
|
|
2.16(a) |
|
IRS
|
|
|
2.16(a) |
|
Knowledge
|
|
|
8.3(b) |
|
Lease Documents
|
|
|
2.7(b) |
|
Leased Real Property
|
|
|
2.7(a) |
|
Legal Requirements
|
|
|
1.7(f) |
|
Liens
|
|
|
2.1(c) |
|
Made Available
|
|
|
8.3(c) |
|
Material Adverse Effect
|
|
|
8.3(d) |
|
Materials of Environmental Concern
|
|
|
2.13(a) |
|
Measurement End Date
|
|
|
1.6(a) |
|
Merger Sub
|
|
|
Preamble |
|
Merger Sub Charter Documents
|
|
|
3.1 |
|
Merger Sub Common Stock
|
|
|
1.6(d) |
|
Merger
|
|
|
1.1 |
|
Necessary Consents
|
|
|
2.3(d) |
|
Open Source
|
|
|
2.8 |
|
Option Plans
|
|
|
2.2(b) |
|
Parent
|
|
|
Preamble |
|
Parent Benefit Plan
|
|
|
5.9(e) |
|
Parent Charter Documents
|
|
|
3.1 |
|
Parent Ordinary Shares
|
|
|
1.6(a) |
|
A-iv
|
|
|
|
|
Defined Term |
|
Section | |
|
|
| |
Parent Disclosure Schedule
|
|
|
Article III |
|
Parent Financials
|
|
|
3.5(b) |
|
Parent Options
|
|
|
3.3(a) |
|
Parent SEC Reports
|
|
|
3.5(a) |
|
Parents 401(k) Plan
|
|
|
5.9(d) |
|
Pension Plan
|
|
|
2.16(a) |
|
Per Share Merger Consideration
|
|
|
1.6(e) |
|
Permitted Liens
|
|
|
2.7(c) |
|
Person
|
|
|
8.3(e) |
|
Prospectus/ Proxy Statement
|
|
|
2.21 |
|
Registration Statement
|
|
|
2.21 |
|
SEC
|
|
|
2.3(d) |
|
Securities Act
|
|
|
2.4(a) |
|
Shrink-Wrapped Code
|
|
|
2.8 |
|
Significant Subsidiary
|
|
|
2.1(b) |
|
Significant Supplier
|
|
|
2.19(b) |
|
Source Code
|
|
|
2.8 |
|
Stockholders Meeting
|
|
|
5.2(a) |
|
Subsidiary
|
|
|
2.1(a) |
|
Subsidiary Charter Documents
|
|
|
2.1(b) |
|
Superior Offer
|
|
|
5.3(h)(ii) |
|
Surviving Corporation
|
|
|
1.1 |
|
Tax
|
|
|
2.6(a) |
|
Tax Authority
|
|
|
2.6(a) |
|
Tax Opinions
|
|
|
5.12 |
|
Tax Returns
|
|
|
2.6(a) |
|
Taxes
|
|
|
2.6(a) |
|
Termination Fee
|
|
|
7.3(b)(i) |
|
Top-up Notice
|
|
|
1.6(a) |
|
Trade Secret
|
|
|
2.8 |
|
Triggering Event
|
|
|
7.1 |
|
Voting Agreements
|
|
|
Recitals |
|
Voting Debt
|
|
|
2.2(c) |
|
Walk-Away Notice
|
|
|
1.6(a) |
|
Walk-Away Price
|
|
|
1.6(a) |
|
WARN
|
|
|
2.16(a) |
|
A-v
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
September 4, 2006, by and among Flextronics International
Ltd., a Singapore company (Parent), Granite
Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent (Merger Sub), and
International DisplayWorks, Inc., a Delaware corporation (the
Company).
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub
and the Company have deemed it advisable and in the best
interests of their respective companies and stockholders that
Parent and the Company consummate the business combination and
other transactions provided for herein.
B. Concurrently with the execution of this Agreement, and
as a condition and inducement to Parents willingness to
enter into this Agreement, all current executive officers and
members of the Board of Directors of the Company are entering
into Voting Agreements and irrevocable proxies in substantially
the form attached hereto as Exhibit A (the Voting
Agreements).
C. The Board of Directors of the Company has resolved to
recommend to its stockholders the adoption and approval of this
Agreement and the approval of the Merger.
D. Parent, as the sole stockholder of Merger Sub, has
approved and adopted this Agreement and approved the Merger.
E. Parent, Merger Sub and the Company each desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe certain
conditions to the Merger.
F. For United States federal income tax purposes, the
parties intend that the Merger qualify as a
reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder
(the Code), and this Agreement will be, and
hereby is, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants,
promises and representations set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be
legally bound, do hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At
the Effective Time and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of
the Delaware General Corporation Law (Delaware
Law), Merger Sub shall be merged with and into the
Company (the Merger), the separate corporate
existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly-owned
subsidiary of Parent. The surviving corporation after the Merger
is hereinafter sometimes referred to as the Surviving
Corporation.
1.2 Effective Time;
Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by
filing a Certificate of Merger with the Secretary of State of
the State of Delaware in accordance with the relevant provisions
of Delaware Law (the Certificate of Merger)
(the time of such filing with the Secretary of State of the
State of Delaware (or such later time as may be agreed in
writing by the Company and Parent and specified in the
Certificate of Merger) being the Effective
Time) as soon as practicable on the Closing Date. The
closing of the Merger (the Closing) shall
take place at the offices of Curtis, Mallet-Prevost,
Colt & Mosle LLP, located at 101 Park Avenue, New York,
New York, or such other place as agreed to by the parties, at a
time and date to be specified by the parties, which shall be no
later than the third Business Day after the satisfaction or
waiver of the conditions set forth in Article VI (other
than those that by their terms are to be satisfied or waived at
the Closing), or at such other time, date and
A-1
location as the parties hereto agree in writing. The date on
which the Closing occurs is referred to herein as the
Closing Date. Business Day shall
mean each day that is not a Saturday, Sunday or other day on
which banking institutions located in San Jose, California
are authorized or obligated by law or executive order to close.
1.3 Effect of the
Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges,
powers and franchises of Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties
of Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
1.4 Certificate of
Incorporation and Bylaws. At the Effective Time, the
certificate of incorporation of the Company shall be amended and
restated in its entirety to be identical to the certificate of
incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, until thereafter amended in accordance with
Delaware Law and as provided in 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 and restated in its
entirety to read as follows: The name of the corporation
is International DisplayWorks, Inc. At the Effective Time,
the bylaws of the Company shall be amended and restated in their
entirety to be identical to the bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, until thereafter
amended in accordance with Delaware Law and as provided in such
bylaws.
1.5 Directors and
Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately
prior to the Effective Time, until their respective successors
are duly elected or appointed and qualified. The initial
officers of the Surviving Corporation shall be the officers of
Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed. In addition, unless
otherwise determined by Parent prior to the Effective Time,
Parent, the Company and the Surviving Corporation shall take
such action as reasonably requested by Parent to cause the
directors and officers of Merger Sub immediately prior to the
Effective Time to be the directors and officers, respectively of
each of the Companys Subsidiaries immediately after the
Effective Time, each to hold office as a director or officer of
each such Subsidiary in accordance with the provisions of the
laws of the respective jurisdiction of organization and the
respective bylaws or equivalent organizational documents of each
such Subsidiary.
1.6 Effect on Capital
Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the
Company or the holders of any shares of capital stock of the
Company, the following shall occur:
|
|
|
(a) Company Common Stock. Each share of the
common stock, par value $0.001 per share, of the Company
(Company Common Stock) issued and outstanding
immediately prior to the Effective Time, other than any shares
of Company Common Stock to be canceled pursuant to
Section 1.6(c), will be canceled and extinguished and
automatically converted (subject to Section 1.6(f)) into
the right to receive a fraction (rounded to the nearest ten
thousandth or carried out to five one-hundred thousandths if the
fraction ends in 0.00005) of a validly issued, fully paid and
nonassessable ordinary share, no par value, of Parent
(Parent Ordinary Shares), such fraction to be
in the ratio hereinafter provided (the Exchange
Ratio). If the Average Parent Share Price is |
|
|
|
(i) equal to or greater than $10.5606 and equal to or less
than $12.9074, the Exchange Ratio shall be equal to the quotient
obtained by dividing $6.55 by the Average Parent Share Price; |
|
|
(ii) greater than $12.9074 and equal to or less than
$13.4941, the Exchange Ratio shall be fixed at 0.5075; |
|
|
(iii) greater than $13.4941, the Exchange Ratio shall be
equal to the quotient obtained by dividing $6.85 by the Average
Parent Share Price; or |
|
|
(iv) less than $10.5606, the Exchange Ratio shall be fixed
at 0.6202; |
A-2
|
|
|
provided, that if the Average Parent Share Price is less
than $9.9739 (the Walk-Away Price), the
Company shall have the right to give telephonic notice to Parent
(a Walk-Away Notice), followed promptly by
written notice, that the Company elects to terminate this
Agreement in accordance with Section 7.1(j) hereof. Any
Walk-Away Notice shall be delivered to Parent no later than
5:00 p.m., New York City time on the first Business Day
following the Measurement End Date. If the Company delivers a
timely Walk-Away Notice, Parent shall have the right to give
telephonic notice to the Company (the Top-Up
Notice), followed promptly by written notice, that
Parent elects to increase the Exchange Ratio to equal the
quotient obtained by dividing $6.19 by the Average Parent Share
Price. Any Top-Up Notice shall be delivered to the Company no
later than 5:00 p.m., New York City time on the second
Business Day following the Measurement End Date. As used herein,
the Average Parent Share Price shall mean the
average of the per share closing prices of the Parent Ordinary
Shares reported on the Nasdaq Global Market during the twenty
consecutive trading days ending on the fifth trading day
immediately preceding, but not including, the Closing Date (the
Measurement End Date). |
|
|
|
(b) Repurchase Rights. If any shares of
Company Common Stock outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase
option, risk of forfeiture or other condition (including,
without limitation, restrictions on transferability) under any
applicable restricted stock purchase agreement or other
agreement or arrangement with the Company that does not by its
terms provide that such repurchase option, risk of forfeiture or
other condition lapses upon consummation of the Merger, then the
Parent Ordinary Shares issued in exchange for such shares of
Company Common Stock will, to the extent permitted by applicable
law, also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition (including, without
limitation, restrictions on transferability), and the
certificates representing such Parent Ordinary Shares may
accordingly be marked with appropriate legends. The Company
shall use reasonable best efforts to provide that, from and
after the Effective Time, the Surviving Corporation is entitled
to exercise any such repurchase option or other right set forth
in any such restricted stock purchase agreement or other
agreement. |
|
|
(c) Cancellation of Treasury and Parent Owned
Stock. Each share of Company Common Stock held by the
Company or Parent or any direct or indirect wholly-owned
subsidiary of the Company or of Parent immediately prior to the
Effective Time shall be canceled and extinguished without any
conversion thereof. |
|
|
(d) Capital Stock of Merger Sub. Each share
of common stock, par value $0.001 per share, of Merger Sub
(the Merger Sub Common Stock) issued and
outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable
share of common stock, par value $0.001 per share, of the
Surviving Corporation. |
|
|
(e) Stock Options. At the Effective Time,
each Company Option that is unexpired, unexercised and
outstanding immediately prior to the Effective Time shall, on
the terms and subject to the conditions set forth in this
Agreement, terminate in its entirety at the Effective Time, and
the holder of each Company Option shall to the extent permitted
under the Option Plans be entitled to receive therefor an amount
of cash (rounded down to the nearest whole cent) equal to the
product of (i) the number of shares of Company Common Stock
that are subject to such Company Option and that are unexpired,
unexercised and outstanding immediately prior to the Effective
Time, and (ii) the excess, if any of the Per Share Merger
Consideration over the per share exercise price of such Company
Option immediately prior to the Effective Time. As used herein,
Per Share Merger Consideration shall mean the
product of the Exchange Ratio and the Average Parent Share
Price, rounded down to the nearest whole cent. The Company shall
keep Parent apprised of all actions taken to terminate the
Company Options in accordance with this Section 1.6(e), and
in connection with such termination, the Company shall take such
actions as may be necessary to allow for the net share
settlement of the Company Options upon their exercise, if such
action may be taken without any adverse effect to the Company
and otherwise is effected in a manner approved by Parent. |
|
|
(f) Fractional Shares. No fraction of a
Parent Ordinary Shares will be issued by virtue of the Merger,
but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be |
A-3
|
|
|
entitled to a fraction of a Parent Ordinary Shares (after
aggregating all fractional shares of Parent Ordinary Shares that
otherwise would be received by such holder) shall, upon
surrender of such holders Certificate(s), receive from
Parent an amount of cash (rounded to the nearest whole cent),
without interest, less the amount of any withholding taxes as
contemplated by Section 1.7(f), which are required to be
withheld with respect thereto, equal to the product of:
(i) such fraction, multiplied by (ii) the Average
Parent Share Price. |
|
|
(g) Adjustments to Exchange Ratio. The
Exchange Ratio shall be adjusted to reflect fully the
appropriate effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of
securities convertible into Parent Ordinary Shares or Company
Common Stock), reorganization, recapitalization,
reclassification or other like change with respect to Parent
Ordinary Shares or Company Common Stock having a record date on
or after the date hereof and prior to the Effective Time. |
1.7 Surrender of
Certificates.
(a) Exchange Agent. Parent shall designate a
bank or trust company reasonably satisfactory to the Company to
act as the exchange agent (the Exchange
Agent) for the Merger.
(b) Parent to Provide Common Stock. Prior to
the Effective Time, Parent shall enter into an agreement with
the Exchange Agent, reasonably satisfactory to the Company,
which shall provide that Parent shall make available to the
Exchange Agent for exchange in accordance with this
Article I, the Parent Ordinary Shares issuable pursuant to
Section 1.6(a) in exchange for outstanding shares of
Company Common Stock. In addition, Parent shall make available
as necessary, cash in an amount sufficient for payment in lieu
of fractional shares pursuant to Section 1.6(f) and any
dividends or distributions which holders of shares of Company
Common Stock may be entitled pursuant to Section 1.7(d).
Any cash and Parent Ordinary Shares deposited with the Exchange
Agent shall hereinafter be referred to as the Exchange
Fund.
(c) Exchange Procedures. As promptly as
practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the
Certificates) which immediately prior to the
Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive
Parent Ordinary Shares pursuant to Section 1.6(a), cash in
lieu of any fractional shares pursuant to Section 1.6(f)
and any dividends or other distributions pursuant to
Section 1.7(d): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in customary
form and have such other provisions as Parent may reasonably
specify and the Company shall reasonably approve prior to the
Effective Time) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates
representing whole Parent Ordinary Shares, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any
dividends or other distributions pursuant to
Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent (with appropriate notice of
such appointment having been provided to such holders of
record), together with such letter of transmittal, duly
completed and validly executed in accordance with the
instructions thereto and such other documents as may reasonably
be required by the Exchange Agent, the holder of such
Certificates shall be entitled to receive in exchange therefor
the number of whole Parent Ordinary Shares (after taking into
account all Certificates surrendered by such holder) to which
such holder is entitled pursuant to Section 1.6(a) (which
shall be in uncertificated book entry form unless a physical
certificate is requested or is otherwise required by applicable
law or regulation), payment in lieu of fractional shares which
such holder has the right to receive pursuant to
Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the
ownership of the number of full Parent Ordinary Shares into
which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of
the issuance of any fractional shares in accordance with
Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d).
A-4
(d) Distributions With Respect to Unexchanged
Shares. No dividends or other distributions declared or
made after the date hereof with respect to Parent Ordinary
Shares with a record date after the Effective Time and no
payment in lieu of fractional shares pursuant to
Section 1.6(f) will be paid to the holders of any
unsurrendered Certificates with respect to the Parent Ordinary
Shares represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates,
the Exchange Agent shall deliver to the record holders thereof,
without interest (i) promptly after such surrender, the
number of whole Parent Ordinary Shares issued in exchange
therefor along with payment in lieu of fractional shares
pursuant to Section 1.6(f) and the amount of any such
dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to such whole
shares of Parent Ordinary Shares and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a
payment date subsequent to such surrender payable with respect
to such whole Parent Ordinary Shares.
(e) Transfers of Ownership. If shares of
Parent Ordinary Shares are to be issued in a name other than
that in which the Certificates surrendered in exchange therefor
are registered, it will be a condition of the issuance thereof
that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Persons
requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other Taxes required by reason
of the issuance of Parent Ordinary Shares in any name other than
that of the registered holder of the Certificates surrendered,
or established to the reasonable satisfaction of Parent or any
agent designated by it that such Tax has been paid or is not
payable.
(f) Required Withholding. Each of the
Exchange Agent and the Surviving Corporation shall be entitled
to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder
or former holder of Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or
under any provision of state, local or foreign Tax law or under
any other applicable Legal Requirements. To the extent such
amounts are so deducted or withheld, the amount of such
consideration shall be treated for all purposes under this
Agreement as having been paid to the Person to whom such
consideration would otherwise have been paid. For purposes of
this Agreement, Legal Requirements shall mean
any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution,
ordinance, code, order, edict, decree, directive, rule,
regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.
(g) No Liability. Notwithstanding anything to
the contrary in this Section 1.7, none of the Exchange
Agent, the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any
amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar Legal
Requirements.
(h) Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange Fund as
directed by Parent on a daily basis; provided that no such
investment or loss thereon shall affect the amounts payable to
Company stockholders pursuant to this Article I. Any
interest and other income resulting from such investment shall
become a part of the Exchange Fund, and any amounts in excess of
the amounts payable to Company stockholders pursuant to this
Article I shall be paid to Parent as soon as practicable at
the end of each calendar month.
(i) Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the holders
of Certificates six (6) months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not surrendered such Certificates in
compliance with this Section 1.7 shall after such delivery
to Parent look only to Parent for Parent Ordinary Shares
pursuant to Section 1.6(a), cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or
other distributions pursuant to Section 1.7(d) with respect
to the shares of Company Common Stock formerly represented
thereby.
1.8 No Further Ownership
Rights in Company Common Stock. All Parent Ordinary
Shares issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof
(including any cash paid in respect thereof pursuant to
Section 1.6(f) and 1.7(d)) shall be deemed to have
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been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and there shall be no
further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed
Certificates. In the event any Certificates shall have
been lost, stolen or destroyed, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder
thereof, such Parent Ordinary Shares, cash for fractional
shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d); provided, however, that Parent
may, in its reasonable discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen
or destroyed Certificates to deliver a bond in such sum as it
may reasonably direct as indemnity against any claim that may be
made against Parent, the Company or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.10 Amendment to
Agreement. Upon the written request of Parent, Merger
Sub and the Company shall enter into an amendment to this
Agreement providing that in lieu of the Merger of Merger Sub
with and into Company as contemplated by this Article I,
the structure of the transactions contemplated by this Agreement
would be modified so that Parent may effect an acquisition of
all of the outstanding Company Common Stock directly, or by an
affiliate of Parent or a trust established by Parent or an
affiliate thereof, or may effect a merger of the Company with or
into any other subsidiary or affiliate of Parent, in each case
on the terms specified in such written request of Parent;
provided that (a) the holders of Company Common Stock are
not and will not be adversely affected in any way thereby;
(b) the transaction provided for in such amendment
qualifies as a tax free reorganization pursuant to
Section 368(a) of the Code and that the Companys
stockholders shall not incur any income tax liability as a
result thereof or with respect thereto; and (c) the
transaction does not impose any additional material requirements
or obligations upon the Company (other than obligations arising
after the Effective Time) or adversely affect the ability of any
of the Company, Parent or Merger Sub to satisfy the conditions
to Closing by the scheduled Closing Date set forth in this
Agreement.
1.11 Further Action.
At and after the Effective Time, the officers and directors of
Parent and the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company
and Merger Sub, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of the
Company and Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets acquired or to be
acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub,
subject to the exceptions specifically disclosed in writing in
the disclosure schedule (referencing the appropriate section or
subsection; provided, however, that any information set forth in
one section of the disclosure schedule shall be deemed to apply
to each other section or subsection thereof to which its
relevance is reasonably apparent on its face) supplied by the
Company to Parent dated as of the date hereof (the
Company Disclosure Schedule), as follows:
2.1 Organization; Standing
and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. The
Company and each of its Subsidiaries (i) are each a
corporation or other organization duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation or organization, and (ii) are each
duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the properties owned, leased
or operated by it or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified,
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individually or in the aggregate, would not reasonably be
expected to be material to the Company. The Company and each of
its Subsidiaries each has the requisite power and authority and
all necessary governmental licenses, authorizations, permits,
consents and approvals required to own, lease and operate its
properties and to carry on its business as currently conducted,
except for those licenses, authorizations, permits, consents and
approvals the absence of which, individually or in the
aggregate, would not reasonably be expected to be material to
the Company. For purposes of this Agreement,
Subsidiary, when used with respect to any
party, shall mean any corporation, association, business entity,
partnership, limited liability company or other Person of which
such party, either alone or together with one or more
Subsidiaries or through one or more Subsidiaries
(A) directly or indirectly owns or controls securities or
other interests representing more than 50% of the voting power
of such Person or (B) is entitled, by Contract or
otherwise, to elect, appoint or designate directors or other
Persons constituting a majority of the members of such
Persons board of directors or other governing body. For
purposes of this Agreement, Contract shall
mean any written or oral contract, agreement, lease, license,
subcontract, binding understanding, binding instrument,
indenture, note, bond, loan, binding commitment or other
arrangement or undertaking, including any and all amendments,
exhibits and schedules thereto.
(b) Charter Documents. The Company has Made
Available to Parent a true and correct copy of (i) the
certificate of incorporation and bylaws of the Company, each as
amended to date and as in full force and effect (collectively,
the Company Charter Documents) and
(ii) the certificate of incorporation and bylaws, or like
organizational documents (collectively, Subsidiary
Charter Documents), of each of its Subsidiaries that
is a significant subsidiary within the meaning of
Rule 1-02 of
Regulation S-X
promulgated by the SEC (a Significant
Subsidiary), each as amended to date and as in full
force and effect. The Company is not in violation of any of the
provisions of the Company Charter Documents and none of its
Subsidiaries is in material violation of its respective
Subsidiary Charter Documents.
(c) Subsidiaries. Section 2.1(c) of the
Company Disclosure Schedule sets forth each Subsidiary of the
Company. The Company is the direct or indirect owner of all of
the outstanding shares of capital stock of, or other equity or
voting interests in, each such Subsidiary and all such shares or
interests have been duly authorized, validly issued and are
fully paid and nonassessable, free and clear of all pledges,
claims, liens, charges, encumbrances, options, restrictions and
security interests of any kind or nature whatsoever
(collectively, Liens), except for
restrictions imposed by applicable securities laws. Other than
the Subsidiaries of the Company, neither the Company nor any of
its Subsidiaries owns any capital stock of, or other equity or
voting interests of any nature in, or any interest convertible,
exchangeable or exercisable for, capital stock of, or other
equity or voting interests of any nature in, any other Person.
2.2 Capital Structure.
(a) Capital Stock. The authorized capital
stock of the Company consists of:
(i) 100,000,000 shares of Company Common Stock and
(ii) 10,000,000 shares of undesignated preferred
stock, par value $0.001 per share (the Company
Preferred Stock). As of the close of business on
September 1, 2006: (i) 44,831,829 shares of
Company Common Stock were issued and outstanding, and
(ii) no shares of Company Common Stock were held by the
Company in its treasury; and, as of the date hereof, no shares
of Company Preferred Stock were issued or outstanding. No shares
of Company Common Stock are owned or held by any Subsidiary of
the Company. All outstanding shares of Company Common Stock are
duly authorized, validly issued, fully paid and non-assessable
and are not subject to preemptive rights created by statute, the
Company Charter Documents, or any agreement to which the Company
is a party or by which it is bound.
(b) Company Options. As of the close of
business on September 1, 2006:
(i) 2,867,800 shares of Company Common Stock are
issuable upon the exercise of outstanding options to purchase
Company Common Stock under the Companys 2000 Equity
Incentive Plan, 2005 Equity Incentive Plan, and under an option
granted to Thomas Lacey dated September 7, 2004
(collectively, the Option Plans) (such
options, whether payable in cash, shares or otherwise granted
under or pursuant to the Option Plans are referred to in this
Agreement as Company Options); and
(ii) there are no shares of Company Common Stock issuable
upon the exercise of outstanding options to purchase Company
Common Stock that were not issued under the
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Option Plans. Section 2.2(b)(i) of the Company Disclosure
Schedule sets forth a list of each outstanding Company Option,
including (a) the name of the holder of such Company
Option; (b) the number of shares of Company Common Stock
subject to such Company Option; (c) the exercise price of
such Company Option; (d) the date on which such Company
Option was granted or issued; (e) the Option Plan under
which such Company Option was issued and whether such Company
Option is an incentive stock option (as defined in
Section 422 of the Code) or a nonqualified stock option;
(f) for each Company Option, whether such Company Option is
held by a Person who is not an employee of the Company or any of
its Subsidiaries; (g) the applicable vesting schedule, if
any, and the extent to which such Company Option is vested and
exercisable as of the date hereof; and (h) the date on
which such Company Option expires. All shares of Company Common
Stock subject to issuance under the Option Plans have been duly
authorized, and upon issuance in accordance with the terms and
conditions specified in the Option Plans, will be validly
issued, fully paid and nonassessable. Except as set forth in
Section 2.2(b)(ii) of the Company Disclosure Schedule,
there are no commitments or agreements of any character to which
the Company is bound obligating the Company to accelerate the
vesting or exercisability of any Company Option as a result of
the Merger (whether alone or upon the occurrence of any
additional or subsequent events). There are no outstanding or
authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to the
Company. Each outstanding Company Option has been granted with
an exercise price no less than the fair market value of the
shares of Company Common stock subject to such Company Options
on the date of grant.
(c) Voting Debt. Neither the Company nor any
of its Subsidiaries has outstanding any bonds, debentures, notes
or other indebtedness which carries or possesses the right to
vote on any matters on which stockholders may vote or which is
convertible into, or exchangeable for, securities having such
right (collectively, Voting Debt).
(d) Other Securities. Except as otherwise set
forth in Section 2.2(b) or Section 2.2(d) of the
Company Disclosure Schedule, as of the date hereof, there are no
securities, options, warrants, calls, rights, contracts,
commitments, agreements, instruments, arrangements,
understandings, obligations or undertakings of any kind to which
the Company or any of its Subsidiaries is a party or by which
any of them is bound obligating (or purporting to obligate) the
Company or any of its Subsidiaries to (including on a deferred
basis) issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock, Voting Debt, other
voting securities or any securities convertible into shares of
capital stock, Voting Debt or other voting securities of the
Company or any of its Subsidiaries, or obligating the Company or
any of its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment,
agreement, instrument, arrangement, understanding, obligation or
undertaking. There are no outstanding Contracts to which the
Company or any of its Subsidiaries is a party or by which any of
them is bound obligating the Company or any of its Subsidiaries
to (i) repurchase, redeem or otherwise acquire any shares
of capital stock of, or other equity or voting interests in, the
Company or any of its Subsidiaries or (ii) dispose of any
shares of the capital stock of, or other equity or voting
interests in, any of its Subsidiaries. The Company is not a
party to any voting agreement with respect to shares of the
capital stock of, or other equity or voting interests in, the
Company or any of its Subsidiaries and, to the Companys
Knowledge, other than the Voting Agreements and the irrevocable
proxies granted pursuant to the Voting Agreements, there are no
irrevocable proxies, voting agreements, or voting trusts with
respect to any Company Common Stock. There are no rights plans,
anti-takeover plans or registration rights agreements with
respect to any shares of the capital stock of, or other equity
or voting interests in, the Company or any of its Significant
Subsidiaries to which the Company or any of its Subsidiaries is
a party or by which any of them are bound.
(e) No Changes. Since the close of business
on September 1, 2006 and through the date hereof, other
than pursuant to the exercise of Company Options outstanding as
of the close of business on September 1, 2006 issued
pursuant to the Option Plans, there has been no change in
(A) the outstanding capital stock of the Company,
(B) the number of Company Options outstanding, or
(C) the number of other options, warrants or other rights
to purchase capital stock of the Company.
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2.3 Authority; No Conflict;
Necessary Consents.
(a) Authority. The Company has all requisite
corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby, subject, in
the case of consummation of the Merger, to obtaining the
adoption of this Agreement by the Companys stockholders as
contemplated in Section 5.2. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no further
action is required on the part of the Company to authorize the
execution and delivery of this Agreement or to consummate the
Merger and the other transactions contemplated hereby, subject
only to the adoption of this Agreement by the Companys
stockholders as contemplated by Section 5.2 and the filing
of the Certificate of Merger pursuant to Delaware Law. The
affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock is the only vote of the holders
of any class or series of Company capital stock necessary to
adopt this Agreement and consummate the Merger. This Agreement
has been duly executed and delivered by the Company and assuming
due authorization, execution and delivery by Parent and Merger
Sub, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to
general principles of equity.
(b) The Board of Directors of the Company has, by
resolution duly adopted by unanimous vote at a meeting of all
Directors duly called and held (i) determined that the
Merger is fair to, and in the best interests of, the Company and
its stockholders and declared the Merger to be advisable,
(ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, and
(iii) recommended that the stockholders of the Company
adopt this Agreement and directed that such matter be submitted
to the Companys stockholders at the Stockholders
Meeting. As of the date hereof, the Board of Directors of the
Company has not subsequently rescinded or modified in any way
the foregoing resolutions.
(c) No Conflict. The execution and delivery
by the Company of this Agreement and the consummation of the
transactions contemplated hereby do not and will not
(i) conflict with or violate any provision of the Company
Charter Documents or any Subsidiary Charter Documents of any
Subsidiary of the Company, (ii) subject to obtaining the
adoption of this Agreement by the Companys stockholders as
contemplated in Section 5.2 and compliance with the
requirements set forth in Section 2.3(d), conflict with or
violate any Legal Requirements applicable to the Company or any
of its Subsidiaries or by which the Company or any of its
Subsidiaries or any of their respective properties or assets
(whether tangible or intangible) is bound or affected,
(iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time
or both would become a material default) under, or impair the
Companys rights or alter the rights or obligations of any
third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any Company Material
Contract or any other Contract to which the Company or any of
its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or its or any of their respective assets or
properties are bound or affected, or (iv) result in the
creation of a Lien on any of the properties or assets of the
Company or any of its Subsidiaries. Section 2.3(c) of the
Company Disclosure Schedule lists all consents, waivers and
approvals required to be obtained in connection with the
consummation of the transactions contemplated hereby under any
Contract to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound or any of their properties or assets is bound or affected,
which if individually or in the aggregate not obtained, could
reasonably be expected to result in a material loss of benefits
to the Company, Parent or the Surviving Corporation as a result
of the Merger.
(d) Necessary Consents. No consent, waiver,
approval, order or authorization of, or registration,
declaration or filing with any supranational, national, state,
municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other
governmental authority or instrumentality or any
quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental
authority (a Governmental Entity) is required
to be obtained or made by the Company in connection with the
execution and delivery of this Agreement by the Company or the
consummation of the Merger by the Company and other transactions
contemplated hereby, except for (i) the
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filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business, (ii) the filing and effectiveness
of the Prospectus/ Proxy Statement with the United States
Securities and Exchange Commission (the SEC)
in accordance with the requirements of the Securities Exchange
Act of 1934, as amended (the Exchange Act),
and the rules and regulations promulgated thereunder,
(iii) the filing of the Notification and Report Forms with
the United States Federal Trade Commission
(FTC) and the Antitrust Division of the
United States Department of Justice (DOJ)
required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (HSR Act) and the
expiration or termination of the applicable waiting period under
the HSR Act, and such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may
be required under the foreign merger control regulations
identified in Section 2.3(d) of the Company Disclosure
Schedule, (iv) such other filings and notifications as may
be required to be made by the Company under federal, state or
foreign securities laws or the rules and regulations of The
Nasdaq Stock Market, and (v) such other consents, waivers,
approvals, orders, authorizations, registrations, declarations
and filings which, if not obtained or made would not,
individually or in the aggregate, reasonably be expected to
materially affect the ability of the Company to consummate the
Merger or have a Material Adverse Effect on the Company. The
consents, approvals, orders, authorizations, registrations,
declarations and filings set forth in (i) through
(iv) are referred to herein as the Necessary
Consents.
2.4 SEC Filings; Financial
Statements; Internal Controls.
(a) SEC Filings. The Company has timely filed
or furnished all required registration statements, prospectuses,
reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated by
reference) required to be filed or furnished by it with the SEC
since November 1, 2002. All such required registration
statements, prospectuses, reports, schedules, forms, statements
and other documents, as each of the foregoing have been amended
since the time of their filing (including those that the Company
may file subsequent to the date hereof) are referred to herein
as the Company SEC Reports. As of their
respective dates, the Company SEC Reports (i) were prepared
in accordance with, and complied in all material respects with,
the requirements of the Securities Act of 1933, as amended (the
Securities Act), or the Exchange Act, as the
case may be, and, in each case, the rules and regulations
promulgated thereunder applicable to such Company SEC Reports
and (ii) did not at the time they were filed or furnished
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
to the extent corrected: (A) in the case of Company SEC
Reports filed on or prior to the date of this Agreement that
were amended or superseded on or prior to the date of this
Agreement, by the filing of the applicable amending or
superseding Company SEC Report; and (B) in the case of
Company SEC Reports filed after the date of this Agreement that
are amended or superseded prior to the Closing, by the filing of
the applicable amending or superseding Company SEC Report. None
of the Companys Subsidiaries is required to file any
forms, reports or other documents with the SEC. The Company has
Made Available to Parent complete and correct copies of all
amendments and modifications to the Company SEC Reports effected
prior to the date of this Agreement that have not yet been filed
by the Company with the SEC but which are required to be filed.
The Company has Made Available to Parent true, correct and
complete copies of all correspondence, other than transmittal
correspondence, between the SEC, on the one hand, and the
Company and any of its Subsidiaries, on the other, since
November 1, 2002, including all SEC comment letters and
responses to such comment letters by or on behalf of the
Company. To the Companys Knowledge, as of the date hereof,
none of the Company SEC Reports is the subject of ongoing SEC
review or outstanding SEC comment. Each of the principal
executive officer of the Company and the principal financial
officer of the Company (or each former principal executive
officer of the Company and each former principal financial
officer of the Company, as applicable) has made all
certifications required by
Rule 13a-14 or
Rule 15d-14 under
the Exchange Act or Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 with respect to the Company SEC
Reports. For purposes of the preceding sentence, principal
executive officer and principal financial
officer shall have the meanings given to such terms in the
Sarbanes-Oxley Act of 2002.
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(b) Financial Statements. Each of the
consolidated financial statements (including, in each case, any
accompanying notes thereto) contained in the Company SEC Reports
(including each Company SEC Report filed after the date hereof
until the Closing), including the consolidated statement of
operations, consolidated statement of cash flows and
consolidated balance sheet for the year ended, and as of,
October 31, 2005 (the Company
Financials): (i) complied as to form in all
material respects with the published rules and regulations of
the SEC with respect thereto, (ii) was prepared in
accordance with United States generally accepted accounting
principles (GAAP) applied on a consistent
basis throughout the periods covered (except as may be indicated
in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the rules of the
SEC and except that the unaudited financial statements may not
contain footnotes and are subject to normal and recurring
year-end adjustments) and (iii) fairly presented the
consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of the Companys operations and
cash flows for the periods indicated (subject, in the case of
unaudited quarterly statements, to normal year-end audit
adjustments). The Company does not intend to correct or restate,
and there is not any basis to correct or restate any of the
Company Financials. The consolidated balance sheet of the
Company and its consolidated subsidiaries as of October 31,
2005 contained in the Company SEC Reports is hereinafter
referred to as the Company Balance Sheet.
Except as disclosed in the Company Financials, neither the
Company nor any of its Subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise), except for
(i) liabilities incurred since the date of the Company
Balance Sheet in the ordinary course of business consistent with
past practice, (ii) liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, and
(iii) liabilities that would not reasonably be expected to
be material to the Company and its Subsidiaries, taken as a
whole. The Company has not had any disagreement with Grant
Thornton, its independent public accountants, regarding material
accounting matters or policies during any of its past three full
fiscal years or during the current fiscal
year-to-date. The books
and records of the Company and each Subsidiary have been, and
are being, maintained in accordance with applicable legal and
accounting requirements and the Company Financials are
consistent with such books and records. Neither the Company nor
any of its Subsidiaries is a party to, or has any commitment to
become a party to, any off-balance sheet
arrangements (as defined in Item 303(a) of
Regulation S-K of
the SEC).
(c) Internal Controls. The Company has
established and maintains a system of internal controls over
financial reporting required by
Rules 13a-15(f) or
15d-15(f) under the
Exchange Act designed to provide reasonable assurances regarding
the reliability of financial reporting and the preparation of
its consolidated financial statements in accordance with GAAP
and including those policies and procedures that:
(i) require the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company and its Subsidiaries;
(ii) provide reasonable assurance that material information
relating to the Company and its Subsidiaries is promptly made
known to the officers responsible for establishing and
maintaining the system of internal controls; (iii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of the Company and its
Subsidiaries are being made only in accordance with
authorizations of management and the Board of Directors of the
Company; (iv) provide reasonable assurance that the
reporting of assets is compared with existing assets at regular
intervals and appropriate action is taken with respect to any
differences; and (v) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use
or disposition of the assets of the Company and its
Subsidiaries. There are no material weaknesses (as
defined by the Public Company Accounting Oversight Board) in the
design or operation of the Companys internal controls, and
there is no series of multiple significant
deficiencies (as defined by the Public Company Accounting
Oversight Board) that collectively represents a material
weakness in the design or operation of the Companys
internal controls. Since October 31, 2005, neither the
Company nor any of its Subsidiaries (including any current
Employee/ Service Provider thereof) nor, to the Companys
Knowledge, the Companys independent auditors have
identified or been made aware of (A) any significant
deficiency or material weakness in the system of internal
controls utilized by the Company and its Subsidiaries,
(B) any fraud, whether or not material, that involves the
Companys management or other employees who have a role in
the preparation of financial statements or
A-11
the internal controls utilized by the Company and its
Subsidiaries, or (C) any material claim or allegation
regarding any of the foregoing.
(d) Disclosure Controls. The Company has
established and maintains disclosure controls and procedures
required by
Rules 13a-15(e) or
15d-15(e) under the
Exchange Act to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and
forms and is accumulated and communicated to the Companys
management to allow timely decisions regarding required
disclosure.
(e) Other Controls and Procedures. The
Company has established and maintains a system of controls and
procedures sufficient to (i) provide assurance that any
significant deficiencies or material weaknesses in the design or
operation of internal controls which are reasonably likely to
materially and adversely affect the ability to record, process,
summarize and report financial information, and any fraud that
is detected by the Company, whether or not material, that
involves the Companys management or other employees who
have a role in the preparation of financial statements or the
internal controls utilized by the Company and its Subsidiaries,
are adequately and promptly disclosed to the Companys
independent auditors and the audit committee of the
Companys Board of Directors and (ii) provide
reasonable assurance that access to assets is permitted only in
accordance with managements general or specific
authorization.
2.5 Absence of Certain
Changes or Events. Except as otherwise set forth in
Section 2.5 of the Company Disclosure Schedule, since the
date of the Company Balance Sheet through the date hereof, the
business of the Company and its Subsidiaries has been conducted
in the ordinary course consistent with past practices and there
has not been, accrued or arisen:
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(a) any event, change or development that has had or would
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company; |
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(b) any merger or consolidation involving the Company or
any of its Subsidiaries, or any acquisition by the Company or
any of its Subsidiaries of any business, whether by purchasing
all or substantially all of the assets of or equity securities
of, or otherwise acquiring, any business or corporation,
partnership, association or other business organization or a
division thereof; |
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(c) any material Contract entered into by the Company or
any of its Subsidiaries, other than in the ordinary course of
business and as provided to Parent, or any material amendment or
termination of, or default under, any material Contract to which
the Company or any of its Subsidiaries is a party or by which it
or any of them is bound; |
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(d) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Companys or any of its
Subsidiaries capital stock (other than any distribution,
payment or dividend by any of the Companys Subsidiaries to
the Company or to any of the other Companys Subsidiaries),
or any purchase, redemption or other acquisition by the Company
or any of its Subsidiaries of any of the Companys or any
of its Subsidiaries capital stock or any other securities
of the Company or any options, warrants, calls or rights to
acquire any such shares or other securities (except for
repurchases from employees following their termination pursuant
to the terms of their pre-existing stock option agreements and
other than transactions among the Company and its Subsidiaries); |
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(e) any split, combination, recapitalization, exchange,
readjustment or reclassification of any of the Companys or
any of its Subsidiaries capital stock; |
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(f) any granting by the Company or any of its Subsidiaries,
whether orally or in writing, of any (i) increase in
compensation or fringe benefits payable or otherwise due to
officers of the Company or any Subsidiary or (ii) material
increase in compensation or fringe benefits payable or otherwise
due to any non-officer employees of the Company or any
Subsidiary whose annual base salary is in excess of $100,000
other than in the ordinary course of business consistent with
past practice; |
A-12
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(g) (i) any change by the Company or any of its
Subsidiaries of severance, termination or bonus policies and
practices (excluding sales commissions), (ii) any change in
the policy of the Company relating to the granting of stock
options to its employees, directors and consultants;
(iii) any entry by the Company or any of its Subsidiaries
into, or amendment of, (A) any employment, severance,
deferred compensation, termination, change of control or
indemnification agreement or (B) any agreement the benefits
of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the
Company of the nature contemplated hereby (either alone or upon
the occurrence of additional or subsequent events), or
(iv) the establishment, adoption or amendment (except as
required by law) of any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement or other similar
benefit plan or arrangement covering any director, officer or
employee of the Company or any of its Subsidiaries; |
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(h) any material amendment or termination of any Company
Material Contract; |
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(i) any Contract entered into by the Company or any of its
Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets or property) or any
relinquishment by the Company or any of its Subsidiaries of any
Contract or other right, in each case having a stated contract
amount or involving obligations or entitlements with a value of
more than $500,000 in each individual case (other than Contracts
with customers, suppliers, distributors and representatives
entered into in the ordinary course of business, consistent with
past practice); |
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(j) any change in any method of accounting principles or
practices by the Company or any of its Subsidiaries, except for
any such change required by reason of a concurrent change in
GAAP or
Regulation S-X
under the Exchange Act; |
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(k) any debt, capital lease or other debt or equity
financing transaction by the Company or any of its Subsidiaries
or entry into any agreement by the Company or any of its
Subsidiaries in connection with any such transaction, except for
capital leases entered into in the ordinary course of business
consistent with past practice which are not, individually or in
the aggregate, material to the Company and its Subsidiaries
taken as a whole; |
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(l) any grants of any material refunds, credits, rebates or
other allowances by the Company or any of its Subsidiaries to
any customer, reseller or distributor, in each case, other than
in the ordinary course of business consistent with past practice; |
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(m) any material change in the level of product returns,
bad debts or reserves relating to accounts receivable
experienced by the Company or any of its Subsidiaries; |
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(n) any material restructuring activities by the Company or
any of its Subsidiaries, including any material reductions in
force, or any lease terminations or restructuring of contracts; |
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(o) any license of or Lien on any properties or assets,
except licenses and Liens which are not material, individually
or in the aggregate, to the business of the Company or any of
its Subsidiaries; |
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(p) any loan, advance or capital contribution by the
Company or any of its Subsidiaries to, or investment in, any
Person other than (i) loans or advances to Employees/
Service Providers in connection with business related travel and
expenses, in each case in the ordinary course of business
consistent with past practice; (ii) loans, advances or
capital contributions or investments by the Company to or in any
wholly-owned Subsidiary, by any wholly-owned Subsidiary in the
Company, or by a wholly-owned Subsidiary of the Company in any
other wholly-owned Subsidiary of the Company; or
(iii) loans or advances to vendors consistent with past
practice that are not, individually or in the aggregate,
material to the Company and its Subsidiaries, taken as a whole; |
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(q) any material purchases of fixed assets or other long
term assets other than in the ordinary course of business and in
a manner consistent with past practice; |
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(r) any amendment of any material Tax Returns, any adoption
of or change in any material election in respect of Taxes,
adoption or change in any accounting method in respect of Taxes,
agreement or |
A-13
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settlement of any closing agreement relating to an Audit, or
consent to any waiver of the statutory period of limitations in
respect of any Audit; |
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(s) any material revaluation, or any indication that such a
revaluation is required under GAAP, by the Company or any of its
Subsidiaries of any of their respective assets, including,
without limitation, writing down the value of long-term or
short-term investments, fixed assets, goodwill, intangible
assets, deferred tax assets, or writing off notes or accounts
receivable other than in the ordinary course of business
consistent with past practice; |
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(t) any significant deficiency or material weakness
identified in the system of internal controls utilized by the
Company and its Subsidiaries; |
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(u) any settlement of any lawsuit or other proceeding by
the Company or any Subsidiary; |
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(v) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties,
assets or business of the Company or any of its
Subsidiaries; or |
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(w) any material recall, field notification or field
correction with respect to products manufactured by on or behalf
of the Company or any of its Subsidiaries. |
2.6 Taxes.
(a) Definitions. Tax (and,
with correlative meaning, Taxes and
Taxable) means (i) all foreign, federal,
state and local, income, profits, franchise, gross receipts,
payroll, transfer, sales, employment, use, property, excise,
value added, ad valorem, estimated, stamp, alternative or add-on
minimum, recapture, withholding and any other taxes, together
with all interest, penalties and additions imposed on or with
respect to such amounts and (ii) any liability for payment
of any amounts of the type described in clause (i) as a
result of being a member of an affiliated, consolidated,
combined or unitary group. Tax Authority
means the IRS and any other domestic or foreign governmental
authority responsible for the administration of any Taxes.
Tax Return means any return, declaration,
report, claim for refund, or information return or statement
filed or required to be filed with any Tax Authority in
connection with the determination, assessment, collection or
imposition of any Taxes. Audit means any
audit, assessment, examination, written claim, or other written
inquiry relating to Taxes by any Tax Authority or any judicial
or administrative proceeding relating to Taxes.
(b) Tax Returns and Audits.
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(i) All Tax Returns required to be filed by or with respect
to the Company and each of its Subsidiaries have been timely
filed and in the manner prescribed by law. All such Tax Returns
are true, correct and complete in all material respects, and all
Taxes owed by the Company and its Subsidiaries, whether or not
shown on any Tax Return (including all withholding and payroll
Taxes), have been paid. None of the Company or any of its
Subsidiaries has received written notice of any claim by any Tax
Authority in any jurisdiction other than in which it has filed
Tax Returns that the Company or any of its Subsidiaries are or
may be subject to taxation by that jurisdiction. |
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(ii) No material adjustment relating to any Tax Return of
the Company or any of its Subsidiaries by any Tax Authority has
been proposed in writing formally or informally by any Tax
Authority to the Company or any of its Subsidiaries. |
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(iii) There are no Liens or other encumbrances with respect
to Taxes upon any of the assets or properties of the Company or
any of its Subsidiaries, other than with respect to Taxes not
yet due and payable. |
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(iv) No Audit is currently pending with respect to any Tax
Return of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has received any written
communication from any Tax Authority that an Audit is
forthcoming. Neither the Company nor any of its Subsidiaries has
been delinquent in the payment of any material Tax, and there is
no deficiency for any Taxes that is outstanding, assessed or
proposed against the Company or any of its Subsidiaries, which
deficiency has not been paid in full when due and payable. |
A-14
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(v) There are no outstanding written agreements or waivers
extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of,
Taxes due from or with respect to the Company or any of its
Subsidiaries for any taxable period. No power of attorney
granted by or with respect to the Company or any of its
Subsidiaries relating to Taxes is currently in force, and no
extension of time for filing any Tax Return required to be filed
by or on behalf of the Company or any of its Subsidiaries is in
force. The Company has delivered or made available to Parent
complete and correct copies of all foreign, federal and state
income Tax Returns, audit reports and statements of deficiencies
for the Company and each of its Subsidiaries filed by or issued
to or with respect to the Company and each of its Subsidiaries
for all periods which have been requested by Parent. |
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(vi) With respect to Taxes not yet due or owing, the
Company and its Subsidiaries have made such accruals for such
Taxes in the Company Financials as are required by GAAP. The
Company and its Subsidiaries have no liability for unpaid Taxes
which have not been accrued for or reserved in the most recent
Company Financials, whether asserted or unasserted, contingent
or otherwise, which is material to the Company, other than any
liability for unpaid Taxes that may have accrued since the date
of the most recent Company Financials in connection with the
operation of the business of the Company and its Subsidiaries in
the ordinary course, including, without limitation, as a result
of acquisitions. |
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(vii) Neither the Company nor any of its Subsidiaries is a
party to or bound by, or has any obligation under, any Tax
sharing agreement or similar contract or arrangement. Neither
the Company nor any of its Subsidiaries has been a member of an
affiliated group filing a consolidated, combined, or unitary
income Tax Return (other than a group the common parent of which
was the Company). Neither the Company nor any of its
Subsidiaries has liability for the Taxes of any person (other
than the Company and such Subsidiary) under Treasury
Regulation 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by
contract, or otherwise. |
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(viii) Neither the Company nor any of its Subsidiaries has
agreed to, or is required to, make any adjustments under
Section 481(a) or Section 263A of the Code or any
comparable provision under state or foreign Tax laws by reason
of a change in accounting method or otherwise. |
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(ix) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code in the two years prior to the date of this Agreement or in
a distribution which could otherwise constitute part of a
plan or series of related transaction
(within the meaning of Section 355(e) of the Code) in
conjunction with the Merger. |
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(x) There are no outstanding options, warrants, securities
convertible into stock or other contractual obligations that
might reasonably be treated for Federal income tax purposes as
stock or another equity interest in the Company or any of its
Subsidiaries. |
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(xi) All transactions among the Company and any of its
Subsidiaries (and all other inter-company transactions) comply
with the transfer pricing rules contained in Section 482 of
the Code (and similar provisions of applicable state, local or
foreign law); the Company and its Subsidiaries have complied
with all Tax reporting, filing and documentation required under
the Code (and similar provisions of applicable state, local or
foreign law) relating to such intercompany transactions; and
neither the Company nor any of its Subsidiaries has entered into
any advance pricing agreement or similar agreement or received
written notice from a Tax Authority regarding any transfer
pricing inquiry under Section 482 of the Code (or a similar
provision of state, local or foreign law) that remains
unresolved. |
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(xii) The Company and its Subsidiaries have not
participated in a reportable transaction
(as defined in Section 1.6011-4 of the United States
Treasury Regulations promulgated under the Code). |
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(xiii) The Company and each of its Subsidiaries is not, and
during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code has not been, a United
States real property holding corporation within the meaning of
Section 897(c)(2) of the Code. |
A-15
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(xiv) Section 2.6 of the Company Disclosure Schedule
sets forth the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company or its
Subsidiaries as of the Closing Date. |
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(xv) None of Companys nor any of its
Subsidiaries assets are tax exempt use property within the
meaning of Section 168(h) of the Code. |
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(xvi) Neither the Company nor any of its Subsidiaries has
taken or agreed to take any action, or is aware of any fact or
circumstance, that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the
Code. |
2.7 Title to
Properties.
(a) Properties. Neither the Company nor any
of its Subsidiaries owns any real property. Section 2.7(a)
of the Company Disclosure Schedule sets forth a true and
complete list of all real property currently leased, licensed or
subleased by the Company or any of its Subsidiaries or otherwise
used or occupied by the Company or any of its Subsidiaries (the
Leased Real Property). All Lease Documents
are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under
any of the Lease Documents, any material existing breach,
default or event of default (or event which with notice or lapse
of time, or both, would constitute a default) by the Company or
its Subsidiaries or, to the Companys Knowledge, any third
party under any of the Lease Documents, in each case subject to
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity. Except
as set forth on Section 2.7(a) of the Company Disclosure
Schedule, (i) no parties other than the Company or any of
its Subsidiaries have a right to occupy any material Leased Real
Property, (ii) the Leased Real Property is used only for
the operation of the business of the Company and its
Subsidiaries, (iii) the Leased Real Property and the
physical assets of the Company and the Subsidiaries are, in all
material respects, in good condition and repair and regularly
maintained in accordance with standard industry practice,
(iv) to the Companys Knowledge, the Leased Real
Property is in compliance, in all material respects, with Legal
Requirements and (v) neither the Company nor any of its
Subsidiaries will be required to incur any material cost or
expense for any restoration or surrender obligations, or any
other material costs otherwise qualifying as asset retirement
obligations under Financial Accounting Standards Board Statement
of Financial Accounting Standard No. 143 Accounting
for Asset Retirement Obligations, upon the expiration or
earlier termination of any leases or other occupancy agreements
for the Leased Real Property.
(b) Documents. The Company has Made Available
to Parent true, correct and complete copies of all Contracts
under which the Leased Real Property is currently leased,
licensed, subleased used or occupied by the Company or any of
its Subsidiaries (Lease Documents).
(c) Valid Title. The Company and each of its
Subsidiaries have good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all
of their material tangible properties and assets, real, personal
and mixed, reflected in the latest Company Financials included
in the Company SEC Reports (except for personal property sold
since the date of the latest Company Financials in the ordinary
course of business consistent with past practice), free and
clear of any Liens except (i) with respect to Liens
securing obligations reflected in the Company Balance Sheet,
(ii) (A) statutory liens for Taxes or other payments
that are not yet due and payable; (B) statutory liens to
secure obligations to landlords, lessors or renters under leases
or rental agreements; (C) deposits or pledges made in
connection with, or to secure payment of, workers
compensation, unemployment insurance or similar programs
mandated by Legal Requirements; (D) statutory liens in
favor of carriers, warehousemen, mechanics and materialmen, to
secure claims for labor, materials or supplies and other like
liens; and (E) statutory purchase money liens
(clauses (A), (B), (C), (D) and (E) collectively,
the Permitted Liens) and (iii) such
imperfections of title which do not materially impair the
continued use of the properties or assets subject thereto or
affected thereby, or otherwise materially impair business
operations at such properties. The rights, properties and assets
presently owned, leased or licensed by the Company and its
Subsidiaries include all rights, properties and assets necessary
to permit the Company and its Subsidiaries to conduct their
business in all material respects in the same manner as their
businesses have been conducted prior to the date hereof.
A-16
2.8 Intellectual
Property. Definitions. For all purposes of this
Agreement, the following terms shall have the following
respective meanings:
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Company Intellectual Property shall mean any
and all Intellectual Property and Intellectual Property Rights
that are owned by, or exclusively licensed to, the Company or
its Subsidiaries. |
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Company Products shall mean all products and
services developed or under development by or on behalf of the
Company or any of its Subsidiaries and owned, made, provided,
distributed, imported, sold or licensed by or on behalf of the
Company or any of its Subsidiaries. |
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Intellectual Property shall mean any or all
of the following (i) original works of authorship including
computer programs, source code and executable code, whether
embodied in software, firmware or otherwise, documentation,
designs, files and records, (ii) inventions (whether or not
patentable), discoveries, improvements and technology,
(iii) trademarks and service marks, logos, trade names,
trade dress, (iv) Trade Secrets, (v) domain names, web
addresses and sites, (vi) tools, methods and processes and
(vii) schematics. |
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Intellectual Property Contract shall mean any
Contract that is material to the business of the Company and
that provides for the license or other use of Company
Intellectual Property or the license or other use by the Company
or its Subsidiaries of Intellectual Property or Intellectual
Property Rights of a third party. |
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Intellectual Property Rights shall mean all
statutory or common law rights in Intellectual Property,
together with the right to enforce and recover remedies for
infringement thereof. |
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Open Source Code shall mean Source Code that
is subject, in whole or in part, to open source, public source
or freeware license provisions, including without limitation any
GNU general public license or GNU lesser general public license,
or other software license whose terms require the distribution
of or access to Source Code or restrict the ability of the
licensee to charge for distribution of or to use software for
commercial purposes. |
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Registered Intellectual Property shall mean
any Intellectual Property Rights which have been registered,
filed, or issued by or under the authority of any Governmental
Entity responsible for issuing or registering Intellectual
Property or Intellectual Property Rights, including, without
limitation, (i) patents and patent applications,
(ii) copyright registrations and copyright applications and
moral rights, (iii) trademark and service mark
registrations, and applications therefor, (iv) trade name
and domain name registrations, (v) designs registrations,
and (vi) divisions, continuations, renewals, reissuances
and extensions of any of the foregoing (as applicable). |
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Shrink-Wrapped Code shall mean generally
commercially available
off-the-shelf software
code or programs where available for a cost of not more than
$10,000 for a perpetual license for a single user or work
station (or $75,000 in the aggregate for all users and work
stations). |
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Source Code shall mean computer software and
code in a human-readable computer programming language, which
may include related programmer comments and annotations. |
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Trade Secret shall mean any proprietary and
confidential information or know-how, databases, data
compilations or collections of technical data or business data
including, to the extent kept confidential, customer lists,
customer contact information, customer correspondence and
customer licensing and purchasing histories relating to its
current and former customers. |
(a) No Default/ No Conflict. The consummation
of the transactions contemplated by this Agreement will neither
violate nor by their terms result in the breach, modification,
cancellation, termination, suspension of, or acceleration of any
payments with respect to any Intellectual Property Contract.
Each of the Company and its Subsidiaries is in material
compliance with, and has not materially breached any term of any
Intellectual Property Contract and, to the Companys
Knowledge, all other parties to such Intellectual Property
Contracts are in compliance with, and have not materially
breached any term thereof. The Surviving Corporation will be
permitted to exercise all of the Companys and its
Subsidiaries material rights under
A-17
Intellectual Property Contracts to the same extent the Company
and its Subsidiaries would have been able to had the
transactions contemplated by this Agreement not occurred and,
except as set forth in Section 2.8(a) of the Company
Disclosure Schedule, without the payment of any additional
amounts or consideration other than ongoing fees, royalties or
payments which the Company or any of its Subsidiaries would
otherwise be required to pay.
(b) No Infringement. To the Companys
Knowledge, the operation of the business of the Company and its
Subsidiaries as currently conducted, including the design,
development, use, import, branding, advertising, promotion,
marketing, manufacture and sale of the Company Products does not
infringe or misappropriate, any Intellectual Property Rights of
any third party, or violate any right to privacy or publicity of
any third party or constitute unfair competition or trade
practices under the laws of any jurisdiction in which the
Company or any of its Subsidiaries are currently doing business.
(c) Notice. Neither the Company nor any of
its Subsidiaries has received written notice or, to the
Companys Knowledge, any oral notice, from any third party
claiming that the Company, any of its Subsidiaries, or any
Company Product infringes or misappropriates any Intellectual
Property Rights of any third party, violates any rights to
privacy or publicity or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does the
Company have Knowledge of any basis therefor).
(d) No Third Party Infringers. To the
Companys Knowledge, no Person is infringing,
misappropriating or otherwise violating the Companys
rights in any Company Intellectual Property. Neither the Company
nor any of its Subsidiaries have asserted or threatened in
writing or, to the Companys Knowledge, orally any claim
against any Person alleging any infringement, misappropriation
or violation of any of the Companys rights in Company
Intellectual Property.
(e) Transaction. Neither this Agreement nor
the consummation of the transactions contemplated hereby, will
result in the Surviving Corporation or, to the Companys
Knowledge, Parent or any of Parents Subsidiaries which are
Subsidiaries as of the date hereof: (i) granting to any
third party any incremental right to or with respect to any
material Intellectual Property Rights owned by, or licensed to,
any of them, (ii) being bound by, or subject to, any
incremental non-compete or other incremental material
restriction on the operation or scope of their respective
businesses or (iii) being obligated to pay any incremental
royalties or other material amounts, or offer any incremental
discounts, to any third party. As used in Sections 2.8(e)
and 2.8(i), an incremental right, non-compete,
restriction, royalty or discount refers to a right, non-compete,
restriction, royalty or discount, as applicable, in excess of
the rights, non-competes, restrictions, royalties or discounts
payable that would have been required to be offered or granted,
as applicable, had the parties not entered into this Agreement
or consummated the transactions contemplated hereby.
(f) Intellectual Property. The Company and
its Subsidiaries have taken commercially reasonable steps to
obtain, maintain and protect the Company Intellectual Property.
Without limiting the foregoing, each of the Company and its
Subsidiaries has executed with each current and former employee,
consultant and contractor who created any material Company
Intellectual Property sufficient proprietary information and
confidentiality agreements which (i) assign or obligate the
employee, consultant or contractor to assign to the Company and
its Subsidiaries all right, title and interest (including the
sole right to enforce) in any Intellectual Property or
Intellectual Property Rights arising therefrom and
(ii) provide reasonable protection for Trade Secrets of the
Company and its Subsidiaries.
(g) No Order. There are no consents,
settlements, judgments, injunctions, decrees, awards,
stipulations, orders or similar litigation-related, inter partes
or adversarial-related, or government-imposed obligations to
which the Company or a Subsidiary is a party or are otherwise
bound, that do or, to the Companys Knowledge, may:
(i) restrict the rights of the Company or any of its
Subsidiaries to use, transfer, license or enforce any of its
Intellectual Property Rights, (ii) restrict the conduct of
the business of the Company or any of its Subsidiaries in order
to accommodate a third partys Intellectual Property Rights
or (iii) grant any third party any right with respect to
any Company Intellectual Property.
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(h) Open Source Code. To the Companys
Knowledge, no Open Source Code has been used in, incorporated
into, integrated or bundled with, any current Company Product,
and no Open Source Code development tools have been used in the
development or compilation of, any current Company Product.
(i) Source Code. Section 2.8(i) of the
Company Disclosure Schedule identifies each Intellectual
Property Contract pursuant to which the Company has deposited
with an escrow agent or any other Person, any of its Source
Code. The execution of this Agreement and the consummation of
the transactions contemplated by this Agreement will not result
in a release of any Source Code owned by the Company or any of
its Subsidiaries or the grant of incremental rights to a Person
with regard to such Source Code. The Company and its
Subsidiaries have not taken any action that will, or would
reasonably be expected to, result in the disclosure or delivery
of any Source Code owned by the Company or any of its
Subsidiaries under any Contract. To the Companys
Knowledge, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time,
or both) will, or would reasonably be expected to, result in the
disclosure or delivery by the Company, any of its Subsidiaries
or any Person acting on their behalf to any Person of any Source
Code owned by the Company or any of its Subsidiaries under any
Contract, and no such Source Code has been disclosed, delivered
or licensed to a third party.
(j) Software. To the Knowledge of the
Company, all Company Products and Company Intellectual Property
(and all parts thereof) are free of: (i) any disabling
codes or instructions and any back door, time
bomb, Trojan horse, worm,
drop dead device, virus or other
software routines or hardware components that permit
unauthorized access or the unauthorized disruption, impairment,
disablement or erasure of such Company Product or Company
Intellectual Property (or all parts thereof) or data or other
software of users (Contaminants); and (ii) any
critical defects, including without limitation any critical
error or omission in the processing of any transactions.
(k) Information Technology. The Company and
its Subsidiaries have taken commercially reasonable steps and
implemented commercially reasonable procedures intended to
ensure that information technology systems used in connection
with the operation of the Company and its Subsidiaries are free
from Contaminants. The Company and its Subsidiaries have
appropriate disaster recovery plans, procedures and facilities
for their businesses and have taken commercially reasonable
steps to safeguard the information technology systems utilized
in the operation of the business of the Company and its
Subsidiaries as it is currently conducted. To the Companys
Knowledge, there have been no unauthorized intrusions or
breaches of the security of the information technology systems,
other than insignificant breaches which did not compromise in
any material respect the security of the information technology
systems. The Company and its Subsidiaries have implemented
security patches or upgrades that are generally available for
the Companys information technology systems where, in the
Companys reasonable judgment, such patches or upgrades are
required.
(l) Licenses-In. Other than (i) licenses
to the Company of third party Shrink-Wrapped Code and
(ii) non-disclosure agreements entered into in the ordinary
course of business, Section 2.8(l) of the Company
Disclosure Schedule lists all Intellectual Property Contracts
under which the Company or any of its Subsidiaries has been
granted or provided any rights to Intellectual Property or
Intellectual Property Rights by a third party.
(m) Licenses-Out. Section 2.8(m) of the
Company Disclosure Schedule lists all Intellectual Property
Contracts under which the Company or any of its Subsidiaries has
granted or provided to any third party any rights to use Company
Intellectual Property.
(n) Trade Secrets. (i) The Company and
its Subsidiaries have taken commercially reasonable steps to
protect their Trade Secrets, and any Trade Secrets of third
parties provided under written agreement obligating the Company
or its Subsidiaries to protect the same, according to the laws
of the applicable jurisdictions where such Trade Secrets are
developed, practiced or disclosed, (ii) the Company and its
Subsidiaries have used commercially reasonable efforts to
enforce a policy requiring all personnel and third parties
having access to such Trade Secrets to execute a written
agreement which provides reasonable protection for such Trade
Secrets, (iii) except pursuant to such agreements, there
has been no disclosure by
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the Company or any of its Subsidiaries of any such Trade
Secrets, and (iv) to the Companys Knowledge, no party
to any such agreement is in breach thereof.
(o) Privacy. To the Companys Knowledge,
the Company and its Subsidiaries have complied with all
applicable laws relating to privacy, data protection, and the
collection and use of personal information, and the Company and
its Subsidiaries have complied with their respective internal
privacy policies and guidelines, if any, relating to privacy,
data protection, and the collection and use of personal
information collected, used, or held for use by the Company and
its Subsidiaries in the conduct of their business. To the
Companys Knowledge, the Company and its Subsidiaries take
reasonable measures to ensure that such information is protected
against unauthorized access, use, modification, or other misuse.
To the Companys Knowledge, the execution, delivery and
performance of this Agreement complies with all applicable laws
relating to privacy and the Companys and its
Subsidiaries applicable privacy policies. True copies of
the Companys privacy policies and guidelines have been
Made Available to Parent, and to the Companys Knowledge,
the Company and its Subsidiaries have at all times made all
disclosure to users or customers required by applicable laws and
none of such disclosures have been inaccurate in any material
respect or materially misleading or deceptive or in violation of
any applicable laws.
(p) Ownership of Intellectual Property.
Section 2.8(p) of the Company Disclosure Schedule lists all
Registered Intellectual Property owned by the Company,
identifying in each case the inventors/authors, status,
filing/grant dates, issuance/registration/application number,
maintenance and other fees and deadlines falling within the next
six months, as applicable. Except with respect to third party
Intellectual Property licensed exclusively to the Company under
Intellectual Property Contracts identified on
Section 2.8(m) of the Company Disclosure Schedule or as
otherwise set forth on Section 2.8(p) of the Company
Disclosure Schedule, the Company owns all right, title, and
interest (including the sole right to enforce) free and clear of
all Liens, in and to all Company Intellectual Property, and with
respect to the Company Registered Intellectual Property, are
listed in the records of the Governmental Entity as the sole
owner for each item thereof.
(q) Validity and Enforceability. To the
Companys Knowledge: (i) the Company Intellectual
Property is subsisting, in full force and effect, is valid and
enforceable, and has not expired or been cancelled or abandoned;
and (ii) with respect to all Registered Intellectual
Property owned by the Company, all necessary prosecution,
registration, maintenance and renewal fees due on or before the
Closing Date have been made, and all documents, recordations and
certificates, required as of the Closing Date for the purposes
of maintaining such Registered Intellectual Property have been
filed.
2.9 Restrictions on Business
Activities. Except as set forth in Section 2.9 of
the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is party to or bound by any Contract containing
any covenant (a) limiting in any material respect the right
of the Company or any of its Subsidiaries to engage or compete
in any line of business, to make use of any material Company
Intellectual Property or to compete with any Person,
(b) granting any exclusive distribution rights,
(c) providing most favored nations terms for
Company Products, or (d) which otherwise adversely affects
or would reasonably be expected to adversely affect the right of
the Company and its Subsidiaries to sell, distribute or
manufacture any Company Products or material Company
Intellectual Property or to purchase or otherwise obtain any
material software, components, parts or subassemblies.
2.10 Governmental
Authorizations. Each material consent, license, permit,
grant or other authorization (i) pursuant to which the
Company or any of its Subsidiaries currently operates or holds
any material interest in any of their respective properties or
(ii) which is required for the operation of the
Companys or any of its Subsidiaries business as
currently conducted or the holding of any such interest
(Governmental Authorizations) has been issued
or granted to the Company or any of its Subsidiaries, as the
case may be, and is in full force and effect in all material
respects. As of the date hereof, neither the Company nor any of
its Subsidiaries has received any written notification from a
Governmental Entity regarding any pending or threatened
suspension or cancellation of any of the Governmental
Authorizations. To the Companys Knowledge, there is no
threatened action to change the Companys or any of its
Subsidiaries customs rating or
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grade with or by any Governmental Entity, nor is there any basis
that could reasonably be expected to result in any such change
or downgrading.
2.11 Litigation.
Except as set forth in Section 2.11 of the Company
Disclosure Schedule, there is no action, suit, claim or
proceeding pending or, to the Companys Knowledge,
threatened against the Company, any of its Subsidiaries or any
of their respective properties or assets (tangible or
intangible). There is no investigation or other proceeding
pending or, to the Companys Knowledge, threatened against
the Company, any of its Subsidiaries or any of their respective
properties or assets (tangible or intangible) by or before any
Governmental Entity. There is no action, suit, claim,
investigation or proceeding pending, or to the Companys
Knowledge, threatened against any present or former officer,
director or employee of the Company or any of its Subsidiaries
or any other Person for which the Company or any of its
Subsidiaries may be subject to a claim for indemnification.
There are not currently, nor, to the Companys Knowledge,
have there been since January 1, 2003, any internal
investigations or inquiries being conducted by the Company, the
Companys Board of Directors (or any committee thereof) or
any third party at the request of any of the foregoing
concerning any financial, accounting, Tax, conflict of interest,
illegal activity, fraudulent or deceptive conduct or other
misfeasance or malfeasance issues. There is no action, suit,
proceeding, arbitration or, to the Companys Knowledge,
investigation involving the Company, which the Company presently
intends to initiate.
2.12 Compliance with
Law. Neither the Company nor any of its Subsidiaries is
in violation or default in any material respect of any Legal
Requirements applicable to the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries
is bound or any of their respective properties is bound or
affected. There is no agreement, judgment, injunction, order or
decree binding upon the Company or any of its Subsidiaries which
has or would reasonably be expected to have the effect of
prohibiting or impairing any business practice of the Company or
any of its Subsidiaries in such a way as to be material and
adverse to the Company and its Subsidiaries, taken as a whole,
nor, to the Knowledge of the Company, is there any pending
investigation or inquiry relating thereto.
2.13 Environmental
Matters.
(a) Definitions. For all purposes of this
Agreement, the following terms shall have the following
respective meanings:
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Environmental Claim means any claim, action,
cause of action, suit, proceeding, investigation, order, demand
or notice (in each instance in writing) by any Person alleging
potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or release into the
environment, of, or exposure to, any Material of Environmental
Concern at any location, whether or not owned or operated by the
Company or any of its Subsidiaries or (b) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law. |
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Environmental Laws mean all applicable
federal, state, local and foreign laws, regulations, ordinances,
treaties and common law relating to pollution or protection of
human health (to the extent relating to exposure to Materials of
Environmental Concern) or protection of the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata, and natural
resources), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened
releases of, or exposure to, Materials of Environmental Concern. |
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Materials of Environmental Concern means
hazardous chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum
products, asbestos or asbestos-containing materials or products,
polychlorinated biphenyls, lead or lead-based paints or
materials, radon, toxic fungus, toxic mold, mycotoxins or other
hazardous substances that would reasonably be expected to have
an adverse effect on human health or the environment. |
(b) Environmental Compliance. The Company and
its Subsidiaries are in compliance in all material respects with
applicable Environmental Laws, which compliance includes, but is
not limited to, the possession
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by the Company and its Subsidiaries of all material permits and
other governmental authorizations required under the
Environmental Laws, and compliance with the terms and conditions
thereof. Neither the Company nor any of its Subsidiaries has
received any written communication, whether from a Governmental
Entity, citizens group, employee or otherwise, that alleges that
the Company or any of its Subsidiaries are not in such
compliance.
(c) Environmental Liabilities. There is no
material Environmental Claim pending or, to the Companys
Knowledge, threatened against the Company, any of its
Subsidiaries or against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries have
contractually retained or assumed. In addition, there has been
no past or present release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that would
reasonably be expected to form the basis of any material
Environmental Claim against the Company, any of its Subsidiaries
or against any Person whose liability for any Environmental
Claim the Company or any of its Subsidiaries have contractually
retained or assumed, or otherwise result in any material costs
or liabilities under Environmental Law.
(d) Environmental Information. The Company
has provided to Parent all nonprivileged and material
assessments, reports, data, results of investigations or audits
that are in the possession or control of the Company or its
Subsidiaries regarding environmental matters pertaining to the
environmental condition of the business of the Company and its
Subsidiaries, or the compliance (or noncompliance) by the
Company and its Subsidiaries with any Environmental Laws.
(e) Environmental Obligations. Neither the
Company nor any of its Subsidiaries is required under any
Environmental Law by virtue of the transactions set forth herein
and contemplated hereby or as a condition to the effectiveness
of any transactions contemplated hereby, (i) to perform a
site assessment for Materials of Environmental Concern,
(ii) to remove or remediate Materials of Environmental
Concern, (iii) to give notice to or receive approval from
any Governmental Entity or (iv) to record or deliver to any
Person any disclosure document or statement pertaining to
environmental matters.
2.14 Brokers and
Finders Fees. Except for fees payable to Deutsche
Bank Securities Inc. (Deutsche Bank) pursuant
to an engagement letter dated August 16, 2006 and fees
payable to UBS Securities pursuant to a letter dated
July 7, 2006, copies of which have been provided to Parent,
neither the Company nor any of its Subsidiaries has incurred,
nor will it incur, directly or indirectly, any liability for
brokerage or finders fees or agents commissions,
fees related to investment banking or similar advisory services
or any similar charges in connection with this Agreement or any
transaction contemplated hereby, nor has the Company or any of
its Subsidiaries entered into any indemnification agreement or
arrangement with any Person specifically in connection with this
Agreement and the transactions contemplated hereby.
2.15 Transactions with
Affiliates. Except as set forth in the Companys
definitive proxy statement filed with the SEC on
Schedule 14A on April 10, 2006, there has not been
since November 1, 2004, nor is there proposed, any
transaction or relationship which is or would be required to be
disclosed pursuant Item 404 of
Regulation S-K
promulgated by the SEC, provided that for purpose