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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10,2001
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
SANMINA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------
DELAWARE 3672 77-0228183
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
-------------------------
JURE SOLA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SANMINA CORPORATION
2700 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
(408) 964-3500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------------
Copies to:
CHRISTOPHER D. MITCHELL, ESQ. G. WILLIAM SPEER, ESQ.
JON LAYMAN, ESQ. POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
MARK METCALF, ESQ. 191 PEACHTREE STREET, N.E., 16TH FLOOR
WILSON SONSINI GOODRICH & ROSATI ATLANTA, GA 30303
PROFESSIONAL CORPORATION (404) 572-6600
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the merger referred to 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. [ ]
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 number for the same offering. [ ]____________
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. [ ]_______________
-------------------------
CALCULATION OF REGISTRATION FEE
======================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED (1) PER SHARE PRICE (2) FEE
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Common Stock
$0.01 par value.................. 198,605,240 shares $28.105 $5,581,800,270 $ 1,395,451
======================================================================================================================
(1) Based upon the maximum number of shares of common stock, par value $0.01
per share, of Sanmina Corporation that may be issued pursuant to the
merger.
(2) Estimated solely for purposes of calculating the registration fee
required by the Securities Act of 1933, as amended, and computed pursuant
to Rules 457(f) and (c) under the Securities Act based on (i) $28.105 the
average of the high and low per share prices of common stock, par value
$0.10 per share, of SCI Systems, Inc. on the New York Stock Exchange on
August 9, 2001.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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[Sanmina Logo] [SCI Logo]
To the stockholders of Sanmina Corporation
and the stockholders of SCI Systems, Inc.
After careful consideration, the boards of directors of Sanmina and SCI
have approved a merger between Sanmina and SCI.
In the merger, each share of SCI common stock will be exchanged for 1.36
shares of Sanmina common stock. Sanmina common stock is traded on the Nasdaq
National Market System under the trading symbol "SANM." On August 9, 2001, the
closing price of Sanmina common stock was $21.03 per share.
Following the merger, Sanmina's board of directors will be composed of ten
members: seven will be from the current Sanmina board and three will be from the
current SCI board. The executive leadership will include officers from both
companies, with Jure Sola, current chairman and chief executive officer of
Sanmina, as co-chairman and chief executive officer of Sanmina, and Randy Furr,
current president and chief operating officer of Sanmina, continuing in his
current positions. A. Eugene Sapp, Jr., current chairman and chief executive
officer of SCI, will be appointed as co-chairman of Sanmina, and Robert C.
Bradshaw, current president and chief operating officer of SCI, will be the
president of EMS operations of Sanmina.
The merger cannot be completed unless a quorum of the outstanding shares
are represented in person or by proxy at each of the special meetings described
below, and a majority of the Sanmina shares outstanding and entitled to vote,
and a majority of the SCI shares outstanding and entitled to vote, are voted in
favor of the proposals presented. The attached joint proxy statement/prospectus
provides detailed information concerning Sanmina, SCI, the merger and the
proposals related to the merger. Please give all of the information contained in
the joint proxy statement/prospectus your careful attention. In particular, you
should carefully consider the discussion in the section entitled "Risk Factors"
on page 20 of this joint proxy statement/ prospectus.
AFTER CAREFUL CONSIDERATION, THE BOARDS OF DIRECTORS OF BOTH SANMINA AND
SCI HAVE DETERMINED THE MERGER TO BE FAIR TO YOU AND IN YOUR BEST INTERESTS. THE
BOARDS OF DIRECTORS OF SANMINA AND SCI HAVE ADOPTED THE MERGER AGREEMENT AND
APPROVED THE MERGER, AND RECOMMEND ADOPTION OF THESE PROPOSALS AND YOUR VOTING
IN FAVOR OF THE PROPOSALS PRESENTED IN THE ATTACHED JOINT PROXY
STATEMENT/PROSPECTUS.
Stockholders of Sanmina and SCI are cordially invited to attend the special
meeting of their company to vote on the merger:
The special meeting of SANMINA STOCKHOLDERS will be held on [ ],
2001 at [ ] local time at [ ]. Only stockholders who hold shares of
Sanmina at the close of business on [ ], 2001 will be entitled to vote
at this special meeting.
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The special meeting of SCI STOCKHOLDERS will be held on [ ], 2001
at [ ] local time at [ ]. Only stockholders who hold shares of SCI
at the close of business on [ ], 2001 will be entitled to vote at this
special meeting.
Please use this opportunity to take part in the affairs of Sanmina and SCI
by voting on the merger. Whether or not you plan to attend the Sanmina or SCI
special meeting, please complete, sign, date and return the accompanying proxy
card in the enclosed self-addressed stamped envelope. You may also vote your
shares by telephone or on the Internet. Returning the proxy card or voting by
telephone or on the Internet does NOT deprive you of your right to attend the
meeting and to vote your shares in person. YOUR VOTE IS VERY IMPORTANT.
We appreciate your consideration of this matter.
Jure Sola A. Eugene Sapp, Jr.
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Sanmina Corporation SCI Systems, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated [ ], 2001 and was
first mailed to holders of Sanmina common stock and SCI common stock on or about
[ ], 2001.
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WHERE TO OBTAIN ADDITIONAL INFORMATION
The enclosed joint proxy statement/prospectus incorporates important
business and financial information about Sanmina and SCI from documents filed
with the Securities and Exchange Commission that are not included in or
delivered with the enclosed joint proxy statement/prospectus. This information
is available without charge upon your written or oral request. You can obtain
the information incorporated by reference in the joint proxy
statement/prospectus at the Internet website that the Securities and Exchange
Commission maintains at http://www.sec.gov, as well as from Sanmina Corporation
and SCI Systems, Inc.
Sanmina Corporation SCI Systems, Inc.
2700 North First Street 2101 West Clinton Avenue
San Jose, California 95134 Huntsville, Alabama 35805
By email: info@sanmina.com By email: shareholder.info@scimail.sci.com
By telephone: (408) 964-3500 By telephone: (256) 882-4800
IF YOU WOULD LIKE TO REQUEST ANY INFORMATION, PLEASE DO SO BY [ ],
2001, IN ORDER TO RECEIVE IT BEFORE THE SPECIAL MEETINGS.
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SANMINA CORPORATION
2700 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ], 2001
AT [ ]
---------------------
To Our Stockholders:
A special meeting of stockholders of Sanmina Corporation will be held at
[ ] located at [ ] on [ ], 2001 at
[ ], local time, for the following purposes:
1. To approve the issuance of shares of Sanmina common stock in the
merger of Sun Acquisition Subsidiary, Inc., a wholly-owned subsidiary of
Sanmina, with and into SCI Systems, Inc., as contemplated by the Amended
and Restated Agreement and Plan of Reorganization dated as of July 13,
2001, by and among Sanmina, Sun Acquisition Subsidiary and SCI. Sanmina
will issue 1.36 shares of its common stock in exchange for each share of
outstanding SCI common stock.
2. To approve an amendment to Sanmina's Restated Certificate of
Incorporation to change Sanmina's corporate name to [ ]
effective upon the consummation of the merger provided for in the Amended
and Restated Agreement and Plan of Reorganization dated as of July 13,
2001, by and among Sanmina, Sun Acquisition Subsidiary and SCI.
3. To transact any other business that properly comes before the
special meeting or any adjournment or postponement thereof.
The accompanying joint proxy statement/prospectus describes the proposed
merger and other proposals in more detail. We encourage you to read the entire
document carefully. In particular, you should carefully consider the discussion
entitled "Risk Factors."
Stockholders of record at the close of business on [ ], 2001
are entitled to notice of, and to vote at, the special meeting and any
adjournment or postponement thereof. Holders of shares of Sanmina common stock
on the record date will be entitled to one vote for each share of Sanmina common
stock held on each matter submitted to a vote at the special meeting. The
affirmative vote of at least a majority of the shares of Sanmina common stock
present or represented by proxy at the special meeting is required to approve
the issuance of Sanmina common stock to SCI stockholders in connection with the
merger. The affirmative vote of at least a majority of the shares of Sanmina's
common stock outstanding and entitled to vote on the record date is required to
approve the change of Sanmina's corporate name.
Certain stockholders of Sanmina who, as of [ ], 2001,
beneficially own and have voting control over approximately [ ]% of the
outstanding shares of Sanmina common stock have agreed to vote FOR the adoption
of the merger agreement and the approval of the merger, the share issuance and
the name change.
THE SANMINA BOARD OF DIRECTORS CAREFULLY CONSIDERED THE TERMS OF THE
PROPOSED MERGER, DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER ARE IN THE
BEST INTERESTS OF SANMINA AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THE ISSUANCE OF SANMINA COMMON STOCK AND THE CHANGE OF SANMINA'S
CORPORATE NAME.
By Order of the Board of Directors of
Sanmina Corporation
Christopher D. Mitchell, Esq.
Secretary
San Jose, California
[ ], 2001
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TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU MAY ALSO
VOTE YOUR SHARES BY GRANTING A PROXY BY TELEPHONE OR ON THE INTERNET. YOU CAN
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE MEETING.
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SCI SYSTEMS, INC.
2101 WEST CLINTON AVENUE
HUNTSVILLE, ALABAMA 35805
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ], 2001
AT [ ]
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To Our Stockholders:
We invite you to attend a special meeting of stockholders of SCI Systems,
Inc. to be held at [ ] a.m., on [ ], 2001 at [
], for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Amended and Restated Agreement and Plan of Reorganization dated as of July
13, 2001 by and among Sanmina Corporation, a Delaware corporation, Sun
Acquisition Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of Sanmina, and SCI Systems, Inc., a Delaware corporation, and
to approve the merger provided for therein, as described in more detail in
the joint proxy statement/prospectus that accompanies this notice.
2. To transact any other business that may properly come before the
meeting or any adjournment or postponement thereof.
The accompanying joint proxy statement/prospectus describes the proposed
merger and the other proposals in more detail. We encourage you to read the
entire document carefully. In particular, you should carefully consider the
discussion in the section entitled "Risk Factors."
Stockholders of record at the close of business on [ ], 2001 are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement thereof. Holders of shares of SCI common stock on the record
date will be entitled to one vote for each share of SCI common stock held on
each matter submitted to a vote at the special meeting. The affirmative vote of
at least a majority of the votes entitled to be cast by holders of shares of SCI
common stock outstanding and entitled to vote is required to approve and adopt
the merger agreement and approve the merger.
Certain stockholders of SCI who, as of [ ], 2001, beneficially own
and have voting control over approximately [ ]% of the outstanding shares of
SCI common stock have agreed to vote FOR the approval and adoption of the merger
agreement and the approval of the merger.
THE BOARD OF DIRECTORS OF SCI HAS APPROVED AND ADOPTED THE MERGER AGREEMENT
AND HAS DETERMINED THAT THE MERGER, UPON THE TERMS AND CONDITIONS CONTAINED IN
THE MERGER AGREEMENT, IS IN THE BEST INTERESTS OF, AND IS ON TERMS THAT ARE FAIR
TO, SCI'S STOCKHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND APPROVE THE
MERGER.
By Order of the Board of Directors of
SCI Systems, Inc.
Michael M. Sullivan, Esq.
General Counsel and Secretary
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Huntsville, Alabama
[ ], 2001
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU MAY ALSO
VOTE YOUR SHARES BY GRANTING A PROXY BY TELEPHONE OR ON THE INTERNET. YOU CAN
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE MEETING.
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TABLE OF CONTENTS
PAGE
-------
Summary of the Joint Proxy Statement/Prospectus............. 1
Where You Can Find More Information......................... 9
Forward Looking Statements.................................. 11
Recent Developments......................................... 11
Summary Selected Financial Data............................. 12
Summary Unaudited Pro Forma Combined Condensed Financial
Data...................................................... 14
Comparative Per Share Market Price Data..................... 18
Dividend Policy............................................. 19
Risk Factors................................................ 20
The Special Meeting of Sanmina Stockholders................. 36
The Special Meeting of SCI Stockholders..................... 39
The Merger.................................................. 42
The Merger Agreement........................................ 69
Agreements Related to the Merger............................ 79
Unaudited Pro Forma Combined Condensed Financial
Statements................................................ 85
Description of Sanmina Capital Stock........................ 92
Comparison of Rights of Holders of Sanmina Common Stock and
SCI Common Stock.......................................... 95
Vote Required and Board of Directors' Recommendation........ 100
Other Proposals............................................. 101
Legal Matters............................................... 101
Experts..................................................... 101
Appendices:
Amended and Restated Agreement and Plan of Reorganization,
dated as of July 13, 2001.............................. Annex A
Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................... Annex B
Opinion of Goldman, Sachs & Co. .......................... Annex C
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SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus pertains to the merger of a
wholly-owned subsidiary of Sanmina with and into SCI, and it is being sent to
the holders of Sanmina common stock and the holders of SCI common stock. This
summary may not contain all of the information that is important to you. You
should read carefully this entire document, including the merger agreement and
its exhibits and other documents attached to this joint proxy
statement/prospectus and the other documents referenced in it, for a more
complete understanding of the merger. In particular, you should read the merger
agreement (and the exhibits thereto), which is attached as Annex A, the opinion
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is attached as
Annex B, and the opinion of Goldman, Sachs & Co., which is attached as Annex C.
THE COMPANIES
Sanmina Corporation SCI Systems, Inc.
2700 North First Street 2101 West Clinton Avenue
San Jose, California 95134 Huntsville, Alabama 35805
(408) 964-3500 (256) 882-4800
www.sanmina.com www.sci.com
Sanmina is a leading supplier of customized SCI is one of the world's premier providers
integrated electronics manufacturing of electronic manufacturing services and one
services, including turnkey electronic of the leaders in surface mount technology
assembly and turnkey manufacturing management production capacity. SCI pioneered the
services, to original equipment manufacturers electronic contract manufacturing services
in the electronics industry. Sanmina's industry, which encompasses a full range of
electronic manufacturing services consist outsourcing services to U.S. and
primarily of the manufacture of complex international OEMs for the global production
printed circuit board assemblies using and assembly of electronic products,
surface mount and pin-through-hole including engineering, advanced supply chain
interconnection technologies, the manufacture management and inventory management, testing,
of custom design backplane assemblies, distribution and depot repair services. SCI
fabrication of complex multilayer printed designs, manufactures, distributes, and
circuit boards, electronic enclosure systems services electronic products for virtually
manufacture and testing and assembly of every market segment, including the computer,
completed systems. In addition to assembly, peripheral, datacom, telecom, medical,
turnkey manufacturing management also industrial, consumer, aerospace, defense and
involves procurement and materials entertainment industries, as well as the U.S.
management, as well as consultation on government.
printed circuit board design and
manufacturability. Sanmina also manufactures
custom cable and wire harness assemblies for
electronics industry OEMs. These
manufacturing services are provided by
Sanmina personnel at Sanmina's facilities.
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WE ARE PROPOSING A MERGER OF SANMINA AND SCI
Q: WHAT IS THE PROPOSED MERGER? (SEE PAGE 42)
A. In the proposed merger, SCI will merge with a wholly-owned subsidiary of
Sanmina. SCI will survive the merger as a wholly-owned subsidiary of
Sanmina. The merger agreement is attached to this joint proxy
statement/prospectus as Annex A. You are encouraged to read it carefully.
Q: WHAT WILL I RECEIVE IN THE MERGER? (SEE PAGES 42 AND 69)
A. Following the merger:
- SCI stockholders will receive, in exchange for each of their shares of
SCI common stock, 1.36 shares of Sanmina common stock.
- Each option to purchase SCI common stock outstanding immediately before
the completion of the merger will automatically become an option to
purchase shares of Sanmina common stock. The number of shares of Sanmina
common stock which may be purchased under each assumed option will be
equal to the product of the number of SCI shares that were purchasable
before the merger multiplied by 1.36, rounded down to the nearest number
of whole shares of Sanmina common stock. The exercise price per share
will be the pre-merger exercise price divided by 1.36 and rounded up to
the nearest whole cent.
- Instead of fractional shares in the merger, SCI stockholders will receive
cash in an amount equal to the fraction multiplied by the average closing
prices reported on the Nasdaq National Market System for Sanmina common
stock for the five trading days immediately preceding the effective date
of the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. Sanmina and SCI are working toward completing the merger as quickly as
possible. We hope to complete the merger no later than the end of the
fourth calendar quarter of 2001.
Q: ARE THERE RISKS INVOLVED IN UNDERTAKING THE MERGER? (SEE PAGE 20)
A. Yes. In evaluating the merger, you should carefully consider the factors
discussed in the section of the joint proxy statement/prospectus entitled
"Risk Factors" beginning on page 21.
Q: ARE THERE CONDITIONS TO COMPLETION OF THE MERGER? (SEE PAGES 75-76)
A. Yes. Sanmina's and SCI's respective obligations to complete the merger are
subject to the satisfaction or waiver of certain specified closing
conditions. If either Sanmina or SCI waives any conditions, each company
will consider the facts and circumstances at that time and make a
determination whether a resolicitation of proxies from its respective
stockholders is appropriate.
Q: IS THE MERGER SUBJECT TO GOVERNMENTAL APPROVALS? (SEE PAGES 66-67)
A. Yes. This merger is subject to review by the Department of Justice and the
Federal Trade Commission to determine whether it is in compliance with
applicable antitrust laws. The merger is also subject to the approval of
the European Commission under the competition laws of the European Union,
and the Competition Bureau of Canada under the competition laws of Canada.
Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the competition laws of the European Union and
Canada, the merger may not be consummated until the specified waiting
period requirements under those laws have been satisfied. Sanmina and SCI
also have filed a premerger notification form with the antitrust agency in
Brazil and may be required to file a premerger notification form with the
antitrust agency in Mexico, and possibly other countries, and observe any
applicable waiting periods before closing the merger. The merger may also
be subject to regulatory review by other U.S. governmental authorities and
by regulatory authorities in other jurisdictions.
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Q: WHAT STOCKHOLDER APPROVALS ARE REQUIRED FOR THE MERGER? (SEE PAGE 74)
A. The affirmative vote of the holders of at least a majority of the shares of
Sanmina common stock present or represented by proxy at the special meeting
must approve the issuance of Sanmina common stock to SCI stockholders in
the merger. The affirmative vote of the holders of at least a majority of
the shares of Sanmina common stock outstanding and entitled to vote on the
record date must approve the changing of Sanmina's corporate name to
[ ] effective upon the consummation of the merger.
The affirmative vote of the holders of at least a majority of the shares of
SCI common stock outstanding and entitled to vote on the record date must
approve and adopt the merger agreement and approve the merger.
Q: ARE THERE ANY STOCKHOLDERS ALREADY COMMITTED TO VOTING IN FAVOR OF THE
MERGER AND THE SHARE ISSUANCE? (SEE PAGE 79)
A. Yes.
- Sanmina stockholders who collectively hold approximately [ ]% of the
outstanding Sanmina common stock as of [ ], 2001 entered
into voting agreements requiring them to vote all of their beneficially
owned shares in favor of approving the share issuance and the name
change.
- SCI stockholders who collectively hold approximately [ ]% of the SCI
common stock outstanding as of [ ], 2001 entered into
voting agreements requiring them to vote all of their beneficially owned
shares for approval and adoption of the merger agreement and approval of
the merger.
Q: WHO WILL BE THE DIRECTORS OF SANMINA FOLLOWING THE MERGER? (SEE PAGE 74)
A. Following the merger, the board of directors of Sanmina is expected to
consist of the seven current members of Sanmina's board of directors and
three members of SCI's current board of directors.
Q: WHO WILL BE THE PRINCIPAL EXECUTIVE OFFICERS OF SANMINA FOLLOWING THE
MERGER? (SEE PAGES 80-84)
A. Following the merger, the executive management team of Sanmina is expected
to include:
- Jure Sola, as co-chairman and chief executive officer of Sanmina;
- A. Eugene Sapp, Jr., as co-chairman of Sanmina;
- Randy Furr, as president and chief operating officer of Sanmina;
- Rick Ackel, as chief financial officer of Sanmina; and
- Robert C. Bradshaw, as president of EMS operations of Sanmina.
OUR REASONS FOR PROPOSING THE MERGER OF SANMINA AND SCI
Q: WHY ARE SANMINA AND SCI PROPOSING THE MERGER? (SEE PAGE 45)
A. The boards of directors of Sanmina and SCI believe that a combined company
would be better positioned to compete in the global electronics
manufacturing services market and will create the opportunity for Sanmina
and SCI to:
- build an industry-leading electronics manufacturing services company that
is able to provide customers with a full range of manufacturing services;
- enhance their ability to serve their existing customer base through
increased scale and a broader global presence;
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- utilize Sanmina's fabrication capabilities across a larger revenue base
to realize additional operating efficiencies; and
- compete more effectively for original equipment manufacturer divestitures
and other acquisition transactions.
Q: DOES THE BOARD OF DIRECTORS OF SANMINA RECOMMEND VOTING IN FAVOR OF
ADOPTING THE MERGER AGREEMENT AND APPROVING THE MERGER, THE SHARE ISSUANCE
AND THE NAME CHANGE? (SEE PAGES 45-47)
A. Yes. After careful consideration, the members of Sanmina's board of
directors unanimously recommends that Sanmina stockholders vote in favor of
approving the issuance of Sanmina common stock in the merger and the change
of Sanmina's corporate name.
Q: DOES THE BOARD OF DIRECTORS OF SCI RECOMMEND VOTING IN FAVOR OF THE MERGER
AGREEMENT AND THE MERGER? (SEE PAGES 47-49)
A. Yes. After careful consideration, SCI's board of directors unanimously
recommends that its stockholders vote in favor of approval and adoption of
the merger agreement and the approval of the merger.
Q: DO PERSONS INVOLVED IN THE MERGER HAVE INTERESTS WHICH MAY CONFLICT WITH
MINE? (SEE PAGE 63)
A. Yes. When considering the recommendations of Sanmina's and SCI's respective
boards of directors, you should be aware that certain SCI directors and
officers have interests in the merger that are different from, or are in
addition to, yours. These interests include the employment of the SCI
executive officers by Sanmina or the SCI subsidiary after the merger, the
appointment of A. Eugene Sapp, Jr., Wayne Shortridge and Jackie M. Ward to
Sanmina's board of directors and the indemnification of directors and
officers of SCI, as provided in the merger agreement, against certain
liabilities both before and after the merger.
In addition, Sanmina director Joseph M. Schell serves as chairman of global
technology investment banking of Merrill Lynch & Co. Merrill Lynch, Pierce,
Fenner & Smith Incorporated, the corporate parent of Merrill Lynch & Co.,
served as Sanmina's financial advisor on the merger. Mr. Schell abstained
from voting on proposals related to the merger.
Q: DID SANMINA'S AND SCI'S FINANCIAL ADVISORS RENDER OPINIONS CONCERNING THE
FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW? (SEE PAGES
49-63)
A. Yes.
In connection with the merger:
- Sanmina's board of directors considered the opinion it received from
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as to the fairness,
from a financial point of view, on the date of such opinion, to Sanmina
of the exchange ratio provided for in the merger agreement; and
- SCI's board of directors considered the opinion it received from Goldman,
Sachs & Co. that, as of the date of such opinion, the exchange ratio
pursuant to the merger agreement was fair from a financial point of view
to the holders of SCI common stock.
The full text of the written opinions of Merrill Lynch and Goldman Sachs
dated July 13, 2001, which set forth assumptions made, matters considered
and limitations on the review undertaken in connection with the opinions,
are contained in Annex B and Annex C, respectively. Merrill Lynch and
Goldman Sachs provided their respective opinions for the information and
assistance of the board of directors of Sanmina and SCI, respectively, in
connection with its consideration of the merger. Neither the Merrill Lynch
opinion nor the Goldman Sachs opinion is a recommendation as to how any
stockholder should vote with respect to the transaction. We urge you to
read the opinions in their entirety.
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STEPS FOR YOU TO TAKE NOW
Q: WHAT DO I NEED TO DO NOW? (SEE PAGES 36-41)
A. After carefully reading and considering the information contained in this
joint proxy statement/ prospectus, please vote your shares by:
- mailing your signed proxy card in the enclosed return envelope; or
- granting a proxy by telephone or on the Internet.
IF YOU DO NOT INCLUDE INSTRUCTIONS ON HOW TO VOTE YOUR PROPERLY SIGNED
PROXY CARD, YOUR COMMON STOCK WILL BE VOTED "FOR" APPROVAL OF MATTERS
RELATED TO THE MERGER.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
Q: WHEN AND WHERE WILL THE VOTES TAKE PLACE? (SEE PAGES 36-41)
A. Special meeting of Sanmina stockholders. The Sanmina special meeting will
be held at [ ] at [ ] on [ ],
2001, starting at [ ], local time.
Special meeting of SCI stockholders. The SCI special meeting will be held
at [ ] on [ ], 2001, starting at [ ],
local time.
Q: SHOULD I SEND IN MY SCI STOCK CERTIFICATES NOW? (SEE PAGE 65)
A. No. After the merger is completed, Sanmina will send you written
instructions for exchanging your SCI stock certificates for Sanmina stock
certificates.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME? (SEE PAGES 37 AND 40)
A. No. Your broker will vote your shares only if you provide instructions on
how to vote by following the instructions provided to you by your broker.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE? (SEE PAGES 38 AND 41)
A. You can change your vote at any time before your proxy is voted at your
special meeting. There are several ways for you to do this:
- send written notice to the secretary of Sanmina or SCI (as appropriate)
that you wish to revoke your proxy;
- send a completed proxy card bearing a date later than your original proxy
card prior to the vote at the special meeting;
- grant a new telephone or Internet proxy prior to the vote at the special
meeting; or
- attend the meeting and vote in person.
Q: WHAT HAPPENS IF AN SCI STOCKHOLDER DOES NOT VOTE? (SEE PAGE 40)
A. If an SCI stockholder fails to grant a proxy or vote at the special
meeting, it will have the same effect as a vote against approval and
adoption of the merger agreement and approval of the merger. If you return
your proxy and do not indicate how you want to vote, your proxy will be
counted as a vote to approve and adopt the merger agreement and approve the
merger.
If you submit a proxy and affirmatively elect to abstain from voting, your
proxy will be counted as present for the purpose of determining the
presence of a quorum but will not be voted at the special meeting.
Consequently, your abstention will have the same effect as a vote against
approval and adoption of the merger agreement and approval of the merger.
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15
Q: WHAT HAPPENS IF A SANMINA STOCKHOLDER DOES NOT VOTE? (SEE PAGE 37)
A. If a Sanmina stockholder does not grant a proxy or vote at the special
meeting on the issuance of Sanmina common stock to SCI stockholders in
connection with the merger, the shares will not be counted as present for
purposes of determining the presence of absence of a quorum and will have
no effect on the outcome of the proposal. If a Sanmina stockholder fails to
grant a proxy or vote at the special meeting on the change of Sanmina's
corporate name to [ ], it will have the same effect as a vote
against the proposal.
If you submit a proxy card and do not indicate how you want to vote, your
proxy will be counted as a vote to approve these proposals.
If you grant a proxy and affirmatively elect to abstain from voting, your
shares will be counted as present for the purpose of determining the
presence of a quorum but will not be voted at the special meeting.
Consequently, your abstention will have the same effect as a vote against
the issuance of Sanmina common stock and the change of Sanmina's corporate
name.
Q: AM I ENTITLED TO DISSENTERS' OR APPRAISAL RIGHTS IN CONNECTION WITH THE
MERGER? (SEE PAGE 68)
A. No. Under Delaware law, stockholders of SCI are not entitled to dissenters'
or appraisal rights in connection with the merger. Similarly, under
Delaware law, stockholders of Sanmina are not entitled to dissenters' or
appraisal rights in connection with the issuance of Sanmina common stock to
SCI stockholders.
OTHER MATTERS TO CONSIDER
Q: HOW DO THE MARKET PRICES OF SANMINA AND SCI COMMON STOCK COMPARE? (SEE PAGE
18)
A. Shares of Sanmina common stock are listed on the Nasdaq National Market
System and shares of SCI are listed on the New York Stock Exchange.
Sanmina's trading symbol is "SANM" and SCI's trading symbol is "SCI." On
July 13, 2001, the last full trading day prior to the public announcement
of the proposed merger, the last reported sale prices were:
- $22.14 per share of Sanmina common stock, and
- $25.17 per share of SCI common stock.
On [ ], 2001 the last reported sale prices were:
- $[ ] per share of Sanmina common stock, and
- $[ ] per share of SCI common stock.
Sanmina and SCI urge you to obtain current market quotations.
Q: WHAT ARE THE EXPECTED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER? (SEE PAGES 65-66)
A. Sanmina and SCI each expect the merger to qualify as a reorganization for
U.S. federal income tax purposes. SCI stockholders will not recognize gain
or loss for U.S. federal income tax purposes by exchanging their SCI shares
for shares of Sanmina common stock. However, SCI stockholders will
recognize gain or loss with respect to cash received in lieu of a
fractional share of Sanmina common stock.
A DESCRIPTION OF THE MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES OF THE
MERGER IS SET FORTH IN "THE MERGER -- MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER." THE TAX CONSEQUENCES TO EACH SCI
STOCKHOLDER WILL DEPEND ON THE FACTS OF THAT STOCKHOLDER'S OWN SITUATION.
THEREFORE, SCI STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THEIR PARTICULAR TAX CONSEQUENCES.
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16
Q: HOW WILL THE MERGER BE ACCOUNTED FOR? (SEE PAGE 66)
A. The merger will be accounted for as a purchase business combination in
accordance with accounting principles generally accepted in the United
States. Accordingly, the cost to acquire SCI will be allocated to the
tangible and identifiable intangible assets acquired and liabilities
assumed based on their fair values, with any excess being treated as
goodwill. Goodwill under the recently issued Statements of Financial
Accounting Standards Nos. 141 and 142 "Business Combinations" and "Goodwill
and Other Intangibles" will no longer be subject to periodic amortization,
but rather goodwill is subject to at least an annual assessment for
impairment applying a fair-value based test. Identified intangible assets
with finite lives will be amortized over those lives.
Q. WHAT ARE THE CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR?
(SEE PAGES 75-76)
A. Completion of the merger is subject to the satisfaction or waiver of a
number of conditions, including (but not limited to):
- holders of a majority of the outstanding shares of SCI common stock must
vote in favor of approval and adoption of the merger agreement and
approval of the merger;
- holders of a majority of the shares of Sanmina common stock present or
represented by proxy at the special meeting must approve the share
issuance and the holders of a majority of the outstanding shares of
Sanmina common stock entitled to vote on the record date must approve the
name change;
- the registration statement, of which this joint proxy
statement/prospectus is a part, must be declared and remain effective by
the Securities and Exchange Commission;
- no law, regulation or order preventing the completion of the merger shall
be in effect;
- the applicable waiting periods under antitrust laws must expire or be
terminated;
- each company must receive an opinion from its tax counsel that the merger
will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended;
- the shares of Sanmina common stock to be issued in the merger must be
approved for listing on the Nasdaq National Market;
- each company must not have breached any covenant, representation or
warranty in a material manner;
- SCI must have obtained all consents, waivers and approvals required under
the merger agreement; and
- neither Sanmina nor SCI shall have had a Material Adverse Effect (as
defined on p. 76 of this joint proxy statement/prospectus) since July 13,
2001.
Q: DOES THE MERGER AGREEMENT PERMIT TERMINATION OF THE MERGER? (SEE PAGES
76-77)
A. Yes. Sanmina and SCI may mutually agree to terminate the merger agreement
without completing the merger. Additionally, either SCI or Sanmina may
terminate the merger agreement under any of the following circumstances:
- if the merger is not completed by December 31, 2001;
- if a final court order prohibiting the merger is issued and is not
appealable;
- if the Sanmina stockholders do not approve the share issuance and the
name change;
- if the SCI stockholders do not approve and adopt the merger agreement and
approve the merger; or
- if the conditions to completion of the merger would not be satisfied
because of a breach of a representation or warranty in the merger
agreement resulting in a Material Adverse Effect or a failure to comply
in all material respects with a covenant or agreement in the merger
agreement.
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17
Sanmina may terminate the merger agreement if:
- SCI's board of directors withdraws, amends or modifies in a manner
adverse to Sanmina, its recommendation in favor of the merger;
- SCI's board of directors fails to include its recommendation in favor of
the merger agreement and merger in any proxy statement or prospectus to
be sent to SCI stockholders;
- SCI's board of directors recommends any acquisition proposal from a party
other than Sanmina or enters into a definitive agreement for an
acquisition transaction with a party other than Sanmina, or resolves to
take any such action;
- SCI breaches its agreement not to solicit alternative proposals for a
business combination with SCI; or
- SCI's board of directors fails to send its stockholders a recommendation
to reject any tender or exchange offer by a third party within 10 days of
commencement of the offer.
SCI may terminate the merger agreement if it executes a definitive
agreement relating to an Acquisition Transaction (as defined on p. 73 of
this joint proxy statement/prospectus).
Q: COULD PAYMENT OF A TERMINATION FEE BE REQUIRED IN CONNECTION WITH THE
MERGER? (SEE PAGES 77-78)
A. Yes. If the merger agreement is terminated upon some specified occurrences,
SCI may be required to pay to Sanmina a termination fee of up to $150.0
million. In addition, either party may be required to pay the other a fee
of $3.0 million if the matters in this joint proxy statement/prospectus are
not approved by that party's stockholders and the merger does not occur as
a result.
Q: MAY SCI NEGOTIATE WITH OTHER PARTIES? (SEE PAGES 72-74)
A. No. SCI agreed, subject to limited exceptions for responses to unsolicited
bona fide offers, not to initiate or engage in discussions with another
party concerning a business combination with a party other than Sanmina
while the merger is pending.
Nothing in the merger agreement prevents the SCI board of directors from
withdrawing or changing its recommendation in favor of the merger if, as a
result of a Superior Offer (as defined on page 74 of this joint proxy
statement/prospectus) from a third party, the board reasonably concludes in
good faith, after consultation with its outside counsel, that the failure
to so withdraw or change its recommendation would result in a reasonable
likelihood that the SCI board of directors would not fulfill its fiduciary
duties to SCI's stockholders under Delaware law.
Q: ARE THERE RESTRICTIONS ON THE ABILITY TO SELL SANMINA STOCK RECEIVED AS A
RESULT OF THE MERGER? (SEE PAGE 67)
A. All Sanmina common stock received by SCI stockholders in connection with
the merger will be freely transferable unless the holder is considered an
affiliate of either Sanmina or SCI under the Securities Act of 1933, as
amended. Shares of Sanmina received by affiliates of SCI in the merger may
only be resold in compliance with Rule 145 under the Securities Act.
Generally, an affiliate is considered to be someone who is an executive
officer or director of a company or someone who owns more than 10% of the
outstanding stock of a company.
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WHERE YOU CAN FIND MORE INFORMATION
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED IN OR DELIVERED WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS.
All documents filed by Sanmina and SCI pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of
this joint proxy statement/prospectus and before the date of the special meeting
are incorporated by reference into this joint proxy statement/prospectus from
the date of filing of those documents.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
The following documents, which were filed by Sanmina with the Securities
and Exchange Commission, are incorporated by reference into this joint proxy
statement/prospectus:
- Sanmina's Annual Report on Form 10-K for the fiscal year ended September
30, 2000 (file number 333-64294) (filed December 18, 2000).
- Sanmina's Quarterly Reports on Form 10-Q for the quarters ended June 30,
2001 (filed August 10, 2001); March 31, 2001 (filed May 11, 2001); and
December 30, 2000 (filed February 13, 2001).
- Sanmina's Current Reports on Form 8-K dated July 17, 2001 (filed July 17,
2001); May 18, 2001 (filed May 21, 2001); May 14, 2001 (filed May 14,
2001); March 2, 2001 (filed March 2, 2001); February 28, 2001 (filed
March 1, 2001); February 26, 2001 (filed February 26, 2001); February 22,
2001 (filed February 22, 2001); February 15, 2001 (filed February 15,
2001); January 31, 2001 (filed January 31, 2001); and January 26, 2001
(filed January 26, 2001).
- Sanmina's Definitive Proxy Statement on Schedule 14A (filed December 27,
2000).
- The description of Sanmina's common stock contained in Sanmina's
Registration Statement on Form 8-A/A (filed May 25, 2001), including any
amendment or report filed for the purpose of updating such description.
The following documents, which were filed by SCI with the Securities and
Exchange Commission, are incorporated by reference into this joint proxy
statement/prospectus.
- SCI's Annual Report on Form 10-K for the fiscal year ended June 30, 2000
(file number 001-12821) (filed September 28, 2000).
- SCI's Quarterly Reports on Form 10-Q for the quarters ended September 24,
2000 (filed November 8, 2000); December 24, 2000 (filed February 7,
2001); and March 25, 2001 (filed May 9, 2001).
- SCI's Current Reports on Form 8-K dated December 20, 2000 (filed December
22, 2000) and July 13, 2001 (filed July 16, 2001).
- SCI's Definitive Proxy Statement on Schedule 14A dated September 25, 2000
(filed September 26, 2000).
- The description of SCI's common stock contained in SCI's Registration
Statement on Form 8A (filed March 18, 1997), including any amendment or
report filed for the purpose of updating such description.
- The description of SCI's common stock purchase rights contained in SCI's
Registration Statement on Form 8A (filed January 9, 2001).
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this joint proxy statement/prospectus will be
deemed to be modified or superseded for purposes of this joint proxy
statement/prospectus to the extent that a statement contained in this joint
proxy statement/prospectus or any other subsequently filed document that is
deemed to be incorporated by reference into this joint proxy
statement/prospectus modifies or supersedes the prior statement. Any statement
so modified or superseded
9
19
will not be deemed, except as so modified or superseded, to constitute a part of
this joint proxy statement/prospectus.
The documents incorporated by reference into this joint proxy
statement/prospectus are available from us upon request. We will provide a copy
of any and all of the documents that are incorporated by reference in this joint
proxy statement/prospectus (not including exhibits to the documents unless those
exhibits are specifically incorporated by reference into this joint proxy
statement/prospectus) to any person, without charge, upon written or oral
request. Any request for documents should be made by [ ], 2001 to
ensure timely delivery of the documents.
Requests for documents or information Requests for documents or information
regarding the merger relating to Sanmina regarding the merger relating to SCI should
should be directed to: be directed to:
Sanmina Corporation SCI Systems, Inc.
2700 North First Street 2101 West Clinton Avenue
San Jose, California 95134 Huntsville, Alabama 35805
Attn: Investor Relations Attn: Richard Hare
By email: info@sanmina.com By email: shareholder.info@sci.com
By telephone: (408) 964-3500 By telephone: (256) 882-4800
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a website that contains reports, proxy statements and other
information regarding each of us. The address of the Securities and Exchange
Commission website is http://www.sec.gov.
Sanmina has filed a registration statement on Form S-4 under the Securities
Act with the Securities and Exchange Commission with respect to the Sanmina
common stock to be issued to SCI stockholders in the merger. This joint proxy
statement/prospectus constitutes the prospectus of Sanmina filed as part of the
registration statement. This joint 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 Securities and Exchange Commission. The registration
statement and its exhibits are available for inspection and copying as set forth
above.
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS JOINT
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 JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES PURSUANT TO THIS JOINT 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 JOINT PROXY STATEMENT/PROSPECTUS
BY REFERENCE OR IN OUR AFFAIRS SINCE THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS WITH RESPECT TO SCI AND ITS SUBSIDIARIES WAS PROVIDED BY
SCI AND THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS WITH
RESPECT TO SANMINA AND ITS SUBSIDIARIES WAS PROVIDED BY SANMINA.
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FORWARD LOOKING STATEMENTS
You should not rely on forward looking statements in this joint proxy
statement/prospectus. This joint proxy statement/prospectus and the documents
incorporated by reference into this joint proxy statement/prospectus contain
forward looking statements within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 with respect to Sanmina's and SCI's
financial conditions, operating results and businesses and on the expected
impact of the merger on Sanmina's financial performance. We use words such as
"anticipates," "believes," "plans," "expects," "future," "intends," "may,"
"will," "should," "estimates," "predicts," "potential," "continue" and similar
expressions to identify such forward looking statements. These forward looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated by the forward looking statements.
Some of the factors that may cause actual results to differ materially from
those contemplated by such forward looking statements include, but are not
limited to, the following possibilities:
- successfully integrating Sanmina's and SCI's operations, systems and
personnel may be more difficult than we expect;
- the combined company may not be able to retain and hire key executives,
technical personnel and other employees;
- the transaction may not close due to the failure to obtain required
regulatory or stockholder approvals;
- the combined company may not effectively manage its growth;
- relationships with customers, suppliers, and strategic partners may
change to the combined company's disadvantage;
- the combined company's operating costs may be higher than anticipated;
- general economic conditions or conditions in securities markets may be
less favorable than we currently anticipate; and
- costs related to the merger may be more than we currently anticipate.
Some of these factors and additional risks and uncertainties are further
discussed under the other factors identified in the "Risk Factors" section
beginning on page 20. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such statements. Sanmina and SCI stockholders are cautioned not to
place undue reliance on such statements, which speak only as of the date of this
joint proxy statement/prospectus or the date of any document incorporated by
reference.
RECENT DEVELOPMENTS
On July 12, 2001, SCI and Nokia UK Ltd entered into an asset purchase
agreement providing for SCI's acquisition of Nokia UK Ltd's Camberley, U.K. test
and repair center. The parties expect the acquisition to close on August 13,
2001. At closing, SCI and Nokia intend to enter into a multi-year repair service
agreement and other related agreements. Under the repair service agreement, SCI
will provide wireless diagnostics, testing and repair services to Nokia for its
mobile communication base station products located in Europe, the Middle East
and Africa.
On June 28, 2001, SCI and Nortel Networks, Inc. entered into an asset
purchase agreement providing for SCI's purchase of manufacturing equipment and
inventory located at Nortel Network's Boston, Massachusetts systems house. This
transaction closed on August 3, 2001, at which time SCI and Nortel Networks
entered into a multi-year supply agreement under which SCI will manufacture
products for Nortel Networks.
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SUMMARY SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived this information
from the audited consolidated financial statements of Sanmina and SCI for the
fiscal years ended September 30, 1996, 1997 and 1998, the fiscal year ended
October 2, 1999, and the fiscal year ended September 30, 2000 with respect to
Sanmina, and the fiscal years ended June 30, 1996, 1997, 1998, 1999 and 2000
with respect to SCI, and the unaudited consolidated financial statements for the
interim periods presented. The interim financial data reflect normal recurring
adjustments, which are considered necessary to present fairly the financial
information for such periods. The information is only a summary and you should
read it in conjunction with each company's historical financial statements and
related notes incorporated by reference in this document. The results of any
interim period are not necessarily indicative of results for a full fiscal year,
and historical results are not necessarily indicative of future results. All
share and per share amounts have been adjusted for all stock splits completed
prior to the date of this joint proxy statement/prospectus.
SANMINA'S FINANCIAL DATA
The audited consolidated balance sheets of Sanmina as of October 2, 1999
and September 30, 2000 and the consolidated statements of operations,
comprehensive income, stockholders' equity and cash flows for each of the years
in the three-year period ended September 30, 2000 are incorporated by reference
in this document. The selected historical financial data of Sanmina as of and
for the nine months ended June 30, 2001 have been derived from Sanmina's
unaudited financial statements, which are incorporated by reference in this
joint proxy statement/prospectus, and include, in the opinion of Sanmina's
management, all adjustments consisting of normal recurring adjustments that
Sanmina considers necessary to present fairly the results of operations and
financial position of Sanmina in those periods.
SANMINA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEARS ENDED
----------------------------------------------------------------- NINE MONTHS ENDED
SEPTEMBER 30, -----------------------
------------------------------------ OCTOBER 2, SEPTEMBER 30, JULY 1, JUNE 30,
1996 1997 1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ------------- ---------- ----------
(UNAUDITED)
HISTORICAL CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net sales......................... $1,077,367 $1,713,239 $2,171,427 $2,620,623 $4,239,102 $2,871,895 $3,453,311
Operating income.................. 145,440 107,403 119,118 197,034 361,456 199,019 317,940
Income before provision for income
taxes........................... 144,083 95,706 96,148 169,367 357,969 193,985 334,809
Net income before extraordinary
charge.......................... $ 92,016 $ 26,156 $ 39,185 $ 104,716 $ 215,053 $ 112,676 $ 208,293
========== ========== ========== ========== ========== ========== ==========
Basic net income per share, before
extraordinary charge............ $ 0.40 $ 0.11 $ 0.15 $ 0.37 $ 0.71 $ 0.37 $ 0.65
========== ========== ========== ========== ========== ========== ==========
Basic net income per share, after
extraordinary charge............ $ 0.40 $ 0.11 $ 0.15 $ 0.37 $ 0.69 $ 0.37 $ 0.65
========== ========== ========== ========== ========== ========== ==========
Diluted net income per share,
before extraordinary charge..... $ 0.36 $ 0.10 $ 0.14 $ 0.35 $ 0.67 $ 0.36 $ 0.62
========== ========== ========== ========== ========== ========== ==========
Diluted net income per share,
after extraordinary charge...... $ 0.36 $ 0.10 $ 0.14 $ 0.35 $ 0.65 $ 0.36 $ 0.62
========== ========== ========== ========== ========== ========== ==========
Shares used in computing diluted
per share amounts............... 266,215 276,477 286,368 300,328 337,350 317,352 349,266
========== ========== ========== ========== ========== ========== ==========
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AS OF
-----------------------------------------------------------------------------
SEPTEMBER 30,
---------------------------------- OCTOBER 2, SEPTEMBER 30, JUNE 30,
1996 1997 1998 1999 2000 2001
-------- ---------- ---------- ---------- ------------- -----------
(UNAUDITED)
HISTORICAL CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash equivalents........... $201,442 $ 76,850 $ 100,700 $ 149,281 $ 998,242 $ 618,219
Net working capital................. 280,425 336,826 444,308 764,877 1,913,617 2,143,376
Total assets........................ 739,176 1,185,341 1,601,339 2,124,809 3,835,600 3,772,142
Long-term debt...................... 135,633 232,694 434,382 696,386 1,200,764 1,213,632
Stockholders' equity................ 387,353 581,935 726,884 886,455 1,758,793 2,005,858
SCI'S FINANCIAL DATA
The audited consolidated balance sheets of SCI as of June 30, 1999 and
2000, and the consolidated statements of income, shareholders' equity, cash
flows and comprehensive income for each of the years in the three-year period
ended June 30, 2000 are incorporated by reference in this document. The selected
historical financial data of SCI as of and for the nine months ended March 26,
2000 and March 25, 2001 have been derived from SCI's unaudited financial
statements, which are incorporated by reference in this joint proxy
statement/prospectus, and include, in the opinion of SCI's management, all
adjustments that SCI considers necessary to present fairly the results of
operations and financial position of SCI in those periods.
SCI
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
NINE MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, -----------------------
--------------------------------------------------------------- MARCH 26, MARCH 25,
1996 1997 1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net Sales............... $4,544,759 $5,762,656 $6,805,893 $6,710,785 $ 8,342,580 $6,036,091 $6,639,921
Intangible
amortization.......... 910 534 1,478 6,642 24,443 16,443 30,276
Nonrecurring special
charges............... -0- -0- -0- -0- -0- -0- 59,045
Operating income........ 159,475 206,176 257,101 234,802 321,671 228,979 203,900
Net interest expense.... 24,165 17,993 21,304 16,938 30,909 20,691 54,874
Net income.............. 80,955 112,713 145,085 137,848 196,735 139,725 100,712
Basic earnings per
share................. 0.69 0.95 1.21 1.11 1.36 0.97 0.68
Diluted earnings per
share................. 0.67 0.84 1.06 1.00 1.34 0.95 0.68
Total assets............ 1,283,195 1,869,852 1,944,728 2,322,660 3,351,304 3,284,286 4,260,028
Long-term debt.......... 338,773 454,308 440,502 140,853 748,402 701,595 1,431,120
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SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
We are providing the following summary unaudited pro forma combined
condensed financial data to give you a picture of what the results of operations
and financial position of the combined businesses of Sanmina and SCI might have
looked like had the merger occurred at an earlier date. These statements give
effect to the merger accounted for as a purchase business combination. This
information is provided for illustrative purposes only and does not show what
the results of operations or financial position of Sanmina would have been if
the merger actually occurred on the dates assumed. In addition, this information
is not an indicator of what Sanmina's future consolidated operating results or
consolidated financial position will be.
The unaudited pro forma combined financial data are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have been realized had the entities been a single entity
during these periods. The unaudited pro forma combined financial data are
derived from the unaudited pro forma combined condensed financial statements
included elsewhere in this joint proxy statement/prospectus and should be read
in conjunction with those statements and related notes. See "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS."
THESE PRO FORMA FINANCIAL STATEMENTS HAVE BEEN BASED ON ASSUMPTIONS
We prepared these pro forma statements on the basis of assumptions
described in the notes to them. The pro forma adjustments made in connection
with the development of the pro forma information are preliminary and have been
made solely for purposes of developing such pro forma information for
illustrative purposes necessary to comply with the disclosure requirements of
the Securities and Exchange Commission. The unaudited pro forma combined
financial statements do not purport to be indicative of the results of
operations for future periods or the combined financial position or the results
that actually would have been realized had the entities been a single entity
during these periods.
COSTS RESULTING FROM THE ACQUISITION
Sanmina and SCI estimate that they will incur direct transaction costs of
approximately $18.5 million and $26.8 million, respectively, associated with the
merger. The unaudited pro forma combined condensed balance sheet and the
unaudited pro forma combined condensed statements of operations give effect to
such costs of Sanmina, which will be included as part of the purchase cost, as
if they had been incurred as of June 30, 2001 and October 1, 2000, respectively.
Such charges of SCI, which will be expensed, will be reflected in SCI's
consolidated financial statements in the period in which the merger is
consummated.
YOU SHOULD READ THESE SUMMARY PRO FORMA FINANCIAL STATEMENTS WITH THE HISTORICAL
FINANCIAL STATEMENTS
The Sanmina summary unaudited pro forma combined condensed financial data
should be read in conjunction with the Sanmina unaudited pro forma combined
condensed financial statements and the related notes, which begin on page 85.
They should also be read in conjunction with the historical audited and
unaudited financial statements of Sanmina and SCI which are incorporated by
reference in this document. The Sanmina summary unaudited pro forma combined
condensed financial data are not necessarily indicative of what the actual
results of operations and financial position would have been had the merger
taken place on the dates indicated, and do not indicate future results of
operations or financial position.
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SANMINA AND SCI
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, JUNE 30,
2000 2001
------------------ ------------
PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $12,531,969 $10,061,504
Operating income............................................ 638,718 500,477
Income before provision for income taxes.................... 607,195 463,762
Net income before extraordinary charge...................... 383,721 296,666
Basic net income per share, before extraordinary
charge(1)................................................. $0.76 $0.57
Diluted net income per share, before extraordinary
charge(1)................................................. $0.73 $0.55
Shares used in computing basic per share amount............. 500,990 519,090
Shares used in computing diluted per share amount........... 536,886 551,779
AS OF
JUNE 30, 2001
-------------
PRO FORMA COMBINED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 833,976
Net working capital......................................... 3,017,915
Total assets................................................ 11,106,853
Long-term debt.............................................. 1,883,381
Stockholders' equity........................................ 6,356,836
---------------
(1) The pro forma combined basic and diluted net income per share are computed
by dividing pro forma combined net income by the pro forma combined
weighted-average number of common and common equivalent shares outstanding
of Sanmina and SCI for each period at an assumed exchange ratio of 1.36
shares of Sanmina common stock for each share of SCI common stock.
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COMPARATIVE PER SHARE INFORMATION
The following table summarizes per share information for Sanmina and SCI on
a historical, pro forma combined and equivalent pro forma combined basis. The
following information should be read in conjunction with the audited
consolidated financial statements of Sanmina and SCI, the unaudited interim
consolidated financial statements of Sanmina and SCI, and the unaudited pro
forma combined condensed financial statements included elsewhere or incorporated
by reference in this joint proxy statement/prospectus. The pro forma information
is presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
merger had been consummated on the dates indicated, nor is it necessarily
indicative of the future operating results or financial position of the combined
companies. All per share data presented have been restated to retroactively
reflect all previous stock splits.
SANMINA
FISCAL YEARS ENDED NINE MONTHS
------------------------------------------ ENDED
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, JUNE 30,
1998 1999 2000 2001
------------- ---------- ------------- -----------
(UNAUDITED)
HISTORICAL PER COMMON SHARE DATA:
Basic net income per share, before extraordinary
charge(1)..................................... $ 0.15 $ 0.37 $ 0.71 $ 0.65
Basic net income per share, after extraordinary
charge(1)..................................... 0.15 0.37 0.69 0.65
Diluted net income per share, before
extraordinary charge(1)....................... 0.14 0.35 0.67 0.62
Diluted net income per share, after
extraordinary charge(1)....................... 0.14 0.35 0.65 0.62
Book value per common share(2) (unaudited)...... 2.62 3.07 5.56 6.26
---------------
(1) The historical basic net income per share is computed by dividing net income
for each respective period by the number of weighted average common shares
outstanding during the respective time period. The historical diluted net
income per share is computed by dividing net income after adding back
interest expense, net of related income tax effect, associated with
convertible subordinated debt from each respective period by the common
equivalent shares outstanding during the respective time period assuming the
conversion of convertible subordinated debt, unless antidilutive.
(2) The historical book value per share is computed by dividing total
stockholders' equity at the end of each respective period by the number of
common shares outstanding at the end of each respective period.
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SCI
NINE MONTHS
YEARS ENDED JUNE 30, ENDED
--------------------- MARCH 25,
1998 1999 2000 2001
----- ----- ----- -----------
(UNAUDITED)
HISTORICAL PER COMMON SHARE DATA:
Basic net income per share(1)............................... $1.21 $1.11 $1.36 $ 0.68
Diluted net income per share(1)............................. 1.06 1.00 1.34 0.68
Book value per common share(2).............................. 6.23 8.09 9.46 10.07
---------------
(1) The historical basic net income per share is computed by dividing net income
for each respective period by the weighted average common shares outstanding
during the respective time period. The historical diluted net income per
share is computed by dividing net income after adding back the interest
expense, net of related income tax effect, associated with outstanding
convertible subordinated notes from each respective period by the common
equivalent shares outstanding during the respective time period.
(2) The historical book value per share is computed by dividing total
stockholders' equity at the end of each respective period by the number of
common shares outstanding at the end of each respective period.
UNAUDITED PRO FORMA COMBINED AND EQUIVALENT PRO FORMA COMBINED
FISCAL YEAR NINE MONTHS
ENDED ENDED
------------------ -------------
SEPTEMBER 30, 2000 JUNE 30, 2001
------------------ -------------
(UNAUDITED)
PRO FORMA COMBINED PER SANMINA COMMON SHARE DATA:
Basic net income per share, before extraordinary
charge(1)................................................. $ 0.76 $ 0.57
Diluted net income per share, before extraordinary
charge(1)................................................. $ 0.73 $ 0.55
Book value per common share(2).............................. -- $ 12.25
EQUIVALENT PRO FORMA COMBINED PER SCI COMMON SHARE DATA:
Basic net income per share(3)............................... $ 1.03 $ 0.78
Diluted net income per share(3)............................. $ 0.99 $ 0.75
Book value per common share(3).............................. -- $ 16.66
---------------
(1) The unaudited pro forma combined basic and diluted net income per Sanmina
common share data are based upon the unaudited pro forma combined net income
divided by the unaudited pro forma combined, weighted average number of
common and common equivalent shares outstanding of Sanmina and SCI of each
respective period at an assumed exchange ratio of 1.36 shares of Sanmina
common stock for each share of SCI common stock. The unaudited pro forma
combined net income for the nine months ended June 30, 2001 combines
Sanmina's nine months ended June 30, 2001 with SCI's nine months ended March
25, 2001. The unaudited pro forma combined net income for the year ended
September 30, 2000 combines Sanmina's fiscal year end of September 30, 2000
with SCI's fiscal year end of June 30, 2000, respectively. The unaudited pro
forma combined and equivalent pro forma combined data do not present like
periods. The use of different closing dates is necessary as each entity has
different year ends. The pro forma reporting with respect to combining
Sanmina and SCI's annual period results with different fiscal year ends that
are within 93 days is in accordance with Securities and Exchange Commission
guidance.
(2) The unaudited pro forma combined book value per Sanmina share is computed by
dividing the unaudited pro forma combined stockholders' equity at the end of
each respective period by the number of pro forma combined common shares
outstanding at the end of the period, at an assumed exchange ratio of 1.36
shares of Sanmina common stock for each share of SCI common stock.
(3) The unaudited equivalent pro forma combined basic and diluted net income per
SCI share amounts and the unaudited equivalent pro forma book value per SCI
share amount are calculated by multiplying the respective unaudited pro
forma combined Sanmina per share amounts by an assumed exchange ratio of
1.36 shares of Sanmina common stock for each share of SCI common stock.
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COMPARATIVE PER SHARE MARKET PRICE DATA
Sanmina common stock is traded on the Nasdaq National Market under the
symbol "SANM." SCI common stock is traded on the New York Stock Exchange under
the symbol "SCI." Because the market price of Sanmina common stock that you will
receive in the merger may increase or decrease before the merger, you are urged
to obtain current market quotations.
The following table sets forth, for the quarters indicated, the intraday
high and low prices per share of Sanmina common stock as reported on the Nasdaq
National Market and SCI common stock as reported on the New York Stock Exchange.
Sanmina common stock began trading on the Nasdaq National Market on June 23,
1993 and SCI common stock began trading on the New York Stock Exchange on March
18, 1997.
HIGH LOW
------ ------
SANMINA COMMON STOCK
FISCAL 2001
Quarter Ended September 29, 2001 (through August 9)......... $24.00 $17.75
Quarter Ended June 30, 2001................................. 38.20 17.53
Quarter Ended March 31, 2001................................ 54.75 18.50
Quarter Ended December 30, 2000............................. 60.50 29.59
FISCAL 2000
Quarter Ended September 30, 2000............................ $59.97 $40.32
Quarter Ended July 1, 2000.................................. 43.91 21.07
Quarter Ended April 1, 2000................................. 34.00 22.50
Quarter Ended January 1, 2000............................... 27.32 18.69
FISCAL 1999
Quarter Ended October 2, 1999............................... $20.82 $16.03
Quarter Ended July 3, 1999.................................. 20.32 14.03
Quarter Ended April 3, 1999................................. 18.89 12.38
Quarter Ended January 2, 1999............................... 15.63 5.85
HIGH LOW
------ ------
SCI COMMON STOCK
FISCAL 2002
Quarter Ended September 30, 2001 (through August 9, 2001)... $31.51 $21.70
FISCAL 2001
Quarter Ended June 30, 2001................................. $29.90 $15.58
Quarter Ended March 25, 2001................................ 35.13 15.53
Quarter Ended December 24, 2000............................. 47.00 22.56
Quarter Ended September 24, 2000............................ 65.13 35.81
FISCAL 2000
Quarter Ended June 30, 2000................................. $58.38 $32.75
Quarter Ended March 26, 2000................................ 55.13 33.50
Quarter Ended December 26, 1999............................. 43.16 19.53
Quarter Ended September 26, 1999............................ 28.44 21.48
FISCAL 1999
Quarter Ended June 30, 1999................................. $25.00 $12.63
Quarter Ended March 28, 1999................................ 29.69 14.59
Quarter Ended December 26, 1998............................. 28.97 10.38
Quarter Ended September 27, 1998............................ 22.25 10.63
---------------
(1) Per share amounts of Sanmina common stock have been restated to
retroactively reflect two-for-one stock splits effected in June 1998, March
2000 and January 2001.
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(2) Per share amounts of SCI common stock have been restated to retroactively
reflect a two-for-one stock split effected in February 2000.
The following table sets forth the closing prices per share of Sanmina
common stock as reported on the Nasdaq National Market and the closing prices
per share of SCI common stock as reported on the New York Stock Exchange on (a)
July 13, 2001, the last full trading day preceding public announcement that
Sanmina and SCI had entered into the merger agreement and (b) August 9, 2001,
the last full trading day for which it was practicable to obtain closing prices
at the time of the printing of this joint proxy statement/prospectus.
SANMINA COMMON STOCK SCI COMMON STOCK
-------------------- ----------------
July 13, 2001........................................... $22.14 $25.17
August 9, 2001.......................................... $21.03 $28.42
DIVIDEND POLICY
Neither Sanmina nor SCI has paid cash dividends on their common stock.
SCI's bank agreements restrict its ability to pay dividends by requiring it to
maintain a certain consolidated net worth which required amount at June 30, 2000
was $1,027,200,000. After the merger is completed, Sanmina does not anticipate
paying any cash dividends.
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RISK FACTORS
In evaluating the merger, you should carefully consider the discussion of
risks and uncertainties below and you should refer to the matters discussed
under the caption "Forward Looking Statements" in this joint proxy
statement/prospectus on page 11.
By voting in favor of the merger, SCI stockholders will be choosing to
invest in Sanmina common stock. An investment in Sanmina common stock involves a
high degree of risk. By voting in favor of the share issuance in connection with
the merger, current Sanmina stockholders will face dilution of their ownership
interest in Sanmina. In addition to the other information contained in this
joint proxy statement/prospectus, you should carefully consider all of the
following risk factors relating to the proposed merger, the combined company,
Sanmina and SCI in deciding whether to vote for the merger.
RISKS RELATED TO THE MERGER
SANMINA FACES UNCERTAINTIES RELATING TO THE INTEGRATION OF SANMINA'S AND SCI'S
OPERATIONS, SYSTEMS AND PERSONNEL.
Integrating the operations, systems and personnel of Sanmina and SCI will
be a complex process, and Sanmina and SCI are uncertain that the integration
will be completed in a timely manner or will achieve the anticipated benefits of
the merger. The challenges involved in this integration include:
- retaining existing customers, suppliers and other business partners of
each company;
- retaining and integrating management and other key employees of both
Sanmina and SCI;
- combining product and service offerings effectively, quickly and without
disruption to Sanmina's or SCI's ongoing businesses;
- transitioning all systems to a common information technology system;
- persuading employees that the business cultures of Sanmina and SCI are
compatible; and
- developing, maintaining and combining uniform standards, controls,
procedures and policies.
The combined company may not succeed in addressing these risks or any other
problems encountered in connection with the merger. The diversion of the
attention of Sanmina's and SCI's management and any difficulties encountered in
the process of combining the companies could cause the disruption of, or a loss
of momentum in, the activities of Sanmina's and SCI's businesses. In addition,
there may be unanticipated expenses related to integration of the two companies.
Further, neither Sanmina nor SCI can assure you that the growth rate of the
combined company will equal the historical growth rates experienced by either
company.
THE VALUE OF THE SANMINA COMMON STOCK TO BE RECEIVED BY SCI STOCKHOLDERS WILL
FLUCTUATE WITH SANMINA'S SHARE PRICE, AND NO ADJUSTMENT TO THE EXCHANGE RATIO
WILL BE MADE AS A RESULT OF CHANGES IN THE MARKET PRICE OF SANMINA OR SCI COMMON
STOCK.
At the closing of the merger, each share of SCI common stock will be
exchanged for 1.36 shares of Sanmina common stock. This exchange ratio will not
be adjusted for changes in the market price of Sanmina common stock or SCI
common stock. SCI stockholders will not know the exact market value of Sanmina's
common stock which will be issued to them in the merger at the time of the
special meeting of SCI stockholders. Neither Sanmina nor SCI may terminate or
renegotiate the merger agreement, and SCI may not resolicit the vote of its
stockholders solely because of changes in the market price of Sanmina common
stock or SCI common stock. If Sanmina's common stock price declines prior to or
on the closing of the merger, the Sanmina common stock received by SCI
stockholders at the closing will have a market value less than the current
market value of Sanmina common stock.
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The market price of Sanmina's common stock, like that of the shares of many
other technology companies, has been and is expected to continue to be volatile.
For example, during the twelve months ended on August 9, 2001, Sanmina common
stock traded as high as $60.50 per share and as low as $17.53 per share. The
market price of Sanmina common stock is expected to continue to fluctuate
significantly.
CUSTOMER AND EMPLOYEE UNCERTAINTY ABOUT THE MERGER COULD HARM THE COMBINED
COMPANY.
Sanmina's and SCI's customers may, in response to the announcement or
consummation of the merger, seek alternative sources of product supply or
service, or change orders for products due to uncertainty over the integration
of the two companies or the strategic position of the combined company. As a
result, the combined company may experience some customer attrition prior to or
following the merger which could harm the combined company's results of
operations. In addition, employees of both companies may experience uncertainty
about their future roles with the combined company until or after Sanmina
announces and executes its integration plan with regard to employees. This may
adversely affect the combined company's ability to attract and retain key
management, marketing and technical personnel.
IF SANMINA DOES NOT SUCCESSFULLY INTEGRATE SCI OR THE MERGER'S BENEFITS DO NOT
MEET THE EXPECTATIONS OF INVESTORS OR FINANCIAL OR INDUSTRY ANALYSTS, THE MARKET
PRICE OF SANMINA COMMON STOCK MAY DECLINE AFTER THE MERGER.
The market price of Sanmina common stock may decline as a result of the
merger if:
- the integration of Sanmina and SCI is not completed in a timely and
efficient manner;
- the perceived benefits of the merger are not achieved as rapidly or to
the extent anticipated by financial or industry analysts;
- the effect of the merger on the combined company's financial results is
not consistent with the expectations of financial or industry analysts;
or
- significant stockholders of Sanmina decide to dispose of their shares
after the merger because the results of the merger are not consistent
with their expectations.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT THE MARKET PRICE OF
SANMINA COMMON STOCK AND SCI COMMON STOCK.
If the merger is not completed for any reason, Sanmina and SCI will be
subject to a number of material risks, including:
- the provision in the merger agreement which provides that SCI could be
required to pay Sanmina fees aggregating up to $150.0 million for
terminating the merger agreement, entering into a merger agreement with
another company or consummating a business combination transaction with
another company within 15 months after termination of the merger
agreement;
- the market prices of Sanmina common stock and SCI common stock may
decline to the extent that the current market price of those shares
reflects a market assumption that the merger will be completed;
- significant costs related to the merger, such as filing fees, printing
costs, legal and accounting fees and a portion of the investment banking
fees, must be paid even if the merger is not completed; and
- benefits that Sanmina and SCI expect to realize from the merger, such as
the potentially enhanced competitive position of the combined company,
may not be realized.
If the merger agreement is terminated and the SCI board of directors seeks
another merger or business combination, SCI stockholders cannot be certain that
SCI will be able to find another party willing to pay an equivalent or more
attractive price than the price to be paid by Sanmina in the merger.
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THE MERGER WILL RESULT IN SIGNIFICANT COSTS TO SANMINA AND SCI.
Costs associated with combining the operations of the two companies are
difficult to estimate. Direct transaction costs to Sanmina, which will be
included as part of the total purchase price for accounting purposes, are
estimated at approximately $18.5 million. Direct transaction costs of SCI, which
will be expensed in the quarter that the merger closes, are estimated at
approximately $26.8 million. These costs are expected to consist primarily of
fees for investment bankers, attorneys, accountants, filing fees and financial
printing. The aggregate amount of these costs may be greater than currently
anticipated. A substantial amount of these costs will be incurred whether or not
the merger is completed. Sanmina believes the combined company may incur charges
to operations, which are not currently reasonably estimable, in the quarter in
which the merger is completed or the following quarters, to reflect costs
associated with integrating the businesses and operations of Sanmina and SCI.
There can be no assurance that the combined company will not incur additional
material charges in subsequent quarters to reflect additional costs associated
with the merger.
PURCHASE BUSINESS COMBINATION ACCOUNTING TREATMENT AND THE IMPACT OF
AMORTIZATION OF IDENTIFIABLE INTANGIBLES COULD ADVERSELY AFFECT SANMINA'S
OPERATING RESULTS.
Under United States generally accepted accounting principles that apply to
Sanmina, Sanmina will account for the merger as a purchase business combination.
Sanmina will record the following as the cost of acquiring SCI:
- the market value of Sanmina common stock issued in connection with the
merger;
- the fair value of the options to purchase SCI common stock that will be
converted into options to purchase Sanmina common stock in connection
with the merger; and
- the amount of direct transaction costs incurred by Sanmina.
Sanmina will allocate the cost of the items described above to the
individual assets acquired and liabilities assumed, including deferred
compensation and identifiable intangible assets such as technology-based
intangible assets, based on their respective fair values. Identifiable
intangible assets with finite lives will be amortized over those lives.
Intangible assets, including goodwill, with indefinite lives will not be
amortized. The amount of purchase cost allocated to goodwill and identifiable
intangibles are estimated to be approximately $3.2 billion and $0.4 million,
respectively, computed using the estimated purchase price of $4.4 billion which
is based on the average closing price of Sanmina's common stock during the five
trading day period ended July 17, 2001, or $20.87 per share. Identified
intangible assets will be amortized over estimated lives of five to eight years,
or six years on average. Deferred compensation will be amortized over the
remaining vesting period of SCI's outstanding stock options of up to four years.
The amount of purchase cost allocated to deferred compensation is estimated at
$6.6 million. If identifiable intangible assets were amortized in equal
quarterly amounts over a six year period following the completion of the merger,
and deferred compensation were amortized in equal quarterly amounts over the
average remaining vesting period of the related stock options, the accounting
charge attributable to these items would be approximately $17.2 million per
quarter and $68.9 million per fiscal year in the year following the closing date
of the merger. As a result, business combination accounting treatment of the
merger will decrease the net income of Sanmina in the foreseeable future, which
could have a material adverse effect on the market value of Sanmina common stock
following the completion of the merger. These amounts are only estimates,
however, and actual amounts may differ from these estimates.
DURING THE PENDENCY OF THE MERGER, SCI MAY NOT BE ABLE TO ENTER INTO A MERGER OR
BUSINESS COMBINATION WITH ANOTHER PARTY AT A FAVORABLE PRICE BECAUSE OF
RESTRICTIONS IN THE MERGER AGREEMENT.
Until the merger is completed or the merger agreement is terminated,
subject to specified exceptions, SCI is prohibited from entering into or
soliciting, initiating or encouraging any inquiries or proposals that may lead
to a proposal or offer for a merger, consolidation, business combination, sale
of substantial assets, tender offer, sale of shares of capital stock or other
similar transactions regarding SCI as a whole with any person or
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entity other than Sanmina. In addition, SCI agreed to pay a termination fee of
up to $150.0 million in specified circumstances. These provisions could
discourage other companies from seeking to acquire SCI even though those other
companies might be willing to offer greater value to SCI stockholders than
Sanmina has offered in the merger. The payment of the termination fee could also
have a material adverse effect on SCI's financial condition.
NEED FOR GOVERNMENTAL CLEARANCES MAY DELAY CONSUMMATION OF THE MERGER.
This merger is conditioned upon the expiration or termination of the
applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, the European Union Council Regulation No.
4064/89 and the Competition Act of Canada. Sanmina and SCI also have filed a
premerger notification form with the antitrust agency in Brazil. In addition,
other filings with, notifications to, and authorizations and approvals of, the
antitrust agency in Mexico, and possibly antitrust agencies in other
jurisdictions, may be required to be made and received prior to consummation of
the merger. Sanmina and SCI are seeking to obtain all required regulatory
clearances prior to the scheduled completion of these transactions. However, all
required regulatory clearances may not be obtained on that timetable.
Restrictions on the combined operations of, or divestitures by, the two
companies may be sought by governmental agencies as a condition to obtaining
these clearances. Notwithstanding any agreements regarding operating
restrictions or divestitures that may be required under applicable U.S. or
non-U.S. law or by U.S. or non-U.S. authorities, neither Sanmina nor SCI is
required to agree under the terms of the merger agreement, to any divestiture of
capital stock or of any business, assets or property of Sanmina, SCI or their
subsidiaries or affiliates, or the imposition of any material limitation on the
ability of any of these parties to conduct their businesses or to own or
exercise control of assets, property or stock.
The combined company may be required to agree to various operating
restrictions, before or after receipt of stockholder approval, in order to
obtain the necessary approvals of the merger under U.S. or non-U.S. antitrust
laws, or to assure that non-U.S. governmental authorities do not seek to block
the merger. No additional stockholder approval is expected to be required or
sought for any decision by Sanmina or SCI after the special meetings of
Sanmina's and SCI's stockholders to agree to any terms and conditions necessary
to resolve any regulatory objections to the merger, and stockholder approval
will not be sought unless such stockholder approval is required to approve the
terms and conditions under applicable law.
Even if regulatory approvals are obtained, any federal, state or non-U.S.
governmental entity or any private person may challenge the merger at any time
before or after its completion.
SCI EXECUTIVE OFFICERS AND DIRECTORS HAVE INTERESTS THAT MAY INFLUENCE THEM TO
SUPPORT AND APPROVE THE MERGER.
Some of the directors and executive officers of SCI will receive continuing
indemnification against liabilities and have SCI stock options and employment
offers that provide them with interests in the merger that are different from,
or are in addition to, your interests in the merger. For example, A. Eugene
Sapp, Jr., SCI's chief executive officer and an SCI director, has entered into
an employment agreement with SCI and Sanmina, and James E. Moylan, Jr., SCI's
senior vice president and chief financial officer, intends to enter into an
employment agreement with Sanmina and SCI. Robert C. Bradshaw, SCI's president
and chief operating officer, also intends to enter into an employment agreement
with Sanmina. Further, Mr. Sapp, Wayne Shortridge and Jackie M. Ward, currently
directors of SCI, will become members of the board of directors of Sanmina upon
completion of the merger. As a result, these directors and officers may be more
likely to vote to adopt and approve the merger agreement and approve the merger
than if they did not have these interests. See the section entitled "THE
MERGER -- Interests of SCI Directors and Officers in the Merger" beginning on
page 63 of this document.
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RISKS ASSOCIATED WITH COMBINED COMPANY OPERATIONS
SANMINA AND SCI ARE HEAVILY DEPENDENT ON THE ELECTRONICS INDUSTRY IN GENERAL AND
THE COMMUNICATIONS SECTOR IN PARTICULAR, AND CHANGES IN THE INDUSTRY COULD HARM
THE COMBINED COMPANY'S BUSINESS AND OPERATING RESULTS.
Sanmina's and SCI's businesses are heavily dependent on the health of the
electronics industry. Sanmina's customers are manufacturers in the
communications, industrial and medical instrumentation and high-speed computer
systems sectors of the electronics industry. SCI's customers are manufacturers
of electronics products in various sectors, including the computer, peripheral,
communications, medical, industrial, consumer, aerospace, defense and
entertainment sectors. These industry sectors, and the electronics industry as a
whole, are subject to rapid technological change and product obsolescence.
Sanmina's and SCI's customers can discontinue or modify products containing
components manufactured by them. Any discontinuance or modification of orders or
commitments could harm Sanmina's and SCI's operating results.
A substantial portion of Sanmina's revenues are derived from the
communications sector. SCI also has several significant customers in this
sector. During 2001, the communications sector has undergone a significant
downturn and many major communications companies have reported declining sales
and operating results. The downtown in this sector has resulted in rescheduling
of customer orders and shipments and has adversely affected Sanmina's, and to a
lesser extent, SCI's, operating results. In the event this downtown continues,
the combined company's operating results will continue to be harmed.
The electronics industry is also subject to economic cycles and has in the
past experienced, and is likely in the future to experience, recessionary
periods. In particular, many sectors of the electronics industry are currently
experiencing the effects of a downturn in economic conditions. This downturn is
leading to reduced demand for the services provided by electronic manufacturing
services companies. These changes in demand and in economic conditions have
resulted and may continue to result in customer cancellation or rescheduling of
orders and shipments, which could affect the combined company's results of
operations. In addition, a protracted general recession in the electronics
industry could have a material adverse effect on the combined company's
business, financial condition and results of operations.
In addition, Sanmina and SCI have experienced, and the combined company may
continue to experience, the risk that customers will be unable or unwilling to
pay for products and services already provided to them. On June 13, 2001,
Sanmina filed a complaint against Metricom, Inc. in California state court. The
complaint arose out of a July 2, 1999 agreement for electronic manufacturing
services and seeks compensation for cancellation charges arising under this
agreement. Sanmina's damages consist of the cost of certain materials and
work-in-process. Metricom has filed for Chapter 11 bankruptcy and, as a result,
Sanmina's claim has been stayed. Accordingly, Sanmina has filed a claim for its
damages in the bankruptcy proceedings. Based on Sanmina's reserves allocated for
the Metricom situation as well as current estimates of funds that will be
available to satisfy claims of trade creditors in the Metricom bankruptcy
proceeding, Sanmina currently estimates its potential exposure on this matter
will not exceed $10 million (after exhausting reserves). The actual amount of
exposure will depend on actions taken by the bankruptcy court, and the amount
realized from Metricom's assets in the bankruptcy proceeding that are available
to be distributed to unsecured creditors. Accordingly, Sanmina's actual exposure
in this matter could be in excess of the estimated amount.
SANMINA AND SCI TYPICALLY DO NOT OBTAIN LONG-TERM VOLUME PURCHASE COMMITMENTS
FROM CUSTOMERS, AND CANCELLATIONS AND RESCHEDULING OF PURCHASE ORDERS COULD HARM
THE COMBINED COMPANY'S OPERATING RESULTS AND CAUSE THE COMBINED COMPANY'S STOCK
PRICE TO DECLINE.
Sanmina and SCI typically do not obtain long-term volume purchase
commitments from their customers. Customer orders may be canceled and volume
levels may be changed or delayed. For example, Sanmina and SCI have recently
experienced certain cancellation and rescheduling of shipment dates of customer
orders. As a result, Sanmina's and SCI's results of operations for the second
calendar quarter of 2001 were adversely affected. Results of operations in
future fiscal periods may continue to be affected by customer cancellations
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and reschedulings as well as by changes in shipment volumes. Sanmina and SCI
cannot assure you that they will be able to replace canceled, delayed or reduced
contracts or purchase orders with new business. As a result, future
cancellations or rescheduling of orders or commitments could cause the combined
company's operating results to be below expectations, which would likely cause
the combined company's stock price to decline.
THE COMBINED COMPANY'S OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY, WHICH MAY
CAUSE ITS STOCK PRICE TO FALL.
Sanmina's and SCI's quarterly and annual results of operations have varied
in the past, and the combined company's operating results may vary significantly
in the future due to a number of factors including, but not limited to, the
following:
- timing of orders from major customers;
- mix of products ordered by and shipped to major customers;
- the volume of orders as related to each company's capacity;
- pricing and other competitive pressures;
- component shortages, which could cause the combined company to be unable
to meet customer delivery schedules;
- fluctuations in component prices;
- economic conditions in the electronics industry;
- the combined company's ability to effectively manage inventory and fixed
assets; and
- the combined company's ability to time expenditures in anticipation of
future sales.
The combined company's results can also be significantly influenced by the
development and introduction of new products by its customers. From time to
time, Sanmina and SCI experience changes in the volume of sales to each of their
principal customers, and operating results may be affected on a period-to-period
basis by these changes. Sanmina's and SCI's customers generally require short
delivery cycles, and a substantial portion of each of their backlogs are
typically scheduled for delivery within six months. Quarterly sales and
operating results therefore depend in large part on the volume and timing of
bookings received during the quarter, which are difficult to forecast.
Sanmina's and SCI's backlogs also affect their ability to plan production
and inventory levels, which could lead to fluctuations in operating results. In
addition, a significant portion of Sanmina's and SCI's operating expenses are
relatively fixed in nature and planned expenditures are based in part on
anticipated orders. Any inability to adjust spending quickly enough to
compensate for any revenue shortfall may magnify the adverse impact of such
revenue shortfall on Sanmina's and SCI's results of operations. Results of
operations in any period should not be considered indicative of the results to
be expected for the combined company in any future period. In addition,
fluctuations in operating results may also result in fluctuations in the price
of the combined company's common stock.
THE COMBINED COMPANY WILL RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A
SUBSTANTIAL PART OF ITS REVENUES, AND DECLINES IN SALES TO MAJOR CUSTOMERS COULD
HARM THE COMBINED COMPANY'S OPERATING RESULTS.
Sales to a limited number of customers have accounted for a significant
portion of each of Sanmina's and SCI's revenues in each fiscal period. Sanmina
and SCI expect that sales to a limited number of customers will continue to
account for a substantial portion of the combined company's total revenues in
future periods. Sanmina and SCI each has experienced periods in which sales to
some of their respective major customers, as a percentage of total revenues,
have fluctuated due to delays or failures to place expected orders.
During fiscal 2000, 1999 and 1998, sales to Sanmina's ten largest customers
accounted for approximately 55%, 48% and 40%, respectively, of Sanmina's net
sales. For fiscal 2000, only sales to one customer, Nortel
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Networks, represented more than 10% of Sanmina's net sales. For fiscal 1999 and
1998, no single customer accounted for more than 10% of net sales. This customer
information gives effect to the restatement of Sanmina's results of operations
to reflect its recent acquisition of AB Segerstrom and Svensson.
During fiscal 2000, 1999 and 1998, SCI's ten largest customers contributed
more than 75% of SCI's revenues. For fiscal 2000, sales to Hewlett-Packard
Company and Nortel Networks Corporation each represented more than 10% of SCI's
revenues. For fiscal 1999, sales to Hewlett-Packard, Dell and Compaq each
represented more than 10% of SCI's revenues and for fiscal 1998, sales to
Hewlett-Packard represented more than 10% of SCI's revenues.
Although Sanmina and SCI cannot assure you that the combined company's
principal customers will continue to purchase products and services at current
levels, if at all, Sanmina and SCI expect that the combined company will
continue to depend upon its principal customers for a significant portion of
their net sales. The combined company's customer concentration could increase or
decrease, depending on future customer requirements, which will depend in large
part on market conditions in the electronics industry segments in which the
combined company's customers participate. The loss of one or more major
customers or declines in sales to major customers could significantly harm the
combined company's business and operating results and lead to declines in the
price of the combined company's common stock.
SANMINA AND SCI ARE EACH SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS, AND
THESE RISKS COULD HARM THE COMBINED COMPANY'S OPERATING RESULTS AND CAUSE ITS
STOCK PRICE TO DECLINE.
Sanmina and SCI each have, for the past several fiscal years, pursued a
strategy of growth through acquisitions. In Sanmina's case, these acquisitions
have primarily involved acquisitions of entire companies. In addition, Sanmina
and SCI have acquired selected assets from electronics industry OEMs,
principally equipment, inventory and in certain cases facilities or facility
leases. These transactions also typically involve new supply agreements with
OEMs. Acquisitions of companies and businesses and expansion of operations
involve certain risks, including the following:
- the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale or
other value;
- diversion of management's attention;
- difficulties in scaling up production at new sites and coordinating
management of operations at new sites;
- difficulties associated with managing and integrating operations in
distant geographic locations, such as Europe, the Middle East, Asia and
Latin America;
- the possible need to restructure, modify or terminate customer
relationships of the acquired company; and
- loss of key employees of acquired operations.
Accordingly, the combined company may experience problems in integrating
operations recently acquired by Sanmina or SCI or operations associated with any
future acquisition. Sanmina and SCI therefore cannot assure you that any recent
or future acquisition will result in a positive contribution to the combined
company's results of operations. Furthermore, Sanmina and SCI cannot assure you
that the combined company will realize value from any acquisition which equals
or exceeds the consideration paid. In particular, the successful combination of
the combined company with any businesses the combined company acquires in the
future will require substantial effort from each company, including the
integration and coordination of sales and marketing efforts. The diversion of
the attention of management and any difficulties encountered in the transition
process, including, the interruption of, or a loss of momentum in, the
activities of any future acquisition, problems associated with integration of
management information and reporting systems, and delays in implementation of
consolidation plans, could harm the combined company's ability to realize the
anticipated benefits of any future acquisition. Any failure by the combined
company to realize the anticipated benefits of its acquisitions could harm its
business and operating results, and could cause the price of the
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combined company's common stock to decline. In addition, future acquisitions may
result in dilutive issuances of equity securities, the incurrence of additional
debt, large one-time write-offs and the creation of goodwill or other intangible
assets that could result in amortization expense or impairment charges. These
factors could harm the combined company's business and operating results and
cause the price of the combined company's common stock to decline.
OEM ASSET DIVESTITURE TRANSACTIONS INVOLVE SIGNIFICANT RISKS THAT COULD HARM THE
COMBINED COMPANY.
Sanmina and SCI have pursued and both companies expect to continue to
pursue opportunities to acquire assembly operations being divested by
electronics industry OEMs. Sanmina and SCI expect that competition for these
opportunities among electronics manufacturing services firms will be intense as
these transactions typically enable the acquiror to enter into long-term supply
arrangements with the divesting OEM. Accordingly, the combined company's future
results of operations could be harmed if it is not successful in consummating a
significant portion of the OEM divestiture transactions it pursues. In addition,
due to the large scale and long-term nature of supply arrangements typically
entered into in OEM divestiture transactions and because cost reductions are
generally a major reason why the OEM is divesting operations, pricing of
manufacturing services may be less favorable to the manufacturer than in
standard contractual relationships. For example, Sanmina experienced declines in
gross margins during fiscal 2000 due to Sanmina's increase in sales to Nortel
Networks under Sanmina's supply agreement relating to the operations it
acquired. In addition, premiums paid to the divesting OEM may be in excess of
the value that can be realized from the transaction. Furthermore, because these
transactions involve customers, they can present difficult managerial and
organizational challenges, particularly with respect to excess inventory, excess
capacity and similar problems. If the combined company enters into OEM
divestiture transactions, it may experience erosion in gross margins as a result
of the pricing structure in such transactions as well as problems arising from
excess inventory and capacity.
THE COMBINED COMPANY MAY EXPERIENCE COMPONENT SHORTAGES, WHICH WOULD CAUSE IT TO
DELAY SHIPMENTS TO CUSTOMERS, RESULTING IN POTENTIAL DECLINES IN REVENUES AND
OPERATING RESULTS.
Recently, a number of components purchased by each of Sanmina and SCI and
incorporated into assemblies and subassemblies they each produce have been
subject to shortages. These components include application-specific integrated
circuits, capacitors and connectors. Unanticipated component shortages caused
Sanmina to be unable to make certain scheduled shipments to customers during
fiscal 2000 and may do so in the future. SCI also has experienced shipment
delays due to component shortages. The inability to make scheduled shipments in
the future could cause the combined company to experience a shortfall in
revenues and cost absorption. The combined company could also experience
negative customer goodwill due to the delay in shipment. Component shortages may
also increase the combined company's cost of goods due to premium charges it
must pay to purchase components in short supply and due to changes in the mix of
assemblies shipped to customers. For example, shortages in certain components
negatively affected Sanmina's and SCI's operating results and contributed to an
increase in inventory levels during fiscal 2001. Accordingly, component
shortages could harm the combined company's operating results for a particular
fiscal period due to the resulting revenue shortfall, cost absorption or cost
increases and could also damage customer relationships over a longer-term
period.
THE COMBINED COMPANY IS SUBJECT TO COMPETITION AND TECHNOLOGICAL CHANGE, AND ITS
BUSINESS MAY BE HARMED BY COMPETITIVE PRESSURES AND FAILURE TO ADAPT TO
TECHNOLOGICAL CHANGES.
Because SCI and Sanmina operate to a considerable degree in different
markets, each of SCI and Sanmina will be affected differently by competition and
technological change. The combined company will be affected by competition and
technological change in the same manner as each company is affected, in addition
to facing new competitive and technological challenges as a result of the
merger.
The electronics manufacturing services industry is highly competitive.
Sanmina and SCI compete on a worldwide basis to provide electronics
manufacturing services to OEM's. Sanmina and SCI must continually develop
improved manufacturing processes to accommodate customers' needs for
increasingly complex
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products. Sanmina's and SCI's competitors include large independent
manufacturers such as Solectron Corporation, Flextronics International Ltd.,
Celestica, Inc. and Jabil Circuit, Inc. Some of these companies have greater
manufacturing and financial resources than Sanmina and SCI individually and as a
combined company. In addition, Sanmina and SCI face competition from OEMs that
manufacture their own products.
The communications equipment industry is highly fragmented and
characterized by intense competition. Sanmina offers products and services in
the communications equipment product space, which is highly competitive but is
less fragmented than the electronics manufacturing services industry as a whole.
Sanmina's competitors also manufacture communications equipment products, and
some of these competitors have greater manufacturing and financial resources
than Sanmina, as well as greater surface mount assembly capacity. Consequently,
as a participant in the communications equipment product space, Sanmina must
continually develop improved manufacturing processes to accommodate Sanmina's
customers' needs for increasingly complex products. During periods of recession
in the electronics industry, Sanmina's competitive advantages in the areas of
quick turnaround manufacturing and responsive customer service may be of reduced
importance to OEMs, who may become more price sensitive. Sanmina may also be at
a competitive disadvantage with respect to price when compared to manufacturers
with lower cost structures, particularly those with offshore facilities where
labor and other costs are lower.
SCI competes against numerous domestic and international companies which
participate in the electronics manufacturing services industry. Additionally,
SCI faces competition from current and prospective customers who evaluate SCI's
services and capabilities against the merits of internal manufacturing.
The combined company will experience intense competition which is expected
to intensify further as more companies enter markets in which the combined
company operates, as existing competitors expand capacity and as the industry
consolidates. To remain competitive, the combined company must develop and
provide technologically advanced engineering services, information systems and
manufacturing processes. In addition, the combined company must maintain high
quality products and services, offer flexible delivery schedules and deliver
products on a timely basis. Failure to satisfy these or other requirements could
adversely affect the combined company.
THE COMBINED COMPANY'S OPERATING RESULTS MAY BE AFFECTED BY SEASONALITY.
Although SCI's business historically has not been consistently seasonal,
seasonal demands for products produced by SCI for its customers and sold by them
to consumers may impact the combined company's quarterly revenues. The effect of
seasonality has increased in recent quarters, as the proportion of SCI's
customers' products ultimately sold at retail, has increased. SCI's operating
margins have undergone seasonal fluctuations in the past, particularly in the
first fiscal quarter due to the slowing effects of the summer season. Sanmina
and SCI believe these seasonality effects may continue at the combined company.
ENVIRONMENTAL MATTERS ARE A KEY CONSIDERATION IN EACH OF SANMINA'S AND SCI'S
BUSINESS AND FAILURE TO COMPLY WITH THE REQUIREMENTS OF ENVIRONMENTAL LAWS COULD
HARM ITS BUSINESS.
Both Sanmina and SCI are subject to a variety of local, state and federal
environmental laws in the United States and elsewhere and regulations relating
to the storage, use, discharge and disposal of chemicals, solid waste and other
hazardous materials used during their manufacturing processes, as well as air
quality regulations and restrictions on water use. Proper waste disposal is a
major consideration for printed circuit board manufacturers, such as Sanmina,
because metals and chemicals are used in the manufacturing process. Maintenance
of environmental controls is also important in the electronics assembly process.
When violations of environmental laws occur, Sanmina and SCI can be held liable
for damages and the costs of remedial actions and can also be subject to
revocation of permits necessary to conduct their businesses. There can be no
assurance that violations of environmental laws will not occur in the future as
a result of the inability to obtain permits, human error, equipment failure or
other causes. Any permit revocations could require the combined company to cease
or limit production at one or more facilities, which could seriously harm the
combined company's business, financial condition and results of operations.
Moreover, the failure to comply with present and future regulations could
restrict the combined company's ability to expand facilities or could require
the
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combined company to acquire costly equipment or to incur other significant
expenses to comply with environmental regulations.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with violations.
The combined company will operate in several environmentally sensitive locations
and will be subject to potentially conflicting and changing regulatory agendas
of political, business and environmental groups. Changes or restrictions on
discharge limits, emissions levels, permitting requirements and material storage
or handling may require a higher than anticipated level of capital investment
or, depending on the severity of the impact of the foregoing factors, plant
relocation. Compliance with new or existing regulations could seriously harm the
combined company's business, financial condition and results of operations.
SANMINA IS SUBJECT TO ENVIRONMENTAL CONTINGENCIES AT SITES OPERATED BY ACQUIRED
COMPANIES AND COULD INCUR SUBSTANTIAL COSTS FOR ENVIRONMENTAL REMEDIATION AND
RELATED ACTIVITIES AT THESE SITES.
In November 1997, Sanmina acquired Elexsys International Inc., which became
a wholly-owned subsidiary of Sanmina. Several facilities owned or occupied by
Elexsys at the time of the acquisition, or formerly owned or occupied by Elexsys
or companies acquired by Elexsys, had either soil or groundwater contamination
underneath or near the facility. For example, the Von Karman Avenue, Irvine,
California facility, a printed circuit board manufacturing plant, has solvent
contamination in soil and groundwater and is currently under investigation by
the California Regional Water Quality Control Board (RWQCB). Sanmina has been
pumping and treating groundwater for a number of years. By letter dated June 8,
2001, the RWQCB threatened to issue a Clean-up and Abatement Order to address
concerns about additional investigation and remediation. No such order has been
issued, and Sanmina is working with the RWQCB to address their concerns. To
date, the cost of the various investigations and of operating the remediation
system at the Irvine facility have not materially affected Sanmina's financial
condition. In the event Sanmina is required to undertake additional groundwater
or soil cleanup, the cost of such cleanup is likely to be substantial. However,
Sanmina believes, based on the information currently available to it, that the
potential cost of any groundwater or soil clean-up would not materially affect
Sanmina's financial condition. Currently, Sanmina is unable to anticipate
whether any third party claims will be brought against it for the existence of
the contamination at the Irvine facility.
At two facilities formerly owned or occupied by a predecessor company to
Elexsys in Mountain View, California, Sanmina has been required by the
California Department of Toxic Substances Control (DTSC) to undertake
investigation of soil and groundwater. DTSC has advised Sanmina that no further
investigation will be required at one of the two facilities. At the other
facility, test results have not been sufficient to enable Sanmina to determine
whether or not cleanup activities will be required; however, Sanmina does not
believe any such activities will be required. Sanmina has not been ordered to
undertake any soil or groundwater cleanup activities at either of the two former
Mountain View facilities. Nevertheless, the process of remediating contaminated
soil and groundwater is costly, and if Sanmina is required to undertake
substantial remediation activities at one or more of the former Elexsys
facilities, the costs of such activities may materially affect Sanmina's
financial condition.
In November 1998, Sanmina acquired Altron Incorporated, which became a
wholly-owned subsidiary of Sanmina. Altron was advised in 1993 by Olin
Corporation that contamination resulting from activities of prior owners of
property owned by Olin and located close to the Altron manufacturing plant in
Wilmington, Massachusetts, had migrated under the Altron plant. Olin has assumed
full responsibility for any remediation activities that may be required and has
agreed to indemnify and hold Altron harmless from any and all costs,
liabilities, fines, penalties, charges and expenses arising from and relating to
any action or requirement, whether imposed by statute, ordinance, rule,
regulation, order, decree or by general principles of law to remediate, clean up
or abate contamination emanating from the Olin site. Although Sanmina believes
that Olin's assumption of responsibility will result in no remediation cost to
Altron from the contamination, there can be no assurance that Altron will not be
subject to some costs regarding this matter. Sanmina does not anticipate costs
relating to this matter, if any, will materially affect its financial condition.
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Sanmina has been named as a potentially responsible party at several
contaminated disposal sites as a result of the past disposal of hazardous waste
by companies acquired by Sanmina or their corporate predecessors. While
liabilities for such historic disposal activities have not materially affected
Sanmina's financial condition to date, there can be no guarantee that past
disposal activities will not result in liability which will materially affect
Sanmina in the future.
HADCO, A WHOLLY-OWNED SUBSIDIARY OF SANMINA, IS SUBJECT TO ENVIRONMENTAL
CONTINGENCIES AT SITES CURRENTLY OR FORMERLY OPERATED BY IT AND COULD INCUR
SUBSTANTIAL COSTS FOR ENVIRONMENTAL REMEDIATION AND RELATED ACTIVITIES AT THESE
SITES.
Hadco is aware of certain chemicals that exist in the ground at certain of
its facilities. Hadco has notified various governmental agencies and continues
to work with them to monitor and resolve these matters. During March 1995, Hadco
received a Record Of Decision (ROD) from the New York State Department of
Environmental Conservation (NYSDEC), regarding soil and groundwater
contamination at its Owego, New York facility. Based on a Remedial Investigation
and Feasibility Study (RIFS) for apparent on-site contamination at that facility
and a Focused Feasibility Study (FFS), each prepared by environmental
consultants of Hadco, the NYSDEC has approved a remediation program of
groundwater withdrawal and treatment and iterative soil flushing. Hadco has
executed a Modification of the Order on Consent to implement the approved ROD.
Capital equipment for this remediation has already been acquired by Hadco, and
future operation and maintenance costs, which will be incurred and expended over
the estimated life of the program of the next 28 years, are estimated at between
$40,000 and $100,000 per year. In the summer of 1998, NYSDEC took additional
samples from a wetland area near Hadco's Owego facility. Analytical reports of
earlier sediment samples indicated the presence of certain inorganics. The new
samples showed elevated levels of certain metals, but NYSDEC has not made a
determination as to the potential source of such metals, the remedial action to
be taken, or the persons to undertake and/or pay for any remediation. There can
be no assurance that Hadco and/or other third parties will not be required to
conduct additional investigations and remediation at that location, the costs of
which are currently indeterminable.
Hadco has commenced the operation of a groundwater extraction system at its
Derry, New Hampshire, facility to address certain groundwater contamination and
migration control issues. It is not possible to make a reliable estimate of the
length of time remedial activity will have to be performed. However, it is
anticipated that the groundwater extraction system will be operated for at least
30 years. There can be no assurance that Hadco will not be required to conduct
additional investigations and remediation relating to the Derry facility. The
total costs of such groundwater extraction system and of conducting any
additional investigations and remediation relating to the Derry facility are not
fully determinable.
From 1974 to 1980, Hadco operated a printed circuit manufacturing facility
in Florida as a lessee. In June 1999, Hadco, Gould Electronics, Inc. and the
Florida Department of Environmental Protection (FDEP) entered into a Settlement
Agreement which provides that Hadco and Gould will undertake remedial action
based on a Supplemental Contamination Assessment Report and a later Feasibility
Study, which has been prepared by a consultant to Hadco and Gould and approved
by the FDEP. The remedial capital costs are estimated to be $1.4 million. In
addition, ongoing monitoring and operation and maintenance costs are estimated
to be $1.4 million, which includes operation of the remediation system for 8
years and monitoring for 30 years. Actual remedial activities have not yet
commenced.
In March 1993, the EPA notified Hadco Santa Clara of its potential
liability for maintenance and remediation costs in connection with a hazardous
waste disposal facility operated by Casmalia Resources, a California Limited
Partnership, in Santa Barbara County, California. In June 1997, the United
States District Court in Los Angeles, California, approved and entered a Consent
Decree among the EPA and 49 entities (including Hadco Santa Clara) acting
through the Casmalia Steering Committee (CSC). The Consent Decree sets forth the
terms and conditions under which the CSC will carry out work aimed at final
closure of the site. Certain closure activities will be performed by the CSC.
Under the Consent Decree, the settling parties will work with the EPA to pursue
the non-settling parties to ensure they participate in contributing to the
closure and long-term operation and maintenance of the facility.
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In May 2000, Sanmina was notified by the city of Santa Clara, California,
of a number of alleged wastewater discharge and other violations of
environmental laws by one of Sanmina's plants. Sanmina cooperated with Santa
Clara to address the city's concerns regarding the plant's operations and
subsequently settled this matter with the city. Santa Clara did not file any
lawsuit against Sanmina in connection with this matter.
In March 2001, Sanmina acquired approximately 94% of the outstanding shares
and convertible debentures of Segerstrom. It is possible that previous
operations have contaminated soil and/or groundwater at Segerstrom facilities.
At the current time, Sanmina believes that the estimated environmental
liabilities associated with the Segerstrom facilities are approximately $4.4
million. Sanmina believes, based on the limited information currently available,
that the cost of any groundwater or soil clean-up that may be required would not
harm Sanmina's business, financial condition and results of operations.
Nevertheless, the process of remediating contaminated soil and groundwater is
costly, and if Sanmina is required to undertake substantial remediation
activities at one or more of the former Segerstrom facilities, there can be no
assurance that the costs of such activities would not harm Sanmina's business,
financial condition and results of operations.
SCI IS SUBJECT TO ENVIRONMENTAL CONTINGENCIES AT SITES OPERATED BY SCI AND COULD
INCUR SUBSTANTIAL COSTS FOR ENVIRONMENTAL REMEDIATION AND RELATED ACTIVITIES AT
THESE SITES.
SCI has undertaken remediation activities for groundwater contamination at
Plants 1 and 4 in Huntsville, Alabama. The applicable regulatory authorities
have granted "no further action status" with regard to these remediation
projects. In addition, Plant 34 in Brockville, Ontario, Canada has contaminated
soil and groundwater which Nortel Networks is remediating. In addition, Plant 34
in Brockville, Ontario, Canada has groundwater contamination that Nortel
Networks is remediating to comply with applicable standards. Nortel Networks has
agreed to indemnify SCI for any loss it incurs as a result of claims by third
parties relating to the groundwater contamination or the work associated with
the cleanup of the contamination. However, there may also be soil and/or
groundwater contamination at other current or former SCI manufacturing
facilities which has yet to be discovered and could give rise to material
remediation obligations and/or other liabilities.
In the course of preparing its plants located in Arab, Alabama, and
Colorado Springs, Colorado, for sale, SCI conducted a Phase I Environmental Site
Assessment and Limited Compliance Review at both facilities. Both procedures
indicated the presence of lead in wipe samples obtained from surfaces in the
interior of these plants. While there are no standards for lead on surfaces in
commercial buildings, these concentrations are above residential standards not
applicable to these facilities. Remediation activities to reduce the lead
concentrations are currently underway at both plants. Lead dust has also been
identified at SCI's San Jose, California, facility. The estimated clean up costs
for identified remediation activities at these plants is approximately $900,000.
As the manufacturing equipment that generated the lead dust is used at most
SCI manufacturing facilities, it is possible that lead dust could be present in
the interior of some or all of its current and former manufacturing facilities.
While SCI regularly monitors for airborne concentrations of lead in its
buildings and is not aware of any significant lead concentrations in excess of
the applicable OSHA standards, the presence of lead dust in these facilities
could give rise to affirmative remediation obligations and/or other liabilities
if the levels are found to be sufficiently high.
Asbestos is present at several SCI manufacturing facilities. While this
asbestos is being managed in place pursuant to asbestos operations and
maintenance plans, the presence of asbestos could give rise to affirmative
remediation obligations and other liabilities.
On February 1, 2000, SCI was named as a third-party defendant in an action
brought pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act based on releases of hazardous substances to the soil and
groundwater at the Allworth, Inc. solvent recycling facility in Tarrant City,
Alabama. Plaintiff Southdown, Inc., former owner of Allworth, initially brought
this cost recovery action against other prior owners of Allworth and current and
former customers of Allworth. In turn, the customer defendants named additional
customers, including SCI. On November 7, 2000, the District Court dismissed the
claims against all former customer defendants with prejudice. On December 4,
2000, Southdown, Inc. and
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Southdown Environmental LLC, an indirect wholly-owned subsidiary of Southdown,
Inc., filed a notice of appeal of the District Court's November 7, 2000 Order,
which appeal is pending. The parties to this action have agreed to settle the
case and dismiss all claims with prejudice with each party bearing its own
costs. The current owners of the Allworth facility have agreed to indemnify the
customers of the facility, including SCI, for all necessary remediation costs.
However, should the current owner of the Allworth facility not be able to honor
its indemnification of SCI, it is possible that state or federal authorities
could require SCI to participate, along with the numerous other potentially
responsible parties, in the remediation of the soil and groundwater at the
Allworth facility.
SOME EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO THE BUSINESS OF THE
COMBINED COMPANY AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH THE
COMPANY IN THE FUTURE.
The success of the combined company depends upon the continued service of
some executive officers and other key personnel. Generally, neither Sanmina's
nor SCI's employees are bound by employment or noncompetition agreements, and
there can be no assurance that the combined company will retain its officers and
key employees, particularly its highly skilled design, process and test
engineers involved in the manufacture of existing products and the development
of new products and processes. The competition for these employees is intense,
and the loss of key employees could negatively affect the combined company. Upon
completion of the merger, A. Eugene Sapp, Jr., chief executive officer of SCI,
will become co-chairman of Sanmina and Robert C. Bradshaw, president and chief
operating officer of SCI, will become president of EMS operations of Sanmina. If
the combined company loses the services of Jure Sola, chairman and chief
executive officer of Sanmina, Randy Furr, president and chief operating officer
of Sanmina, Mr. Sapp, Mr. Bradshaw, one or more of its other executive officers
or key employees, or if one or more of these individuals decides to join a
competitor or otherwise compete directly or indirectly with the combined
company, the combined company's business, operating results and financial
condition could be seriously harmed.
THE COMBINED COMPANY WILL HAVE SUBSTANTIAL INDEBTEDNESS, SOME OF WHICH IS
VARIABLE INTEREST DEBT THAT IS AFFECTED BY INTEREST RATE FLUCTUATIONS.
In May 1999, Sanmina raised approximately $350 million through an offering
of four and one-quarter percent convertible subordinated notes due 2004 to
qualified institutional investors. In September 2000, Sanmina raised
approximately $750 million through an offering of zero coupon convertible
subordinated debentures due 2020 to qualified institutional investors. For a
description of Sanmina's outstanding indebtedness, refer to Sanmina's audited
and unaudited financial statements incorporated into this joint proxy
statement/prospectus by reference. Sanmina's other indebtedness is principally
comprised of operating, synthetic and capital leases.
In July 1996, SCI borrowed $100 million under adjustable rate senior notes
due 2006 issued to a group of institutional investors. In March 2001, SCI
borrowed $600 million under adjustable rate senior notes due 2006 issued to a
second group of institutional investors. The interest rates under these issues
of senior notes adjust on the basis of certain changes in financial covenants
applicable to SCI. SCI also has in place two credit facilities with a group of
domestic and international banks under which SCI may borrow principal amounts up
to $325 million under a 364-day revolving credit line and up to $200 million
under a five-year credit line. SCI further has a $210 million asset
securitization program expiring November 2001 under which certain accounts
receivable may be sold by a special purpose subsidiary of SCI, with limited
recourse. In March 2000, SCI issued $575 million of its 3% convertible
subordinated notes due March 2007. The notes are convertible into SCI's common
stock and will become convertible into Sanmina common stock following the
merger. For a complete description of SCI's outstanding indebtedness, refer to
SCI's audited and unaudited financial statements incorporated herein by
reference. SCI's other debt-related liabilities include lease or guarantee
obligations under industrial revenue bonds.
Included in the debt described above is approximately $422 million of
variable interest debt, at March 25, 2001, incurred by SCI. Short term interest
rate changes can impact SCI's interest expense on this debt, as well as the
discount (reflected in interest expense) on its accounts receivable sold under
SCI's asset
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securitization agreement. The fluctuations in interest rates may have an effect
on operating results of the combined company.
The level of the combined company's indebtedness, among other things,
could:
- make it difficult for the combined company to make payments on the notes
and leases;
- make it difficult for the combined company to obtain any necessary future
financing for working capital, capital expenditures, debt service
requirements or other purposes;
- require the combined company to dedicate a substantial portion of its
expected cash flow from operations to service its indebtedness, which
would reduce the amount of its expected cash flow available for other
purposes, including working capital and capital expenditures;
- limit its flexibility in planning for, or reacting to, changes in the
combined company's business; and
- make the combined company more vulnerable in the event of a downturn in
its business.
The combined company may incur substantial additional indebtedness in the
future.
FAILURE TO MANAGE THE COMBINED COMPANY'S GROWTH MAY SERIOUSLY HARM ITS BUSINESS.
Sanmina's and SCI's businesses have grown in recent years through both
internal expansion and acquisitions, and continued growth may cause a
significant strain on the combined company's infrastructure and internal
systems. To manage the combined company's growth effectively, the combined
company must continue to improve and expand its management information systems.
The combined company will face additional growth management challenges,
particularly as a result of Sanmina's recent acquisitions in Europe and Brazil.
Future acquisitions, both in the United States and internationally, could place
additional strains on the combined company's management infrastructure. If the
combined company is unable to manage growth effectively, its results of
operations could be harmed.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS MAY HARM THE OPERATIONS OF THE
COMBINED COMPANY.
Sanmina's and SCI's existing international operations and plans to expand
international operations involve risks, and the failure to effectively expand
internationally could harm the combined company's operating results. Sanmina
opened its first overseas facility, located in Dublin, Ireland, in June 1997.
During June 2000 and July 2000, Sanmina acquired operations in Ireland, Sweden,
Finland, Malaysia and China. In October 2000, Sanmina acquired a 49.9% ownership
interest in INBOARD, a wholly-owned subsidiary of Siemens AG, located in
Germany. By virtue of the Segerstrom acquisition, Sanmina acquired operations in
Sweden, Finland, Brazil, Hungary, and Scotland. SCI currently generates more
than half of its revenue from its non-U.S. operations. Additionally, much of
SCI's manufacturing material is provided by international suppliers.
U.S. export sales by SCI approximated $175 million, $116 million and $185
million for fiscal 2000, 1999, and 1998, respectively. Sales by SCI's non-U.S.
operations amounted to $4.2 billion in fiscal 2000, $2.8 billion in fiscal 1999
and $2.1 billion in fiscal 1998. Non-U.S. sales represented 50.5% of
consolidated sales in fiscal 2000, 41.8% in fiscal 1999 and 30.9% in fiscal
1998. Property, plant and equipment investments by SCI in non-U.S. operations
were $427 million, $308 million and $271 million at June 30, 2000, 1999 and
1998, respectively.
Sanmina's and SCI's international sales and operations may be limited or
disrupted by the imposition of government controls, export license requirements,
political and economic instability, trade restrictions, changes in tariffs,
labor unrest and difficulties in staffing, coordinating communications among and
managing international operations. Additionally, the combined company's business
and operating results may be harmed by fluctuations in international currency
exchange rates as well as increases in duty rates, earnings expatriation
restrictions, difficulties in obtaining export licenses, misappropriation of
intellectual property, constraints on the combined company's ability to maintain
or increase prices and competition. Sanmina and SCI cannot assure you that the
combined company will realize the anticipated strategic benefits of its
international
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expansion or that international operations will contribute positively to the
combined company's business and operating results.
To respond to competitive pressures and customer requirements, the combined
company may further expand internationally in lower cost locations, particularly
additional locations in Asia, Central Europe and Latin America. As a result of
this possible expansion, the combined company could encounter difficulties in
scaling up production at overseas facilities and in coordinating its U.S. and
international operations. The combined company may not realize anticipated
revenue growth at new international operations. The combined company may elect
to establish start-up operations rather than acquiring existing businesses,
which would require it to recruit management and other personnel and build a
customer base at a completely new operation. Accordingly, unanticipated problems
the combined company encounters in establishing new international operations
could harm its business and operating results and cause its stock price to
decline.
THE COMBINED COMPANY'S OPERATING RESULTS MAY BE AFFECTED BY FLUCTUATIONS IN
INTERNATIONAL CURRENCIES.
SCI currently primarily conducts its international sales and purchase
transactions in U.S. dollars or under customer contract provisions that protect
against most major currency risks. SCI's largest currency risk is that
associated with its Brazilian operation. Unlike SCI's other international
operations, its Brazilian plant is directly exposed to the effects of currency
devaluation on certain customers' contracts until forward pricing is adjusted
accordingly (normally quarterly). Other currency exchange risks associated with
SCI's international operations primarily relate to current assets and
liabilities denominated in currencies other than the U.S. dollar. Although SCI
endeavors to balance such items against each other where possible at individual
operations, no assurance can be given that it will be successful in mitigating
the effects of changes in currency exchange rates upon such international dollar
transactions. Changes in some international currency exchange rates impact the
geographic areas where SCI's revenue is derived. When international currencies
are devalued, manufacturing costs of plants in those countries may become more
competitive with other established plants. Sanmina's international purchase and
sale transactions are also primarily denominated in U.S. dollars, except that
Segerstrom's transactions are denominated primarily in Euros, Swedish kronors or
other European currencies. Accordingly, the combined company will be subject to
risks associated with currency fluctuations and devaluations.
SANMINA AND SCI ARE SUBJECT TO RISKS RELATED TO INTELLECTUAL PROPERTY RIGHTS
HELD BY THIRD PARTIES.
Sanmina and SCI are subject to risks related to intellectual property
rights held by third parties. In certain cases, the combined company may find it
necessary or desirable to license or otherwise acquire rights to intellectual
property held by others. In July 2000, Sanmina settled one such dispute through
a licensing arrangement with the Lemelson Foundation. SCI is currently in
litigation with the Lemelson Foundation regarding claims that certain activities
of SCI infringe United States patents held by the Lemelson Foundation. Other
such disputes, which could involve the combined company in litigation or in
administrative proceedings before the United States Patent and Trademark Office
or patent authorities in other countries, could arise in the future. These
proceedings could be costly to conduct and could also result in the diversion of
management time and attention. In addition, adverse determinations in any
proceedings of this nature could require the combined company to pay monetary
damages and could also result in the loss of intellectual property rights. In
the event the combined company was able to settle disputes through licensing or
similar arrangements, the costs of these licenses could be substantial.
Accordingly, future disputes regarding intellectual property rights could harm
the combined company's business, financial condition and results of operations.
On February 14, 2001, Gemstar-TV Guide International, Inc. and StarSight
Telecast, Inc. filed a complaint against SCI and four other respondents with the
United States International Trade Commission. With respect to SCI, the complaint
alleged certain unfair acts, including patent infringement, in the importation
of set top boxes manufactured by SCI for EchoStar Communications Corporation,
another respondent in the case. The Commission instituted an investigation
following publication of its notice in the Federal Register on March 21, 2001.
The matter is in the discovery phase, and trial is currently scheduled to
commence on December 3, 2001.
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THE COMBINED COMPANY'S BUSINESS MAY BE HARMED BY THE CALIFORNIA ELECTRICAL POWER
CRISIS.
A significant portion of Sanmina's customer base and operations are located
in the State of California, which is in the midst of an energy crisis that could
disrupt Sanmina's operations and increase Sanmina's expenses. In the event of an
acute power shortage, that is, when power reserves for the State of California
fall below 1.5%, California has on some occasions implemented, and may in the
future continue to implement, rolling blackouts throughout California. If
blackouts interrupt Sanmina's power supply, Sanmina could be temporarily unable
to continue operations at certain of its California facilities. In addition,
concerns exist that the California energy crisis could lead to worsening of
economic conditions in California which could affect the combined company's
customers in California. Power shortages in California have also caused the
wholesale price of electricity to increase, which will likely cause operating
expenses for California facilities to increase. Accordingly, the California
energy situation could adversely affect the combined company's business and
results of operations.
THE COMBINED COMPANY MAY BE SUBJECT TO A SECURITIES CLASS ACTION SUIT IF ITS
STOCK PRICE FALLS.
Following periods of volatility in the market price of a company's stock,
some stockholders may file a securities class action litigation. Any future
securities class action litigation could be expensive and divert management's
attention and harm the combined company's business, regardless of its merits.
THE TRADING PRICE OF THE COMBINED COMPANY'S SECURITIES, INCLUDING COMMON STOCK
AND CONVERTIBLE SUBORDINATED DEBENTURES, MAY BE VOLATILE, AND THE VALUE OF YOUR
INVESTMENT COULD DECLINE.
The trading price of Sanmina's common stock and SCI's common stock has been
and could in the future be subject to significant fluctuations in response to
variations in quarterly operating results, developments in the electronics
industry, changes in general economic conditions and economic conditions in the
electronics industry and the communications sector in particular, changes in
securities analysts' recommendations regarding Sanmina's and SCI's securities
and other factors. In addition, the stock market in recent years has experienced
significant price and volume fluctuations which have affected the market prices
of technology companies and which have been unrelated to or disproportionately
impacted by the operating performance of those companies. For example, Sanmina's
common stock price has fluctuated from a high of approximately $60.50 to a low
of approximately $17.53 during the 52 weeks ended August 9, 2001, and SCI's
common stock price has fluctuated from a high of approximately $65.125 to a low
of approximately $15.53 during the 52 weeks ended August 9. These broad market
fluctuations may cause the market price of the combined company's common stock
to decline, which could diminish the value of your investment.
In addition, Sanmina and SCI each have outstanding several classes of
convertible subordinated notes. The Sanmina notes are not traded on a national
securities exchange or market. However, inter-institutional trading markets do
exist for these securities. The SCI 3% convertible subordinated notes are listed
on the New York Stock Exchange and will remain outstanding as an obligation of
SCI following the merger. As a result of the merger, the SCI 3% notes may not
qualify for continued listing on the New York Stock Exchange. The market price
of these securities is likely to be affected by the same factors that will
affect the market price for the combined company's common stock.
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THE SPECIAL MEETING OF SANMINA STOCKHOLDERS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to you in
connection with the solicitation of proxies by Sanmina's board of directors in
connection with the proposed merger. This joint proxy statement/prospectus is
first being furnished to stockholders of Sanmina on or about [ ], 2001.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of stockholders of Sanmina is scheduled to be held as
follows:
[ ], 2001
[ ], local time
[LOCATION]
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held to approve the issuance of shares of
Sanmina common stock to SCI stockholders in connection with the merger, to
change Sanmina's corporate name to [ ] effective upon the consummation
of the merger and to transact any other business that properly comes before the
special meeting or any adjournment thereof.
If the Sanmina stockholders do not approve the proposal to change Sanmina's
corporate name to [ ], SCI will not be obligated to complete the
merger. Accordingly, unless SCI waives this condition, the merger would not be
consummated even if Sanmina's stockholders approved the issuance of Sanmina
common stock to the SCI stockholders.
If the stockholders of Sanmina approve the proposals and the other
conditions to the completion of the merger are satisfied or waived, Sun
Acquisition Subsidiary will merge with and into SCI, and SCI will survive the
merger as a wholly-owned subsidiary of Sanmina. You will not receive any
additional shares of Sanmina common stock or be required to exchange your
Sanmina stock certificates in connection with the merger.
RECOMMENDATION OF THE SANMINA BOARD OF DIRECTORS
The members of the board of directors of Sanmina, excluding Joseph M.
Schell who abstained from voting, unanimously concluded that the merger
agreement and the merger are fair to and in the best interests of Sanmina's
stockholders, and the board unanimously recommends that the stockholders vote
FOR the proposal to approve the issuance of Sanmina common stock to SCI
stockholders in connection with the merger and the change of Sanmina's corporate
name to [ ] effective upon the consummation of the merger.
STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING
Sanmina's board of directors has fixed the close of business on
[ ], 2001 as the record date for determination of Sanmina stockholders
entitled to notice of, and to vote at, the special meeting. On the record date,
there were [ ] shares of Sanmina common stock outstanding, held by
approximately [ ] holders of record.
MAJORITY VOTE OF SANMINA STOCKHOLDERS REQUIRED TO APPROVE THE STOCKHOLDER
PROPOSALS
A majority of the outstanding shares of Sanmina common stock entitled to
vote at the special meeting must be represented, either in person or by proxy,
to constitute a quorum at the special meeting. The affirmative vote of the
holders of at least a majority of the shares of Sanmina common stock represented
at the special meeting is required to approve the issuance of Sanmina common
stock in connection with the merger. The affirmative vote of the holders of at
least a majority of the shares of Sanmina common stock outstanding and entitled
to vote is required to approve the change of Sanmina's corporate name to [ ]
effective upon the consummation of the merger. You are entitled to one vote for
each share of Sanmina common stock held by you on the record date on each
proposal to be presented to stockholders at the special meeting.
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On the record date for the special meeting, directors and executive
officers of Sanmina and their affiliates held approximately [ ] shares of
Sanmina common stock representing approximately [ ]% of all outstanding shares
of Sanmina common stock as of the record date.
Sanmina executive officers and directors, in their capacity as
stockholders, have agreed, subject to the terms and conditions of a voting
agreement with Sanmina and SCI, to vote their shares of Sanmina common stock in
favor of the approval of share issuance and the name change. As of the record
date these stockholders held approximately [ ] shares of Sanmina common
stock representing approximately [ ]% of the outstanding shares of Sanmina
common stock as of the record date.
PROXIES
Voting By Proxy Card
All shares of Sanmina common stock represented by properly executed proxy
card received before or at the special meeting will, unless the proxies are
revoked, be voted in accordance with the instructions indicated on the proxy
cards. If no instructions are indicated on a properly executed proxy card, the
shares will be voted FOR approval of the share issuance and the name change. You
are urged to mark a box on the proxy card to indicate how to vote your shares.
If a properly executed proxy card is returned and the stockholder has
instructed the proxies to abstain from voting on the share issuance in
connection with the merger, the Sanmina common stock represented by the proxy
will be considered present at the special meeting for purposes of determining a
quorum, but will not be voted for or against the stockholder proposals, thereby
having the effect of being a vote against the stockholder proposals. If your
shares are held in an account at a brokerage firm or bank, you must instruct
such institution how to vote your shares. If an executed proxy card is returned
by a broker holding shares in the name of a brokerage firm or bank, which
indicates that the broker or bank does not have instructions or discretionary
authority to vote on approval of the proposals, the shares will be considered
present at the meeting for the purpose of determining a quorum, but will not be
considered to have been voted in favor of approval of the proposals. Your broker
or bank will vote your shares only if you provide instructions on how to vote by
following the information provided to you by your broker or bank.
Because the approval of the name change requires the affirmative vote of a
majority of the shares of Sanmina common stock outstanding on the record date,
abstentions, failures to vote and broker non-votes will have the same effect as
a vote against this proposal.
Sanmina does not expect that any matters other than those set forth above
will be brought before the special meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to those matters, unless authority to do so is
withheld in the proxy.
Voting by Telephone or on the Internet
Registered stockholders of Sanmina can simplify their voting and save us
expense by calling 1-800-240-6326 or by voting via the Internet at
http://www.eproxy.com/sanm/. We provide telephone and Internet voting
information on the proxy card. A company number and a control number, located at
the top right on the back of the proxy card, is designed to verify the
stockholder's identity, allow the stockholder to vote such stockholder's shares
and confirm that we have properly recorded such stockholder's voting
instructions.
If you do not choose to vote by telephone or Internet, you may still return
your proxy card, properly signed, and we will vote the shares in accordance with
your directions. You can specify your choices by marking the appropriate boxes
on your proxy card. If you sign and return your proxy card without specifying
choices, we will vote the shares as recommended by our board of directors. IF
YOU DO VOTE BY TELEPHONE OR ON THE INTERNET, IT IS NOT NECESSARY TO RETURN YOUR
PROXY CARD.
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REVOCATION OF PROXIES
You may revoke your proxy at any time before it is voted by:
- notifying in writing the secretary of Sanmina at 2700 North First Street,
San Jose, California 95134;
- properly submitting a subsequent proxy card;
- properly submitting a subsequent proxy by telephone or on the Internet;
or
- appearing in person and voting at the special meeting.
Attendance at the special meeting will not in and of itself constitute the
revocation of a proxy.
SOLICITATION OF PROXIES
Sanmina and SCI will share the expenses incurred in connection with the
printing and mailing of this joint proxy statement/prospectus. Sanmina will also
request banks, brokers and other intermediaries holding shares of Sanmina common
stock beneficially owned by others to send this joint proxy statement/prospectus
to, and obtain proxies from, the beneficial owners and will reimburse the
holders for their reasonable expenses in so doing. Sanmina has retained
[ ] to aid in the solicitation of proxies and to verify records related
to the solicitations. [ ] will receive a fee of approximately
$[ ] plus reasonable out-of-pocket expenses for such services.
Solicitation of proxies by mail may be supplemented by telephone, telegram and
other electronic means, advertisements and personal solicitation by the
directors, officers or employees of Sanmina. No additional compensation will be
paid to directors, officers or employees for such solicitation.
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THE SPECIAL MEETING OF SCI STOCKHOLDERS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to you in
connection with the solicitation of proxies by SCI's board of directors in
connection with the proposed merger. This joint proxy statement/ prospectus is
first being furnished to stockholders of SCI on or about [ ],
2001.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of stockholders of SCI is scheduled to be held as
follows:
[ ], 2001
[ ], local time
[LOCATION]
PURPOSE OF THE SPECIAL MEETING
At the special meeting, SCI will ask you to consider and vote upon a
proposal to approve and adopt the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 13, 2001, by and among Sanmina Corporation, a
Delaware corporation, Sun Acquisition Subsidiary, Inc., a Delaware corporation
and a wholly-owned subsidiary of Sanmina, and SCI Systems, Inc., a Delaware
corporation, and the merger provided for therein.
If the stockholders of SCI approve and adopt the merger agreement and
approve the merger and the other conditions to completion of the merger are
satisfied or waived, Sun Acquisition Subsidiary will merge with and into SCI,
and SCI will survive the merger as a wholly-owned subsidiary of Sanmina. You
will be entitled to receive 1.36 shares of Sanmina common stock for each share
of SCI common stock you hold at the effective time of the merger.
RECOMMENDATION OF THE SCI BOARD OF DIRECTORS
The board of directors of SCI has approved and adopted the merger agreement
and has determined that the merger, upon the terms and conditions contained in
the merger agreement, is in the best interests of, and is on terms that are fair
to, SCI's stockholders. The board of directors unanimously recommends that the
stockholders vote FOR the proposal to approve and adopt the merger agreement and
approve the merger.
STOCKHOLDERS RECORD DATE FOR THE SPECIAL MEETING
SCI's board of directors has fixed the close of business on
[ ], 2001 as the record date for determination of SCI stockholders
entitled to notice of, and to vote at, the special meeting. On the record date,
there were [ ] shares of SCI common stock outstanding, held by
approximately [ ] holders of record.
MAJORITY VOTE OF SCI STOCKHOLDERS REQUIRED FOR ADOPTION AND APPROVAL OF THE
MERGER AGREEMENT
You are entitled to one vote for each share of SCI common stock held by you
on the record date on each proposal to be presented to stockholders at the
special meeting. A majority of the outstanding shares of SCI common stock
entitled to vote at the special meeting must be represented, either in person or
by proxy, to constitute a quorum at the special meeting. SCI will count shares
of its common stock represented in person or by proxy for the purpose of
determining whether a quorum is present at the special meeting. SCI will also
treat shares that abstain from voting as shares that are present and entitled to
vote at the special meeting for purposes of determining whether a quorum exists.
The affirmative vote of the holders of at least a majority of the shares of
SCI common stock outstanding on the record date is required to approve and adopt
the merger agreement and approve the merger.
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SCI executive officers and directors, including [ ], in their
capacity as stockholders, have agreed, subject to the terms and conditions of a
voting agreement with SCI and Sanmina, to vote their shares of SCI common stock
in favor of the approval and adoption of the merger agreement and approval of
the merger. These executive officers and directors have delivered proxies to
Sanmina which give Sanmina the initial right to vote such shares in favor of the
merger. As of the record date these stockholders held approximately [ ]
shares of SCI common stock representing approximately [ ]% of the
outstanding shares of SCI common stock as of the record date.
PROXIES
Voting By Proxy Card
All shares of SCI common stock represented by properly executed proxy cards
received before or at the special meeting will, unless the proxies are revoked,
be voted in accordance with the instructions indicated on the proxy cards. If no
instructions are indicated on a properly executed proxy card, the shares will be
voted FOR approval and adoption of the merger agreement and the merger. You are
urged to mark a box on the proxy card to indicate how to vote your shares.
If a properly executed proxy card is returned and the stockholder has
instructed the proxies to abstain from voting on approval and adoption of the
merger agreement and approval of the merger, the SCI common stock represented by
the proxy will be considered present at the special meeting for purposes of
determining a quorum, but will not be voted for or against approval of the
merger, thereby having the effect of being a vote against approval of the
merger. If your shares are held in an account at a brokerage firm or bank, you
must instruct such institution how to vote your shares. If an executed proxy
card is returned by a broker holding shares in the name of a brokerage firm or
bank, which indicates that the broker or bank does not have instructions or
discretionary authority to vote on adoption of the merger agreement, the shares
will be considered present at the meeting for the purpose of determining a
quorum, but will not be considered to have been voted in favor of approval and
adoption of the merger agreement and the approval of merger. Your broker or bank
will vote your shares only if you provide instructions on how to vote by
following the information provided to you by your broker or bank.
Because approval and adoption of the merger agreement and approval of the
merger require the affirmative vote of a majority of the shares of SCI common
stock outstanding on the record date, abstentions, failures to vote and broker
non-votes will have the same effect as a vote against the merger.
SCI does not expect that any matter other than approval and adoption of the
merger agreement and approval of the merger will be brought before the special
meeting. If, however, other matters are properly presented, the persons named as
proxies will vote in accordance with their judgment with respect to those
matters, unless authority to do so is withheld in the proxy.
Voting by Telephone or on the Internet
Registered stockholders of SCI can simplify their voting and save us
expense by calling [ ] or by voting via the Internet at
[ ]. We provide telephone and Internet voting information on the
proxy card. A control number, located above the stockholder's name and address
on the lower left of the proxy card, is designed to verify the stockholder's
identity, allow the stockholder to vote such stockholder's shares and confirm
that we have properly recorded such stockholder's voting instructions.
If you do not choose to vote by telephone or Internet, you may still return
your proxy card, properly signed, and we will vote the shares in accordance with
your directions. You can specify your choices by marking the appropriate boxes
on your proxy card. If you sign and return your proxy card without specifying
choices, we will vote the shares as recommended by our board of directors. IF
YOU DO VOTE BY TELEPHONE OR ON THE INTERNET, IT IS NOT NECESSARY TO RETURN YOUR
PROXY CARD.
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REVOCABILITY OF PROXIES
Any proxy you give may be revoked at any time before it is voted at the
special meeting. You may revoke a proxy by doing any of the following:
- sending a signed written notice stating that you would like to revoke
your proxy;
- completing and submitting a new proxy card;
- attending the special meeting and voting in person; or
- properly submitting a subsequent proxy by telephone or on the Internet.
Simply attending the special meeting will not revoke your proxy; you must
request a ballot and vote at the special meeting.
To be effective, any written notice of revocation or any new proxy card
must be received by SCI Systems, Inc., 2101 West Clinton Avenue, Huntsville,
Alabama 35805, Attention: Michael M. Sullivan, Secretary, prior to the time of
the special meeting. Attendance at the special meeting will not in and of itself
constitute the revocation of a proxy.
SOLICITATION OF PROXIES
Sanmina and SCI will share the expenses incurred in connection with the
printing and mailing of this joint proxy statement/prospectus. SCI will also
request banks, brokers and other intermediaries holding shares of SCI common
stock beneficially owned by others to send this joint proxy statement/prospectus
to, and obtain proxies from, the beneficial owners and will reimburse the
holders for their reasonable expenses in so doing. Sanmina has retained
[ ] to aid in the solicitation of proxies and to verify records related
to the solicitations. [ ] will receive a fee of approximately
$[ ] plus reasonable out-of-pocket expenses for such services.
Solicitation of proxies by mail may be supplemented by telephone, telegram and
other electronic means, advertisements and personal solicitation by the
directors, officers or employees of SCI. No additional compensation will be paid
to directors, officers or employees for such solicitation.
YOU SHOULD NOT SEND IN ANY SCI STOCK CERTIFICATES WITH YOUR PROXY CARD. A
TRANSMITTAL LETTER WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES
WILL BE MAILED TO YOU AS SOON AS POSSIBLE AFTER COMPLETION OF THE MERGER.
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THE MERGER
This section of the joint proxy statement/prospectus describes material
aspects of the proposed merger, including the merger agreement. While we believe
that the description covers the material terms of the merger, this summary may
not contain all of the information that is important to you. You should read
this entire joint proxy statement/prospectus and the other documents we refer to
carefully for a more complete understanding of the merger. In addition, we
incorporate important business and financial information about Sanmina and SCI
into this joint proxy statement/prospectus by reference. You may obtain the
information incorporated by reference into this joint proxy statement/prospectus
without charge by following the instructions in the section entitled "WHERE YOU
CAN FIND MORE INFORMATION" on page 9 of this joint proxy statement/prospectus.
EFFECT OF THE MERGER AND CONVERSION OF SCI COMMON STOCK
Upon the closing of the merger, Sun Acquisition Subsidiary, Inc., a
wholly-owned subsidiary of Sanmina, will merge with and into SCI, and SCI will
survive the merger as a wholly-owned subsidiary of Sanmina. Following the
merger, SCI will continue its operations as a wholly-owned subsidiary of
Sanmina. SCI stockholders will become Sanmina stockholders, and their rights as
stockholders will be governed by the Sanmina certificate of incorporation, as
amended, the Sanmina bylaws and the laws of the State of Delaware. See
"COMPARISON OF RIGHTS OF HOLDERS OF SANMINA COMMON STOCK AND SCI COMMON STOCK"
on page 95 of this joint proxy statement/prospectus.
At the closing of the merger, by virtue of the merger and without any
action on the part of Sanmina, Sun Acquisition Subsidiary, SCI or any of their
stockholders, each share of SCI common stock issued and outstanding immediately
prior to the effective time will be cancelled, extinguished and automatically
converted into the right to receive 1.36 shares of Sanmina common stock upon
surrender of the certificate representing such share of SCI common stock in the
manner provided for in the merger agreement, or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit and bond, if required. The
exchange ratio in the merger will be appropriately adjusted in the event of any
stock split, stock dividend, reorganization, recapitalization, reclassification
or similar change with respect to Sanmina common stock or SCI common stock
occurring prior to the closing of the merger. However, no adjustment in the
exchange ratio will be made for changes in the relative market prices of SCI's
and Sanmina's shares. No fractional shares of Sanmina common stock will be
issued in connection with the merger. SCI stockholders will receive cash,
without interest, in lieu of the issuance of any fractional shares of Sanmina
common stock which would have been otherwise issuable to SCI stockholders as a
result of the merger. Each share of SCI common stock held by SCI or any direct
or indirect wholly-owned subsidiary of SCI immediately prior to the closing of
the merger will be cancelled and extinguished.
BACKGROUND OF THE MERGER
During the latter half of calendar year 2000 and early calendar year 2001,
Sanmina management began considering and exploring various strategic
alternatives to broaden Sanmina's global electronics manufacturing services
presence. The objective of this strategic initiative was to expand Sanmina's
global footprint and overall electronics manufacturing services offerings in
order to better position Sanmina to meet the increasingly global manufacturing
and product requirements of Sanmina's current and potential future customers. In
particular, Sanmina's senior management believed that a larger, more global
presence and a broader range of full electronics manufacturing services would be
necessary to successfully compete for the growing number of divestiture
transactions being proposed by OEMs in the electronics industry.
In April and May 2001, Jure Sola and Randy Furr, Sanmina's chairman and
president, respectively, and A. Eugene Sapp, Jr., SCI's chairman and chief
executive officer, engaged in informal discussions regarding a possible business
combination through a series of telephone calls and meetings. Mr. Sola and Mr.
Furr had previously discussed with Mr. Sapp the possible benefits of combining
Sanmina and SCI on a number of occasions over the past few years. In the past,
Mr. Sapp had expressed SCI's view that it wanted to pursue an independent growth
strategy. Based on a reassessment of the strategic positioning of the two
companies,
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Messrs. Sola, Furr and Sapp agreed in May 2001 that there were significant
merits in considering a possible combination of the two companies. Mr. Sapp
invited Mr. Sola to provide a proposal to SCI which Mr. Sapp could present to
SCI's board of directors for its consideration.
On May 24, 2001, Mr. Sapp received a letter from Mr. Sola proposing a stock
for stock merger at a one to one exchange ratio. Mr. Sapp advised the executive
committee of the SCI board of the proposal by Mr. Sola and of his intention to
reject the proposed exchange ratio, as to which the executive committee
concurred. Mr. Sapp responded by telephone on May 25 and expressed SCI's view
that the exchange ratio was not adequate for SCI stockholders and that an
exchange ratio should be based on relative financial contributions by each of
SCI and Sanmina to the combined company. Mr. Sapp nonetheless agreed that the
parties should further develop their understanding of each others' businesses
and the strategic merits of a possible combination and should engage in a
valuation discussion to see if the parties could come to an agreement.
In May 2001, SCI reached agreement with Goldman Sachs as to the terms upon
which Goldman Sachs would act as SCI's financial advisor in a potential sale of
SCI.
On May 30, 2001, Sanmina and Merrill Lynch executed an engagement letter
pursuant to which Sanmina retained Merrill Lynch as its financial advisor for a
possible business combination with SCI. The terms of this engagement letter were
approved by Sanmina's board of directors, with director Joseph M. Schell,
chairman of Merrill Lynch's technology investment banking practice, abstaining.
In late May and early June 2001, a series of telephone conversations
involving Mr. Sapp and Mr. Sola took place. In these conversations, both parties
engaged in preliminary discussions regarding the possibility of combining the
companies. As a result of these conversations, Mr. Sapp and Sanmina's senior
management concluded that a common ground for proceeding with additional
discussions existed, and the parties determined to meet again during the week of
June 11.
On June 6, 2001, at a regularly scheduled meeting of the SCI board of
directors, Mr. Sapp apprised the board of his discussions with Mr. Sola and the
engagement of Goldman Sachs as SCI's financial advisor. SCI's board of directors
agreed that discussions with Sanmina should proceed.
On June 11, 2001, a regularly scheduled meeting of Sanmina's board of
directors took place. Representatives of Merrill Lynch attended this meeting and
gave a presentation regarding SCI and the strategic benefits and synergies
expected to result from the merger, as provided by Sanmina management, that the
combined company could potentially realize. Messrs. Sola and Furr presented
their strategic rationale for the transaction to the Sanmina board. The Merrill
Lynch representatives then presented a range of possible exchange ratios and
other financial analyses related to a possible combination of Sanmina and SCI.
On June 12, 2001, Sanmina and SCI entered into a mutual nondisclosure
agreement.
On June 12 and 13, 2001, Sanmina and SCI senior management, together with
representatives of Merrill Lynch and Goldman Sachs, met to exchange and review
information regarding the respective companies and discuss the merits of a
possible combination. At this meeting, it was agreed that the parties needed to
review more detailed financial information regarding the respective companies,
and a follow-up meeting was scheduled for this review.
On June 15 and 16, 2001, Mr. Sola and Mr. Sapp had several telephone
conversations in which various exchange ratios were discussed but not agreed to.
On July 2 and 3, 2001, Sanmina and SCI senior management, together with
representatives of Merrill Lynch and Goldman Sachs, met again and discussed the
business and financial prospects of the two companies, potential exchange ratios
and other transaction terms. At these meetings, the parties agreed in principle
upon a fixed exchange ratio of 1.36 shares of Sanmina common stock per share of
SCI common stock, subject to mutual due diligence investigations, agreement on a
definitive merger agreement and approval by the respective boards of directors.
The parties also discussed other concerns including composition of the combined
company's board of directors, roles of senior SCI management, employment
arrangements for key SCI personnel and other matters.
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On July 5, 2001, Sanmina and SCI and each of their legal and accounting
advisors began the process of conducting detailed business, legal and accounting
due diligence with respect to each other. Over the course of the next eight
days, Sanmina and SCI and their representatives and their respective legal and
financial advisors conducted negotiations relating to a definitive merger
agreement and related documents. Due diligence activities also continued during
this time.
On July 9, 2001, the board of directors of SCI met in Atlanta and received
a report from Mr. Sapp regarding the discussions held with representatives of
Sanmina and with respect to SCI's current condition and prospects.
Representatives of Goldman Sachs and counsel to SCI also attended this meeting.
G. William Speer of Powell, Goldstein, Frazer & Murphy LLP, SCI's outside legal
counsel, advised the members of the board concerning their legal requirements as
directors generally and, more particularly, in the context of a merger
transaction. The board of directors of SCI considered the terms of the proposed
merger, discussed the advantages and disadvantages to SCI and its stockholders
as a result of the proposed merger, discussed with Goldman Sachs certain
financial aspects of the proposed merger and authorized management to continue
discussions relating to the proposed merger, subject to further action by the
board of directors of SCI.
On July 13, 2001, the board of directors of SCI held a meeting in the
offices of Goldman Sachs in New York to discuss and review the draft merger
agreement. All directors participated in the meeting. Mr. Sapp reviewed the
current conditions of SCI, the history of the meetings and discussions held
between SCI and Sanmina and the possible effects of a combination of SCI and
Sanmina. Mr. Sapp, James E. Moylan, Jr., SCI's senior vice president and chief
financial officer, and Mr. Speer briefed the directors on the results of the
business and legal due diligence investigation conducted with respect to Sanmina
and Mr. Speer reviewed the draft merger agreement and related agreements and
summarized the few remaining open issues. Representatives of Goldman Sachs
presented financial analysis with respect to certain aspects of the proposed
merger and Goldman Sachs delivered its oral opinion, later confirmed in writing,
that as of such date, the exchange ratio was fair from a financial point of view
to the holders of SCI common stock. The board of directors voted unanimously to
approve and adopt the merger agreement, subject to resolution to the
satisfaction of SCI officers' of the few remaining items, and determined that
the merger, upon the terms and conditions contained in the merger agreement, is
in the best interests of, and is on terms that are fair to, SCI's stockholders.
On July 13, 2001, the board of directors of Sanmina held a meeting by
telephone conference call and all directors participated to discuss and review a
draft of the merger agreement in detail. Members of Sanmina's management,
including Messrs. Furr and Sola and Rick Ackel, Sanmina's chief financial
officer, reviewed the business and legal due diligence conducted on SCI.
Christopher D. Mitchell of Wilson Sonsini Goodrich & Rosati, Sanmina's outside
legal counsel, reviewed the draft merger agreement and related agreements and
summarized the few remaining open issues. Mr. Mitchell also reviewed with the
Sanmina board of directors the legal principles applicable to the proposed
merger, including the board's fiduciary duties and authority in considering the
proposed merger and the share issuance by Sanmina. Representatives of Merrill
Lynch then presented a report concerning certain financial aspects of the
proposed merger and Merrill Lynch delivered its oral opinion, subsequently
confirmed in writing, that as of the date of such opinion, the exchange ratio
was fair from a financial point of view to Sanmina. The board of directors,
excluding Mr. Schell who abstained from voting due to his relationship with
Merrill Lynch, voted unanimously to approve the merger agreement, the merger,
the issuance of Sanmina common stock to SCI stockholders in the merger and the
change of Sanmina's corporate name.
Negotiations regarding the remaining open issues in the merger agreement
continued during the afternoon and evening of July 13, 2001. During the late
evening on July 13, SCI and Sanmina entered into the merger agreement. At 12:01
a.m. on Monday, July 16, 2001, Sanmina and SCI issued a joint press release
announcing the merger.
On August 10, Sanmina and SCI amended the merger agreement to remove the
requirement that Sanmina stockholders adopt the merger agreement and approve the
merger by executing and delivering the amended and restated merger agreement.
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JOINT REASONS FOR THE MERGER
The boards of directors of Sanmina and SCI have determined that a combined
company would be positioned to compete more effectively in the global
electronics manufacturing services market, thereby increasing the potential for
improved long-term operating and financial results. In particular, the boards
believe that the merger will create the opportunity for Sanmina and SCI to:
- build an industry-leading electronics manufacturing services company
offering customers technology leadership and the ability to provide
end-to-end system solution capabilities;
- enhance their ability to serve their existing customer base through
increased scale, the ability to provide a broader range of manufacturing
services, and enhanced global order fulfillment capabilities;
- combine, and thereby broaden and diversify, their customer bases and
revenue streams in high growth sectors of the electronics industry;
- utilize Sanmina's vertical integration in the areas of printed circuit
board fabrication, backplane assembly, enclosures, cable assemblies and
other components and subsystems across a larger revenue base and thereby
realize additional operating efficiencies; and
- use their combined financial strength to better position the combined
company to compete more effectively for original equipment manufacturer
divestitures or other acquisition opportunities.
RECOMMENDATION OF SANMINA'S BOARD OF DIRECTORS AND SANMINA'S REASONS FOR THE
MERGER
In reaching its decision to adopt the merger agreement and approve the
merger, the share issuance and the name change, the Sanmina board of directors
consulted with Sanmina's management, its financial advisor, Merrill Lynch, and
legal counsel. The Sanmina board of directors believed that the combined
experience of its members and Sanmina management enabled the Sanmina board of
directors to make an informed decision regarding the merger agreement, the
merger, the share issuance and the name change.
At a meeting held on July 13, 2001, the board of directors of Sanmina,
excluding Joseph M. Schell who abstained from voting due to his relationship
with Merrill Lynch, unanimously concluded that the merger is consistent with and
in furtherance of the long-term business strategy of Sanmina and is fair to, and
in the best interests of, Sanmina and the Sanmina stockholders. Accordingly, the
board of directors determined to recommend that the Sanmina stockholders approve
the issuance of the shares of Sanmina common stock to SCI stockholders in
connection with the merger and the change of Sanmina's corporate name. The
summary set forth below briefly describes certain of the reasons, factors and
information taken into account by the Sanmina board in reaching its conclusion.
The Sanmina board did not assign any relative or specific weights to the factors
considered in reaching such determination, and individual directors may have
given differing weights to different factors.
In reaching its determination, the Sanmina board consulted with Sanmina's
management and legal and financial advisors, and carefully considered a number
of factors, including:
- the potential strategic benefits of the merger, including without
limitation, the expanded global presence of the combined company and the
ability of the combined company to provide a full range of electronics
manufacturing services in major technology centers throughout the world;
- the strength of the combined company as a global EMS business, including
the ability of the combined company to effectively compete for major
multinational OEM asset divestiture transactions and other new business;
- historical information concerning Sanmina's and SCI's respective
businesses, prospects, financial performance and condition, operations,
technology, management and competitive position, including public reports
concerning results of operations for each company filed with the
Securities and Exchange Commission;
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- Sanmina management's view of the financial condition, results of
operations and businesses of Sanmina and SCI before and after giving
effect to the merger;
- current financial market conditions and historical market prices,
volatility and trading information with respect to Sanmina common stock
and SCI common stock;
- the consideration to be received by SCI stockholders in the merger and
the relationship between the current and historical market values of
Sanmina common stock and SCI common stock and a comparison of comparable
acquisition transactions;
- the belief that the terms of the merger agreement, including the parties'
respective representations, warranties and covenants, and the conditions
to their respective obligations, are reasonable;
- the prospects of Sanmina independent of SCI;
- the potential for other parties to enter into strategic relationships
with or to acquire Sanmina or SCI, and the available acquisition
candidates for Sanmina to pursue in furtherance of its globalization
strategy;
- the opinion of Merrill Lynch that, as of the date of such opinion, the
exchange ratio was fair from a financial point of view to Sanmina.
Merrill Lynch's opinion was subject to the assumptions made, matters
considered and certain qualifications and limitations on the scope of the
review undertaken noted in the opinion and described under "Opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated" beginning on page 49
of this joint proxy statement/prospectus. You should carefully read both
that section and the opinion that is attached to this document as Annex
B;
- the impact of the merger on Sanmina's customers and employees; and
- reports from management, legal and financial advisors as to the results
of the due diligence investigation of SCI.
In its deliberations, the Sanmina board of directors identified several
potential negative factors, including the following:
- the risk that the potential benefits of the merger may not be realized;
- the challenges of integrating the management teams, strategies, cultures
and organizations of the two companies, particularly given the geographic
separation of their facilities;
- the risk that SCI's financial results will not meet expectations given
the current slowdown in demand for electronics products sold by SCI's
principal customers;
- the risk of disruption of sales momentum as a result of uncertainties
created by the announcement of the merger or customers' concerns
regarding integration of the combined company's operations and the
ability of the combined company to continue to provide a high level of
service;
- the risk that the merger might not occur despite the parties' efforts,
even if approved by the holders of each company's common stock;
- the substantial costs and financial statement charges to be incurred in
connection with the merger, including costs of integrating the businesses
and transaction expenses arising from the merger;
- the effect of the public announcement of the merger and the possibility
that the merger might not be consummated on (a) Sanmina's sales and
operating results and (b) Sanmina's ability to attract and retain key
management, marketing and technical personnel; and
- other applicable risks described in the section of this joint proxy
statement/prospectus entitled "Risk Factors" beginning on page 20.
The foregoing discussion of the information and factors considered by the
Sanmina board of directors is not intended to be exhaustive but includes the
material factors considered by the Sanmina board of directors. In view of the
complexity and wide variety of information and factors, both positive and
negative, considered
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by the Sanmina board of directors, it did not find it practical to quantify,
rank or otherwise assign relative or specific weights to the factors considered.
In addition, the Sanmina board did not reach any specific conclusion with
respect to each of the factors considered, or any aspect of any particular
factor. Instead, the Sanmina board of directors conducted an overall analysis of
the factors described above, including discussions with Sanmina's management and
Sanmina's legal, financial and accounting advisors. In considering the factors
described above, individual members of the Sanmina board of directors may have
given different weights to different factors.
The Sanmina board considered all these factors as a whole and believed the
factors supported its determination to approve the merger.
AFTER TAKING INTO CONSIDERATION ALL OF THE FACTORS SET FORTH ABOVE, THE
MEMBERS OF SANMINA'S BOARD OF DIRECTORS, EXCLUDING JOSEPH M. SCHELL WHO
ABSTAINED FROM VOTING DUE TO HIS RELATIONSHIP WITH MERRILL LYNCH, UNANIMOUSLY
CONCLUDED THAT THE MERGER IS CONSISTENT WITH AND IN FURTHERANCE OF THE LONG-TERM
BUSINESS STRATEGY OF SANMINA AND IS FAIR TO, AND IN THE BEST INTERESTS OF,
SANMINA AND SANMINA STOCKHOLDERS AND THAT SANMINA SHOULD PROCEED WITH THE
MERGER.
RECOMMENDATION OF, AND FACTORS CONSIDERED BY, THE SCI BOARD OF DIRECTORS
In reaching its decision to approve and adopt the merger agreement and the
merger, the SCI board of directors consulted with SCI's management and its legal
counsel and financial advisor. SCI did not seek out alternative acquirers or
merger partners. The SCI board determined that Sanmina offered the greatest
potential for long-term value to the SCI stockholders. The SCI board of
directors believed that the combined experience of the members of the board of
directors and the executive officers of SCI enabled the SCI board of directors
to make an informed decision with respect to the terms of the proposed merger
and a decision not to seek alternative acquirers or merger partners. Among the
factors considered by the SCI board of directors in its deliberations were the
following:
Terms of the Transaction. In reaching its decision, the SCI board of
directors reviewed SCI's business, results of operations, and near- and
long-term prospects as an independent entity, its business model, and the
financial aspects and timing of the merger as compared to continuing as an
independent company. SCI's board of directors also considered SCI's strategic
position in its industry, its management succession planning, its near-and
long-term prospects and the anticipated value of the combined company resulting
from the merger. The SCI board of directors viewed Sanmina as having a track
record that demonstrates a clear ability to compete effectively in the
electronic manufacturing services industry and, in particular, the high-end
communications segment of the electronic manufacturing services industry, a
segment in which SCI has a much smaller presence. In analyzing the terms of the
proposed transaction with Sanmina, the SCI board of directors took into account:
- the current and historical market prices of Sanmina common stock;
- the risks and possible rewards associated with the ownership of Sanmina
common stock;
- the substantial number of shares of Sanmina common stock to be delivered
to SCI stockholders in the merger, which reflected, in the view of the
SCI board of directors, a fair valuation of SCI;
- the terms of the merger agreement, including representations and
warranties, conditions to closing and rights of termination;
- the anticipated favorable impact of the merger on customers, suppliers
and employees of SCI and Sanmina;
- the expected qualification of the merger as a tax free reorganization
under Section 368 of the Internal Revenue Code;
- the likelihood that the merger would be completed; and
- the opinion of Goldman Sachs to the effect that, as of the date of its
opinion, the exchange ratio pursuant to the merger agreement was fair,
from a financial point of view, to SCI's stockholders (the
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full text of such opinion, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with
the opinion, is attached hereto as Annex C).
Industry Trends. The SCI board of directors was aware of the continuing
industry trend toward consolidation which it believed would result in a smaller
number of industry participants able to offer a more diverse range of services
and thus compete more effectively in the marketplace. Further, because of the
continued trend on the part of original equipment manufacturers to outsource
most of their manufacturing requirements, SCI's board of directors noted that a
number of OEM asset divestitures are expected in the near term on the part of
many of those manufacturers. To avail itself of new growth opportunities, both
in terms of acquiring new customers as well as participating in OEM asset
divestitures, and thus not lose market share to its competitors, SCI would
require increasing amounts of capital. Because of SCI's narrowing net margins
and a substantial slowdown in the personal computer industry, one of the areas
in which SCI has an industry leading presence, and because of the decline in the
price of its common stock, increasing amounts of capital were becoming harder to
obtain on acceptable terms.
Strategic Alternatives and Factors Relating to Sanmina. The SCI board of
directors' deliberations included consideration of the likelihood of effecting
alternative transactions and the alternative of continuing as an independent
company. The SCI board of directors also considered the financial terms of the
transaction in view of certain industry valuation metrics (including revenue,
gross margins, net after tax profits and historical growth rates) and comparable
transactions. The SCI board of directors took into account the views expressed
by SCI management that Sanmina occupies a prominent position in the electronic
manufacturing services industry generally, and as a provider of products for
communications products specifically, and that Sanmina appears to be a good
strategic fit for SCI. The SCI board of directors believes that Sanmina would be
a good strategic fit based on:
- the larger scale of the combined company bringing greater credibility to
customers for new business and to original equipment manufacturers with
respect to asset divestitures;
- the opportunity to expand relationships with common customers and the
opportunity for each company to establish relationships with customers of
the other company;
- the economies of scale and control, especially in purchasing and supply
chain management;
- the perception of a compatible product mix, cultural fit and customer
base between the two companies;
- Sanmina's enhanced product line removing SCI from being what has
historically been a commodity style business;
- Sanmina's historically higher margins and SCI's sales resulting in the
combined company potentially having operating margins higher than average
operating margins in the industry;
- the opportunities to utilize Sanmina's vertical integration capabilities
in SCI's business;
- the strong balance sheet of the combined company providing financial
capital and flexibility;
- Sanmina's traditional strength in areas of the industry where SCI has
traditionally been weak, in particular the communications segment,
resulting in a diversified combined company with strength across all
areas of the electronic manufacturing services spectrum;
- other synergies expected to be realized from the combined companies
operations; and
- the increased global footprint and customer presence of the combined
company.
The SCI board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including:
- the risk that its operations might not be successfully integrated with
the operations of Sanmina;
- the risk that, despite efforts after the merger to retain them, key
personnel might leave the combined company;
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- the risk that the combined company will have increased exposure to the
communications sector and could be adversely affected in the event of a
substantial slowdown in this sector;
- the risk that gross margins may decline as more competitors enter the
higher margin electronic manufacturing service sectors in which Sanmina
competes;
- the difficulty of managing operations in the different geographic
locations in which SCI and Sanmina operate and will continue to operate;
and
- the risk that the potential synergistic benefits of the merger might not
be fully realized.
The SCI board of directors believes that, overall, these negative factors
are outweighed by the potential benefits of the merger.
Tax Treatment of the Transaction. The SCI board of directors noted that
the merger is expected to be generally tax-free for federal income tax purposes
to SCI stockholders receiving Sanmina common stock.
The foregoing discussion of the information and factors considered by SCI's
board of directors is not intended to be exhaustive, but includes the material
factors considered by the SCI board of directors. In view of the complexity and
wide variety of information and factors, both positive and negative, considered
by the SCI board of directors, it did not find it practicable to quantify, rank
or otherwise assign relative or specific weights to the factors considered. In
addition, the SCI board of directors did not reach any specific conclusion with
respect to each of the factors considered, or any aspect of any particular
factor. Instead, the SCI board of directors conducted an overall analysis of the
factors described above, including discussions with SCI's management and its
legal and financial advisors. In considering the factors described above,
individual members of the SCI board of directors may have given different
weights to different factors. The SCI board of directors, after consideration of
all of these factors as a whole, believes the factors support its determination
to approve the proposed merger.
AFTER CONSIDERING THE RECOMMENDATION OF THE BOARD OF DIRECTORS WITH RESPECT
TO THE MERGER AGREEMENT, YOU SHOULD BE AWARE THAT SOME DIRECTORS AND OFFICERS OF
SCI HAVE INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM, OR ARE IN ADDITION TO,
THE INTERESTS OF SCI STOCKHOLDERS GENERALLY. PLEASE SEE THE SECTION ENTITLED
"INTERESTS OF SCI DIRECTORS AND OFFICERS IN THE MERGER" BEGINNING ON PAGE 63 OF
THIS JOINT PROXY STATEMENT/PROSPECTUS.
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Sanmina retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to act
as its financial advisor in connection with the proposed merger of Sanmina and
SCI. As part of the engagement, Sanmina requested that Merrill Lynch evaluate
whether the exchange ratio in the proposed merger was fair from a financial
point of view to Sanmina. On July 13, 2001, Merrill Lynch delivered to the board
of directors of Sanmina an oral opinion, subsequently confirmed by delivery of a
written opinion dated July 13, 2001, to the effect that, as of that date, and
based upon and subject to the factors and the assumptions set forth in the
opinion, the exchange ratio was fair, from a financial point of view, to
Sanmina.
The full text of the Merrill Lynch opinion, which sets forth the
assumptions made, matters considered and certain qualifications and limitations
on the scope of the review undertaken by Merrill Lynch, is attached as Annex B
and is incorporated herein by reference. The summary of the Merrill Lynch
opinion set forth below is qualified in its entirety by reference to the full
text of the opinion and you are urged to read the Merrill Lynch opinion in its
entirety and consider it carefully.
The Merrill Lynch opinion was addressed to the Sanmina board of directors
for its information and was directed only to the fairness, from a financial
point of view, of the exchange ratio to Sanmina. The Merrill Lynch opinion did
not address any other aspect of the merger, including the underlying decision by
Sanmina to engage in the merger, and does not constitute, nor should it be
construed as, a recommendation to any Sanmina stockholder as to how such
stockholder should vote on the proposed issuance of shares of Sanmina in the
merger or any other matter related to the merger. In addition, Merrill Lynch did
not express any opinion as to the prices at which the Sanmina common stock might
trade subsequent to the merger.
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In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to Sanmina and SCI that Merrill Lynch deemed to be relevant;
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
Sanmina and SCI, furnished to or discussed with Merrill Lynch by Sanmina
and SCI, as well as the amount and timing of any cost savings and related
expenses and synergies expected to result from the merger, furnished to
or discussed with Merrill Lynch by Sanmina and SCI;
- conducted discussions with members of senior management and
representatives of Sanmina and SCI concerning the matters described in
the above clauses, as well as their respective businesses and prospects
before and after giving effect to the merger and any cost savings and
related expenses and synergies expected to result from the merger;
- reviewed the historical market prices and valuation multiples for shares
of Sanmina common stock and shares of SCI common stock and compared them
with those of certain publicly traded companies that Merrill Lynch deemed
to be relevant;
- reviewed the results of operations of Sanmina and SCI and compared them
with those of certain publicly traded companies that Merrill Lynch deemed
to be relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
- participated in certain discussions among representatives of Sanmina and
SCI and their respective financial and legal advisors;
- considered the potential pro forma impact of the merger on Sanmina;
- reviewed the merger agreement and other related agreements; and
- reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including its
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available. Merrill Lynch
did not assume any responsibility for independently verifying any such
information and did not undertake an independent evaluation or appraisal of any
assets or liabilities (contingent or otherwise) of Sanmina or SCI, and was not
furnished with any such evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct, nor did it conduct, any physical
inspection of the properties or facilities of Sanmina and SCI. With respect to
the financial forecasts information and the information concerning any cost
savings and related expenses and synergies expected to result from the merger
furnished to or discussed with Merrill Lynch by Sanmina and SCI, Merrill Lynch
assumed that such information had been reasonably prepared and reflected the
best currently available estimates and judgements of Sanmina's or SCI's
management as to the expected future financial performance of Sanmina or SCI, as
the case may be, and any cost savings and related expenses and synergies
expected to result from the merger. Merrill Lynch further assumed that the
merger will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to it, as of July 13, 2001. Merrill Lynch assumed
that in the course of obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the merger, no restrictions, including
any divestiture requirements or amendments or modifications, would be imposed
that will have a material adverse effect on the contemplated benefits of the
merger. Merrill Lynch also assumed that the merger would be consummated in
accordance with the terms of the merger agreement without waiver of any material
condition.
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In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Sanmina or SCI. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Merrill Lynch opinion was among several factors taken into
consideration by the Sanmina board of directors in making its determination to
approve the merger agreement and the merger. Consequently, Merrill Lynch's
analyses should not be viewed as determinative of the decision of the Sanmina
board of directors or Sanmina's management with respect to the fairness to
Sanmina of the exchange ratio set forth in the merger agreement.
At the meeting of the Sanmina board of directors held on July 13, 2001,
Merrill Lynch presented certain financial analyses accompanied by written
materials in connection with the delivery of its oral opinion at that meeting
and the delivery of its written opinion as of July 13, 2001.
The following is a summary of the material financial analyses performed by
Merrill Lynch in arriving at its opinion. Some of the financial analyses
summarized below include information presented in a tabular format. In order to
understand fully Merrill Lynch's financial analyses, the tables must be read
together with the text of the summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the data set forth
below in tables without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the financial analyses
performed by Merrill Lynch.
Historical Relative Trading Performance
Merrill Lynch reviewed the recent historical stock market performance of
SCI common stock and Sanmina common stock in relation to each other and reviewed
the exchange ratios implied by those relative trading values. In addition,
Merrill Lynch compared the merger agreement exchange ratio of 1.36x to the
average implied exchange ratios over certain specified time periods and noted
the amount by which the 1.36x exchange ratio constituted a premium to the
average implied exchange ratios for such periods, including the information set
forth below:
RANGE OF IMPLIED
EXCHANGE RATIOS
AVERAGE IMPLIED ----------------- PREMIUM TO AVERAGE
PERIOD ENDING JULY 12, 2001 EXCHANGE RATIO LOW HIGH IMPLIED EXCHANGE RATIO
--------------------------- --------------- ------- ------- ----------------------
1 day prior (July 12, 2001).......... 1.087x -- -- 25.1%
1 Month.............................. 1.054x 0.974x 1.130x 29.0%
1 Year............................... 0.836x 0.519x 1.213x 62.7%
3 Year............................... 1.235x 0.519x 2.160x 10.1%
5 Year............................... 1.649x 0.519x 3.113x (17.5)%
Merrill Lynch also reviewed the per share closing price trading data of
shares of SCI common stock and shares of Sanmina common stock for the three
month and one year periods prior to and including July 12, 2001. These analyses
indicated the following trading ranges and the range of implied exchange ratios
derived from the relative per share values of SCI common stock and Sanmina
common stock:
TRADING RANGE PER TRADING RANGE PER
SHARE OF SCI SHARE OF SANMINA RANGE OF IMPLIED
COMMON STOCK COMMON STOCK EXCHANGE RATIOS
----------------- ----------------- -------------------------
PERIOD ENDING JULY 12, 2001 LOW HIGH LOW HIGH LOW TO HIGH HIGH TO LOW
--------------------------- ------- ------- ------- ------- ----------- -----------
Three Months.................... $20.12 $29.46 $19.92 $38.00 0.529x 1.479x
One Year........................ $15.90 $64.00 $17.88 $59.00 0.269x 3.580x
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Publicly Traded Comparable Companies Analysis
Merrill Lynch compared selected financial and operating data of Sanmina and
SCI with corresponding data for certain publicly traded comparable companies
that Merrill Lynch deemed relevant for the purposes of its analyses. The SCI
comparable companies and the Sanmina comparable companies were as follows
(Sanmina and SCI were excluded from the Sanmina comparable companies and the SCI
comparable companies, respectively):
SANMINA AND SCI COMPARABLE COMPANIES
- Celestica, Inc. - Sanmina Corporation
- Flextronics International Ltd. - SCI Systems, Inc.
- Jabil Circuit, Inc. - Solectron Corporation
Using publicly available information and estimates of future results
published as of July 12, 2001 (i) by First Call and (ii) by Wall Street equity
analysts, Merrill Lynch compared selected financial data of SCI based on (i)
projections by SCI management for the fiscal years ending September 30, 2001 and
2002 and publicly available research and discussions with Sanmina management for
the fiscal years ending September 30, 2003 through 2006, which is collectively
referred to below as the SCI Management Case, and (ii) publicly available
research and consensus First Call estimates of cash earnings per share, commonly
referred to as cash EPS, for the fiscal years ending September 30, 2001 and 2002
and publicly available research and discussions with Sanmina management for the
fiscal years ending September 30, 2003 through 2006, which is collectively
referred to below as the SCI Street Case.
Using publicly available information and estimates of future results
published as of July 12, 2001 (i) by First Call and (ii) by Wall Street equity
analysts, Merrill Lynch compared selected financial data of Sanmina based on (i)
projections by Sanmina management for the fiscal years ending September 30, 2001
and 2002 and publicly available research and discussions with Sanmina management
for the fiscal years ending September 30, 2003 through 2006, which is
collectively referred to below as the Sanmina Management Case, and (ii) publicly
available research and consensus First Call estimates of cash EPS for the fiscal
years ending September 30, 2001 and 2002 and publicly available research and
discussions with Sanmina management for the fiscal years ending September 30,
2003 through 2006, which is collectively referred to below as the Sanmina Street
Case.
Merrill Lynch analyzed the total enterprise value (defined as market value
of common equity plus book value of total debt, preferred stock and minority
interest less cash) of the SCI comparable companies and the Sanmina comparable
companies as a multiple of, among other things, projected earnings before
interest, taxes, depreciation and amortization, commonly referred to as EBITDA,
for the fiscal year ending September 30, 2001 and the ratio of the trading value
per share to cash EPS for the fiscal years ending September 30, 2001 and 2002.
Applying the ranges of multiples derived from the SCI comparable companies
information to selected financial data from the SCI Street Case and the SCI
Management Case, Merrill Lynch estimated the following implied equity value
ranges per share of SCI common stock, before giving effect to the synergies
expected to result from the merger:
IMPLIED EQUITY VALUE PER
SHARE OF SCI COMMON STOCK
---------------------------------
FISCAL YEAR ENDING COMPARABLE SCI SCI
SEPTEMBER 30TH FINANCIAL STATISTICS COMPANY MULTIPLES STREET CASE MANAGEMENT CASE
----------------------------------- ----------------- --------------- ---------------
2001 Estimated EBITDA................. 9.0x - 14.0x $22.64 - $39.57 $22.33 - $39.08
2001 Estimated Cash EPS............... 20.0x - 26.0x $25.00 - $32.50 $24.60 - $31.98
2002 Estimated Cash EPS............... 20.0x - 26.0x $28.80 - $37.44 $34.40 - $44.72
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Applying the ranges of multiples derived from the Sanmina comparable
companies information to selected financial data from the Sanmina Street Case
and the Sanmina Management Case, Merrill Lynch estimated the following implied
equity value ranges per share of Sanmina common stock, before giving effect to
the synergies expected to result from the merger:
IMPLIED EQUITY VALUE PER
SHARE OF SANMINA COMMON STOCK
---------------------------------
FISCAL YEAR ENDING COMPARABLE SANMINA SANMINA
SEPTEMBER 30TH FINANCIAL STATISTICS COMPANY MULTIPLES STREET CASE MANAGEMENT CASE
----------------------------------- ----------------- --------------- ---------------
2001 Estimated EBITDA................. 9.0x - 14.0x $19.05 - $28.11 $18.75 - $27.63
2001 Estimated Cash EPS............... 20.0x - 26.0x $19.20 - $24.96 $18.80 - $24.44
2002 Estimated Cash EPS............... 22.0x - 28.0x $18.04 - $22.96 $30.14 - $38.36
Based upon these analyses, Merrill Lynch calculated the following range of
implied exchange ratios based on the relative implied equity value per share,
before giving effect to the synergies expected to result from the merger, of SCI
common stock and Sanmina common stock based on the SCI Management Case and the
Sanmina Management Case, respectively:
SCI MANAGEMENT CASE AND SANMINA MANAGEMENT CASE
RANGE OF
IMPLIED EXCHANGE RATIOS
-------------------------
FISCAL YEAR ENDING SEPTEMBER 30TH FINANCIAL STATISTICS LOW TO HIGH HIGH TO LOW
------------------------------------------------------ ----------- -----------
2001 Estimated EBITDA....................................... 0.808x 2.084x
2001 Estimated Cash EPS..................................... 1.007x 1.701x
2002 Estimated Cash EPS..................................... 0.897x 1.484x
Based upon these analyses, Merrill Lynch calculated the following range of
implied exchange ratios, before giving effect to the synergies expected to
result from the merger, based on the relative implied equity value per share of
SCI common stock and Sanmina common stock based on the SCI Street Case and the
Sanmina Street Case, respectively:
SCI STREET CASE AND SANMINA STREET CASE
RANGE OF
IMPLIED EXCHANGE RATIOS
-------------------------
FISCAL YEAR ENDING SEPTEMBER 30TH FINANCIAL STATISTICS LOW TO HIGH HIGH TO LOW
------------------------------------------------------ ----------- -----------
2001 Estimated EBITDA....................................... 0.806x 2.077x
2001 Estimated Cash EPS..................................... 1.002x 1.693x
2002 Estimated Cash EPS..................................... 1.254x 2.075x
None of the SCI comparable companies or the Sanmina comparable companies
utilized in the above analyses for comparative purposes is, of course, identical
to SCI or Sanmina. Accordingly, a complete analysis of the results of the
foregoing calculations cannot be limited to a quantitative review of such
results and involves complex considerations and judgments concerning differences
in financial and operating characteristics of the SCI comparable companies and
the Sanmina comparable companies and other factors that could affect the public
trading value of the comparable companies.
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Comparable Acquisition Analysis
Merrill Lynch also reviewed the financial terms of certain other precedent
transactions that it deemed to be relevant. The comparable acquisitions
considered by Merrill Lynch were the following:
TARGET/ACQUIROR
Omni Industries Limited/Celestica, Inc. Shure, Inc. -- Circuitry Plant, IL/Plexus Corp.
Primetech Electronics, Inc./Celestica, Inc. GET Manufacturing, Inc./Jabil Circuit, Inc.
AB Segerstrom & Svensson/Sanmina Corporation Avex Electronics, Inc./Benchmark Electronics, Inc.
NatSteel Electronics Ltd./Solectron Corporation CMC Industries, Inc./ACT Manufacturing, Inc.
JIT Holdings Limited/Flextronics International Ltd. SeaMED Corporation/Plexus Corp.
Chatham Technologies/Flextronics International Ltd. International Manufacturing Services, Inc./ Celestica, Inc.
Ocean Manufacturing Ltd./Sanmina Corporation Altron Incorporated/Sanmina Corporation
Keltek Holdings Ltd./Plexus Corp. Continental Circuits Corp./Hadco Corporation
InterWorks Computer Products/Sanmina Corporation Micron Custom Manufacturing Services/ Cornerstone Equity
Investors, LLC.
Essex AB/Sanmina Corporation Neutronics Electronic Industries AG/Flextronics
Bluegum Group Ltd./Solectron Corporation International Ltd.
Hadco Corporation/Sanmina Corporation Elexsys International, Inc./Sanmina Corporation
GSS Array Technology Public Company Ltd./ACT Forward Group PLC/Hicks, Muse, Tate & First,
Manufacturing, Inc. Inc.
DII Group, Inc./Flextronics International Ltd. Zycon Corporation/Hadco Corporation
Smart Modular Technologies, Inc./Solectron Circo Craft Co., Inc./Hicks, Muse, Tate & First,
Corporation Inc.
Advance Circuits, Inc./Johnson Matthey Plc
Based on information publicly available as of July 12, 2001, Merrill Lynch
calculated the transaction values (defined as offer value plus net debt) for the
comparable acquisitions as a multiple of, among other things, the last twelve
months EBITDA, to the extent publicly available over the relevant time period,
and offer values for the comparable acquisitions as multiples of the last twelve
months cash EPS, to the extent publicly available over the relevant time period.
Applying the ranges of multiples derived from its review of the comparable
acquisitions, Merrill Lynch estimated the following implied equity value ranges
per share of SCI common stock, before giving effect to the synergies expected to
result from the merger:
IMPLIED EQUITY VALUE
COMPARABLE ACQUISITIONS PER SHARE OF
FINANCIAL STATISTICS MULTIPLE SCI COMMON STOCK
-------------------- ----------------------- --------------------
Last Twelve Months EBITDA....................... 12.0x - 14.0x $34.15 - $41.15
Last Twelve Months Cash EPS..................... 30.0x - 34.0x $44.70 - $50.66
Based upon (i) the implied equity values per share of SCI common stock
derived from the comparable acquisitions analyses and (ii) the implied equity
values per share of Sanmina common stock derived from the Sanmina comparable
companies analyses, Merrill Lynch calculated the following range of implied
exchange ratios, before giving effect to the synergies expected to result from
the merger:
RANGE OF IMPLIED
EXCHANGE RATIOS
-----------------
LOW HIGH
------- -------
Sanmina Management Case..................................... 1.236x 2.195x
Sanmina Street Case......................................... 1.215x 2.160x
No company or transaction examined in the comparable acquisitions analysis
was identical to SCI or the proposed merger. Accordingly, an analysis of the
results of the foregoing comparable acquisitions analysis is
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not purely mathematical. Rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies included in the comparable acquisitions transaction analysis and
other factors that could affect the offer value and the transaction
consideration.
Merger Premium Analysis
Based on information publicly available as of July 12, 2001, Merrill Lynch
examined for each of the comparable acquisitions the premium paid to (i) market
price one day prior to announcement, (ii) average market price during the week
prior to announcement and (iii) average market price during the four weeks prior
to announcement and compared this information to the implied premium per share
of SCI common stock, over each relevant time period, based on the merger
agreement exchange ratio of 1.36x. This analysis indicated the following
results:
IMPLIED PREMIUM PER SHARE OF AVERAGE PREMIUM OF
TRADING PERFORMANCE STATISTICS SCI COMMON STOCK COMPARABLE ACQUISITIONS
------------------------------ ---------------------------- -----------------------
1 day prior (July 12, 2001).............. 25.1% 38.9%
1 Week Average........................... 34.7% 47.4%
4 Weeks Average.......................... 36.8% 56.2%
Discounted Cash Flow Analysis
Merrill Lynch performed a discounted cash flow analysis of SCI using the
SCI Management Case and the SCI Street Case for the fiscal years ending
September 30, 2002 through 2006. Merrill Lynch calculated a range of equity
values per share of SCI common stock based upon the sum of the respective
discounted net present value of SCI's five-year stream of projected unlevered
free cash flows plus the discounted net present value of SCI's terminal value
based on a range of multiples of its projected EBITDA for the fiscal year ending
September 30, 2006. Using discount rates ranging from 18% to 20%, based on a
weighted average cost of capital analysis of the SCI comparable companies, and
terminal value multiples of 2006 EBITDA ranging from 8.0x to 13.0x, based on an
analysis of the SCI comparable companies, Merrill Lynch calculated the following
range of implied equity values per share of SCI common stock:
IMPLIED EQUITY VALUE PER SHARE OF
SCI COMMON STOCK
---------------------------------
SCI Management Case (excluding expected synergies)........ $19.40 - $38.84
SCI Street Case (excluding expected synergies)............ $16.18 - $32.62
Merrill Lynch also performed a discounted cash flow analysis of Sanmina
using the Sanmina Management Case and the Sanmina Street Case for the fiscal
years ending September 30, 2002 through 2006. Merrill Lynch calculated a range
of equity values per share of Sanmina common stock based upon the sum of the
respective discounted net present value of Sanmina's five-year stream of
projected unlevered free cash flows plus the discounted net present value of
Sanmina's terminal value based on a range of multiples of its projected EBITDA
for the fiscal year ending September 30, 2006. Using discount rates ranging from
18% to 20%, based on a weighted average cost of capital analysis of the Sanmina
comparable companies, and terminal value multiples of 2006 EBITDA ranging from
8.0x to 13.0x, based on an analysis of the Sanmina comparable companies, Merrill
Lynch calculated the following implied equity values per share of Sanmina common
stock:
IMPLIED EQUITY VALUE PER SHARE OF
SANMINA COMMON STOCK
---------------------------------
Sanmina Management Case (excluding expected synergies).... $25.00 - $39.39
Sanmina Street Case (excluding expected synergies)........ $21.25 - $33.11
Value of Expected Synergies
Based upon the estimates provided by Sanmina management, Merrill Lynch
performed a discounted cash flow analysis of the synergies expected to result
from the merger. The discounted cash flow valuation was calculated assuming a
discount rate of 19% (the midpoint of the discounted cash flow analysis discount
rate range as discussed above) and was comprised of the sum of the present
values of (i) the projected after-tax
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synergies expected to result from the merger, net of after tax costs incurred to
achieve the synergies expected to result from the merger, for the fiscal years
ending September 30, 2002 through 2006; and (ii) the terminal value of the
synergies expected to result from the merger, for the fiscal year ending
September 30, 2006, using a terminal value multiple of 10.5x (the midpoint of
the discounted cash flow analysis terminal multiple range as previously
discussed). Based upon this discounted cash flow analysis, Merrill Lynch valued
the synergies expected to result from the merger at $3.32 per share of SCI
common stock.
Relative Discounted Cash Flow Analysis
Merrill Lynch utilized the SCI stand-alone discounted cash flow analysis
and the Sanmina stand-alone discounted cash flow analysis (both as described
above) to calculate the implied exchange ratio both before giving effect to the
synergies expected to result from the merger and after giving effect to the
present value to SCI of the synergies expected to result from the merger. The
analysis yielded the following range of implied exchange ratios:
SCI SCI
MANAGEMENT CASE STREET CASE
AND SANMINA AND SANMINA
MANAGEMENT CASE STREET CASE
---------------- ----------------
LOW TO HIGH TO LOW TO HIGH TO
IMPLIED DISCOUNTED CASH FLOW HIGH LOW HIGH LOW
---------------------------- ------ ------- ------ -------
Implied Exchange Ratio (excluding expected
synergies).......................................... 0.492x 1.554x 0.489x 1.536x
Implied Exchange Ratio (including expected synergies
to SCI)............................................. 0.577x 1.687x 0.589x 1.692x
Relative Contribution Analysis
Using publicly available actual results for the twelve months ending March
31, 2001 and using the Sanmina Management Case and the SCI Management Case for
the twelve-month periods ending June 30, 2001, September 30, 2001, June 30,
2002, and September 30, 2002, Merrill Lynch calculated the relative
contributions of Sanmina and SCI to historical and projected EBITDA and cash net
income of the pro forma combined entity both before and after giving effect to
the synergies expected to result from the merger to SCI. Based upon the analysis
Merrill Lynch calculated the following range of implied exchange ratios:
RANGE OF IMPLIED
EXCHANGE RATIOS
-----------------
RELATIVE CONTRIBUTION ANALYSIS -- MANAGEMENT CASE LOW HIGH
------------------------------------------------- ------- -------
Implied Exchange Ratio (excluding expected synergies)....... 1.073x 1.461x
Implied Exchange Ratio (including expected synergies to
SCI)...................................................... 1.330x 1.879x
Merrill Lynch also analyzed the relative contributions of Sanmina and SCI
to cash net income of the pro forma combined entity using publicly available
actual results for the twelve months ending March 31, 2001 and using First Call
estimates publicly available as of July 12, 2001 for the twelve-month periods
ending June 30, 2001, September 30, 2001, June 30, 2002 and September 30, 2002,
Merrill Lynch calculated the relative contributions of Sanmina and SCI to cash
net income both before and after giving effect to the synergies expected to
result from the merger to SCI. Based upon the analysis Merrill Lynch calculated
the following range of implied exchange ratios:
RANGE OF IMPLIED
EXCHANGE RATIOS
-----------------
RELATIVE CONTRIBUTION ANALYSIS -- STREET CASE LOW HIGH
--------------------------------------------- ------- -------
Implied Exchange Ratio (excluding expected synergies)....... 1.212x 2.081x
Implied Exchange Ratio (including expected synergies to
SCI)...................................................... 1.597x 2.784x
Pro Forma Combination Analysis
Merrill Lynch analyzed the pro forma impact of the merger on Sanmina's cash
EPS for the fiscal year ending September 30, 2002. Such analysis was based on
the Sanmina Management Case, the Sanmina Street
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Case, the SCI Management Case, and the SCI Street Case, the merger agreement's
exchange ratio of 1.36x, and the synergies expected to result from the merger as
provided by management of Sanmina. The analysis indicated that the merger could
be accretive (excluding the income statement impact of merger-related costs) to
Sanmina's cash EPS for the fiscal year ending September 30, 2002 after giving
effect to the synergies expected to result from the merger.
Other Factors
In preparing its opinion to the board of directors of Sanmina, Merrill
Lynch performed a variety of financial and comparative analyses, including those
described above. The summary set forth above does not purport to be a complete
description of the analyses underlying the Merrill Lynch opinion or the
presentation made by Merrill Lynch to the board of directors of Sanmina. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments regarding the
significance and relevance of each analysis and factor. Accordingly, Merrill
Lynch believes its analyses must be considered as a whole and that selecting
only portions of its analyses and factors, or focusing on information presented
in tabular format, without considering all of the analyses and factors or the
narrative description of the analyses, could create an incomplete or misleading
view of the processes underlying its opinion.
The board of directors of Sanmina selected Merrill Lynch to render a
fairness opinion because Merrill Lynch is an internationally recognized
investment banking firm with substantial experience in transactions similar to
the merger. Merrill Lynch continually is engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions and for other
purposes and has substantial experience in transactions similar to the merger.
Joseph M. Schell, chairman of global technology investment banking of Merrill
Lynch & Co., abstained from voting on the proposal to select Merrill Lynch as
Sanmina's financial advisor due to his relationship with Merrill Lynch.
Sanmina has agreed to pay Merrill Lynch a customary fee for its services
and also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket
expenses (including reasonable fees and expenses of its legal counsel) incurred
in connection with its engagement as financial advisor. All of Merrill Lynch's
fee will be paid upon consummation of the merger. In addition, Sanmina has
agreed to indemnify Merrill Lynch and certain related persons against certain
liabilities arising out of or in conjunction with the services rendered by
Merrill Lynch under its engagement, including certain liabilities under federal
securities laws.
In the ordinary course of business, Merrill Lynch may actively trade the
equity and debt securities of Sanmina and SCI for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities and loans.
OPINION OF GOLDMAN, SACHS & CO.
On July 13, 2001, Goldman Sachs delivered its oral opinion to the board of
directors of SCI that as of the date of that opinion, the exchange ratio
pursuant to the merger agreement was fair from a financial point of view to the
holders of SCI common stock. Goldman Sachs subsequently confirmed its oral
opinion by delivery of its written opinion dated July 13, 2001.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JULY 13, 2001,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX C AND IS
INCORPORATED HEREIN BY REFERENCE. GOLDMAN SACHS PROVIDED ITS OPINION FOR THE
INFORMATION AND ASSISTANCE OF SCI'S BOARD OF DIRECTORS IN CONNECTION WITH ITS
CONSIDERATION OF THE MERGER. THE GOLDMAN SACHS OPINION IS NOT A RECOMMENDATION
AS TO HOW ANY HOLDER OF SCI COMMON STOCK SHOULD VOTE WITH RESPECT TO THE
TRANSACTION. WE URGE YOU TO READ THE OPINION IN ITS ENTIRETY.
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In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- Annual Reports to Stockholders and Annual Reports on Form 10-K of SCI and
Sanmina for the five fiscal years ended June 30, 2000 and September 30,
2000, respectively;
- certain Current Reports on Form 8-K of Sanmina, including such reports
dated June 23, 2000 and September 5, 2000 regarding Sanmina's acquisition
of Hadco Corporation and dated January 31, 2001 and May 14, 2001
regarding Sanmina's acquisition of AB Segerstrom & Svensson;
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q of SCI and Sanmina;
- certain other communications from SCI and Sanmina to their respective
stockholders;
- certain internal financial analyses and forecasts for Sanmina prepared by
the management of Sanmina;
- certain financial analyses and forecasts for Sanmina prepared by the
management of SCI;
- certain internal financial analyses and forecasts for SCI prepared by the
management of SCI; and
- certain cost savings and operating synergies projected by the management
of SCI to result from the transaction contemplated by the merger
agreement.
Goldman Sachs also held discussions with members of the senior management
of SCI and Sanmina regarding their assessment of the strategic rationale for,
and the potential benefits of, the transaction contemplated by the merger
agreement, including their respective views of the importance of global scale in
the electronic manufacturing services industry, and the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for the SCI common stock
and the Sanmina common stock;
- compared certain financial and stock market information for SCI and
Sanmina with similar information for certain other companies the
securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the electronic manufacturing services industry specifically and in other
industries generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it and
assumed such accuracy and completeness for purposes of rendering its opinion. In
that regard, Goldman Sachs assumed, with the consent of SCI's board of
directors, that the internal financial analyses and forecasts for SCI prepared
by the management of SCI, the financial analyses and forecasts for Sanmina
prepared by the management of SCI and the cost savings and operating synergies
projected by the management of SCI to result from the proposed merger were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of SCI and that such cost savings and operating synergies will be
realized in the amounts and time periods contemplated. In addition, Goldman
Sachs did not make an independent evaluation or appraisal of the assets and
liabilities of SCI or Sanmina or any of their respective subsidiaries and was
not furnished with any such evaluation or appraisal.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to SCI's board of
directors on July 13, 2001. Some of the summaries of the financial analyses
include information presented in tabular format. In order to more fully
understand the financial analyses used by Goldman Sachs, the tables must be read
together with the full text of each summary. The tables alone are not a complete
description of Goldman Sachs' financial analyses.
(1) Exchange Ratio Analysis. For selected time periods ending on July 12,
2001, Goldman Sachs calculated (i) the average ratio of the closing price of the
SCI common stock to the closing price of the Sanmina common stock, (ii) the
highest ratio of the closing price of the SCI common stock to the closing
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price of the Sanmina common stock and (iii) the lowest ratio of the closing
price of the SCI common stock to the closing price of the Sanmina common stock.
In addition, with respect to each of the foregoing ratios, Goldman Sachs
calculated the implied premium being paid in the merger based on the exchange
ratio pursuant to the merger agreement of 1.36 shares of Sanmina common stock
for each share of SCI common stock. The results of such analysis are set forth
below:
AVERAGE
PERIOD RATIO OF IMPLIED HIGH RATIO OF IMPLIED LOW RATIO OF IMPLIED
(ENDING ON JULY 12, 2001) CLOSING PRICES PREMIUM CLOSING PRICES PREMIUM CLOSING PRICES PREMIUM
------------------------- -------------- ------- -------------- ------- -------------- -------
July 12, 2001........... 1.09x 25% NA NA NA NA
5 Trading Days.......... 1.10x 24% 1.13x 20% 1.09x 25%
30 Trading Days......... 1.03x 32% 1.13x 20% 0.87x 56%
90 Trading Days......... 0.90x 51% 1.13x 20% 0.56x 143%
180 Trading Days........ 0.80x 70% 1.13x 20% 0.52x 162%
1 Year.................. 0.84x 62% 1.21x 12% 0.52x 162%
3 Years................. 1.24x 10% 2.16x (37)% 0.52x 162%
(2) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information and public market multiples for SCI and Sanmina to
corresponding financial information and public market multiples for selected
publicly traded corporations in the electronic manufacturing services industry,
focusing particularly on the following large capitalization (market
capitalization greater than $3 billion as of July 12, 2001) companies:
- Celestica, Inc.;
- Flextronics International Ltd.;
- Jabil Circuit, Inc.; and
- Solectron Corporation.
Goldman Sachs calculated the financial information and public market
multiples based on financial data as of July 12, 2001, information it obtained
from publicly available financial statements, and estimates from Goldman Sachs
Research, Institutional Brokers Estimate System (IBES) and other sources. With
respect to each of the selected companies, Goldman Sachs analyzed:
- calendarized price-earnings ratio;
- five-year compound annual growth rate of earnings per share; and
- last-twelve-months' earnings before interest and taxes (EBIT) as a
percentage of last-twelve-months' revenue.
The results of these analyses are summarized below:
SELECTED LARGE
CAPITALIZATION
COMPANIES
-------------------
MEAN(A) MEDIAN(A) SCI SANMINA
------- --------- ----- -------
GS Calendarized P/E Ratios(b)
2001............................................. 31.4x 30.9x 21.8x 33.5x
2002............................................. 22.1x 23.1x 17.8x 23.1x
IBES Calendarized P/E Ratios(c)
2001............................................. 32.1x 31.3x 21.1x 35.0x
2002............................................. 24.5x 22.8x 15.6x 30.4x
5-Yr. Compound Annual Growth Rate of Earnings Per
Share(c)......................................... 30.0% 30.0% 25.0% 30.0%
Last-Twelve-Months' EBIT Margin(d)................. 5.0% 3.8% 4.0% 13.3%
---------------
(a) Data for Sanmina is included for purposes of calculating mean and median.
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(b) Based on Goldman Sachs Research cash EPS estimates.
(c) Based on median IBES estimates.
(d) Based on latest publicly available financial statements.
(3) Premium Analysis. Goldman Sachs analyzed the premiums paid in 97
transactions announced from March 1989 to December 2000 in which the target
stockholders' ownership of the combined company ranged from 30% to 50% and where
the combined company's pro forma market capitalization exceeded $1 billion one
day prior to announcement of the transaction. Goldman Sachs calculated the
premiums paid in such transactions based on the closing stock prices of the
target and acquiror on the last trading day prior to announcement of the
transaction. Goldman Sachs performed such analysis for purposes of comparison
with the 25% premium being paid to SCI stockholders in the proposed transaction
(based on the exchange ratio pursuant to the merger agreement and the closing
prices of the SCI common stock and Sanmina common stock on July 12, 2001). Such
analysis indicated that:
- the premium exceeded 25% in 21 of the selected transactions;
- the premium exceeded 50% in 8 of the selected transactions;
- the median premium for the selected transactions was 11.3%;
- the mean premium for the selected transactions was 13.6%;
- the lowest premium in the top quartile of the selected transactions in
terms of premiums paid was 21.5%; and
- the highest premium in the bottom quartile of the selected transactions
in terms of premiums paid was 0.6%.
(4) Contribution Analysis. Goldman Sachs reviewed the cash net income of
SCI, Sanmina and the pro forma combined company resulting from the merger for
various time periods, and calculated the contribution each of SCI and Sanmina
would make to the cash net income of the pro forma combined company with respect
to each such period and the implied exchange ratio based on such relative
contributions, for purposes of comparison with the exchange ratio pursuant to
the merger agreement of 1.36 shares of Sanmina common stock for each share of
SCI common stock. The results of such analysis are set forth below:
SANMINA CONTRIBUTION TO SCI CONTRIBUTION TO IMPLIED
COMBINED COMPANY COMBINED COMPANY EXCHANGE RATIO
----------------------- ------------------- --------------
Cash Net Income
Last-Twelve-Months ended June 30,
2001(a)........................ 66.0% 34.0% 1.200x
Calendar Year 2001(a)............. 63.2% 36.8% 1.350x
Forward-Twelve-Months Beginning
July 1, 2001(a)................ 61.6% 38.4% 1.442x
Fiscal Year 2002 -- Base
Case(a)........................ 65.1% 34.9% 1.247x
Fiscal Year 2002 -- Adjusted
Case(b)........................ 61.9% 38.1% 1.425x
---------------
(a) Based on estimates and forecasts provided by management of SCI and Sanmina.
(b) Based on forecasts for SCI provided by management of SCI and SCI
management's revision to forecasts for Sanmina provided by management of
Sanmina.
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Goldman Sachs also calculated the implied exchange ratio based on the
quarterly contribution of each of SCI and Sanmina to the earnings per share of
the combined company, based on estimates of earnings per share for SCI and
Sanmina by management of SCI and Sanmina, respectively, Goldman Sachs Research,
Merril Lynch Research and IBES, for purposes of comparison with the exchange
ratio pursuant to the merger agreement of 1.36 shares of Sanmina common stock
for each share of SCI common stock. The results of such analysis are set forth
below:
IMPLIED EXCHANGE RATIOS
----------------------------------------------------
GOLDMAN SACHS MERRILL LYNCH
SOURCE OF EPS ESTIMATES MANAGEMENT(A) RESEARCH RESEARCH IBES
----------------------- ------------- ------------- ------------- ----
Quarter Ended:
June 2001............................. 2.41 2.54 2.09 2.69
September 2001........................ 2.14 2.60 2.02 2.90
December 2001......................... 1.24 2.04 1.45 2.75
March 2002............................ 1.29 1.46 1.02 2.35
June 2002............................. 1.40 1.40 1.07 2.19
September 2002........................ 0.97 1.20 1.05 1.81
---------------
(a) Based on estimates and forecasts provided by management of SCI and Sanmina.
(5) Incremental Cash Net Income Analysis. Goldman Sachs analyzed the
fiscal year 2002 estimated cash net income for each of SCI, Sanmina and the pro
forma combined company, assuming $100 million of pre-tax synergies ($62 million
after-tax) (based on forecasts provided by SCI management) and based on
forecasts for SCI provided by management of SCI and forecasts for Sanmina
provided by management of Sanmina as well as SCI management's revision of the
forecasts for Sanmina provided by management of Sanmina. For each scenario,
Goldman Sachs calculated the amount of cash net income of the combined company
that could be considered to be attributable to the former SCI stockholders,
based on the former SCI stockholders' pro forma ownership of the combined
company. This analysis indicated that, under each scenario, the merger could be
accretive to the cash net income attributable to SCI's stockholders as compared
to SCI's standalone cash net income.
(6) Accretion/Dilution Analysis. Goldman Sachs analyzed the accretion or
dilution in earnings per share of the combined company (based on different
estimates of the standalone earnings per share of SCI and Sanmina) as compared
to the standalone estimated earnings per share of Sanmina. Goldman Sachs
performed such analysis assuming no synergies in the merger and assuming $100
million in pre-tax synergies ($62 million after-tax) (based on forecasts
provided by SCI management). The results of such analysis are set forth below:
SOURCE OF EPS ESTIMATES
---------------------------------------------------------------------
MERRILL GOLDMAN
MANAGEMENT -- MANAGEMENT -- LYNCH SACHS FIRST
BASE CASE(A) ADJUSTED CASE(B) RESEARCH RESEARCH IBES CALL
------------- ---------------- -------- -------- ---- -----
No Synergies
Fiscal Year 2002
Accretion/Dilution(%)... (1.9) 3.0 (4.8) 9.3 27.8 16.2
Calendar Year 2002
Accretion/Dilution(%)... (4.1) 1.3 (7.2) 4.9 21.9 11.5
$100 Million in Pre-Tax
Synergies
Fiscal Year 2002
Accretion/Dilution(%)... 6.0 12.1 6.9 22.4 44.4 30.2
Calendar Year 2002
Accretion/Dilution(%)... 2.7 9.3 3.2 15.8 36.0 23.4
---------------
(a) Forecasts for SCI provided by SCI management and forecasts for Sanmina
provided by Sanmina management.
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(b) Forecasts for SCI provided by SCI management; forecasts for Sanmina based on
SCI management's revisions to forecasts provided by Sanmina management.
(7) Value Creation/Dilution Analysis. Goldman Sachs analyzed potential
value creation or dilution to the stockholders of SCI and Sanmina by comparing
the price of the SCI common stock and the Sanmina common stock (based on their
respective closing prices on July 12, 2001) with various estimates of the value
of the shares of Sanmina common stock to be held by such stockholders after
consummation of the proposed transaction. Goldman Sachs performed such analysis
based on (i) IBES, First Call, Goldman Sachs Research and Merrill Lynch Research
estimates of the earnings per share of SCI and Sanmina, and the pro forma
earnings per share of the combined company based on such estimates, in each case
for calendar year 2002, (ii) various assumptions with respect to the
price-earnings ratio at which the Sanmina common stock could trade after
consummation of the proposed transaction and (iii) the exchange ratio pursuant
to the merger agreement of 1.36 shares of Sanmina common stock for each share of
SCI common stock. Goldman Sachs performed such analysis assuming no synergies
would be achieved in the proposed transaction and assuming that $100 million in
pre-tax synergies ($62 million after-tax) (based on forecasts provided by SCI
management) would be achieved. Such analysis indicated that the proposed
transaction could be value accretive to SCI's stockholders in each of the
scenarios considered in such analysis, except the scenarios in which the
combined company's earnings per share are based on IBES or First Call estimates
and the common stock of the combined company trades in line with the
price-earnings ratio of the SCI common stock prior to the merger using the IBES
or First Call estimates, respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
SCI or Sanmina or the contemplated transaction.
The analyses were prepared solely for purposes of Goldman Sachs' providing
its opinion to the SCI board of directors as to the fairness from a financial
point of view of the exchange ratio pursuant to the merger agreement. These
analyses do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
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 the parties or
their respective advisors, none of SCI, Sanmina, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecast.
As described above, Goldman Sachs' opinion to the board of directors of SCI
was one of many factors taken into consideration by the SCI board of directors
in making its determination to approve the merger agreement. The foregoing
summary does not purport to be a complete description of the analyses performed
by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with SCI having provided certain investment banking services to SCI
from time to time, including having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
merger agreement.
SCI selected Goldman Sachs as its financial advisor because it is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the merger.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of SCI or Sanmina for its own account and for the accounts of customers.
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Pursuant to a letter agreement dated May 1, 2001, SCI engaged Goldman Sachs
to act as its financial advisor in connection with the possible sale of all or a
portion of the company. Pursuant to the terms of this engagement letter, SCI has
agreed to pay Goldman Sachs a customary transaction fee.
SCI has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorneys' fees, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
INTERESTS OF SCI DIRECTORS AND OFFICERS IN THE MERGER
When considering the recommendation of SCI's board of directors, you should
be aware that the SCI directors and executive officers identified below have
interests in the merger that are different from, or are in addition to, yours.
The SCI board of directors was aware of these potential conflicts and considered
them in making its recommendation.
Employment Agreements
Sanmina and SCI have entered into an employment agreement with A. Eugene
Sapp, Jr., and have agreed to enter into an employment agreement with James E.
Moylan, Jr. which will become effective upon consummation of the merger. Sanmina
has agreed to enter into an employment agreement with Robert C. Bradshaw which
will become effective upon completion of the merger. See "AGREEMENTS RELATED TO
THE MERGER -- Employment Agreements" for a description of the material terms of
these employment agreements.
Employee Severance Agreements
Sanmina will enter into employee severance agreements with certain of SCI's
officers which will become effective upon completion of the merger. Each of the
agreements provides that in the event employment is terminated for any reason
other than cause or the employee voluntarily terminates his employment because
of the occurrence of certain events, the employee will be entitled to receive
severance payments equal to 1.5 times annual salary at the date of termination
and 1.5 times his average annualized bonus for the preceding two years. In
addition, in such event all outstanding stock options will fully vest on the
date of termination and will be required to be exercised within 90 days of such
date. See "AGREEMENTS RELATED TO THE MERGER -- Employee Severance Agreements"
for a description of the material terms of the employee severance agreements.
Director and Officer Indemnification
SCI's directors and officers will receive, for a period of six years after
the completion of the merger, directors and officers insurance coverage with
terms substantially the same as SCI's existing directors and officers insurance
policy for events occurring on or prior to the completion of the merger through
one of the following mechanisms:
- a directors and officers insurance policy whose annual premium is not
greater than 125% of the premium of SCI's policy in effect on the date of
the merger agreement; or
- obtaining six-year "tail" coverage under SCI's existing directors and
officers insurance policy.
SCI Representative Directors
Three representatives of SCI, A. Eugene Sapp, Jr., Wayne Shortridge and
Jackie M. Ward, will become members of Sanmina's board of directors when the
merger is completed. Sanmina also has agreed to place Messrs. Sapp's and
Shortridge's and Ms. Ward's names on its slate of nominees for the Sanmina board
of directors at the next three annual meetings of the Sanmina stockholders,
provided that the SCI representative's attendance at meetings of the Sanmina
board of directors for the prior year is at least equal to the average of the
attendance of all Sanmina directors for the same year. Each of these directors
who is not an employee of Sanmina or one of its subsidiaries will be entitled to
participate in the compensation and benefit
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plans to the same extent as other nonemployee directors of Sanmina and will
become a party to an indemnification agreement with Sanmina that is
substantially similar to the indemnification agreements between Sanmina and its
nonemployee directors who were not formerly directors of SCI.
Assumption of SCI Stock Options
In connection with the merger, Sanmina will assume any outstanding options
to purchase SCI common stock and those options will be converted to options to
purchase Sanmina common stock. Each stock option which is assumed will continue
to have the same terms and conditions which applied prior to consummation of the
merger except that each option will be exercisable for the number of whole
shares of Sanmina common stock equal to the product of the number of shares of
SCI common stock that were issuable upon exercise of such option immediately
prior to completion of the merger multiplied by the exchange ratio of 1.36,
rounded down to the nearest whole share, and the per share exercise price will
be equal to the quotient determined by dividing the exercise price per share of
SCI common stock at which such option was exercisable immediately prior to
completion of the merger by the exchange ratio, rounded up to the nearest whole
cent. As of [ ], 2001, the directors and officers of SCI held
options to purchase [ ] shares of SCI common stock which are vested or will
become vested within 60 days of that date. The exercise period of the options
held by certain SCI officers will, pursuant to their employment agreements, be
extended in certain circumstances. The remaining options held by the officers
and directors of SCI will continue to vest on their original schedules.
EXCHANGE OF SCI STOCK CERTIFICATES FOR SANMINA STOCK CERTIFICATES
Following the completion of the merger, Sanmina's exchange agent will mail
to SCI stockholders a letter of transmittal and instructions for surrendering
SCI stock certificates in exchange for Sanmina stock certificates. When SCI
stockholders deliver their SCI stock certificates to the exchange agent along
with an executed letter of transmittal and any other required documents, their
SCI stock certificates will be canceled and they will receive Sanmina stock
certificates representing the number of full shares of Sanmina common stock to
which they are entitled under the merger agreement. SCI stockholders will not
receive any fractional shares of Sanmina common stock in the merger, but will
instead receive cash equal to their proportionate interest of the aggregate
fractional shares. In this case, the market value of the fractional shares will
be based on the average closing price of Sanmina common stock for the five
trading days ending immediately preceding the trading day on which the
effectiveness of the merger occurs.
SCI STOCKHOLDERS SHOULD NOT SUBMIT THEIR SCI STOCK CERTIFICATES FOR EXCHANGE
UNTIL THEY RECEIVE INSTRUCTIONS AND A FORM OF LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT.
SCI stockholders are not entitled to receive any dividends or other
distributions on Sanmina common stock until the merger is completed and they
have surrendered their SCI stock certificates in exchange for Sanmina stock
certificates. Subject to the effect of applicable laws, SCI stockholders will
receive payment for any dividend or other distribution on Sanmina common stock
with a record date after the merger and a payment date prior to the date SCI
stockholders surrender their stock certificates after Sanmina stock certificates
are issued. SCI stockholders will receive payment for any dividend or other
distribution on Sanmina common stock with a record date after the merger and a
payment date after the date SCI stockholders surrender their stock certificates
following the payment date.
Sanmina will only issue a Sanmina stock certificate or a check in lieu of a
fractional share in a name other than the name in which a surrendered SCI stock
certificate is registered if the SCI stockholder presents the exchange agent all
documents required to show and effect the unrecorded transfer of ownership and
show payment of any applicable stock transfer taxes. Any SCI stockholder that
has a stock certificate that has been lost, stolen or destroyed, may be required
to deliver an affidavit and bond prior to receiving Sanmina stock certificate.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to Sanmina, and Powell, Goldstein, Frazer & Murphy LLP,
counsel to SCI, the following are the material U.S. federal income tax
consequences of the merger, assuming that the merger is effected as described in
the merger agreement and this joint proxy statement/prospectus. This opinion and
the following discussion are based on currently existing provisions of the
Internal Revenue Code of 1986, as amended, existing Treasury Regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Any such change, which may or may not be retroactive,
could alter the tax consequences to Sanmina, SCI or SCI stockholders as
described herein. The Internal Revenue Code of 1986, as amended, is referred to
as the "Code."
The discussion does not address all U.S. federal income tax considerations
that may be relevant to particular SCI stockholders in light of their particular
circumstances. The discussion assumes that the SCI stockholders hold their
shares of SCI common stock as capital assets (generally for investment). In
addition, the following discussion does not address the tax consequences of the
merger under foreign, state or local tax laws or the tax consequences of
transactions effectuated prior or subsequent to or concurrently with the merger
(whether or not such transactions are in connection with the merger), including,
without limitation, transactions in which SCI common stock is acquired or
Sanmina common stock is disposed of.
ACCORDINGLY, SCI STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER IN
THEIR PARTICULAR CIRCUMSTANCES.
Consummation of the merger is conditioned upon the receipt by Sanmina and
SCI of tax opinions from their respective counsel that the merger will be
treated as a "reorganization" within the meaning of Section 368(a) of the Code.
The tax opinions will be subject to certain assumptions, limitations and
qualifications, and are based upon the truth and accuracy of certain factual
representations of Sanmina, Sun Acquisition Subsidiary, Inc. and SCI.
Provided that the merger qualifies as a reorganization, subject to the
assumptions, limitations and qualifications referred to herein:
- Holders of SCI common stock will recognize no gain or loss upon the
receipt of Sanmina common stock solely in exchange for their SCI common
stock in the merger, except with respect to cash received in lieu of
fractional shares of Sanmina common stock.
- The aggregate tax basis of the Sanmina common stock received by the SCI
stockholders in the merger will be the same as the aggregate tax basis of
the SCI common stock surrendered in exchange therefor (reduced by any
basis allocable to fractional shares for which cash is received).
- The holding period of the Sanmina common stock received by each SCI
stockholder in the merger will include the holding period of the SCI
common stock surrendered in exchange therefor.
- A holder of SCI common stock receiving cash in the merger in lieu of a
fractional interest in Sanmina common stock will be treated as if such
holder actually received such fractional share interest which was
subsequently redeemed by Sanmina. An SCI stockholder should recognize
gain or loss with respect to a cash payment in lieu of a fractional share
measured by the difference, if any, between the amount of cash received
and the basis in such fractional share.
- None of Sanmina, Sun Acquisition Subsidiary or SCI will recognize gain or
loss solely as a result of the merger.
No ruling has been or will be obtained from the Internal Revenue Service in
connection with the merger. SCI stockholders should be aware that the tax
opinions do not bind the Internal Revenue Service and that the Internal Revenue
Service is therefore not precluded from asserting a contrary opinion. The tax
opinions are also subject to certain assumptions and qualifications and will be
based on the truth and accuracy of certain
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representations made by Sanmina, Sun Acquisition Subsidiary and SCI, including,
without limitation, representations in certificates to be delivered to counsel
by the respective management of Sanmina, Sun Acquisition Subsidiary and SCI.
A successful Internal Revenue Service challenge to the reorganization
status of the merger would result in SCI stockholders recognizing taxable
capital gain or loss with respect to each share of SCI common stock surrendered
equal to the difference between the SCI stockholder's tax basis in such share
and the fair market value, as of the closing of the merger, of the Sanmina
common stock and any other consideration received in exchange therefor. In such
event, an SCI stockholder's aggregate basis in the Sanmina common stock so
received would equal its fair market value as of the closing of the merger and
the holding period for such stock would begin the day after the closing of the
merger. However, even in that event, neither Sanmina, Sun Acquisition Subsidiary
nor SCI would recognize gain or loss solely as a result of the merger.
Certain noncorporate SCI stockholders may be subject to backup withholding
at a rate of 30.5% on cash payments received in the merger. Backup withholding
will not apply, however, to a stockholder who furnishes a correct taxpayer
identification number and certifies that he or she is not subject to backup
withholding on the substitute Form W-9 included in the letter of transmittal,
who provides a certificate of foreign status on an appropriate Form W-8, or who
is otherwise exempt from backup withholding. A stockholder who fails to provide
the correct taxpayer identification number on Form W-9 may be subject to a $50
penalty imposed by the Internal Revenue Service.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO.
THUS, SCI STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF NON-U.S., FEDERAL, STATE, LOCAL,
AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for as a purchase business combination for
financial accounting purposes in accordance with accounting principles generally
accepted in the United States. For purposes of preparing Sanmina's consolidated
financial statements, Sanmina will establish a new accounting basis for SCI's
assets and liabilities based upon their fair values, the merger consideration
and the costs of the merger. Sanmina believes that any excess of cost over the
fair value of the net tangible and identifiable intangible assets of SCI will be
recorded as goodwill. Pursuant to Statements of Financial Accounting Standards
No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets," goodwill will no longer be subject to amortization over its estimated
useful life. Rather, goodwill will be subject to at least annual assessment for
impairment based on a fair value test. Identified intangible assets with finite
lives will be amortized over those lives. A final determination of the
intangible asset values and required purchase accounting adjustments, including
the allocation of the purchase price to the assets acquired and liabilities
assumed based on their respective fair values, has not yet been made. Sanmina
will determine the fair value of SCI's assets and liabilities and will make
appropriate business combination accounting adjustments. However, for purposes
of disclosing pro forma information in this joint proxy statement/prospectus,
Sanmina has made a preliminary determination of the purchase price allocation,
based upon current estimates and assumptions, which is subject to revision upon
consummation of the merger.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
U.S. Antitrust. This merger is subject to review by the Department of
Justice and the Federal Trade Commission to determine whether it is in
compliance with applicable antitrust laws. Under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the merger may
not be consummated until the specified waiting period requirements of that act
have been satisfied. Sanmina and SCI
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filed notification reports, together with requests for early termination of the
waiting period, with the Department of Justice and the Federal Trade Commission
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
European Union. Both Sanmina and SCI conduct business in member states of
the European Union. European Union Council Regulation No. 4064/89 and
accompanying regulations require notification of and approval by the European
Commission of specific mergers or acquisitions involving parties with aggregate
worldwide sales and individual European Union sales exceeding specified
thresholds before these mergers and acquisitions can be implemented. Sanmina and
SCI intend to file formal notifications with the European Commission. Completing
a review and gaining approval under the European Commission merger regulation is
a condition to completing the merger.
Canada. Both Sanmina and SCI conduct business in Canada. The Competition
Act of Canada and accompanying regulations require notification to and approval
by Canada's Competition Bureau of specific mergers or acquisitions involving
parties whose aggregate Canadian assets or whose revenues from sales to and from
Canada exceed a predetermined threshold, or if the amount of the Canadian assets
being acquired exceeds a specific dollar value. This notification to the
Competition Bureau and expiration of the applicable waiting period are required
before the merger can be completed.
Sanmina and SCI also have filed a premerger notification form with the
antitrust agency in Brazil and may be required to file a premerger notification
form with the antitrust agency in Mexico, and possibly with the antitrust
agencies in other jurisdictions in which Sanmina and SCI conduct their
businesses.
Stock Exchanges. The completion of this merger is subject to compliance
with the rules of the Nasdaq National Market System and the New York Stock
Exchange.
Third-party Approvals. SCI is a party to a number of loan agreements,
lease agreements and other agreements. Pursuant to the merger agreement, SCI has
agreed to use commercially reasonable efforts to obtain all consents, approvals
and waivers from third parties.
Rights Plan. In December 2000, SCI's board of directors adopted a
stockholders' rights agreement. Pursuant to the terms of the rights agreement,
each right entitles the holder to purchase a share of SCI common stock at a
specified exercise price. The rights agreement further provides that no right is
exercisable until the occurrence of certain events.
On July 13, 2001, prior to approving the merger agreement, SCI's board of
directors amended the rights agreement to render it inapplicable to the merger
and related transaction described herein.
CERTAIN SECURITIES LAWS CONSIDERATIONS
The shares of Sanmina common stock to be issued in the merger will be
registered under the Securities Act of 1933, as amended. These shares will be
freely transferable under the Securities Act, except for Sanmina common stock
issued to any person who is deemed to be an affiliate of SCI. Persons who may be
deemed to be affiliates include individuals or entities that control, are
controlled by, or are under common control with SCI and may include SCI's
officers and directors, as well as its principal stockholders. SCI's affiliates
may not sell their Sanmina common stock acquired in the merger except pursuant
to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 promulgated by the
Securities and Exchange Commission under the Securities Act; or
- any other applicable exemption under the Securities Act.
NO APPRAISAL RIGHTS
In accordance with the Delaware General Corporation Law, there will be no
appraisal rights or dissenters' rights available to holders of SCI common stock
in connection with the merger.
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LISTING ON THE NASDAQ NATIONAL MARKET SYSTEM OF SANMINA COMMON STOCK TO BE
ISSUED IN THE MERGER
Sanmina has agreed to cause the shares of Sanmina common stock to be issued
and to be reserved for issuance in connection with the merger to be approved for
listing on the Nasdaq National Market System, subject to official notice of
issuance.
DELISTING AND DEREGISTRATION OF SCI COMMON STOCK AFTER THE MERGER
If the merger is completed, SCI's common stock will be delisted from the
New York Stock Exchange and will be deregistered under the Securities Exchange
Act of 1934, as amended. As a result of the merger, SCI's 3% convertible
subordinated notes may not qualify for continued listing on the New York Stock
Exchange.
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THE MERGER AGREEMENT
This section of the joint proxy statement/prospectus describes the merger
agreement. While Sanmina and SCI believe that the description covers the
material terms of the merger agreement, this summary may not contain all of the
information that is important to you. The merger agreement is attached to this
joint proxy statement/prospectus as Annex A, and Sanmina and SCI urge you to
read it carefully.
GENERAL
Following the adoption of the merger agreement, the approval of the merger,
the issuance of shares of Sanmina common stock to SCI stockholders in connection
with the merger and the change Sanmina's corporate name to [ ],
and the satisfaction or waiver of the other conditions to the merger, Sun
Acquisition Subsidiary, Inc., a wholly-owned subsidiary of Sanmina, will merge
with and into SCI. SCI will survive the merger as a wholly-owned subsidiary of
Sanmina. If all conditions to the merger are satisfied or waived, the merger
will become effective at the time of the filing of certificate of merger with
the Secretary of State of the State of Delaware.
THE EXCHANGE RATIO AND TREATMENT OF SCI COMMON STOCK
At the effective time of the merger, each issued and outstanding share of
SCI common stock will be converted into the right to receive 1.36 shares of
Sanmina common stock. However, any shares owned by SCI, Sanmina or any of their
direct or indirect wholly-owned subsidiaries will be cancelled without
conversion. Sanmina will adjust the exchange ratio to reflect any stock split,
stock dividend, reorganization, recapitalization, reclassification or other
similar change with respect to Sanmina common stock or SCI common stock
occurring before the effective time of the merger.
Based on the exchange ratio of 1.36, and based on the number of shares of
SCI common stock and options to purchase SCI common stock outstanding as of
[ ], 2001, a total of approximately [ ] shares of Sanmina
common stock and options to purchase Sanmina common stock will be issued or
granted in the merger.
TREATMENT OF RESTRICTED STOCK OF SCI
Any shares of SCI capital stock outstanding at the effective time of the
merger which are subject to a repurchase option, risk of forfeiture or other
condition under any restricted stock purchase agreement or other arrangements
will be converted into unvested shares of Sanmina common stock based on the
exchange ratio and will remain subject to the same terms, restrictions and
vesting schedules as were applicable prior to the effective time of the merger.
Sanmina will assume any rights SCI held prior to the effective time of the
merger to repurchase these unvested shares.
TREATMENT OF SCI STOCK OPTIONS
At the effective time of the merger, Sanmina will assume all outstanding
options, whether vested or unvested, to purchase shares of SCI common stock and
convert them into options to purchase Sanmina common stock subject to the same
terms and conditions as were applicable prior to the effective time of the
merger, including, without limitation, any repurchase rights or vesting
provisions. The number of shares of Sanmina common stock issuable upon the
exercise of these stock options will be adjusted based on the exchange ratio.
Any fractional share of Sanmina common stock resulting from such adjustment will
be rounded down to the nearest whole number. The exercise price per share of
Sanmina common stock issuable under each assumed SCI option will equal the
exercise price per share of the SCI common stock purchasable under the SCI
option divided by the exchange ratio. The exercise price will be rounded up to
the nearest whole cent.
Sanmina will reserve for issuance a sufficient number of shares of its
common stock for delivery upon an SCI optionholder's exercise of his or her
option. Sanmina has agreed that within 10 business days of the
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closing of the merger, Sanmina will file a registration statement on Form S-8
covering the shares of Sanmina common stock issuable with respect to assumed SCI
stock options.
The exercise period for options held by certain SCI officers may, pursuant
to their employment agreements, be extended in certain circumstances following
the merger.
EXCHANGE OF CERTIFICATES
Exchange Agent; Exchange Procedures; No Further Ownership Rights. After
the effective time of the merger, Sanmina's exchange agent will mail a letter of
transmittal and instructions for surrendering SCI certificates to each record
holder of SCI common stock. Only those holders who properly surrender their
certificates in accordance with the instructions will receive certificates
representing Sanmina common stock, cash in lieu of any fractional Sanmina common
stock and any dividends or distributions to which they are entitled. The
surrendered certificates representing shares of SCI common stock will be
cancelled. After the effective time of the merger, each certificate representing
shares of SCI common stock that have not been surrendered will only represent:
- the number of whole shares of common stock of Sanmina into which such
shares have been converted;
- the right to receive cash in lieu of any fractional share of Sanmina
common stock; and
- any dividends or distributions that may be applicable.
Following the closing of the merger, SCI will not register any transfers of SCI
common stock on its stock transfer books.
No Fractional Shares. Sanmina will not issue any fractional shares of
common stock in the merger. Instead, each holder of shares of SCI common stock
exchanged in the merger who would otherwise be entitled to receive a fraction of
a share of common stock of Sanmina will receive cash, without interest, equal to
such fraction multiplied by the average closing price per share of Sanmina
common stock on the Nasdaq National Market for the five trading days immediately
preceding the trading day on which the effective time of the merger occurs.
Distributions With Respect to Unexchanged Shares. After the effective date
of the merger, no dividends or other distributions declared or made after the
closing of the merger with respect to Sanmina common stock will be paid to the
holder of any unsurrendered SCI certificate until the holder surrenders his or
her SCI certificate in accordance with the letter of transmittal.
Lost Certificates. If any SCI common stock certificate is lost, stolen or
destroyed, an SCI stockholder must provide an appropriate affidavit certifying
that fact to Sanmina's exchange agent. Sanmina or its exchange agent may require
an SCI stockholder to deliver a bond as indemnity against any claim that may be
made against Sanmina or its exchange agent with respect to any lost, stolen or
destroyed certificate.
HOLDERS OF SCI COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL FROM SANMINA'S EXCHANGE AGENT.
REPRESENTATIONS AND WARRANTIES
Sanmina and SCI each made a number of representations and warranties in the
merger agreement regarding aspects of their respective businesses, financial
condition, structure and other facts pertinent to the merger. Each of the
companies made representations and warranties as to:
- corporate organization and qualification to do business;
- certificate of incorporation and bylaws;
- capitalization;
- authorization of the merger agreement by the respective companies;
- the effect of the merger on obligations of the respective companies under
applicable laws;
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- regulatory approvals required to complete the merger;
- compliance with applicable laws;
- filings and reports with the Securities and Exchange Commission;
- liabilities;
- changes in the respective companies' business since March 25, 2001, with
respect to SCI, and March 31, 2001, with respect to Sanmina;
- litigation;
- environmental matters;
- employee matters and benefit plans;
- information supplied by the respective companies in this joint proxy
statement/prospectus and the related registration statement filed by
Sanmina;
- restrictions on the activities of each company;
- title to property and condition of equipment;
- taxes;
- payments, if any, required to be made to brokers and agents on account of
the merger;
- intellectual property;
- material agreements;
- insurance;
- the fairness opinion received by each company;
- approval by the board of directors;
- the vote of holders of each company's common stock required to approve
the stockholder proposals;
- ownership of the other party's capital stock;
- the inapplicability of state takeover statutes to the merger;
- product warranties;
- inventory; and
- payments to foreign officials and political contributions;
In addition, Sanmina and Sun Acquisition Subsidiary made representations
and warranties as to the operations of Sun Acquisition Subsidiary.
All representations and warranties of Sanmina and SCI expire at the closing
of the merger.
The representations and warranties contained in the merger agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the merger agreement entitled "Representations and Warranties of
Company," relating to SCI and "Representations and Warranties of Parent and
Merger Sub," relating to Sanmina and Sun Acquisition Subsidiary.
CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
Sanmina and SCI agreed that, until the earlier of the completion of the
merger or termination of the merger agreement or unless the other company
consents in writing, each company will conduct its business in all material
respects in the ordinary course, consistent with past practice, pay its debts
and taxes when due,
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and pay or perform material obligations and use its commercially reasonable
efforts consistent with past practices and policies to:
- preserve intact its present business organization;
- keep available the services of its present officers and employees; and
- preserve its relationships with customers, suppliers, distributors,
licensors, licensees and others with which it has business dealings.
Sanmina and SCI also agreed to promptly notify the other company of any
material event involving each company's respective business or operations.
Sanmina and SCI also agreed that until the earlier of the completion of the
merger or termination of the merger agreement or unless the other company
consents in writing, each company will conduct its business in compliance with
certain specific restrictions relating to the following:
- restricted stock and stock options;
- employees and employee benefits, including severance and termination
payments;
- the declaration or issuance of dividends or other distributions;
- the purchase, encumbrance and redemption of securities;
- the issuance of any capital stock other than pursuant to outstanding
stock options or employee stock purchase plans or the granting of stock
options in the ordinary course of business consistent with past practice;
- amendment to its certificate of incorporation and bylaws;
- the acquisition of assets or other entities;
- the sale, lease, license and disposition of assets;
- the incurrence of indebtedness;
- the adoption, amendment or increase of employee benefit plans, policies
or arrangements;
- modification, amendment or termination of material contracts;
- material changes of accounting methods, principles or practices;
- the making of any tax election that would adversely affect the tax
liability or tax attributes of each company; and
- actions which could be expected to impact treatment of the merger as a
"reorganization" under the Internal Revenue Code.
Sanmina and SCI also agreed to change Sanmina's corporate name effective
upon the consummation of the merger and Sanmina agreed to submit the name change
to its stockholders for approval.
The agreements related to the conduct of SCI's and Sanmina's businesses in
the merger agreement are complicated and not easily summarized. You are urged to
carefully read the section of the merger agreement entitled "-- Conduct Prior to
the Effective Time".
NO SOLICITATION BY SCI
SCI further agreed to cease, as of the date of the merger agreement, any
and all existing activities, discussions or negotiations with any parties
conducted prior to that date with respect to any Acquisition Proposal (as
defined below) and request that all confidential information provided to any
such party be returned.
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An "Acquisition Proposal" is any inquiry, offer or proposal relating to any
Acquisition Transaction, other than an offer or proposal by Sanmina.
An "Acquisition Transaction" is any transaction or series of related
transactions, other than the merger of Sanmina and SCI, involving any of the
following:
- the acquisition or purchase from SCI of more than a 15% interest in the
total outstanding voting securities of SCI or any of its subsidiaries;
- any tender offer or exchange offer that if consummated would result in
any person or group beneficially owning 15% or more of the total
outstanding voting securities of SCI or any of its subsidiaries;
- any merger, consolidation, business combination or similar transaction
involving SCI pursuant to which the SCI stockholders immediately
preceding such transaction hold less than 85% of the equity interests in
the surviving or resulting entity;
- any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition or
disposition of more than 50% of the assets of SCI; or
- any liquidation or dissolution of SCI.
Until the merger is completed or the merger agreement is terminated, SCI
and its subsidiaries agreed not to directly or indirectly take any of the
following actions:
- solicit, initiate, encourage or knowingly induce the making, submission
or announcement of any Acquisition Proposal;
- participate in any discussions or negotiations regarding, or furnish to
any person any non-public information with respect to any Acquisition
Proposal;
- take any other action to facilitate any inquiries or the making of any
proposal that constitutes or would reasonably be expected to lead to any
Acquisition Proposal;
- subject to limited exceptions, approve, endorse or recommend any
Acquisition Proposal; or
- enter into any letter of intent or similar agreement or any contract,
agreement or commitment contemplating or relating to any Acquisition
Transaction.
SCI's board of directors may, without breaching the merger agreement,
respond to an unsolicited, bona fide written Superior Proposal (as defined
below) by discussing the proposal with the party making the proposal, furnishing
information to the party making the proposal, recommending a Superior Proposal
to SCI stockholders or withdrawing its recommendation of the merger agreement
with Sanmina, if all of the following conditions are met:
- SCI and its subsidiaries have not violated the restrictions set forth
above regarding Acquisition Proposals and Acquisition Transactions;
- SCI's board determines in good faith, after consulting with its outside
legal counsel, that not recommending the Superior Proposal would result
in a reasonable likelihood that SCI's board will not fulfill its
fiduciary obligations to SCI stockholders under Delaware law;
- SCI receives from such person an executed confidentiality agreement;
- SCI gives prior written notice to Sanmina of the identity of the party
making the proposal and of any discussions or negotiations with, or the
furnishing of information to, the party making the proposal; and
- when furnishing nonpublic information to the party making the proposal,
SCI contemporaneously furnishes the same information to Sanmina, to the
extent it has not already been received by Sanmina, or complies with
Rules 14d-9 and 14e-2 under the Exchange Act, if applicable.
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For purposes of the foregoing, any action by any officer, director or
affiliate of SCI or any of its subsidiaries or any investment banker, attorney
or auditor of SCI or any of its subsidiaries is deemed to be an action by SCI.
A "Superior Proposal" is an unsolicited, bona fide offer made by a third
party to consummate any of:
- a sale or other disposition by SCI of all or substantially all of its
assets; or
- the acquisition by any person or group, including by way of merger,
tender offer or exchange offer or issuance by SCI, directly or
indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing a majority of the then outstanding
voting power of SCI.
In addition, to qualify as a Superior Proposal, SCI's board of directors
must determine in its good faith (after consultation with its financial
advisor):
- that the offer is more favorable to SCI stockholders than the merger with
Sanmina; and
- that any financing required by the offering party has already been
committed or in the reasonable judgment of its financial advisor is
likely to be obtained on a timely basis.
SCI has agreed to promptly inform Sanmina of any request for information
that SCI reasonably believes would lead to an Acquisition Proposal, or of any
Acquisition Proposal, or any inquiry with respect to which SCI reasonably
believes would lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the person or group making any such request, Acquisition Proposal or inquiry.
SCI further agreed to keep Sanmina informed in all material respects of the
status and details, including material amendments or proposed amendments, of any
such request, Acquisition Proposal or inquiry, and to provide Sanmina with
advance notice of any meeting of the SCI board of directors at which the board
of directors is reasonably expected to consider an Acquisition Proposal or
recommend a Superior Offer to SCI stockholders.
SCI STOCKHOLDERS' MEETING
SCI is obligated under the merger agreement to hold and convene the SCI
special meeting of stockholders for purposes of voting for approval and adoption
of the merger agreement and approval of the merger. Unless SCI's board of
directors withdraws its recommendations and recommends a Superior Offer, SCI's
board of directors will continue to recommend that SCI stockholders vote in
favor of approval and adoption of the merger agreement and approval of the
merger.
SANMINA STOCKHOLDERS' MEETING
Sanmina is obligated under the merger agreement to hold and convene the
Sanmina special meeting of stockholders for purposes of voting for the approval
of the issuance of shares of Sanmina common stock in the merger and the change
of Sanmina's corporate name. Sanmina's board of directors will recommend that
Sanmina's stockholders vote in favor of these proposals in connection with the
merger.
SANMINA'S BOARD OF DIRECTORS AFTER THE TRANSACTION
Sanmina has agreed to amend its bylaws at the effective time of the
transaction to increase the size of its board of directors from seven to ten
persons and to appoint three representatives of SCI to fill these vacancies.
Sanmina also agreed to nominate these SCI representatives for election to
Sanmina's board of directors at Sanmina's annual meetings in 2002, 2003 and 2004
provided that the SCI representative's attendance for the prior year is at least
equal to the average of the attendance of all Sanmina directors for the same
year. The SCI representatives will be A. Eugene Sapp, Jr., Wayne Shortridge, and
Jackie M. Ward.
SANMINA AND SCI RIGHTS PLANS
Sanmina and SCI have agreed to take any action necessary to render the SCI
or Sanmina rights plans, as the case may be, not applicable to the merger.
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CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Sanmina and SCI to complete the merger and the other
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver, to the extent legally permissible, of each of the
following conditions before completion of the merger:
- the merger agreement must be adopted and the merger must be approved by
the requisite vote of holders of SCI stock under applicable law;
- the issuance of Sanmina common stock to SCI stockholders and the change
of Sanmina's corporate name must be approved by the requisite vote of
Sanmina stockholders under applicable laws and the rules of the Nasdaq
National Market System;
- Sanmina's registration statement on Form S-4 must be effective, no stop
order suspending its effectiveness can be in effect and no proceedings
for suspension of its effectiveness can have been initiated or threatened
by the Securities and Exchange Commission;
- no law, regulation or order shall have been enacted or issued which has
the effect of making the merger illegal or otherwise prohibiting
completion of the merger;
- all applicable waiting periods under applicable antitrust laws must have
expired or been terminated;
- Sanmina and SCI must each receive from their respective tax counsel an
opinion to the effect that the merger will constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code; and
- the shares of Sanmina's common stock to be issued in the merger must have
been authorized for listing on the Nasdaq National Market System.
SCI's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- Sanmina's representations and warranties must be true and correct as of
July 13, 2001, and at and as of the date the merger is to be completed as
if made at and as of that time except:
- to the extent Sanmina's representations and warranties address matters
only as of a particular date, they must be true and correct as of that
date; and
- if any of Sanmina's representations and warranties are not true and
correct but the effect, in the aggregate, of the inaccuracies of these
representations and breaches of these warranties does not have a
Material Adverse Effect (as defined below) on Sanmina, then this
condition will be deemed satisfied;
- Sanmina must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by Sanmina at or before completion of the merger; and
- Sanmina shall not have had a Material Adverse Effect (as defined below)
since July 13, 2001.
Sanmina's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- SCI's representations and warranties must be true and correct as of July
13, 2001, and at and as of the date the merger is to be completed as if
made at and as of that time except:
- to the extent SCI's representations and warranties address matters only
as of a particular date, they must be true and correct as of that date;
and
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- if any of SCI's representations and warranties are not true and correct
but the effect, in the aggregate, of the inaccuracies of these
representations and breaches of these warranties does not have a Material
Adverse Effect on SCI, then this condition will be deemed satisfied;
- SCI must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by SCI at or before completion of the merger;
- SCI shall not have had a Material Adverse Effect since July 13, 2001; and
- SCI must have obtained all consents, waivers and approvals contemplated
by the merger agreement.
DEFINITION OF MATERIAL ADVERSE EFFECT
Under the terms of the merger agreement, a Material Adverse Effect on
either Sanmina or SCI is defined to mean any change, event, violation,
inaccuracy, circumstance or effect that is, or would reasonably be expected to
be, materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, results of operations or prospects of such
entity and its subsidiaries taken as a whole. However, under the terms of the
merger agreement, none of the following will be deemed to constitute, nor will
any of the following be taken into account in determining whether there has been
or will be a Material Adverse Effect on any entity:
- a change that primarily results from conditions generally affecting the
United States economy or the world economy;
- a change that primarily results from conditions generally affecting the
electronics manufacturing services industry;
- a change that primarily results from the effect of change of control
provisions in contracts and agreements between SCI and its principal
customers;
- a change that results from the announcement and the pendency of the
merger agreement and the transactions contemplated thereby; or
- a change that results directly from action taken by a party in connection
with fulfilling its obligations under the merger agreement.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the merger, whether before or after adoption of the merger agreement and
approval of the merger by the SCI stockholders and the Sanmina stockholders:
- by mutual written consent of the boards of directors of Sanmina and SCI;
- by Sanmina or SCI, if the merger is not completed before December 31,
2001, except that this right to terminate the merger agreement is not
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the merger to occur on
or before December 31, 2001, and this action or failure to act
constitutes a material breach of the merger agreement;
- by Sanmina or SCI, if there is any order, decree or ruling of a court or
governmental authority having jurisdiction over either Sanmina or SCI
permanently restraining, enjoining or otherwise prohibiting the
completion of the merger;
- by Sanmina or SCI, if the SCI stockholders fail to adopt the merger
agreement and approve the merger at the SCI stockholders' meeting, or if
the Sanmina stockholders fail to approve the stockholder proposals at the
Sanmina stockholders' meeting, except that this right is not available to
any party whose action or failure to act has been the principal cause of
or resulted in the failure to receive the stockholder vote and such
action or failure constitutes a breach of the merger agreement;
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- by SCI concurrently with the execution by SCI of a definitive agreement
relating to an Acquisition Transaction;
- by SCI, upon Sanmina's breach of any representation, warranty, covenant
or agreement in the merger agreement, or if any of Sanmina's
representations or warranties become untrue in either case so that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by Sanmina, SCI may not
terminate the merger agreement until 30 days after delivery of written
notice so long as Sanmina exercises commercially reasonable efforts to
cure the breach and the breach is not cured during this 30 days;
- by Sanmina, upon SCI's breach of any representation, warranty, covenant
or agreement in the merger agreement, or if any of SCI's representations
or warranties become untrue, in either case so that the corresponding
condition to completion of the merger would not be met. However, if the
breach or inaccuracy is curable by SCI, Sanmina may not terminate the
merger agreement until 30 days after delivery of written notice so long
as SCI exercises commercially reasonable efforts to cure the breach and
the breach is not cured during this 30 days; or
- by Sanmina if any of the following shall have occurred:
- SCI's board of directors withdraws, amends or modifies its
recommendation of the merger agreement or the merger in a manner adverse
to Sanmina, or SCI's board of directors resolves to do so;
- SCI's board of directors fails to include its recommendation of the
merger agreement and the merger in any proxy statement/prospectus
regarding the merger;
- SCI's board of directors recommends any Acquisition Proposal, or
resolves to do so;
- SCI breaches in any material respect any of the non-solicitation
provisions of the merger agreement;
- SCI enters a definitive agreement for an Acquisition Transaction, or
SCI's board of directors resolves to do so; or
- SCI's board of directors fails to send its stockholders a recommendation
to reject any tender or exchange offer within 10 days.
PAYMENT OF TERMINATION FEE BY SCI
SCI will pay Sanmina a termination fee of $30.0 million if SCI terminates
the merger agreement and enters into a definitive agreement relating to a Change
of Control Transaction (as defined below) and an additional $120.0 million if
SCI consummates this or any other Change of Control Transaction within 15 months
after termination of the merger agreement.
SCI will pay Sanmina a termination fee of $150.0 million if Sanmina
terminates the merger agreement and SCI consummates a Change of Control
Transaction within 15 months of any of the following:
- SCI's board of directors withdraws, amends or modifies its recommendation
of the merger agreement or the merger in a manner adverse to Sanmina, or
resolves to do so;
- SCI's board of directors fails to include its recommendation of the
merger agreement and the merger in any proxy statement/prospectus
regarding the merger;
- SCI's board of directors recommends any Acquisition Proposal, or resolves
to do so;
- SCI breaches in any material respect any of the non-solicitation
provisions of the merger agreement;
- SCI enters a definitive agreement for an Acquisition Transaction, or
resolves to do so; or
- SCI's board of directors fails to send its stockholders a recommendation
to reject any tender or exchange offer within 10 days.
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For purposes of this section, a "Change of Control Transaction" is any
transaction or series of related transactions, other than the merger of Sanmina
and SCI, involving any of the following:
- the acquisition or purchase from SCI of more than a 50% interest in the
total outstanding voting securities of SCI or any of its subsidiaries;
- any tender offer or exchange offer that if consummated would result in
any person or group beneficially owning 50% or more of the total
outstanding voting securities of SCI or any of its subsidiaries;
- any merger, consolidation, business combination or similar transaction
involving SCI pursuant to which the SCI stockholders immediately
preceding such transaction hold less than 50% of the equity interests in
the surviving or resulting entity;
- any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition or
disposition of more than 50% of the assets of SCI; or
- any liquidation or dissolution of SCI.
SCI will pay Sanmina $3.0 million for its expenses if the merger agreement
is terminated because the SCI stockholders do not approve and adopt the merger
agreement and approve the merger, as long as the Sanmina stockholders approve
the share issuance and the change of Sanmina's corporate name. If SCI is
required to pay both the $30.0 million fee and the $3.0 million fee, payment of
the $3.0 million fee will be credited against the $30.0 million fee.
Sanmina will pay SCI a $3.0 million fee if the merger agreement is
terminated because the Sanmina stockholders do not approve the share issuance
and the change of Sanmina's corporate name, as long as the SCI stockholders have
adopted the merger agreement and approved the merger and the merger agreement is
not otherwise terminable by Sanmina for other specified reasons.
AFTER THE MERGER
Following the merger, SCI will be a wholly-owned subsidiary of Sanmina. The
stockholders of SCI will become stockholders of Sanmina, and their rights as
stockholders will be governed by the Sanmina certificate of incorporation and
bylaws, as currently in effect, and the laws of Delaware. See "COMPARISON OF
RIGHTS OF HOLDERS OF SCI COMMON STOCK AND SANMINA COMMON STOCK" on page 95 of
this joint proxy statement/prospectus.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Subject to applicable law and the requirements of the New York Stock
Exchange and the Nasdaq National Market System, Sanmina and SCI may amend the
merger agreement before completion of the merger by mutual written consent. In
addition, either Sanmina or SCI may extend the other's time for the performance
of any of the obligations or other acts under the merger agreement, waive any
inaccuracies in the other's representations and warranties and waive compliance
by the other with any of the agreements or conditions contained in the merger
agreement.
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AGREEMENTS RELATED TO THE MERGER
This section of the joint proxy statement/prospectus describes agreements
related to the merger agreement, including the Sanmina voting agreements, the
SCI voting agreements and the employment agreements. While Sanmina and SCI
believe that these descriptions cover the material terms of these agreements,
these summaries may not contain all of the information that is important to you.
SANMINA VOTING AGREEMENTS
By entering into the voting agreements, certain executive officers and
directors of Sanmina have irrevocably appointed SCI as their lawful attorney and
proxy. These proxies give SCI the limited right to vote the shares of Sanmina
common stock beneficially owned by these Sanmina stockholders, subject to the
voting agreements, in favor of adopting the merger agreement and approving the
merger, the share issuance and the change of Sanmina's corporate name. These
Sanmina stockholders may vote their shares of Sanmina common stock on all other
matters.
As of [ ], 2001, the Sanmina stockholders who entered into voting
agreements collectively beneficially owned approximately [ ] million shares
of Sanmina common stock which represented approximately [ ]% of all outstanding
Sanmina common stock. None of the Sanmina stockholders who are parties to the
voting agreements were paid additional consideration in connection with them.
The voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement or the completion of the merger. Each
Sanmina stockholder who is a party to a voting agreement agreed, prior to such
termination, not to sell or otherwise transfer Sanmina stock and options owned,
controlled or acquired, either directly or indirectly, by that person; provided,
however, the Sanmina stockholder may sell shares of Sanmina stock:
- in an amount not to exceed five percent of such party's aggregate
holdings of Sanmina common stock as of July 13, 2001; or
- if any transferee of shares subject to the voting agreement agrees to be
bound by the terms of the voting agreement.
The form of Sanmina voting agreement is attached as Exhibit A-1 to the merger
agreement attached hereto as Annex A and you are urged to read it in its
entirety.
SCI VOTING AGREEMENTS
By entering into the voting agreements, certain executive officers and
directors of SCI have irrevocably appointed Sanmina as their lawful attorney and
proxy. These proxies give Sanmina the limited right to vote the shares of SCI
common stock beneficially owned by these SCI stockholders, subject to the voting
agreements, in favor of approval and adoption of the merger agreement and
approval of the merger. These SCI stockholders may vote their shares of SCI
common stock on all other matters.
As of July 13, 2001, the SCI stockholders who entered into voting
agreements collectively beneficially owned approximately [ ] million shares
of SCI common stock which represented approximately [ ]% of the outstanding SCI
common stock. None of the SCI stockholders who are parties to the voting
agreements was paid additional consideration in connection with them.
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The SCI voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement or the completion of the merger. Each SCI
stockholder who is a party to a voting agreement agreed, prior to such
termination, not to sell or otherwise transfer SCI stock and options owned,
controlled or acquired, either directly or indirectly, by that person; provided,
however, the SCI stockholder may sell shares of SCI stock:
- in an amount not to exceed five percent of such party's aggregate
holdings of SCI common stock as of July 13, 2001; or
- if any transferee of shares subject to the voting agreement agrees to be
bound by the terms of the voting agreement.
The form of SCI voting agreement is attached as Exhibit A-2 to the merger
agreement attached hereto as Annex A, and you are urged to read it in its
entirety.
EMPLOYMENT AGREEMENTS
Sanmina and SCI have entered into an employment agreement with A. Eugene
Sapp, Jr., and intend to enter into an employment agreement with James E.
Moylan, Jr. In addition, Sanmina intends to enter into an employment agreement
with Robert C. Bradshaw. The term of each employment agreement will commence
upon completion of the merger and will continue for a period of one year in the
case of Mr. Sapp, three years in the case of Mr. Bradshaw and six months in the
case of Mr. Moylan.
A. Eugene Sapp, Jr. Under his employment agreement, Mr. Sapp:
- will serve as co-chairman of SCI and co-chairman of Sanmina;
- will be entitled to a base salary of $864,000 and an annual bonus of at
least $1.0 million to be paid no later than the first anniversary of the
completion of the merger;
- will be entitled to receive upon completion of the merger a nonqualified
option to purchase 125,000 shares of Sanmina common stock at an exercise
price equal to the fair market value of the stock on the date of grant;
and
- will be entitled to participate in all employee benefit plans and
programs on a basis no less favorable than the basis on which he was
participating in such programs during the 90-day period immediately
preceding the merger.
If Mr. Sapp's employment is terminated for any reason, he or his legal
representatives will be entitled to receive his earned base salary through the
date of termination; any unpaid deferred compensation and accrued vacation pay;
benefits owed under the employee benefit plans and policies; and reimbursement
for expenses incurred prior to the date of termination.
If his employment is terminated for any reason other than cause,
disability, death or retirement or he voluntarily terminates his employment
because any of the following events occur without his consent:
- a reduction in his base salary or his annual target bonus opportunity;
- a change of more than 25 miles in the location of his office;
- a substantial change in his position or duties from those held by him
prior to the completion of the merger; or
- a failure by Sanmina to comply with certain of its obligations under the
employment agreement,
and he signs and does not revoke a standard release of claims, then Mr. Sapp
will also be entitled to receive a cash payment equal to his base salary for the
term of his employment agreement plus his annual bonus minus all base salary and
bonus amounts that have already been paid during the term of the employment
agreement. In addition, Mr. Sapp, his wife and eligible dependents will be
entitled to the continuation of certain health and life insurance benefits and,
as of the date of termination, all of his outstanding equity based awards will
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become vested and the exercise period of any stock options will be extended
until the tenth anniversary of the grant date of the options.
If Mr. Sapp's employment is terminated by reason of his disability, he will
be entitled to continue to participate in all employee benefit plans and
programs until his sixty-fifth birthday or the expiration of the term of his
employment agreement, whichever occurs later.
Robert C. Bradshaw. Under his employment agreement, Mr. Bradshaw:
- will serve as president of EMS operations of Sanmina;
- will be entitled to base salary of $477,000 per year and a targeted
annual bonus of $650,000 if certain performance goals are met;
- will be entitled to receive upon completion of the merger a nonqualified
option to purchase 100,000 shares of Sanmina common stock at an exercise
price equal to the value of the stock on the date of grant;
- will be entitled to receive a $1.5 million cash bonus; and
- will be entitled to participate in all employee benefit plans and
programs of Sanmina on a basis no less favorable than the basis on which
he was participating in such programs of SCI during the 90-day period
immediately preceding the merger.
If Mr. Bradshaw's employment is terminated by any reason, he or his legal
representatives will be entitled to receive his base salary through the date of
termination, any unpaid deferred compensation and accrued vacation pay, benefits
owed under the employee benefit plans and policies and reimbursement for
expenses incurred prior to the date of terminations;
If during the term of the agreement Mr. Bradshaw's employment is terminated
other than for cause, disability, death or retirement or he voluntarily
terminates his employment because any of the following events occur without his
consent:
- a reduction in his base salary or his annual target bonus opportunity;
- a change of more than 25 miles in the location of his office;
- a substantial change in his position or duties from those held by him
prior to the completion of the merger; or
- a failure by Sanmina to comply with certain of its obligations under the
employment agreement,
and he signs and does not revoke a standard release of employment-related
claims, then he will also be entitled to receive a lump sum severance payment in
cash equal to
- two times the average of his annualized bonus payable for Sanmina's (or
for periods prior to the merger, SCI's) two most recently completed
fiscal years; and
- an amount equal to the greater of two times his base salary at the date
of termination or $954,000; reduced by
- the net after-tax proceeds of the $1.5 million bonus described above
which is payable to him upon completion of the merger
In addition, Mr. Bradshaw, his wife and eligible dependents will be
entitled to the continuation of certain health and welfare benefits, and as of
the date of termination, all of his outstanding equity based awards will become
vested and all vested stock options will be required to be exercised within
ninety days of the date of termination or such longer post-termination exercise
period applicable to such option.
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If Mr. Bradshaw's employment is terminated by reason of his death, all of
Mr. Bradshaw's outstanding equity based awards will become vested and all vested
stock options will be required to be exercised within ninety days of the date of
termination or such longer post-termination exercise period applicable to such
option.
If Mr. Bradshaw's employment is terminated as a result of his disability:
- he, his wife and his eligible dependents will be entitled to continue to
participate under all health and insurance benefit programs the term of
his employment agreement expires; and
- all of Mr. Bradshaw's outstanding equity based awards will become vested
and all vested stock options will be required to be exercised within
ninety days of the date of termination or such longer post-termination
exercise period applicable to such option.
James E. Moylan. Under his employment agreement, Mr. Moylan:
- will serve as chief financial officer of SCI;
- will be entitled to base salary of $367,500 per year
- a stay bonus of $200,000 on the sixth month anniversary of the completion
of the merger, if he remains employed by SCI through that date;
- will be fully vested in all stock options previously granted by SCI as of
the six month anniversary of the merger; and
- will be entitled to participate in all employee benefit plans and
programs on a basis no less favorable than the basis on which he was
participating in such programs during the 90-day period immediately
preceding the merger.
If Mr. Moylan's employment is terminated for any reason, he or his legal
representatives will be entitled to receive his base salary through the date of
termination, any unpaid deferred compensation and accrued vacation pay, benefits
owed under the employee benefit plans and policies and reimbursement for
expenses incurred prior to the date of termination.
If during the term of the agreement Mr. Moylan's employment is terminated
other than for cause, disability, death or retirement or he voluntarily
terminates his employment because any of the following events occur without his
consent:
- a reduction in his base salary or his annual target bonus opportunity;
- a change of more than 25 miles in the location of his office;
- a substantial change in his position or duties from those held by him
prior to the completion of the merger; or
- a failure by SCI or Sanmina to comply with certain of its obligations
under the employment agreement,
then he will also be entitled to receive a lump sum severance payment in cash
equal to the $200,000 bonus described above which would have been payable to him
on the six month anniversary of the merger. In addition, as of the date of
termination, all of Mr. Moylan's outstanding equity based awards will become
vested and all vested stock options will be required to be exercised within a
specified period of the date of termination.
If Mr. Moylan's employment is terminated by reason of his death, his legal
representatives will be entitled to receive the $200,000 lump sum severance
payment described above. In addition, his family will be entitled to receive the
benefits generally available to surviving families of Sanmina executives with
comparable responsibilities or positions and as of the date of termination, all
of his outstanding equity based awards will become vested and all vested stock
options will be required to be exercised within a specified period of the date
of termination.
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Mr. Moylan will also be entitled to receive as a result of the termination
of his employment by reason of his disability an amount equal to the $200,000
lump sum severance payment described above. Additionally, he, his wife and his
eligible dependents will be entitled to continue to participate under all health
and welfare programs until the 6 month anniversary of the effective date of the
merger, and as of the date of termination, all of his outstanding equity based
awards will become vested and all vested stock options will be required to be
exercised within a specified period of the date of termination.
EMPLOYEE SEVERANCE AGREEMENTS
SCI intends to enter into severance agreements, effective upon completion
of the merger, with twenty-one of its other officers. The severance agreements
will provide for certain payments to these officers in the event that their
employment with SCI is terminated within a specified period of the effective
date of the merger.
All of the severance agreements contain substantially similar terms and
provide that if the officer's employment is terminated for any reason, the
officer or his or her legal representatives will be entitled to receive the
officer's base salary through the date of termination, any unpaid deferred
compensation and accrued vacation pay, benefits owed under the employee benefit
plans and policies and reimbursement for expenses incurred prior to the date of
termination.
Under the severance agreements, if the officer's employment is terminated
other than for cause, disability, death or retirement or the officer voluntarily
terminates employment because any of the following events occur without his or
her consent:
- a reduction in base salary or annual target bonus opportunity;
- a change of more than 25 miles in the location of his or her office;
- a substantial change in the officer's position or duties from those held
by the officer prior to the completion of the merger;
- the failure by SCI to provide the officer with participation in any of
the benefit programs that the officer was participating in prior to the
merger;
- the failure of SCI to provide the officer with prompt reimbursement for
reasonable business expenses, or to provide paid vacation or employee
benefits; or
- a failure by SCI or Sanmina to comply with certain of its obligations
under the employment agreement;
and the officer signs and does not revoke a standard release of
employment-related claims, then the officer shall also be entitled to receive a
lump sum severance payment in cash equal to
- one and one-half times the average of the officer's annualized bonus
payable for the two most recently completed fiscal years; and
- an amount equal to one and one-half times the officer's base salary at
the date of termination.
In addition, the officer, his or her spouse and eligible dependents will be
entitled to the continuation of certain health and welfare benefits for 18
months after the termination date or, alternatively, may elect to receive a cash
payment equal to 1.5 times SCI's cost to provide such benefits; and as of the
date of termination, all of the officer's outstanding equity based awards will
become vested and all vested stock options will be required to be exercised
within 90 days of the date of termination, or such longer post-termination
exercise period applicable to such option.
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If the officer's employment is terminated by reason of his or her death,
the officer's family will be entitled to receive the benefits generally
available to surviving families of Sanmina executives with comparable
responsibilities or positions, and as of the date of termination, all of the
officer's outstanding equity based award will become vested and all vested stock
options will be required to be exercised within 90 days of the date of
termination, or such longer post-termination exercise period applicable to such
option.
If the officer's employment is terminated by reason of his or her
disability, the officer's family will be entitled to continue to participate
under all health and welfare programs for the period ending on the earlier to
occur of the executive's 65th birthday or 18 months from the date of the
officer's termination of employment.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the proposed merger of Sanmina and SCI using the purchase method
of accounting, as required by Statement of Financial Accounting Standard No.
141, "Business Combinations." Under this method of accounting, Sanmina will
allocate the purchase price to the fair value of assets acquired, including
identified intangible assets and goodwill. The purchase price allocation is
subject to revision when Sanmina obtains additional information regarding asset
valuation. The unaudited pro forma combined condensed financial statements are
based on the respective historical consolidated financial statements and the
accompanying notes of Sanmina and SCI, which are incorporated by reference in
this joint proxy statement/prospectus. The unaudited pro forma combined
condensed balance sheet assumes the merger took place on June 30, 2001, and
combines Sanmina's June 30, 2001, unaudited consolidated balance sheet with
SCI's March 25, 2001, unaudited consolidated balance sheet. The unaudited pro
forma combined statements of operations assume that the merger took place on
October 3, 1999. Sanmina's unaudited consolidated statement of operations for
the nine months ended June 30, 2001, has been combined with SCI's unaudited
consolidated statement of income for the nine months ended March 25, 2001.
Sanmina's audited statement of operations for the year ended September 30, 2000
has been combined with SCI's audited statement of income for the fiscal year
ended June 30, 2000. The unaudited pro forma combined condensed statements of
operations for the annual period does not present like periods. The use of
different closing dates is necessary as each entity has different fiscal year
ends. The pro forma reporting with respect to combining Sanmina and SCI's
results with different fiscal year ends that are within 93 days and is in
accordance with Securities and Exchange Commission guidance. The periods
combined for purposes of presenting the unaudited pro forma combined statements
of operations are not necessarily indicative of the periods expected to be
combined after the date of the closing of the merger. The unaudited pro forma
combined condensed financial statements are based on the estimates and
assumptions set forth in the notes to these statements. The pro forma
adjustments made in connection with the development of the pro forma information
are preliminary and have been made solely for purposes of developing such pro
forma information for illustrative purposes necessary to comply with the
disclosure requirements of the Securities and Exchange Commission. The unaudited
pro forma combined condensed financial statements do not purport to be
indicative of the results of operations for future periods or the combined
financial position or the results that actually would have been realized had the
entities been a single entity during these periods. Sanmina and SCI estimate
that they will incur direct transaction costs of approximately $18.5 million and
$26.8 million, respectively, associated with the merger. Such costs of Sanmina
will be included in the total purchase cost for accounting purposes and are
considered in the pro forma adjustments. Such costs of SCI will be charged to
operations by SCI in the fiscal quarter in which the merger is consummated.
There can be no assurance that the combined company will not incur additional
charges in subsequent quarters reflecting costs associated with the merger.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with the historical consolidated financial statements and
the related notes thereto of Sanmina and SCI which are incorporated by reference
in this joint proxy statement/prospectus.
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SANMINA AND SCI
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
HISTORICAL
-----------------------
SANMINA SCI
JUNE 30, MARCH 25, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents.... $ 618,219 $ 215,757 $ 833,976
Short-term investments....... 777,100 -0- 777,100
Accounts receivable, net..... 553,954 854,835 (2,515)(G) 1,406,274
Inventories.................. 550,535 1,704,039 2,254,574
Deferred income taxes........ 90,282 16,272 106,554
Prepaid expenses and other... 29,681 132,609 162,290
---------- ---------- ----------- -----------
Total current
assets............. 2,619,771 2,923,512 (2,515) 5,540,768
Property, plant and equipment,
net.......................... 723,881 710,340 1,434,221
Long-term investments.......... 78,954 -0- 78,954
Goodwill, intangibles and
other........................ 349,536 626,176 3,077,198(C)(D)(F) 4,052,910
---------- ---------- ----------- -----------
Total assets......... $3,772,142 $4,260,028 $ 3,074,683 $11,106,853
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses.................. $ 363,175 $1,153,709 $ (129,818)(A)(G) $ 1,387,066
Accrued liabilities and
other..................... 113,220 83,544 135,583(A)(C) 332,347
Current maturities of
long-term debt and
short-term bank
borrowings................ -- 31,849 771,591(A)(B) 803,440
---------- ---------- ----------- -----------
Total current
liabilities........ 476,395 1,269,102 777,356 2,522,853
---------- ---------- ----------- -----------
Long-term liabilities:
Long-term debt, net of
current portion........... 1,213,632 1,431,120 (761,371)(B) 1,883,381
Other liabilities............ 76,257 90,626 176,900(F) 343,783
---------- ---------- ----------- -----------
Total long-term
liabilities........ 1,289,889 1,521,746 (584,471) 2,227,164
---------- ---------- ----------- -----------
Stockholders' equity:
Common stock and additional
paid-in capital, net...... 1,221,506 496,392 3,861,141(C)(E) 5,579,039
Accumulated other
comprehensive loss........ (14,876) (28,455) 28,455(E) (14,876)
Deferred compensation........ -- -- (6,555)(C) (6,555)
Retained earnings............ 799,228 1,001,243 (1,001,243)(E) 799,228
---------- ---------- ----------- -----------
Total stockholders'
equity............. 2,005,858 1,469,180 2,881,798 6,356,836
---------- ---------- ----------- -----------
$3,772,142 $4,260,028 $ 3,074,683 $11,106,853
========== ========== =========== ===========
See accompanying notes to unaudited pro forma combined condensed financial
statements.
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SANMINA AND SCI
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL
-------------------------
SANMINA SCI
NINE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, MARCH 25, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
Net sales.............................. $3,453,311 $6,639,921 $ (31,728)(H) $10,061,504
Cost of sales.......................... 2,900,767 6,292,949(L) (31,728)(H) 9,161,988
---------- ---------- --------- -----------
Gross profit......................... 552,544 346,972 -- 899,516
---------- ---------- --------- -----------
Operating expenses:
Selling, general and
administrative.................... 186,349 97,029(L) 1,639(J) 285,017
Amortization of goodwill and
identifiable intangibles.......... 20,348 30,276 19,724(I) 70,348
Plant closing, relocation, merger and
restructuring costs............... 27,907 15,767(L) 43,674
---------- ---------- --------- -----------
Total operating expenses..... 234,604 143,072 21,363 399,039
---------- ---------- --------- -----------
Operating income....................... 317,940 203,900 (21,363) 500,477
Other income (expense), net............ 16,869 (53,584) (36,715)
---------- ---------- --------- -----------
Income before provision for income
taxes................................ 334,809 150,316 (21,363) 463,762
Provision for income taxes............. 126,516 49,604 (9,024)(M) 167,096
---------- ---------- --------- -----------
Net income........................... $ 208,293 $ 100,712 $ (12,339) $ 296,666
========== ========== ========= ===========
Earnings per share:
Basic................................ $ 0.65 $ 0.68 $ 0.57
Diluted.............................. $ 0.62 $ 0.68 $ 0.55
Shares used in computing per share
amounts:
Basic................................ 318,824 147,254 519,090(K)
Diluted.............................. 349,266 148,907 551,779(K)
See accompanying notes to unaudited pro forma combined condensed financial
statements.
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SANMINA AND SCI
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SANMINA SCI
YEAR ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30, PRO FORMA PRO FORMA
2000 2000 ADJUSTMENTS COMBINED
------------- ----------- ----------- -----------
Net sales............................... $4,239,102 $8,342,580 $(49,713)(H) $12,531,969
Cost of sales........................... 3,562,430 7,925,813(L) (49,713)(H) 11,438,530
---------- ---------- -------- -----------
Gross profit.......................... 676,672 416,767 -- 1,093,439
---------- ---------- -------- -----------
Operating expenses:
Selling, general and administrative... 235,720 70,653(L) 2,185(J) 308,558
Amortization of goodwill and
identifiable intangibles........... 23,545 24,443 42,224(I) 90,212
Write down of long-lived assets....... 8,750 -- 8,750
Plant closing, relocation, merger and
restructuring costs................ 47,201 47,201
---------- ---------- -------- -----------
Total operating expenses...... 315,216 95,096 44,409 454,721
---------- ---------- -------- -----------
Operating income........................ 361,456 321,671 (44,409) 638,718
Other income (expense), net............. (3,487) (28,036) (31,523)
---------- ---------- -------- -----------
Income before provision for income
taxes................................. 357,969 293,635 (44,409) 607,195
Provision for income taxes.............. 142,916 96,900 (16,342)(M) 223,474
---------- ---------- -------- -----------
Income before extraordinary item...... $ 215,053 $ 196,735 $(28,067) $ 383,721
========== ========== ======== ===========
Earnings per share -- basic:
Income before extraordinary item...... $ 0.71 $ 1.36 $ 0.76
========== ========== ======== ===========
Earnings per share -- diluted:
Income before extraordinary item...... $ 0.67 $ 1.34 $ 0.73
========== ========== ======== ===========
Shares used in computing per share
amounts:
Basic................................. 304,824 144,240 500,990(K)
Diluted............................... 337,350 149,657 536,886(K)
See accompanying notes to unaudited pro forma combined condensed financial
statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
On July 16, 2001, Sanmina announced that it had entered into a definitive
merger agreement with SCI Systems, Inc. ("SCI"). Under the terms of the
agreement, each outstanding share of SCI common stock will be converted into
1.36 shares of Sanmina common stock. In addition, Sanmina will issue options to
purchase shares of Sanmina common stock in exchange for each issued and
outstanding SCI option, using the ratio of 1.36 shares of Sanmina for each share
of SCI.
The merger will be accounted for as a business combination under the
purchase method of accounting. Accordingly, the purchase price will be allocated
to the tangible and intangible assets acquired and the liabilities assumed on
the basis of their respective fair values on the acquisition date. The assumed
total purchase price for SCI used in the pro forma combined condensed financial
statements is an initial estimate of the purchase price and is subject to
change. Additionally, the purchase price allocation is based upon a preliminary
valuation which could change when finalized upon closing the acquisition, based
upon the facts and circumstances at that time. A change in the purchase price or
the allocation of the purchase price would affect the value assigned to the
tangible and intangible assets and therefore could have a material effect on
actual future results of Sanmina. The amounts and components of the estimated
purchase price along with the preliminary allocation of the estimated purchase
price are presented below:
PURCHASE PRICE
(IN THOUSANDS)
Fair value of Sanmina common stock to be issued............. $4,145,267
Fair value of SCI options to be assumed..................... 223,466
Estimated transaction costs of Sanmina...................... 18,500
----------
Total purchase price.............................. $4,387,233
==========
The assumed total purchase price of approximately $4.4 billion consists of
approximately 198.6 million shares of Sanmina common stock with an estimated
fair value of $4.1 billion, 13.1 million stock options with an estimated fair
value, of $223.5 million, and estimated direct transaction costs of Sanmina of
approximately $18.5 million. The 198.6 million shares of Sanmina common stock to
be issued is based upon 146,018,515 shares of SCI common stock outstanding at
July 13, 2001 at the exchange ratio of 1.36. The unaudited pro forma combined
condensed financial statements were prepared assuming a market value of Sanmina
common stock of $20.87. The fair value of Sanmina common stock was determined as
the average closing market price for the five trading days ending July 17, 2001.
The fair value of the SCI common stock options to be assumed was estimated using
the Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 4.48%, expected life of four years,
expected dividend rate of 0% and volatility of 105%. Estimated direct
transaction costs of Sanmina consist primarily of fees for investment bankers,
attorneys, and accountants, filing fees, and financial printing.
The total purchase price is expected to be allocated to tangible assets and
liabilities, identifiable intangible assets, goodwill and deferred compensation.
A valuation of intangible assets and fixed assets is being conducted and is
expected to be completed at or prior to closing. In addition, it is expected
that following the merger, the combined company will incur restructuring costs,
including employee separations and elimination of duplicate facilities, which
cannot be currently estimated. Such costs with respect to SCI operations will be
accounted for as additional purchase cost. Such costs with respect to Sanmina
operations will be accounted for as restructuring charges in the consolidated
statement of operations in accordance with Emerging Issues Task Force Issue Nos.
94-03 and 95-03.
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NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (CONTINUED)
ALLOCATION OF PURCHASE PRICE
(IN THOUSANDS)
Net tangible assets acquired................................ $ 782,704
Identifiable intangible assets (primarily developed
technology and customer backlog).......................... 400,000
Deferred compensation related to options.................... 6,555
Goodwill.................................................... 3,197,974
----------
Total purchase price........................................ $4,387,233
==========
The final purchase price allocation will depend upon the actual purchase
price and the final valuation of the assets acquired and the liabilities assumed
upon the closing of the merger. Consequently, the actual allocation of the
purchase price could differ from that presented above.
(1) UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
The unaudited pro forma combined condensed balance sheets give effect to
the merger as if it had occurred on June 30, 2001 and combines Sanmina's June
30, 2001 unaudited condensed consolidated balance sheet with SCI's March 25,
2001 unaudited condensed consolidated balance sheet. Certain SCI amounts have
been reclassified to conform to Sanmina's method of presentation.
The following adjustments have been reflected in the unaudited pro forma
combined condensed balance sheet:
(A) To reclassify SCI's accounts payable and accrued liabilities to
conform with Sanmina's presentation and to classify Sanmina's current
portion of long-term debt as a separate line item.
(B) To reclassify SCI's redeemable long-term debt to current
liabilities. Due to existing change of control provisions in the related
SCI debt agreements, Sanmina is currently determining whether these debt
issuances will be refinanced or repaid, or a combination thereof. Sanmina's
ultimate plan in connection with the redemption of the debt will be
determined at the date of the acquisition based on the facts and
circumstances existing at that date.
(C) To record the purchase of SCI by Sanmina through the issuance of
Sanmina common stock and options, and to record estimated transaction costs
and deferred compensation associated with the purchase. Deferred
compensation represents a portion of the estimated intrinsic value of
unvested SCI stock options assumed by Sanmina in the merger agreement to
the extent that service is required to vest after the closing date of the
merger (see also Note (J)). In accordance with Emerging Issues Task Force
Issue No. 99-12, the value of Sanmina common stock to be issued is based on
the average closing market price of Sanmina stock during the five trading
days ending July 17, 2001.
(D) To eliminate SCI's historical goodwill and intangible assets.
(E) To eliminate SCI's historical equity balances including
preacquisition retained earnings.
(F) To record deferred tax liabilities attributable to tax effect of
pro forma adjustments and to identifiable intangible assets acquired.
(G) To eliminate accounts receivable and accounts payable balances
between Sanmina and SCI.
(2) UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
The pro forma combined condensed statements of operations give effect to
the merger as if it had occurred on October 3, 1999. Sanmina's unaudited
consolidated statement of operations for the nine months ended June 30, 2001,
has been combined with SCI's unaudited consolidated statement of income for the
nine
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NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (CONTINUED)
months ended March 25, 2001. Sanmina's audited statement of operations for the
year ended September 30, 2000 has been combined with SCI's audited statement of
income for the fiscal year ended June 30, 2000.
The following adjustments have been reflected in the unaudited pro forma
combined condensed statements of operations:
(H) To eliminate the revenue and cost of sales for transactions
between Sanmina and SCI.
(I) To remove amortization of historical goodwill and other intangible
assets previously recorded by SCI and to record the amortization of
identifiable intangible assets resulting from the allocation of the SCI
purchase price. The pro forma adjustments assume identifiable intangible
assets acquired from SCI will be amortized on a straight-line basis over an
estimated life of five to eight years. The ultimate lives assigned to
identifiable intangible assets acquired from SCI will be determined at the
date of acquisition based on the facts and circumstances existing at that
date.
(J) To record the amortization of deferred compensation associated
with the intrinsic value of unvested SCI options assumed by Sanmina.
Deferred compensation represents a portion of the estimated intrinsic value
of unvested SCI stock options assumed by Sanmina in the merger agreement to
the extent that service is required after the closing date of the merger in
order to vest. In March 2000, the Financial Accounting Standards Board
issued FASB Interpretation No. 44, Accounting for Certain Transactions
Involving Stock Compensation, an Interpretation of APB No. 25. The
Interpretation, which was effective as of July 1, 2000, results in
compensation charges over the remaining term of the option's vesting
period. Sanmina expects to amortize the value assigned to deferred
compensation of approximately $6.6 million over an average remaining
vesting period of three years.
(K) To reflect the estimated number of shares to be issued as
consideration for the SCI acquisition based on an exchange ratio of SCI
stock to Sanmina stock of 1.36.
(L) The historical consolidated statements of operations of SCI for
the year ended June 30, 2001 and the nine months ended March 25, 2001
combine these captions as line items entitled "Costs and Expenses," and for
the nine months ended March 25, 2001, "Non-Recurring Special Charges."
These costs reflect the reclassification of SCI's "Costs and Expenses" and
"Non-Recurring Special Charges" to conform with Sanmina's presentation.
(M) To record the tax effect of the removal of SCI amortization of
historical goodwill, the amortization of identifiable intangibles recorded,
and the amortization of the deferred compensation related to SCI assumed
options.
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DESCRIPTION OF SANMINA CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The following summary of certain provisions of Sanmina common stock and
preferred stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of Sanmina's restated certificate of
incorporation and by the provisions of applicable law. All material elements of
Sanmina's restated certificate of incorporation are described in this proxy
statement/prospectus.
Common Stock. Sanmina's certificate of incorporation authorizes Sanmina to
issue up to 1,000,000,000 shares of common stock, $0.01 par value. As of
[ ], 2001, there were approximately [ ] shares of common stock issued
and outstanding, held by [ ] stockholders of record.
The holders of Sanmina common stock are entitled to one vote per share on
all matters to be voted on by stockholders. Holders of common stock are entitled
to receive dividends declared by the board of directors, out of funds legally
available for the payment of dividends, subject to the rights of holders of
preferred stock. Currently, Sanmina is not paying a dividend. Upon any
liquidation, dissolution or winding up of our business, the holders of common
stock are entitled to share equally in all assets available for distribution
after payment of all liabilities and provision for liquidation preference of
shares of preferred stock then outstanding. The holders of common stock have no
preemptive rights and no rights to convert their common stock into any other
securities. There are also no redemption or sinking fund provisions applicable
to Sanmina common stock. All outstanding shares are fully paid and
non-assessable.
Sanmina common stock does not have cumulative voting rights. As a result,
the holders of more than 50% of the shares of common stock voting for the
election of directors can elect all the directors if they choose to do so, and,
in such event, the holders of the remaining shares of common stock will not be
able to elect any person or persons to the board of directors. Under Delaware
law, unless otherwise provided in the certificate of incorporation, any action
which may be taken at a meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing
setting forth the action to be taken are signed by the holders of common stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
were present and voted. Sanmina's bylaws provide that, upon receipt of written
notice from a stockholder wishing stockholder action to be taken by written
consent, the board of directors has ten days to set a record date for such
action and may set the record date to be up to ten days following the expiration
of such period. Sanmina's bylaws also provide that stockholders wishing to
nominate directors or present proposals at Sanmina's annual meeting of
stockholders must comply with certain notice requirements, including, among
other things, timely delivery of written notice thereof not less than forty-five
days nor more than seventy-five days prior to the first anniversary of the date
on which Sanmina first mailed its proxy materials for the preceding year's
annual meeting of stockholders, subject to certain exceptions. These provisions
could in certain circumstances have the effect of delaying, deferring, or
preventing extraordinary corporate transactions such as a merger,
reorganization, sale of substantially all of Sanmina's assets, or liquidation.
Preferred Stock. Sanmina's certificate of incorporation authorizes Sanmina
to issue up to 5,000,000 shares of preferred stock, $0.01 par value. As of
[ ], 2001, there were no shares of preferred stock issued and outstanding.
At present, Sanmina has no plans to issue any shares of preferred stock.
The board of directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series and to fix the rights, qualifications, preferences, privileges,
limitations and restrictions of each such series, including the dividend rights,
dividend rate or rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or the designations
of such series, without any further vote or action by the stockholders. Thus,
any series may, if so determined by Sanmina's board of directors, have
disproportionately high voting rights or class voting rights, be convertible
into or exchangeable for Sanmina common stock or another security of Sanmina, be
redeemable, carry the right to specified participating dividends (which may be
fixed or adjustable and which may be cumulative) and have such other relative
rights, preferences and limitations as the board of directors shall determine.
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Issuance of authorized but unissued shares of Sanmina common stock or preferred
stock (including issuance upon conversion of any convertible preferred stock)
could cause a dilution of the book value of Sanmina common stock and (in the
case of Sanmina common stock and preferred stock with voting rights) would
dilute the voting power of the then current stockholders. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Sanmina without further action by the stockholders, may
discourage bids for Sanmina common stock at a premium over the market price of
Sanmina common stock and may adversely affect the market price of Sanmina common
stock.
In connection with Sanmina's preferred stock rights agreement, 1,000,000
shares of preferred stock have been designated series A participating preferred
stock. No shares of the series A participating preferred stock have been issued
or are issuable until the occurrence of certain triggering events. See
"-- Preferred Stock Purchase Rights."
PREFERRED STOCK PURCHASE RIGHTS
In May 2001, Sanmina's board of directors adopted a preferred stock rights
agreement. Pursuant to the rights agreement, Sanmina declared a dividend of one
right for each outstanding share of Sanmina common stock and each share of
Sanmina common stock issued thereafter. Initially, each right entitles the
holder thereof to purchase from Sanmina one one-thousandth share of Sanmina
series A participating preferred stock at an exercise price of $200.00, subject
to adjustment for stock splits, stock dividends and similar events. The rights
are not exercisable until the occurrence of certain triggering events.
In the event that a person obtains 15% or more of Sanmina's common stock,
each right becomes exercisable for shares of Sanmina common stock (or, in
certain circumstances as determined by the Sanmina board of directors, a
combination of cash, property, common stock or other securities) having a value
of twice the right's purchase price. Alternatively, in the event that, after an
acquiring person obtains 15% or more of Sanmina's common stock, Sanmina is
involved in a merger or other business combination transaction or a sale of 50%
or more of Sanmina's assets or earning power, each right becomes exercisable for
shares of common stock of such acquiring company having a value of twice the
right's purchase price. The rights are redeemable up to five days following such
acquisition, subject to extension by Sanmina's board of directors, at a price of
$0.001 per right. The rights plan expires in June 2011 unless Sanmina redeems
the rights earlier.
Pursuant to the rights agreement, Sanmina's board of directors designated
1,000,000 shares of series A participating preferred stock, and reserved those
shares for issuance under the rights agreement. Each one one-thousandth of a
share of series A participating preferred stock purchasable upon exercise of the
rights has rights and preferences substantially equivalent to those of one
common share.
The rights are designed to protect Sanmina stockholders in the event of an
unsolicited attempt by an acquirer to take over Sanmina in a manner or on terms
not approved by the board of directors. The rights are not intended to prevent a
takeover of Sanmina and will not do so. Subject to the restrictions described
above, the rights may be redeemed by Sanmina. Accordingly, the rights should not
interfere with any merger or business combination approved by Sanmina's board of
directors.
CHANGE OF CONTROL PROVISIONS
Certain provisions of Sanmina's certificate of incorporation and bylaws may
have the effect of preventing, discouraging or delaying any change of control of
Sanmina. The authorization of undesignated preferred stock makes it possible for
the Sanmina board of directors to issue preferred stock with voting or other
rights or preferences that could impede the success of any attempt to change
control of Sanmina. There are also a substantial number of authorized but
unissued shares of Sanmina common stock that could be issued for such purpose.
See "COMPARISON OF RIGHTS OF HOLDERS OF SCI COMMON STOCK AND SANMINA COMMON
STOCK -- Anti-Takeover Provisions; Restrictions on Certain Business
Combinations."
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TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Sanmina's common stock is Wells Fargo
Bank Minnesota, National Association. Its address is 161 North Concord Exchange,
South St. Paul, Minnesota 55075-0738 and its telephone number is (800) 468-9716.
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COMPARISON OF RIGHTS OF
HOLDERS OF SANMINA COMMON STOCK AND SCI COMMON STOCK
GENERAL
SCI stockholders will automatically become Sanmina stockholders at the
effective time. As stockholders of Sanmina, their rights will be determined by
Sanmina's certificate of incorporation, Sanmina's bylaws and Delaware law. The
following is a summary of the material differences in the rights of holders of
Sanmina common stock and SCI common stock. This summary is necessarily general
and is not a complete discussion of, and is qualified by, the more detailed
provisions of Delaware law, SCI's certificate of incorporation and bylaws, and
Sanmina's certificate of incorporation and bylaws.
AUTHORIZED CAPITAL
Sanmina. Sanmina is authorized to issue 1,000,000,000 shares of common
stock, par value of $0.01 per share, and 5,000,000 shares of preferred stock,
par value of $0.01 per share. As of the Sanmina record date, [ ], 2001,
[ ] shares of Sanmina common stock were issued and outstanding and no shares
of Sanmina preferred stock were issued or outstanding.
SCI. SCI is authorized to issue 500,000,000 shares of common stock, par
value of $0.10 per share, and 500,000 shares of preferred stock without par
value. As of the SCI record date, [ ], 2001, [ ] shares of SCI common
stock were issued and outstanding and no shares of SCI preferred stock were
issued or outstanding.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Sanmina. Delaware law generally requires that an amendment to a Delaware
corporation's certificate of incorporation requires the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. Furthermore, under
Delaware law, the holders of the outstanding shares of a class are entitled to
vote as a class upon any proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the provisions of the corporation's
certificate of incorporation, if the amendment would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences or specific rights of the shares of such class so as to adversely
affect them. Sanmina's certificate of incorporation does not alter these voting
requirements of Delaware law.
Delaware law permits a corporation's board of directors to amend its bylaws
without further approval by the stockholders if so provided in the company's
certificate of incorporation. Sanmina's certificate of incorporation provides
that the board of directors may amend the bylaws without stockholder consent.
Sanmina's bylaws provide that the vote of a majority of the outstanding shares
of common stock of Sanmina entitled to vote at an election of directors may also
amend the bylaws.
SCI. Generally, an amendment to SCI's certificate of incorporation
requires the affirmative vote of a majority of the outstanding stock entitled to
vote. To amend certain provisions of SCI's certificate of incorporation, the
affirmative vote of at least 70% of the shares entitled to vote is required,
unless the amendment is recommended by not less than two-thirds of the board of
directors.
SCI's certificate of incorporation allows the board of directors to amend
the bylaws without stockholder approval.
NOTICE OF MEETINGS OF STOCKHOLDERS
Sanmina and SCI. The bylaws of Sanmina and SCI each provide that each
company must notify its stockholders between 10 and 60 days before any annual or
special meeting of the date, time and place of the meeting. In the case of a
special meeting, the companies must specify the purpose or purposes of the
meeting. In addition, Delaware law requires the notice to include the method of
remote communication, if any, by which stockholders and proxy holders may be
deemed to be present in person and vote at such meeting.
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SPECIAL MEETINGS OF STOCKHOLDERS
Sanmina. The board of directors, chairman of the board of directors,
president or secretary of Sanmina may call a special meeting of the stockholders
at any time. In addition, if Sanmina should have no directors in office, then
any stockholder or officer of Sanmina may call a special meeting of the
stockholders. Written notice of such meeting must be delivered to the president
or secretary of Sanmina and no business may be conducted at the special meeting
other than specified in such notice.
SCI. A special meeting of the stockholders of SCI may be called by the
affirmative vote of two-thirds of the board of directors, the chairman of the
board of directors or by the holders of 70% of the outstanding stock of SCI,
stating the specific purpose for the meeting.
STOCKHOLDER PROXIES
Sanmina. The Sanmina bylaws require stockholder proxies to be filed with
the secretary of Sanmina prior to any shareholder meeting, and provide that
proxies are not effective after three years unless expressly stated otherwise.
SCI. The SCI bylaws do not restrict the use of proxies in any manner.
STOCKHOLDER PROPOSALS; ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Sanmina. Sanmina's bylaws allow any stockholder to nominate candidates for
election to Sanmina's board of directors at the annual meeting, or at special
meetings called for electing directors. Sanmina stockholders may also propose
business to be brought before an annual stockholder meeting. A stockholder who
seeks to nominate a candidate or make a proposal must give timely written notice
to the secretary of Sanmina before the stockholder meeting, and must have been a
stockholder of record on the date notice of the stockholder meeting was given
and entitled to vote at such meeting. Notice by a Sanmina stockholder is timely
if it is delivered to the secretary of Sanmina not less than 45 days nor more
than 75 days prior to the first anniversary of the date Sanmina mailed its proxy
materials for the previous year's annual meeting.
A stockholder's notice to Sanmina for nominations or other business to be
properly brought before the annual meeting must include the name and address of
the stockholder and the beneficial owner, if any, as they appear on Sanmina's
books and the class and number of shares of Sanmina which are owned by the
stockholder. The notice must also state whether such stockholder or beneficial
owner intends to deliver a proxy statement or proxies sufficient to elect the
nominated director or pass the proposal. A stockholder's notice for proposed
business must also include a brief description of the business the stockholder
proposes to bring before the meeting, the reasons for conducting that business
at that meeting and any material interest of the stockholder in the business
proposed and the beneficial owner, if any, on whose behalf the proposal is made.
SCI. SCI's bylaws do not provide for specific stockholder notice
provisions to nominate candidates for election to SCI's board of directors or to
propose business to be brought before an annual or special stockholder meeting.
ELECTION OF DIRECTORS
Sanmina and SCI. Neither Sanmina's nor SCI's certificate of incorporation
provides for cumulative voting of directors. Each SCI stockholder is entitled to
one vote for each share of SCI stock he or she holds in the election of
directors, and each Sanmina stockholder is entitled to one vote for each share
of Sanmina stock he or she holds in the election of directors.
NUMBER OF DIRECTORS
Sanmina. The number of directors is presently fixed at 7 under Sanmina's
bylaws. The number of directors may be changed by an amendment to the bylaws
adopted by the board of directors or stockholders. Directors are elected at each
annual meeting of stockholders and serve until a successor is elected at the
next
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annual meeting. Sanmina's board of directors will amend Sanmina's bylaws to
increase the number of directors from 7 to 10 effective upon the consummation of
the merger.
SCI. SCI's bylaws provide for a number of directors between 3 and 11, with
the exact number to be fixed and determined from time to time by resolution of a
majority of the board of directors.
REMOVAL OF DIRECTORS
Sanmina. Sanmina's bylaws provide that any director may be removed, with
or without cause, at any time by vote of the holders of a majority of the
outstanding shares of common stock entitled to vote at an election of directors,
or by written consent of the stockholders as provided in Sanmina's bylaws.
SCI. SCI's bylaws provide that at any stockholder meeting called expressly
for such purpose, any or all directors may be removed from office with or
without cause by the affirmative vote of the holders of a majority of the shares
entitled to vote at an election of directors.
BOARD OF DIRECTOR VACANCIES
Sanmina. Under Delaware law, vacancies and newly created directorships may
be filled by a majority of the directors in office, even though less than a
quorum, unless otherwise provided in the certificate of incorporation or bylaws.
The Sanmina bylaws provide that vacancies on the board of directors may only be
filled by the vote of the majority of directors then in office, including, in
the case of any vacancy created by resignation which is to be effective at a
future date, those directors who have so resigned. The Sanmina bylaws also
provide that vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors that are in office, although less than a quorum, or by a sole
remaining director.
SCI. Neither the bylaws nor the certificate of incorporation of SCI limits
or expands upon the Delaware law regarding this issue.
BLANK CHECK PREFERRED STOCK
Sanmina. Sanmina's certificate of incorporation authorizes its board of
directors to issue shares of preferred stock in one or more series and to fix
the designations, preferences, powers and rights of the shares to be included in
each series. Sanmina certificate of incorporation authorizes the issuance of
5,000,000 shares of preferred stock, of which 1,000,000 shares have been
designated series A participating preferred stock in connection with its
preferred stock rights agreement.
SCI. SCI's certificate of incorporation further provides, in the event of
a settlement, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the corporation is advised by its
counsel that the person to be indemnified did not commit a breach of duty to the
corporation.
ANTI-TAKEOVER PROVISIONS; RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS
Sanmina and SCI. According to Delaware law, a company will be subject to
Section 203 of the Delaware General Corporation Law, an anti-takeover law,
unless it elects to opt out by including an express provision to that effect in
its bylaws. Neither Sanmina nor SCI has elected to opt-out of Section 203 and as
a result, are subject to its protection. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless:
- prior to the date of the transaction, the board of directors of the
corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder;
- the stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding (a) shares owned by
persons who are directors and also officers, and (b) shares owned by
employee
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stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
- on or subsequent to the date of the transaction, the business combination
is approved by the board and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns or, within three years prior to the
determination of interested stockholder status, did own 15% or more of a
corporation's outstanding voting securities.
Both Sanmina and SCI have determined that the contemplated transaction for
which this proxy statement is being disseminated is not a business combination
within the meaning of Section 203 of the Delaware General Corporation Law.
SCI. SCI has an additional provision in its certificate of incorporation
requiring approval by the holders of at least 70% of the outstanding stock
entitled to vote before it is able to engage in a business combination with an
interested stockholder. Such a business combination does not require a 70%
approval, however, if it is approved by two-thirds of its Continuing Directors
(as defined in SCI's certificate of incorporation) and certain fair price
requirements are met with respect to the consideration offered in the business
combination. SCI has determined that the contemplated transaction for which this
proxy statement is being disseminated does not qualify as a business combination
under the terms of its certificate incorporation.
STOCKHOLDERS RIGHTS AGREEMENTS
Sanmina. On May 17, 2001, the Sanmina board adopted a preferred stock
rights agreement, under which rights to purchase one one-thousandth share of
series A participating preferred stock at an exercise price of $200.00 were
distributed to holders of common stock at the rate of one right for each share
of common stock held as of the close of business on June 15, 2001. The Sanmina
rights agreement is designed to protect Sanmina stockholders in the event of an
unsolicited attempt by an acquirer to obtain control over Sanmina without
offering a fair price to all of Sanmina's stockholders. The Sanmina rights
agreement was not adopted in response to any specific takeover attempt and will
not prevent a takeover of Sanmina that is approved by the board of directors.
SCI. On December 20, 2000 the SCI board adopted a rights agreement, under
which rights to purchase one share of common stock at a price of $240.00 per
share were distributed to holders of common stock at the rate of one right for
each share of common stock held as of the close of business on January 1, 2001.
The SCI rights agreement was adopted as part of a continuing program by SCI's
board of directors to allow the board of directors to respond in an orderly
fashion to any unsolicited activity that may occur which, in the judgment of the
board of directors, is inadequate or unfair to SCI's stockholders. The SCI board
of directors has amended the rights agreement to make it inapplicable to the
merger.
LIMITATION ON DIRECTOR LIABILITY; INDEMNIFICATION
Sanmina. Sanmina's certificate of incorporation provides that no director
shall be personally liable to Sanmina or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for:
- any breach of the director's duty of loyalty to Sanmina or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
- authorizing the payment of a dividend or repurchase of stock; or
- any transaction from which the director derived an improper personal
benefit.
The limitation of liability provided herein shall continue after a director
has ceased to occupy such position as to acts or omissions occurring during such
director's term or terms of office.
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SCI. SCI's certificate of incorporation provides that it shall indemnify
every director and officer, his heirs, executors and administrators, against
expenses reasonably incurred in connection with any action, suit or proceeding
by reason of being or having been an officer of the corporation, except in
relation to matters as to which he shall be finally adjudged in such action suit
or proceeding to have been liable thereunder by reason of negligence or
misconduct.
SCI's certificate of incorporation further provides, in the event of a
settlement, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the corporation is advised by its
counsel that the person to be indemnified did not commit a breach of duty to the
corporation.
ACTIONS BY WRITTEN CONSENT OF STOCKHOLDERS
Sanmina. Pursuant to Sanmina's bylaws, stockholders may execute an action,
without prior notice and without a vote, by written consent in lieu of a meeting
of the stockholders. Such written consent will be effective if signed by
stockholders representing the number of voting shares outstanding as would have
been required to approve such action at an actual meeting of the stockholders.
If, however, the written consent is not unanimous, prompt notice of the action
must be provided to non-consenting stockholders. The stockholders seeking to act
by written consent must first request that the board of directors set a record
date to determine the number of shares required to approve the action.
SCI. SCI's certificate of incorporation provides that any action required
or permitted to be taken at a meeting of the stockholders of the corporation may
be taken without a meeting if written consent, setting forth the action to be
taken, shall be signed by stockholders holding not less than 70% of SCI's
outstanding stock entitled to vote on the matter.
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
Sanmina and SCI. Delaware law requires a corporation to prepare at least
10 days before every meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Delaware law requires such list to be open to the examination
of any stockholder, for any purpose germane to the meeting for a period of time
at least 10 days prior to the meeting.
Neither the bylaws nor the certificate of incorporation of either Sanmina
or SCI limits or expands upon these rights.
DISSENTERS' APPRAISAL RIGHTS
Sanmina and SCI. Generally, stockholders of a Delaware corporation who
dissent from a merger or consolidation of the corporation for which a
stockholders' vote is required are entitled to appraisal rights, requiring the
surviving corporation to purchase the dissenting shares at fair value. There
are, however, generally no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock are either: (a)
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc.; or (b) held of record by more than 2,000
stockholders where such stockholders receive only shares of stock of the
corporation surviving or resulting from the merger or consolidation (or cash in
lieu of fractional interests therein).
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OTHER PROPOSALS TO BE CONSIDERED AT THE SANMINA SPECIAL MEETING
AMENDMENT OF SANMINA'S RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE SANMINA'S CORPORATE NAME TO [ ]
Sanmina's board of directors has approved an amendment to Article 1 of
Sanmina's Restated Certificate of Incorporation to change the corporate name of
Sanmina Corporation to [ ] effective upon the consummation of the merger.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of Sanmina's outstanding
shares of common stock entitled to vote will be required to approve this
proposal.
THE BOARD OF DIRECTORS, EXCLUDING JOSEPH M. SCHELL WHO ABSTAINED FROM
VOTING DUE TO HIS RELATIONSHIP WITH MERRILL LYNCH, HAS UNANIMOUSLY APPROVED THIS
PROPOSAL AND RECOMMENDS THE STOCKHOLDERS VOTE "FOR" THE AMENDMENT OF SANMINA'S
RESTATED CERTIFICATE OF INCORPORATION TO CHANGE SANMINA'S CORPORATE NAME TO
[ ] EFFECTIVE UPON THE CONSUMMATION OF THE MERGER.
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OTHER PROPOSALS
As a Sanmina stockholder, you are entitled to present proposals for action
at a forthcoming meeting if they comply with the requirements of the proxy rules
established by the Securities and Exchange Commission. If you intend to present
a proposal or nominate a director at Sanmina's next annual meeting of
stockholders, the proposal or nomination must be received by Sanmina no later
than [ ], 2001 in order that the proposals or nomination be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
The deadline for providing timely notice to Sanmina of matters that stockholders
otherwise desire to introduce at the annual meeting of stockholders of Sanmina
in 2002 is [ ], 2001.
LEGAL MATTERS
The validity of the shares of Sanmina common stock offered by this joint
proxy statement/prospectus will be passed upon for Sanmina by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California. Mario M.
Rosati, a director of Sanmina, and Christopher D. Mitchell, secretary of
Sanmina, are members of Wilson Sonsini Goodrich & Rosati. As of the date of this
joint proxy statement/prospectus, investment partnerships composed of
individuals associated with Wilson Sonsini Goodrich & Rosati, and attorneys who
are members of or are employed by Wilson Sonsini Goodrich & Rosati beneficially
own an aggregate of 23,075 shares of Sanmina Common Stock.
Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia will pass upon
certain legal matters for SCI.
EXPERTS
The consolidated financial statements of Sanmina as of September 30, 2000
and October 2, 1999 and for each of the years in the three year period ended
September 30, 2000 which are incorporated by reference in the joint proxy
statement/prospectus and the registration statement of which it forms a part,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto included in Sanmina's Current
Report on Form 8-K filed May 14, 2001 and are incorporated by reference herein
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of SCI Systems, Inc., as of June 30,
1999 and 2000 and for each of the three years in the period ended June 30, 2000,
incorporated by reference in this joint proxy statement/prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon which is included in SCI's Annual Report on Form 10-K for the year ended
June 30, 2000. The financial statements audited by Ernst & Young LLP have been
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
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ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SANMINA CORPORATION
SUN ACQUISITION SUBSIDIARY, INC.
AND
SCI SYSTEMS, INC.
DATED AS OF JULY 13, 2001
A-1
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TABLE OF CONTENTS
PAGE
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ARTICLE I MERGER..................................................... A-5
1.1 The Merger.................................................. A-5
1.2 Effective Time; Closing..................................... A-6
1.3 Effect of the Merger........................................ A-6
1.4 Certificate of Incorporation; Bylaws........................ A-6
1.5 Directors and Officers...................................... A-6
1.6 Effect on Capital Stock..................................... A-6
1.7 Surrender of Certificates................................... A-7
1.8 No Further Ownership Rights in Company Common Stock......... A-8
1.9 Lost, Stolen or Destroyed Certificates...................... A-8
1.10 Tax Consequences............................................ A-9
1.11 Taking of Necessary Action; Further Action.................. A-9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................. A-9
2.1 Organization and Qualification; Subsidiaries................ A-9
2.2 Certificates of Incorporation and Bylaws.................... A-10
2.3 Capitalization.............................................. A-10
2.4 Authority Relative to this Agreement........................ A-12
2.5 No Conflict; Required Filings and Consents.................. A-12
2.6 Compliance; Permits; Restrictions........................... A-13
2.7 SEC Filings; Company Financial Statements................... A-13
2.8 No Undisclosed Liabilities.................................. A-13
2.9 Absence of Certain Changes or Events........................ A-14
2.10 Absence of Litigation....................................... A-14
2.11 Environmental Matters....................................... A-14
2.12 Employee Matters and Benefit Plans.......................... A-15
2.13 S-4; Proxy Statements....................................... A-19
2.14 Restrictions on Business Activities......................... A-19
2.15 Title to Property; Condition of Equipment................... A-19
2.16 Taxes....................................................... A-20
2.17 Brokers..................................................... A-21
2.18 Intellectual Property....................................... A-21
2.19 Agreements, Contracts and Commitments....................... A-22
2.20 Insurance................................................... A-22
2.21 Opinion of Financial Advisor................................ A-22
2.22 Board Approval.............................................. A-22
2.23 Vote Required............................................... A-23
2.24 No Ownership of Parent Common Stock......................... A-23
2.25 State Takeover Statutes..................................... A-23
2.26 Product Warranty............................................ A-23
2.27 Inventory................................................... A-23
2.28 Questionable Payments....................................... A-23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB................................................................ A-24
3.1 Organization and Qualification; Subsidiaries................ A-24
3.2 Certificates of Incorporation and Bylaws.................... A-24
3.3 Capitalization.............................................. A-25
3.4 Authority Relative to this Agreement........................ A-26
3.5 No Conflict................................................. A-26
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3.6 Compliance; Permits; Restrictions........................... A-27
3.7 SEC Filings; Financial Statements........................... A-27
3.8 No Undisclosed Liabilities.................................. A-28
3.9 Absence of Certain Changes or Events........................ A-28
3.10 Absence of Litigation....................................... A-28
3.11 Environmental Matters....................................... A-28
3.12 Employee Matters and Benefit Plans.......................... A-29
3.13 S-4; Joint Proxy Statement/Prospectus....................... A-30
3.14 Restrictions on Business Activities......................... A-31
3.15 Title to Property; Condition of Equipment................... A-31
3.16 Taxes....................................................... A-31
3.17 Brokers..................................................... A-33
3.18 Parent Intellectual Property................................ A-33
3.19 Agreements, Contracts and Commitments....................... A-33
3.20 Insurance................................................... A-34
3.21 Opinion of Financial Advisor................................ A-34
3.22 Board Approval.............................................. A-34
3.23 Vote Required............................................... A-34
3.24 No Ownership of Company Common Stock........................ A-34
3.25 State Takeover Statutes..................................... A-34
3.26 Product Warranty............................................ A-34
3.27 Inventory................................................... A-34
3.28 Questionable Payments....................................... A-35
3.29 Interim Operations of Merger Sub............................ A-35
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME....................... A-35
4.1 Conduct of Business......................................... A-35
4.2 Conduct Affecting the Status of the Reorganization.......... A-37
4.3 Parent Name................................................. A-37
ARTICLE V ADDITIONAL AGREEMENTS...................................... A-37
5.1 Joint Proxy Statement/Prospectus; S-4; Other Filings........ A-37
5.2 Meetings of Company Stockholders and Parent Stockholders.... A-38
5.3 Non-Disclosure; Access to Information....................... A-40
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5.4 No Solicitation............................................. A-40
5.5 Public Disclosure........................................... A-42
5.6 Reasonable Efforts; Notification............................ A-42
5.7 Third Party Consents........................................ A-43
5.8 Stock Options and Company ESPP.............................. A-43
5.9 Form S-8.................................................... A-44
5.10 Indemnification............................................. A-44
5.11 NASDAQ Listing.............................................. A-44
5.12 Company Affiliate Restrictions.............................. A-44
5.13 Regulatory Filings; Reasonable Efforts...................... A-45
5.14 Company Representatives on Parent Board of Directors........ A-45
5.15 Rights Agreements........................................... A-45
ARTICLE VI CONDITIONS TO THE MERGER.................................. A-46
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... A-46
6.2 Additional Conditions to Obligations of Company............. A-46
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub.................................................. A-47
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................ A-47
7.1 Termination................................................. A-47
7.2 Notice of Termination; Effect of Termination................ A-49
7.3 Fees and Expenses........................................... A-49
7.4 Amendment................................................... A-50
7.5 Extension; Waiver........................................... A-50
ARTICLE VIII GENERAL PROVISIONS...................................... A-50
8.1 Non-Survival of Representations and Warranties.............. A-50
8.2 Notices..................................................... A-51
8.3 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-52
8.8 Governing Law............................................... A-53
8.9 Rules of Construction....................................... A-53
8.10 Assignment.................................................. A-53
INDEX OF EXHIBITS
Exhibit A-1.....................................Form of Company Voting Agreement
Exhibit A-2......................................Form of Parent Voting Agreement
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (the
"AGREEMENT") is made and entered into as of July 13, 2001, among Sanmina
Corporation, a Delaware corporation ("PARENT"), Sun Acquisition Subsidiary,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER
SUB") and SCI Systems, Inc., a Delaware corporation ("COMPANY").
RECITALS
A. Whereas, the Board of Directors of each of Parent, Merger Sub and
Company have determined that it is in the best interests of each corporation and
their respective stockholders that the Company and Parent enter into a strategic
business combination transaction by means of the merger of Merger Sub with and
into the Company (the "MERGER") and, in furtherance thereof, have approved the
Merger and declared the Merger advisable;
B. Whereas, pursuant to the Merger, the outstanding shares of common stock
of Company will be converted into shares of common stock of Parent at the rate
set forth herein; and
C. Whereas, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization within the meaning of Section 368 (a) of the
Internal Revenue Code of 1986, as amended (the "CODE"); and
D. Whereas, concurrently with the execution of this Agreement, and as an
inducement to Parent's and Company's willingness to enter into this Agreement,
(i) certain affiliates of Company are entering into Voting Agreements in
substantially the form attached hereto as Exhibit A-1 (the "COMPANY VOTING
AGREEMENTS") and (ii) certain affiliates of Parent are entering into Voting
Agreements substantially the form attached hereto as Exhibit A-2 (the "PARENT
VOTING Agreements").
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 agree
as follows:
ARTICLE I
MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and
into Company (the "MERGER"), the separate corporate existence of Merger Sub
shall cease and Company shall continue as the surviving corporation (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 the Certificate of Merger (the "CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware in accordance with the relevant
provisions of the Delaware General Corporation Law (the "DGCL" or "DELAWARE
LAW") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger)
being the "EFFECTIVE TIME") as soon as practicable on or after the Closing
Date (as hereinafter defined). Unless the context otherwise requires, the
term "AGREEMENT" as used herein refers collectively to this Agreement and
Plan of Reorganization and the Certificate of Merger. The closing of the
Merger (the "CLOSING") shall take place at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California, at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver
of the conditions set forth in Article VI, or at such other time, date and
location as the parties hereto agree in writing (the "CLOSING DATE").
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1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers
and franchises of 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; Bylaws. At the Effective Time, the
Certificate of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation of the Surviving Corporation; provided,
however, that at the Effective Time the Certificate of Incorporation of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be "Sun, Inc." The Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be, at the Effective Time,
the Bylaws of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation immediately following the Effective Time shall be the directors
of Merger Sub, until their respective successors are duly elected or
appointed and qualified. The initial officers of the Surviving Corporation
shall be the officers of Company immediately prior to the Effective Time,
until their respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Common
Stock, $0.10 par value per share, of Company (the "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(b), will be canceled and extinguished and automatically
converted (subject to Section 1.6(f)) into the right to receive 1.36
(the "EXCHANGE RATIO") validly issued, fully paid and nonassessable
shares of Common Stock, $0.01 par value per share, of Parent (the
"PARENT COMMON STOCK") upon surrender of the certificate representing
such share of Company Common Stock in the manner provided in Section 1.7
(or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided
in Section 1.9). 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 under any
applicable restricted stock purchase agreement or other agreement with
the Company, then the shares of Parent Common Stock issued in exchange
for such shares of Company Common Stock will also be unvested and/or
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends. Company
shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(b) Cancellation of Parent-Owned and Company-Held Stock. Each
share of Company Common Stock held by Company or owned by Merger Sub,
Parent or any direct or indirect wholly owned subsidiary of Company or
of Parent immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective
Time, all options to purchase Company Common Stock then outstanding
under Company's 1994 Stock Incentive Plan, 2000 Stock Incentive Plan and
Directors Deferred Compensation Plan (collectively, the "COMPANY STOCK
OPTION PLANS") shall be assumed by Parent in accordance with Section 5.8
hereof. Rights outstanding under Company's Employee Stock Purchase Plan
shall be treated as set forth in Section 5.8.
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(d) Capital Stock of Merger Sub. Each share of Common Stock,
$0.001 par value 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, $0.001 par value per share, of the Surviving
Corporation. Each certificate evidencing ownership of shares of Merger
Sub Common Stock shall evidence ownership of such shares of capital
stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common
Stock), reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock
occurring on or after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each
holder of shares of Company Common Stock who would otherwise be entitled
to a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock that otherwise would be
received by such holder) shall receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product obtained by
multiplying (i) such fraction, by (ii) the average of the closing price
of Parent Common Stock on the Nasdaq National Market ("NASDAQ") for the
five trading days immediately preceding the trading day on which the
Effective Time occurs.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall designate Wells Fargo Shareowner
Services, the transfer agent for Parent's Common Stock, to act as the
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of Parent Common Stock
issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock, and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(f) and any dividends
or distributions to which holders of shares of Company Common Stock may
be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly 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 shares of Parent Common Stock
pursuant to Section 1.6, 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 in customary form (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 containing such other provisions
as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock, 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, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions
thereto, the holders of such Certificates shall be entitled to receive
in exchange therefor certificates representing the number of whole
shares of Parent Common Stock that such holder has a right to receive
pursuant to Section 1.6(a), payment in lieu of fractional shares which
such holders have 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
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corporate purposes, subject to Section 1.7(d) as to the payment of
dividends or other distributions, to evidence only the right to receive
the number of full shares of Parent Common Stock issuable in exchange
for such shares of Company Common Stock pursuant to Section 1.6(a) 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).
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement
with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered
Certificates with respect to the shares of Parent Common Stock issuable
in exchange therefor 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, certificates representing
the number of whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to
Section 1.6(f) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing shares of
Parent Common Stock 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 certificates representing shares
of Parent Common Stock 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, Parent, 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 requirement. To the extent such amounts
are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person to whom
such amounts would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares
of Parent Common Stock or Company Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued 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 been issued and paid in full satisfaction
of all rights pertaining to such shares of Company Common Stock. At the
Effective Time: (i) all shares of Company Common Stock outstanding
immediately prior to the Effective Time shall automatically be cancelled
and retired and cease to exist, and all holders of Certificates
representing shares of Company Common Stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of Company other than the rights expressly provided in this
Agreement and (ii) 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 that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
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Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing the shares of Parent Common Stock into
which the shares of Company Common Stock represented by such Certificates
were converted pursuant to Section 1.6, 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 discretion and as a condition precedent to the issuance
of such certificates representing shares of Parent Common Stock, cash and
other distributions, 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 Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged
to have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368
of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Company and Merger Sub, the
officers and directors of Surviving Corporation and Parent, acting for and
on behalf of the Company and Merger Sub, shall be fully authorized to take
all such lawful and necessary action. Parent shall cause Merger Sub to
perform all of its obligations relating to this Agreement and the
transactions contemplated thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to such
exceptions as are specifically disclosed in writing in the disclosure letter
delivered by Company to Parent on or prior to the date of this Agreement and
certified by a duly authorized officer of Company (the "COMPANY DISCLOSURE
SCHEDULE"), as follows (it being understood that disclosure in one instance is
sufficient for all purposes if the context thereof is reasonably evident and it
being understood that disclosure of an item is not to be construed as an
admission of any fact):
2.1 Organization and Qualification; Subsidiaries.
(a) Each of Company, its domestic subsidiaries and its foreign
subsidiaries incorporated under the laws of Canada or Mexico (the
"COMPANY DESIGNATED FOREIGN SUBSIDIARIES") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Company has
delivered to Parent a complete and correct list of all of Company's
direct and indirect subsidiaries as of the date of this Agreement,
indicating the jurisdiction of organization of each subsidiary and
Company's equity interest therein. Each of Company, its domestic
subsidiaries and each of the Company Designated Foreign Subsidiaries is
in possession of all franchises, grants, authorizations, licenses,
permits, consents, certificates, approvals, variances, exemptions and
orders ("APPROVALS") necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business and
the business of its subsidiaries as it is now being conducted, except
where the failure to have such Approvals would not, individually or in
the aggregate, have a Material Adverse Effect on Company. Each of
Company, its domestic subsidiaries and each of the Company Designated
Foreign Subsidiaries is in compliance with the terms of the Approvals
and is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed
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and in good standing that would not, either individually or in the
aggregate, have a Material Adverse Effect on Company. Other than wholly
owned subsidiaries, Company does not directly or indirectly own any
material equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business, association
or entity.
(b) Each of the foreign subsidiaries of Company that are
incorporated under the laws of countries other than Canada or Mexico
(the "COMPANY OTHER FOREIGN SUBSIDIARIES") is, to the Company's
knowledge, a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now
being conducted. Each of the Company Other Foreign Subsidiaries is, to
the Company's knowledge, is in possession of all Approvals necessary to
own, lease and operate the properties it purports to own, operate or
lease and to carry on its business and the business of its subsidiaries
as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material
Adverse Effect (as defined in Section 8.3(b)) on Company. Each of the
Company Other Foreign Subsidiaries is, to the Company's knowledge, in
compliance with the terms of the Approvals and is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to
be so duly qualified or licensed and in good standing that would not,
either individually or in the aggregate, have a Material Adverse Effect
on Company.
2.2 Certificates of Incorporation and Bylaws. The Company has
previously furnished to Parent a complete and correct copy of the
Certificate of Incorporation and Bylaws of Company, as amended to date.
Such Certificate of Incorporation, Bylaws and equivalent organizational
documents of Company and each of its subsidiaries are in full force and
effect. Neither Company nor any of its subsidiaries is in violation of any
of the provisions of its respective Certificate of Incorporation or Bylaws
or equivalent organizational documents, except for any violation which
would not reasonably be expected to have a Material Adverse Effect on
Company.
2.3 Capitalization.
(a) The authorized capital stock of Company consists of 500,000,000
shares of Company Common Stock, $0.10 par value per share, and 500,000
shares of Preferred Stock, without par value ("COMPANY PREFERRED
STOCK"). At the close of business on June 30, 2001:
(i) 147,024,974 shares of Company Common Stock were issued and
outstanding;
(ii) 884,045 shares of Company Common Stock were held in
treasury by Company or by subsidiaries of Company;
(iii) 9,037,200 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding options to purchase Company
Common Stock under the Company Stock Option Plans;
(iv) 4,890,234 shares of Company Common Stock were available for
future grant under the Company Stock Option Plans;
(v) 500,000 shares of Company Common Stock were reserved for
issuance under the Company's United States and International Employee
(Stock Purchase Plans (collectively, the "COMPANY ESPP") in the
Purchase Period (as defined in the Company ESPP) ended June 30, 2001;
(vi) 500,000 shares of Company Common Stock were available for
future sale under the Company ESPP;
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(vii) 10,225,858 shares of Company Common Stock were reserved
for issuance upon conversion of Company's 3% Convertible Subordinated
Notes due 2007 (the "COMPANY CONVERTIBLE NOTES"); and
(viii) 146,990,574 shares of Company Common Stock reserved for
issuance upon exercise of the rights (the "COMPANY RIGHTS")
distributed to holders of Company Common Stock pursuant to the Rights
Agreement dated December 20, 2000 between Company and Mellon Investor
Services LLC, as Rights Agent, the "COMPANY RIGHTS AGREEMENT").
(b) As of the date hereof, no shares of Company Preferred Stock are
issued and outstanding.
(c) No change in such capitalization has occurred between June 30,
2001 and the date hereof except (x) the issuance of shares of Company
Common Stock pursuant to the exercise of outstanding options or warrants
or (y) the cancellation of unvested options for Common Stock held by, or
the repurchase of unvested shares of Common Stock from, directors,
employees, consultants or other service providers of Company pursuant to
the terms of their stock option, stock purchase or stock restriction
agreements. All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Company or any agreement or document to which
Company is a party or by which it is bound.
(d) Except as set forth in Section 2.3 of the Company Disclosure
Schedule, as of the date of this Agreement, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Company or
any of its subsidiaries that obligate Company or any of its subsidiaries
to issue or sell any shares of capital stock of, or other equity
interests in, Company or any of its subsidiaries or obligating Company
or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant or other right, agreement,
arrangement or commitment.
(e) All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and nonassessable.
(f) There are no obligations, contingent or otherwise, of Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire
any shares of Company Common Stock or the capital stock of any
subsidiary, except the repurchase of unvested shares of Company Common
Stock from directors, employees, consultants or other service providers
of Company pursuant to the terms of their stock option, stock purchase
or stock restriction agreements, or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in
any such subsidiary or any other entity.
(g) All of the outstanding shares of capital stock of each of
Company's domestic direct or indirect subsidiaries and Designated
Foreign Subsidiaries, and to Company's knowledge, of each of Company's
direct or indirect Other Foreign Subsidiaries, are duly authorized,
validly issued, fully paid and nonassessable and, except for de minimis
numbers of shares of certain foreign subsidiaries required to be held by
individuals to satisfy local law requirements (as indicated in the
Company Disclosure Schedule), all such shares are owned by Company or
another subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Company's voting rights,
charges or other encumbrances of any nature whatsoever.
(h) The Company Disclosure Schedule lists for each person who held
options or warrants to acquire shares of Company Common Stock as of June
30, 2001, the name of the holder of such option or warrant, the exercise
price of such option or warrant, the number of shares as to which such
option or warrant had vested as of June 30, 2001 for such option or
warrant and whether the exercisability of such option or warrant will be
accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of acceleration, if any.
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(i) Except as contemplated by this Agreement and the Company Rights
Agreement, there are no registration rights and no voting trusts,
proxies, shareholder rights plans, anti-takeover plans or other
agreements or understandings to which Company is a party or by which it
is bound with respect to any equity security of any class of Company or
with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
(j) The stockholders of Company will not be entitled to dissenters'
rights under the DGCL or any other applicable state law in connection
with the Merger.
2.4 Authority Relative to This Agreement. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, subject to obtaining the approval of
the stockholders of Company of this Agreement and the Merger, to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Company and the consummation by Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Company and no other corporate proceedings
on the part of Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to
the Merger, the approval and adoption of this Agreement and the approval of
the Merger by holders of a majority of the outstanding shares of Company
Common Stock in accordance with the DGCL and the Company's Certificate of
Incorporation and Bylaws (the "COMPANY STOCKHOLDER APPROVAL")). This
Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery by Parent and Merger
Sub, constitutes a legal and binding obligation of Company, enforceable
against Company in accordance with its terms.
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Company does
not, and the performance of this Agreement by Company will not, (i)
conflict with or violate the Certificate of Incorporation, Bylaws or
equivalent organizational documents of Company or any of its
subsidiaries, (ii) subject to obtaining the Company Stockholder Approval
and compliance with the requirements set forth in Section 2.5(b) below,
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Company or any of its subsidiaries or by which
Company or any of its subsidiaries or any of their respective properties
are bound or affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or impair Company's or any such subsidiaries'
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, or result in the creation of a lien or encumbrance on
any of the properties or assets of Company or any of its subsidiaries
pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Company or any of its subsidiaries is a party or by
which Company or any of its subsidiaries or its or any of their
respective properties are bound or affected. The Company Disclosure
Schedule lists all material consents, waivers and approvals under any of
Company's or any of its subsidiaries' material agreements, contracts,
licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by Company does
not, and the performance of this Agreement by Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a
"GOVERNMENTAL ENTITY"), except (A) for applicable requirements, if any,
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state
securities laws ("BLUE SKY LAWS"), the pre-merger notification
requirements (the "HSR APPROVAL") of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") and of foreign
Governmental Entities and the rules and regulations thereunder, the
rules and regulations of the New York Stock Exchange ("NYSE"), and the
filing of the Certificate of Merger as required by the
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DGCL and (B) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not prevent consummation of the Merger or otherwise impair
Company's ability to timely perform its obligations under this
Agreement.
2.6 Compliance; Permits; Restrictions. Neither Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any
law, rule, regulation, order, judgment or decree applicable to Company or
any of its subsidiaries or by which Company or any of its subsidiaries or
any of their respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for
any conflicts, defaults or violations which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company. No investigation by any governmental or regulatory body
or authority is pending or, to the Company's knowledge, threatened against
Company or its subsidiaries, nor has any governmental or regulatory body or
authority indicated in writing an intention to conduct the same.
2.7 SEC Filings; Company Financial Statements.
(a) Company has made available to Parent a correct and complete
copy of each material form, report, schedule, registration statement and
definitive proxy statement filed by Company with the Securities and
Exchange Commission ("SEC") since July 1, 1999 (the "COMPANY SEC
REPORTS"), which are all the material forms, reports and documents
required to be filed by Company with the SEC since July 1, 1999. The
Company SEC Reports (A) complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports, and (B) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) 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 light of the circumstances under which they were made, not
misleading. None of Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC
Reports, including each Company SEC Report filed after the date hereof
until the Closing, (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 involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be
permitted by Form 10-Q or Form 10-K under the Exchange Act) and (iii)
fairly presented the consolidated financial position of Company and its
subsidiaries as of the respective dates thereof and the consolidated
results of Company's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may
not contain all footnotes and were or are subject to year-end
adjustments. The balance sheet of Company at March 25, 2001 (the
"Company Balance Sheet Date") contained in Company SEC Reports is
hereinafter referred to as the "COMPANY BALANCE SHEET."
(c) Company has previously furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by
Company with the SEC pursuant to the Securities Act or the Exchange Act.
2.8 No Undisclosed Liabilities. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), which are, individually or in the aggregate, material to the
business, results of operations or financial condition of Company and its
subsidiaries taken as a whole, except (i) liabilities provided for in
Company Balance Sheet, (ii) liabilities incurred since the Company Balance
Sheet Date in the ordinary course of business consistent with past
practices, which would not
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reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company or (iii) banking, accounting, legal and
printing fees and expenses associated with the Merger.
2.9 Absence of Certain Changes or Events. Except as disclosed on the
Company Disclosure Schedule, since the Company Balance Sheet Date, there
has not been: (i) any Material Adverse Effect on Company, (ii) any
declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of
Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by Company of any of Company's capital
stock or any other securities of Company or its subsidiaries or issuances
of 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 or
purchase agreements, (iii) any split, combination or reclassification of
any of Company's or any of its subsidiaries' capital stock, (iv) any
granting by Company or any of its subsidiaries of any material increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past
practice, or any payment by Company or any of its subsidiaries of any
material bonus, except for bonuses made in the ordinary course of business
consistent with past practice, or any granting by Company or any of its
subsidiaries of any increase in severance or termination pay or any entry
by Company or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Company
of the nature contemplated hereby, (v) entry by Company or any of its
subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any material Intellectual Property (as
defined in Section 2.18) other than licenses in the ordinary course of
business consistent with past practice or any amendment or consent with
respect to any licensing agreement filed or required to be filed by Company
with the SEC, (vi) any material change by Company in its accounting
methods, principles or practices, except as required by concurrent changes
in GAAP, or (vii) any revaluation by Company of any of its assets,
including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the
ordinary course of business.
2.10 Absence of Litigation. Section 2.10 of the Company Disclosure
Schedule lists all material claims, actions, suits or proceedings pending
or, to the knowledge of Company, threatened against Company or any of its
subsidiaries or any properties or rights of Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign.
2.11 Environmental Matters. (a) Definitions. For the purposes of this
Agreement, the following terms shall have the meanings set forth below:
(i) "ENVIRONMENTAL LAWS" shall mean all applicable and
enforceable laws, directives, guidance, rules, regulations, orders,
treaties, statutes, and codes promulgated by any Governmental Entity
which prohibit, regulate or control any Hazardous Material or any
Hazardous Material Activity, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, the Resource Recovery and Conservation Act of 1976, the
Occupational Safety and Health Act, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act, the Clean Water Act, all as amended to date and
any jurisdiction relating to Hazardous Materials or Hazardous
Materials Activity;
(ii) "ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
registrations, clearances, consents, approvals and other
authorizations that are required for the operation of the business of
the Company and its subsidiaries under Environmental Laws;
(iii) "HAZARDOUS MATERIALS" shall mean any material or substance
that is prohibited or regulated by any Environmental Law or that has
been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the
environment; and
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(iv) "Hazardous Materials Activity" shall mean the
transportation, transfer, recycling, storage, use, treatment,
manufacture, removal, remediation, release, exposure of others to,
sale, or distribution of any Hazardous Material or any product or
waste containing a Hazardous Material, or product manufactured with
Ozone depleting substances.
(b) The Company and its subsidiaries have obtained all applicable
Environmental Permits and are and have been in compliance in all
material respects with such Environmental Permits and any conditions
placed thereon, except to the extent that the failure to obtain or
comply with Environmental Permits could not reasonably be expected to
have a Material Adverse Effect on Company.
(c) The Company and its subsidiaries have not disposed of,
released, discharged or emitted any Hazardous Materials into the soil or
groundwater at any properties owned or leased at any time by the Company
or any of its subsidiaries, or at any other property, or exposed any
employee or other individual to any Hazardous Materials or any workplace
or environmental condition in such a manner as would result in any
material liability or material clean-up obligation of any kind or nature
to the Company or any of its subsidiaries.
(d) No Hazardous Materials are present in, on, or under any
properties owned, leased or used at any time by the Company or its
subsidiaries so as to give rise to any material liability or material
clean-up obligation under any Environmental Laws.
2.12 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of Affiliate
set forth in Section 2.12(a)(i) below (such definition shall only apply
to this Section 2.12 and Section 3.12), for purposes of this Agreement,
the following terms shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with Company or Parent, as the case may be, within the
meaning of Section 414(b), (c), (m) or (o) of the Code and the
regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or
other employee benefits or remuneration of any kind, whether written,
unwritten or otherwise, funded or unfunded, including without
limitation, each "EMPLOYEE BENEFIT PLAN," within the meaning of
Section 3(3) of ERISA (as defined below) which is or has been
maintained, contributed to, or required to be contributed to, by
Company or any Affiliate for the benefit of any Employee (as defined
below), or with respect to which Company or any Affiliate has or may
have any liability or obligation;
(iv) "DOL" shall mean the United States Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of Parent, Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance, consulting or similar agreement between
Company or any Affiliate and any Employee of Company;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
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(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company
Employee Plan or Parent Employee Plan(as such term is defined in
Section 3.12), as the case may be, that has been adopted or
maintained by Parent, Company or any Affiliate, or with respect to
which Parent, Company or any Affiliate will have any liability, for
the benefit of Employees who perform services outside the United
States;
(x) "IRS" shall mean the United States Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "PENSION PLAN" (as
defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA; and
(xii) "PENSION PLAN" shall refer to each Company Employee Plan
or Parent Employee Plan which is an "employee pension benefit plan,"
within the meaning of Section 3(2) of ERISA.
(b) The Company Disclosure Schedule contains an accurate and
complete list of each Company Employee Plan, International Employee Plan
and each Employee Agreement. Company does not have any plan or
commitment to establish any new Company Employee Plan, International
Employee Plan or Employee Agreement, to modify any Company Employee
Plan, International Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such Company Employee Plan,
International Employee Plan or Employee Agreement to the requirements of
any applicable law, in each case as previously disclosed to Parent in
writing, or as required by this Agreement or as required to maintain tax
qualification), or to adopt or enter into any Company Employee Plan,
International Employee Plan or Employee Agreement nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. Company has provided to Parent correct and complete
copies of: (i) all material documents embodying each Company Employee
Plan, International Employee Plan and each Employee Agreement including,
without limitation, all amendments thereto and all related trust
documents; (ii) the most recent annual actuarial valuations, if any,
prepared for each Company Employee Plan; (iii) the two (2) most recent
annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan; (iv) if Company Employee
Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination, opinion, notification
and advisory letters; (vii) all agreements and contracts relating to
each Company Employee Plan, International Employee Plan and Employee
Agreement, including, but not limited to, administrative service
agreements, group annuity contracts and group insurance contracts, if
any; (viii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee
Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of
payments or vesting schedules or other events which would result in any
material liability to Company; (ix) all material correspondence to or
from any governmental agency relating to any Company Employee Plan; (x)
all material COBRA forms and related notices (or such forms and notices
as required under comparable law); (xi) all policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Company
Employee Plan; (xii) discrimination tests for each Company Employee Plan
for the three (3) most recent plan years; and (xiii) all registration
statements, annual reports (Form 10-K and all attachments thereto) and
prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in all
material respects all obligations required to be performed by it under,
is not in default or violation of, and has no knowledge of any default
or violation by any other party with respect to each Company Employee
Plan, and each Company Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance
with all applicable laws, statutes, orders,
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rules and regulations, including but not limited to ERISA or the Code;
(ii) each Company Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of
the Code has either received a favorable determination, opinion,
notification and/or advisory letter, as applicable, from the IRS with
respect to each such Company Employee Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has a remaining period
of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a letter and make any amendments necessary to
obtain a favorable determination as to the qualified status of each such
Company Employee Plan; (iii) no "prohibited transaction" within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or Section 408
of ERISA (or any administrative class exemption issued thereunder), has
occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Company,
threatened or anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company
Employee Plan; (v) except as disclosed on the Company Disclosure
Schedule each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time, without material
liability to Company, Parent or any of its Affiliates (other than
ordinary administration expenses); (vi) there are no audits, inquiries
or proceedings pending or, to the knowledge of Company or any
Affiliates, threatened by the IRS or DOL with respect to any Company
Employee Plan; and (vii) neither Company nor any Affiliate is subject to
any penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. Except as disclosed on the Company Disclosure
Schedule, neither Company nor any Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any Pension
Plan, which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Collectively Bargained, Multiemployer and Multiple Employer
Plans. Neither Company nor any Affiliate contributes to or is obligated
to contribute to any Multiemployer Plan. Neither Company nor any
Affiliate has established or maintains, sponsors, participates in or
contributes to any multiple employer plans, or to any plan described in
Section 413 of the Code.
(g) No Post-Employment Obligations. Except as set forth on the
Company Disclosure Schedule, no Company Employee Plan provides, or
reflects or represents any liability to provide retiree health to any
person for any reason, except as may be required by COBRA or other
applicable statute, and Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) Health Care Compliance. Neither Company nor any Affiliate has,
prior to the Effective Time, in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and
Accountability Act of 1996, the requirements of the Women's Health and
Cancer Rights Act of 1998, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996 or any amendment to each such act
or any similar provisions of state law applicable to its Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, trust or
loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any Employee.
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(ii) No payment, compensation or benefit which will or may be
made by Parent, Company or their respective Affiliates with respect
to any Employee or any other "disqualified individual" in connection
with the consummation of the transaction contemplated hereby will be
characterized as a "parachute payment," within the meaning of Section
280G(b)(2) of the Code as a result of the Merger or the other
transactions contemplated by this Agreement.
(j) Employment Matters. The Company Disclosure Schedule lists all
current officers and directors of Company. The Company, each of its
domestic subsidiaries, each Company Designated Foreign Subsidiary and,
to the Company's knowledge, each Company Other Foreign Subsidiary (i) is
in compliance in all material respects with all applicable federal,
state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and
hours, in each case, with respect to Employees (including any
immigration laws with respect to the same); (ii) has withheld and
reported all amounts required by law or by agreement to be withheld from
the wages, salaries and other payments to Employees; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment
to any trust or other fund governed by or maintained by or on behalf of
any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are
no pending or threatened in writing claims or actions against Company
under any workers compensation policy or long-term disability policy.
Each person who is acting or has acted as a consultant to Company is
acting or has acted as an "independent contractor" and could not, based
on the facts and circumstances of his or her consultancy, reasonably be
deemed to be or have been "employed" with Company. The Company
Disclosure Schedule also sets forth all outstanding offers of employment
by the Company, whether written or oral, made to any prospective
executive or managerial-level employee, which offer has not been
rejected by the offeree.
(k) Labor. Except as set forth in the Company Disclosure Schedule,
no work stoppage or labor strike against Company is pending, threatened
or reasonably anticipated. Company does not know of any activities or
proceedings of any labor union to organize any Employees. There are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened relating to any labor, safety or
discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination
complaints, except for such action, suits, claims, labor disputes or
grievances which, if adversely determined, would not, individually or in
the aggregate, result in any Material Adverse Effect on Company. Company
and its subsidiaries have not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. The Company is
not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by
Company.
(l) International Employee Plan. Each International Employee Plan
of the Company or of one of the Company's foreign subsidiaries has been
established, maintained and administered in compliance in all material
respects with its terms and conditions and with the requirements
prescribed by any and all statutory or regulatory laws that are
applicable to such International Employee Plan, and no such
International Employee Plan has any material unfunded liabilities, that
as of the Effective Time, will not be offset by insurance or fully
accrued.
(m) No Interference or Conflict. To the knowledge of Company, no
stockholder, officer, employee or consultant of Company is obligated
under any contract or agreement subject to any judgement, decree or
order of any court or administrative agency that would interfere with
such person's efforts to promote the interests of Company or that would
interfere with Company's business, except for any interference that
would not give rise to a Material Adverse Effect on the Company.
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2.13 S-4; Proxy Statements. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of the Parent Common Stock in or as a result
of the Merger (the "S-4") will, at the time the S-4 is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; and (ii) the Joint Proxy Statement/ Prospectus (the "JOINT
PROXY STATEMENT/PROSPECTUS") to be filed with the SEC by Company and Parent
pursuant to Section 5.1 hereof will, at the dates mailed to the
stockholders of Company, at the times of the stockholder meeting of Company
(the "COMPANY STOCKHOLDERS' MEETING") and the stockholders of the Parent
(the "PARENT STOCKHOLDERS' MEETING") in connection with the transactions
contemplated hereby and as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Joint Proxy Statement/Prospectus will comply as to form in all material
respects with the provisions of the Securities Act, Exchange Act and the
rules and regulations promulgated by the SEC thereunder. If at any time
prior to the Effective Time any event relating to Company or any of its
affiliates, officers or directors should be discovered by Company which in
the opinion of Company's counsel is required to be set forth in an
amendment to the S-4 or a supplement to the Joint Proxy
Statement/Prospectus, Company shall promptly inform Parent. Notwithstanding
any statement by the Parent and Merger Sub in this Agreement, Company makes
no representation or warranty with respect to any information supplied by
Parent or Merger Sub, which is contained in any of the foregoing documents.
2.14 Restrictions on Business Activities. There is no material
judgment, injunction, order or decree binding upon Company or any of its
subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of Company or
any of its subsidiaries, any acquisition of property by Company or any of
its subsidiaries or the conduct of business by Company or any of its
subsidiaries as currently conducted.
2.15 Title to Property; Condition of Equipment.
(a) Company has good and marketable fee simple title to all real
property owned by the Company ("OWNED REAL PROPERTY"). There are no
parties in possession of any portion of the Owned Real Property as
lessees, sublessees, assignees, tenants at sufferance or trespassers and
there are no leases, subleases, assignments, or operating agreements
applicable to or affecting the Owned Real Property.
(b) All leases or other occupancy agreements for the material real
property leased or otherwise occupied by the Company ("LEASED REAL
PROPERTY") afford Company peaceful and undisturbed possession of the
Leased Real Property. All leases for the Leased Real Property are in
good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases or other occupancy
agreements, any existing material default or event of default (or any
event which with notice or lapse of time, or both, would constitute a
material default).
(c) All of the improvements to the Owned Real Property and all of
the plants and structures of Company and its subsidiaries, except such
as may be under construction, are in good operating condition and
repair, in all material respects, ordinary wear and tear excepted. To
its knowledge, Company is not in violation of any zoning, building,
safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of the Owned Real Property
or the Leased Real Property except where such violation would not give
rise to a Material Adverse Effect, and Company has not received any
notice of such violation. Company has good and marketable title to all
of its assets (including real property) used in its business or as shown
on the Company Balance Sheet, free and clear of all mortgages, liens,
charges, encumbrances or restrictions (other than for Permitted Liens,
as defined below), other than such assets as were sold in the ordinary
course of Company's business since the Company Balance Sheet Date or
which are subject to capitalized
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leases. "PERMITTED LIENS" means any lien, mortgage, encumbrance or
restriction which is (i) set forth on Schedule 2.15 of the Company
Disclosure Schedule or the Parent Disclosure Schedule or (ii) reflected
in the Company financial statements and is not in excess of $1,000,000
and which does not materially detract from the value or materially
interfere with the use, as currently utilized, of the properties subject
thereto or affected thereby or otherwise materially impair the business
operations being conducted thereon.
(d) The material machinery and equipment (the "EQUIPMENT") owned or
leased by Company is (i) suitable for the uses to which it is currently
employed; (ii) in good operating condition (except for ordinary wear and
tear); and (iii) regularly and properly maintained in all material
respects.
2.16 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions
and liabilities relating to taxes, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits
(i) Company and each of its subsidiaries (to the extent any such
subsidiaries are required to file tax returns on a basis other than
as part of a consolidated group with Company) have timely filed
(taking into account applicable extensions) all material federal and
state, local and foreign returns, estimates, information statements
and reports ("RETURNS") relating to Taxes required to be filed by
Company and each of such subsidiaries with any Tax authority and such
Returns, when filed, were true and correct in all material respects.
(ii) There is no material Tax deficiency outstanding which has
been proposed or assessed in writing against Company or any of its
subsidiaries.
(iii) To the Company's knowledge, no audit or other examination
of any Return of Company or any of its subsidiaries by any Tax
authority is presently in progress. Neither Company nor any of its
subsidiaries has been notified of any request for such an audit or
other examination, except for any audit or other examination that
would not be expected to have a Material Adverse Effect on Company.
(iv) No adjustment relating to any Returns filed by Company or
any of its subsidiaries has been proposed in writing by any Tax
authority to Company or any of its subsidiaries or any representative
thereof, except for any adjustment that would not be expected to have
a Material Adverse Effect on Company.
(v) Neither Company nor any of its subsidiaries has any
liability for unpaid Taxes which has not been accrued for or reserved
on the Company Balance Sheet, whether asserted or unasserted,
contingent or otherwise, which is material to Company, other than any
liability for unpaid Taxes that may have accrued since the date of
the Company Balance Sheet in connection with the operation of the
business of Company and its subsidiaries in the ordinary course of
business.
(vi) There is no contract, agreement, plan or arrangement to
which Company is a party as of the date of this Agreement, including
but not limited to the provisions of this Agreement, covering any
employee or former employee of Company or any of its subsidiaries
that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code as a result of the Merger and the other
transactions contemplated hereby.
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(vii) Neither Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code)
owned by Company.
(viii) Neither Company nor any of its subsidiaries is party to
or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement with an unaffiliated third party.
(ix) Company and its subsidiaries have not been and will not be
required to include any material adjustment in Taxable income for any
Tax period (or portion thereof) pursuant to Section 481 or Section
263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(x) None of Company's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(xi) The Company Disclosure Schedule lists (A) any material
foreign Tax holidays, (B) any material intercompany transfer pricing
agreements, or other arrangements that have been established by
Company or any of its subsidiaries with any Tax authority and (C) any
material expatriate programs or policies affecting Company or any of
its subsidiaries.
(xii) Neither the Company nor any of its subsidiaries was either
a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under section
355 of the Code that (x) occurred within two years before the date of
this Agreement or (y) could otherwise constitute part of "plan or
series of transactions" (within the meaning of section 355(e) of the
Code) that includes the Merger.
(xiii) None of the Company and its subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of which was the
Company) or (B) has any material liability for the Taxes of any
person (other than the Company and its subsidiaries) 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.
(xiv) the Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning
of Section 897(c) of the Code.
2.17 Brokers. Except for fees payable to Goldman, Sachs & Co. (the
"Company Financial Advisor"), pursuant to an engagement letter dated May 1,
2001, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of Company.
2.18 Intellectual Property. The Company owns, or is validly licensed
or otherwise has the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service
mark rights, copyrights and other proprietary intellectual property rights
and computer programs (collectively, "INTELLECTUAL PROPERTY RIGHTS") which
are material to the conduct of the business of the Company and its
subsidiaries taken as a whole. Except as set forth on the Company
Disclosure Schedule, no claims are pending or, to the knowledge of the
Company, threatened in writing that the Company or any of its subsidiaries
is infringing or otherwise adversely affecting the rights of any person
with regard to any Intellectual Property Right except for claims which, if
determined adversely to the Company, would not have a Material Adverse
Effect on the Company. To the knowledge of the Company, no person is
infringing the rights of the Company or any of its subsidiaries with
respect to any Intellectual Property Right except where such infringement
has not had, and could not reasonably be expected to have, a Material
Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has licensed, or otherwise granted, to any third party, any
rights in or to any Intellectual
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Property Rights which are material to the conduct of the business of the
Company and its subsidiaries taken as a whole.
2.19 Agreements, Contracts and Commitments. Except as set forth on
the Company Disclosure Schedule, neither Company nor any of its
subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any executive officer, director or member of Company's Board of
Directors, other than those that are terminable by Company or any of its
subsidiaries on no more than thirty days notice and which do so with no
express (whether by contract or by policy) liability or financial
obligation to Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan
(except for those described in Section 2.3 of the Company Disclosure
Schedule), any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of
any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty currently in
force other than any agreement of indemnification entered into in
connection with the sale or license or distribution or marketing of
products or services in the ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any material respect the right of Company or any of its
subsidiaries to engage in any line of business;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Company or any of its
subsidiaries after the date of this Agreement of a material amount of
assets not in the ordinary course of business or pursuant to which
Company has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than
Company's subsidiaries;
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation or
default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Disclosure Schedule pursuant to
this Section 2.19 (any such agreement, contract or commitment, a "COMPANY
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
2.20 Insurance. Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of Company and its subsidiaries
(collectively, the "INSURANCE POLICIES") which are of the type and in
amounts customarily carried by persons conducting businesses similar to
those of Company and its subsidiaries. There is no material claim by
Company or any of its subsidiaries pending under any of the Insurance
Policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds other than customary reservation
of rights notices issued by such insurers.
2.21 Opinion of Financial Advisor. Company has received a written
opinion from the Company Financial Advisor to the effect that as of the
date hereof, the Exchange Ratio is fair to the stockholders of Company from
a financial point of view.
2.22 Board Approval. The Board of Directors of Company has, as of the
date of this Agreement, (i) approved this Agreement and the transactions
contemplated hereby, (ii) determined that the Merger is in the best
interests of the stockholders of Company and is on terms that are fair to
such stockholders and (iii) recommended that the stockholders of Company
approve this Agreement and the Merger.
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2.23 Vote Required. The affirmative vote 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's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
2.24 No Ownership of Parent Common Stock. As of the date hereof,
Company does not own, beneficially or of record, any shares of Parent
Common Stock other than ownership, if any, held by Company Employee Plan or
Pension Plan.
2.25 State Takeover Statutes. The Board of Directors of Company has
approved the Merger, this Agreement and the Company Voting Agreement, and
has taken such additional action, if any, as may be necessary to render
inapplicable to the Merger, this Agreement and the Company Voting Agreement
and the transactions contemplated hereby and thereby, any applicable state
takeover statute or similar law or regulation including "control share,"
"fair price," "business combination" or other anti-takeover laws and
regulations of any state including Section 203 of the DGCL.
2.26 Product Warranty. Since January 1, 1999, each product
manufactured, sold, leased or delivered by Company has complied in all
material respects with all applicable standard contractual commitments and
all express and implied warranties, and there is no present action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
pending for any replacement or repair thereof or other damages in
connection therewith which if determined adversely to the Company would
have a Material Adverse Effect. No product manufactured, sold, leased or
delivered by Company is subject to any warranty or other indemnity beyond
the applicable standard terms and conditions of sale or lease.
2.27 Inventory. Except as set forth on the Company Disclosure
Schedule, the parts and materials in the inventory of Company, the value of
which is reflected in the Company Balance Sheet, and thereafter acquired by
Company (the "INVENTORY") was acquired and maintained through an
acquisition transaction or in the ordinary course of business of Company
and except for those parts or materials for which a reserve is reflected on
the Company Balance Sheet, is of such quality as to be usable or salable in
the ordinary course of Company's business. Since the date of the Company
Balance Sheet, Company has continued to replenish inventories in the
ordinary course of business consistent with past practices. All items
included in the Inventory are owned by Company, free and clear of all liens
and encumbrances (except Permitted Liens), except for inventory sold by
Company in the ordinary course of business subsequent to the date of the
Company Balance Sheet. Company is not under any liability or obligation
with respect to the return of Inventory in the possession of any customer
other than return of Inventory used in noncompliant products.
2.28 Questionable Payments. The Company has not nor has, to its
knowledge, any director, officer or other employee of the Company: (i) made
any payments or provided services or other favors in the United States or
any foreign country in order to obtain preferential treatment or
consideration by any Government Entity with respect to any aspect of the
Company's business; or (ii) made any political contributions that would not
be lawful under the laws of the United States (including the Foreign
Corrupt Practices Act) or the foreign country in which such payments were
made.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company, subject to such
exceptions as are specifically disclosed in writing in the disclosure letter
delivered by Parent and Merger Sub to Company on or prior to the date of this
Agreement and certified by a duly authorized officer of Parent and Merger Sub
(the "PARENT DISCLOSURE SCHEDULE"), as follows (it being understood that
disclosure in one instance is sufficient for all purposes if the context thereof
is reasonably evident and it being understood that disclosure of an item is not
to be construed as an admission of any fact):
3.1 Organization and Qualification; Subsidiaries.
(a) Each of Parent, its domestic subsidiaries and its foreign
subsidiaries incorporated under the laws of Canada or Sweden (the
"PARENT DESIGNATED FOREIGN SUBSIDIARIES") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Parent has delivered
to Company a complete and correct list of all of Parent's direct and
indirect subsidiaries as of the date of this Agreement, indicating the
jurisdiction of organization of each subsidiary and Parent's equity
interest therein. Each of Parent, its domestic subsidiaries and each of
the Parent Designated Foreign Subsidiaries is in possession of all
Approvals necessary to own, lease and operate the properties it purports
to own, operate or lease and to carry on its business and the business
of its subsidiaries as it is now being conducted, except where the
failure to have such Approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Each of Parent, its
domestic subsidiaries and each of the Parent Designated Foreign
Subsidiaries is in compliance with the terms of the Approvals and is
duly qualified or licensed as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing
that would not, either individually or in the aggregate, have a Material
Adverse Effect on Parent. Other than wholly owned subsidiaries, Parent
does not directly or indirectly own any material equity or similar
interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership,
joint venture or other business, association or entity.
(b) Each of the foreign subsidiaries of Parent that are
incorporated under the laws of countries other than Canada or Sweden
(the "PARENT OTHER FOREIGN SUBSIDIARIES") is, to the Parent's knowledge,
a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being
conducted. Each of the Parent Other Foreign Subsidiaries is, to the
Parent's knowledge, is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease
and to carry on its business and the business of its subsidiaries as it
is now being conducted, except where the failure to have such Approvals
would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Each of the Parent Other Foreign Subsidiaries is, to
the Parent's knowledge, in compliance with the terms of the Approvals
and is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed
and in good standing that would not, either individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.2 Certificates of Incorporation and Bylaws. Parent has previously
furnished to Company a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date, and Merger Sub has previously
furnished to Company a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date. Such Certificate of
Incorporation or Certificate of Incorporation, as the
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case may be, and Bylaws are in full force and effect. Neither Parent nor
any of its subsidiaries is in violation of any of the provisions of their
Certificate of Incorporation or Certificate of Incorporation, as the case
may be, or Bylaws or equivalent organizational documents, except for any
violation which would not reasonably be expected to have a Material Adverse
Effect on the Company.
3.3 Capitalization.
(a) The authorized capital stock of Parent consists of
1,000,000,000 shares of Parent Common Stock, $0.01 par value per share,
and 5,000,000 shares of Preferred Stock, $0.01 par value per share
("PARENT PREFERRED STOCK"), of which 1,000,000 shares have been
designated Series A Preferred Stock in connection with the Rights
Agreement (as defined in Section 3.3(h) below). At the close of business
on June 30, 2001:
(i) 320,528,259 shares of Parent Common Stock were issued and
outstanding;
(ii) no shares of Parent Common Stock were held in treasury by
Parent or by subsidiaries of Parent;
(iii) 32,118,590 shares of Parent Common Stock were reserved for
issuance upon the exercise of outstanding options to purchase Parent
Common Stock under the Parent's 1990 Stock Option Plan, 1999 Stock
Option Plan, 1995 Director Stock Option Plan and 1996 Supplemental
Stock Option Plan (collectively, the "PARENT OPTION PLANS");
(iv) 24,386,228 shares of Parent Common Stock were available for
future grant under the Parent Option Plans;
(v) 1,674,092 shares of Parent Common Stock were reserved for
issuance under the Parent's 1993 Employee Stock Purchase Plan (the
"PARENT ESPP"); and
(vi) 15,789,236 shares of Parent Common Stock were reserved for
issuance upon conversion of Parent's 4.25% Convertible Subordinated
Notes due 2004 and 10,761,116 shares of Parent Common Stock were
reserved for issuance upon conversion of Parent's 4% Zero Coupon
Notes due 2020 (collectively, the "PARENT CONVERTIBLE NOTES");
(vii) 382,076 shares of Parent Common Stock were reserved for
issuance upon conversion of certain convertible subordinated notes
issued by predecessor companies acquired by Parent; and
(viii) 1,000,000 shares have been designated Series A
Participating Preferred Stock and reserved for issuance upon exercise
of the rights (the "PARENT RIGHTS") distributed to holders of Parent
Common Stock pursuant to a Preferred Stock Rights Agreement dated May
17, 2001 between Parent and Wells Fargo Bank Minnesota, N.A., as
Rights Agent (the "PARENT RIGHTS AGREEMENT").
(b) As of the date hereof, no shares of Parent Preferred Stock are
issued and outstanding.
(c) No change in such capitalization has occurred between June 30,
2001 and the date hereof except (x) the issuance of shares of Parent
Common Stock pursuant to the exercise of outstanding options or (y) the
cancellation of unvested options for Common Stock held by, or the
repurchase of unvested shares of Common Stock from, directors,
employees, consultants or other service providers of Parent pursuant to
the terms of their stock option, stock purchase or stock restriction
agreements. All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Parent or any agreement or document to which
Parent is a party or by which it is bound.
(d) Except as set forth in this Section 3.3 or in Section 3.3(d) of
the Patent Disclosure Schedule, as of the date of this Agreement, there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital
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stock of Parent or any of its subsidiaries that obligate Parent or any
of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant or
other right, agreement, arrangement or commitment.
(e) All shares of Parent Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and nonassessable.
(f) There are no obligations, contingent or otherwise, of Parent or
any of its subsidiaries to repurchase, redeem or otherwise acquire any
shares of Parent Common Stock or the capital stock of any subsidiary,
except to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such subsidiary or any
other entity.
(g) All of the outstanding shares of capital stock of each of
Parent's domestic direct or indirect subsidiaries and Designated Parent
Foreign Subsidiaries, and to Parent's knowledge, of each of Parent's
direct or indirect Other Parent Foreign Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except for
de minimis numbers of shares of certain foreign subsidiaries required to
be held by individuals to satisfy local law requirements (as indicated
in the Parent Disclosure Schedule) all such shares are owned by Parent
or another subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
(h) Except as contemplated by this Agreement, the Parent Rights
Agreement and Section 3.3 of the Parent Disclosure Schedule, there are
no registration rights and, to the knowledge of Parent, there are no
voting trusts, proxies, rights plans, anti-takeover plans or other
agreements or understandings to which Parent is a party or by which it
is bound with respect to any equity security of any class of Parent or
with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
(i) The Parent Common Stock to be issued pursuant to the Merger has
been duly authorized and will, when issued in accordance with this
Agreement be validly issued, fully paid, and nonassessable and will not
be subject to any restrictions on resale under the Securities Act, other
than restrictions imposed by Rule 145 under the Securities Act.
3.4 Authority Relative to This Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement, or to consummate the transactions so
contemplated, subject only to (i) the approval of the issuance of the
parent Common Stock in connection with the Merger by the stockholders of
the Parent (the "PARENT STOCKHOLDERS' APPROVAL") and (ii) the filing of the
Certificate of Merger pursuant to the DGCL. This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub and, assuming
the due authorization, execution and delivery by Company, constitute legal
and binding obligations of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with their respective terms.
3.5 No Conflict.
(a) The execution and delivery of this Agreement by Parent does
not, and the performance of this Agreement by Parent will not, (i)
conflict with or violate the Certificate of Incorporation, Bylaws or
equivalent organizational documents of Parent or any of its
subsidiaries, (ii) subject to obtaining the Parent Stockholder Approval
and compliance with the requirements set forth in Section 3.5(b) below,
conflict with or violate any law, rule, regulation, order, judgment or
decree
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applicable to Parent or any of its subsidiaries or by which Parent or
any of its subsidiaries or any of their respective properties are bound
or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or impair Parent's or any such subsidiaries' 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, or result in the creation of a lien or encumbrance on
any of the properties or assets of Parent or any of its subsidiaries
pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by
which Parent or any of its subsidiaries or its or any of their
respective properties are bound or affected.
(b) The execution and delivery of this Agreement by Parent do not,
and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky
Laws, the pre-merger notification requirements of the HSR Act and of
foreign Governmental Entities and the rules and regulations thereunder,
the rules and regulations of Nasdaq, and the filing of the Certificate
of Merger as required by the DGCL and (B) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent consummation of the Merger
or otherwise impair Parent's ability to timely perform its obligations
under this Agreement.
3.6 Compliance; Permits; Restrictions. Neither Parent nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any
law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which Parent or any of its subsidiaries or
any of their respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for
any conflicts, defaults or violations which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent. To the knowledge of Parent, no investigation by any
governmental or regulatory body or authority is pending or threatened
against Parent or its subsidiaries, nor has any governmental or regulatory
body or authority indicated in writing an intention to conduct the same.
3.7 SEC Filings; Financial Statements.
(a) Parent has made available to Company a correct and complete
copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC on or after October 1, 1999
(the "PARENT SEC REPORTS"), which are all the forms, reports and
documents required to be filed by Parent with the SEC since October 1,
1999 and prior to the date of this Agreement. The Parent SEC Reports (A)
complied as to Form in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (B) did
not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing)
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 light of the circumstances under which
they were made, not misleading. None of Parent's subsidiaries is
required to file any reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC
Reports (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 GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or as may be permitted by Form 10-Q or Form 10-K of the Exchange
Act) and (iii) fairly presented the consolidated financial position of
Parent and its subsidiaries as of the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may
not contain footnotes
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and were or are subject to normal and recurring year-end adjustments.
For purposes of this Agreement, the Parent balance sheet as of March 31,
2001 (the "Parent Balance Sheet Date") as set forth in the Parent's Form
10-Q for the quarter ended March 31, 2001 shall be referred to as the
"PARENT BALANCE SHEET."
(c) Parent has previously furnished to Company a complete and
correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by Parent
with the SEC pursuant to the Securities Act or the Exchange Act.
3.8 No Undisclosed Liabilities. Neither Parent nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), which are, individually or in the aggregate, material to the
business, results of operations or financial condition of Parent and its
subsidiaries taken as a whole, except (i) liabilities provided for in
Parent Balance Sheet or the notes thereto, (ii) liabilities incurred since
the Parent Balance Sheet Date in the ordinary course of business consistent
with past practices, which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or
(iii) banking, accounting, legal and printing fees and expenses associated
with the Merger.
3.9 Absence of Certain Changes or Events. Since the Parent Balance
Sheet Date, there has not been: (i) any Material Adverse Effect on Parent,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of
Parent's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by Parent of any of Parent's capital stock
or any other securities of Parent or its subsidiaries 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 or purchase agreements,
(iii) any split, combination or reclassification of any of Parent's or any
of its subsidiaries' capital stock, (iv) any material change by Parent in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (v) any revaluation by Parent of any of its
assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any
sale of assets of the Parent other than in the ordinary course of business.
3.10 Absence of Litigation. Section 3.10 of the Parent Disclosure
Schedule lists all material claims, actions, suits or proceedings pending
or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries or any properties or rights of Parent or any of its
subsidiaries, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign.
3.11 Environmental Matters. (i) The Parent and its subsidiaries have
obtained all applicable Environmental Permits and are and have been in
compliance in all material respects with such Environmental Permits and any
conditions placed thereon except to the extent that the failure to obtain
or comply with Environmental Permits could not reasonably be expected to
have a Material Adverse Effect on Parent.
(b) The Parent and its subsidiaries have not disposed of, released,
discharged or emitted any Hazardous Materials into the soil or
groundwater at any properties owned or leased at any time by the Parent
or any of its subsidiaries, or at any other property, or exposed any
employee or other individual to any Hazardous Materials or any workplace
or environmental condition in such a manner as would result in any
material liability or material clean-up obligation of any kind or nature
to the Parent or any of its subsidiaries.
(c) No Hazardous Materials are present in, on, or under any
properties owned, leased or used at any time by the Parent or its
subsidiaries so as to give rise to any material liability or material
clean-up obligation under any Environmental Laws.
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3.12 Employee Matters and Benefit Plans.
(a) Definitions. The following terms shall have the meanings set
forth below:
(i) "PARENT EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or
other employee benefits or remuneration of any kind, whether written,
unwritten or otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of
Section 3(3) of ERISA which is or has been maintained, contributed
to, or required to be contributed to, by Parent or any Affiliate for
the benefit of any Employee of Parent, or with respect to which
Parent or any Affiliate has or may have any liability or obligation;
(ii) "PARENT EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance or consulting or similar agreement between
Parent or any Affiliate and any Employee of Parent;
(b) Employee Plan Compliance. (i) The Parent has performed in all
material respects all obligations required to be performed by it under,
is not in default or violation of, and has no knowledge of any default
or violation by any other party with respect to each Parent Employee
Plan, and each Parent Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance
with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Parent
Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination, opinion, notification and/or
advisory letter, as applicable, from the IRS with respect to each such
Parent Employee Plan as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has a remaining period of time under
applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and make any amendments necessary to obtain a
favorable determination as to the qualified status of each such Parent
Employee Plan; (iii) no "prohibited transaction" within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 4975 of the Code or Section 408 of ERISA
(or any administrative class exemption issued thereunder), has occurred
with respect to any Parent Employee Plan; (iv) there are no actions,
suits or claims pending, or, to the knowledge of Parent, threatened or
anticipated (other than routine claims for benefits) against any Parent
Employee Plan or against the assets of any Parent Employee Plan; (v)
there are no audits, inquiries or proceedings pending or, to the
knowledge of Parent or any Affiliates, threatened by the IRS or DOL with
respect to any Parent Employee Plan; and (vi) neither Parent nor any
Affiliate is subject to any penalty or tax with respect to any Parent
Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code.
(c) Pension Plans. Neither Parent nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to,
any Pension Plan, which is subject to Title IV of ERISA or Section 412
of the Code.
(d) Collectively Bargained, Multiemployer and Multiple Employer
Plans. Neither Parent nor any Affiliate contributes to or is obligated
to contribute to any Multiemployer Plan. Neither Parent nor any
Affiliate has established or maintains, sponsors, participates in or
contributes to any multiple employer plans, or to any plan described in
Section 413 of the Code.
(e) Health Care Compliance. Neither Parent nor any Affiliate has,
prior to the Effective Time, in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and
Accountability Act of 1996, the requirements of the Women's Health and
Cancer Rights Act of 1998, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996 or any amendment to each such act
or any similar provisions of state law applicable to its Employees.
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(f) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Parent Employee Plan, Parent Employee
Agreement, trust or loan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any Employee of Parent.
(g) Employment Matters. The Parent Disclosure Schedule lists all
current officers and directors of Parent. Parent, each of its domestic
subsidiaries, each Designated Parent Foreign Subsidiary and, to Parent's
knowledge, each Other Parent Foreign Subsidiary (i) is in compliance in
all material respects with all applicable federal, state and local laws,
rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with
respect to its Employees (including any immigration laws with respect to
the same); (ii) has withheld and reported all amounts required by law or
by agreement to be withheld from the wages, salaries and other payments
to its Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing;
and (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for its
Employees (other than routine payments to be made in the normal course
of business and consistent with past practice). There are no pending or
threatened in writing claims or actions against Parent under any workers
compensation policy or long-term disability policy. The Parent
Disclosure Schedule also sets forth all outstanding offers of employment
by Parent, whether written or oral, made to any prospective executive
officer of Parent, which offer has not been rejected by the offeree.
(h) Labor. No work stoppage or labor strike against Parent is
pending, threatened or reasonably anticipated. Parent does not know of
any activities or proceedings of any labor union to organize any of its
Employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of Parent, threatened relating
to any labor, safety or discrimination matters involving any of its
Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, except for such action, suits,
claims, labor disputes or grievances which, if adversely determined,
would not, individually or in the aggregate, result in any Material
Adverse Effect on Parent. Parent and its subsidiaries have not engaged
in any unfair labor practices within the meaning of the National Labor
Relations Act. The Parent is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union
contract with respect to its Employees and no collective bargaining
agreement is being negotiated by Parent.
(i) International Employee Plan. Each International Employee Plan
of the Parent or of one of Parent's foreign subsidiaries has been
established, maintained and administered in compliance in all material
respects with its terms and conditions and with the requirements
prescribed by any and all statutory or regulatory laws that are
applicable to such International Employee Plan, and no such
International Employee Plan has any material unfunded liabilities, that
as of the Effective Time, will not be offset by insurance or fully
accrued.
(j) No Interference Or Conflict. To the knowledge of Parent, no
stockholder, officer, employee or consultant of Parent is obligated
under any contract or agreement subject to any judgement, decree or
order of any court or administrative agency that would interfere with
such person's efforts to promote the interests of Parent or that would
interfere with Parent's business, except for any interference that would
not give rise to a Material Adverse Effect on Parent.
3.13 S-4; Joint Proxy Statement/Prospectus. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by
reference in (i) the S-4 will not, at the time the S-4 is filed with the
SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
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and (ii) the Joint Proxy Statement/Prospectus will, at the dates mailed to
the stockholders of Parent, at the time of the Parent Stockholders' Meeting
and as of the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The S-4 will
comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations promulgated by the SEC
thereunder. If at any time prior to the Effective Time any event relating
to Parent or any of its affiliates, officers or directors should be
discovered by Parent which in the opinion of Parent's counsel is required
to be set forth in an amendment to the S-4 or a supplement to the Joint
Proxy Statement/Prospectus, Parent shall promptly inform Company.
Notwithstanding any statement by the Parent and Merger Sub in this
Agreement, Parent makes no representation or warranty with respect to any
information supplied by Company that is contained in any of the foregoing
documents.
3.14 Restrictions on Business Activities. There is no material
judgment, injunction, order or decree binding upon Parent or any of its
subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of Parent or
any of its subsidiaries, any acquisition of property by Parent or any of
its subsidiaries or the conduct of business by Parent or any of its
subsidiaries as currently conducted.
3.15 Title to Property; Condition of Equipment.
(a) Parent has good and marketable fee simple title to all real
property owned by the Parent ("PARENT OWNED REAL PROPERTY"). There are
no parties in possession of any portion of the Parent Owned Real
Property as lessees, sublessees, assignees, tenants at sufferance or
trespassers and there are no leases, subleases, assignments, or
operating agreements applicable to or affecting the Parent Owned Real
Property.
(b) All leases or other occupancy agreements for the material real
property leased or otherwise occupied by Parent ("PARENT LEASED REAL
PROPERTY") afford Parent peaceful and undisturbed possession of the
Parent Leased Real Property. All leases for the Parent Leased Real
Property are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases or
other occupancy agreements, any existing material default or event of
default (or any event which with notice or lapse of time, or both, would
constitute a material default).
(c) All of the improvements to the Parent Owned Real Property and
all of the plants and structures of Parent and its subsidiaries, except
such as may be under construction, are in good operating condition and
repair, in all material respects, ordinary wear and tear excepted. To
its knowledge, Parent is not in violation of any zoning, building,
safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of the Parent Owned Real
Property or the Parent Leased Real Property except where such violation
would not give rise to a Material Adverse Effect, and Parent has not
received any notice of such violation. Parent has good and marketable
title to all of its assets (including real property) used in its
business or as shown on the Parent Balance Sheet, free and clear of all
mortgages, liens, charges, encumbrances or restrictions (other than for
Permitted Liens, as defined below), other than such assets as were sold
in the ordinary course of Parent's business since the Parent Balance
Sheet Date or which are subject to capitalized leases.
(d) The Equipment owned or leased by Parent is (i) suitable for the
uses to which it is currently employed; (ii) in good operating condition
(except for ordinary wear and tear); and (iii) regularly and properly
maintained in all material respects.
3.16 Taxes.
(a) Tax Returns and Audits.
(i) Parent and each of its subsidiaries (to the extent any such
subsidiaries are required to file tax returns on a basis other than
as part of a consolidated group with Parent) have timely
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filed (taking into account applicable extensions) all material
Returns relating to Taxes required to be filed by Parent and each of
its subsidiaries with any Tax authority and such Returns, when filed,
were true and correct in all material respects.
(ii) There is no Tax deficiency outstanding which has been
proposed or assessed in writing against Parent or any of its
subsidiaries.
(iii) To Parent's knowledge, no audit or other examination of
any Return of Parent or any of its subsidiaries by any Tax authority
is presently in progress. Neither Parent nor any of its subsidiaries
has been notified of any request for such an audit or other
examination, except for any audit or examination that would not be
expected to have a Material Adverse Effect on Parent.
(iv) No adjustment relating to any Returns filed by Parent or
any of its subsidiaries has been proposed in writing by any Tax
authority to Parent or any of its subsidiaries or any representative
thereof, except for any adjustment that would not be expected to have
a Material Adverse Effect on Parent.
(v) Neither Parent nor any of its subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the
Parent Balance Sheet, whether asserted or unasserted, contingent or
otherwise, which is material to Parent, other than any liability for
unpaid Taxes that may have accrued since the date of the Parent
Balance Sheet in connection with the operation of the business of
Parent and its subsidiaries in the ordinary course of business.
(vi) There is no contract, agreement, plan or arrangement to
which Parent is a party as of the date of this Agreement, including
but not limited to the provisions of this Agreement, covering any
employee or former employee of Parent or any of its subsidiaries
that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code as a result of the Merger or the other
transactions contemplated hereby.
(vii) Neither Parent nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code)
owned by Parent.
(viii) Neither Parent nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement with any unaffiliated party.
(ix) Parent and its subsidiaries have not been and will not be
required to include any material adjustment in Taxable income for any
Tax period (or portion thereof) pursuant to Section 481 or Section
263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(x) None of Parent's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(xi) The Parent Disclosure Schedule lists (A) any material
foreign Tax holidays, (B) any material intercompany transfer pricing
agreements, or other arrangements that have been established by
Parent or any of its subsidiaries with any Tax authority and (C) any
material expatriate programs or policies affecting Parent or any of
its subsidiaries.
(xii) Neither the Parent nor any of its subsidiaries was either
a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under section
355 of the Code that (x) occurred within two years before the date of
this Agreement or
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(y) could otherwise constitute part of "plan or series of
transactions" (within the meaning of section 355(e) of the Code) that
includes the Merger.
(xiii) None of Parent and its subsidiaries (A) has been a member
of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Parent) or
(B) has any liability for the Taxes of any person (other than Parent
and its subsidiaries) 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.
(xiv) Parent is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of
Section 897(c) of the Code.
3.17 Brokers. Except for fees payable to Merrill Lynch, Pierce,
Fenner & Smith Inc. (the "PARENT FINANCIAL ADVISOR") pursuant to an
engagement letter dated May 30, 2001, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
3.18 Parent Intellectual Property. The Parent owns, or is validly
licensed or otherwise has the right to use, all Intellectual Property
Rights which are material to the conduct of the business of the Parent and
its subsidiaries taken as a whole. No claims are pending or, to the
knowledge of the Parent, threatened in writing that Parent or any of its
subsidiaries is infringing or otherwise adversely affecting the rights of
any person with regard to any Intellectual Property Right except for claims
which, if determined adversely to Parent, would not have a Material Adverse
Effect on Parent. To the knowledge of the Parent, no person is infringing
the rights of the Parent or any of its subsidiaries with respect to any
Intellectual Property Right except where such infringement has not had, and
could not reasonably be expected to have, a Material Adverse Effect on
Parent. Neither Parent nor any of its subsidiaries has licensed, or
otherwise granted, to any third party, any rights in or to any Intellectual
Property Rights which are material to the conduct of the business of Parent
and its subsidiaries taken as a whole.
3.19 Agreements, Contracts and Commitments. Neither Parent nor any of
its subsidiaries is a party to or is bound by:
(i) any employment or consulting agreement, contract or
commitment with any executive officer, director or member of Parent's
Board of Directors, other than those that are terminable by Parent or
any of its subsidiaries on no more than thirty days notice and which
do so with no express (whether by contract or by policy) liability or
financial obligation to Parent;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any
of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(iii) any agreement of indemnification or any guaranty currently
in force other than any agreement of indemnification entered into in
connection with the sale or license or distribution or marketing of
products or services in the ordinary course of business;
(iv) any agreement, contract or commitment containing any
covenant limiting in any material respect the right of Parent or any
of its subsidiaries to engage in any line of business;
(v) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Parent or any of its
subsidiaries after the date of this Agreement of a material amount of
assets not in the ordinary course of business or pursuant to which
Parent has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than
Parent's subsidiaries;
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Neither Parent nor any of its subsidiaries, nor to Parent's knowledge any
other party to a Parent Contract (as defined below), is in breach, violation or
default under, and neither Parent nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Parent or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Parent Disclosure Schedule pursuant to
this Section 3.19 (any such agreement, contract or commitment, a "PARENT
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Parent Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
3.20 Insurance. Parent maintains Insurance Policies covering the
assets, business, equipment, properties, operations, employees, officers
and directors of Company and its subsidiaries which are of the type and in
amounts customarily carried by persons conducting businesses similar to
those of Parent and its subsidiaries. There is no material claim by Parent
or any of its subsidiaries pending under any of the Insurance Policies as
to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds other than customary reservations of
rights notices issued by the insurers.
3.21 Opinion of Financial Advisor. Parent has received a written
opinion from Parent Financial Advisor to the effect that, as of the date
hereof, the Exchange Ratio is fair to Parent from a financial point of
view.
3.22 Board Approval. The Board of Directors of Parent has, as of the
date hereof, (i) approved this Agreement and the transactions contemplated
hereby, (ii) determined that the Merger is in the best interests of the
stockholders of Parent and is on terms that are fair to such stockholders,
(iii) has approved this Agreement and the Merger and (iv) has determined to
recommend that the stockholders of Parent vote in favor of this Agreement
and the Merger.
3.23 Vote Required. The affirmative vote of a majority of the
outstanding shares of Parent Common Stock present at the Parent
Stockholders' Meeting at which a quorum is present is the only vote of the
holders of any class or series of Parent's capital stock necessary to
approve the Share Issuance.
3.24 No Ownership of Company Common Stock. As of the date hereof,
Parent does not own, beneficially or of record, any shares of Company
Common Stock other than ownership, if any, held by any Parent Employee
Plan.
3.25 State Takeover Statutes. The Board of Directors of Parent has
approved the Merger, this Agreement and the Parent Voting Agreement, and
has taken such action, if any, as may be necessary to render inapplicable
to the Merger, this Agreement and the Parent Voting Agreement and the
transactions contemplated hereby and thereby, any applicable state takeover
statute or similar law or regulation including "control share," "fair
price," "business combination" or other anti-takeover laws and regulations
of any state including Section 203 of the DGCL.
3.26 Product Warranty. Since January 1, 1999, each product
manufactured, sold, leased or delivered by Parent has complied in all
material respects with all applicable standard contractual commitments and
all express and implied warranties, and there is no present action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
pending for any replacement or repair thereof or other damages in
connection therewith which if determined adversely to Parent would have a
Material Adverse Effect. No product manufactured, sold, leased or delivered
by Parent is subject to any warranty or other indemnity beyond the
applicable standard terms and conditions of sale or lease.
3.27 Inventory. The parts and materials in the inventory of Parent,
the value of which is reflected in the Parent Balance Sheet, and thereafter
acquired by Parent (the "INVENTORY") was acquired and maintained in an
acquisition transaction or in the ordinary course of business of Parent and
except for those parts or materials for which a reserve is reflected on the
Parent Balance Sheet, is of such quality as to be usable or salable in the
ordinary course of Parent's business. Since the date of the Parent Balance
Sheet, Parent has continued to replenish inventories in the ordinary course
of business consistent with past practices. All items included in the
Inventory are owned by Parent, free and clear of all liens and
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encumbrances (except Permitted Liens), except for inventory sold by Parent
in the ordinary course of business subsequent to the date of the Parent
Balance Sheet. Parent is not under any liability or obligation with respect
to the return of Inventory in the possession of any customer other than
return of Inventory used in noncompliant products.
3.28 Questionable Payments. Parent has not nor has, to its knowledge,
any director, officer or other employee of the Parent: (i) made any
payments or provided services or other favors in the United States or any
foreign country in order to obtain preferential treatment or consideration
by any Government Entity with respect to any aspect of the Parent's
business; or (ii) made any political contributions that would not be lawful
under the laws of the United States (including the Foreign Corrupt
Practices Act) or the foreign country in which such payments were made.
3.29 Interim Operations of Merger Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations
only as contemplated hereby.
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and Parent
shall, and shall cause their respective subsidiaries to, carry on their
respective businesses, in all material respects, in the ordinary course, in
substantially the same manner as heretofore conducted and in compliance
with all applicable laws and regulations, pay their respective debts and
taxes when due subject to good faith disputes over such debts or taxes, pay
or perform other material obligations when due, and use commercially
reasonable efforts consistent with past practices and policies to (i)
preserve intact their respective present business organizations, (ii) keep
available the services of their respective present officers and employees
and (iii) preserve their respective relationships with customers,
suppliers, distributors, licensors, licensees, and others with which each
has business dealings. In addition, unless otherwise required by law or
contract, Company and Parent will each promptly notify the other of any
material event involving its business or operations.
In addition, except as permitted or expressly contemplated by the terms of
this Agreement or as disclosed in the Company Disclosure Schedule or the Parent
Disclosure Schedule, Company and Parent will not, without the prior written
consent of the other party, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, do any of the following or permit their
respective subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted
under any of such plans;
(b) Grant (whether in cash, stock, equity securities, property or
otherwise) any severance or termination pay to any executive officer or
any person who reports directly to an executive officer except pursuant
to written agreements outstanding, or policies existing, on the date
hereof, or adopt any new severance plan, except in the ordinary course
of business consistent with past practice;
(c) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock;
(d) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock, except repurchases of unvested shares in
connection with the termination of the service relationship with any
employee or consultant pursuant to the terms of stock option or purchase
agreements in effect on the date hereof;
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(e) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of
capital stock, or subscriptions, rights, warrants or options to acquire
any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible
securities, other than (x) the issuance, delivery and/or sale of (i)
shares of Company Common Stock or Parent Common Stock, as the case may
be, pursuant to the exercise of stock options or warrants therefor
outstanding as of the date of this Agreement, and (ii) shares of Company
Common Stock and Parent Common Stock, as the case may be, issuable to
participants in the Company ESPP or the Parent ESPP consistent with the
respective terms thereof and (y) the granting of stock options in the
ordinary course of business consistent with past practice (and the
issuance of Company Common Stock and Parent Common Stock, as the case
may be, upon exercise thereof);
(f) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries), except as otherwise
contemplated by this Agreement;
(g) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of,
any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the
aggregate, to the business of Company or Parent, as the case may be, or
enter into any material joint ventures, strategic partnerships or
alliances (collectively, an "ACQUISITION"); provided, however, that this
clause shall not prohibit an Acquisition or Acquisitions which (i) does
not involve the issuance of Company Common Stock, Parent Common Stock or
securities exercisable for or convertible into Company Common Stock or
Parent Common Stock, (ii) does not involve cash consideration for the
stock or assets being purchased in excess of $375 million (either
individually or in the aggregate); provided that the limitations set
forth in this clause (ii) shall not apply to Parent's previously
announced divestiture transaction with Alcatel USA; and (iii) will not
delay or adversely affect the ability of Company or Parent, as the case
may be, to complete the Merger and fulfill its obligations hereunder;
and provided further that the covenant set forth in this Section 4.1(g)
shall terminate upon the first to occur of (x) Company's receipt of an
Acquisition Proposal or (y) October 31, 2001;
(h) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the
aggregate, to the business of Company or Parent, as the case may be,
except sales or licenses of product or inventory in the ordinary course
of business consistent with past practice;
(i) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities
of Company or Parent, as the case may be, enter into any "keep well" or
other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing
other than (i) in connection with the financing of ordinary course trade
payables consistent with past practice or (ii) pursuant to existing
credit facilities in the ordinary course of business;
(j) Except as disclosed on the Company Disclosure Schedule, adopt
or amend any employee benefit plan or employee stock purchase or
employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any
special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates or fringe benefits (including rights
to severance or indemnification) of its directors, officers, employees
or consultants other than as required by applicable law or this
Agreement, except in connection with (i) regularly scheduled
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periodic performance reviews and compensation adjustments consistent
with past practice or (ii) Acquisitions permitted by the last clause of
Subsection (g) of this Section 4.1;
(k) Except in the ordinary course of business consistent with past
practice, modify or amend in any material respect or terminate any
material contract or agreement to which Company or Parent or any
subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder;
(l) Except as required by GAAP, make any change in accounting
methods, principles or practices;
(m) Make any Tax election inconsistent with past practice that,
individually or in the aggregate, would adversely affect in any material
respect the Tax liability or Tax attributes of the Company or any of its
subsidiaries, taken as a whole, or settle or compromise any material Tax
liability, or consent to any extension or waiver of any limitation
period with respect to Taxes;
(n) Make any Tax election inconsistent with past practice that,
individually or in the aggregate, would adversely affect in any material
respect the Tax liability or Tax attributes of Parent or any of its
subsidiaries, taken as a whole, or settle or compromise any material Tax
liability, or consent to any extension or waiver of any limitation
period with respect to Taxes; or
(o) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (n) above.
4.2 Conduct Affecting the Status of the Reorganization. During the
period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Effective
Time, Parent and the Company shall not, and shall not permit any of their
respective subsidiaries to, engage in any action that could cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code.
4.3 Parent Name. Parent and Company shall mutually agree upon the
name of the Parent which will become effective immediately following the
Merger, and Parent shall submit any such name change for approval of its
stockholders at the Parent Stockholders' Meeting; provided that any such
agreed upon name change shall be contingent upon completion of the Merger.
If Parent and Company do not agree upon a new name, the name of Parent
immediately following the Merger shall be changed to the name set forth in
Section 4.3 of the Parent Disclosure Schedule.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Joint Proxy Statement/Prospectus; S-4; Other Filings. As promptly
as practicable after the execution of this Agreement, Company and Parent
will prepare and file with the SEC the Joint Proxy Statement/Prospectus and
Parent will prepare and file with the SEC the S-4 in which the Joint Proxy
Statement/Prospectus will be included as a prospectus. Each of Company and
Parent will respond to any comments of the SEC, will use its respective
commercially reasonable efforts to have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing, and
Company and Parent will cause the Joint Proxy Statement/Prospectus to be
mailed to their respective stockholders at the earliest practicable time
after the S-4 is declared effective by the SEC. As promptly as practicable
after the date of this Agreement, each of Company and Parent will prepare
and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other federal, foreign or Blue Sky or
related laws relating to the Merger and the transactions contemplated by
this Agreement (the "OTHER FILINGS"). Each of Company and Parent will
notify the other promptly upon the receipt of any comments from the SEC or
its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or
supplements to the S-4, the Joint Proxy Statement/ Prospectus or any Other
Filing or for additional information and will supply the other with copies
of all
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correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the
other hand, with respect to the S-4, the Joint Proxy Statement/Prospectus,
the Merger or any Other Filing. Each of Company and Parent will cause all
documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 5.1 to comply in all material
respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Joint Proxy
Statement/Prospectus, the S-4 or any Other Filing, Company or Parent, as
the case may be, will promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of Company and stockholders of
Parent, such amendment or supplement.
5.2 Meetings of Company Stockholders and Parent Stockholders.
(a) Company Stockholders' Meeting.
(i) Promptly after the date hereof, Company will take all action
necessary in accordance with the DGCL and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting
to be held as promptly as practicable, and in any event (to the
extent permissible under applicable law and Company's Certificate of
Incorporation and Bylaws) within 45 days after the declaration of
effectiveness of the S-4, for the purpose of voting upon this
Agreement and the Merger. Subject to Section 5.2(a)(iii), Company
will use its commercially reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this
Agreement and the approval of the Merger and will take all other
action necessary or advisable to secure the vote or consent of its
stockholders required by the rules of the NYSE or the DGCL to obtain
such approvals ("COMPANY STOCKHOLDER VOTE"). Company shall ensure
that the Company Stockholders' Meeting is called, noticed, convened,
held and conducted, and subject to Section 5.2(a)(iii), that all
proxies solicited by Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with the DGCL, its
Certificate of Incorporation and Bylaws, the rules of the NYSE and
all other applicable legal requirements. Notwithstanding anything to
the contrary contained in this Agreement, Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to
ensure that any necessary supplement or amendment to the Joint
Prospectus/Proxy Statement is provided to Company's stockholders in
advance of a vote on the Merger and this Agreement or if as of the
time for which Company Stockholders' Meeting is originally scheduled
(as set forth in the Joint Prospectus/Proxy Statement) there are
insufficient shares of Company Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the
business of the Company Stockholders' Meeting.
(ii) Subject to Section 5.4: (A) the Board of Directors of
Company shall recommend that Company's stockholders vote in favor of
and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting; (B) the Joint Prospectus/Proxy Statement shall
include a statement to the effect that the Board of Directors of
Company has recommended that Company's stockholders vote in favor of
and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting; and (C) neither the Board of Directors of
Company nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify in a manner adverse
to Parent, the recommendation of the Board of Directors of Company
that Company's stockholders vote in favor of and adopt and approve
this Agreement and the Merger.
(iii) Nothing in this Agreement shall prevent the Board of
Directors of Company from withholding, withdrawing, amending or
modifying its recommendation in favor of the Merger, ceasing to
solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger, or from
endorsing or recommending to its stockholders a Superior Offer (as
defined below) if (A) a Superior Offer is made to Company and is not
withdrawn, (B) Company shall have not violated any of the
restrictions set forth in
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Section 5.4, (C) the Board of Directors of Company concludes in good
faith, after consultation with its outside counsel, that, in light of
such Superior Offer, the failure to withhold, withdraw, amend or
modify its recommendation, ceasing to solicit from its stockholders
proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger, would result in a reasonable likelihood
that the Board of Directors of Company would not fulfill its
fiduciary duties to the Company's stockholders under Delaware Law and
(D) the Company provides Parent with two (2) business days prior
written notice of its intent to approve, endorse or recommend any
Superior Offer, such notice to include the material terms and
conditions of such Superior Offer and the identity of the person or
group making any such Superior Offer. For purposes of this Agreement
"SUPERIOR OFFER" shall mean an unsolicited, bona fide offer made by a
third party to consummate any of the following transactions: (x) a
sale or other disposition by Company of all or substantially all of
its assets or (y) the acquisition by any person or group (including
by way of a merger, tender offer or an exchange offer or issuance by
Company), directly or indirectly, of beneficial ownership or a right
to acquire beneficial ownership of shares representing a majority of
the voting power of the then outstanding shares of Company Common
Stock, on terms that the Board of Directors of Company determines, in
good faith, after consultation with the Company Financial Advisor, to
be more favorable to Company stockholders than the terms of the
Merger; provided, however, that any such offer shall not be deemed to
be a Superior Offer if any financing required to consummate the
transaction contemplated by such offer is not committed or is not
likely in the reasonable judgment of Company's Board of Directors
after consultation with the Company Financial Advisor to be obtained
by such third party on a timely basis.
(b) Parent Stockholders' Meeting.
(i) Promptly after the date hereof, Parent will take all action
necessary in accordance with the DGCL and its Certificate of
Incorporation and Bylaws to convene the Parent Stockholders' Meeting
to be held as promptly as practicable, and in any event (to the
extent permissible under applicable law and Parent's Certificate of
Incorporation and Bylaws) within 45 days after the declaration of
effectiveness of the S-4, for the purpose of voting upon the change
of Parent's name and the issuance of shares of Parent Common Stock as
pursuant to the Merger (collectively, the "PARENT STOCKHOLDER
PROPOSALS"). Parent will use its commercially reasonable efforts to
solicit from its stockholders proxies in favor of the Parent
Stockholder Proposals and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required
by the rules of Nasdaq or Delaware Law to obtain such approval
("PARENT STOCKHOLDER VOTE"). Notwithstanding anything to the contrary
contained in this Agreement, Parent may adjourn or postpone the
Parent Stockholders' Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the Joint Prospectus/ Proxy
Statement is provided to Parent's stockholders in advance of a vote
on the Parent Stockholder Proposals or, if as of the time for which
Parent Stockholders' Meeting is originally scheduled (as set forth in
the Joint Prospectus/Proxy Statement) there are insufficient shares
of Parent Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Parent
Stockholders' Meeting. Parent shall ensure that the Parent
Stockholders' Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by Parent in connection
with the Parent Stockholders' Meeting are solicited, in compliance
with Delaware Law, its Certificate of Incorporation and Bylaws, the
rules of Nasdaq and all other applicable legal requirements.
(ii) The Board of Directors of Parent shall recommend that
Parent's stockholders vote in favor of and adopt and approve the
Parent Stockholder Proposals at the Parent Stockholders' Meeting; (B)
the Joint Prospectus/Proxy Statement shall include a statement to the
effect that the Board of Directors of Parent has recommended that
Parent's stockholders vote in favor of and adopt and approve the
Parent Stockholder Proposals at the Parent Stockholders' Meeting; and
(C) neither the Board of Directors of Parent nor any committee
thereof shall withdraw,
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amend or modify, or propose or resolve to withdraw, amend or modify
in a manner adverse to Company, the recommendation of the Board of
Directors of Parent that Parent's stockholders vote in favor of and
adopt and approve the Parent Stockholder Proposals.
5.3 Non-Disclosure; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a Mutual Non-Disclosure Agreement, dated as of June 12, 2001
(the "NON-DISCLOSURE AGREEMENT"), which Non-Disclosure Agreement will
continue in full force and effect in accordance with its terms.
(b) Access to Information.
(i) Company. Company will afford Parent and its accountants,
counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of
Company during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product
development efforts, properties, results of operations and personnel
of Company, as Parent may reasonably request. Parent and its agents
and representatives shall have access during normal business hours to
the Company's facilities for the purpose of performing such
environmental testing and investigations (including, without
limitation, sampling of subsurface soils and groundwater) that
Parent, in its sole discretion, deems necessary (such testing and
investigation, whenever performed, referred to as an "ENVIRONMENTAL
REVIEW") at any time prior to the Closing; provided, however, that
Parent shall not unreasonably interfere with the operations of the
Company during the performance of the Environmental Reviews.
(ii) Parent. Parent will afford Company and its accountants,
counsel and other representatives reasonable access upon reasonable
notice during normal business hours to the properties, books, records
and personnel of Parent during the period prior to the Effective Time
to obtain all information concerning the business, including the
status of product development efforts, properties, results of
operations and personnel of Parent, as Company may reasonably
request. Company and its agents and representatives shall have access
during normal business hours to the Parent's facilities for the
purpose of performing Environmental Reviews at any time prior to the
Closing; provided, however, that Company shall not unreasonably
interfere with the operations of the Parent during the performance of
the Environmental Reviews.
(iii) No information or knowledge obtained by Parent or Company
in any investigation pursuant to this Section 5.3 will affect or be
deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the
Merger.
5.4 No Solicitation.
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VII, Company
and its subsidiaries will not, nor will they authorize or knowingly
permit any of their respective officers, directors, or affiliates or any
investment banker, attorney or auditor retained by any of them to,
directly or indirectly, (i) solicit, initiate, encourage or knowingly
induce the making, submission or announcement of any Acquisition
Proposal (as hereinafter defined), (ii) participate in any discussions
or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or would
reasonably be expected to lead to, any Acquisition Proposal, (iii)
subject to Section 5.2(a)(iii), approve, endorse or recommend any
Acquisition Proposal or (iv) enter into any letter of intent or similar
document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction; provided, however,
that prior to the approval of this Agreement by the required Company
Stockholder Vote, this Agreement shall not prohibit Company from (A)
furnishing nonpublic information regarding Company and its subsidiaries
to, entering into a confidentiality agreement with or entering into
discussions or negotiations with, any person or group in response to a
Superior
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Offer submitted by such person or group (and not withdrawn) if (1)
Company and its subsidiaries shall not have violated any of the
restrictions set forth in this Section 5.4, (2) the Board of Directors
of Company concludes in good faith, after consultation with its outside
legal counsel, that the failure to take such action will result in a
reasonable likelihood that the Company's Board of Directors will not
fulfill its fiduciary obligations to the Company's stockholders under
Delaware Law, (3) prior to furnishing any such nonpublic information to,
or entering into discussions or negotiations with, such person or group,
Company gives Parent two (2) business days prior written notice of the
identity of such person or group and of Company's intention to furnish
nonpublic information to, or enter into discussions or negotiations
with, such person or group and Company receives from such person or
group an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such person or group by or on behalf of Company
that is no more favorable to such person or group than the
Non-Disclosure Agreement is to Parent (provided that any such
confidentiality agreement need not contain restrictions of the nature
set forth in Section 7 thereof), and (4) contemporaneously with
furnishing any such nonpublic information to such person or group,
Company furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously furnished by Company
to Parent) or (B) complying with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act or other applicable law with regard to an Acquisition
Proposal, provided, however, that unless the conditions set forth in
clauses (A) through (C) of the first sentence of Section 5.2(a)(iii) are
satisfied, the Company's Board of Directors may not withhold, withdraw,
modify or change in a manner adverse to Parent, or fail to make, any of
its recommendations in connection with this Agreement and the Merger, or
approve, endorse or recommend, any Acquisition Proposal. The Company
also will promptly request each Person that has executed a
confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return all confidential information heretofore
furnished to such person by or on behalf of the Company or any of its
Subsidiaries. Company and its subsidiaries will immediately cease any
and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in this Section 5.4 by any officer, director
or affiliate of Company or any of its subsidiaries or any investment
banker, attorney or auditor of Company or any of its subsidiaries that
results in a Superior Offer shall be deemed to be a breach of this
Section 5.4 by Company. In addition to the foregoing, Company shall
provide Parent with at least two (2) business days prior notice of any
meeting of Company's Board of Directors at which Company's Board of
Directors is reasonably expected to consider a Superior Offer.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean
any inquiry, offer or proposal (other than an inquiry, offer or proposal
by Parent) relating to any Acquisition Transaction. For the purposes of
this Agreement, "ACQUISITION TRANSACTION" shall mean any transaction or
series of related transactions other than the transactions contemplated
by this Agreement involving: (A) any acquisition or purchase from
Company by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a
15% interest in the total outstanding voting securities of Company or
any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 15% or more of the total outstanding
voting securities of Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving
Company pursuant to which the stockholders of Company immediately
preceding such transaction hold less than 85% of the equity interests in
the surviving or resulting entity of such transaction; (B) any sale,
lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 50% of the assets of Company; or
(C) any liquidation or dissolution of Company.
(b) In addition to the obligations of Company set forth in
paragraph (a) of this Section 5.4, Company as promptly as practicable,
and in any event within two (2) business days, shall advise
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Parent in writing of any request for non-public information which
Company reasonably believes would lead to an Acquisition Proposal or of
any Acquisition Proposal, the material terms and conditions of such
request, Acquisition Proposal or inquiry and the identity of the person
or group making any such request, Acquisition Proposal or inquiry.
Company will keep Parent informed in all material respects of the status
and details (including material amendments or proposed amendments) of
any such request, Acquisition Proposal or inquiry.
5.5 Public Disclosure. Parent and Company will consult with each
other, and to the extent practicable, agree, before issuing any press
release or otherwise making any public statement with respect to the Merger
and this Agreement and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required
by law or any listing agreement with a national securities exchange, the
NYSE (in the case of Company) or Nasdaq (in the case of Parent).
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including using
reasonable efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions precedent set forth in
Article VI to be satisfied, (ii) the obtaining of all necessary actions
or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the
taking of all reasonable steps as may be necessary to avoid any suit,
claim, action, investigation or proceeding by any Governmental Entity,
(iii) the obtaining of all necessary consents, approvals or waivers from
third parties, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection
with and without limiting the foregoing, Company and its Board of
Directors shall, if any state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement or any
of the transactions contemplated by this Agreement, use all reasonable
efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the transactions contemplated hereby. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be
deemed to require Parent or Company or any subsidiary or affiliate
thereof to agree to any divestiture by itself or any of its affiliates
of shares of capital stock or of any business, assets or property, or
the imposition of any material limitation on the ability of any of them
to conduct their businesses or to own or exercise control of such
assets, properties and stock.
(b) Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect, or any failure of
Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section
6.3(a) or 6.3(b) could not be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(c) Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this
Agreement becoming untrue or inaccurate in any material respect,
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or any failure of Parent or Merger Sub to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.2(a) or 6.2(b) could not be
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or
the conditions to the obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use all commercially reasonable
efforts to obtain any consents, waivers and approvals under any of its or
its subsidiaries' respective agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the
transactions contemplated hereby or necessary to enable the Surviving
Corporation to conduct and operate the business of Company and its
subsidiaries substantially as presently conducted.
5.8 Stock Options, Company ESPP and Benefit Plans.
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock under Company's Stock Option Plans,
whether or not exercisable and whether or not vested, shall by virtue of
the Merger and without any further action on the part of Company or the
holder thereof, be assumed by Parent, all outstanding options under the
Company Stock Option Plans (each a "COMPANY STOCK OPTION" and
collectively the "COMPANY STOCK OPTIONS"), whether or not exercisable
and whether or not vested, shall, and without any further action on the
part of the Company or the holder thereof, be assumed by Parent, in such
manner (with respect to all such option assumptions) that Parent (i) is
"assuming a stock option in a transaction to which Section 424(a)
applied" within the meaning of Section 424(a) of the Code, or (ii) to
the extent that Section 424 of the Code does not apply to any such
Company Stock Options, would be a transaction within Section 424 of the
Code. Each Company Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Company Stock Option Plan
immediately prior to the Effective Time (including, without limitation,
any repurchase rights or vesting provisions), except that (1) each
Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for the number of whole shares of Parent
Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Stock
Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock and (2) the per share exercise price for the shares
of Parent Common Stock issuable upon exercise of such assumed Company
Stock Option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company
Stock Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that Company Stock Options assumed by Parent
shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent such Company Stock
Options qualified as incentive stock options immediately prior to the
Effective Time and the provisions of this Section 5.8 shall be applied
consistent with such intent.
(c) Company shall take actions as are necessary to cause the
"Purchase Date" (as such term is used in the Company ESPP) applicable to
the then current Offering (as such term is used in the Company ESPP) to
be the last trading day on which the Company Common Stock is traded on
the NYSE immediately prior to the Effective Time (the "FINAL COMPANY
PURCHASE DATE"); provided, that such change in the Purchase Date shall
be conditioned upon the consummation of the Merger. On the Final Company
Purchase Date, Company shall apply the funds credited as of such date
under the Company ESPP within each participant's payroll withholding
account to the purchase of whole shares of Company Common Stock in
accordance with the terms of the Company ESPP. Any such shares purchased
under the Company ESPP shall be automatically converted on the same
basis as all other shares of Company Common Stock (other than shares
canceled pursuant to Section 1.6(b)), except that such shares shall be
converted automatically into shares of Parent
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Common Stock without the issuance of certificates representing issued
and outstanding shares of Company Common Stock to the Company ESPP
participants.
(d) Notwithstanding anything to the contrary contained herein,
Company shall not incur any obligations under the Company ESPP after the
Final Company Purchase Date and the Company shall take any steps
necessary to terminate the Company ESPP on the Final Company Purchase
Date immediately after effecting the transactions described in Section
5.8(c).
5.9 Form S-8. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options as to which Form S-8 is available within ten (10)
business days following the Effective Time and to maintain the
effectiveness of such registration statement thereafter for so long as any
of such options or other rights remain outstanding.
5.10 Indemnification.
(a) Parent will cause the Surviving Corporation to fulfill and
honor in all respects the obligations of Company pursuant to any
indemnification agreements between Company and its present and former
directors, officers, employees and agents in effect immediately prior to
the Effective Time (the "INDEMNIFIED Parties") and any indemnification
provisions under Company's Certificate of Incorporation or Bylaws as in
effect on the date hereof. The Certificate of Incorporation and Bylaws
of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the Certificate of
Incorporation and Bylaws of Company as in effect on the date hereof,
which provisions will not be amended, repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or
agents of Company, unless such modification is required by law.
(b) For a period of six (6) years after the Effective Time, Parent
will cause the Surviving Corporation to maintain in effect the current
policies of directors' and officers' liability insurance maintained by
the Company and its subsidiaries (provided that such policy shall during
such period cover only acts of Company's directors and officers
occurring at or prior to the Effective Time and not thereafter). Parent
may substitute therefor policies of substantially similar coverage
containing terms and conditions that are not less advantageous, in all
material respects to the Indemnified Parties; provided, however, that in
no event will Parent or the Surviving Corporation be required to expend
in excess of 125% of the annual premium currently paid by Company for
such coverage (or, alternatively, shall obtain such coverage as is
available for 125% of such annual premium).
(c) The provisions of this Section 5.10 are intended to be in
addition to the rights otherwise available to the Indemnified Parties by
law, charter, statute, bylaw, resolution of the Board of Directors of
Company or agreement, and shall operate for the benefit of, and shall be
enforceable by, each of the Indemnified Parties, their heirs and their
representatives.
5.11 NASDAQ Listing. Parent agrees to authorize for listing on Nasdaq
the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice
of issuance.
5.12 Company Affiliate Restrictions. Set forth in the Company
Disclosure Schedule is a list of those persons who may be deemed to be, in
Company's reasonable judgement, affiliates of Company (each a "COMPANY
AFFILIATE"), as such term is defined in paragraphs (c) and (d) of Rule 145
promulgated by the Securities Act. Company will provide Parent with such
information and documents as Parent reasonably requests for purposes of
reviewing and validating such list. Parent will be entitled to place
appropriate legends referring to SEC Rule 145 on the certificates
evidencing any Parent Common Stock to be received by a Company Affiliate
pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the provisions of Rule 145.
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5.13 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, Company and Parent each shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of
the United States Department of Justice ("DOJ") Notification and Report
Forms relating to the transactions contemplated herein as required by the
HSR Act, as well as comparable pre-merger notification forms required by
the merger notification or control laws and regulations of any applicable
jurisdiction, as agreed to by the parties in the exercise of reasonable
business judgment and with the advice of counsel. Company and Parent each
shall (a) cooperate and coordinate with one another in the making of such
Filings, (b) promptly supply the other with any information which may be
required in order to effectuate such filings and (c) promptly supply any
additional information which reasonably may be required by the FTC, the DOJ
or the competition or merger control authorities of any other jurisdiction
and which the parties may reasonably deem appropriate.
5.14 Company Representatives on Parent Board of Directors. At the
Effective Time, the Board of Directors of Parent shall amend its bylaws to
increase the size of its Board of Directors from seven (7) to ten (10)
persons and shall appoint three (3) representatives of Company (the
"COMPANY DIRECTORS") to fill such vacancies. Each Company Director who is
not an employee of Parent or one of its subsidiaries shall be entitled to
participate in the compensation and benefits plans to the same extent as
other nonemployee directors of Parent and shall become a party to an
indemnification agreement with Parent that is substantially similar to the
indemnification agreements between Parent and its nonemployee directors who
were not formerly directors of the Company. Parent shall nominate the
Company Directors for election as members of the Parent's Board of
Directors at Parent's 2002, 2003 and 2004 annual meetings of stockholders,
provided that the Company Directors are willing to be so nominated and, in
the case of Company directors standing for re-election, shall have average
board meeting attendance for the prior year at least equal to the average
meeting attendance for the prior year of all Parent's other directors as a
group.
5.15 Rights Agreements.
(a) The Board of Directors of Parent shall take all action to the
extent necessary (including amending the Parent Rights Agreement) in
order to render the Parent Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement. Except in connection
with the foregoing sentence, the Board of Directors of Parent shall not,
without the prior written consent of Company, (i) amend the Parent
Rights Agreement or (ii) take any action with respect to, or make any
determination under, the Parent Rights Agreement, including a redemption
of the Parent Rights, in each case in order to facilitate any
Acquisition Proposal with respect to Parent.
(b) The Board of Directors of Company shall take all action to the
extent necessary (including amending the Company Rights Agreement) in
order to render the Company Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement. Except in connection
with the foregoing sentence, the Board of Directors of Company shall
not, without the prior written consent of Parent (except with respect to
a Superior Offer), (i) amend the Company Rights Agreement or (ii) take
any action with respect to, or make any determination under, the Company
Rights Agreement, including a redemption of the Company Rights, in each
case in order to facilitate any Acquisition Proposal with respect to
Company.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. This Agreement shall have been approved
and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Company.
Each of the Parent Stockholder Proposals shall have been duly approved,
by the requisite vote under applicable law and the rules of NASDAQ, by
the stockholders of Parent.
(b) S-4 Effective; Proxy Statement. The SEC shall have declared
the S-4 effective. No stop order suspending the effectiveness of the S-4
or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy
Statement/ Prospectus, shall have been initiated or threatened in
writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or terminated early
and all material foreign antitrust approvals required to be obtained
prior to the Merger in connection with the transactions contemplated
hereby shall have been obtained without any requirement that would
violate the provisions of the last sentence of Section 5.6(a) hereof.
(d) Tax Opinions. Parent and Company shall each have received
written opinions from their respective tax counsel in form and substance
reasonably satisfactory to them, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn. The parties to
this Agreement agree to make such reasonable representations as
requested by such counsel for the purpose of rendering such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable to
stockholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall
have been authorized for listing on Nasdaq upon official notice of
issuance.
6.2 Additional Conditions to Obligations of Company. The obligation
of Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement (i)
shall have been true and correct as of the date of this Agreement and
(ii) shall be true and correct on and as of the Closing Date with the
same force and effect as if made on the Closing Date except, (A) for
such inaccuracies as in the aggregate, would not constitute a Material
Adverse Effect on Parent and Merger Sub and (B) for those
representations and warranties which address matters only as of a
particular date (which representations shall have been so true and
correct as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded and (ii) any
update of or modification to the Parent Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded). Company shall have received a certificate with respect to
the foregoing signed on behalf of Parent by the Chief Executive Officer
and the Chief Financial Officer of Parent.
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and Company shall have received a
certificate to such effect signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Parent shall have occurred since the date of this Agreement
and Company shall have received a certificate to such effect signed on
behalf of Parent by the Chief Executive Officer and the Chief Financial
Officer of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, any of which may be waived, in
writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of Company contained in this Agreement (i) shall have been
true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect
as if made on and as of the Closing Date except (A) for such
inaccuracies as in the aggregate would not constitute a Material Adverse
Effect on the Company (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based
on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update
of or modification to the Company Disclosure Schedule made or purported
to have been made after the date of this Agreement shall be disregarded)
and (B) those representations and warranties which address matters only
as of a particular date (which representations shall have been so true
and correct as of such particular date). Parent shall have received a
certificate with respect to the foregoing signed on behalf of Company by
the Chief Executive Officer and the Chief Financial Officer of Company.
(b) Agreements and Covenants. Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date, and Parent shall have received a certificate
to such effect signed on behalf of Company by the Chief Executive
Officer and the Chief Financial Officer of Company.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Company shall have occurred since the date of this Agreement
and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and Chief Financial
Officer of the Company.
(d) Consents. Company shall have obtained all consents, waivers
and approvals contemplated by this Agreement or the Company Disclosure
Schedule in connection with the material agreements, contracts, licenses
or leases of Company or its subsidiaries.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the requisite approval of
the stockholders of Company or Parent, respectively:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by December 31, 2001 for any reason; provided, however, that
the right to terminate this Agreement
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under this Section 7.1(b) shall not be available to any party whose
action or failure to act has been the 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 this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is
final and nonappealable;
(d) by either Company or Parent if: (i) the required approval of
the stockholders of Company contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote
at the Company Stockholder Meeting or at any adjournment thereof or (ii)
the required approval of the stockholders of Parent contemplated by this
Agreement shall not have been obtained by reason of the failure to
obtain the required vote at the Parent Stockholder Meeting or at any
adjournment thereof; PROVIDED that the right to terminate this Agreement
under this Section 7.1(d) shall not be available to any party whose
action or failure to act has been the principal cause of or resulted in
the failure to receive such requisite stockholder vote and such action
or failure to act constitutes a breach of this Agreement;
(e) by Company concurrently with the execution by Company of a
definitive agreement relating to an Acquisition Transaction;
(f) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement,
or if any representation or warranty of Parent shall have become untrue,
in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided that Company may not terminate this Agreement under this
Section 7.1(f) until 30 days after delivery of written notice from
Company to Parent of such breach, provided Parent promptly commences to
exercise commercially reasonable efforts to cure such breach (it being
understood that Company may not terminate this Agreement pursuant to
this paragraph (f) if it shall have materially breached this Agreement
or if such breach by Parent is cured during such 30 day period);
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this
Agreement, or if any representation or warranty of Company shall have
become untrue, in either case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall
have become untrue, provided, that Parent may not terminate this
Agreement under this Section 7.1(g) until 30 days after delivery of
written notice from Parent to Company of such breach, provided Company
promptly commences to exercise commercially reasonable efforts to cure
such breach (it being understood that Parent may not terminate this
Agreement pursuant to this paragraph (g) if it shall have materially
breached this Agreement or if such breach by Company is cured during
such 30 day period); or
(h) by Parent if a Triggering Event (as defined below) shall have
occurred.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of Company or any
committee thereof shall for any reason have withdrawn or shall have amended
or modified in a manner adverse to Parent its recommendation in favor of,
the adoption and approval of the Agreement or the approval of the Merger;
(ii) Company shall have failed to include in the Proxy Statement/Prospectus
the recommendation of the Board of Directors of Company in favor of the
adoption and approval of the Agreement and the approval of the Merger;
(iii) the Board of Directors of Company or any committee thereof shall have
approved or recommended any Acquisition Proposal; (iv) Company shall have
materially breached Section 5.4; (v) Company shall have entered into a
definitive agreement for an Acquisition Transaction; (vi) a tender or
exchange offer relating to securities of Company shall have been commenced
by a Person unaffiliated with Parent and Company
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shall not have sent to its security holders pursuant to Rule 14e-2
promulgated under the Securities Act, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Company recommends rejection of such tender or exchange
offer, or (vii) the Board of Directors of Company resolves to take any of
the actions described under clauses (i), (iii) and (v) above.
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon
the delivery of written notice of the terminating party to the other
parties hereto. In the event of the termination of this Agreement as
provided in Section 7.1, this Agreement shall be of no further force or
effect, except (i) as set forth in this Section 7.2, Section 7.3 and
Article 8, each of which shall survive the termination of this Agreement,
and (ii) nothing herein shall relieve any party from liability for any
willful breach of this Agreement. No termination of this Agreement shall
affect the obligations of the parties contained in the Non-disclosure
Agreement, all of which obligations shall survive termination of this
Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated; provided, however, that Parent
and Company shall share all fees and expenses, other than attorneys' and
accountants fees and expenses, incurred in relation to (i) the printing
and filing (with the SEC) of the Joint Proxy Statement/Prospectus
(including any preliminary materials related thereto) and the S-4
(including financial statements and exhibits) and any amendments or
supplements thereto and (ii) the filing of any notices required to be
filed for HSR Approval or comparable filing requirements with other
Governmental Entities, in proportion to the relative ownership levels of
Parent Common Stock upon Closing by the stockholders of Company and
Parent.
(b) Company Payments.
(i) In the event that Company shall terminate this Agreement
pursuant to Section 7.1(e), Company shall, promptly but in no event
more than two (2) business days after such termination, pay Parent a
termination fee (the "TERMINATION FEE") of $30,000,000.00. In the
event that, within fifteen (15) months after such termination by the
Company, the Company consummates the Acquisition Transaction which
gave rise to the Company's right to terminate this Agreement pursuant
to Section 7.1(e) or consummates any other Acquisition Transaction,
Company shall, promptly but in no event more than two (2) business
days after such consummation, pay Parent a consummation fee (the
"CONSUMMATION FEE") of $120,000,000.00.
(ii) In the event that Parent shall terminate this Agreement
pursuant to Section 7.1(h) and within fifteen (15) months after such
termination by Parent, the Company consummates an Acquisition
Transaction, Company shall, promptly but in no event more than two
(2) business days after such consummation, pay Parent an amount equal
to the sum of the Termination Fee and the Consummation Fee.
(iii) For purposes of Sections 7.3(i) and 7.3(ii) hereof, the
15% threshold referenced in clause (A) of the definition of
"Acquisition Transaction" shall be increased to a threshold of 50% or
more of the total outstanding voting securities of the Company and
the 85% threshold referenced in said clause (A) shall be reduced to a
threshold of less than 50% of the equity interests in the surviving
or resulting entity.
(c) Payments in the Event of Stockholder Vote Not Received.
(i) Company shall pay Parent a cash termination fee of $3.0
million (the "EXPENSE FEE") in the event this Agreement is terminated
pursuant to Section 7.1(d)(i) as a result of the
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failure to receive the Company Stockholder Vote if the Parent
Stockholder vote has been obtained. The Expense Fee will, to the
extent paid by the Company or on its behalf, be credited against the
Termination Fee, if any, payable under Section 7.3(b).
(ii) Parent shall pay Company the Expense Fee in the event this
Agreement is terminated pursuant to Section 7.1(d)(ii) as a result of
the failure to receive the Parent Stockholder Vote if (A) the Company
Stockholder Vote has been obtained and (B) this Agreement is not
terminable by Parent pursuant to Section 7.1(h).
(d) The Expense Fee shall be paid no later than two (2) business
days after the date the obligation arises pursuant to clauses (i) or
(ii) of Section 7.3(c).
(e) Each party acknowledges that the agreements contained in this
Section 7.3 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the other party
would not enter into this Agreement; accordingly, if either party fails
promptly to pay the amounts due pursuant to this Section 7.3, and, in
order to obtain such payment, the other party commences a suit which
results in a judgment against such party for the amounts set forth in
this Section 7.3, such party shall pay to the other party its reasonable
costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set
forth in this Section 7.3 at the prime rate of Bank of America N.A. in
effect on the date such payment was required to be made. All fees
payable pursuant to this Section 7.3 shall be paid by wire transfer of
immediately available funds to an account designated by the party to
whom such fees are payable.
(f) Payment of the fees and expenses described in Sections 7.3(b)
and 7.3(c) shall be in lieu of damages incurred in the event of breach
of this Agreement.
7.4 Amendment. Subject to applicable law and the requirements of NYSE
and Nasdaq, the parties may amend this Agreement hereto at any time by
execution of an instrument in writing signed on behalf of each of Parent
and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such
party. Delay in exercising any right under this Agreement shall not
constitute a waiver of such right.
ARTICLE VII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the
covenants that by their terms survive the Effective Time shall survive the
Effective Time.
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8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by
commercial delivery service, or sent via telecopy (receipt confirmed) to
the parties at the following addresses or telecopy numbers (or at such
other address or telecopy numbers for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to:
Sanmina Corporation
2700 North First Street
San Jose, CA 95134
Attn: Rick Ackel, Chief Financial Officer
Facsimile:
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention:
Facsimile: (650) 493-6811
(b) if to Company, to:
SCI Systems, Inc.
2101 West Clinton Avenue
P.O. Box 1000
Huntsville, AL 35807
Attention: Michael M. Sullivan, General Counsel
Facsimile: (256) 882-4466
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
16th Floor, 191 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attention: James J. McAlpin, Jr. Esq.
Facsimile: (404) 572-6999
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words "without
limitation" except when preceded by a negative predicate. The table of
contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "THE
BUSINESS OF" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect that is or would
reasonably be expected to be materially adverse to the business, assets
(including intangible assets), capitalization, financial condition, or
results of operations or prospects of such entity and its parent (if
applicable) and subsidiaries taken as a whole (provided, however, that
none of the following shall be deemed, in and of itself, to be a
Material Adverse Effect: (A) a change that
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primarily results from conditions generally affecting the United States
economy or the world economy; (B) a change that primarily results from
conditions generally affecting the electronics manufacturing services
industry; (C) a change that results from the effect of change of control
provisions in contracts and agreements between the Company and its
principal customers or suppliers; or (D) a change that results from the
announcement and the pendency of this Agreement and the transactions
contemplated hereby or (E) a change that results directly from action
taken by a party in connection with fulfilling its obligations
hereunder. For purposes of this condition, changes in the trading price
of the Parent Common Stock, as reported by Nasdaq, or the Company Common
Stock, as reported by the NYSE, shall not alone constitute a Material
Adverse Effect, whether occurring at any time or from time to time.
(c) For purposes of this Agreement, the term "PERSON" shall mean
any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any limited liability
company or joint stock company), firm or other enterprise, association,
organization, entity or Governmental Entity.
(d) For purposes of this Agreement, term "KNOWLEDGE" when used in
connection with the Company's knowledge shall refer to the actual
knowledge of the Chief Executive Officer, President, Chief Financial
Officer and General Counsel of Company and when used in connection with
the Parent's knowledge shall mean the actual knowledge of the Chief
Executive Officer, President and Chief Financial Officer of Parent.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including Company Disclosure
Schedule and the Parent Disclosure Schedule (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being
understood that the Non-Disclosure Agreement shall continue in full force
and effect until the Closing and shall survive any termination of this
Agreement; and (b) are not intended to confer upon any other person any
rights or remedies hereunder, except as expressly and specifically provided
herein.
8.6 Severability. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by
a party of any one remedy will not preclude the exercise of any other
remedy. The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
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8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts
of law thereof; provided that issues involving the corporate governance of
any of the parties hereto shall be governed by their respective
jurisdictions of incorporation. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction of any state or federal court within
the State of Delaware, in connection with any matter based upon or arising
out of this Agreement or the matters contemplated herein, agrees that
process may be served upon them in any manner authorized by the laws of the
State of Delaware for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction
and such process.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement
or other document will be construed against the party drafting such
agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
SANMINA CORPORATION
By: /s/ JURE SOLA
------------------------------------
Name: Jure Sola
Title: Chief Executive Officer
SUN ACQUISITION SUBSIDIARY, INC.
By: /s/ JURE SOLA
------------------------------------
Name: Jure Sola
Title: Chief Executive Officer
SCI SYSTEMS, INC.
By: /s/ A. EUGENE SAPP, JR.
------------------------------------
Name: A. Eugene Sapp, Jr.
Title: Chairman and Chief Executive
Officer
* * * * AGREEMENT AND PLAN OF REORGANIZATION * * * *
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ANNEX B
July 13, 2001
Board of Directors
Sanmina Corporation
2700 North First Street
San Jose, CA 95134
Members of the Board of Directors:
Sanmina Corporation (the "Acquiror"), Sun Acquisition Subsidiary, Inc., a
wholly owned subsidiary of the Acquiror (the "Merger Sub"), and SCI Systems,
Inc. (the "Company") propose to enter into an Agreement and Plan of
Reorganization dated as of July 13, 2001 (the "Agreement") pursuant to which the
Merger Sub will be merged with and into the Company in a transaction (the
"Merger") in which each outstanding share of the Company's common stock, par
value $0.10 per share (the "Shares"), will be converted into the right to
receive 1.36 shares (the "Exchange Ratio") of the common stock, par value $0.01
per share, of the Acquiror (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the Acquiror.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company and the Acquiror, as well as the amount and timing
of any cost savings and related expenses and synergies expected to result
from the Merger (the "Expected Synergies"), furnished to or discussed with
us by the Company and the Acquiror;
(3) Conducted discussions with members of senior management and
representatives of the Company and the Acquiror concerning the matters
described in clauses 1 and 2 above, as well as their respective businesses
and prospects before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the historical market prices and valuation multiples for
the Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their respective
financial and legal advisors;
(8) Considered the potential pro forma impact of the Merger on the
Acquiror;
(9) Reviewed the Agreement and other related agreements; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us, discussed with or
reviewed by us or for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or undertaken an
independent
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evaluation or appraisal of any assets or liabilities (contingent or otherwise)
of the Company or the Acquiror or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct, nor have
we conducted any physical inspection of the properties or facilities of the
Company and the Acquiror. With respect to the financial forecasts information
and Expected Synergies furnished to or discussed with us by the Company and the
Acquiror, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgements of the Company's or the
Acquiror's management as to the expected future financial performance of the
Company or the Acquiror, as the case may be, and the Expected Synergies. We have
further assumed that the Merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. We have also assumed that the
Merger will be consummated in accordance with the terms of the Agreement without
waiver of any material condition.
We are acting as financial advisor to the Acquiror in connection with the
Merger and will receive a fee from the Acquiror for our services, a portion of
which is contingent upon the consummation of the merger. In addition, the
Acquiror has agreed to indemnify us for certain liabilities arising out of our
engagement. We have in the past provided certain financial advisory and
financing services to the Acquiror unrelated to the Merger, and may continue to
do so and may receive fees for the rendering of such services. In addition, in
the ordinary course of business, we may actively trade the securities of the
Acquiror and the Company for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Acquiror in its evaluation of the Merger. Our opinion does not address the
merits of the underlying decision by the Acquiror to engage in the Merger and
does not constitute a recommendation to any shareholder of the Acquiror or the
Company as to how such shareholder should vote on the proposed issuance of the
Acquiror Shares or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to the Acquiror.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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ANNEX C
PERSONAL AND CONFIDENTIAL
July 13, 2001
Board of Directors
SCI Systems, Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.10
per share (the "Shares"), of SCI Systems, Inc. (the "Company") of the exchange
ratio of 1.36 shares of Common Stock, par value $0.01 per share ("Parent Common
Stock"), of Sanmina Corporation ("Parent") to be received for each Share (the
"Exchange Ratio") pursuant to the Agreement and Plan of Reorganization, dated as
of July 13, 2001 (the "Agreement"), among Parent, Sun Acquisition Subsidiary,
Inc., a wholly owned subsidiary of Parent, and the Company.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as its financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the Agreement. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Parent for its
own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Parent for the five fiscal years ended June 30, 2000 and September
30, 2000, respectively; certain Current Reports on Form 8-K of Parent, including
such reports dated June 23, 2000 and September 5, 2000 regarding Parent's
acquisition of Hadco Corporation and dated January 31, 2001 and May 14, 2001
regarding Parent's acquisition of AB Segerstrom & Svensson; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
Parent; certain other communications from the Company and Parent to their
respective stockholders; certain internal financial analyses and forecasts for
Parent prepared by the management of Parent; certain financial analyses and
forecasts for Parent prepared by the management of the Company; certain internal
financial analyses and forecasts for the Company prepared by the management of
the Company; and certain cost savings and operating synergies projected by the
management of the Company to result from the transaction contemplated by the
Agreement (the "Synergies"). We also have held discussions with members of the
senior management of the Company and Parent regarding their assessment of the
strategic rationale for, and the potential benefits of, the transaction
contemplated by the Agreement, including their respective views of the
importance of global scale in the electronic manufacturing services industry,
and the past and current business operations, financial condition and future
prospects of their respective companies. In addition, we have reviewed the
reported price and trading activity for the Shares and the Parent Common Stock,
compared certain financial and stock market information for the Company and
Parent with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the electronic manufacturing services industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
In that regard, we have assumed with your consent that the internal financial
analyses and forecasts for the Company prepared by the management of the
Company, the financial analyses
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and forecasts for Parent prepared by the management of the Company and the
Synergies have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the Company and that the Synergies will be
realized in the amounts and time periods contemplated. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or Parent or any of their respective subsidiaries and we have not been
furnished with any such evaluation or appraisal. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to the holders of Shares.
Very truly yours,
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of the Registrant's Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification
of officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The general effect of Section 145 of the Delaware General Corporation
Law, the Company's charter documents and the indemnification agreements is to
provide indemnification to officers and directors for liabilities that may arise
by reason of their status as officers or directors, other than liabilities
arising from willful or intentional misconduct, acts or omissions not in good
faith, unlawful distributions of corporate assets or transactions from which the
officer or director derived an improper personal benefit.
ITEM 21 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT
NUMBER EXHIBITS
------- --------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated as of July 13, 2001
among the Registrant, Sun Acquisition Subsidiary, Inc. and
SCI Systems, Inc., as amended and restated (included as
Annex A to the Proxy Statement/Prospectus which is a part of
this Registration Statement on Form S-4).
2.2 Form of SCI Systems, Inc. Voting Agreement dated as of July
13, 2001 among the Registrant and certain stockholders of SCI
Systems, Inc. listed therein.
2.3 Form of Sanmina Corporation Voting Agreement dated as of July
13, 2001 among SCI Systems, Inc. and the certain stockholders
of the Registrant listed therein.
3.1 (8) Restated Certificate of Incorporation of Registrant dated
January 31, 1996.
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170
EXHIBIT
NUMBER EXHIBITS
----------- --------------------------------------------------------------
3.1.1 (18) Certificate of Amendment of the Restated Certificate of
Incorporation of Registrant dated March 2001.
3.1.2 Certificate of Designation filed with the Delaware
Secretary of State on May 31, 2001 designating 1,000,000
shares of Series A Participating Preferred Stock, par value
$0.01.
3.1.3* Certificate of Amendment of the Restated Certificate of
Incorporation of Registrant.
3.2 (19) Amended and Restated Bylaws of Registrant.
4.1 (1) Specimen Stock Certificate.
4.2 (19) Preferred Stock Rights Agreement, dated as of May 17, 2001
between Registrant and Wells Fargo National Bank,
Minnesota, N.A., including the Certificate of
Determination, the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits A, B and C,
respectively.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati ("WSGR")
relating to validity of shares registered hereby.
8.1 Tax opinion of WSGR.
8.2 Tax opinion of Powell, Goldstein, Frazer & Murphy
LLP ("PGFM").
10.2 (4) Amended 1990 Incentive Stock Plan.
10.3 (1) 1993 Employee Stock Purchase Plan.
10.9 (k)(2) Amended and Restated Credit Agreement dated as of
August 18, 1993 among Sanmina Corporation, Chemical Bank
and other lenders.
10.9 (k)(5) Amendment dated July 27, 1995 to Amended and Restated
Credit Agreement dated August 18, 1993
10.9 (l)(2) Revolving Credit Note, $12,000,000, Chemical Bank.
10.10(l)(1) Lease for premises at 2109 O'Toole Avenue, Suites A-E,
San Jose, California (Portion of Plant I).
10.11 (1) Lease for premises at 2101 O'Toole Avenue, San Jose,
California (Portion of Plant I).
10.12 (l) Lease for premises at 2539 Scott Boulevard, Santa Clara,
California (Plant III).
10.14 (l) Lease for premises at 2060-2068 Bering Drive, San Jose,
California (Plant II).
10.15 (l) Lease for premises at 4220 Business Center Drive, Fremont,
California (Plant V).
10.16 (l) Lease for premises at McCarthy Boulevard, Milpitas,
California (Plant VI).
10.17 (l) Lease for premises at 2121 O'Toole Avenue, San Jose,
California (Corporate Headquarters).
10.19 (2) Lease for premises at 1250 American Parkway, Richards,
Texas (Plant VII).
10.20 (2) Lease for premises at 6453 Kaiser Drive, Fremont,
California (Plant VIII).
10.21 (3) Asset Purchase Agreement dated September 28, 1994 between
Registrant and Comptronix Corporation.
10.22 (4) Lease for premises at 355 East Trimble Road, San Jose,
California.
10.23 (5) Stock Purchase Agreement dated May 31, 1995 between
Sanmina Corporation, Assembly Solutions, Inc. and the
principal stockholders of Assembly Solutions, Inc.
10.24 (6) Indenture dated August 15, 1995 between Registrant and
Norwest Bank Minnesota, N.A. as Trustee.
10.25 (7) Asset Purchase Agreement dated September 20, 1996 between
Registrant and Comptronix Corporation.
10.26 (9) Agreement and Plan of Merger dated July 22, 1997 among
Registrant, SANM Acquisition Subsidiary, Inc. and Elexsys
International, Inc.
10.26 (10) Agreement and Plan of Merger dated September 2, 1998
among Registrant, SANM Acquisition Subsidiary, Inc. and
Altron, Inc.
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EXHIBIT
NUMBER EXHIBITS
----------- --------------------------------------------------------------
10.27 (11) Synthetic Lease Agreement.
10.28 (12) Agreement and Plan of Merger dated March 30, 1999 among
Registrant, SANM Acquisition Subsidiary, Inc. and
Manu-Tronics, Inc.
10.29 (14) 1999 Stock Plan and form of agreement thereunder.
10.30 (20) 1995 Director Option Plan and form of agreement thereunder.
10.31 (21) 1996 Supplemental Stock Plan and form of agreement
thereunder.
10.32 (15) Hadco 1998 Stock Plan as Amended and Restated March 3,
1999 1998 and form of agreement thereunder.
10.33 (16) Hadco 1995 NSO Stock Plan as Amended and Restated July 1,
1998 1998 and form of agreement thereunder.
10.34 (17) Hadco 1990 NSO Stock Plan as Amended and Restated April
7, 1998 and form of agreement thereunder.
10.35 (22) Agreement and Plan of Merger dated April 17, 2000 among
Registrant, SANM Acquisition Subsidiary, Inc. and Hadco
Corporation.
10.36 (23) Form of Shareholder Agreement dated May 31, 2000 among
Registrant, Essex AB and the shareholders of Essex AB.
10.37 (24) Indenture dated July 22, 1999 between Registrant and Wells
Fargo Bank, N.A. as Trustee.
10.38 (25) Indenture dated September 13, 2000 between Registrant and
Wells Fargo Bank, N.A. as Trustee.
10.39 (26) Form of Indemnification Agreement executed by Registrant
and its officers and directors pursuant to Delaware
reincorporation.
10.40* Employment Agreement dated July 13, 2001 between the
Registrant, SCI Systems, Inc. and A. Eugene Sapp, Jr.
10.41* Employment Agreement between the Registrant and Robert C.
Bradshaw.
13 (13) Annual Report.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Auditors.
23.2 Consent of Ernst & Young LLP, Independent Accountants.
23.3 Consents of WSGR as to legal matters and tax opinion
(included in Exhibits 5.1 and 8.1, respectively).
23.4 Consent of PGFM (included in Exhibit 8.2).
24.1 Power of Attorney (see page II-5 of this Registration
Statement on Form S-4).
99.1 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
99.2 Consent of Goldman, Sachs & Co.
99.3 Form of SCI Systems, Inc. Proxy.
99.4 Form of Sanmina Corporation Proxy.
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----------------
* To be filed supplementally.
(1) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Registration Statement on Form S-1, No.
33-70700 filed with the Securities and Exchange Commission ("SEC") on
February 19, 1993.
(2) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Registration Statement on Form S-1 No. 33-70700
filed with the SEC on October 22, 1993.
(3) Incorporated by reference to exhibit 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(4) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Report on Form 10-K filed with the SEC on
December 29, 1994.
(5) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Report on Form 10-Q filed with the SEC on July
31, 1995.
(6) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended
September 30, 1995.
(7) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15,
1996.
(8) Incorporated by reference to the like numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended
September 30, 1996 filed with the SEC on December 24, 1996.
(9) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on November 21,
1997.
(10) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on September 4,
1998.
(11) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended
September 30, 1998 filed with the SEC on December 21, 1998.
(12) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on April 29, 1999.
(13) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K filed with the SEC on December
18, 2000.
(14) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Registration Statement on Form S-8 filed with the SEC
on May 25, 1999.
(15) Incorporated by reference to Exhibit 4.1 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
June 23, 2000.
(16) Incorporated by reference to Exhibit 4.2 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
June 23, 2000.
(17) Incorporated by reference to Exhibit 4.3 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
June 23, 2000.
(18) Incorporated by reference to Exhibit 3.1(a) to Sanmina's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2001 filed
on May 11, 2001.
(19) Incorporated by reference to the like numbered exhibit previously filed
with Registrant's Registration Statement on Form 8-A No. 000-21272
filed with the SEC on May 25, 2001.
(20) Incorporated by reference to Exhibit 10.4 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
March 19, 1997.
(21) Incorporated by reference to Exhibit 10.1 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
March 19, 1997.
(22) Incorporated by Reference to Exhibit 2.1 previously filed with
Registrant's Registration Statement on Form S-4, No. 333-37526 filed
with the SEC on May 22, 2000.
(23) Incorporated by Reference to Exhibit 2.1 previously filed with
Registrant's Registration Statement on Form S-3, No. 333-39316 filed
with the SEC on June 14, 2000.
(24) Incorporated by reference to Exhibit 25.1 previously filed with
Registrant's Registration Statement on form S-3, No. 333-84221 filed
with the SEC on July 30, 1999.
(25) Incorporated by reference to Exhibit 4.1 previously filed with
Registrant's Registration Statement on form S-3, No. 333-50282 filed
with the SEC on November 20, 2000.
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173
(26) Incorporated by reference to the like-numbered exhibits previously
filed with Registrant's Registration Statement on Form S-1, No.
33-70700 filed with the SEC on February 19, 1993.
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174
(B) FINANCIAL STATEMENT SCHEDULES
None.
(C) ITEM 4(B) INFORMATION
The opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated is
included as Annex B to the Proxy Statement / Prospectus included in this
Registration Statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering;
(d) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
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(e) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form;
(f) that every prospectus (i) that is filed pursuant to paragraph (e)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof;
(g) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue;
(h) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request; and
(i) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Jose, California on the 10th day
of August 2001.
SANMINA CORPORATION
By: /s/ JURE SOLA
---------------------------------
JURE SOLA,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Randy Furr and Rick Ackel, and each of them, as his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
-------------------------- ------------------------------------ ---------------
/s/ JURE SOLA Chairman, Chief Executive Officer, and August 10, 2001
-------------------------- Director (Principal Executive Officer)
JURE SOLA
/s/ RANDY FURR President, Chief Operating Officer and August 10, 2001
-------------------------- Director
RANDY FURR
/s/ RICK ACKEL Executive Vice President and Chief August 10, 2001
-------------------------- Financial Officer (Principal Financial
RICK ACKEL and Accounting Officer)
/s/ MARIO ROSATI Director August 10, 2001
--------------------------
MARIO ROSATI
/s/ BERNARD VONDERSCHMITT Director August 10, 2001
--------------------------
BERNARD VONDERSCHMITT
/s/ NEIL BONKE Director August 10, 2001
--------------------------
NEIL BONKE
/s/ JOHN BOLGER Director August 10, 2001
--------------------------
JOHN BOLGER
/s/ JOSEPH SCHELL Director August 10, 2001
--------------------------
JOSEPH SCHELL
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBITS
---------- -------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated as of July 13, 2001
among the Registrant, Sun Acquisition Subsidiary, Inc. and SCI
Systems, Inc., as amended and restated (included as Annex A to
the Proxy Statement/ Prospectus which is a part of this
Registration Statement on Form S-4).
2.2 Form of SCI Systems, Inc. Voting Agreement dated as of July
13, 2001 among the Registrant and certain stockholders of SCI
Systems, Inc. listed therein.
2.3 Form of Sanmina Corporation Voting Agreement dated as of July
13, 2001 among SCI Systems, Inc. and the certain stockholders
of the Registrant listed therein.
3.1 (8) Restated Certificate of Incorporation of Registrant dated
January 31, 1996.
3.1.1 (18) Certificate of Amendment of the Restated Certificate of
Incorporation of Registrant dated March 2001.
3.1.2 Certificate of Designation filed with the Delaware Secretary
of State on May 31, 2001 designating 1,000,000 shares of
Series A Participating Preferred Stock, par value $0.01.
3.1.3* Certificate of Amendment of the Restated Certificate of
Incorporation of Registrant.
3.2 (19) Amended and Restated Bylaws of Registrant.
4.1 (1) Specimen Stock Certificate.
4.2 (19) Preferred Stock Rights Agreement, dated as of May 17, 2001
between Registrant and Wells Fargo National Bank, Minnesota,
N.A., including the Certificate of Determination, the form of
Rights Certificate and the Summary of Rights attached thereto
as Exhibits A, B and C, respectively.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati ("WSGR") relating
to validity of shares registered hereby.
8.1 Tax opinion of WSGR.
8.2 Tax opinion of Powell, Goldstein, Frazer & Murphy LLP
("PGFM").
10.2 (4) Amended 1990 Incentive Stock Plan.
10.3 (1) 1993 Employee Stock Purchase Plan.
10.9 (k)(2) Amended and Restated Credit Agreement dated as of August 18,
1993 among Sanmina Corporation, Chemical Bank and other
lenders.
10.9 (k)(5) Amendment dated July 27, 1995 to Amended and Restated Credit
Agreement dated August 18, 1993
10.9 (l)(2) Revolving Credit Note, $12,000,000, Chemical Bank.
10.10(l)(1) Lease for premises at 2109 O'Toole Avenue, Suites A-E, San
Jose, California (Portion of Plant I).
10.11 (1) Lease for premises at 2101 O'Toole Avenue, San Jose,
California (Portion of Plant I).
10.12 (l) Lease for premises at 2539 Scott Boulevard, Santa Clara,
California (Plant III).
10.14 (l) Lease for premises at 2060-2068 Bering Drive, San Jose,
California (Plant II).
10.15 (l) Lease for premises at 4220 Business Center Drive, Fremont,
California (Plant V).
10.16 (l) Lease for premises at McCarthy Boulevard, Milpitas, California
(Plant VI).
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10.17(l) Lease for premises at 2121 O'Toole Avenue, San Jose,
California (Corporate Headquarters).
10.19(2) Lease for premises at 1250 American Parkway, Richards, Texas
(Plant VII).
10.20(2) Lease for premises at 6453 Kaiser Drive, Fremont, California
(Plant VIII).
10.21(3) Asset Purchase Agreement dated September 28, 1994 between
Registrant and Comptronix Corporation.
10.22(4) Lease for premises at 355 East Trimble Road, San Jose,
California.
10.23(5) Stock Purchase Agreement dated May 31, 1995 between Sanmina
Corporation, Assembly Solutions, Inc. and the principal
stockholders of Assembly Solutions, Inc.
10.24(6) Indenture dated August 15, 1995 between Registrant and Norwest
Bank Minnesota, N.A. as Trustee.
10.25(7) Asset Purchase Agreement dated September 20, 1996 between
Registrant and Comptronix Corporation.
10.26(9) Agreement and Plan of Merger dated July 22, 1997 among
Registrant, SANM Acquisition Subsidiary, Inc. and Elexsys
International, Inc.
10.26(10) Agreement and Plan of Merger dated September 2, 1998 among
Registrant, SANM Acquisition Subsidiary, Inc. and Altron, Inc.
10.27(11) Synthetic Lease Agreement.
10.28(12) Agreement and Plan of Merger dated March 30, 1999 among
Registrant, SANM Acquisition Subsidiary, Inc. and
Manu-Tronics, Inc.
10.29(14) 1999 Stock Plan and form of agreement thereunder.
10.30(20) 1995 Director Option Plan and form of agreement thereunder.
10.31(21) 1996 Supplemental Stock Plan and form of agreement thereunder.
10.32(15) Hadco 1998 Stock Plan as Amended and Restated March 3,
19991998 and form of agreement thereunder.
10.33(16) Hadco 1995 NSO Stock Plan as Amended and Restated July 1,
19981998 and form of agreement thereunder.
10.34(17) Hadco 1990 NSO Stock Plan as Amended and Restated April 7,
1998 and form of agreement thereunder.
10.35(22) Agreement and Plan of Merger dated April 17, 2000 among
Registrant, SANM Acquisition Subsidiary, Inc. and Hadco
Corporation.
10.36(23) Form of Shareholder Agreement dated May 31, 2000 among
Registrant, Essex AB and the shareholders of Essex AB.
10.37(24) Indenture dated July 22, 1999 between Registrant and Wells
Fargo Bank, N.A. as Trustee.
10.38(25) Indenture dated September 13, 2000 between Registrant and
Wells Fargo Bank, N.A. as Trustee.
10.39(26) Form of Indemnification Agreement executed by Registrant and
its officers and directors pursuant to Delaware
reincorporation.
10.40* Employment Agreement dated July 13, 2001 between the
Registrant, SCI Systems, Inc. and A. Eugene Sapp, Jr.
10.41* Employment Agreement between the Registrant and Robert C.
Bradshaw.
13(13) Annual Report.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Auditors.
23.2 Consent of Ernst & Young LLP, Independent Accountants.
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EXHIBIT
NUMBER EXHIBITS
------- --------
23.3 Consents of WSGR as to legal matters and tax opinion (included
in Exhibits 5.1 and 8.1, respectively).
23.4 Consent of PGFM (included in Exhibit 8.2).
24.1 Power of Attorney (see page II-5 of this Registration
Statement on Form S-4).
99.1 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.2 Consent of Goldman, Sachs & Co.
99.3 Form of SCI Systems, Inc. Proxy.
99.4 Form of Sanmina Corporation Proxy.
-----------------
* To be filed supplementally.
(1) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-70700 filed
with the Securities and Exchange Commission ("SEC") on February 19, 1993.
(2) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1 No. 33-70700 filed
with the SEC on October 22, 1993.
(3) Incorporated by reference to exhibit 2 previously filed with Registrant's
Report on Form 8-K filed with the SEC on October 28, 1994.
(4) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 29,
1994.
(5) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-Q filed with the SEC on July 31, 1995.
(6) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1995.
(7) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15, 1996.
(8) Incorporated by reference to the like numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1996 filed with the SEC on December 24, 1996.
(9) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on November 21, 1997.
(10) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on September 4, 1998.
(11) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1998 filed with the SEC on December 21, 1998.
(12) Incorporated by reference to exhibit 2.1 previously filed with
Registrant's Report on Form 8-K filed with the SEC on April 29, 1999.
(13) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 18,
2000.
(14) Incorporated by reference to the like-numbered exhibit previously filed
with Registrant's Registration Statement on Form S-8 filed with the SEC on
May 25, 1999.
(15) Incorporated by reference to Exhibit 4.1 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on June
23, 2000.
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(16) Incorporated by reference to Exhibit 4.2 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on June
23, 2000.
(17) Incorporated by reference to Exhibit 4.3 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on June
23, 2000.
(18) Incorporated by reference to Exhibit 3.1(a) to Sanmina's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2001 filed on May 11,
2001.
(19) Incorporated by reference to the like numbered exhibit previously filed
with Registrant's Registration Statement on Form 8-A No. 000-21272 filed
with the SEC on May 25, 2001.
(20) Incorporated by reference to Exhibit 10.4 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
March 19, 1997.
(21) Incorporated by reference to Exhibit 10.1 previously filed with
Registrant's Registration Statement on Form S-8 filed with the SEC on
March 19, 1997.
(22) Incorporated by Reference to Exhibit 2.1 previously filed with
Registrant's Registration Statement on Form S-4, No. 333-37526 filed with
the SEC on May 22, 2000.
(23) Incorporated by Reference to Exhibit 2.1 previously filed with
Registrant's Registration Statement on Form S-3, No. 333-39316 filed with
the SEC on June 14, 2000.
(24) Incorporated by reference to Exhibit 25.1 previously filed with
Registrant's Registration Statement on form S-3, No. 333-84221 filed with
the SEC on November 20, 2000.
(25) Incorporated by reference to Exhibit 4.1 previously filed with
Registrant's Registration Statement on form S-3, No. 333-50282 filed with
the SEC on July 30, 1999.
(26) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-70700 filed
with the SEC on February 19, 1993.
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